WINN-DIXIE STORES, INC.
5050 EDGEWOOD COURT
JACKSONVILLE, FLORIDA 32254-3699
Notice of Annual Meeting of Shareholders
To be held October 7, 1998
To all Shareholders of Winn-Dixie Stores, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Winn-Dixie Stores, Inc. (the "Company") will be held at the Prime Osborn
Convention Center in Room 102, 1000 West Water Street, Jacksonville, Florida at
9:00 a.m., local time, on Wednesday, October 7, 1998, for the following
purposes:
1. To elect four Class I Directors for terms expiring in 2001.
2. To approve the material terms of the incentive compensation
performance goals under the Company's Annual Incentive Plan
and the Performance - Based Restricted Stock Plan.
3. To take action with respect to the approval and ratification
of amendments to the Company's Key Employee Stock Option Plan.
4. To take action with respect to the ratification of the
appointment by the Board of Directors of the Company of KPMG
Peat Marwick LLP as auditors of the Company for the fiscal
year commencing June 25, 1998.
5. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
NOTICE IS FURTHER GIVEN that the Board of Directors has fixed July 31,
1998, as the record date, and only holders of the Company's Common Stock of
record at the close of business on that date will be entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
Judith W. Dixon
Secretary
Jacksonville, Florida
August 26, 1998
EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN
THE EVENT A SHAREHOLDER DECIDES TO ATTEND THE MEETING, THE SHAREHOLDER MAY, IF
SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
WINN-DIXIE STORES, INC.
5050 Edgewood Court
Jacksonville, Florida 32254-3699
PROXY STATEMENT AND CONSOLIDATED FINANCIAL STATEMENTS
for
Annual Meeting of Shareholders
To be held October 7, 1998
-----------------------
GENERAL INFORMATION
The Board of Directors of Winn-Dixie Stores, Inc. (the "Company")
solicits your proxy for use at the 1998 Annual Meeting of Shareholders to be
held on Wednesday, October 7, 1998, at the Prime Osborn Convention Center in
Room 102, 1000 West Water Street, Jacksonville, Florida, commencing at 9:00
a.m., local time, and any adjournments thereof. A form of proxy is enclosed.
Any shareholder who executes and delivers the proxy may revoke it at any time
prior to its use.
The cost of soliciting the proxies will be borne by the Company.
Directors, officers and employees of the Company may solicit proxies by
telephone, telegram or personal interview. In addition, the Company will,
upon the request of brokers, dealers, banks and voting trustees, and their
nominees, who are holders of record of shares of the Company's stock on the
record date referred to below, pay their reasonable expenses for completing
the mailing of copies of the Annual Report, this Notice of Meeting and Proxy
Statement and the enclosed form of proxy to the beneficial owners of such
shares of stock.
The Annual Report of the Company to its shareholders for the 1997-98
fiscal year is being mailed with this Proxy Statement to shareholders
entitled to vote at the Annual Meeting. The approximate date on which this
Proxy Statement and form of proxy are first being sent or given to
shareholders is August 26, 1998.
Securities and Exchange Commission ("SEC") rules require that an
annual report precede or be included with the Company's proxy materials.
Shareholders with multiple accounts may be receiving more than one annual
report, which is costly to the Company and may be inconvenient to these
shareholders. Shareholders who have not yet authorized the Company to
discontinue mailing extra reports may now do so by marking the appropriate
box on the proxy card for selected accounts. Such an election will take
effect at the end of the Company's 1998-99 fiscal year. At least one account
must continue to receive an annual report. Eliminating these duplicate
mailings will not affect receipt of future proxy statements and proxy cards
nor the mailing of dividend checks, dividend reinvestment statements, or
special notices. To resume the mailing of an annual report to an account,
please make a written request to: First Chicago Trust Company of New York, P.
O. Box 2500, Jersey City, New Jersey 07303-2500.
VOTING PROCEDURES
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the 2001
Annual Meeting of Shareholders, shareholders voting by proxy may vote in
favor of all nominees, withhold their votes as to all nominees or withhold
their votes as to specific nominees. With respect to the other proposals to
be voted upon, shareholders may vote in favor of a proposal, against a
proposal or may abstain from voting. Shareholders should specify their
choices on the enclosed form of proxy. If no specific instructions are given
with respect to the matters to be acted upon, the shares represented by a
signed proxy will be voted FOR the election of all nominees, FOR the proposal
to approve the material terms of the performance goals under the Annual
Incentive Plan and Performance-Based
<PAGE>
Restricted Stock Plan, FOR the proposal to approve the amendments to
the Key Employee Stock Option Plan, and FOR the proposal to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors. Directors will
be elected by a plurality of the votes cast by the shareholders voting in
person or by proxy at the Annual Meeting. Approval of each other proposal
will require the affirmative vote of the holders of a majority of the shares
of Common Stock voting on the proposal in person or by proxy at the Annual
Meeting. Abstentions are not included in determining whether the requisite
number of affirmative votes are received for the proposals, other than the
proposal to amend the Key Employee Stock Option Plan. Pursuant to the rules
of the New York Stock Exchange, abstentions will have the same effect as a
vote against the amendments to the Key Employee Stock Option Plan. Broker
non-votes will not be included in vote totals and will have no effect on the
outcome of any vote. A broker non-vote generally occurs when a broker who
holds shares in street-name for a customer does not have authority to vote on
certain non-routine matters because its customer has not provided any voting
instructions on the matter.
If a shareholder is a participant in the Dividend Reinvestment Plan
of Winn-Dixie Stores, Inc., the proxy card serves as voting instruction for
the number of full shares in the dividend reinvestment plan account, as well
as other shares registered in the participant's name. If a shareholder is a
participant in the Winn-Dixie Stores, Inc. Profit Sharing/401(k) Plan (the
"Profit Sharing Plan"), the proxy card also will serve as voting instruction
for the trustee of the Profit Sharing Plan where all accounts are registered
in the same name. If voting instructions are not received for shares in the
Profit Sharing Plan, those shares will be voted in the same proportion as the
shares in such plan for which voting instructions are received.
