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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 24, 1998
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 of 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
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. [ X ]
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 24,
1998, as reported on the New York Stock Exchange was approximately
$4,295,684,979. 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 24, 1998, registrant had outstanding 148,530,736 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy
Statement in respect to the 1998 Annual Meeting of Shareholders are incorporated
by reference in Part III hereof, as more specifically described herein.
<PAGE>
TABLE OF CONTENTS
Page
Number
PART I
Business.................................................................... 1
Properties.................................................................. 5
Legal Proceedings........................................................... 6
Submission of Matters to a Vote of Security Holders......................... 6
Executive Officers of the Registrant........................................ 7
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 Supplementary 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 August 26, 1998, in connection with its Annual Meeting of
Shareholders................................................................ 9
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 9
Signatures.................................................................. 13
<PAGE>
PART I
ITEM 1: BUSINESS
General
Winn-Dixie Stores, Inc., organized in Florida on December 26, 1928, is
a major food retailer with 1,168 stores in fourteen states and the Bahama
Islands. According to published reports of sales at June 24, 1998, the Company
is one of the nation's largest supermarket retailers.
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.
Financial information on industry segments and lines of business is
omitted because, apart from the principal business of operating retail
self-service food stores, the Company has no other lines of business or industry
segments.
Store Formats and Business Strategy
The business of the Company is the operation of a chain of retail
self-service food stores which sell groceries, meats, seafood, fresh produce,
deli/bakery, pharmaceuticals and general merchandise items. The Company's stores
offer broad lines of merchandise, including nationally advertised and private
label brands and unbranded merchandise (principally meats, seafood and produce),
and generally operate on the basis of competitive pricing. Food items sold
include dry groceries, dairy products, baked goods, meats, poultry, fish, fresh
fruit, vegetables, frozen foods and other items commonly marketed by retail food
stores. The Company's stores also sell many general merchandise items, such as
magazines, soaps, paper products, health and cosmetic products, hardware and
numerous small household items. Many locations have ancillary departments such
as pharmacies, photo labs, dry cleaners and in-store banks. At June 24, 1998,
the Company operated 1,168 retail stores of which 427 were located in Florida,
126 in North Carolina, 119 in Georgia, 101 in Alabama, 77 in South Carolina, 77
in Louisiana, 67 in Texas, 61 in Kentucky, 35 in Virginia, 23 in Tennessee, 20
in Ohio, 15 in Mississippi, 13 in the Bahamas, 5 in Oklahoma and 2 in Indiana.
Such stores were operated under the names of "Winn-Dixie" (405), "Winn-Dixie
Marketplace" (726), "Thriftway" (26), "The City Meat Markets" (10) and "Buddies"
(1).
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:
1
<PAGE>
ITEM 1: BUSINESS, continued
LOCATION FACILITIES
- -------------------------------------------------------------------------------
ALABAMA Montgomery Two distribution centers; Plants: milk
bottling and frozen
pizza
FLORIDA Jacksonville Two distribution centers and a general
merchandise distribution center; Plants:
detergents; paper bags; and coffee, tea
and spices
Madison Plant: meat processing
Miami Distribution center; Plant: milk bottling
Orlando Distribution center
Bartow Plant: egg processing
Plant City Plants: ice cream and milk bottling
Pompano Distribution center
Sarasota Distribution center
Tampa Distribution center
GEORGIA Atlanta Distribution center
Fitzgerald Plants: jams, jellies, mayonnaise, salad
dressing, peanut butter and condiments;
canned and bottled carbonated beverages
Gainesville Plants: oleomargarine; natural cheese
cutting and wrapping, processed cheese and
pimento cheese
Valdosta Plants: crackers and cookies; and snacks
KENTUCKY Louisville Distribution center
LOUISIANA New Orleans Distribution center
Hammond Distribution center; Plant: milk bottling
NORTH CAROLINA Charlotte Distribution center
Raleigh Distribution center
High Point Plants: milk bottling and cultured
products
SOUTH CAROLINA Greenville General merchandise distribution center;
Plants: ice cream and milk bottling
TEXAS Fort Worth Distribution center and a general
merchandise distribution center; Plant:
milk bottling
BAHAMAS Nassau Distribution center
2
<PAGE>
ITEM 1: BUSINESS, continued
An insignificant portion of the production of the manufacturing plants
is sold to others.
Types of products produced by the Company for sale in its stores are
described above. Services provided by the Company such as check cashing are
incidental to the total business.
The Company has not publicly announced, or otherwise made public,
information about any new product or industry segment which would require the
investment of a material amount of the assets of the Company or which otherwise
is material.
Sources of available raw materials are factors which do not affect the
Company in any different manner than they affect other manufacturers and
processors of the goods identified.
Patents and trademarks owned by the Company are not of material
importance to its operations.
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.
The Company and other food retailers have no unusual working capital
requirements.
The business of the Company is not dependent upon a single or a few
customers. The Company does not sell goods or services in an amount which equals
10 percent or more of the Company's consolidated sales to any single customer or
group of customers under common control or to any affiliated group of customers.
Backlog ordering is not a factor in the business of the Company.
No portion of the business of the Company is subject to renegotiation
of profits or termination of contracts or subcontracts at the election of any
government.
Marketing and Competition
In all areas in which the Company operates, the business is highly
competitive with local and national food chain stores, as well as with
independent stores and markets. Many factors enter into the competition,
including price, quality of goods and services, product mix and convenience.
3
<PAGE>
ITEM 1: BUSINESS, continued
The retail food industry is extremely competitive. Each division faces
somewhat different competitive conditions. The following table lists the major
competitors for each division.
Division Major Competitors
Jacksonville Publix, Albertson's, Wal-Mart Supercenter, Food Lion, Super K
Charlotte Food Lion, Harris-Teeter, Bi-Lo, Super K, Publix
Raleigh Food Lion, Harris-Teeter, Kroger, Hannaford, U-Krops
Bahamas Super Value
Tampa Publix, Albertson's, Food Lion/Kash N Karry, Wal-Mart
Supercenter, U-Save
Miami Publix, Sedano's, Albertson's
Fort Worth Kroger, Albertson's, Minyards, Randall's, Wal-Mart Supercenter,
H.E. Butt
Midwest Kroger, Wal-Mart Supercenter, Biggs, Meijers
Atlanta Kroger, Ingles, A&P, Cub, Publix, Harris-Teeter, Wal-Mart
Supercenter
Orlando Publix, Albertson's, Goodings, Food Lion, Wal-Mart Supercenter,
Super K
Montgomery Bruno, Delchamps, Wal-Mart Supercenter
New Orleans Delchamps, Schwegmans, Albertson's
Additionally, local chains and wholesaler-supported independents are
well represented in all regions.
Winn-Dixie is considered a major competitor in all geographic areas in
which it competes.
The Company did not spend a material amount on Company-sponsored
research and development activities or on Company-sponsored research activities
relating to the development of new products, services or techniques, or the
improvement of existing products, services or techniques during any of the years
in the three-year period ended June 24, 1998.
Government Regulation
The Company's compliance with federal, state and local provisions
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment has not had, and is not expected
to have, a material effect on its capital expenditures, earnings or competitive
position.
Associates
At the end of fiscal 1998, the Company had 57,000 full-time and 82,000
part-time associates.
4
<PAGE>
ITEM 1: BUSINESS, continued
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 subsidiaries in the Bahamas which operate 13 retail food stores as
outlined above.
ITEM 2: PROPERTIES
Stores
All of the retail stores operated by the Company are on premises
occupied on a rental basis. See "Note 8 of the Notes to Consolidated Financial
Statements," page F-21, included herein.
Support Properties
The warehousing and distribution centers are rented under leases due to
expire as follows: Montgomery (perishable) - 2023; Raleigh - 2023; Orlando -
2022; Atlanta - 2019; Charlotte - 2019; Jacksonville (Edgewood) - 2019;
Louisville - 2019; Sarasota - 2019; Miami - 2018; Montgomery - 2018; New Orleans
- - 2018; Tampa - 2018; Fort Worth - 2016; Hammond - 2016; Jacksonville
(Commonwealth) - 2011; Nassau - 2011 and Pompano - 2003. All of these contain
renewal options, which vary from lease to lease.
An expansion and refurbishment of the corporate headquarters in
Jacksonville, Florida is under construction.
A new distribution center and retail support center is in the
planning stages for the Jacksonville, Florida division. The new facility will be
leased. The existing Jacksonville (Commonwealth) distribution center will be
converted to a general merchandise distribution center.
