UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 7, 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 or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5050 Edgewood Court, Jacksonville, Florida 32254-3699
(Address of principal executive offices) (Zip Code)
(904) 783-5000
(Registrant's telephone number, including area code)
Unchanged
(Former name, former address and former fiscal year, if changed since
last report)
------------------
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
As of January 14, 1998, there were 148,643,496 shares
outstanding of the registrant's common stock, $1 par value.
<PAGE>
WINN-DIXIE STORES, INC.
FORM 10-Q
TABLE OF CONTENTS
Part I: Financial Information
Page
Condensed Consolidated Statements of Earnings
(Unaudited), For the 16 and 28 Weeks Ended
January 7,1998 and January 8,1997 1
Condensed Consolidated Balance Sheets (Unaudited),
January 7, 1998 and June 25, 1997 2
Condensed Consolidated Statements of Cash Flows
(Unaudited), For the 28 Weeks Ended
January 7, 1998 and January 8, 1997 3
Notes to Condensed Consolidated Financial Statements
(Unaudited) 4-6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Part II: Other Information
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Amounts in thousands except per share data
For the 16 Weeks Ended
MOST RECENT QUARTER Jan. 7, 1998 Jan. 8, 1997
Net sales $ 4,150,243 4,057,174
Cost of sales 3,054,686 3,067,855
--------- ---------
Gross profit 1,095,557 989,319
Operating & administrative expenses 1,029,947 943,392
--------- ---------
Operating income 65,610 45,927
Cash discounts & other income 34,130 35,786
Interest expense (9,935) (7,202)
--------- --------
Earnings before income taxes 89,805 74,511
Provision for income taxes 33,677 26,824
--------- --------
Net earnings $ 56,128 47,687
========= ========
Basic and diluted earning per share $ 0.38 0.32
========= ========
Dividends per share $ 0.34 0.32
========= ========
FISCAL YEAR-TO-DATE For the 28 Weeks Ended
Jan. 7, 1998 Jan. 8, 1997
Net sales $ 7,206,446 7,042,876
Cost of sales 5,288,066 5,312,834
---------- ---------
Gross profit 1,918,380 1,730,042
Operating & administrative expenses 1,795,923 1,632,521
---------- ---------
Operating income 122,457 97,521
Cash discounts & other income 60,379 62,170
Interest expense (17,015) (11,691)
---------- ---------
Earnings before income taxes 165,821 148,000
Provision for income taxes 62,183 53,280
---------- ---------
Net earnings $ 103,638 94,720
========== =========
Basic and diluted earnings per share $ 0.70 0.63
========== =========
Dividends per share $ 0.51 0.48
========== =========
See accompanying notes to Condensed Consolidated Financial
Statements.
Page 1
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WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Amounts in thousands
ASSETS Jan. 7, 1998 June 25, 1997
Cash and cash equivalents $ 23,433 14,116
Trade and other receivables 125,898 175,679
Merchandise inventories less LIFO reserve of
$234,999 ($224,999 at June 25, 1997) 1,355,701 1,249,215
Prepaid expenses 129,209 148,961
--------- ---------
Total current assets 1,634,241 1,587,971
Investments and other assets 191,909 182,628
Deferred income taxes 19,271 22,129
Net property, plant and equipment 1,140,336 1,128,681
--------- ---------
Total assets $ 2,985,757 2,921,409
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 586,923 604,034
Short-term borrowings 401,500 380,000
Reserve for insurance claims and self-insurance 63,869 60,219
Accrued wages and salaries 110,032 98,771
Accrued rent 77,173 76,528
Accrued expenses 171,909 137,115
Current obligations under capital leases 3,051 3,023
Income taxes 16,208 32,923
--------- ---------
Total current liabilities 1,430,665 1,392,613
Obligations under capital leases 52,639 54,026
Defined benefit plan 35,492 33,452
Reserve for insurance claims and self-insurance 93,488 94,783
Other liabilities 11,190 9,041
Shareholders' equity:
Common stock 148,677 148,876
Retained earnings 1,213,606 1,188,618
--------- ---------
Total shareholders' equity 1,362,283 1,337,494
--------- ---------
Total liabilities and shareholders' equity $ 2,985,757 2,921,409
========= =========
See accompanying notes to Condensed Consolidated Financial
Statements.