Only owners of record of shares of Common Stock of the Company at the
close of business on July 31, 1998, are entitled to vote at the meeting or
adjournments or postponements thereof. Each owner of record on the record
date is entitled to one vote for each share of Common Stock of the Company so
held. On July 31, 1998, there were 148,556,240 shares of Common Stock of the
Company issued and outstanding.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board is divided into three classes of Directors. Each class of
Directors is elected to serve for a term of three years, so that the terms of
office of approximately one-third of the Directors will expire each year. At
the Annual Meeting of Shareholders, four Directors are to be elected in Class
I to hold office until the 2001 Annual Meeting of Shareholders or until their
successors are elected and qualified. The persons designated as nominees for
election as Directors in Class I are A. Dano Davis, T. Wayne Davis, Carleton
T. Rider and Charles P. Stephens. Each of such nominees currently is a
Director of the Company.
Should any one or more of these nominees become unable to serve for
any reason, or for good cause will not serve, which is not anticipated, the
Board of Directors may, unless the Board by resolution provides for a lesser
number of Directors, designate substitute nominees, in which event the
persons named in the enclosed proxy will vote proxies that otherwise would be
voted for the named nominees for the election of such substitute nominee or
nominees.
Certain information with respect to each of the nominees and
Directors relating to principal occupations and directorships, and the
approximate number of shares of the Company's Common Stock beneficially owned
by them, directly or indirectly, has been furnished to the Company by such
nominees and Directors.
The Board of Directors recommends a vote FOR all four nominees.
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OF WINN-DIXIE STORES, INC.
Has Been a
Director
Name, Principal Occupation for Age as of Continuously
The Past Five Years, Directorships June 24, 1998 Since
----------------------------------- ------------- -----
CLASS I DIRECTOR NOMINEES
FOR TERMS EXPIRING IN 2001
<S> <C> <C>
A. Dano Davis - For more than the last five years, Chairman of the
Board and Principal Executive Officer of the Company; with the
Company since 1968; also a Director of First Union Corporation and
American Heritage Life Investment Corporation...................... 53 1981
T. Wayne Davis - For more than the last five years, a private
investor; with the Company 1971-1987; Chairman of the Board of
Transit Group, Inc.; also a Director of Enstar Group, Inc., and
AccuStaff, Incorporated............................................ 51 1981
Carleton T. Rider - August 1993 to date, Continuous Improvement
Officer, Mayo Foundation; 1985 to July 1993, Administrator, Mayo
Clinic Jacksonville; also a Director of St. Luke's Hospital,
Jacksonville, Florida.............................................. 53 1992
Charles P. Stephens - For more than the last five years, Vice
President, Director and a principal stockholder of Norman W.
Paschall Co., Inc. (brokers, importers, exporters and processors of
textile fibers and by-products).................................... 60 1982
INCUMBENT CLASS III DIRECTORS
WHOSE TERMS EXPIRE IN 1999
Armando M. Codina - For more than the last five years, Chairman of
the Board and President of Codina Group, Inc.; also a Director of
American Bankers Insurance Group, Inc., BellSouth Corporation, AMR,
Inc., and FPL Group, Inc........................................... 51 1987
Radford D. Lovett - For more than the last five years, Chairman of
the Board of Commodores Point Terminal Corporation; also a Director
of First Union Corporation, American Heritage Life Investment
Corporation, Florida Rock Industries, Inc., and FRP Properties, Inc. 64 1983
Julia B. North - October 1997 to date, President and CEO of VSI
Enterprises, Inc.; April 1996 to October 1997, President of Consumer
Services, a business unit of BellSouth Telecommunications, Inc.; for
more than five years prior thereto, Vice President of BellSouth
Telecommunications, Inc.; also a Director of ChoicePoint, Inc..... 50 1994
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Has Been a
Director
Name, Principal Occupation for Age as of Continuously
The Past Five Years, Directorships June 24, 1998 Since
----------------------------------- ------------- -----
INCUMBENT CLASS II DIRECTORS WHOSE
TERMS EXPIRE IN 2000
<S> <C> <C>
Robert D. Davis - For more than the last five years, Chairman of the
Board of D.D.I., Inc.; with the Company 1955-1990; also a Director
of American Heritage Life Investment Corporation.................. 66 1972
James Kufeldt - For more than the last five years, President of the
Company; with the Company since 1961; also a Director of NationsBank
Jacksonville Advisory Board........................................ 59 1988
Charles H. McKellar - For more than the last five years, Executive
Vice President of the Company; with the Company since 1957......... 60 1988
David F. Miller - May 1997 to date, private investor; also a
Director of Suiza Foods Corp.; March 1996 to May 1997, President and
Chief Operating Officer of What-A-World, Inc.; March 1990 to March
1997, Chairman of the Board of PureIce of the South, Inc.; prior to
that time was Vice Chairman of the Board of J.C. Penney Company,
Inc. and President and Chief Operating Officer of J.C. Penney Stores
and Catalog........................................................ 69 1987
</TABLE>
The Company was founded by Messrs. A. D. Davis, James E. Davis, M. Austin
Davis and Tine W. Davis (the "Founding Brothers"), all of whom are deceased. Mr.
A. Dano Davis, the Company's Chairman and Principal Executive Officer, is the
son of Mr. James E. Davis. Mr. Robert D. Davis is the son of Mr. A. D. Davis.
Mr. T. Wayne Davis is the son of Mr. Tine W. Davis. Mr. Charles P. Stephens is
the son-in-law of Mr. M. Austin Davis.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the
Company's Common Stock by each person who, as of June 24, 1998, is known to the
Company to be the beneficial owner of 5% or more of the Common Stock.
Name and Amount and
Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
- ---------------- --------------------------- -------------------- --------------
Common Stock Davis Family (1) 58,963,576 39.70
c/o D.D.I., Inc.
4310 Pablo Oaks Court
Jacksonville, FL 32224
(1) Certain relatives of the Founding Brothers, trusts, estates, corporations
and other entities involving them and their associates (collectively, the
"Davis Family") own beneficially for the Davis Family, directly or
indirectly, the shares listed in this table. These shares include those
listed for Messrs. A. Dano, Robert D. and T. Wayne Davis and Charles P.
Stephens in the following table setting forth the beneficial ownership by
directors, nominees and executive officers. The figures exclude 58,484
shares, those in excess of the pro rata beneficial interest of the Davis
Family in 100,000 shares held by American Heritage Life Investment
Corporation.