The new distribution center for our Raleigh, North Carolina division
and the new perishable warehouse for our Montgomery, Alabama division are now
open and operating. With the opening of the new distribution center in the
Raleigh, North Carolina division, we are converting the Greenville, South
Carolina warehouse into a general merchandise distribution center. The old
distribution center in Raleigh was sold.
The Deep South plant in Orlando, Florida was closed in 1995 and the
property was sold during 1998.
5
<PAGE>
ITEM 2: PROPERTIES, continued
The Company's Valdosta cracker and cookie, and snacks bakeries; Fort
Worth dairy plant; Madison meat processing plant; Plant City ice cream and milk
bottling plants; Miami reclaim center; and Gainesville oleomargarine and cheese
processing and packaging plants are owned in fee.
The Company's Jacksonville coffee, tea and spices processing, detergent
and bag plants; Montgomery milk bottling plant; and Hammond milk bottling plant
are situated at the leased warehousing and distribution center locations in
those cities. The Bartow egg processing plant; Greenville ice cream and milk
bottling plants and general merchandise distribution center; High Point milk
bottling and cultured products plants; Miami milk bottling plant; Montgomery
frozen pizza plant; and the Fitzgerald jam, jellies, mayonnaise, salad dressing,
peanut butter and condiments and canned and bottled carbonated beverage plants
are rented under leases.
All of the above support properties are considered to be in excellent
condition.
ITEM 3: LEGAL PROCEEDINGS
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 which 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.
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 24, 1998.
6
<PAGE>
Executive Officers of the Registrant
Set forth below is certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
YEAR YEAR FIRST
AGE IN APPOINTED EMPLOYED
YEARS AT TO CURRENT BY
NAME 06-24-98 OFFICE HELD POSITION WINN-DIXIE
<S> <C> <C> <C> <C>
A. Dano Davis 53 Chairman of the Board 1988 1968
and Principal Executive Officer
James Kufeldt 59 President 1988 1961
C. H. McKellar 60 Executive Vice President 1988 1957
H. E. Hess 58 Senior Vice President 1988 1958
R. A. Sevin 55 Senior Vice President 1997 1961
C. E. Winge 53 Senior Vice President 1988 1963
R. P. McCook 45 Financial Vice President 1984 1984
and Principal Financial Officer
L. H. May 53 Vice President 1989 1964
E. E. Zahra, Jr. 51 Vice President and General Counsel 1995 1995
D. H. Bragin 54 Treasurer and Principal Accounting 1985 1961
Officer
R. J. Brocato 54 Vice President 1993 1963
W. C. Calkins 59 Vice President 1987 1958
J. W. Critchlow 51 Vice President 1988 1967
R. J. Ehster 57 Vice President 1983 1958
J. D. Fitzgerald 48 Vice President 1998 1970
D. G. Lafever 49 Vice President 1990 1966
R. C. Lunn 46 Vice President 1997 1969
H. E. Miller 66 Vice President 1984 1956
L. J. Sadlowski 57 Vice President 1983 1961
J. A. Schlosser 49 Vice President 1997 1967
M. A. Sellers 44 Vice President 1997 1973
</TABLE>
All of the officers listed above, with the exception of E. E. Zahra,
Jr., 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 General Counsel, Mr. Zahra was
the managing partner of the Jacksonville office of LeBoeuf, Lamb, Greene &
MacRae L.L.P., an international law firm.
Officers are elected annually by the Board of Directors and serve for a
one-year period or until their successors are elected. No officers have
employment contracts with the Company.
7
<PAGE>
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 24, 1998 was 51,997.
Information required by this Item concerning sales prices of the
Company's common stock and the frequency and amount of dividends is in "Note 12
of the Notes to Consolidated Financial Statements," on page F-25 included
herein.
ITEM 6: SELECTED FINANCIAL DATA
The information required by this Item is 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-2 included herein.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this Item is on page F-18 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 24,
1998.
8
<PAGE>
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 are incorporated herein by
reference to the Company's definitive proxy statement to be filed on, or before,
August 26, 1998, in connection with its 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
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
3.1 Restated Articles of Incorporation as Previously filed as Exhibit 3.1 to Form 10-K for
filed with the Secretary of State of the year ended June 30, 1993, which Exhibit is
Florida. 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 Previously filed as Exhibit 3.2 to Form 10-K for
amended through June 21, 1995. the year ended June 28, 1995, which Exhibit is
herein incorporated by reference.
9.1 Agreement of Shareholders of D.D.I., Previously filed as Exhibit 9.1 to Form 10-K for
Inc. (formerly Vadis Investments, Inc.) the year ended June 30, 1993, which Exhibit is
dated April 19, 1989. herein incorporated by reference.
10.1 Annual Officer Incentive Compensation Previously filed as Exhibit 10.2 to Form 10-K for
Plan as amended, effective June 17, 1991. the year ended June 30, 1993, which Exhibit is
herein incorporated by reference.
</TABLE>
10
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
10.2 Long-term Officer Incentive Compensation Previously filed as Exhibit 10.3 to Form 10-K for
Plan as amended, effective June 27, 1991. the year ended June 30, 1993, which Exhibit is
herein incorporated by reference.
10.2.1 Restricted Stock Plan, effective Previously filed as Exhibit 10.2.1 to Form 10-Q
June 29, 1995. for the quarter ended January 10, 1996, which
Exhibit is herein incorporated by reference.
10.3 Key Employee Stock Option Plan Previously filed as Exhibit 10.5 to Form 10-K for
effective January 24, 1990, as amended the year ended June 30, 1993, which Exhibit is
through October 7, 1992. herein incorporated by reference.
10.3.1 Amendment adopted June 22, 1994, to Key Previously filed as Exhibit 10.5.1 to Form 10-Q
Employee Stock Option Plan. for the quarter ended January 11, 1995, which
Exhibit is herein incorporated by reference.
10.3.2 Amendment adopted July 25, 1994, to Key Previously filed as Exhibit 10.5.2 to Form 10-Q
Employee Stock Option Plan. for the quarter ended January 11, 1995, which
Exhibit is herein incorporated by reference.
10.4 Supplemental Retirement Plan dated July Previously filed as Exhibit 10.6 to Form 10-K for
1, 1994. the year ended June 29, 1994, which Exhibit is
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.
</TABLE>
11
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
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.
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 10-K
Senior Corporate Officer's Management for the year ended June 26, 1996, which Exhibit
Security Plan. is herein incorporated by reference.
21.1 Subsidiaries of Winn-Dixie Stores, Inc.
23.1 Consent of KPMG Peat Marwick LLP.
</TABLE>
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
quarter ended June 24, 1998.
12
<PAGE>
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 A. DANO DAVIS
--------------------------
A. Dano Davis, Chairman
Date August 6, 1998
--------------------------
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.
