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United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 27, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-3657
WINN-DIXIE STORES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0514290
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5050 Edgewood Court, Jacksonville, Florida 32254-3699
(Address of principal executive offices) (Zip Code)
Area Code (904) 783-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock Par Value $1.00 Per Share New York Stock Exchange
8.875% Senior Notes due 2008 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [|X|] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of common stock on June 27,
2001, as reported on the New York Stock Exchange was approximately
$2,050,509,347. Shares of common stock held by each executive officer and
director and by principal shareholders filing Schedules 13D and 13G have been
excluded in that such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of June 27, 2001, registrant had outstanding 140,466,235 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy
Statement in respect to the 2001 Annual Meeting of Shareholders are incorporated
by reference in Part III hereof, as more specifically described herein.
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TABLE OF CONTENTS
Page
Number
------
PART I
Business.................................................................... 1
Properties.................................................................. 5
Legal Proceedings........................................................... 5
Submission of Matters to a Vote of Security Holders......................... 5
Executive Officers of the Registrant........................................ 6
PART II
Market for the Registrant's Common Equity and Related Shareholder Matters... 8
Selected Financial Data..................................................... 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Quantitative and Qualitative Disclosure about Market Risk................... 8
Financial Statements and Supplemental Data.................................. 8
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 8
PART III
The information required by Part III is hereby incorporated by reference
to Winn-Dixie Stores, Inc.'s definitive proxy statement to be filed on or
before September 5, 2001 in connection with its Annual Meeting of
Shareholders................................................................ 9
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 9
Signatures.................................................................. 13
PART I
ITEM 1: BUSINESS
General
Winn-Dixie Stores, Inc., organized in Florida on December 26, 1928, is a
major food and drug retailer with 1,153 stores in 14 states located primarily in
the southeastern United States and the Bahama Islands. According to published
reports of sales at June 27, 2001, the Company is one of the nation's largest
food retailers and one of the largest supermarket chains in the southeastern
region of the United States.
All of the Company's subsidiaries except Bahamas Supermarkets Limited are
wholly-owned. Except where the context indicates otherwise, the term "Company"
includes Winn-Dixie Stores, Inc. and all of its subsidiaries, collectively.
In October 2000, the Company acquired certain supermarket operations of
Gooding's Supermarkets, Inc. in the Orlando, Florida area. The operations
consist of nine supermarkets averaging 47,300 square feet. This acquisition fits
the Company's strategic direction of seeking prime supermarket locations that
offer potential for sales growth within its core markets.
In January 2001, the Company acquired 68 stores averaging 34,300 square
feet, 32 fuel stations and other assets owned by Jitney Jungle Stores of
America, Inc. The acquired assets are located in Mississippi, Alabama and
Louisiana. The Company views the acquisition as an excellent opportunity to
expand existing operations.
Based upon information monitored by the Company's operating decision-makers
to manage the business, the Company has determined that its operations are
within one reportable segment. Accordingly, financial information on industry
segments is omitted because, apart from the principal business of operating
retail self-service food stores, the Company has no other industry segments.
1
ITEM 1: BUSINESS, continued
Store Formats and Business Strategy
The Company's retail stores sell groceries, meats, seafood, fresh produce,
deli/bakery products, pharmaceutical products and general merchandise items,
such as magazines, soaps, paper products, health and cosmetic products, hardware
and numerous small household items. In addition, many locations also offer broad
lines of merchandise and services such as company-operated photo labs and
in-store banks operated by independent third parties who rent space. The Company
supports the retail operations through 16 strategically located warehouse
distribution facilities and 19 manufacturing facilities. In addition, the
Company operates 34 fuel centers, 32 of which were acquired from Jitney Jungle
on January 11, 2001, and, as of June 27, 2001 operated seven liquor stores.
Store locations by state and by format:
Winn- Market- Thrift- Jitney Sack & City Meat Save
State Total Dixie Place way Jungle Save Markets Buddies Rite
- --------------------------------------------------------------------------------------------------------------------
Florida 436 61 372 - - - - - 3
Alabama 118 39 74 - 5 - - - -
North Carolina 109 53 56 - - - - - -
Georgia 94 13 81 - - - - - -
Louisiana 79 18 60 - 1 - - - -
Texas 71 14 56 - - - - 1 -
Mississippi 69 7 12 - 42 8 - - -
South Carolina 62 24 38 - - - - - -
Kentucky 40 6 29 5 - - - - -
Virginia 28 10 18 - - - - - -
Ohio 17 - - 17 - - - - -
Bahamas 12 3 - - - - 9 - -
Tennessee 12 4 8 - - - - - -
Oklahoma 5 4 1 - - - - - -
Indiana 1 - 1 - - - - - -
----------------------------------------------------------------------------------------------
1,153 256 806 22 48 8 9 1 3
==============================================================================================
Stores average 44,300 square feet and range in size from 7,100 to 85,200 square
feet.
2
ITEM 1: BUSINESS, continued
Support and Other Services
The following table shows the locations of the Company's distribution
centers and its manufacturing and processing plants, as well as the principal
products produced in the plants:
LOCATION FACILITIES
- --------------------------------------------------------------------------------
ALABAMA Montgomery Distribution center; Plants: milk bottling
- ------- and frozen pizza
FLORIDA Baldwin Distribution center
- ------- Jacksonville General merchandise distribution center;
Plant: coffee, tea and spices
Madison Plant: meat processing
Miami Distribution center; Plant: milk bottling
Orlando Distribution center
Plant City Plants: ice cream and milk bottling
Pompano Distribution center
Sarasota Distribution center
GEORGIA Atlanta Distribution center
- ------- Fitzgerald Plants: jams, jellies, mayonnaise, salad
dressing, peanut butter and condiments;
canned and bottled carbonated beverages
Gainesville Plants: margarine; natural cheese cutting
and wrapping, processed cheese and pimento
cheese
Valdosta Plants: crackers and cookies; and snacks
KENTUCKY Louisville Distribution center
- --------
LOUISIANA Hammond Distribution center; Plant: milk bottling
- --------- New Orleans Distribution center
NORTH CAROLINA Charlotte Distribution center
- -------------- High Point Plants: milk bottling and cultured
products
Raleigh Distribution center
SOUTH CAROLINA Greenville General merchandise distribution center;
- -------------- Plants: ice cream and milk bottling
TEXAS Ft. Worth Distribution center; Plant: milk bottling
- -----
BAHAMAS Nassau Distribution center
- -------
3
ITEM 1: BUSINESS, continued
The principal function of manufacturing operations is to purchase,
manufacture and process private label merchandise sold in stores operated by the
Company. An insignificant portion of the products produced by the manufacturing
plants is sold to others.
Seasonality does not materially affect the business of the Company.
However, due to the influx of winter residents to the Sunbelt, Florida in
particular, and increased purchases of food items for the Thanksgiving and
Christmas holiday seasons, there is a seasonal sales increase during the period
of November - April each fiscal year.
Marketing and Competition
Retail businesses generally compete on the basis of location, quality of
products and service, price, convenience, product variety and store condition.
The number and type of competitors vary by location and competitive position
varies according to the individual markets in which the Company operates.
The retail merchandising business in general, and the supermarket industry
in particular, is highly and increasingly competitive and generally
characterized by high inventory turnover and narrow profit margins. The Company
competes directly with national, regional and local supermarket chains, as well
as independent supermarkets, discount stores, convenience stores and the newer
"alternative format" food stores, including warehouse club stores, deep discount
"supercenters" and conventional department stores. The Company also faces
increased competition from restaurants and fast food chains due to the
increasing proportion of consumer expenditures for food consumed away from home
as compared to food consumed at home.
Associates
At the end of fiscal 2001, the Company had 46,000 full-time and 73,000
part-time associates. None of the 119,000 associates are covered by a collective
bargaining agreement.
Bahamas
All sales of the Company are to customers within the United States and the
Bahama Islands. The Company exports an insignificant amount of merchandise to
its subsidiary in the Bahamas, which operates 12 retail food stores.
4
ITEM 1: BUSINESS, continued
Management Actions
On April 20, 2000, the Company announced a major restructuring plan to
improve the support of the retail stores and the Company's overall efficiency.
The restructuring plan included the closing of certain manufacturing,
warehousing and retail locations as well as retrofitting of over 50% of the
Company's retail stores to improve efficiency and customer service. As of June
27, 2001, the restructuring efforts were substantially complete. Any remaining
expenditures relating to retrofits are not considered to be material to the
Company's operations and will be included as a component of operating and
administrative expense.
ITEM 2: PROPERTIES
Stores
All but 16 of the retail stores operated by the Company are on premises
occupied on a rental basis. See Note 11 of the "Notes to Consolidated Financial
Statements," page F-31, included herein.
Support Properties
The warehousing and distribution centers, with the exception of the
facilities in Baldwin, FL; Montgomery, AL; New Orleans, LA; Louisville, KY; and
Fort Worth, TX; are rented under leases due to expire within 3 to 23 years. All
of these contain renewal options, which vary from lease to lease.
The Company's Valdosta, GA cracker and cookie bakery and snacks bakery;
Fort Worth, TX dairy plant; Madison, FL meat processing plant; Plant City, FL
ice cream and milk bottling plants; Miami, FL reclaim center; Gainesville, GA
oleomargarine and cheese processing and packaging plants; and Montgomery, AL
milk bottling and frozen pizza plants are owned in fee. All other manufacturing
facilities are rented under leases due to expire in 23 years. All of these
contain renewal options, which vary from lease to lease.
All of the above support properties are considered to be in excellent
condition.
ITEM 3: LEGAL PROCEEDINGS
See Note 13(d) of the "Notes to Consolidated Financial Statements," page
F-34 included herein, regarding various claims and lawsuits pending against the
Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended June 27, 2001.
5
Executive Officers of the Registrant
Set forth below is certain information concerning the executive officers of the
Company as of June 27, 2001:
YEAR YEAR FIRST
AGE IN APPOINTED EMPLOYED
YEARS AT TO CURRENT BY
NAME 06-27-01 OFFICE HELD POSITION WINN-DIXIE
- ---- -------- ----------- -------- ----------
A. Dano Davis 56 Chairman of the Board 1988 1968
A. R. Rowland 57 President and 1999 1999
Chief Executive Officer
D. G. Lafever 52 Senior Vice President and 2001 1966
Director of Sales and Procurement
R. P. McCook 48 Senior Vice President and 1984 1984
Chief Financial Officer
D. M. Sheehan 46 Senior Vice President and 2000 2000
Director of Real Estate
J. R. Sheehan 43 Senior Vice President and 2001 2000
Director of Operations
A. B. Toscano 39 Senior Vice President and 2000 2000
Director of Human Resources
E. E. Zahra, Jr. 54 Senior Vice President and 1995 1995
General Counsel
D. M. Byrum 48 Vice President, Corporate Controller 2000 1972
and Chief Accounting Officer
K. D. Ross 32 Vice President, Strategic Planning 2000 2000
and Treasurer
Division Presidents:
J. D. Fitzgerald 51 Vice President 1998 1970
M. J. Istre 50 Vice President 1999 1969
R. C. Lunn, Jr. 49 Vice President 1997 1969
D. J. Richardson 51 Vice President 2000 1966
M. A. Sellers 47 Vice President 1997 1973
H. M. Solana, Jr. 46 Vice President 1999 1971
D. A. Weaver 45 Vice President 2000 1972
6
Executive Officers of the Registrant, continued
All of the officers listed as executive officers of the registrant, with
the exception of Mr. Allen Rowland, Mr. Dennis Sheehan, Mr. John Sheehan, Mr.
August Toscano and Ms. Kellie Ross, have been employed for the past five years
in either the same capacity as listed, or in a position with the Company which
was consistent in occupation with the present assignment.
Prior to becoming President and Chief Executive Officer, Mr. Rowland was
President and Chief Operating Officer of Smith's Food & Drug Centers from 1996
to 1997 and, prior to that, was a Senior Vice President with Albertson's.
Senior Vice President and Director of Real Estate, Mr. Dennis Sheehan was a
private real estate developer for grocery and other retail facilities in the
Southeast since 1987. For the 10 years preceding 1987, Mr. Sheehan was employed
at Albertson's, most recently as Director of Real Estate.
Senior Vice President and Director of Operations, Mr. John Sheehan was
Executive Vice President of Pathmark Stores, Inc. from 1997 to 2000. For the 16
years preceding 1997, Mr. Sheehan was employed at Albertson's, most recently as
Director of Operations, Southern California Division.
Senior Vice President and Director of Human Resources, Mr. Toscano was Vice
President, Human Resources of Burger King Corporation, from 1999 to 2000. From
1998 to 1999, Mr. Toscano was International Human Resources Vice President of
Citibank. Mr. Toscano was Senior Director of Human Resources for Tricon Global
Restaurants from 1994 to 1998.
Vice President, Strategic Planning and Treasurer, Ms. Ross was Audit
Manager of Arthur Andersen LLP, from 1999 to 2000. From 1997 to 1999, Ms. Ross
was Corporate Controller for Armor Holding, Inc. Ms. Ross was Assistant
Controller for PSS World Medical, Inc. from 1995 to 1997.