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock by each of the directors and nominees, each of the
executive officers named in the Summary Compensation Table and all of the
Company's directors and executive officers as a group as of June 24, 1998.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership (1)
-------------------------
Direct or Indirect
With Sole Indirect with
Voting and Shared Voting
Investment And Investment Percent
Name of Beneficial Owner Power Power Total Of Class
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
Armando M. Codina 15,213 15,213 *
A. Dano Davis 988,860 5,972,063 6,960,923 4.69
Robert D. Davis 355,424 2,682,038 3,037,462 2.05
T. Wayne Davis 363,048 2,105,309 2,468,357 1.66
James Kufeldt 381,469 14,740 396,209 0.27
Radford D. Lovett 17,704 17,704 *
Charles H. McKellar 126,529 126,529 0.09
David F. Miller 800 800 *
Julia B. North 4,604 4,604 *
Carleton T. Rider 1,619 1,619 *
Charles P. Stephens 22,358 2,772,080 2,794,438 1.88
Charles E. Winge 55,393 55,393 *
Richard J. Ehster 59,353 59,353 *
Directors and Executive Officers
as a Group (31 persons) 3,052,380 13,546,230 16,598,610 11.18
</TABLE>
- --------------------
* Less than .1% of issued and outstanding shares of Common Stock of the Company.
(1) Includes shares held by the wives and children of certain of the persons
named, as to which such persons disclaim beneficial ownership. The numbers of
such shares so disclaimed are as follows: Robert D. Davis, 644,194; T. Wayne
Davis, 352,619; James Kufeldt, 14,740; Radford D. Lovett, 148; Charles H.
McKellar, 10,552; Carleton T. Rider, 900; Charles P. Stephens, 2,772,071; and
Charles E. Winge, 17,564. The holdings set forth above exclude 34,046,748 shares
of Common Stock of the Company, included in the Davis Family holdings shown on
page 4 hereof, held by various entities as to which one or more of A. Dano
Davis, A. Dano Davis' wife, Robert D. Davis, T. Wayne Davis, Charles P. Stephens
and Charles P. Stephens' wife have direct or indirect voting and/or investment
powers, but no pecuniary interests, and as to which they disclaim beneficial
ownership. Finally, the holdings set forth above exclude 7,819,320 shares held
indirectly by the Estate of A. D. Davis whose personal representative, Robert D.
Davis, has indirect shared voting and dispositive powers with respect to such
shares and 30,352 shares held directly by the Estate of Myra S. Varnedoe whose
personal representative, A. Dano Davis' wife, has direct sole voting and
dispositive powers with respect to such shares.
The holdings set forth above include restricted shares awarded as Long-Term
Incentive Awards pursuant to the Company's Officer Compensation Program. Certain
shares included are subject to forfeiture if certain performance goals are not
met within the three fiscal-year period expiring June 24, 1998, as follows: Mr.
Kufeldt, 6,762 shares; Mr. McKellar, 4,926 shares; Mr. Ehster, 1,088 shares, and
Mr. Winge, 2,150 shares. Such shares are included because the determination of
whether such performance goals have been met is not made until the audited
financials for the Company for the 1997-98 fiscal year have been completed,
which occurs in early fiscal year 1998-99. Certain other shares are subject to
forfeiture if certain performance goals are not met within the three fiscal-year
period expiring June 30, 1999, as follows: Mr. Kufeldt, 5,552 shares; Mr.
McKellar, 4,045 shares; Mr. Ehster, 924 shares; and Mr. Winge, 1,799 shares.
Certain other shares are subject to forfeiture if certain performance goals are
not met within the three fiscal-year period expiring June 28, 2000, as follows:
Mr. Kufeldt, 5,342 shares; Mr. McKellar, 3,892 shares; Mr. Ehster, 889 shares;
and Mr. Winge, 1,731 shares. The holdings for the 22 officers within the
Directors and Executive Officers group total 85,332 restricted shares.
The holdings set forth above include equivalent shares credited to the Stock
Equivalent Accounts of Directors under the Directors' Deferred Fee Plan (see
"Director's Fees"): Mr. Codina, 12,213 equivalent shares; Mr. R. D. Davis, 6,356
equivalent shares; Mr. T. W. Davis, 1,330 equivalent shares; Mr. Lovett, 10,892
equivalent shares; Mr. Rider, 719 equivalent shares; and Ms. North, 4,204
equivalent shares. These holdings are payable only in cash upon retirement.
The holdings set forth above also include the equivalent of 5,301 shares
credited to Mr. Kufeldt's account, allocated by him to the Company stock fund
within the Profit Sharing Plan, and a total of 17,436 shares for all executive
officers as a group in such fund.
These holdings further include shares under options granted on June 15, 1992,
which are now exercisable, of 50,000 shares for Mr. Kufeldt, and shares under
additional options granted on June 22, 1994, which are now exercisable, of
50,000 shares for Mr. Kufeldt. These holdings also include shares under
additional options granted on June 19, 1996, which are not presently
exercisable, of 25,000 shares for Mr. Kufeldt, 20,000 shares for Mr. McKellar,
10,000 shares for Mr. Ehster and 12,000 shares for Mr. Winge. All of these share
options are more fully described in the table on options on page 8.
<PAGE>
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC and the New York Stock Exchange. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it and written representations from certain
reporting persons that no Forms 5 were required for them, the Company believes
that during the Company's most recently completed fiscal year ended on June 24,
1998, all filing requirements applicable to its officers, directors, and greater
than ten percent beneficial owners were met.
MEETINGS OF THE BOARD AND
COMMITTEES
During the most recently completed fiscal year, the Board of Directors
held four regular meetings and took action by unanimous written consent in lieu
of a meeting three times. The Board of Directors has Audit, Nominating and
Compensation Committees. The Audit Committee and Compensation Committee held two
and three meetings, respectively, during the 1997-98 fiscal year. The Nominating
Committee did not meet. All current Directors attended at least 75% of the
meetings of the Board and of the committees on which they served, with the
exception of Mr. Armando M. Codina who did not attend one meeting of the Board
and one meeting of each of the Audit Committee and the Compensation Committee,
all of which meetings were held on the same day.