A. DANO DAVIS Chairman (Principal August 6, 1998
- ------------------------
(A. Dano Davis) Executive Officer) and Director
JAMES KUFELDT President and Director August 6, 1998
- ------------------------
(James Kufeldt)
RICHARD P. MCCOOK Financial Vice President August 6, 1998
- ------------------------
(Richard P. McCook) (Principal Financial Officer)
DAVID H. BRAGIN Treasurer August 6, 1998
- ------------------------
(David H. Bragin) (Principal Accounting Officer)
ROBERT D. DAVIS Director August 6, 1998
- ------------------------
(Robert D. Davis)
13
<PAGE>
SIGNATURES, continued
T. WAYNE DAVIS Director August 6, 1998
- ------------------------
(T. Wayne Davis)
CHARLES H. MCKELLAR Director August 6, 1998
- ------------------------
(Charles H. McKellar)
RADFORD D. LOVETT Director August 6, 1998
- ------------------------
(Radford D. Lovett)
CHARLES P. STEPHENS Director August 6, 1998
- ------------------------
(Charles P. Stephens)
ARMANDO M. CODINA Director August 6, 1998
- ------------------------
(Armando M. Codina)
DAVID F. MILLER Director August 6, 1998
- ------------------------
(David F. Miller)
CARLETON T. RIDER Director August 6, 1998
- ------------------------
(Carleton T. Rider)
JULIA B. NORTH Director August 6, 1998
- ------------------------
(Julia B. North)
14
<PAGE>
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-2
Consolidated Financial Statements and Supplemental Data:
Independent Auditors' Report F-6
Report of Management F-7
Consolidated Statements of Earnings, Years ended
June 24, 1998, June 25, 1997 and June 26, 1996 F-8
Consolidated Balance Sheets, June 24, 1998 and June 25, 1997 F-9
Consolidated Statements of Cash Flows, Years ended
June 24, 1998, June 25, 1997 and June 26, 1996 F-10
Consolidated Statements of Shareholders' Equity, Years ended
June 24, 1998, June 25, 1997 and June 26, 1996 F-11
Notes to Consolidated Financial Statements F-12
Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule S-1
II Consolidated Valuation and Qualifying Accounts, Years ended
June 24, 1998, June 25, 1997 and June 26, 1996 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
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
1998 1997 1996 1995 1994
Dollars in millions except per share data
<S> <C> <C> <C> <C> <C> <C>
Sales
Net sales........................................... $ 13,617 13,219 12,955 11,788 11,082
Percent increase.................................... 3.0 2.0 9.9 6.4 2.3
Average annual sales per store...................... $ 11.7 11.3 11.0 10.0 9.6
Earnings Summary
Gross profit........................................ $ 3,624 3,316 3,093 2,723 2,534
Percent of sales.................................. 26.6 25.1 23.9 23.1 22.9
LIFO charge (credit)................................ $ (12) 3 10 7 (2)
Operating and administrative expenses............... $ 3,375 3,094 2,803 2,462 2,270
Percent of sales.................................. 24.8 23.4 21.6 20.9 20.5
Net earnings........................................ $ 199 204 256 232 216
Basic earnings per share.......................... $ 1.34 1.36 1.69 1.55 1.45
Diluted earnings per share........................ $ 1.33 1.36 1.68 1.55 1.45
Percent of net earnings to sales.................... 1.5 1.5 2.0 2.0 2.0
Percent of net earnings to average equity........... 14.7 15.3 19.9 20.3 21.2
EBITDA ................................................ $ 676.7 632.8 656.9 569.3 520.2
EBITDAR .............................................. $ 1,089.2 1,015.6 1,009.7 890.7 809.2
Dividends
Dividends paid...................................... $ 150.9 144.2 134.0 116.5 107.4
Percent of net earnings............................. 76.0 70.5 52.4 50.2 49.7
Per share (present rate $1.02)...................... $ 1.02 .96 .885 .78 .72
Common Stock (WIN)
Total shares outstanding (000,000).................. 148.5 148.9 151.7 151.1 148.4
NYSE - Stock price range
Common - High................................... $ 59.25 42.38 38.38 28.94 33.88
Low.................................... $ 33.69 29.88 28.06 21.32 21.75
Financial Data
Cash flow information:
Net cash provided by operating activities......... $ 464.5 413.9 556.9 414.2 436.3
Net cash used in investing activities............. $ 325.9 477.7 387.9 379.3 214.7
Net cash provided by (used in) financing
activities....................................... $ (129.2) 45.7 (167.3) (35.9) (212.4)
Capital expenditures, net........................... $ 369.6 423.1 362.0 371.6 277.7
Depreciation and amortization....................... $ 330.4 291.2 248.3 200.9 157.4
Working capital..................................... $ 228.6 195.4 388.7 414.9 486.2
Current ratio....................................... 1.2 1.1 1.4 1.4 1.6
Total assets........................................ $ 3,069 2,921 2,649 2,472 2,145
Obligations under capital leases.................... $ 49 54 61 78 85
Shareholders' equity................................ $ 1,369 1,337 1,342 1,231 1,056
Book value per share................................ $ 9.22 8.98 8.85 8.14 7.12
Stores
In operation at year-end............................ 1,168 1,174 1,178 1,175 1,159
Opened and acquired during year..................... 84 83 61 108 60
Closed or sold during year.......................... 90 87 58 92 66
Enlarged or remodeled during year................... 136 79 128 86 87
New/enlarged/remodeled in last five years........... 912 805 743 654 535
Percent to total stores in operation.............. 78.1 68.6 63.1 55.7 46.2
Year-end retail square footage (000,000)............ 49.6 47.8 45.7 43.8 40.7
Average store size at year-end (000)................ 42.4 40.7 38.8 37.3 35.1
Other Year-end Data
Associates (000).................................... 139 136 126 123 112
Shareholder accounts (000).......................... 52.0 55.2 56.3 44.8 39.5
Shareholders per store.............................. 45 47 48 38 34
Taxes
Federal, state and local............................ $ 302 285 288 261 261
Per diluted share................................... $ 2.03 1.90 1.89 1.74 1.75
</TABLE>
F-1
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales for 1998 were $13.6 billion, compared to $13.2 billion for 1997
and $13.0 billion for 1996. This reflects a 3.0%, 2.0% and 9.9% increase in
sales per year for 1998, 1997 and 1996, respectively. Average weekly store sales
increased 3.0%, 1.8% and 8.4% for each of the last three fiscal years, while
identical store sales decreased 0.3% in 1998, decreased 0.9% in 1997 and
increased 4.4% for 1996. Fourth quarter sales were $3.3 billion, $3.1 billion
and $3.0 billion for 1998, 1997 and 1996, respectively. Sales for the quarter
were positively impacted by Easter being in the fourth quarter this year and in
the third quarter last year. For the fourth quarter, average store sales
increased 7.0% in 1998, 1.2% in 1997 and 4.5% in 1996. Identical store sales for
the fourth quarter increased 3.1% in 1998, decreased 1.8% in 1997 and increased
1.7% in 1996.
In fiscal year 1998, the Company continued to increase its average
store size by opening and acquiring 84 stores, averaging 50,000 square feet,
enlarging or remodeling 136 stores and closing 90 smaller stores, averaging
30,500 square feet.
As a percent of sales, gross profit margins were 26.6%, 25.1% and 23.9%
in fiscal 1998, 1997 and 1996, respectively. Operating margins improved with an
increase in the number of larger stores, added service departments and improved
pricing. Approximately 88% of the Company's inventories are valued under the
LIFO (last-in, first-out) method. The LIFO calculations resulted in a pre-tax
increase in gross profit of $12.1 million in 1998, and a decrease of $2.7
million in 1997 and a decrease of $9.9 million in 1996.
Operating and administrative expenses, as a percent of sales, were
24.8%, 23.4% and 21.6% in fiscal 1998, 1997 and 1996, respectively. Increases in
depreciation expense, occupancy costs, a higher payroll percentage in our larger
stores and training costs associated with our emphasis toward increased customer
service, were major contributing factors of our increase in operating and
administrative expenses in 1998.
During 1998, the Company began its consolidation of our accounting
departments to corporate headquarters. The opening of the new distribution
facility in Raleigh, North Carolina, resulted in the closing and the sale of the
older Raleigh distribution facility; the closing of the Greenville, South
Carolina distribution facility which will be converted into a general
merchandise facility; and the reorganization of the Raleigh and Charlotte
divisions. The Company experienced a non-recurring administrative charge
totaling $18.1 million (after tax, $11.0 million or $0.07 per diluted share) due
to these activities.
Cash discounts and other income amounted to $115.4 million, $119.4
million and $118.0 million in 1998, 1997 and 1996, respectively. Investment
income amounted to $0.3 million, $0.3 million and $0.6 million in fiscal 1998,
1997 and 1996, respectively.
F-2
<PAGE>
Results of Operations, continued
Interest expense totaled $28.5 million, $22.1 million and $21.2 million
in fiscal 1998, 1997 and 1996, respectively. Interest expense primarily reflects
a computation of interest on capital lease obligations and short-term
borrowings. The 1998 and 1997 increase in interest expense is due to an increase
in short-term borrowings.
Earnings before income taxes were $317.8 million, $319.4 million and
$387.3 million in fiscal 1998, 1997 and 1996, respectively. The 1998 and 1997
decrease in pre-tax earnings is primarily a result of the increase in operating
expenses as previously mentioned. The effective income tax rates were 37.5%,
36.0% and 34.0% for fiscal 1998, 1997 and 1996, respectively. The increase in
the effective tax rate during fiscal 1998 and 1997 reflects a change made by the
Health Insurance Portability and Accountability Act of 1996 whereby certain
deductions for interest relating to indebtedness with respect to certain
Corporate Owned Life Insurance (COLI) policies are being phased out over a
three-year period.
