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 April 1, 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 T No
As of April 10, 1998, there were 148,536,049 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 12 and 40 Weeks Ended
April 1, 1998 and April 2, 1997 1
Condensed Consolidated Balance Sheets (Unaudited),
April 1, 1998 and June 25, 1997 2
Condensed Consolidated Statements of Cash Flows
(Unaudited), For the 40 Weeks Ended
April 1, 1998 and April 2, 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 12 Weeks Ended
------------------------------
MOST RECENT QUARTER
April 1, 1998 April 2, 1997
------------- -------------
Net sales $ 3,160,878 3,114,029
Cost of sales 2,302,664 2,323,771
----------- -----------
Gross profit 858,214 790,258
Operating & administrative expenses 780,538 722,288
----------- -----------
Operating income 77,676 67,970
Cash discounts & other income 26,572 27,308
Interest expense (6,693) (5,681)
----------- -----------
Earnings before income taxes 97,555 89,597
Provision for income taxes 36,583 32,254
----------- -----------
Net earnings $ 60,972 57,343
=========== ===========
Basic and diluted earning per share $ 0.41 0.38
=========== ===========
Dividends per share $ 0.255 0.240
=========== ===========
For the 40 Weeks Ended
------------------------------
FISCAL YEAR-TO-DATE April 1, 1998 April 2, 1997
------------- -------------
Net sales $ 10,367,324 10,156,905
Cost of sales 7,590,730 7,636,606
----------- -----------
Gross profit 2,776,594 2,520,299
Operating & administrative expenses 2,576,461 2,354,809
----------- -----------
Operating income 200,133 165,490
Cash discounts & other income 86,951 89,479
Interest expense (23,708) (17,373)
----------- -----------
Earnings before income taxes 263,376 237,596
Provision for income taxes 98,766 85,534
----------- -----------
Net earnings $ 164,610 152,062
=========== ===========
Basic and diluted earnings per share $ 1.11 1.01
=========== ===========
Dividends per share $ 0.765 0.720
=========== ===========
See accompanying notes to Condensed Consolidated Financial Statements.
Page 1
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Amounts in thousands
ASSETS April 1, 1998 June 25,1997
--------------- -------------
Cash and cash equivalents $ 22,768 14,116
Trade and other receivables 119,082 175,679
Merchandise inventories less LIFO reserve of
$236,999 ($224,999 at June 25, 1997) 1,393,716 1,249,215
Prepaid expenses 125,875 148,961
---------- ----------
Total current assets 1,661,441 1,587,971
Investments and other assets 137,116 182,628
Deferred income taxes 17,002 22,129
Net property, plant and equipment 1,132,458 1,128,681
---------- ----------
Total assets $ 2,948,017 2,921,409
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 601,801 604,034
Short-term borrowings 325,000 380,000
Reserve for insurance claims and self-insurance 63,919 60,219
Accrued wages and salaries 119,660 98,771
Accrued rent 75,935 76,528
Accrued expenses 160,697 137,115
Current obligations under capital leases 3,063 3,023
Income taxes 25,862 32,923
---------- ----------
Total current liabilities 1,375,937 1,392,613
---------- ----------
Obligations under capital leases 52,045 54,026
Defined benefit plan 36,469 33,452
Reserve for insurance claims and self-insurance 92,933 94,783
Other liabilities 12,530 9,041
---------- ----------
Shareholders' equity:
Common stock 148,539 148,876
Retained earnings 1,229,564 1,188,618
---------- ----------
Total shareholders' equity 1,378,103 1,337,494
---------- ----------
Total liabilities and shareholders' equity $ 2,948,017 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 40 Weeks Ended
----------------------------
FISCAL YEAR-TO-DATE April 1, 1998 April 2, 1997
------------- -------------
Cash flows from operating activities:
Net earnings $ 164,610 152,062
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 251,548 219,358
Deferred income taxes 13,415 (5,787)
Defined benefit plan 3,017 5,006
Reserve for insurance claims and self-insurance 1,851 (5,297)
Stock compensation plan 4,835 7,775
Change in cash from:
Receivables 56,597 6,875
Merchandise inventories (144,501) (94,990)
Prepaid expenses 27,476 25,192
Accounts payable (1,233) (6,763)
Income taxes (20,476) 826
Other current accrued expenses 44,949 48,663
---------- ----------
Net cash provided by operating activities 402,088 352,920
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (252,401) (310,325)