The Audit Committee is composed of Mr. David F. Miller, Chairman, and
Messrs. Armando M.Codina, Radford D. Lovett, Carleton T. Rider and Charles P.
Stephens, and Ms. Julia B. North. The Audit Committee, whose members are not
officers, employees, or retired employees of the Company, reviews the scope and
results of the audit, approves types of non-audit services provided to the
Company and recommends selection of the Company's independent auditors. It
also reviews the scope of internal audits, systems of internal controls and
accounting policies and procedures.
The Nominating Committee is composed of Mr. T. Wayne Davis, Chairman, and
Messrs. A. Dano Davis, Robert D. Davis, Radford D. Lovett and Charles P.
Stephens. The Nominating Committee recommends qualified candidates to fill
vacancies on the Board of Directors and will consider nominees recommended by
shareholders, who may submit names and biographical data and qualifications in
writing to the Secretary of the Company.
The Compensation Committee, composed of Mr. Radford D. Lovett,
Chairman, and Messrs. Armando M. Codina and Carleton T. Rider and Ms. Julia B.
North, approves the Company's compensation strategy to ensure that management
employees are awarded appropriately for their contributions to Company growth
and profitability and that the compensation strategy supports organization
objectives and shareholder interests. The Committee also establishes and reviews
the salary, annual incentive, long-term incentive, and benefit plans for
officers and other management employees. The Compensation Committee, whose
members are not officers, employees or retired employees of the Company,
established and reviewed whether performance goals were met under the Company's
Officer Compensation Program and Key Employee Stock Option Plan for stock and
cash compensation to be awarded for fiscal year 1997-98 and reviewed and revised
the Company's Officer Compensation Program effective beginning in fiscal year
1998-99. The activities of the Compensation Committee are described further in
the Report on Executive Compensation beginning on page 9.
DIRECTORS' FEES
Directors are paid a retainer fee of $12,000 per annum plus $3,000 for
attendance at each regular meeting of the Board of Directors. Directors also are
paid $1,000 for each action by written consent in lieu of a meeting. Members of
the Audit, Nominating, and Compensation Committees are paid $3,000 for each
committee meeting attended. Travel expenses of Directors incurred in traveling
to Committee and Board of Directors' meetings also are reimbursed by the
Company. Members of the Board of Directors who also are employees are not paid
Director's fees or fees for attending Committee meetings.
<PAGE>
A Director may elect to defer payment of all or any part of the above
fees until termination as a Director under a Deferred Fee Plan for Directors
effective June 30, 1988, with fees credited to an Income Account at a prime rate
of interest or to a Stock Equivalent Account based on the closing market price
of the Company's Common Stock on the date fees are earned. The deferred fees are
payable only in cash in a single payment or annual installments upon retirement.
Directors Codina, Lovett, Rider, T. Wayne Davis and North elected to participate
in the Deferred Fee Plan during all or part of the 1997-98 fiscal year.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
of the Principal Executive Officer and the four other most highly compensated
executive officers who served in such capacities as of June 24, 1998, which was
the end of the last completed fiscal year.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation (1)
------------------------- -------------------------------
Awards
--------------
Fiscal Year Restricted Long-Term All Other
Ended Last Stock Incentive Compensa-
Name and Wednesday Salary (2) Award(3) Plan tion (4)
Principal Position in June ($) ($) Bonus ($) ($) Options(#) Payouts ($) ($)
- ------------------ ----------- ---------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
A. Dano Davis 1998 397,952 202,062 - - - 41,347
Chairman of the 1997 384,494 218,635 - - - 47,011
Board and 1996 376,955 376,955 - - - 58,863
Principal
Executive
Officer
James Kufeldt 1998 397,952 202,062 192,247 - 153,435 41,270
President 1997 384,494 218,635 188,478 25,000 137,247 45,531
1996 376,955 376,955 182,988 - 132,600 58,700
Charles H. 1998 362,420 129,376 140,066 - 111,788 34,654
McKellar 1997 350,164 144,185 137,319 20,000 99,990 36,617
Executive Vice 1996 343,298 274,638 133,320 - 96,608 40,063
President
Charles E. Winge 1998 214,934 160,319 62,300 - 48,766 24,345
Senior Vice 1997 207,666 116,593 59,904 12,000 43,619 23,372
President 1996 199,679 145,741 58,159 - 42,144 30.025
Richard J. 1998 165,600 138,282 32,000 - 25,074 21,670
Ehster 1997 160,000 139,000 30,351 10,000 22,427 78,490
Vice President 1996 151,757 150,803 29,903 20,000 21,669 62,451
</TABLE>
------------------
(1) Long-term compensation amounts are shown for years in which paid,
although earned in the prior year.
(2) Includes compensation amounts earned during the fiscal year but
deferred under the Company's 401(k) plan and amounts contributed
under the Company's Senior Corporate Officers' Management Security
Plan (Mr. A. Dano Davis, $7,467; Mr. Kufeldt, $9,632; Mr. McKellar,
$9,905; Mr. Winge, $8,494; and Mr. Ehster, $5,414).
(3) Dividends are paid on restricted shares at the ordinary rate. Value
is determined based upon the closing market price of the Company's
Common Stock on the date of grant. The aggregate of restricted
shares held and their value at June 24, 1998, were: Mr. A. Dano
Davis, no shares; Mr. Kufeldt, 17,656 shares, $859,627; Mr.
McKellar, 12,863 shares, $626,267; Mr. Winge, 5,680 shares,
$276,545; and Mr. Ehster, 2,901 shares, $141,242. These shares all
vest, if at all, over a period of three fiscal years from grant if
certain performance goals are attained. The values above do not
reflect the risk of forfeiture.
(4) Includes (a) Company contributions to the Company's Profit Sharing
Plan of $7,416 for each of the named officers; (b) Company matching
payments under the Company's 401(k) Plan of $2,400 for each of the
named officers; and (c) $2,000 of merchandising contest awards for
Mr. Ehster. Also includes (a) Company contributions to the
Company's Supplemental Retirement Plan ("SRP") for the 1997-98
fiscal year of $19,444 for Mr. Davis, $19,394 for Mr. Kufeldt,
$15,096 for Mr. McKellar, $8,399 for Mr. Winge and $5,284 for Mr.