Net earnings amounted to $198.6 million or $1.33 per diluted share for
1998, $204.4 million or $1.36 per diluted share for 1997 and $255.6 million or
$1.68 per diluted share for 1996. The LIFO calculations increased net earnings
by $7.4 million or $0.05 per diluted share in 1998, decreased net earnings by
$1.6 million or $0.01 per diluted share in 1997 and decreased net earnings by
$6.0 million or $0.04 per diluted share in 1996.
Liquidity and Capital Resources
The Company's financial condition remains sound and strong at year end.
Cash and cash equivalents amounted to $23.6 million, $14.1 million and $32.2
million at the end of fiscal years 1998, 1997 and 1996, respectively. Cash
provided by operating activities amounted to $464.5 million in 1998, $413.9
million in 1997 and $556.9 million in 1996.
Net capital expenditures totaled $369.6 million, $423.1 million and
$362.0 million in fiscal 1998, 1997 and 1996, respectively. These expenditures
were for new store locations, store enlargements and remodelings, and the
expansion of warehouse facilities. Total capital investment in Company retail
and support facilities, including operating leases, is estimated to be $850
million in fiscal 1998 and projected to be $800 million in fiscal 1999. The
Company has no material construction or purchase commitments outstanding as of
June 24, 1998.
Working capital amounted to $228.6 million and $195.4 million at the end
of fiscal years 1998 and 1997, respectively. Inventories on a FIFO (first-in,
first-out) basis increased $143.6 million in 1998 and $72.7 million in 1997. The
increase in inventories is primarily due to the increase in the total retail
square footage through new openings and store enlargements, and the opening of
our new Raleigh, North Carolina distribution center and the new Montgomery,
Alabama perishable warehouse in 1998.
F-3
<PAGE>
Liquidity and Capital Resources, continued
The Company has an authorized $500.0 million commercial paper program. In
support of this program, or as an independent source of funds, the Company also
has $495.0 million of short-term lines of credit. These lines of credit are
available at any time during the year and are renewable on an annual basis. The
Company had no short-term borrowings against bank lines of credit as of June 24,
1998 or June 25, 1997. There was $420.0 million in commercial paper outstanding
at the end of 1998, compared to $380.0 million in commercial paper outstanding
at the end of 1997. The average interest rate on the commercial paper
outstanding on June 24, 1998 was 5.6%, compared to 5.7% on June 25, 1997.
Excluding capital lease obligations, the Company had no outstanding long-term
debt as of June 24, 1998 or June 25, 1997.
The Company's cash flow from operations and available credit facilities
are considered adequate to fund both the short-term and long-term capital needs
of the Company.
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 which 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, and to the extent permitted by our competition, through improved
gross profit margins.
Year 2000 Compliance
In 1996, the Company created a Year 2000 Project Office to address
potential problems within the Company's operations which could result from the
century change in the Year 2000. The Project Office was authorized by the
Company's Executive Committee, is staffed primarily with representatives of the
Company's Corporate Information Systems Department, and has access to key
associates in all areas of the Company's operations. The Project Office also
uses outside consultants on an as-needed basis.
To address the Year 2000 issues, the Project Office is identifying all
computer-based systems and applications (including embedded systems) that might
not be Year 2000 compliant; determining what revisions or replacements would be
necessary to achieve compliance and prioritizing and implementing the revisions
or replacements; conducting tests necessary to verify that the revised systems
are operational; and transitioning the compliant systems into the everyday
operations of the Company. Management believes that these actions are
approximately sixty percent (60%) complete. Winn-Dixie estimates that all
critical systems will be compliant with the century change by June 30, 1999.
F-4
<PAGE>
2000 Compliance, continued
The Company has budgeted approximately $15.0 million to address the
Year 2000 issues, which includes the estimated costs of all modifications and
the salaries of associates and the fees of consultants addressing the issues.
Approximately $9.1 million of this amount had been expended through June 24,
1998.
As a part of the Year 2000 review, the Company is examining its
relationships with certain key outside vendors and others with whom it has
significant business relationships to determine to the extent practical the
degree of such parties' Year 2000 compliance and to develop strategies for
working with them through the century change. The Company does not have a
relationship with any third-party vendor which is material to the operations of
the Company and, therefore, believes that the failure of any such party to be
Year 2000 compliant would not have a material adverse effect on the Company.
Should the Company or a third party with whom the Company deals have a
systems failure due to the century change, the Company believes that the most
significant impact would likely be the inability to timely deliver inventory to
a group of stores or to electronically process sales to the customer at store
level. While the Company does not expect any such impact to be material, it is
developing contingency plans for alternative methods of product delivery and
transaction processing and estimates that such plans will be finalized by June
30, 1999.
Cautionary Statement Regarding Forward-Looking Information and Statements
This Annual Report on 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," "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, growth,
competition, inflation, pricing and margin pressures, law and taxes. Please
refer to discussions of these and other factors in this Annual Report 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-5
<PAGE>
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 24, 1998 and June 25, 1997,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 24, 1998.
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Winn-Dixie
Stores, Inc. and subsidiaries at June 24, 1998 and June 25, 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 24, 1998, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Jacksonville, Florida
July 27, 1998
F-6
<PAGE>
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 retail and manufacturing divisions 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.
A. Dano Davis Richard P. McCook
Chairman of the Board Financial Vice President
and Principal Executive Officer and Principal Financial Officer
F-7
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended June 24, 1998, June 25, 1997 and June 26, 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- ---------------
Amounts in thousands except per share data
<S> <C> <C> <C> <C>
Net sales..................................................... $ 13,617,485 13,218,715 12,955,488
Cost of sales, including warehousing and delivery expense..... 9,993,568 9,902,862 9,862,244
--------------- -------------- ---------------
Gross profit on sales...................................... 3,623,917 3,315,853 3,093,244
Operating and administrative expenses......................... 3,374,905 3,093,767 2,802,712
Consolidation and distribution facility closing charge........ 18,080 - -
--------------- -------------- ---------------
Operating income........................................... 230,932 222,086 290,532
Cash discounts and other income, net.......................... 115,395 119,435 118,038
--------------- -------------- ---------------
346,327 341,521 408,570
--------------- -------------- ---------------
Interest:
Interest on capital lease obligations...................... 6,528 7,055 8,199
Other interest............................................. 22,007 15,024 13,046
--------------- -------------- ---------------
Total interest........................................... 28,535 22,079 21,245
--------------- -------------- ---------------
Earnings before income taxes.................................. 317,792 319,442 387,325
Income taxes.................................................. 119,172 114,999 131,691
--------------- -------------- ---------------
Net earnings.................................................. $ 198,620 204,443 255,634
=============== ============== ===============
Basic earnings per share...................................... $ 1.34 1.36 1.69
=============== ============== ===============
Diluted earnings per share.................................... $ 1.33 1.36 1.68
=============== ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
CONSOLIDATED BALANCE SHEETS
June 24, 1998 and June 25, 1997
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
Amounts in thousands
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents................................................. $ 23,566 14,116
Trade and other receivables, less allowance for doubtful items of
$2,623,000 ($1,699,000 in 1997)........................................ 146,166 175,679
Merchandise inventories at lower of cost or market less LIFO reserve
of $212,869,000 ($224,999,000 in 1997).................................. 1,404,917 1,249,215
Prepaid expenses.......................................................... 161,141 148,961
-------------- ---------------
Total current assets.................................................... 1,735,790 1,587,971
-------------- ---------------
Investments and other assets:
Cash surrender value of life insurance, net............................... 38,789 88,081
Other assets.............................................................. 101,661 94,547
-------------- ---------------
Total investments and other assets...................................... 140,450 182,628
-------------- ---------------
Deferred income taxes........................................................ 22,626 22,129
Net property, plant and equipment............................................ 1,169,848 1,128,681
-------------- ---------------
$ 3,068,714 2,921,409
============== ===============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable.......................................................... $ 660,539 604,034
Short-term borrowings..................................................... 420,000 380,000
Reserve for insurance claims and self-insurance........................... 71,779 60,219
Accrued wages and salaries................................................ 107,590 98,771
Accrued rent.............................................................. 96,987 76,528
Accrued expenses.......................................................... 135,287 137,115
Current obligations under capital leases.................................. 2,908 3,023
Income taxes.............................................................. 12,119 32,923
-------------- ---------------
Total current liabilities............................................... 1,507,209 1,392,613