Officers are elected annually by the Board of Directors and serve for a
one-year period or until their successors are elected. Dennis Sheehan and John
Sheehan are brothers. A. Dano Davis is the first cousin of T. Wayne Davis,
Director, and the first cousin of the spouse of Charles P. Stephens, Director.
No other executive officer has a family relationship with any other executive
officer or director.
7
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The number of record holders of the Company's common
stock as of June 27, 2001 was 48,761.
Information required by this Item concerning sales prices of the Company's
common stock and the frequency and amount of monthly dividends is in Note 16 of
the "Notes to Consolidated Financial Statements," on page F-37 included herein.
ITEM 6: SELECTED FINANCIAL DATA
The information required by this Item begins on page F-1 included herein.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is on page F-3 included herein.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this Item begins on page F-7 included herein.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Financial statements and supplemental data are set forth in the "Index to
Consolidated Financial Statements, Supporting Schedules and Supplemental Data"
on page 15 included herein.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
between the Company and its auditors within the 24 months prior to June 27,
2001.
8
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11: EXECUTIVE COMPENSATION
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items is incorporated herein by reference
to the Company's definitive proxy statement to be filed in connection with its
2001 Annual Meeting of Shareholders.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) Financial Statements:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 15
included herein.
(2) Financial Statement Schedules:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 15
included herein.
(3) Exhibits:
Certain of the following exhibits which have heretofore
been filed with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities
Exchange Act of 1934 and which are designated in prior
filings as noted below, are hereby incorporated by
reference and made a part hereof:
9
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
Exhibit
Number Description of Exhibit Incorporated by Reference From
- ------ ---------------------- ------------------------------
3.1 Restated Articles of Incorporation as Previously filed as Exhibit 3.1 to Form
filed with the Secretary of State of 10-K for the year ended June 30, 1993, which
Florida. Exhibit is herein incorporated by reference.
3.1.1 Amendment adopted October 7, 1992, to Previously filed as Exhibit 3.1.1 to Form 10-K
Restated Articles of Incorporation. for the year ended June 30, 1993, which Exhibit
is herein incorporated by reference.
3.1.2 Amendment adopted October 5, 1994, to Previously filed as Exhibit 3.1.2 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended January 11, 1995, which
Exhibit is herein incorporated by reference.
3.1.3 Amendment adopted October 1, 1997, to Previously filed as Exhibit 3.1.3 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended September 17, 1997, which
Exhibit is herein incorporated by reference.
3.2 Restated By-Laws of the Registrant as
amended through July 02, 2001.
4.2 First Supplemental Indenture, dated Previously filed as Exhibit 4.2 (a) to Form 8-K
March 29, 2001, among Winn-Dixie Stores, filed on March 29, 2001, which Exhibit is
Inc., the Guarantors named therein and herein incorporated by reference.
Wilmington Trust Company, as Trustee.
9.1 Agreement of Shareholders of D.D.I., Previously filed as Exhibit 9.1 to Form 10-K
Inc. (formerly Vadis Investments, Inc.) for the year ended June 30, 1993, which Exhibit
dated April 19, 1989. is herein incorporated by reference.
10.0 Employment Agreement of Allen R. Rowland Previously filed as Exhibit 10.0 to Form 10-K
effective November 23, 1999. for the year ended June 28, 2000, which Exhibit
is herein incorporated by reference.
10
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
Exhibit
Number Description of Exhibit Incorporated by Reference From
- ------ ---------------------- ------------------------------
10.1 Annual Officer Incentive Compensation Previously filed as Exhibit 10.1 to Form 10-Q for
Plan, effective June 15, 1998. the quarter ended September 16, 1998, which
Exhibit is herein incorporated by reference.
10.2.1 Restricted Stock Plan, as amended Previously filed as Exhibit 10.2.1 to Form 10-Q
effective August 2, 1999. for the quarter ended September 22, 1999, which
Exhibit is herein incorporated by reference.
10.2.2 Performance-Based Restricted Stock Plan Previously filed as Exhibit 10.2.2 to Form 10-Q
as amended effective August 2, 1999. for the quarter ended September 22, 1999, which
Exhibit is herein incorporated by reference.
10.2.3 Amendment to the Performance-Based Previously filed as Exhibit 10.2.3 to Form 10-K
Restricted Stock Plan effective January for the year ended June 28, 2000, which Exhibit
26, 2000. is herein incorporated by reference.
10.2.4 Amendment to the Restricted Stock Plan
effective August 9, 2000
10.3 Key Employee Stock Option Plan Previously filed as Exhibit 10.3 to Form 10-Q for
effective January 24, 1990 as amended the quarter ended September 20, 2000, which
effective August 9, 2000. Exhibit is herein incorporated by reference.
10.4 Supplemental Retirement Plan dated July Previously filed as Exhibit 10.4 to Form 10-K for
1, 1994, as amended effective June 15, the year ended June 28, 2000, which Exhibit is
2000. herein incorporated by reference
10.5 Management Security Plan as amended and Previously filed as Exhibit 10.5 to Form 10-K for
restated effective June 30, 1982. the year ended June 26, 1996, which Exhibit is
herein incorporated by reference.
10.5.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.5.1 to Form 10-K
Management Security Plan. for the year ended June 26, 1996, which Exhibit
is herein incorporated by reference.
11
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K, continued
Exhibit
Number Description of Exhibit Incorporated by Reference From
- ------ ---------------------- ------------------------------
10.6 Senior Corporate Officer's Management Previously filed as Exhibit 10.6 to Form 10-K for
Security Plan as amended and restated the year ended June 26, 1996, which Exhibit is
effective June 30, 1982. herein incorporated by reference.
10.6.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.6.1 to form
Senior Corporate Officer's Management 10-K for the year ended June 26, 1996, which
Security Plan. Exhibit is herein incorporated by reference.
10.7 Winn-Dixie Stores, Inc. Directors' Previously filed as Exhibit 10.7 to Form 10-Q
Deferred Fee Plan as amended through for the quarter ended September 20, 2000, which
October 4, 2000. Exhibit is herein incorporated by reference.
Previously filed as Exhibit 10.8 to Form 10-Q
10.8 Winn-Dixie Stores, Inc. Stock Plan for for the quarter ended September 20, 2000, which
Directors effective October 4, 2000. Exhibit is herein incorporated by reference.
10.9 Credit Agreement, dated March 29, 2001, Previously filed as Exhibit 10 to Form 8-K filed
among Winn-Dixie stores, Inc., First on March 29, 2001, which Exhibit is herein
Union National Bank and other lenders incorporated by reference.
named therein, relating to Winn-Dixie
Stores, Inc.'s senior credit facility
in the amount of $800,000,000.
12.0 Computation of Ratios of Earnings to
Fixed Charges for Winn-Dixie Stores,
Inc.
21.1 Subsidiaries of Winn-Dixie Stores, Inc.
23.1 Consent of KPMG LLP.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the quarter ended June 27, 2001.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WINN-DIXIE STORES, INC.
By /s/ Allen R. Rowland
--------------------
Allen R. Rowland
(Chief Executive Officer)
Date August 8, 2001
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ A. Dano Davis Chairman and Director August 8, 2001
- -------------------------
(A. Dano Davis)
/s/ Allen R. Rowland President and Director August 8, 2001
- ------------------------- (Chief Executive Officer)
(Allen R. Rowland)
/s/ Richard P. McCook Senior Vice President August 8, 2001
- --------------------------- (Chief Financial Officer)
(Richard P. McCook)
/s/ D. Michael Byrum Vice President August 8, 2001
- --------------------------- (Corporate Controller and
(D. Michael Byrum) Chief Accounting Officer)
13
SIGNATURES, continued
/s/ T. Wayne Davis Director August 8, 2001
- -------------------------
(T. Wayne Davis)
/s/ Radford D. Lovett Director August 8, 2001
- ---------------------------
(Radford D. Lovett)
/s/ Charles P. Stephens Director August 8, 2001
- ----------------------------
(Charles P. Stephens)
/s/ Armando M. Codina Director August 8, 2001
- ---------------------------
(Armando M. Codina)
/s/ Carleton T. Rider Director August 8, 2001
- ---------------------------
(Carleton T. Rider)
/s/ Julia B. North Director August 8, 2001
- -------------------------
(Julia B. North)
/s/ Tillie K. Fowler Director August 8, 2001
- --------------------------
(Tillie K. Fowler)
/s/ Ronald Townsend Director August 8, 2001
- --------------------------
(Ronald Townsend)
14
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
SUPPORTING SCHEDULES AND SUPPLEMENTAL DATA
Selected Financial Data F-1
Management's Discussion and Analysis of Financial Condition and Results
of Operations F-3
Consolidated Financial Statements and Supplemental Data:
Report of Management F-10
Independent Auditors' Report F-11
Consolidated Statements of Operations, Years ended
June 27, 2001, June 28, 2000 and June 30, 1999 F-12
Consolidated Balance Sheets, June 27, 2001 and June 28, 2000 F-13
Consolidated Statements of Cash Flows, Years ended
June 27, 2001, June 28, 2000 and June 30, 1999 F-14
Consolidated Statements of Shareholders' Equity, Years ended
June 27, 2001, June 28, 2000 and June 30, 1999 F-15
Notes to Consolidated Financial Statements F-16
Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule S-1
II Consolidated Valuation and Qualifying Accounts, Years ended
June 27, 2001, June 28, 2000 and June 30, 1999 S-2
All other schedules are omitted either because they are not applicable or
because information required therein is shown in the Financial Statements or
Notes thereto.
15
SELECTED FINANCIAL DATA
2001 2000 1999* 1998 1997
---- ---- ----- ---- ----
Sales Dollars in millions except per share data
Net sales................................................. $ 12,903 13,698 14,137 13,617 13,219
Percent (decrease) increase............................... (5.8) (3.1) 3.8 3.0 2.0
Average annual sales per store............................ $ 11.6 11.6 11.9 11.7 11.3
Earnings Summary
Gross profit.............................................. $ 3,454 3,727 3,903 3,729 3,411
Percent of sales........................................ 26.8 27.2 27.6 27.4 25.8
LIFO (credit) charge...................................... $ (12) 15 4 (12) 3
Operating and administrative expenses..................... $ 3,180 3,586 3,577 3,365 3,070
Percent of sales........................................ 24.7 26.2 25.3 24.7 23.2
Restructuring and other non-recurring charges............. $ 147 396 - 18 -
Percent of sales........................................ 1.1 2.9 - 0.1 -
Company owned life insurance (COLI) tax case (after tax).. $ 3 42 - - -
Percent of sales........................................ 0.0 0.3 - - -
Net earnings (loss)....................................... $ 45 (229) 182 199 204
Basic earnings (loss) per share......................... $ 0.32 (1.57) 1.23 1.34 1.36
Diluted earnings (loss) per share....................... $ 0.32 (1.57) 1.23 1.33 1.36
Percent of net earnings (loss) to sales................. 0.4 (1.7) 1.3 1.5 1.5
Percent of net earnings (loss) to average equity........ 5.5 (20.1) 13.1 14.7 15.3
Net earnings excluding COLI, restructuring and
other non-recurring charges........................... $ 139 75 182 210 204
Basic earnings per share................................ $ 1.00 0.52 1.23 1.41 1.36
Diluted earnings per share.............................. $ 0.99 0.52 1.23 1.41 1.36
Percent of net earnings to sales........................ 1.1 0.5 1.3 1.5 1.5
Percent of net earnings to average equity............... 17.0 6.6 13.1 15.5 15.3
EBITDA ...................................................... $ 310.0 1.3 618.5 676.7 632.8
EBITDAR .................................................... $ 658.1 325.8 961.4 985.9 911.6
EBITDA excluding restructuring and
non-recurring charges................................... $ 457.3 397.4 618.5 694.8 632.8
EBITDAR excluding restructuring and
non-recurring charges................................... $ 805.3 721.9 961.4 1,004.0 911.6
Dividends
Dividends paid............................................ $ 142.9 149.0 151.2 150.9 144.2
Percent of net earnings (loss)............................ 315.3 (65.1) 82.9 76.0 70.5
Per share (present rate $1.02)............................ $ 1.02 1.02 1.02 1.02 0.96
Common Stock (WIN)
Total shares outstanding (000,000)........................ 140.5 140.8 148.6 148.5 148.9
NYSE - Common stock price range - High.................. $ 33.12 41.94 52.19 59.25 42.38
- Low................... $ 13.44 14.25 28.63 33.69 29.88
Financial Data
Cash flow information:
Net cash provided by operating activities............... $ 244.9 743.3 436.4 464.5 413.9
Net cash used in investing activities................... $ (443.6) (196.1) (335.1) (325.9) (477.7)
Net cash provided by (used in) financing activities..... $ 290.2 (542.3) (100.0) (129.2) 45.7
Capital expenditures, net................................. $ 313.3 213.0 334.3 368.6 423.1
Depreciation and amortization............................. $ 183.6 256.7 292.4 330.4 291.2
Working capital........................................... $ 449.3 50.4 285.0 262.6 220.1
Current ratio............................................. 1.4 1.0 1.2 1.4 1.2
Total assets.............................................. $ 3,042 2,747 3,149 3,069 2,921
Obligations under capital leases.......................... $ 29 32 38 49 54
Present value of future rentals under operating leases.... $ 2,550 2,408 2,575 2,389 2,048
Long-term rental obligations on closed stores............. $ 154 220 35 34 25
Long-term debt............................................ $ 697 - - - -
Total long-term obligations (Long-term debt + leases)..... $ 3,430 2,660 2,648 2,472 2,127
Long-term obligations to equity ratio..................... $ 4.4 3.1 1.9 1.8 1.6
Comprehensive income (loss)............................... $ 43.7 (232.0) 182.6 199.4 206.4
Shareholders' equity...................................... $ 772 868 1,411 1,369 1,337
Book value per share...................................... $ 5.52 6.16 9.50 9.22 8.98
Ratio of earnings to fixed charges........................ 1.2 ** 2.1 2.3 2.5
Adjusted ratio of earnings to fixed charges............... 1.8 1.5 2.1 2.4 2.5
*53 weeks
**For fiscal year ended June 28, 2000, earnings were inadequate to cover
fixed charges due to non-recurring charges totaling $405 million relating to
the restructuring and other non-recurring charges. The dollar amount of the
coverage deficiency for the year ended June 28, 2000 was $302 million.