Ehster and (b) Company matching 401(k) payments under the Company's
SRP for the 1997-98 fiscal year of $12,087 for Mr. Davis, $12,060
for Mr. Kufeldt, $9,742 for Mr. McKellar, $6,130 for Mr. Winge and
$4,570 for Mr. Ehster.
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 24, 1998, and the number and value
of unexercised options held by such executive officers at fiscal year end.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Value Options at FY-End (#) Options at FY-End ($)(1)
--------------------------------
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ----------------- -------------- ------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
A. Dano Davis --- --- --- --- --- ---
James Kufeldt --- --- 100,000 25,000 2,693,750 351,563
Charles H. McKellar 80,000 1,682,500 --- 20,000 --- 281,250
Charles E. Winge 48,000 1,171,500 --- 12,000 --- 168,750
Richard J. Ehster --- --- --- 10,000 --- 140,625
</TABLE>
(1) The closing price of the Company's Common Stock of $48.6875 as reported
on the New York Stock Exchange composite tape on June 24, 1998, less
the exercise price, was used in calculating the value of unexercised
options. The exercise prices for the presently exercisable shares held
by James Kufeldt is $21.0625 for 50,000 shares and $22.4375 for 50,000
shares. The exercise price is $34.625 per share for all unexercisable
options.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Restricted Stock Plan. In connection with the 1997-98 fiscal year Company's
Officer Compensation Program, the Company provided its officers with an
opportunity to earn shares of the Company's Common Stock through a restricted
stock plan. The restricted stock awards were designed to motivate the Company's
officers to make decisions and to act in the best interest of the Company's
shareholders by having the restricted stock vest when goals for a three-year
period are achieved. For the awards made during fiscal year 1997-98 for the
three-year period ending in fiscal year 1999-2000, goals are based upon
increasing the average number of tons of goods sold. No award is made for
results that are less than the designated threshold. These restricted stock
awards granted during fiscal year 1997-98 are listed in the Summary Compensation
Table.
Performance Unit Plan. In connection with the 1997-98 fiscal year Company's
Officer Compensation Program, the Company also provided its officers with an
opportunity to earn additional cash compensation through a performance unit
plan. The performance units are designed to reward officers for improvements in
specified areas of Company performance for a three-year period. For the awards
made during fiscal year 1997-98 for the three-year period ending in fiscal year
1999-2000, goals are based upon a matrix of the increase in identical store
sales and average sales. No award is made for improvements that are less than
the designated threshold. Such performance unit grants, as outlined below, if
earned, would be paid in early fiscal year 2000-2001 for results in the
performance period ending in fiscal year 1999-2000.
<TABLE>
<CAPTION>
Estimated Future Payouts
Number of Under Non-Stock Price-Based Plans
---------------------------------------------------------
Performance Performance
Units Granted Period
Name Last FY Covered Threshold Target ($) Maximum ($)
- ------------------------- ---------------- ------------------ -------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
A. Dano Davis --- --- --- --- ---
James Kufeldt 129,334 1998-2000 --- 129,334 194,001
Charles H. McKellar 94,229 1998-2000 --- 94,229 141,344
Charles E. Winge 41,912 1998-2000 --- 41,912 62,868
Richard J. Ehster 21,528 1998-2000 --- 21,528 32,292
</TABLE>
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is pleased to report to the shareholders
that during this past year the Company's Officer Compensation Program (the
"Compensation Program") and Key Employee Stock Option Plan (the "KESOP") have
been thoroughly reviewed and examined and, as a result, significant changes to
the Compensation Program and KESOP have been made or recommended for shareholder
approval. We believe these changes will enhance the effectiveness of the
Compensation Program and the KESOP's effectiveness in fulfilling both
shareholder and executive employee objectives. Following is (i) a description of
the Compensation Program and the KESOP for fiscal year 1997-98 and a report on
the compensation paid or awarded to the Principal Executive Officer thereunder,
and (ii) a description of the review process related to the Compensation Program
and the KESOP and the primary changes made to them for fiscal years beginning
with the 1998-99 fiscal year.
1997-98 Compensation Program and KESOP
In fiscal year 1997-98 the Compensation Program encompassed three
parts: (1) base salary; (2) annual incentives; and (3) long-term incentives.
Annual incentive awards were based upon performance results compared to
predetermined financial performance goals at the corporate and division
organizational levels. Long-term incentives, cash awards under the Performance
Unit Plan and the vesting of stock options and restricted stock were dependent
upon performance results compared to various other predetermined corporate
performance results. For the Chairman of the Board, who is also the Principal
Executive Officer, and also for the President and Executive Vice President, the
Compensation Program was weighted toward long-term compensation. For Senior Vice
Presidents, it was approximately equally weighted between long-term and annual
compensation. The other executive officers' compensation was weighted toward
annual compensation.
Both base compensation changes and annual incentive awards under the
1997-98 Compensation Program were based in major part on the Company's financial
performance for the 1997-98 fiscal year. The compensation levels for the
Principal Executive Officer and the other executives named in the Summary
Compensation Table were determined for both base compensation and annual
incentive targets by the Compensation Committee in July 1997. The performance
targets for annual incentive awards were based upon sales volume and pre-tax
return on sales and on the position held by each participating officer. The cash
bonuses could range from 0 to 200% of "target" awards for specific performance
goals. For the Principal Executive Officer, President and Executive Vice
President, the target involved a matrix of increases in average store sales and
earnings before income tax as a percentage of sales.
Long-term incentive compensation was provided during fiscal year
1997-98 through the Company's Restricted Stock Plan and Performance Unit Plan.
Under the Restricted Stock Plan, grants of restricted stock that pay dividends
are given to the participants, but these shares do not vest unless and until
certain performance requirements are met over a three-year period. The
three-year performance requirements established by the Compensation Committee
beginning with fiscal year 1997-98 under the Restricted Stock Plan were based on
increasing the average number of tons of goods sold. Under the Performance Unit
Plan, participants can earn a cash award based upon three-year performance
goals. The three-year performance goals established by the Compensation
Committee beginning with fiscal year 1997-98 under the Performance Unit Plan
were based on increasing identical store sales and average sales per store.