-------------- ---------------
Obligations under capital leases............................................. 48,580 54,026
Defined benefit plan......................................................... 37,102 33,452
Reserve for insurance claims and self-insurance.............................. 93,514 94,783
Other liabilities............................................................ 13,426 9,041
-------------- ---------------
Shareholders' equity:
Common stock of $1 par value. Authorized 400,000,000 shares; issued
148,530,736 shares in 1998 and 148,875,899 shares in 1997............... 148,531 148,876
Retained earnings......................................................... 1,220,352 1,188,618
-------------- ---------------
Total shareholders' equity.............................................. 1,368,883 1,337,494
-------------- ---------------
Commitments and contingent liabilities (Notes 6, 8 and 9)
$ 3,068,714 2,921,409
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 24, 1998, June 25, 1997 and June 26, 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
Amounts in thousands
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................. $ 198,620 204,443 255,634
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization............................ 330,408 291,236 248,287
Deferred income taxes.................................... (17,040) (17,988) (7,698)
Defined benefit plan..................................... 3,650 3,919 3,371
Reserve for insurance claims and self-insurance.......... 10,291 (3,967) (3,788)
Stock compensation plans................................. (1,398) 10,086 5,725
Change in cash from:
Receivables............................................ 29,513 (17,234) (6,533)
Merchandise inventories................................ (155,702) (70,089) (19,542)
Prepaid expenses....................................... 3,813 (314) (14,037)
Accounts payable....................................... 56,191 3,914 42,199
Income taxes........................................... (20,804) (9,631) 23,223
Other current accrued expenses......................... 26,952 19,533 30,104
------------- ------------- -------------
Net cash provided by operating activities............ 464,494 413,908 556,945
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net.............. (369,636) (423,105) (361,961)
Increase (decrease) in investments and other assets......... 43,785 (54,548) (25,915)
------------- ------------- -------------
Net cash used in investing activities................ (325,851) (477,653) (387,876)
------------- ------------- -------------
Cash flows from financing activities:
Increase (decrease) in short-term borrowings................. 40,000 270,000 (20,000)
Payments on capital lease obligations........................ (2,653) (2,713) (3,077)
Purchase of common stock..................................... (21,055) (94,500) (51,581)
Proceeds of sales under associates' stock purchase plan...... 8,747 13,111 40,205
Dividends paid............................................... (150,923) (144,165) (134,042)
Other........................................................ (3,309) 3,920 1,220
------------- ------------- -------------
Net cash provided by (used in) financing activities.. (129,193) 45,653 (167,275)
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents................ 9,450 (18,092) 1,794
Cash and cash equivalents at the beginning of the year.......... 14,116 32,208 30,414
------------- ------------- -------------
Cash and cash equivalents at end of the year.................... $ 23,566 14,116 32,208
============= ============= =============
Supplemental cash flow information:
Interest paid................................................ $ 20,316 17,840 14,569
Interest and dividends received.............................. $ 1,449 1,183 8,049
Income taxes paid............................................ $ 152,652 142,684 114,572
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended June 24, 1998, June 25, 1997 and June 26, 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- -------------
Amounts in thousands
<S> <C> <C> <C> <C>
Common stock:
Beginning of year ........................................... $ 148,876 151,685 75,561
Add par value of common stock issued for stock
compensation plans and acquisition......................... 156 140 2,149
Add par value of common stock issued in connection
with 2-for-1 stock split................................... - - 75,580
Deduct par value of common stock acquired.................... 501 2,949 1,605
------------- -------------- -------------
End of year.................................................. 148,531 148,876 151,685
------------- -------------- -------------
Retained earnings:
Beginning of year............................................ 1,188,618 1,190,611 1,155,031
Net earnings................................................. 198,620 204,443 255,634
Deduct excess of cost over par value of common stock
acquired................................................... 20,554 91,551 49,976
Deduct cash dividends on common stock of $1.02, $0.96 and
$0.885 per share in 1998, 1997 and 1996, respectively...... 150,923 144,165 134,042
Deduct par value of common stock issued in connection
with 2-for-1 stock split................................... - - 75,580
Add (deduct) excess of value or proceeds over par value of
common stock and compensation costs recorded for stock
compensation plans and acquisition......................... (1,398) 9,946 53,129
Add (deduct) associates' stock loans, net of payments........ 8,747 13,111 (14,330)
Unrealized gain on marketable securities..................... 796 1,964 -
Add (deduct) other........................................... (3,554) 4,259 745
------------- -------------- -------------
End of year.................................................. 1,220,352 1,188,618 1,190,611
------------- -------------- -------------
Total shareholders' equity...................................... $ 1,368,883 1,337,494 1,342,296
============= ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Other Information
(a) Fiscal Year: The fiscal year ends on the last Wednesday in
June. Fiscal years ended 1998, 1997 and 1996 comprised 52
weeks.
(b) Basis of Consolidation: The consolidated financial statements
include the accounts of Winn-Dixie Stores, Inc. and its
subsidiaries which operate as a major food retailer in
fourteen states and the Bahama Islands.
(c) 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.
(d) 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 88% of inventories
consisting primarily of merchandise in stores and distribution
warehouses. Manufacturing 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.
(e) Marketable Securities: Included in investments and other
assets was $24,400,000 at June 24, 1998, and $19,400,000 at
June 25, 1997, consisting principally of marketable equity
securities categorized as available-for-sale.
Available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses, net of the related tax
effect, are excluded from earnings and reported as a separate
component of shareholders' equity until realized. A decline in
the fair value of available-for-sale securities below cost
that is deemed other than temporary is charged to earnings,
resulting in the establishment of a new cost basis for the
security. Realized gains and losses are included in earnings
and are derived using the specific identification method for
determining the cost of securities sold.
(f) Financial Instruments: Interest rate swaps are accounted for
under the accrual method. Net interest paid or received on
these instruments is included in operating and administrative
expense. See Note 6(b) for additional information on interest
rate swap agreements.
F-12
<PAGE>
1. Summary of Significant Accounting Policies and Other Information,
continued
(g) 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.
(h) 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 $2,000,000
for automobile and general liability and $1,000,000 for
workers' compensation. Self-insurance reserves are established
for property losses with a maximum annual aggregate of
$5,000,000 and a $100,000 per occurrence deductible after the
aggregate is obtained. The Company is insured for losses in
excess of these limits.
(i) 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.
(j) 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. Amortization for retail store leasehold
improvements is based on lives varying from eight to 15 years.
Amortization for warehouse and manufacturing leasehold
improvements is based on a 15 year life.
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 cash flows expected to be generated
by the asset.
(k) Store Opening and Closing Costs: The costs of opening new
stores and closing old stores are charged to earnings in the
year incurred.
F-13
<PAGE>
1. Summary of Significant Accounting Policies and Other Information,
continued
(l) Earnings Per Share: The Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128")
during the second quarter of fiscal 1998. The adoption of this
statement did not materially effect the Company's earnings per
share. All prior period earnings per share amounts have been
restated to conform with the provisions of SFAS 128.
The following weighted average number of shares of common
stock were used in the calculations for earnings per share.
The diluted weighted average number of shares includes the net
shares that would be issued upon the exercise of stock options
using the treasury stock method.
1998 1997 1996
---- ---- ----
Basic 148,697,634 150,040,137 151,577,205
Diluted 148,866,167 150,231,820 151,946,196
(m) Stock-Based Compensation: During fiscal year 1996, the Company
adopted 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. Prior to fiscal year 1996, the
Company followed the intrinsic value method set forth in APB
Opinion 25, "Accounting for Stock Issued to Employees." Since
the Company historically recorded compensation expense under
APB Opinion 25 for its performance based plans, the adoption
of this Standard in 1996 had no material effect on the
Company's financial statements (see Note 7).
(n) New Accounting Pronouncements: In June 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income"
("SFAS 130") and Statement of Financial Accounting Standards
No. 131 "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 relates to the
change in the equity of a business during a reporting period
from transactions of the business. The Company currently
intends to adopt this new accounting standard effective in the
first quarter of fiscal 1999. SFAS 131 supersedes Statement of
Financial Accounting Standards No. 14 "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 provides for the
disclosure of financial information desegregated by the way
management organizes the segments of the enterprise for making
operating decisions. The Company intends to adopt this new
accounting standard in the fourth quarter of fiscal 1999 and
is still determining how SFAS 131 will impact the financial
statement disclosure.
(o) Reclassification: Certain prior year amounts have been
reclassified to conform with the current year's presentation.