F-1
SELECTED FINANCIAL DATA - continued
2001 2000 1999* 1998 1997
---- ---- ----- ---- ----
Dollars in millions except per share data
Taxes
Federal, state and local.................................. $ 215 123 308 302 285
Per diluted share......................................... $ 1.53 0.85 2.07 2.03 1.90
Stores
In operation at year-end.................................. 1,153 1,079 1,188 1,168 1,174
Opened and acquired during year........................... 94 34 79 84 83
Closed or sold during year................................ 19 32 59 90 87
Closed due to restructuring............................... 1 111 - - -
Enlarged or remodeled during year......................... 11 42 64 136 79
New/enlarged/remodeled in last five years................. 706 790 908 912 805
Percent to total stores in operation...................... 61.2 73.2 76.4 78.1 68.6
Year-end retail square footage (000,000).................. 51.1 48.1 52.0 49.6 47.8
Average store size at year-end (000)...................... 44.3 44.6 43.7 42.4 40.7
Other Year-end Data
Associates (000).......................................... 119 120 132 139 136
Shareholder accounts (000)................................ 48.8 45.7 48.1 52.0 55.2
Shareholders per store.................................... 42 42 40 45 47
*53 weeks
F-2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales for fiscal 2001, a 52-week year, were $12.9 billion, compared to
fiscal 2000, $13.7 billion, a 52-week year, and fiscal 1999, $14.1 billion, a
53-week year. This reflects a decrease of 5.8% for fiscal 2001, a decrease of
3.1% for fiscal 2000 and an increase of 3.8% in 1999. Average store sales
decreased 0.6% for the current year, decreased 1.2% in fiscal 2000 and increased
2.1% in fiscal 1999. Identical store sales decreased 4.4%, 2.7% and 0.9% for
2001, 2000 and 1999, respectively.
Identical sales decreased largely as a result of the elimination of
unprofitable sales departments (deli/cafes, melon bars, salad bars, dry cleaners
and selected floral, seafood and pharmacy departments), the elimination of
unprofitable sales items in remaining departments, a reduction in the number of
24-hour stores and construction disruptions from numerous store modifications
(retrofits). The Company has substantially completed its planned store retrofits
and believes that this program has resulted in labor savings and other
efficiencies. The Company believes that the store retrofits have enhanced the
Company's competitive position and, in turn, will positively impact the
Company's sales during fiscal 2002.
For the 52 weeks ended June 27, 2001, the Company opened 94 new stores,
averaging 38,500 square feet, closed 20 stores, averaging 34,800 square feet and
enlarged or remodeled 11 store locations, for a total of 1,153 locations in
operation on June 27, 2001, compared to 1,079 as of June 28, 2000. As of June
27, 2001, retail space totaled 51.1 million square feet, a 6.2% increase over
the prior year. The 94 store openings include 68 Jitney Jungle stores and nine
Gooding's stores that were purchased during fiscal 2001. The 20 store closings
includes one store that closed in the second quarter of fiscal 2001, as part of
management's plan of restructuring.
As a percent of sales, gross profit margins were 26.8%, 27.2% and 27.6% in
fiscal 2001, 2000 and 1999, respectively. Gross profit dollars have decreased in
the current year partially as a result of the closing of 112 stores as part of
management's plan of restructuring. In addition, gross profit has been
negatively impacted by the elimination of high gross profit, yet unprofitable,
sales departments. Higher cost of goods sold was incurred during the Company's
transition to centralized merchandise procurement at the beginning of the fiscal
year. Since the first quarter, gross profit margins on a FIFO basis have
improved. A continued focus on the Company's shrink reduction initiatives is
expected to add to the improvements during fiscal 2002.
Approximately 84% of the Company's inventories are valued under the LIFO
(last-in, first-out) method. The LIFO reserve adjustment resulted in a pre-tax
increase in gross profit of $12.0 million in 2001, a decrease of $15.1 million
in 2000 and a decrease of $4.4 million in 1999.
F-3
Management's Discussion and Analysis of Financial Condition and Results of
Operations - continued
Results of Operations, continued
Operating and administrative expenses decreased $406.1 million in fiscal
2001 and increased $9.1 million and $212.2 million in 2000 and 1999,
respectively. As a percent of sales, operating and administrative expenses were
24.7%, 26.2% and 25.3% in fiscal 2001, 2000 and 1999, respectively. The decrease
in operating and administrative expenses was primarily due to a decrease in
retail and administrative operating expenses, such as payroll, depreciation,
rent and leasehold improvement amortization. The expense reduction was an
expected result of the restructuring and came primarily from the elimination of
high labor cost service departments and expense reductions from the retrofit
activity, certain labor efficiency initiatives adopted by the Company and from
the closing of the division offices and retail stores.
Interest expense totaled $52.8 million, $47.1 million and $29.6 million in
fiscal 2001, 2000 and 1999, respectively. Interest expense is primarily interest
on short-term and long-term debt and interest on capital lease obligations.
Interest expense also reflects accrued interest relating to an unfavorable
opinion from the U.S. Tax Court in October 1999 relating to Company Owned Life
Insurance ("COLI") (see Note 7 - Income Taxes). Year-to-date, the interest
expense on the COLI reserve totaled $5.5 million as compared to $19.7 million
for the previous year. Excluding interest on the COLI reserve, interest expense
has increased in the current year as compared to the previous year due to an
increase in the amount of total debt outstanding and an increase in interest
rates in fiscal 2001.
The Company capitalized interest totaling $5.9 million for the year,
related to construction of new stores and a warehouse facility in Baldwin,
Florida.
Earnings (loss) before income taxes were $73.6 million, $(302.4) million
and $296.5 million in fiscal 2001, 2000 and 1999, respectively. The increase in
pretax earnings for fiscal 2001 is primarily due to the restructuring charge
recorded in fiscal 2000, and a decrease in operating and administrative expenses
in fiscal 2001. The effective income tax expense (benefit) rates were 38.5%,
(24.3)% and 38.5% for fiscal 2001, 2000 and 1999, respectively. The effective
tax rate for fiscal 2000 reflects the effects of certain restructuring expenses
and COLI adjustments.
Net earnings (loss) amounted to $45.3 million, or $0.32 per diluted share
for 2001, $(228.9) million, or $(1.57) per diluted share for 2000 and $182.3
million, or $1.23 per diluted share for 1999. The LIFO reserve adjustment
increased net earnings by $7.4 million, or $0.05 per diluted share in 2001,
increased the net loss by $9.3 million, or $0.06 per diluted share in 2000, and
decreased net earnings by $2.7 million, or $0.02 per diluted share in 1999.
F-4
Management's Discussion and Analysis of Financial Condition and Results of
Operations - continued
Results of Operations, continued
The following tables show the effect of the COLI adjustment, restructuring
and other non-recurring charges on the quarter and year.
Dollar amounts in thousands except per share data
----------------------------------------------------------
Non- Excluding
recurring Non-
Quarter ending June 27, 2001 As Reported Charges recurring
---------------------------- ---------------- --------------- ----------------
Net sales.......................................... $ 2,989,861 - 2,989,861
Cost of sales .................................... 2,157,676 - 2,157,676
---------------- --------------- ----------------
Gross profit on sales ............................. 832,185 - 832,185
Operating and administrative expenses.............. 739,776 - 739,776
Restructuring and other non-recurring
charges............................................ 56,497 56,497 -
---------------- --------------- ----------------
Operating income 35,912 (56,497) 92,409
Interest expense 14,800 887 13,913
---------------- -------------- ----------------
Earnings before income tax......................... 21,112 (57,384) 78,496
Income tax .................................... 8,107 (22,049) 30,156
---------------- --------------- ----------------
Net Earnings... ................................ $ 13,005 (35,335) 48,340
================ =============== ================
Basic earnings per share.......................... $ 0.09 (0.25) 0.34
================
=============== ================
Diluted earnings per share........................ $ 0.09 (0.25) 0.34
================ =============== ================
Non- Excluding
recurring Non-
Year ending June 27, 2001 As Reported Charges recurring
---------------- --------------- ----------------
Net sales.......................................... $ 12,903,373 - 12,903,373
Cost of sales .................................... 9,449,346 - 9,449,346
---------------- --------------- ----------------
Gross profit on sales ............................. 3,454,027 - 3,454,027
Operating and administrative expenses.............. 3,180,297 - 3,180,297
Restructuring and other non-recurring
charges............................................ 147,245 147,245 -
---------------- --------------- ----------------
Operating income 126,485 (147,245) 273,730
Interest expense 52,843 5,512 47,331
---------------- --------------- ----------------
Earnings before income tax......................... 73,642 (152,757) 226,399
Income tax .................................... 28,331 (58,768) 87,099
---------------- --------------- ----------------
Net Earnings................. ..................... $ 45,311 (93,989) 139,300
================ =============== ================
Basic earnings per share.......................... $ 0.32 (0.68) 1.00
================
=============== ================
Diluted earnings per share........................ $ 0.32 (0.67) 0.99
================ =============== ================
F-5
Management's Discussion and Analysis of Financial Condition and Results of
Operations - continued
Liquidity and Capital Resources
Cash and cash equivalents amounted to $121.1 million, $29.6 million and
$24.7 million at the end of fiscal years 2001, 2000 and 1999, respectively. Cash
provided by operating activities amounted to $244.9 million in 2001, $743.3
million in 2000 and $436.4 million in 1999. The reduction in net cash provided
by operations is largely due to the increase in merchandise inventories and cash
payments related to the restructuring. Inventories increased due in part to
additional inventory purchased for the stores acquired in the current year.
Working capital amounted to $449.3 million, $50.4 million and $285.0
million in fiscal 2001, 2000 and 1999 respectively. The increase was due in part
to the refinancing of the Company's short-term borrowings into long-term debt.
Net cash used in investing activities totaled $443.6 million, $196.1
million and $335.1 million in fiscal 2001, 2000 and 1999, respectively. The
increase in the current year was due to an increase in capital expenditures and
the acquisition of 77 retail locations. Net capital expenditures totaled $313.3
million, $213.0 million and $334.3 million in fiscal 2001, 2000 and 1999,
respectively. These expenditures were for new store locations, remodeling and
enlarging of store locations and maintenance and expansion of support
facilities. The Company has no material construction or purchase commitments
outstanding as of June 27, 2001.
Net cash provided by (used in) financing activities was $290.2 million,
$(542.3) million and $(100.0) million in 2001, 2000 and 1999 respectively. The
increase in the current year was due primarily to the net proceeds from the $800
million senior secured credit facilities (the "New Facilities"), the issuance of
$300 million in Senior Unsecured Notes (the "Notes") and the suspension of the
stock repurchase program in the current year. See Note 8 - Debt for further
discussion on the New Facilities and Notes.
The Company is a party to various proceedings arising under federal, state
and local regulations protecting the environment. Management is of the opinion
that any liability that might result from any such proceedings will not have a
material adverse effect on the Company's financial condition or results of
operations.
Impact of Inflation
Winn-Dixie's primary costs, inventory and labor, increase with inflation.
Recovery of these costs has to come from improved operating
efficiencies-including improvements in merchandise procurement-and, to the
extent permitted by the competition, through improved gross profit margins.
Quantitative and Qualitative Disclosures About Market Risk
F-6
Management's Discussion and Analysis of Financial Condition and Results of
Operations - continued
As part of the New Facilities (see Note 8 - Debt), the Company obtained a
$400 million six-year term loan with a variable interest rate based on the
one-month LIBOR. The Company utilizes derivative financial instruments to reduce
its exposure to market risks from changes in interest rates. The instruments
primarily used to mitigate these risks are interest rate swaps. All derivative
instruments held by the Company are designated as highly effective cash flow
hedges of interest rate risk on variable rate debt and, accordingly, the change
in fair value of these instruments is recorded as a component of other
comprehensive income.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to these financial instruments. However,
counterparties to these agreements are major financial institutions and the risk
of loss due to nonperformance is considered by management to be minimal. The
Company does not hold or issue interest rate swaps for trading purposes.
The Company has entered into three interest rate swap agreements to hedge
the interest rate risk associated with the $400 million outstanding in variable
rate debt. The purpose of these swaps is to fix interest rates on variable rate
debt and reduce certain exposures to interest rate fluctuation. At June 27,
2001, the Company had interest rate swaps with a notional amount of $400
million. The notional amounts do not represent a measure of exposure to the
Company.