Page 2
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Amounts in thousands
For the 28 Weeks Ended
FISCAL YEAR-TO-DATE Jan. 7, 1998 Jan. 8, 1997
Cash flows from operating activities:
Net earnings $ 103,638 94,720
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 174,911 150,271
Deferred income taxes 9,391 (4,051)
Defined benefit plan 2,040 3,492
Reserve for claims and self-insurance 2,355 (715)
Stock compensation plan 3,809 5,427
Change in cash from:
Receivables 49,781 23,430
Merchandise inventories (106,486) (100,950)
Prepaid expenses 22,825 31,532
Accounts payable (16,411) (13,810)
Income taxes (26,106) (20,028)
Other current accrued expenses 45,447 40,267
-------- --------
Net cash provided by operating activities 265,194 209,585
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment, net(183,681) (229,898)
Increase in investments and other assets (10,110) (21,887)
-------- --------
Net cash used in investing activities (193,791) (251,785)
-------- --------
Cash flows from financing activities:
Increase in short-term borrowings 21,500 160,500
Payments on capital lease obligations (1,526) (1,450)
Purchase of common stock (11,036) (56,276)
Proceeds of sales under associates'
stock purchase plan 5,586 7,224
Dividends paid (75,314) (72,291)
Other (1,296) 946
Net cash provided by (used in) ------- -------
financing activities (62,086) 38,653
------- -------
Increase (decrease) in cash and cash equivalents 9,317 (3,547)
Cash and cash equivalents at beginning of year 14,116 32,208
------- -------
Cash and cash equivalents at end of period $ 23,433 28,661
======= =======
Supplemental cash flow information:
Interest paid $ 9,910 7,425
Interest and dividends received $ 496 725
Income taxes paid $ 78,924 77,637
======= =======
See accompanying notes to Condensed Consolidated FinancialStatements.
Page 3
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WINN-DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A) Financial information reflects all adjustments which, in the
opinion of management, are necessary to reflect the results of
operations and financial position for the quarters shown. These
condensed financial statements should be read in conjunction with
the fiscal 1997 Form 10-K Annual Report of the Company. 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.
(B) Merchandise inventories are stated at the lower of cost or
market, approximately 90% of which are valued under the LIFO
method.
(C) Results for the quarter reflect a pre-tax LIFO inventory
charge of $5.0 million in 1998 and $6.0 million in 1997. The
cumulative current year charge is $10.0 million as compared with
$12.0 million in 1997. If the FIFO method had been used, current
quarter net earnings would have been $59.2 million or $0.40 per
share, as compared with net earnings of $51.4 million or $0.34 per
share in the previous year. The cumulative current year net
earnings would have been $109.7 million, or $0.74 per share, as
compared with $102.1 million, or $0.68 per share.
(D) The Company has an authorized $500.0 million Commercial Paper
Program and short-term lines of credit totaling $505.0 million. On
January 7, 1998, there was $340.0 million in commercial paper and
$61.5 million in bank lines of credit outstanding as compared to
$380.0 million in commercial paper and none from bank lines of
credit outstanding on June 25, 1997.
(E) The provision for income taxes reflects management's best
estimate of the effective tax rate expected for the fiscal year.
The effective tax rate for fiscal year 1998 is 37.5% as compared to
36.0% in 1997. The effective tax rate during fiscal 1998 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.
(F) Earnings Per Share: In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share." SFAS 128 replaces
the presentation of Primary Earnings Per Share with a presentation
of Basic Earnings Per Share and Diluted Earnings Per Share. The
Company adopted SFAS 128 during the second quarter of fiscal 1998.
The adoption of this statement did not materially affect the
Company's earnings per share. All prior period earnings per share
amounts have been restated to conform with the provisions of SFAS
128.
Page 4
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) cont'd.
The following weighted average number of shares of common stock we
re 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.