Decrease (increase) in investments and other assets 47,521 (55,966)
Net cash used in investing activities (204,880) (366,291)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings (55,000) 188,000
Payments on capital lease obligations (3,838) (3,878)
Purchase of common stock (21,065) (89,811)
Proceeds of sales under associates' stock
purchase plan 7,443 10,259
Dividends paid (113,122) (108,108)
Other (2,974) (2,357)
---------- ----------
Net cash used in financing activities (188,556) (5,895)
---------- ----------
Increase (decrease) in cash and cash equivalents 8,652 (19,266)
Cash and cash equivalents at beginning of year 14,116 32,208
---------- ----------
Cash and cash equivalents at end of period $ 22,768 12,942
========== ==========
Supplemental cash flow information:
Interest paid $ 14,106 11,445
Interest and dividends received $ 646 937
Income taxes paid $ 101,129 90,666
========== ==========
See accompanying notes to Condensed Consolidated Financial Statements.
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 91% of which are valued under the LIFO method.
(C) Results for the quarter reflect a pre-tax LIFO inventory charge of $2.0
million in 1998 and $5.0 million in 1997. The cumulative current year
charge is $12.0 million, as compared with $17.0 million in 1997. If the
FIFO method had been used, current quarter net earnings would have been
$62.2 million or $0.42 per share, as compared with net earnings of $60.4
million or $0.40 per share in the previous year. The cumulative current
year net earnings would have been $171.9 million or $1.15 per share, as
compared with $162.4 million or $1.08 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 April 1,
1998, there was $235.0 million in commercial paper and $90.0 million
from 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.
Page 4
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WINN-DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) cont'd.
(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.
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.
1998 1997
---- ----
Basic:
------
Quarter 148,539,077 149,244,112
Year-to-Date 148,747,048 150,375,766
Diluted:
--------
Quarter 148,710,969 149,405,836
Year-to-Date 148,937,714 150,563,169
(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" ("SFAS131"). 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.
Page 5
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) cont'd.
(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.
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 Consolidated
Financial Statements.
Results of Operations
Sales for the current quarter were $3.2 billion, a $46.8 million increase, or
1.5% over the comparable quarter ended April 2, 1997. Year-to-date, sales were
$10.4 billion, a $210.4 million increase, or 2.1% over the comparable period
last year. Identical store sales decreased 1.6% for the quarter and 1.5% year-
to-date. Average store sales increased 1.4% for the quarter and 1.8% year-to-
date. Sales for the third quarter were adversely affected by approximately 1.0%
due to Easter falling in the fourth quarter versus the third quarter last year.
The Company opened 63 new stores, averaging 49,900 quare feet, enlarged or
remodeled 84 stores, and closed 58 older stores, averaging 30,200 square feet.
As of April 1, 1998, retail space totaled 49.5 million square feet, a 4.2%
increase over the prior year. The Company has 1,179 stores in operation
compared with 1,181 stores last year. Of the 1,179 stores, 942, or 80.0%, are
larger than 35,000 square feet. By the end of this fiscal year, the Company
plans to open approximately 80 new stores and enlarge or remodel 100 existing
stores.
Gross profit increased $68.0 million for the quarter and $256.3 million year-to-
date. As a percent to sales, gross profit for the current quarter was 27.2%,
compared to 25.4% in the previous year. Year-to-date, gross profit as a
percent to sales was 26.8% in the current year, compared to 24.8% 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 $58.3 million for the current
quarter and $221.7 million year-to-date. As a percent to sales, operating and
administrative expenses for the current quarter were 24.7%, compared to 23.2%
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 and a $5.4 million pre-tax charge
for the recognized loss on the sale of the Raleigh, North Carolina distribution
facility.