The maturity and interest rate on the interest rate swaps are shown in the
following table. The Company will pay the counterparty interest at a fixed rate
as noted and the counterparty will pay the Company interest at a variable rate
equal to the one-month LIBOR (3.75% as of June 27, 2001).
Notional
Amount
(in thousands) Maturity Fixed Rate
----------------------- --------------------- ---------------
$ 150,000 March 29, 2002 4.60%
150,000 March 29, 2003 4.81%
100,000 March 29, 2004 5.03%
-----------------------
$ 400,000
=======================
The fair value of the Company's interest rate swaps is obtained from dealer
quotes. These values represent the estimated amount the Company would receive or
pay to terminate the agreement, taking into consideration the difference between
the contract rate of interest and rates currently quoted for agreements of
similar terms and maturities. At June 27, 2001, the fair value of the Company's
interest rate swaps resulted in an unrealized loss of $2.6 million ($1.6 million
after tax). The Company recorded the unrealized loss in accumulated other
comprehensive income in shareholders' equity. During the next 12 months, the
Company will incur interest expense including the effect of interest rate swaps
at a weighted average rate of 7.54% on the $400 million outstanding in variable
rate debt.
Quantitative and Qualitative Disclosures About Market Risk, continued
F-7
The Company measures effectiveness by the ability of interest rate swaps to
offset cash flows associated with changes in the one-month LIBOR. To the extent
that any of these contracts are not considered effective, any changes in fair
value relating to the ineffective portion of these contracts are immediately
recognized in income. However, all of the contracts were effective during the
period and no gain or loss was reported in earnings.
The following table presents the future principal cash flows and
weighted-average interest rates expected on the Company's existing long-term
debt instruments and interest rate swap agreements. Fair values have been
determined based on quoted market prices as of June 27, 2001.
Expected Maturity Date
----------------------
(Dollar amounts in thousands)
2002 2003 2004 2005 2006 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
Liabilities:
Long-term debt
Fixed rate $ 291 $ 288 $ 285 $ 282 $ 279 $ 300,280 $ 301,705 $ 305,920
Average interest 9.40% 9.40% 9.40% 9.40% 9.40% 8.88% 8.88%
rate
Variable rate $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 4,000 $ 380,000 $ 400,000 $ 400,000
Average interest 6.70% 7.90% 8.74% 9.09% 9.29% 9.44% 9.38%
rate
Interest rate derivatives
Interest rate swaps:
Notional amount $ 150,000 $ 150,000 $ 100,000 $ - $ - $ - $ 400,000 $ (2,580)
Average pay rate 4.60% 4.81% 5.03% - - - 4.79%
Average receive rate 3.95% 5.15% 5.99% - - - 4.70%
Cautionary Statement Regarding Forward-Looking Information and Statements
F-8
This Form 10-K contains certain information that constitutes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act, which involves risks and uncertainties. Actual results
may differ materially from the results described in the forward-looking
statements. When used in this document, the words, "estimate," "project,"
"intend," and "believe" and other similar expressions, as they relate to the
Company, are intended to identify such forward-looking statements.
Such statements reflect the current views of the Company and are subject to
certain risks and uncertainties that include, but are not limited to:
o the Company's ability to achieve successfully the long-term benefits
contemplated from the restructuring of operations adopted by the Board of
Directors on April 19, 2000, and which has been substantially completed;
o heightened competition, including specifically the intensification of price
competition, the entry of new competitors, or the expansion of existing
competitors in one or more operating regions;
o changes in federal, state or local legislation or regulations affecting food
manufacturing, food distribution, or food retailing, including environmental
compliance;
o the availability and terms of financing, including in particular the
possible impact of changes in the ratings assigned to the Company by
nationally recognized rating agencies; and
o general business and economic conditions in our operating regions, including
the rate of inflation/deflation and changes in population, consumer demands
and spending, types of employment and number of jobs.
Please refer to discussions of these and other factors in this Form 10-K
and other Company filings with the Securities and Exchange Commission. The
Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
F-9
REPORT OF MANAGEMENT
The Company is responsible for the preparation, integrity and objectivity
of the consolidated financial statements and related information appearing in
the Annual Report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis and include amounts that are based on management's best estimates and
judgments.
Management is also responsible for maintaining a system of internal
controls that provides reasonable assurance that the accounting records properly
reflect the transactions of the Company, that assets are safeguarded and that
the consolidated financial statements present fairly the financial position and
operating results. As part of the Company's controls, the internal audit staff
conducts examinations in each of the operations of the Company.
The Audit Committee of the Board of Directors, composed entirely of outside
directors, meets periodically to review the results of audit reports and other
accounting and financial reporting matters with the independent certified public
accountants and the internal auditors.
Allen R. Rowland Richard P. McCook
President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
F-10
INDEPENDENT AUDITORS' REPORT
The Shareholders and the Board of Directors
Winn-Dixie Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Winn-Dixie
Stores, Inc. and subsidiaries as of June 27, 2001 and June 28, 2000, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended June 27, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Winn-Dixie
Stores, Inc. and subsidiaries at June 27, 2001 and June 28, 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 27, 2001, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Jacksonville, Florida
August 8, 2001
F-11
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 27, 2001, June 28, 2000 and June 30, 1999
2001 2000 1999*
--------------- -------------- ---------------
Amounts in thousands except per share data
Net sales ............................................................. $ 12,903,373 13,697,547 14,136,503
Cost of sales, including warehousing and delivery expense ............. 9,449,346 9,970,497 10,233,155
--------------- -------------- ---------------
Gross profit on sales .............................................. 3,454,027 3,727,050 3,903,348
Operating and administrative expenses ................................. 3,180,297 3,586,351 3,577,220
Restructuring and other non-recurring charges ......................... 147,245 396,029 -
--------------- -------------- ---------------
Operating income (loss) ............................................ 126,485 (255,330) 326,128
Interest:
Interest on capital lease obligations .............................. 4,188 4,458 5,152
Interest on company owned life insurance (COLI ) .................. 5,512 19,707 -
Other interest ..................................................... 43,143 22,916 24,496
--------------- -------------- ---------------
Total interest ................................................... 52,843 47,081 29,648
--------------- -------------- ---------------
Earnings (loss) before income taxes ................................... 73,642 (302,411) 296,480
Income taxes .......................................................... 28,331 (73,516) 114,145
--------------- -------------- ---------------
Net earnings (loss) ................................................... $ 45,311 (228,895) 182,335
=============== ============== ===============
Basic earnings (loss) per share ....................................... $ 0.32 (1.57) 1.23
=============== ============== ===============
Diluted earnings (loss) per share .................................... $ 0.32 (1.57) 1.23
=============== ============== ===============
Dividends per share ................................................... $ 1.02 1.02 1.02
=============== ============== ===============
Weighted average common shares outstanding-basic ...................... 139,824 145,445 148,310
=============== ============== ===============
Weighted average common shares outstanding-diluted .................... 140,399 145,445 148,680
=============== ============== ===============
* 53 Weeks
See accompanying notes to consolidated financial statements.
F-12
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 27, 2001 and June 28, 2000
ASSETS 2001 2000
------------------ -----------------
Dollar amounts in thousands except par value
Current Assets:
Cash and cash equivalents $ 121,061 29,576
Trade and other receivables, less allowance for doubtful items of
$3,935 ($3,822 in 2000) 109,159 107,425
Merchandise inventories less LIFO reserve of
$220,411 ($232,368 in 2000) 1,198,602 1,141,405
Prepaid expenses 34,643 58,739
Deferred income taxes 135,736 134,777
------------------ -----------------
Total current assets 1,599,201 1,471,922
------------------ -----------------
Cash surrender value of life insurance, net 16,876 14,035
Property, plant and equipment, net 1,146,654 1,016,292
Intangible assets, net 92,875 18,606
Non-current deferred income taxes 106,145 166,449
Other assets, net 79,919 59,789
------------------ -----------------
Total assets $ 3,041,670 2,747,093
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ - 235,000
Current portion of long-term debt 4,291 -
Current obligations under capital leases 3,270 2,843
Accounts payable 599,850 575,877
Reserve for insurance claims and self-insurance 100,850 101,874
Reserve for restructuring expenses 43,385 52,721
Accrued wages and salaries 109,183 114,883
Accrued rent 88,452 88,247
Accrued expenses 176,332 164,502
Income taxes payable 24,294 85,606
------------------ -----------------
Total current liabilities 1,149,907 1,421,553
------------------ -----------------
Reserve for insurance claims and self-insurance 147,964 141,251
Long-term debt 697,414 -
Obligations under capital leases 28,953 32,239
Defined benefit plan 49,027 45,241
Long-term restructuring expenses 118,745 143,188
Other liabilities 78,006 95,786
------------------ -----------------
Total liabilities 2,270,016 1,879,258
------------------ -----------------
Commitments and contingent liabilities (Notes 7, 8, 9, 11, and 13)
Shareholders' Equity:
Common stock $1 par value. Authorized 400,000,000 shares;
140,466,235 shares outstanding in 2001 and 140,830,197 in 2000 140,466 140,830
Retained earnings 634,694 727,005
Accumulated other comprehensive income (1,587) -
Associates' stock loans (1,919) -
------------------ -----------------
Total shareholders' equity 771,654 867,835
------------------ -----------------
Total liabilities and shareholders' equity $ 3,041,670 2,747,093
================== =================
See accompanying notes to consolidated financial statements.
F-13
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 27, 2001, June 28, 2000 and June 30, 1999
2001 2000 1999*
--------------- --------------- ---------------
Amounts in thousands
Cash flows from operating activities:
Net earnings (loss) ....................................................... $ 45,311 (228,895) 182,335
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization ......................................... 183,559 256,671 292,414
Deferred income taxes ................................................. 60,336 (189,046) 17,684
Defined benefit plan .................................................. 3,786 4,007 4,132
Non-cash restructuring and other non-recurring charges ................ 68,774 395,053 -
Reserve for insurance claims and self-insurance ....................... 5,689 75,408 2,424
Stock compensation plans .............................................. 8,007 (1,144) 2,459
Change in operating assets and liabilities, net of effects
from acquisitions:
Trade and other receivables ......................................... (1,734) 80,888 (42,148)
Merchandise inventories ............................................. (39,962) 283,693 (20,181)
Prepaid expenses .................................................... 25,416 (11,776) 8,596
Accounts payable .................................................... 23,009 (87,959) (1,191)
Reserve for restructuring expenses .................................. (53,765) - -
Income taxes payable ................................................ (61,312) 74,867 (1,380)
Other current accrued expenses ...................................... (22,226) 91,512 (8,783)
--------- --------- ---------
Net cash provided by operating activities ......................... 244,888 743,279 436,361
--------- --------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment, net ........................... (313,319) (212,990) (334,283)
(Increase) decrease in investments and other assets ....................... (6,519) 16,872 (858)
Acquisitions, net of cash acquired ........................................ (123,753) - -
--------- --------- ---------
Net cash used in investing activities ............................. (443,591) (196,118) (335,141)
--------- --------- ---------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings .............................. (235,000) (230,000) 45,000
Proceeds from issuance of long-term debt .................................. 700,000 - -
Debt issuance costs ....................................................... (24,210) - -
Principal payments on long-term debt ...................................... (257) - -
Principal payments on capital lease obligations ........................... (2,857) (2,612) (2,583)
Purchase of common stock .................................................. (17,003) (162,272) (1,337)
Proceeds of sales under associates' stock purchase plan ................... 11,833 164 2,923
Dividends paid ............................................................ (142,853) (148,966) (151,231)
Other ..................................................................... 535 1,355 7,188
--------- --------- ---------
Net cash provided by (used in) financing activities ............... 290,188 (542,331) (100,040)
--------- --------- ---------
Increase in cash and cash equivalents ........................................ 91,485 4,830 1,180
Cash and cash equivalents at the beginning of the year ....................... 29,576 24,746 23,566
--------- --------- ---------
Cash and cash equivalents at end of the year ................................. $ 121,061 29,576 24,746
========= ========= =========
Supplemental cash flow information:
Interest paid ............................................................. $ 37,064 23,058 21,958
Interest and dividends received ........................................... $ 2,327 808 1,072
Income taxes paid ......................................................... $ 29,307 40,663 94,858
*53 Weeks
See accompanying notes to consolidated financial statements.