The KESOP allows performance-based stock options to be granted to
members of the Executive Committee of the Company (other than the Principal
Executive Officer), Division Presidents and Division Managers. The KESOP
provides that any options granted may not be fully exercised unless the Company
earns a 20% return on equity over a consecutive two year period. No options
vested or were granted under the KESOP in fiscal year 1997-98.
The Chairman of the Board and Principal Executive Officer of the Company,
Mr. A. Dano Davis, for the fiscal year ended June 24, 1998, received a three and
one-half percent (3.5%) increase in base compensation from the prior fiscal
year. Because of his substantial stock ownership, Mr. Davis again chose not to
participate in both the restricted stock and performance unit aspects of the
<PAGE>
Compensation Program's long-term incentive compensation for the 1997-98 fiscal
year. Had he participated, the grants made in June of 1997 for fiscal year
1997-98 and later would have been in the amount of approximately $192,247 of
value of restricted stock and a maximum performance unit payment of
approximately $187,441. The Principal Executive Officer normally would
participate in these plans. If Mr. Davis had participated in fiscal year
1997-98, his compensation would have approximated that of the Company's
President, Mr. James Kufeldt, as shown in the Summary Compensation Table on page
7. The provisions of the KESOP do not allow the Principal Executive Officer to
participate in that plan.
Also included in the Company's compensation for its executive officers are
various employee benefits. Generally, the benefits offered to such persons serve
a different purpose than do the other components of compensation. In general,
these benefits provide protection against financial loss that can result from
illness, disability or death. Benefits offered to these employees are mainly
those that are offered to the Company's other employees, with some variation
primarily to promote tax efficiency and replacement of benefit opportunities
lost due to regulatory limits.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), precludes a public corporation from taking a federal income tax
deduction for compensation paid in excess of $1 million per year to certain
covered officers. Generally, covered officers would include the Company's
Chairman of the Board and Principal Executive Officer and the four other
officers named each year in the Summary Compensation Table in the Proxy
Statement. The limitation does not apply to performance-based compensation,
provided certain conditions are satisfied. The Committee believes that any
compensation realized in connection with the Annual Incentive Plan, Performance
Unit Plan, Restricted Stock Plan and KESOP, as they currently operate, and in
connection with the revised Compensation Program if the performance goals and
KESOP amendments are approved by the shareholders, will continue to be
deductible as performance-based compensation. The Compensation Committee,
however, retains the authority to authorize payments that may not be deductible
under the Code if it believes such payments would be in the best interest of the
Company and its shareholders.
Revised Compensation Program
The 1997-98 Compensation Program (which includes base compensation, the
Annual Incentive Plan, the Restricted Stock Plan and the Performance Unit Plan)
and the KESOP underwent extensive review and revision during the past fiscal
year. The review process included gathering both comparative compensation data
and comparative financial performance data for major food chains with which the
Company must compete for business and for talented employees. Each member of the
Compensation Committee and thirty management employees participated in the
review of the Compensation Program and KESOP and were given the opportunity to
make suggestions for effectively enhancing their purpose. Compensation
consultants from KPMG Peat Marwick LLP also assisted in the review and revision
process.
It was determined during the review process that to improve the
effectiveness of the Compensation Program and to remain competitive with the pay
practices in the retail food chain industry, the Compensation Program needed to
be simplified and distinctly performance-based. It was also determined that the
Compensation Program should be composed of comparatively conservative salaries
(with positions assigned to ranges based primarily upon market data) and should
include competitive annual incentives. Further, it was decided the Compensation
Program should be weighted towards long-term compensation for all of the
Company's senior officers. It was also decided that the KESOP should be
considered part of the Compensation Program and that eligible participants under
the KESOP should be defined in the same manner as those eligible to participate
under the other executive compensation plans. Finally, a share ownership policy,
obligating executives to maintain an ownership interest in Company stock, was
recommended and approved.
Simplification of the Compensation Program was accomplished first by
combining the Performance Unit Plan and Restricted Stock Plan into the
Performance-Based Restricted Stock Plan, which now is comprised of restricted
stock and contingent cash components, and including the KESOP as part of the
long-term incentive
<PAGE>
portion of the Compensation Program. Next, the number of performance goals to be
used for funding and vesting purposes under the annual incentive,
performance-based restricted stock and stock option plans were reduced beginning
with fiscal year 1998-99.
The Committee determined that at the beginning of each fiscal year,
participants in the Annual Incentive Plan will be assigned a threshold, target
and superior incentive opportunity based on a business plan and stated as a
percentage of salary. If results are below the thresholds established in the
business plan, no awards will be made. Actual awards can range from 0% to 200+%
of the employee's target incentive opportunity, depending on how actual
performance compares to the pre-determined performance goals. Performance will
be based on the performance of the participant's business unit, on overall
Company performance, and (except for the Principal Executive Officer, President
and Executive Vice President) on individual objectives. In addition, the award
may be based on changes in customer satisfaction ratings. Performance goals
approved by the Committee for fiscal year 1998-99 will be based on how actual
performance compares to the predetermined sales and pre-tax profit goals set
forth in the business plan established at the beginning of the fiscal year.
Under the Performance-Based Restricted Stock Plan, the performance
measure used for grants made in fiscal year 1998-99 will be based upon a
comparative three-year average total shareholder return ("TSR"). The TSR is the
measure utilized in the Stock Performance Graph in the Company's annual Proxy
Statement. The peer group that will be used for comparison purpose is the same
as that used for the Stock Performance Graph, which is the Standard & Poor's
Retail (Food Chains) Index Group. The maximum award of performance-based
restricted stock that may be granted to any individual in a year will continue
to be 10,000 shares, which is significantly greater than any past or anticipated
individual award. Recipients of performance-based restricted stock grants are
eligible to receive a contingent cash payment equal to the initial grant value
of their awarded restricted shares, if the shares vest. The cash payment is
designed to satisfy all or a portion of the federal and state income tax
obligations of the recipient resulting from the vesting of the restricted stock.
If the shares do not vest, no cash payment is made.