1998 1997
Basic:
Quarter 148,764,052 150,491,563
Year-to-Date 148,836,178 150,860,760
Diluted:
Quarter 148,942,337 150,677,503
Year-to-Date 149,001,688 151,053,425
(G) New Accounting Pronouncement: In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income" ("SFAS 130") and SFAS 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 1999. SFAS 131 supersedes SFAS 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 is still determining how
SFAS 131 will impact the financial statement disclosure.
(H) 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.
Page 5
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) cont'd.
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.
(I) Reclassification: Certain prior year amounts have been
reclassified to conform with the current year's presentation.
Page 6
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This analysis should be read in conjunction with the Condensed Con
solidated Financial Statements.
Results of Operations
Sales for the current quarter were $4.2 billion, a $93.1 million
increase, or 2.3% over the comparable quarter ended January 8,
1997. Year-to-date, sales were $7.2 billion, a $163.6 million
increase over the comparable period last year. Average store sales
increased 1.7% for the quarter and 1.9% year-to-date. Identical
store sales decreased 1.4% for the quarter and 1.4% year-to-date.
The Company opened 46 new stores, averaging 49,800 square feet,
enlarged or remodeled 64 stores, and closed 35 older stores,
averaging 29,500 square feet. As of January 7, 1998, retail space
totaled 49.3 million square feet. The Company has 1,185 stores in
operation compared with 1,179 stores last year. Of the 1,185
stores, 932, or 78.6%, are larger than 35,000 square feet.
Currently, 61 new stores are under construction. By the end of
this fiscal year, the Company plans to have open approximately 80
new stores and enlarged or remodeled 90 existing stores.
Gross profit increased $106.2 million for the quarter and $188.3
million, year-to-date. As a percent to sales, gross profit for
the current quarter was 26.4%, compared to 24.4% in the previous
year. Year-to-date, gross profit as a percent to sales was 26.6%
in the current year, compared to 24.6% in the previous year.
Operating margins improved with an increase in the number of
larger stores, added service departments and improved pricing.
Operating and administrative expenses increased $86.6 million for
the current quarter and $163.4 million year-to-date. As a percent
to sales, operating and administrative expenses for the current
quarter were 24.8%, compared to 23.3% last year. Year-to-date,
operating and administrative expenses, as a percent to sales were
24.9% for the current year and 23.2% for the previous year. Our
expenses were impacted by increased training costs associated with
our emphasis toward increased customer service.
Cash discounts and other income totaled $34.1 million in the
second quarter, compared to $35.8 million for the same quarter
last year. Year-to-date, cash discounts and other income totaled
$60.4 million compared to $62.2 million last year. The decrease
in cash discounts and other income is a result of a decrease in
miscellaneous income. Investment income for the current quarter
totaled $0.1 million compared to $0.1 million last year. Year-to-
date, investment income totaled $0.2 million for the current year,
compared to $0.3 million in the previous year.
Page 7
<PAGE>
Results of Operations, continued
Interest expense totaled $9.9 million for the current quarter com
pared to $7.2 million for the comparable period last year. Year-to-
date, interest expense totaled $17.0 million for the current year
compared to $11.7 million in the previous year. The increase in
interest expense for the year is related to the increase in short-
term borrowings.
Earnings before income taxes were $89.8 million for the current
quarter compared to $74.5 million in the previous year. Year-to-
date, earnings before income taxes were $165.8 million in the
current year and $148.0 million in the previous year. The increase
in pre-tax earnings is primarily a result of the increase in gross
profit as previously mentioned. Income taxes have been accrued at
an effective rate of 37.5% for the current year and 36% for the
previous year. This rate is expected to approximate the effective
rate for the full 1998 fiscal year. The effective tax rate during
fiscal 1998 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 $56.1 million, or $0.38 per share, for
the current quarter compared to $47.7 million, or $0.32 per share
for the comparable period last year. Year-to-date, net earnings
amounted to $103.6 million, or $0.70 per share, compared to $94.7
million, or $0.63 per share, for the previous year. The LIFO
charge reduced net earnings by $3.1 million, or $0.02 per share,
for the current quarter compared to $3.7 million, or $0.02 per
share, in the previous year. Year-to-date, the LIFO charge reduced
net earnings by $6.1 million, or $0.04 per share, compared to $7.3
million, or $0.05 per share, in the previous year.