F-14
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended June 27, 2001, June 28, 2000 and June 30, 1999
Accumulated
Other Associates' Total
Common Retained Comprehensive Stock Shareholders'
Stock Earnings Income Loans Equity
(Amounts in thousands except per share data) -------------- -------------- -------------- -------------- --------------
Balances at June 24, 1998 ................... $ 148,531 1,220,679 2,760 (3,087) $ 1,368,883
-------------- -------------- -------------- -------------- --------------
Comprehensive income:
Net earnings ............................. - 182,335 - - 182,335
Unrealized gain on securities,
net of tax ............................ - - 309 - 309
-------------- -------------- -------------- -------------- --------------
Total comprehensive income ............... - 182,335 309 - 182,644
Cash dividends, $1.02 per share ............. - (151,231) - - (151,231)
Common stock issued and stock
compensation expense ..................... 33 2,189 - - 2,222
Common stock acquired ....................... (37) (1,300) - - (1,337)
Stock options exercised ..................... 50 1,004 - - 1,054
Associates' stock loans, payments ........... - - - 2,923 2,923
Other ....................................... - 5,921 - - 5,921
-------------- -------------- -------------- -------------- --------------
Balances at June 30, 1999 ................... 148,577 1,259,597 3,069 (164) 1,411,079
-------------- -------------- -------------- -------------- --------------
Comprehensive loss:
Net (loss) ............................... - (228,895) - - (228,895)
Realized gain on securities,
net of tax ............................ - - (3,069) - (3,069)
-------------- -------------- -------------- -------------- --------------
Total comprehensive (loss) ............... - (228,895) (3,069) - (231,964)
Cash dividends, $1.02 per share ............. - (148,966) - - (148,966)
Common stock issued and stock
compensation expense ..................... 131 (131) - - -
Common stock acquired ....................... (7,878) (154,394) - - (162,272)
Stock options exercised ..................... - (187) - - (187)
Associates' stock loans, payments ........... - - - 164 164
Other ....................................... - (19) - - (19)
-------------- -------------- -------------- -------------- --------------
Balances at June 28, 2000 ................... 140,830 727,005 - - 867,835
-------------- -------------- -------------- -------------- --------------
Comprehensive income:
Net earnings ............................. - 45,311 - - 45,311
Unrealized loss on
derivative .................................. - - (1,587) - (1,587)
instruments, net of tax
-------------- -------------- -------------- -------------- --------------
Total comprehensive income ............... - 45,311 (1,587) 43,724
Cash dividends, $1.02 per share ............. - (142,853) - - (142,853)
Common stock issued and stock
compensation expense ..................... 811 20,988 - - 21,799
Common stock acquired ....................... (1,180) (15,823) - - (17,003)
Stock options exercised ..................... 5 66 - - 71
Associates' stock loans, payments ........... - - - (1,919) (1,919)
-------------- -------------- -------------- -------------- --------------
Balances at June 27, 2001 ................... $ 140,466 634,694 (1,587) (1,919) $ 771,654
============== ============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
F-15
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information
(a) The Company: Winn Dixie Stores, Inc. and its subsidiaries (the
"Company") operate as a major food retailer in fourteen states
and the Bahama Islands. As of June 27, 2001, the Company
operated 1,153 retail stores, 34 fuel centers and seven liquor
stores. In support of its retail operations, the Company has
16 warehouse distribution centers and 19 manufacturing plants.
(b) Fiscal Year: The fiscal year ends on the last Wednesday in
June. Fiscal year 2001 and 2000 are comprised of 52 weeks.
Fiscal year 1999 is comprised of 53 weeks.
(c) Basis of Consolidation: The consolidated financial statements
include the accounts of Winn Dixie Stores, Inc. and its
subsidiaries. All subsidiaries are wholly owned and fully
consolidated with the exception of Bahamas Supermarkets
Limited, which is owned approximately 78% by W-D Bahamas
Limited. Significant inter-company accounts and transactions
have been eliminated in consolidation.
(d) Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at 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.
(e) Revenue Recognition: Revenue is recognized at the point of
sale for retail sales.
(f) Cash and Cash Equivalents: Cash equivalents consist of highly
liquid investments with a maturity of three months or less
when purchased. Cash and cash equivalents are stated at cost
plus accrued interest, which approximates market.
(g) Inventories: Inventories are stated at the lower of cost or
market. The "dollar value" last-in, first-out (LIFO) method is
used to determine the cost of approximately 84% of inventories
consisting primarily of merchandise in stores and distribution
warehouses. Manufacturing, pharmacy and produce inventories
are valued at the lower of first-in, first-out (FIFO) cost or
market. Elements of cost included in manufacturing inventories
consist of material, direct labor and plant overhead.
F-16
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information, continued
(h) Derivatives: The Company follows Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is,
the type of hedge transaction.
(i) Income Taxes: Deferred tax assets and liabilities are
recognized for the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using the enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered
or settled.
(j) Self-insurance: Self-insurance reserves are established for
automobile and general liability, workers' compensation and
property loss costs based on claims filed and claims incurred
but not reported, with a maximum per occurrence of $2,000 for
automobile and general liability and $1,000 for workers'
compensation. Self-insurance reserves are established for
property losses with a maximum annual aggregate of $5,000
($10,000 for named windstorm and wind driven rain) and a $100
per occurrence deductible after the aggregate is obtained. The
Company is insured for losses in excess of these limits.
(k) Property, Plant and Equipment: Property, plant and equipment
are stated at historical cost. Depreciation is provided over
the estimated useful lives by the straight-line method. Store
equipment depreciation is based on lives varying from five to
eight years. Transportation equipment is based on lives
varying from three to ten years. Warehouse and manufacturing
equipment is based on lives varying from five to ten years.
Amortization of improvements to leased premises is provided
principally by the straight-line method over the periods of
the leases or the estimated useful lives of the improvements,
whichever is less.
The Company reviews its property, plant and equipment for
impairment whenever events or changes in circumstances
indicate the carrying value of an asset may not be
recoverable. Recoverability is measured by comparison of the
carrying amount to the net undiscounted cash flows expected to
be generated by the asset. An impairment loss would be
recorded for the excess of net book value over the fair value
of the asset impaired. The fair value is estimated based on
expected discounted future cash flows.
F-17
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information, continued
(l) Store Opening and Closing Costs: The costs of opening new
stores and closing old stores are charged to earnings in the
year incurred. An expense is recorded for the present value of
expected future net rent payments in the year that a store
closes.
(m) Earnings Per Share: Earnings per common share are based on the
weighted average number of common shares outstanding. Diluted
earnings per share amounts are based on the weighted average
number of common stock outstanding, plus the incremental
shares that would have been outstanding upon the assumed
exercise of all diluted stock options, subject to antidilution
limitations.
The following weighted average numbers of shares of common
stock were used in the calculations for earnings per share.
2001 2000 1999
Basic 139,823,835 145,445,416 148,309,653
Diluted 140,399,055 145,445,416 148,680,198
(n) Comprehensive Income: Comprehensive income is reflected on the
Consolidated Statements of Shareholders' Equity. Accumulated
other comprehensive income is comprised of unrealized
gains/losses on derivative financial instruments and
unrealized gains/losses of available for sale securities.
(o) Stock-Based Compensation: The Company follows Statement of
Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which establishes a
fair value-based method of accounting for stock-based
compensation plans.
(p) New Accounting Pronouncements In July 2001, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 142, "Accounting for Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS No. 142
discontinues the practice of amortizing goodwill and
indefinite lived intangible assets and initiates an annual
review for impairment. Impairment would be examined more
frequently if certain indicators are encountered. Intangible
assets with a determinable useful life will continue to be
amortized over the period. The Company is currently assessing
but has not yet determined the impact of SFAS 142 on its
financial position and results of operations. The Company
plans to adopt SFAS 142 in the first quarter of fiscal year
2002.
F-18
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information, continued
(q) Business Reporting Segments: Based on the information
monitored by the Company's operating decision-makers to manage
the business, the Company has identified that its operations
are within one reportable segment. Accordingly, financial
information on industry segments is omitted because, apart
from the principal business of operating retail self-service
food stores, the Company has no other industry segments. All
sales of the Company are to customers within the United States
and the Bahama Islands. All assets of the Company are located
within the United States and the Bahama Islands. Sales and
assets related to and located in the Bahama Islands represent
less than 1% of the Company's total sales and assets.
(r) Reclassification: Cash discounts and other income have been
reclassified as a reduction of cost of sales and operating and
administrative expenses, respectively. The reclassification
reduced cost of sales for fiscal 2000 and 1999 by $87,203 and
$102,435, respectively. The reclassification reduced operating
and administrative expenses for fiscal 2000 and 1999 by
$22,897 and $16,431, respectively. This reclassification is
consistent with industry practice. Certain other prior year
amounts may have been reclassified to conform to the current
year's presentation.
2. Trade and Other Receivables
Accounts receivable at year-end were as follows:
2001 2000
------------ -------------
Trade and other receivables................ $ 113,067 92,821
Construction advances...................... 27 18,426
------------ -------------
113,094 111,247
Less: Allowance for doubtful items........ 3,935 3,822
------------ -------------
$ 109,159 107,425
============ =============
3. Merchandise Inventories
At June 27, 2001, inventories valued by the LIFO method would have been $220,411
higher ($232,368 higher at June 28, 2000) if they were stated at the lower of
FIFO cost or market. If the FIFO method inventory valuation had been used,
reported net earnings would have been $7,354, or $0.05 per diluted share lower
in 2001, net loss would have been $9,283, or $0.06 per diluted share lower in
2000 and net earnings would have been $2,691, or $0.02 per diluted share higher
in 1999.
F-19
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
4. Intangible Assets
Intangible assets at year-end were as follows:
2001 2000
------------- ------------
Goodwill.................................. $ 98,940 25,591
Other intangibles......................... 5,000 -
------------- ------------
103,940 25,591
Less: Accumulated amortization............ 11,065 6,985
------------- ------------
$ 92,875 18,606
============= ============
Goodwill is amortized over the estimated useful life not to exceed 20 years. The
Company took a non-cash impairment charge of $32,115 for fiscal 2000 as part of
the Company's restructuring (see Note 14 - Restructuring and Other Non-recurring
Charges). Goodwill impairment is measured as the difference between the carrying
value of the goodwill and the discounted cash flows of the operations that gave
rise to the goodwill. There was no non-cash impairment charge in fiscal 2001.
5. Property, Plant and Equipment
Property, plant and equipment consists of the following:
2001 2000
------------- ---------------
Land.............................................................. $ 47,389 17,180
Buildings......................................................... 189,178 67,246
Furniture, fixtures, machinery and equipment...................... 2,234,384 2,307,047
Transportation equipment.......................................... 132,669 135,733
Improvements to leased premises................................... 500,445 469,552
Construction in progress.......................................... 26,432 21,188
------------- ---------------
3,130,497 3,017,946
Less: Accumulated depreciation................................... 2,002,814 2,022,946
------------- ---------------
1,127,683 995,000
Leased property under capital leases, less accumulated
amortization of $34,833 ($32,951 in 2000)..................... 18,971 21,292
------------- ---------------
Net property, plant and equipment................................. $ 1,146,654 1,016,292
============= ===============
The Company took a non-cash charge of $43,277 for fiscal 2001 due to losses on
assets disposed of as a result of store retrofits and took a non-cash impairment
charge of $147,184 for fiscal 2000 as part of the Company's restructuring (see
Note 14 - Restructuring and Other Non-recurring Charges).
F-20
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
6. Comprehensive Income
Comprehensive income differs from net income because of the change in the fair
value of the Company's interest rate swaps in the current year and a
reclassification adjustment of an unrealized gain on investments in the prior
year. Comprehensive income (loss) for fiscal 2001, 2000 and 1999 was $43,724,
$(231,964) and $182,644, respectively.
7. Income Taxes
Income tax expense (benefit) consists of:
Current Deferred Total
-------------- ------------- -------------
2001
Federal..................................... $ (33,422) 58,508 25,086
State....................................... 1,416 1,829 3,245
-------------- ------------- -------------
$ (32,006) 60,337 28,331
============== ============= =============
2000
Federal..................................... $ 111,358 (182,074) (70,716)
State....................................... 4,172 (6,972) (2,800)
-------------- ------------- -------------
$ 115,530 (189,046) (73,516)
============== ============= =============
1999
Federal..................................... $ 79,270 16,110 95,380
State....................................... 17,191 1,574 18,765
-------------- ------------- -------------
$ 96,461 17,684 114,145
============== ============= =============
The following reconciles the expense (benefit) to the Federal statutory income
tax rate:
- --------------------------------------------------------------------------------
2001 2000 1999
-------------- ------------- -------------
Federal statutory income tax rate.................... 35.0% (35.0)% 35.0%
State and local income taxes, net of federal
income tax benefits............................... 2.8 (0.6) 4.4
Tax credits.......................................... (4.0) (0.9) (0.6)
Company owned life insurance (COLI).................. 2.8 0.7
9.6
Goodwill impairment.................................. - -
2.9
Other, net........................................... 1.9 (0.3) (1.0)
-------------- ------------- -------------
38.5% (24.3)% 38.5%
================ ============= =============
The effective tax rate for fiscal 2000 reflects the effects of certain
restructuring expenses and COLI adjustments.
F-21
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
7. Income Taxes, continued
2001 2000 1999
------------- ------------ -------------
Deferred tax assets:
Reserve for insurance claims and self-insurance.......... $ 82,092 79,039 62,429
Reserve for vacant store leases.......................... 21,511 38,308 20,511
Unearned promotional allowance........................... 18,292 5,310 3,143
Reserve for accrued vacations............................ 13,352 13,463 14,225
State net operating loss carry forwards.................. 32,315 17,052 12,929
Excess of book over tax depreciation..................... 10,150 12,032 12,196
Other comprehensive income............................... 991 - -
Excess of book over tax rent expense..................... 997 956 1,084
Excess of book over tax retirement expense............... 21,046 19,452 17,009
Uniform capitalization of inventory...................... 9,291 9,718 9,684
Restructuring costs...................................... 102,375 130,587 -
Other, net............................................... 50,701 52,730 43,213
------------- ------------ -------------
Total gross deferred tax assets........................ 363,113 378,647 196,423
Less: Valuation allowance............................. 29,696 16,489 12,401
------------- ------------ -------------
Net deferred tax assets................................ 333,417 362,158 184,022
------------- ------------ -------------
Deferred tax liabilities:
Excess of tax over book depreciation..................... (84,640) (46,308) (31,098)
Undistributed earnings of the
Bahamas subsidiary..................... (4,783) (4,761) (14,347)
Other comprehensive income............................... - - (1,921)
Other, net............................................... (2,113) (9,863) (26,397)
------------- ------------ -------------
Total gross deferred tax liabilities................... (91,53) (60,932) (73,763)
------------- ------------ -------------
Net deferred tax assets................................ $ 241,881 301,226 110,259
============= ============ =============
The Company believes the results of historical taxable income and the results of
future operations will generate sufficient taxable income to realize the
deferred tax assets.