The performance goals under the KESOP will continue to be based on a
specified percentage return on equity, such percentage to be determined by the
Compensation Committee at the time of grant. If approved by the shareholders,
the employees eligible to participate under the KESOP will include any officer
or other key employee of the Company or its subsidiaries who, in the judgment of
the Compensation Committee, is significantly responsible for, or materially
contributes to, the management, growth or profitability of the business of the
Company or its subsidiaries. Other amendments to the KESOP for which shareholder
approval is sought are set forth in Proposal 3 beginning on page 15.
The Company has chosen to account for its long-term incentives in
accordance with Financial Accounting Standard 123. This accounting treatment
provides the Company with the opportunity to establish performance contingencies
for the vesting of restricted shares and stock options.
The stock ownership policy adopted requires that for participants to
remain eligible for grants under the Performance-Based Restricted Stock Plan and
the KESOP, they must maintain a certain ownership interest in the Company's
stock. The amount of stock participants must hold is based on a multiple of
their respective salaries and range from a high of ten times the base salary of
the Principal Executive Officer and the President, to a low of two times the
base salary for certain other corporate officers.
Each of the adopted changes to the Compensation Program and the KESOP
are consistent with making sure that all compensation expenses will be fully
deductible in accordance with Section 162(m) of the Code. Changes requiring
shareholder approval are set forth in Proposals 2 and 3 beginning on page 13 of
this Proxy Statement. The Compensation Committee recommends that the changes set
forth in those proposals be approved by the shareholders.
This report is submitted by the members of the Compensation Committee:
Radford D. Lovett, Chairman; Armando M. Codina; Carleton T. Rider; and Julia B.
North.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during the most
recently completed fiscal year were Radford D. Lovett, Chairman, and Messrs.
Armando M. Codina and Carleton T. Rider and Ms. Julia B. North. During such
time, no member of the Compensation Committee was a current or former officer or
employee of the Company and no executive officer of the Company served as a
director or as a member of the compensation or equivalent committee of another
entity, one of whose executive officers served as a director of the Company or
on the Company's Compensation Committee.
STOCK PERFORMANCE GRAPH
The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
preceding five fiscal years ended June 24, 1998, compared with the cumulative
total returns of the S & P 500 Index and the S & P Retail (Food Chains) Index.
The comparison assumes $100 was invested on June 24, 1993, in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG WINN-DIXIE STORES, INC., THE S & P 500 INDEX
AND THE S & P RETAIL (FOOD CHAINS) INDEX (1)
<TABLE>
<CAPTION>
Measurement
Pt. FYE FYE FYE FYE FYE
6/30/93 6/29/94 6/28/95 6/26/96 6/25/97 6/24/98
<S> <C> <C> <C> <C> <C> <C>
Winn-Dixie $100 $78.93 $108.46 $137.39 $148.82 $208.85
S & P 500 $100 $101.41 $127.84 $161.08 $216.98 $282.42
S & P Retail
(Food Chains) $100 $97.30 $118.28 $163.80 $178.16 $252.56
</TABLE>
Assumes Initial Investment of $100 and reinvestment of dividends
Note: Total Returns Based on Market Capitalization
Data and chart furnished by Zacks Investment Research, Inc.
- ---------------
(1) Includes, but is not limited to, the following companies: Albertson's,
American Stores, Giant Food Class A, Great A&P, Kroger and Winn-Dixie.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
American Heritage Life Insurance Company (the "Insurance Company") is a
wholly owned subsidiary of American Heritage Life Investment Corporation, of
which Messrs. A. Dano Davis, Robert D. Davis and Radford D. Lovett are
directors. The Company is self-insured for purposes of employee group, medical,
accident and sickness insurance, with the Insurance Company providing
administrative services and expenses. During the fiscal year
<PAGE>
ended June 24, 1998, the Company paid the Insurance Company $4,245,110 for
administrative services, state premium taxes and expenses of the group medical
and accident plan. The Company also paid the Insurance Company $11,534,540 in
net premiums on life insurance policies and $13,597,590 in interest on policy
loans to fund the corporate senior officers management security plan for 35
officers (including 22 executive officers) and a similar contributory plan for
576 other eligible key management personnel. These plans also provide benefits
to 408 former participants who have retired, terminated employment or are
currently ineligible to participate in the plans, and beneficiaries of deceased
participants.
In the fiscal year ended June 24, 1998, the Company received payments
from D.D.I., Inc., a Florida corporation controlled by the Davis Family, in the
aggregate amount of $65,999 for group insurance and office expenses.
AGREEMENT OF SHAREHOLDERS
OF
D.D.I., INC.
On April 19, 1989, an Agreement of Shareholders (the "Agreement") was
entered into by a Florida corporation now known as D.D.I., Inc. ("DDI") and its
shareholders to make provision for future disposition, voting and transfer of
its shares. DDI, which, as of June 24, 1998, owned directly and indirectly
40,817,399 shares of Common Stock of the Company, is controlled by the Davis
Family. Such shares are included in the Davis Family holdings shown on page 4
hereof.
Subject to certain exceptions, the Agreement prohibits disposition of
DDI shares by a DDI shareholder except with the written consent of DDI and all
of the other DDI shareholders. If any DDI shareholder desires to make a
disposition of shares of DDI, such shareholder must offer the shares to DDI, and
if DDI does not purchase all of the shares, then to the other DDI shareholders.
The Agreement also restricts transfers in the event of death, divorce, change in
beneficial interest in a trust or involuntary disposition and sets out
procedures for establishing fair market value, termination of the Agreement,
selection of a Board of Directors of DDI and increasing the capital surplus of
DDI, if necessary, to purchase DDI shares.
DDI shareholders who are parties to the Agreement include Robert D. Davis,
A. Dano Davis, T. Wayne Davis, and Charles P. Stephens, spouses, children,
grandchildren, relatives, in-laws, trusts for the benefit of Davis Family
members, and corporations and other entities controlled by them.
PROPOSAL 2 - APPROVAL OF INCENTIVE COMPENSATION
PERFORMANCE GOALS
Background
In June 1998, the Compensation Committee and the Board of Directors
determined that as part of the revision of the Company's Officer Compensation
Program, the material terms of the performance goals under the Annual Incentive
Plan, and the Restricted Stock Plan (as revised, the "Performance-Based
Restricted Stock Plan") should be changed. The changes to the performance goals
were made in order to simplify the plans and to enhance support for the
Company's business strategies. The review and revisions of the Company's Officer
Compensation Program, including the Annual Incentive Plan and the
Performance-Based Restricted Stock Plan, are described more fully in the Report
on Executive Compensation beginning at page 9.