Liquidity and Capital Resources
The Company's financial condition remains sound and strong. Cash
and cash equivalents amounted to $23.4 million at January 7, 1998,
compared to $28.7 million at January 8, 1997. Net cash provided by
operating activities amounted to $265.2 million for the 28 weeks
ended January 7, 1998, compared to $209.6 million for the
comparable period last year. Capital expenditures totaled $183.7
million compared to $229.9 million for the comparable period last
year. These expenditures were for new store locations, remodeling
and enlargement of store locations and maintenance and expansion
of support facilities. Total capital investment in Company retail
and support facilities, including operating leases, is estimated
to be $850 million in 1998. The Company has no material
construction or purchase commitments outstanding as of January 7,
1998.
Working capital amounted to $203.6 million at January 7, 1998
compared to $195.4 million at June 25, 1997.
Page 8
<PAGE>
Liquidity and Capital Resources, continued
The Company has an authorized $500.0 million Commercial Paper Pro
gram. In addition, the Company has $505.0 million of short-term
lines of credit. These 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. As of January 7, 1998,
$340.0 million of commercial paper was outstanding as compared to
$380.0 million on June 25, 1997. The average interest rate on the
commercial paper outstanding on January 7, 1998 was 5.7%, as
compared to 5.7% on June 25, 1997. Short-term borrowings against
our bank lines of credit were $61.5 million as of January 7, 1998
as compared to none on June 25, 1997. The interest rate on the
bank lines of credit on January 7, 1998, was 5.8%.
Excluding capital leases, the Company had no outstanding
long-term debt as of either January 7, 1998 or June 25, 1997.
The Company's cash flow from operations and available credit
facilities are considered adequate to fund the short-term and
long-term capital needs of the Company.
The Company is a party to various proceedings arising under
federal, state or local regulations protecting the environment.
Management is of the opinion that any liability which might
result from any such proceeding will not have a material adverse
effect on the Company=s consolidated earnings or financial
position.
Impact of Inflation
The Company's primary costs, which are inventory and labor,
increase with inflation. Recovery of these increases has to come
from improved operating efficiencies and, to the extent permitted
by our competition, through improved gross profit margins.
Year 2000 Compliance
Winn-Dixie has undertaken a comprehensive review of its computer-
based systems and applications to identify modifications
necessitated by the century change in the year 2000 and has
implemented a plan to make such modifications. Winn-Dixie intends
to have all critical systems compliant with the century change
prior to the end of 1999. While the Company does not expect the
costs of compliance to be material relative to its financial
condition, the business of the Company could be adversely affected
should the Company or other entities with whom the Company does
business be unsuccessful in completing critical modifications in a
timely manner.
Page 9
<PAGE>
Cautionary Statement Regarding Forward-Looking Information and
Statements
This Form 10-Q contains certain information that constitutes
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act, which involves risks and
uncertainties. Actual results may differ materially from the
results described in the forward-looking statements. When used in
this document, the words, "estimate," "project," "intend" and
"believe" and other similar expressions, as they relate to the
Company, are intended to identify such forward-looking statements.
Such statements reflect the current views of the Company and are
subject to certain risks and uncertainties that include, but are
not limited to, growth, competition, inflation, pricing and margin
pressures, law and taxes. Please refer to discussions of these
and other factors in this Form 10-Q and other Company filings with
the Security 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.
Page 10
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
Part II - Other Information
Item 5. Other Information
Mr. Thomas E. McDonald, Senior Vice President and Regional
Director of the Company, retired after 43 years of service. Mr.
McDonald's responsibilities have been reallocated to the three
current Senior Vice Presidents and Regional Directors of the
Company.
Item 6.
Exhibits and Reports on Form 8-K
Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
January 7, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WINN-DIXIE STORES, INC.
Date: January 23, 1998
RICHARD P. MC COOK
Richard P. McCook
Financial Vice
President and
Principal Financial
Officer
Date: January 23, 1998
DAVID H. BRAGIN
David H. Bragin
Corporate Treasurer and
Principal Accounting
Officer
Page 11
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</LEGEND>
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<PERIOD-END> Jan-07-1998
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