F-22
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
7. Income Taxes, continued
The Company reserved $30.4 million for taxes and $19.7 million for interest
($42.5 million after tax, or $0.29 per diluted share) after receiving an
unfavorable opinion in October 1999 and a computational decision on January
11, 2000 from the U.S. Tax Court. Additional interest totaling $5.5 million
was accrued in fiscal 2001. Interest will continue to accrue until the
matter is finally resolved. The Tax Court upheld the Internal Revenue
Service's position that interest related to loans on broad-based, company
owned life insurance policies in 1993 was not deductible for income tax
purposes. The Eleventh Circuit Court of Appeals issued an opinion on June
28, 2001 affirming the Tax Court's decision. Congress passed legislation
phasing out such deductions over a three-year period in the fall of 1996.
The Company held such policies and deducted interest on outstanding loans
from March 1993 through December 1997. Management disagrees with the Tax
Court's decision and plans further appeal. While the ultimate outcome of
this litigation cannot be predicted with certainty, in the opinion of
management, the ultimate resolution of this matter will not have any
additional material adverse impact on the Company's financial condition or
results of operations.
8. Debt
2001 2000
---------------- ------------------
Short-term borrowings $ - 235,000
364-day $200,000 revolving credit facility;
interest payable at LIBOR plus 2.5% - -
Five-year $200,000 revolving credit facility;
interest payable at LIBOR plus 2.5% - -
Mortgage note payable; interest at 9.4% and monthly
$22 principal and interest payments and 10.0% of
principal paid annually 1,705 -
Six-year $400,000 term loan; interest payable at
LIBOR plus 2.75% and $1,000
quarterly principal payments 400,000 -
8.875% senior notes due 2008; interest payable
semiannually on April 1 and October 1 300,000
---------------- ------------------
-
---------------- ------------------
Total 701,705 235,000
Less current portion 4,291 235,000
---------------- ------------------
Long-term portion $ 697,414 -
================ ==================
On March 29, 2001, the Company replaced its short-term borrowings with $800
million in Senior Secured Credit Facilities (the "New Facilities,") and issued
$300 million of Senior Unsecured Notes (the "Notes"). The New Facilities consist
of a $200 million 364-day revolving credit facility, a $200 million five-year
revolving credit facility, and a $400 million six-year term loan.
F-23
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
8. Debt, continued
The 364-day revolving credit facility and the five-year revolving credit
facility will be used to fund working capital needs, capital expenditures
and general corporate purposes.
The New Facilities are secured by a first lien on essentially all of the
Company's assets and are guaranteed by the capital stock of the Company's
subsidiaries.
Pricing on the New Facilities is based on the corporate credit ratings from
Standard and Poor's and Moody's Investors Services. Based on the Company's
BBB-/Ba1 corporate ratings, the LIBOR spread on the 364-day and five-year
revolving credit facilities is 2.50%. The Company also pays an unused
commitment fee of 37.5 basis points on the 364-day line of credit and 50
basis points on the five-year line of credit. The LIBOR spread on the
six-year term loan is 2.75% at the Company's current rating.
The Company entered into interest rate swap agreements, which expire in one
to three years on the six-year term loan, that effectively converts the $400
million six-year term loan from variable to fixed rate debt. Under the terms
of these agreements, the Company makes payments at a weighted average
interest rate of 7.54% and receives a variable interest rate based on the
one-month LIBOR. See Note 9 - Derivatives for further discussion of the
Company's interest rate swap activity. The Company incurred approximately
$24.2 million in debt issue costs related to the issuance of the New
Facilities and the Notes. These debt issue costs will be amortized over the
life of the debt as additional interest expense.
The Company had no borrowings outstanding on the 364-day and five-year
revolving credit facilities and $400 million outstanding on the six-year
term loan at June 27, 2001. As of June 27, 2001 the Company had $18.6
million in outstanding letters of credit used to support inventory purchases
and insurance obligations.
The Company issued $300 million in unsecured notes under a shelf
registration statement filed with the Securities and Exchange Commission in
December 2000 (the "2000 Registration Statement"). The Notes are priced at
8.875%, pay interest semiannually on April 1 and October 1 and mature on
April 1, 2008. At, June 27, 2001, the Company's outstanding fixed rate
borrowings approximated fair market value. Additional securities up to $700
million remain available for issuance under the Company's 2000 Registration
Statement.
The New Facilities and Notes contain certain covenants as defined in the
credit agreement and indenture, as amended. The Company was in compliance
with all of these covenants at June 27, 2001.
F-24
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
8. Debt, continued
Aggregate principal maturities on long-term debt and capitalized lease
obligations for each of the twelve-month periods subsequent to June 27, 2001
are as follows:
Long-term
Debt
---------------
2002 $ 4,291
2003 4,288
2004 4,285
2005 4,282
2006 4,279
Thereafter 680,280
---------------
$ 701,705
===============
9. Derivatives
The Company follows Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company
adopted SFAS 133 in the first quarter of 2001. However, the Company had no
derivatives to be measured at the time of adoption.
As part of the New Facilities described in Note 8 - Debt, the Company
obtained a $400 million six-year term loan with a variable interest rate
based on the one-month LIBOR. The Company utilizes derivative financial
instruments to reduce its exposure to market risks from changes in interest
rates. The instruments primarily used to mitigate these risks are interest
rate swaps. All derivative instruments held by the Company are designated as
highly effective cash flow hedges of interest rate risk on variable rate
debt and, accordingly, the change in fair value of these instruments is
recorded as a component of other comprehensive income.
The Company is exposed to credit related losses in the event of
nonperformance by counterparties to these financial instruments. However,
counterparties to these agreements are major financial institutions, and the
risk of loss due to nonperformance is considered by management to be
minimal. The Company does not hold or issue interest rate swaps for trading
purposes.
F-25
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
9. Derivatives, continued
The Company has entered into three interest rate swap agreements to hedge
the interest rate risk associated with the $400 million outstanding in
variable rate debt. The purpose of these swaps is to fix interest rates on
variable rate debt and reduce certain exposures to interest rate
fluctuation. At June 27, 2001, the Company had interest rate swaps with a
notional amount of $400 million. The notional amounts do not represent a
measure of exposure of the Company.
The maturity and interest rate on the interest rate swaps are shown in the
following table. The Company will pay the counterparty interest at a fixed
rate as noted and the counterparty will pay the Company interest at a
variable rate equal to the one-month LIBOR (3.75% as of June 27, 2001).
Notional
Amount Maturity Fixed Rate
------------------- ------------------- -------------------
$ 150,000 March 29, 2002 4.60%
150,000 March 29, 2003 4.81%
100,000 March 29, 2004 5.03%
-------------------
$ 400,000
===================
The fair value of the Company's interest rate swaps is obtained from dealer
quotes. These values represent the estimated amount the Company would
receive or pay to terminate the agreement, taking into consideration the
difference between the contract rate of interest and rates currently quoted
for agreements of similar terms and maturities. At June 27, 2001, the fair
value of the Company's interest rate swaps resulted in an unrealized loss of
$2.6 million ($1.6 million, net of tax). The Company recorded the unrealized
loss in accumulated other comprehensive income in shareholders' equity.
During the next 12 months, the Company will incur interest expense,
including the effect of interest rate swaps at a weighted average rate of
7.54% on the $400 million outstanding in variable rate debt.
The Company measures effectiveness by the ability of interest rate swaps to
offset cash flows associated with changes in the one-month LIBOR. To the
extent that any of these contracts are not considered effective, any changes
in fair value relating to the ineffective portion of these contracts are
immediately recognized in income. However, all the contracts were effective
during the period and no gain or loss was reported in earnings.
F-26
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
10. Stock Compensation Plans
The Company has various stock option, stock purchase and incentive plans to
reward employees and key executives of the Company. Under SFAS 123, other
than normal purchase discounts under the employee stock purchase plan, the
fair value of restricted stock and options at date of grant under the
restricted stock plan and the key employee stock option plan are charged to
compensation costs over the vesting or performance period.
Compensation cost charged against income was $8.0 million and $2.5 million
in fiscal 2001 and 1999, respectively. Compensation costs resulted in income
of $1.1 million in fiscal 2000. The primary reason for the income in fiscal
2000 was due to the reversal of compensation expense previously recognized
for restricted stock that did not vest.
The per share weighted fair value of the stock options granted in fiscal
2001 and 2000 is $3.09 and $6.62, respectively. These amounts were estimated
on the date of the grant using the Black-Scholes option pricing model under
the following assumptions: risk-free interest rate of 6.2% and 6.7%;
dividend yield of 7.0% and 5.4%; expected lives of 6.5 and 7 years; and
volatility of 34.0% and 38.0%, respectively.
(a) Stock Purchase Plan: The Company has a stock purchase plan in
effect for associates. Under the terms of this Plan, the Company
may grant options to purchase restricted shares of the Company's
common stock at a price not less than the lesser of 85% of the
fair market value at the date of grant or 85% of the fair market
value at the time of exercise. There are 5,481,835 shares of the
Company's common stock available for the grant of options under
the Plan. Loans to associates for the purchase of the Company's
common stock are reported in the consolidated financial statements
as a reduction of Shareholders' Equity, rather than as a current
asset. The total number of loans outstanding as of June 27, 2001
were $1.9 million. No loans were outstanding at June 28, 2000.
F-27
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
10. Stock Compensation Plans, continued
(b) Restricted Stock Plan: The Company has a restricted stock plan.
Under this plan, the Company issues restricted shares of the
Company's common stock to certain eligible key employees
determined by the Company's compensation committee. The following
table shows the number of shares issued, forfeited and
outstanding.
Weighted Number of shares
Average
Issue Price Total FY 2001 FY 2000 FY 1999
----------------- ------------------------------------------------------
1999 Plan
---------
Issued $ 41.12 252,097 - - 252,097
Forfeited 232,402 169,263 18,592 44,547
------------
Outstanding 19,695
------------
2000 Plan
---------
Issued $ 25.75 239,030 - 239,030 -
Forfeited 127,958 34,834 93,124 -
------------
Outstanding 111,072
------------
2001 Plan
---------
Issued $ 15.22 103,164 103,164 - -
Forfeited 2,192 2,192 - -
Shares Vested 32,254 32,254 - -
------------
Outstanding 68,718
------------
Shares outstanding, June 27, 2001 199,485
============
The vesting of shares issued prior to January 2000 is contingent upon certain
specified goals being attained over a three-year period. The shares issued after
such date vest over time. Some of the shares issued vest one-third each year
beginning with the third year from the date of issue, based on continued
employment. Some of the shares issued vest one-third each year beginning on the
first anniversary of the date of grant, based on continued employment. Other
shares issued vest one-fifth each year beginning on the first anniversary date
of the recipient's employment with the company, based on continued employment.
F-28
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
10. Stock Compensation Plans, continued
(c) Stock Option Plans: The Company has made shares of the Company's
stock available for grant under stock plans described below.
1. Key Employee: Under the Company's Key Employee Stock Option
Plan, 5,000,000 shares of the Company's common stock were made
available for grant at an exercise price of no less than the
market value at date of grant. Options granted under this plan
prior to June 1, 1998 are earned over a three year period, if
certain performance goals are attained; and options granted
after June 1, 1998 but before January, 2000 also are earned
after three years, if certain performance goals are attained.
Options granted in or after January 2000 become exercisable
over time. Some of these options vest over a three-year period
with one-third of the options vesting each year beginning on
June 15, 2001. Other options vest over a five-year period with
one-fifth of options vesting each year beginning on the first
anniversary date of the recipient's employment with the
company.
2. Retention and Attraction Program: As part of the Company's
retention and attraction program, 1,200,000 shares of the
Company's common stock were made available for grant to key
employees beginning on January 28, 2000 at an exercise price
equal to the Company's stock price at date of grant. Options
granted as part of the program are earned over a five-year
period, with one-fifth of the options vesting each year
beginning on January 28, 2001 if the associate remains employed
in his or her position.
3. CEO Stock Options: Pursuant to an employment agreement, the
President and Chief Executive Officer of the Company received
an option to purchase 500,000 shares of the Company's common
stock at an exercise price of $27.00 per share. Currently all
500,000 of the options are exercisable.
4. Directors' Stock Plan: The Company has a stock plan for
non-employee directors. Under this plan, the Company may issue
stock or grant options for the purchase of the Company's common
stock to eligible non-employee directors determined by the
Company's Corporate Governance Committee. A total of 500,000
shares of the Company's common stock were made available for
issuance and option grants. Stock options issued under the plan
were exercisable immediately at an exercise price equal to the
Company's stock price at the date of grant.