F-14
<PAGE>
2. Accounts Receivable
Accounts receivable at year-end were as follows:
1998 1997
--------- ---------
Amounts in thousands
Trade and other receivables........... $ 90,672 76,471
Construction advances................. 58,117 100,907
--------- ---------
148,789 177,378
Less: Allowance for doubtful items... 2,623 1,699
--------- ---------
$ 146,166 175,679
========= =========
3. Inventories
At June 24, 1998, inventories valued by the LIFO method would have been
$212,869,000 higher ($224,999,000 higher at June 25, 1997) 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 $7,411,000 or $0.05 per diluted share lower, $1,624,000 or $0.01
per diluted share higher and $6,022,000 or $0.04 per diluted share
higher in 1998, 1997 and 1996, respectively.
4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
Amounts in thousands
<S> <C> <C> <C>
Land.............................................................. $ 11,343 8,862
Buildings......................................................... 28,739 32,442
Furniture, fixtures, machinery and equipment...................... 2,356,376 2,149,817
Transportation equipment.......................................... 132,381 124,419
Improvements to leased premises................................... 457,931 435,837
Construction in progress.......................................... 69,365 62,224
-------------- -------------
3,056,135 2,813,601
Less: Accumulated depreciation and amortization.................. 1,919,432 1,723,198
-------------- -------------
1,136,703 1,090,403
Leased property under capital leases, less accumulated
amortization of $36,568,000 ($37,090,000 in 1997).............. 33,145 38,278
-------------- -------------
Net property, plant and equipment................................. $ 1,169,848 1,128,681
============== =============
</TABLE>
The Company had no non-cash additions to leased property for 1998 or
1997.
F-15
<PAGE>
5. Income Taxes
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Current Deferred Total
------------ ------------ ------------
Amounts in thousands
<S> <C> <C> <C> <C> <C>
1998
Federal..................................... $ 115,109 (15,779) 99,330
State....................................... 21,103 (1,261) 19,842
------------ ------------ ------------
$ 136,212 (17,040) 119,172
============ ============ ============
1997
Federal..................................... $ 115,347 (17,440) 97,907
State....................................... 17,640 (548) 17,092
------------ ------------ ------------
$ 132,987 (17,988) 114,999
============ ============ ============
1996
Federal..................................... $ 117,136 (7,523) 109,613
State....................................... 22,251 (173) 22,078
------------ ------------ ------------
$ 139,387 (7,696) 131,691
============ ============ ============
</TABLE>
The following reconciles the above provision to the Federal statutory
income tax rate:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Federal statutory income tax rate.................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal
income tax benefits............................... 3.8 3.1 3.5
Other tax credits.................................... (0.6) (0.6) (0.2)
Life insurance....................................... (0.2) (2.1) (3.1)
Other, net........................................... (0.5) 0.6 (1.2)
------------ ------------ ------------
37.5% 36.0% 34.0%
============ ============ ============
</TABLE>
The effective tax rate for 1998 and 1997 reflects a change made by the
Health Insurance Portability and Accountability Act of 1996 whereby
certain deductions for interest relating to indebtedness with respect
to certain corporate owned life insurance (COLI) policies are being
phased out over a three-year period.
In addition to the provision for income taxes presented above, the
Company recorded deferred taxes of $551,000 and $1,105,000 in fiscal
1998 and 1997, respectively, related to the unrealized gain on
marketable securities.
F-16
<PAGE>
5. Income Taxes, continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred liabilities at June
24, 1998, June 25, 1997 and June 26, 1996 are presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
Amounts in thousands
<S> <C> <C> <C> <C>
Deferred tax assets:
Reserve for insurance claims and self-insurance.......... $ 61,160 57,169 58,501
Reserve for vacant store leases.......................... 20,137 14,521 10,319
Unearned promotional allowance........................... 6,844 12,520 7,568
Reserve for accrued vacations............................ 14,172 10,145 9,278
State net operating loss carry forwards.................. 9,249 7,410 6,962
Excess of book over tax depreciation..................... 10,985 11,033 10,026
Excess of book over tax rent expense..................... 1,058 1,482 1,133
Excess of book over tax retirement expense............... 14,757 12,565 10,750
Uniform capitalization of inventory...................... 7,796 6,797 5,181
Other, net............................................... 38,066 31,366 25,464
------------ ------------ ------------
Total gross deferred tax assets........................ 184,224 165,008 145,182
Less: Valuation allowance............................. 9,154 7,314 6,896
------------ ------------ ------------
Net deferred tax assets................................ 175,070 157,694 138,286
------------ ------------ ------------
Deferred tax liabilities:
Excess of tax over book depreciation..................... (11,958) (16,312) (18,514)
Bahamas subsidiary foreign earnings...................... (12,616) (10,680) (11,506)
Unrealized gain on marketable securities................. (1,656) (1,105) -
Other, net............................................... (20,632) (17,879) (13,429)
------------ ------------ ------------
Total gross deferred tax liabilities................... (46,862) (45,976) (43,449)
------------ ------------ ------------
Net deferred tax assets................................ $ 128,208 111,718 94,837
============ ============ ============
</TABLE>
Current deferred income taxes of $105,582,000 and $89,589,000 for 1998
and 1997, respectively, are included in prepaid expenses in the
accompanying consolidated balance sheets.
The Company believes the results of future operations will generate
sufficient taxable income to realize the deferred tax assets.
F-17
<PAGE>
6. Financing
(a) Credit Arrangements: The Company has available a $500.0
million commercial paper program. As of June 24, 1998, there
was $420.0 million outstanding, compared to $380.0 million
outstanding on June 25, 1997. The average interest rate on the
commercial paper outstanding on June 24, 1998, was 5.6% as
compared to 5.7% on June 25, 1997. The Company also has
short-term lines of credit totaling $495.0 million. The lines
of credit are available when needed during the year and are
renewable on an annual basis. The Company is not required to
maintain compensating bank balances in connection with these
lines of credit. There were no short-term borrowings against
bank lines of credit as of June 24, 1998 or June 25, 1997.
The carrying amount of short-term borrowings approximates fair
value because of their short-term maturity. As such, the
Company is not exposed to a significant amount of interest
rate risk.
(b) Interest Rate Swap: The Company has entered into interest rate
swap agreements to reduce the impact of changes in rental
payments on retail locations, distribution facilities and
manufacturing facilities that have a lease term of 25 years
and whose primary rent expense fluctuates with the commercial
paper (CP) interest rate. At June 24, 1998, the Company had
outstanding four interest rate swap agreements, having a
notional principal amount of $50.0 million each, with an
investment bank. These agreements effectively change the
Company's exposure on its leased real estate with floating
rental payments to fixed rental payments based on a 7.19%
interest rate. The interest rate swap agreements mature on
June 30, 2004, 2005, 2006 and 2007. The Company is exposed to
credit loss in the event of nonperformance by the counter
party to these interest rate swap agreements. However, the
Company does not anticipate non-performance by the counter
party.
Since current short-term interest rates at June 24, 1998 are
below the 7.19% rate of these contracts, the estimated
negative value of these swaps was approximately $15.6 million.
The table below presents notional amounts and weighted average
interest rates by contractual maturity dates. Notional amounts
are used to calculate the contractual payments to be exchanged
under the contracts. Weighted average variable receive rates
are based on implied forward rates in the yield curve at the
reporting date.
F-18
<PAGE>
6. Financing, continued
<TABLE>
<CAPTION>
Expected Maturity Dates
There-
1999 2000 2001 2002 2003 after Total
---- ---- ---- ---- ---- -------- -----
Amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Variable to Fixed $ - - - - - 200 200
Average Pay Rate % 7.19 7.19 7.19 7.19 7.19 7.07 7.08
Average Receive Rate % 5.80 5.84 5.91 5.96 6.01 6.05 6.00
</TABLE>
7. Stock Compensation Plans
The Company has an employee stock purchase plan, long-term incentive
stock compensation plans and a performance based stock option plan.
Under SFAS 123, purchase discounts for the employee stock purchase
plan, the fair value at date of grant for the long-term incentive stock
compensation plans and the performance based stock option plan are
charged to compensation costs over the vesting or performance period.
The fair value of the fiscal 1997 grant under the performance based
stock option plan was estimated on the date of the grant using the
Black-Scholes option pricing model under the following assumptions:
risk-free interest rate of 7.0%; dividend yield of 2.8%; expected lives
of 7 years; and volatility of .225.
Compensation costs for these stock compensation plans resulted in
income of $1.4 million in 1998, primarily due to the reversal of
compensation expense previously recognized for restricted shares that
did not vest. Compensation costs charged against income was $10.1
million in 1997 and $5.7 million in 1996.