Cash discounts and other income totaled $26.6 million for the third quarter,
compared to $27.3 million for the same quarter last year. Year-to-date, cash
discounts and other income totaled $87.0 million, compared to $89.5 million last
year. Investment income for the current quarter totaled $0.1 million, compared
to $0.1 million last year. Year-to-date, investment income totaled $0.3 million
for the current year, compared to $0.4 million in the previous year.
Page 7
<PAGE>
Results of Operations, continued
Interest expense totaled $6.7 million for the current quarter, compared to $5.7
million for the comparable period last year. Year-to-date, interest expense
totaled $23.7 million for the current year, compared to $17.4 million in the
previous year. The increase in interest expense for the year is related to the
increase in short-term borrowings through January 1998. Short-term borrowings
were reduced late in the third quarter.
Earnings before income taxes were $97.6 million for the current quarter,
compared to $89.6 million in the previous year. Year-to-date, earnings before
income taxes were $263.4 million in the current year and $237.6 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 36.0% 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 $61.0 million or $0.41 per share for the current
quarter, compared to $57.3 million or $0.38 per share for the comparable period
last year. Year-to-date, net earnings amounted to $164.6 million or $1.11 per
share, compared to $152.1 million or $1.01 per share for the previous year. The
LIFO charge reduced net earnings by $1.2 million or $0.01 per share for the
current quarter, compared to $3.1 million or $0.02 per share in the previous
year. Year-to-date, the LIFO charge reduced net earnings by $7.3 million or
$0.04 per share, compared to $10.4 million or $0.07 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 $22.8 million at April 1, 1998, compared to $12.9
million at April 2, 1997. Net cash provided by operating activities amounted
to $402.1 million for the 40 weeks ended April 1, 1998, compared to $352.9
million for the comparable period last year. Capital expenditures totaled
$252.4 million, compared to $310.3 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 April 1, 1998.
Working capital amounted to 285.5 million at April 1, 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 Program. 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 April 1, 1998, $235.0
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
April 1, 1998 was 5.6% as compared to 5.7% on June 25, 1997. Short-term
borrowings against our bank lines of credit were $90.0 million as of April 1,
1998, as compared to none on June 25, 1997. The interest rate on the bank
lines of credit on April 1, 1998 was 5.9%.
Excluding capital leases, the Company had no outstanding long-term debt as of
April 1, 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. B.B. Tripp, Vice President of the Company and President of Winn-
Dixie Charlotte, Inc., retired after 43 years of service. Mr. J.
Darryl Fitzgerald, Retail Operations Superintendent of Winn-Dixie
Charlotte, Inc. was elected Vice President of the Company and
promoted to President of Winn Dixie Charlotte, Inc. Randy L. Hutton
was elected Vice President and Director of Government Relations of
the Company.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended April 1, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: April 22, 1998 RICHARD P. MCCOOK
-------------------
Richard P. McCook
Financial Vice President
and Principal Financial Officer
Date: April 22, 1998 DAVID H. BRAGIN
--------------------
David H. Bragin
Corporate Treasurer and
Principal Accounting Officer
Page 11
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<FISCAL-YEAR-END> JUN-24-1998
<PERIOD-END> Apr-01-1998
[LEGEND] All amounts in thousands except per
share data.
[/LEGEND]
<CASH> 22768
<SECURITIES> 0
<RECEIVABLES> 119082
<ALLOWANCES> 0
<INVENTORY> 1393716
<CURRENT-ASSETS> 1661441
<PP&E> 1132458
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<CURRENT-LIABILITIES> 1375937
<BONDS> 0
0
0
<COMMON> 148539
<OTHER-SE> 1229564
<TOTAL-LIABILITY-AND-EQUITY> 1378103
<SALES> 10367324
<TOTAL-REVENUES> 10367324
<CGS> 7590730
<TOTAL-COSTS> 2576461
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23708
<INCOME-PRETAX> 263376
<INCOME-TAX> 98766
<INCOME-CONTINUING> 164610
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