F-29
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
10. Stock Compensation Plans, continued
(c) Stock Option Plans, continued
5. Options Outstanding:
Changes in options during the years ended June 27, 2001, June
28, 2000 and June 30, 1999, were as follows:
Weighted
Average
Number of Option Price
Shares Per Share
------------------ ----------------------
Outstanding - June 24, 1998................... 332,000 $ 29.76
Granted....................................... 181,277 41.51
Exercised..................................... (50,000) 21.06
Forfeited..................................... (25,842) 35.65
-------------- --------------
Outstanding - June 30, 1999................... 437,435 35.27
Granted....................................... 1,828,306 23.34
Exercised..................................... (50,000) 22.44
Forfeited..................................... (886,234) 27.43
-------------- --------------
Outstanding - June 28, 2000................... 1,329,507 24.57
Granted....................................... 977,158 14.71
Exercised..................................... (5,000) 14.25
Forfeited..................................... (74,574) 19.37
-------------- --------------
Outstanding - June 27, 2001................... 2,227,091 $ 20.44
============== ==============
Exercisable - June 27, 2001.................. 945,587 $ 21.81
============== ==============
Shares available for additional grant......... 3,920,370
==============
The following table sets forth information regarding options
outstanding at June 27, 2001.
Weighted Weighted
Weighted Average Average
Average Remaining Number Exercise Prices
Number of Exercise Life Currently For Currently
Range Options Price (Years) Exercisable Exercisable
------------------------------------------------------------------------------------------------
$ 14.25 to
20.00 1,554,208 $ 16.49 6.9 444,983 $ 15.97
$ 21.31 to
27.00 503,487 26.96 8.4 500,329 27.00
$ 33.03 to
41.51 169,396 37.37 3.8 275 33.03
------------ ---------- -------------- --------- --------
2,227,091 $ 20.44 7.0 945,587 $ 21.81
============ ========== ============== ========= ========
F-30
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
11. Leases
(a) Leasing Arrangements: There were 1,468 leases in effect on store
locations and other properties at June 27, 2001. Of these 1,468
leases, 25 store leases and 3 warehouse and manufacturing facility
leases are classified as capital leases. Substantially all store
leases will expire during the next twenty years and the warehouse
and manufacturing facility leases will expire during the next 23
years. However, in the normal course of business, it is expected
that these leases will be renewed or replaced by leases on other
properties.
The rental payments on substantially all store leases are based on
a minimum rental plus a contingent rental, which is based on a
percentage of the store's sales in excess of stipulated amounts.
Most of the Company's leases contain renewal options for five-year
periods at fixed rentals.
(b) Leases: Leased property under capital leases by major classes are:
2001 2000
---- ----
Store facilities..................................... $ 38,082 38,521
Warehouses and manufacturing facilities.............. 15,722 15,722
------------ ------------
53,804 54,243
Less: Accumulated amortization....................... 34,833 32,951
------------
------------
$ 18,971 21,292
============ ============
F-31
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
11. Leases, continued
The following is a schedule by year of future minimum lease payments on open
facilities under capital and operating leases, together with the present
value of the net minimum lease payments as of June 27, 2001.
Capital Operating
------- ---------
Fiscal Year:
2002............................................. $ 7,246 356,001
2003............................................. 7,246 352,003
2004............................................. 6,640 346,590
2005............................................. 6,083 336,752
2006............................................. 6,103 323,039
Later years...................................... 21,628 2,987,575
----------- --------------
Total minimum lease payments.................................. 54,946 4,701,960
==============
Less: Amount representing estimated
taxes, maintenance and insurance
costs included in total minimum
lease payments....................................... 970
-----------
Net minimum lease payments.................................... 53,976
Less: Amount representing interest........................... 21,753
-----------
Present value of net minimum lease payments................... $ 32,223
===========
Rental payments and contingent rentals under operating leases are as
follows:
2001 2000 1999
---- ---- ----
Minimum rentals............................................... $ 347,130 323,117 341,296
Contingent rentals............................................ 878 1,380 1,581
----------- ----------- -----------
$ 348,008 324,497 342,877
=========== =========== ===========
An expense is recorded for the present value of expected future net rent
payments in the year a store closes. The accrued balance at June 27, 2001
for stores that closed not related to the restructuring is $59,381.
F-32
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
12. Shareholders' Equity
On April 19, 2000, the Board of Directors authorized the repurchase, in
either open market or private transactions, of up to 10,000,000 shares of
the outstanding common stock in addition to the 5,000,000 share repurchase
program announced on October 6, 1999. From October 6, 1999 through September
20, 2000, the Company repurchased 9,034,400 shares having an aggregate cost
of $179.0 million or $19.82 per share. No shares were repurchased under the
program during the three quarters ended June 27, 2001.
During the second quarter of fiscal 2001, approximately 910,000 shares were
purchased for cash and credit by associates under the Revised Winn-Dixie
Stock Purchase Plan for Employees, for an aggregate value of $13.7 million.
The total amount of cash received at the time of sale was $10.3 million,
with the remainder to be paid by associates over 12 months beginning January
2001.
13. Commitments and Contingent Liabilities
(a) Associate Benefit Programs: The Company has a noncontributory,
trusteed profit sharing retirement program and a contributory,
trusteed 401k retirement program, which are in effect for eligible
associates and may be amended or terminated at any time. Charges
to earnings for contributions to the programs amounted to $42,317,
$17,625 and $67,250 in 2001, 2000 and 1999, respectively.
(b) Defined Benefit Plan: The Company has a Management Security Plan
(MSP), which is a non-qualified defined benefit plan providing
disability, death and retirement benefits to 406 qualified active
associates of the Company and 650 former participants. Total MSP
cost charged to operations was $6,686, $6,104 and $6,132 in 2001,
2000 and 1999, respectively. The projected benefit obligation at
June 27, 2001 was approximately $50,822. The effective discount
rate used in determining the net periodic MSP cost was 8.0% for
2001, 2000 and 1999.
Life insurance policies, which are not considered as MSP assets
for liability accrual computations, were purchased to fund the MSP
payments. These insurance policies are shown on the balance sheet
at their cash surrender values, net of policy loans aggregating
$224,593 and $210,655 at June 27, 2001 and June 28, 2000,
respectively.
(c) Supplemental Retirement Plan: The Company has a deferred
compensation Supplemental Retirement Plan in effect for eligible
management associates. The Company recorded an asset and liability
at June 27, 2001 and June 28, 2000 in the amount of $16.6 million
and $17.0 million, respectively.
F-33
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
13. Commitments and Contingent Liabilities, continued
(d) Litigation: There are pending against the Company various claims
and lawsuits arising in the normal course of business, including
suits charging violations of certain civil rights laws and various
proceedings arising under federal, state or local regulations
protecting the environment.
Among the suits charging violations of certain civil rights laws,
there are actions that purport to be class actions, and which
allege sexual harassment, retaliation and/or a pattern and
practice of race-based and gender-based discriminatory treatment
of employees and applicants. The plaintiffs seek, among other
relief, certification of the suits as proper class actions,
declaratory judgment that the Company's practices are unlawful,
back pay, front pay, benefits and other compensatory damages,
punitive damages, injunctive relief and reimbursement of
attorneys' fees and costs.
The Company is committed to full compliance with all applicable
civil rights laws. Consistent with this commitment, the Company
has firm and long-standing policies in place prohibiting
discrimination and harassment. The Company denies the allegations
of the various complaints and is vigorously defending the actions.
While the ultimate outcome of litigation cannot be predicted with
certainty, in the opinion of management, the ultimate resolution
of these actions will not have a material adverse effect on the
Company's financial condition or results of operations.
See Note 7 - Income Taxes with respect to certain litigation
pending before the U.S. Tax Court.
F-34
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
14. Restructuring and Other Non-recurring Charges
On April 20, 2000, the Board of Directors approved and the Company announced
a major restructuring to improve the support of the retail stores and the
Company's overall efficiency.
As a result of the restructuring, the Company recorded expenses of
approximately $396 million ($256 million after tax or $1.76 per diluted
share) in the fourth quarter of fiscal 2000. Charges totaling $147.2 million
($90.6 million after tax or $0.64 per diluted share) were recorded in the
current year. A summary of the restructuring charges and the remaining
accrual follows:
Other Asset
Employee Lease Location Removal
Termination Termination Closing Asset & Related
Costs Costs Costs Impairment Costs Total
--------------- --------------- --------------- ------------- -------------- --------------
Additions $ 16,713 189,295 10,722 179,299 - $ 396,029
Utilization (7,546) (2,628) (10,647) (179,299) - (200,120)
--------------- --------------- --------------- ------------- -------------- --------------
Balance
at 6/28/00 $ 9,167 186,667 75 - - $ 195,909
Additions 2,153 19,889 12,348 43,277 71,634 149,301
Adjustments (2,018) - (38) - - (2,056)
Utilization (9,302) (44,426) (12,385) (43,277) (71,634) (181,024)
--------------- --------------- --------------- ------------- -------------- --------------
Balance at
6/27/01 $ - 162,130 - - - $ 162,130
=============== =============== =============== ============= ============== ==============
The adjustment to employee termination costs represents the accrued
severance for employees in closed stores where the employees subsequently
became ineligible for severance. The addition to other location closing
costs includes travel expenses, inventory retagging and employee relocation
costs in connection with the restructuring. Asset removal and related costs
and asset impairments are the expenses involved in the retrofit of selected
stores. In addition, other asset impairments were recorded as part of the
restructuring. The addition to lease termination costs reflects the updated
estimate of the remaining liability.
The following table shows the number of people that are eligible for
severance under the restructuring plan.
Manufacturing and
Retail Support Facilities Total
------------ ---------------------- ---------
Eligible for severance 3,351 655 4,006
Number paid 636 240 876
Became ineligible 1,275 63 1,338
------------ ---------------------- ---------
Number eligible at June 28, 2000 1,440 352 1,792
Number paid 417 258 675
Became ineligible 1,023 94 1,117
------------ ---------------------- ---------
Number eligible at June 27, 2001 - - -
============ ====================== =========
F-35
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
14. Restructuring and Other Non-recurring Charges, continued
As part of the Company's restructuring in fiscal year 2000, all stores were
evaluated based on current and projected profitability. As part of this
evaluation, the Company performed an impairment review of its long-lived
assets. During this review, the Company identified impairment losses for
assets to be disposed of and assets to be held and used.
The impairment charge for assets to be disposed of related primarily to the
carrying value of equipment and leasehold improvements for the stores,
division offices, warehouse and manufacturing plants that were closed as
part of the restructuring discussed above. The impairment charge was
determined using the fair value less the cost to sell. The amount of the
impairment charge for assets to be disposed of included in the restructuring
charge for fiscal 2000 was $77.9 million.
The impairment charge for assets to be held and used related primarily to
the carrying value of equipment, leasehold improvements and goodwill for
certain stores that will continue to be operated by the Company. Projected
future undiscounted cash flows were used to determine whether the assets
were impaired. For the assets that were determined to be impaired, the
impairment charge was calculated to be the difference between the carrying
value of the asset and the greater of discounted cash flows and estimated
fair value of the asset. Goodwill impairment was measured as the difference
between the carrying value of the goodwill and the discounted cash flows of
the operations that gave rise to the goodwill. As a result, an impairment
charge of $101.4 million related to assets to be held and used was
recognized in fiscal 2000, reducing the carrying value of fixed assets and
goodwill by $69.3 million and $32.1 million, respectively.
Any remaining expenditures relating to retrofits are not considered to be
material to the Company's operations and will be included as a component of
operating and administrative expense.
15. Business Combinations
In October 2000, the Company acquired nine Gooding's supermarkets in
Orlando, Florida. The acquisition was accounted for as a purchase. On
January 11, 2001, the Company acquired 68 stores, 32 fuel stations and other
assets owned by Jitney Jungle Stores of America, Inc. The acquired assets
are located in Mississippi, Alabama and Louisiana. The acquisition was
accounted for as a purchase. Proforma results of the Gooding's and Jitney
Jungle acquisitions, assuming the transactions were consummated at the
beginning of 2001 and 2000, would not be materially different from the
results reported.