(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 shares of the Company's
common stock at a price not less than the greater of 85% of
the fair value at the date of grant or $1.00. During fiscal
year 1996, 1,069,251 shares (pre-split) of common stock were
sold to associates at an aggregate price of $54,531,801. On
October 2, 1996, the shareholders approved an amendment to the
Revised Winn-Dixie Stock Purchase Plan for Employees, so as to
make an additional 2,000,000 shares of the Company's common
stock available for sale. There are 2,392,626 shares of the
Company's common stock available for the grant of options
under the Plan.
F-19
<PAGE>
7. Stock Compensation Plans, continued
Loans to associates for the purchase of the Company's common
stock are reported in the financial statements as a reduction
of Shareholders' Equity, rather than as a current asset. Loans
outstanding were $3,087,000 and $11,834,000 at June 24, 1998
and June 25, 1997, respectively.
(b) Stock Compensation Plans: The Company has long-term incentive
stock compensation plans. Under these programs the Company
issues restricted shares of the Company's common stock to
eligible management associates. Restricted shares issued and
the weighted average fair value on the grant date are as
follows: 149,743 shares ($37.25) in 1998 (118,200 shares
forfeited); 150,338 shares ($35.21) in 1997 (119,283 shares
forfeited); and 42,076 shares ($27.88) in 1996 (3,626 shares
forfeited). The vesting of these shares are contingent upon
certain specified goals being attained over a three year
period.
(c) Stock Option Plan: Under the Company's Key Employee Stock
Option Plan, 2,000,000 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 performance based stock option plan are earned over a two
year period, if certain performance goals are attained. The
options for 226,000 shares granted in 1992 at an exercise
price of $21.063 have been earned and will expire on December
31, 1998. The options for 466,000 shares granted in 1994 at an
exercise price of $22.438 have also been earned and expire on
January 15, 2001.
On July 29, 1996, the Compensation Committee approved the
grant of options for 237,000 shares, effective June 19, 1996,
at an exercise price of $34.625 ($9.84 fair value of option).
As of June 24, 1998, options for 32,000 shares have been
forfeited. Of these options granted, 102,500 would have been
exercisable on June 24, 1998, but were not earned. These
options will now become exercisable on June 30, 1999, if
earned. The remaining 102,500 shares will become exercisable
on June 28, 2000, if earned. These options expire on January
15, 2003.
F-20
<PAGE>
7. Stock Compensation Plans, continued
Changes in options under these plans during the years ended
June 24, 1998, June 25, 1997 and June 26, 1996, were as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
-------------------- -------------------
<S> <C> <C> <C>
Outstanding - June 28, 1995........................ 876,000 $ 20.13
Granted............................................ - $
-
Exercised.......................................... (236,000) $ 14.94
Forfeited.......................................... (10,000) $ 22.44
------------- -----------
Outstanding - June 26, 1996........................ 630,000 $ 22.04
Granted............................................ 237,000 $ 34.63
Exercised.......................................... (142,000) $ 21.97
Forfeited.......................................... (22,000) $ 34.63
------------- -----------
Outstanding - June 25, 1997........................ 703,000 $ 25.90
Granted............................................ - $ -
Exercised.......................................... (361,000) $ 22.11
Forfeited.......................................... (10,000) $ 34.63
------------- -----------
Outstanding - June 24, 1998........................ 332,000 $ 29.76
============= ===========
Exercisable - June 24, 1998....................... 127,000 $ 21.90
============= ===========
Shares available for additional grant.............. 723,000
=============
</TABLE>
The number of shares exercisable and their weighted average
exercise price at the end of the year are as follows: 127,000
shares ($21.90) in 1998; 488,000 shares ($22.05) in 1997; and
389,000 shares ($21.67) in 1996. At June 24, 1998, the 332,000
options outstanding have a weighted average contractual life
of 4.3 years.
8. Leases
(a) Leasing Arrangements: There were 1,439 leases in effect on
store locations and other properties at June 24, 1998. Of
these 1,439 leases, 37 store leases and 2 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 twenty-five years. However,
in the normal course of business, it is expected that these
leases will be renewed or replaced by leases on other
properties.
F-21
<PAGE>
8. Leases, continued
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: The following is an analysis of the leased property
under capital leases by major classes:
<TABLE>
<CAPTION>
Asset balances at
June 24, 1998 June 25, 1997
--------------- ---------------
Amounts in thousands
<S> <C> <C> <C>
Store facilities.................................... $ 53,991 59,646
Warehouses and manufacturing facilities............. 15,722 15,722
------------ -----------
69,713 75,368
Less: Accumulated amortization...................... 36,568 37,090
------------ -----------
$ 33,145 38,278
============ ===========
</TABLE>
The following is a schedule by year of future minimum lease
payments under capital and operating leases, together with the
present value of the net minimum lease payments as of June 24,
1998.
<TABLE>
<CAPTION>
Capital Operating
Amounts in thousands
<S> <C> <C> <C>
Fiscal Year:
1999............................................. $ 9,334 330,721
2000............................................. 9,214 326,064
2001............................................. 9,220 321,201
2002............................................. 9,280 316,986
2003............................................. 9,259 312,999
Later years...................................... 49,537 3,120,170
----------- --------------
Total minimum lease payments......................... 95,844 4,728,141
==============
Less: Amount representing estimated
taxes, maintenance and insurance
costs included in total minimum
lease payments............................... 1,744
-----------
Net minimum lease payments........................... 94,100
Less: Amount representing interest.................. 42,612
-----------
Present value of net minimum lease
payments........................................... $ 51,488
===========
</TABLE>
F-22
<PAGE>
8. Leases, continued
Rental payments under operating leases including, where
applicable, real estate taxes and other expenses are as
follows:
1998 1997 1996
---- ---- ----
Amounts in thousands
Minimum rentals........... $ 307,289 276,259 254,705
Contingent rentals........ 1,869 2,618 3,320
--------- --------- ---------
$ 309,158 278,877 258,025
========= ========= =========
9. Commitments and Contingent Liabilities
(a) Associate Benefit Programs: The Company has noncontributory,
trusteed profit sharing retirement programs 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 $67,250,000, $62,250,000 and
$62,200,000 in 1998, 1997 and 1996, respectively.
In addition to providing profit sharing benefits, the Company
makes group insurance available to early retirees from the
time they retire until age 65 when they qualify for
Medicare/Medicaid. Currently, the early retiree group
constitutes 88 associates. This group of retirees bears the
entire costs of this plan, which is maintained totally
separate from the Company's regular group insurance plan. The
Company reserves the right to modify these benefits.
(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 611
qualified active associates of the Company and 408 former
participants. Total MSP cost charged to operations was
$5,406,000, $5,485,000 and $4,942,000 in 1998, 1997 and 1996,
respectively. The projected benefit obligation at June 24,
1998 was approximately $41,095,000. The effective discount
rate used in determining the net periodic MSP cost was 8.0%
for 1998, 1997 and 1996.
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 $183,771,000 and $170,479,000 at June
24, 1998 and June 25, 1997, respectively.
F-23
<PAGE>
9. Commitments and Contingent Liabilities, continued
During 1998, the Company phased-out all life insurance
policies previously held on a broad-based group of qualified
associates, which had no material effect on the Company's
consolidated financial statements. At June 25, 1997, insurance
policies were shown on the balance sheet at their cash
surrender value, net of policy loans aggregating $302,055,000.
(c) Supplemental Retirement Plan: The Company has a deferred
compensation Supplemental Retirement Plan in effect for
eligible management associates. At June 24, 1998 and June 25,
1997, the Company's liability under this program was $11.8
million and $7.6 million, respectively.
(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 which 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.
10. Related Party Transactions
The Company is self-insured for purposes of employee group life,
medical, accident and sickness insurance, with American Heritage Life
Insurance Company, a related party, providing administrative services
and expenses for medical and accident claims. Total payments
aggregating $29,440,000, $29,995,000 and $25,001,000 were made in 1998,
1997 and 1996, respectively.
F-24
<PAGE>
11. Consolidation and Distribution Facility Closing
During 1998, the Company began its consolidation of the accounting
departments to corporate headquarters. The opening of our new
distribution facility in Raleigh, North Carolina, resulted in the
closing and the sale of the older Raleigh distribution center; the
closing of our Greenville, South Carolina distribution facility which
will be converted into a general merchandise facility; and the
reorganization of our Raleigh and Charlotte divisions. The Company
experienced a non-recurring administrative charge totaling $18.1
million (after tax, $11.0 million or $0.07 per diluted share) due to
these activities.
12. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of
operations for the years ended June 24, 1998 and June 25, 1997:
<TABLE>
<CAPTION>
Quarters Ended
Sept. 17 Jan. 7 April 1 June 24
1998 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks)
---- ---------- ---------- ---------- ----------
Dollars in thousands except per share data
<S> <C> <C> <C> <C> <C>
Net sales............................. $ 3,056,203 4,150,243 3,160,878 3,250,161
Gross profit on sales................. $ 822,823 1,095,557 858,214 847,323
Net earnings.......................... $ 47,510 56,128 60,972 34,010
Basic earnings per share.............. $ 0.32 0.38 0.41 0.23
Diluted earnings per share............ $ 0.32 0.38 0.41 0.22
Net LIFO charge (credit).............. $ 3,055 3,055 1,222 (14,743)
Net LIFO charge (credit) per diluted
share............................... $ .02 .02 .01 (0.10)
Dividends per share................... $ 0.17 0.34 0.255 0.255
Market price range.................... $ 39.25-33.69 44.13-35.38 59.25-43.56 48.69-36.56
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
Sept. 18 Jan. 8 April 2 June 25
1997 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks)
---- ---------- ---------- ---------- ----------
Dollars in thousands except per share data
<S> <C> <C> <C> <C> <C>
Net sales ............................ $ 2,985,702 4,057,174 3,114,029 3,061,810
Gross profit on sales ................ $ 740,723 989,319 790,258 795,553
Net earnings ......................... $ 47,033 47,687 57,343 52,380
Basic and diluted earnings per share . $ 0.31 0.32 0.38 0.35
Net LIFO charge (credit) ............. $ 3,666 3,666 3,055 (8,763)
Net LIFO charge (credit) per diluted
share............................... $ 0.03 0.02 0.02 (0.06)
Dividends per share .................. $ 0.16 0.32 0.24 0.24
Market price range ................... $ 36.13-32.75 35.38-31.13 34.13-29.88 42.38-32.00
</TABLE>
F-25
<PAGE>
12. Quarterly Results of Operations (Unaudited), continued
During 1998 and 1997, 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 1.2% to
(0.7)% and 1.9% to 0.2%, respectively.
<TABLE>
<CAPTION>
Fourth Quarter Results of Operations
June 24, 1998 June 25, 1997
(12 Weeks) (12 Weeks)
-------------------- ---------------------
Amounts in thousands
<S> <C> <C> <C>
Net sales............................................... $ 3,250,161 3,061,810
Cost of sales........................................... 2,402,838 2,266,257
----------------- -----------------
Gross profit on sales................................... 847,323 795,553
Operating & administrative expenses..................... 798,444 738,958
Consolidation and distribution facility closing......... 18,080 -
----------------- -----------------
Operating income........................................ 30,799 56,595
Cash discounts and other income, net.................... 28,444 29,957
Interest expense........................................ (4,827) (4,707)
----------------- -----------------
Earnings before income taxes............................ 54,416 81,845
Income taxes............................................ 20,406 29,465
----------------- -----------------
Net earnings............................................ $ 34,010 52,380
================= =================
</TABLE>
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors
Winn-Dixie Stores, Inc.:
Under date of July 27, 1998, we reported on the consolidated balance sheets of
Winn-Dixie Stores, Inc. and subsidiaries as of June 24, 1998 and June 25, 1997,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 24, 1998,
as contained in the annual report on Form 10-K for the year 1998. 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
1998. 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 Peat Marwick LLP
Jacksonville, Florida
July 27, 1998
S-1
<PAGE>
Schedule II
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended June 24, 1998, June 25, 1997 and June 26, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance at
beginning charged from end
Description of year to income reserves of year
- ------------------------------------------------------ ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended June 24,1998:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,699 13,995 13,071 2,623
============= =========== ============ ============
Reserves not deducted from assets:
Reserves for insurance claims and self-insurance:
- Current $ 60,219 87,893 76,333 71,779
- Noncurrent 94,783 - 1,269 93,514
------------- ----------- ------------ ------------
$ 155,002 87,893 77,602 165,293
============= =========== ============ ============
Year ended June 25,1997:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,860 14,318 14,479 1,699
============= =========== ============ ============
Reserves not deducted from assets:
Reserves for insurance claims and self-insurance:
- Current $ 61,760 81,194 82,735 60,219
- Noncurrent 97,209 - 2,426 94,783
------------- ----------- ------------ ------------
$ 158,969 81,194 85,161 155,002
============= =========== ============ ============
Year ended June 26,1996:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,105 20,150 19,395 1,860
============= =========== ============ ============
Reserves not deducted from assets:
Reserves for insurance claims and self-insurance:
- Current $ 59,373 85,744 83,357 61,760
- Noncurrent 103,384 2,039 8,214 97,209
------------- ----------- ------------ ------------
$ 162,757 87,783 91,571 158,969
============= =========== ============ ============
</TABLE>
S-2
<PAGE>
Exhibit 21.1
WINN-DIXIE STORES, INC.
SUBSIDIARIES OF REGISTRANT
The Registrant (Winn-Dixie Stores, Inc.) has no parents.
The following list includes all of the subsidiaries of the Registrant
except sixteen wholly-owned inactive domestic subsidiaries of the Registrant
and/or its subsidiaries.
All of the subsidiaries listed below are included in the Consolidated
Financial Statements. The Consolidated Financial Statements also include the
sixteen presently inactive domestic subsidiaries mentioned above.
Each of the following subsidiaries is owned by the Registrant except
that two subsidiaries, the names of which are indented, are owned by the
subsidiary named immediately above each indentation. All subsidiaries are
wholly-owned except for Bahamas Supermarkets Limited, which is owned
approximately 78% by W-D (Bahamas) Limited.
Subsidiary State of Incorporation
Astor Products, Inc. Florida
Deep South Products, Inc. Florida
Dixie Packers, Inc. Florida
Fairway Food Stores Co., Inc. Florida
Monterey Canning Co. California
W-D (Bahamas) Limited Bahama Islands
Bahamas Supermarkets Limited Bahama Islands
The City Meat Markets Limited Bahama Islands
Winn-Dixie Atlanta, Inc. Florida
Winn-Dixie Charlotte, Inc. Florida
Winn-Dixie Louisiana, Inc. Florida
Winn-Dixie Midwest, Inc. Florida
Winn-Dixie Montgomery, Inc. Kentucky
Winn-Dixie Raleigh, Inc. Florida
Winn-Dixie Texas, Inc. Texas
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Shareholders and the Board of Directors
Winn-Dixie Stores, Inc.:
We consent to the incorporation by reference in the Registration Statement Nos.
33-42278 and 33-50039 on Form S-8 of Winn-Dixie Stores, Inc. of our reports
dated July 27, 1998, relating to the consolidated balance sheets of Winn-Dixie
Stores Inc. and subsidiaries as of June 24, 1998 and June 25, 1997; and the
related consolidated statements of earnings, shareholders' equity, and cash
flows and related consolidated financial statement schedule for each of the
years in the three year period ended June 24, 1998, which reports appear in the
June 24, 1998 annual report on Form 10-K of Winn-Dixie Stores, Inc.
KPMG Peat Marwick LLP
Jacksonville, Florida
August 6, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> All amounts in thousands except per share data.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-24-1998
<PERIOD-END> JUN-24-1998
<CASH> 23,566
<SECURITIES> 0
<RECEIVABLES> 146,166
<ALLOWANCES> 2,623
<INVENTORY> 1,404,917
<CURRENT-ASSETS> 1,735,790
<PP&E> 1,169,848
<DEPRECIATION> 1,919,432
<TOTAL-ASSETS> 3,068,714
<CURRENT-LIABILITIES> 1,507,209
<BONDS> 0
0
0
<COMMON> 148,531
<OTHER-SE> 1,220,352
<TOTAL-LIABILITY-AND-EQUITY> 3,068,714
<SALES> 13,617,485
<TOTAL-REVENUES> 13,617,485
<CGS> 9,993,568
<TOTAL-COSTS> 3,392,985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,535
<INCOME-PRETAX> 317,792
<INCOME-TAX> 119,172
<INCOME-CONTINUING> 198,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,620
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.33
</TABLE>