F-36
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
16. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations
for the years ended June 27, 2001 and June 28, 2000:
Quarters Ended
------------------------------------------------------------
Sept. 20 Jan. 10 April 4 June 27
2001 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks)
---- ---------- ---------- ---------- ----------
Net sales................................. $ 2,940,862 3,956,338 3,016,312 2,989,861
Gross profit on sales..................... $ 746,899 1,061,114 813,829 832,185
Net earnings ............................. $ 9,413 12,169 10,724 13,005
Basic earnings per share................. $ 0.07 0.09 0.08 0.09
Diluted earnings per share............... $ 0.07 0.09 0.08 0.09
Net LIFO charge (credit).................. $ 1,845 2,460 1,845 (13,504)
Net LIFO charge (credit) per diluted share $ 0.01 0.02 0.01 (0.10)
Dividends per share....................... $ 0.170 0.340 0.255 0.255
Market price range........................ $ 15.44-13.44 23.13-13.56 30.35-16.88 33.12-25.01
Quarters Ended
------------------------------------------------------------
Sept. 22 Jan. 12 April 5 June 28
2000 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks)
---- ---------- ---------- ---------- ----------
Net sales................................. $ 3,162,171 4,276,024 3,199,356 3,059,996
Gross profit on sales..................... $ 869,592 1,169,681 865,419 822,358
Net earnings (loss)....................... $ 22,069 (18,793) 10,273 (242,444)
Basic earnings (loss) per share........... $ 0.15 (0.13) 0.07 (1.70)
Diluted earnings (loss) per share......... $ 0.15 (0.13) 0.07 (1.70)
Net LIFO charge........................... $ 1,833 2,444 1,833 3,173
Net LIFO charge per diluted share......... $ 0.01 0.02 0.01 0.02
Dividends per share....................... $ 0.170 0.340 0.255 0.255
Market price range........................ $ 41.94-31.31 33.00-22.31 24.00-14.38 21.31-14.25
F-37
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
16. Quarterly Results of Operations (Unaudited), continued
During 2001 and 2000, the fourth quarter results reflect a change from the
estimate of inflation used in the calculation of LIFO inventory to the
actual rate experienced by the Company of 1.0% to (0.8)% and 1.0% to 1.1%,
respectively.
Fourth Quarter Results of
-------------------------
Operations
----------
June 27, 2001 June 28, 2000
(12 Weeks) (12 Weeks)
------------------ -----------------
Net sales............................................... $ 2,989,861 3,059,996
Cost of sales........................................... 2,157,676 2,237,638
----------------- -----------------
Gross profit on sales................................... 832,185 822,358
Operating and administrative expenses................... 739,776 793,417
Restructuring and other non-recurring charges........... 56,497 396,029
----------------- -----------------
Operating income (loss)................................. 35,912 (367,088)
Interest expense........................................ 14,800 6,784
----------------- -----------------
Earnings (loss) before income taxes..................... 21,112 (373,872)
Income taxes............................................ 8,107 (131,428)
-----------------
-----------------
Net earnings (loss)..................................... $ 13,005 (242,444)
================= =================
F-38
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
17. Guarantor Subsidiaries
During the second quarter of fiscal 2001, the Company filed a registration
statement with the Securities and Exchange Commission to authorize the
issuance of up to $1 billion in debt securities. The debt securities may be
jointly and severally, fully and unconditionally guaranteed by substantially
all of the Company's operating subsidiaries. The guarantor subsidiaries are
100% owned subsidiaries of the Company. Condensed consolidating financial
information for the Company and its guarantor subsidiaries is as follows.
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Amounts in thousands)
52 Weeks ended June 27, 2001
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- ---------------
Net sales $ 5,735,327 7,168,046 - 12,903,373
Cost of sales 4,217,260 5,232,086 - 9,449,346
--------------- --------------- --------------- ---------------
Gross profit 1,518,067 1,935,960 - 3,454,027
Operating & administrative expenses 1,298,295 1,882,002 - 3,180,297
Restructuring and other non-recurring charges 80,410 66,835 - 147,245
--------------- --------------- --------------- ---------------
Operating income (loss) 139,362 (12,877) - 126,485
Equity in (loss) of consolidated subsidiaries (5,036) - 5,036 -
Interest expense 52,843 - - 52,843
--------------- --------------- --------------- ---------------
Earnings (loss) before income taxes 81,483 (12,877) 5,036 73,642
Income taxes 36,172 (7,841) - 28,331
--------------- --------------- --------------- ---------------
Net earnings (loss) $ 45,311 (5,036) 5,036 45,311
=============== =============== =============== ===============
52 Weeks ended June 28, 2000
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- ---------------
Net sales $ 6,012,112 7,685,435 - 13,697,547
Cost of sales 4,426,602 5,543,895 - 9,970,497
--------------- --------------- --------------- ---------------
Gross profit 1,585,510 2,141,540 - 3,727,050
Operating & administrative expenses 1,525,112 2,061,239 - 3,586,351
Restructuring and other non-recurring charges 112,869 283,160 - 396,029
--------------- --------------- --------------- ---------------
Operating loss (52,471) (202,859) - (255,330)
Equity in (loss) of consolidated subsidiaries (155,776) - 155,776 -
Interest expense 44,132 2,949 - 47,081
--------------- --------------- --------------- ---------------
Loss before income taxes (252,379) (205,808) 155,776 (302,411)
Income taxes (23,484) (50,032) - (73,516)
--------------- --------------- --------------- ---------------
Net loss $ (228,895) (155,776) 155,776 (228,895)
=============== =============== =============== ===============
F-39
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
17. Guarantor Subsidiaries, continued
53 Weeks ended June 30, 1999
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- ---------------
Net sales $ 6,103,021 8,033,482 - 14,136,503
Cost of sales 4,490,544 5,742,611 - 10,233,155
--------- --------- --------- ----------
Gross profit 1,612,477 2,290,871 - 3,903,348
Operating & administrative expenses 1,461,761 2,115,459 - 3,577,220
Restructuring and other non-recurring charges - - - -
--------- --------- --------- ---------
Operating income 150,716 175,412 - 326,128
Equity in earnings of consolidated subsidiaries 105,687 - (105,687) -
Interest expense 26,086 3,562 - 29,648
--------- --------- --------- ---------
Earnings before income taxes 230,317 171,850 (105,687) 296,480
Income taxes 47,982 66,163 - 114,145
--------- --------- --------- ---------
Net earnings $ 182,335 105,687 (105,687) 182,335
========= ========= ========= =========
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Amounts in thousands except par value)
Year ended June 27, 2001
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- ----------------
Merchandise inventories $ 311,974 886,628 - 1,198,602
Other current assets 256,186 144,413 - 400,599
--------------- --------------- ---------------- ----------------
Total current assets 568,160 1,031,041 - 1,599,201
Property, plant and equipment, net 424,478 722,176 - 1,146,654
Other non-current assets 238,032 57,783 - 295,815
Investments in and advances to/from subsidiaries 935,225 - (935,225) -
--------------- --------------- ---------------- ----------------
Total assets $ 2,165,895 1,811,000 (935,225) 3,041,670
=============== =============== ================ ================
Accounts payable $ 191,778 408,072 - 599,850
Other current liabilities 283,592 266,465 - 550,057
--------------- --------------- ---------------- ----------------
Total current liabilities 475,370 674,537 - 1,149,907
Long-term debt 697,414 - - 697,414
Other non-current liabilities 221,457 201,238 - 422,695
Common stock of $1 par value 140,466 6,240 (6,240) 140,466
Retained earnings 631,188 928,985 (928,985) 631,188
--------------- --------------- ---------------- ----------------
Total liabilities and stockholders' equity $ 2,165,895 1,811,000 (935,225) 3,041,670
=============== =============== ================ ================
F-40
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
17. Guarantor Subsidiaries, continued
Year ended June 28, 2000
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- ----------------
Merchandise inventories $ 354,424 786,981 - 1,141,405
Other current assets 202,605 127,912 - 330,517
--------------- --------------- ---------------- ----------------
Total current assets 557,029 914,893 - 1,471,922
Property, plant and equipment, net 423,346 592,946 - 1,016,292
Other non-current assets 242,454 16,425 - 258,879
Investments in and advances to/from subsidiaries 724,970 - (724,970) -
--------------- --------------- ---------------- ----------------
Total assets $ 1,947,799 1,524,264 (724,970) 2,747,093
=============== =============== ================ ================
Accounts payable $ 352,732 223,145 - 575,877
Short-term borrowings 235,000 - - 235,000
Other current liabilities 304,608 306,068 - 610,676
--------------- --------------- ---------------- ----------------
Total current liabilities 892,340 529,213 - 1,421,553
Other non-current liabilities 187,624 270,081 - 457,705
Common stock of $1 par value 140,830 6,285 (6,285) 140,830
Retained earnings 727,005 718,685 (718,685) 727,005
--------------- --------------- ---------------- ----------------
Total liabilities and stockholders' equity $ 1,947,799 1,524,264 (724,970) 2,747,093
=============== =============== ================ ================
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year ended June 27, 2001
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- --------------- ---------------- ----------------
Net cash provided by operating activities $ 127,529 117,359 - 244,888
-------------- --------------- ---------------- ----------------
Purchases of property, plant and equipment, net (69,348) (243,971) - (313,319)
Increase in other assets (218,241) (4,205) 215,927 (6,519)
Acquisitions, net of cash acquired (30,942) (92,811) - (123,753)
-------------- --------------- ---------------- ----------------
Net cash used in investing activities (318,531) (340,987) 215,927 (443,591)
-------------- --------------- ---------------- ----------------
Decrease in short-term borrowings (235,000) - - (235,000)
Proceeds from issuance of long-term debt 700,000 - - 700,000
Purchases of common stock (17,003) - - (17,003)
Dividends paid (142,853) - - (142,853)
Other (18,163) 219,134 (215,927) (14,956)
-------------- --------------- ---------------- ----------------
Net cash provided by financing activities 286,981 219,134 (215,927) 290,188
-------------- --------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents 95,979 (4,494) - 91,485
Cash and cash equivalents at the beginning of the year 15,157 14,419 - 29,576
-------------- --------------- ---------------- ----------------
Cash and cash equivalents at end of the year $ 111,136 9,925 - 121,061
============== =============== ================ ================
F-41
WINN DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
17. Guarantor Subsidiaries, continued
Year ended June 28, 2000
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- --------------- ---------------- ----------------
Net cash (used in) provided by operating activities $ (7,582) 750,861 - 743,279
-------------- --------------- ---------------- ----------------
Purchases of property, plant and equipment, net (90,857) (122,133) - (212,990)
Decrease in other assets 638,496 7,375 (628,999) 16,872
-------------- --------------- ---------------- ----------------
Net cash provided by (used in) investing activities 547,639 (114,758) (628,999) (196,118)
-------------- --------------- ---------------- ----------------
Decrease in short-term borrowings (230,000) - - (230,000)
Purchases of common stock (162,272) - - (162,272)
Dividends paid (148,966) - - (148,966)
Other (1,510) (628,582) 628,999 (1,093)
-------------- --------------- ---------------- ----------------
Net cash used in financing activities (542,748) (628,582) 628,999 (542,331)
-------------- --------------- ---------------- ----------------
(Decrease) increase in cash and cash equivalents (2,691) 7,521 - 4,830
Cash and cash equivalents at the beginning of the year 17,848 6,898 - 24,746
-------------- --------------- ---------------- ----------------
Cash and cash equivalents at end of the year $ 15,157 14,419 - 29,576
============== =============== ================ ================
Year ended June 30, 1999
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- --------------- ----------------
----------------
Net cash provided by operating activities $ 121,999 314,362 - 436,361
-------------- --------------- ---------------- ----------------
Purchases of property, plant and equipment, net (140,706) (193,577) - (334,283)
Decrease (increase) in other assets 120,159 14,294 (135,311) (858)
-------------- --------------- ---------------- ----------------
Net cash used in investing activities (20,547) (179,283) (135,311) (335,141)
-------------- --------------- ---------------- ----------------
Increase in short-term borrowings 45,000 - - 45,000
Purchases of common stock (1,337) - - (1,337)
Dividends paid (151,231) - - (151,231)
Other 7,078 (134,861) 135,311 7,528
-------------- --------------- ---------------- ----------------
Net cash used in financing activities (100,490) (134,861) 135,311 (100,040)
-------------- --------------- ---------------- ----------------
Increase in cash and cash equivalents 962 218 - 1,180
Cash and cash equivalents at the beginning of the year 16,886 6,680 - 23,566
-------------- --------------- ---------------- ----------------
Cash and cash equivalents at end of the year $ 17,848 6,898 - 24,746
============== =============== ================ ================
The Company allocates all cost incurred by its headquarters which is not
specifically indentifiable to each subsidiary based on its relative size to the
Company as a whole. Taxes payable and deferred taxes are obligations of the
Company. Expenses related to both current and deferred income taxes are
allocated to each subsidiary based on the consolidated company's effective tax
rates.
Expenses incurred by the guarantor subsidiaries, if they operated on a
stand-alone basis, may or may not have been higher were it not for the benefit
derived from the related party transactions and the headquarters functions
described above.
F-42
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors
Winn-Dixie Stores, Inc.:
Under date of August 8, 2001, we reported on the consolidated balance sheets of
Winn-Dixie Stores, Inc. and subsidiaries as of June 27, 2001 and June 28, 2000,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 27, 2001,
as contained in the annual report on Form 10-K for the year 2001. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index on page 15 of the annual report on Form 10-K for the year
2001. This consolidated financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, the consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Jacksonville, Florida
August 8, 2001
S-1
Schedule II
-----------
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended June 27, 2001, June 28, 2000 and June 30, 1999
(Amounts in thousands)
Balance at Additions Deductions Balance at
beginning charged from end
Description of year to income reserves of year
- ------------------------------------------------------ ------------ ----------- ------------ ------------
Year ended June 27, 2001:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 3,822 17,024 16,911 3,935
============ =========== ============ ============
Year ended June 28, 2000:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 3,615 19,021 18,814 3,822
============ =========== ============ ============
Year ended June 30, 1999:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 2,623 14,506 13,514 3,615
============ =========== ============ ============
S-2