To comply with Section 162(m) of the Code, the Company has included
this proposal for shareholder approval of the new material terms of the
performance goals of the Annual Incentive Plan and the Performance-Based
Restricted Stock Plan, which will be effective for awards granted beginning in
fiscal year 1998-99.
Section 162(m) of the Code precludes a public corporation from taking a
federal income tax deduction for compensation paid in excess of $1 million per
year to a "covered employee." A "covered employee" under Section 162(m) is the
Chief Executive Officer on the last day of the taxable year, or any individual
acting in such capacity,
<PAGE>
and any other officer who is among the four highest compensated officers for the
taxable year (other than the Chief Executive Officer) as reported in the proxy
statement. Generally, this would include the Company's Principal Executive
Officer and the four other officers named each year in the Summary Compensation
Table in the Proxy Statement.
The $1 million limit on deductibility does not apply to compensation
that meets the requirements for "qualified performance-based compensation" under
regulations adopted under the Code. In order for compensation to qualify as
performance-based, certain conditions must be met. One of these conditions
requires the Company to obtain shareholder approval of the material terms of the
performance goals set by a compensation committee comprised of two or more
outside directors under which the compensation is to be paid. The material terms
of the performance goals that must be approved by shareholders under Section
162(m) include the employees eligible to receive the performance-based
compensation, a description of the business criteria on which each performance
goal is based, and either the maximum amount that could be paid, or the formula
used to calculate the amount of compensation that could be paid, to any
individual executive officer.
In accordance with these requirements and the prior approval of the
shareholders at the 1996 Annual Meeting of the eligible employees and the
maximum payment amount under the plans, the Board of Directors is recommending
that the shareholders approve the new business measurements on which each of the
performance goals is based. If approved by the shareholders, the Company will
not be precluded under Section 162(m) from taking the deductions for any
payments made under the plans.
The Annual Incentive Plan
The Annual Incentive Plan is administered by a committee appointed by
the Board of Directors and composed of two or more outside directors. Eligible
employees include officers or other key employees of the Company or its
subsidiaries who, in the judgment of the committee, are significantly
responsible for or materially contribute to the management, growth or
profitability of the Company or its subsidiaries. At the beginning of each
fiscal year, eligible employees are assigned a threshold, target and superior
incentive opportunity, stated as percents of base salary. Actual awards can
range from 0% to 200+% of the employee's target incentive opportunity, depending
on how actual performance compares to the performance goals. Because Section
162(m) of the Code requires a stated maximum award either as a dollar amount or
as a percent of the total amount funded, the maximum annual payment to any
individual under this plan is limited to $1 million, which is significantly
greater than any past or anticipated individual award.
The performance goals under the Annual Incentive Plan are established
at the beginning of each fiscal year based on a business plan, and they are
reviewed and approved by the committee. Awards beginning in fiscal year 1998-99
will be based primarily on how actual performance compares to the predetermined
sales and pre-tax profit goals set forth in the business plan. Performance will
be determined in part by the performance of the business unit most immediately
affected by the eligible employee and in part by overall Company performance. A
portion of the annual incentive awards (except for that of the Principal
Executive Officer, President and Executive Vice President) will be based on
meeting individual performance objectives. The annual incentive award also may
be based in part on changes in customer satisfaction ratings.
In all instances, the measures used to award annual incentives will be
reviewed and approved by the committee within the first quarter of each fiscal
year. The committee shall certify in writing prior to payment of the
compensation that the performance goals and any other material terms were in
fact satisfied.
The Performance-Based Restricted Stock Plan
The Performance-Based Restricted Stock Plan also is administered by a
committee appointed by the Board of Directors and composed of two or more
outside directors. Eligible employees include key employees selected by the
committee. Key employees are officers or other key employees of the Company or
its subsidiaries who, in the judgment of the committee, are significantly
responsible for or materially contribute to the management, growth or
profitability of the business of the Company or its subsidiaries. Previously,
the key employees eligible to participate
<PAGE>
in the plan included the Principal Executive Officer (although he has elected
not to participate in the past), the President and other officers.
Performance-based restricted stock is granted annually to eligible employees.
In the past, grants have been made to approximately 35 employees each year.
The maximum grant awarded to any individual in any given year is
limited to not more than 10,000 shares, which is significantly greater than any
past or anticipated individual award. Grants are conditioned further by the fact
that no discretionary adjustments can be made to either the value of the
restricted shares or the number of restricted shares granted to any individual
during or at the conclusion of any given vesting period.
In prior years, the performance goals that had to be met under the
Restricted Stock Plan for the stock to vest related to average customer order
size, return on equity or capital, improvement in customer image score, or
increase in tonnage sold, all over a period established by the committee, which
was usually three years. Under the Performance-Based Restricted Stock Plan, the
restricted stock granted will vest at the end of the period established by the
committee if the Company's Total Shareholder Return ("TSR") for that period is
greater than that of its peer group. TSR is the same measure presented in the
Stock Performance Graph in the Company's annual Proxy Statement. See page 12.
The peer group used for the comparison is the Standard & Poor's Retail (Food
Chains) Index Group, which also is used for the Stock Performance Graph in the
Proxy Statement. The committee shall certify in writing prior to the vesting of
such restricted shares that the performance goal and any other material terms
were in fact satisfied.
The Board of Directors recommends a vote FOR Proposal 2.
PROPOSAL 3 - APPROVAL OF AMENDMENTS TO
KEY EMPLOYEE STOCK OPTION PLAN
On April 15, 1998, the Board of Directors approved the amendment of the
Key Employee Stock Option Plan ("KESOP"), subject to shareholder approval, as
part of the revision of the Company's Compensation Program. The review and
revisions of the Compensation Program, including the KESOP, are described more
fully in the Report on Executive Compensation beginning on page 9.
The proposed amendments to the KESOP that, if approved by the Company's
shareholders, would be effective for option grants made beginning in the 1998-99
fiscal year include: (1) revising the definition of the employees eligible to
participate in the KESOP, (2) removing the prohibition on the exercise of
options after January 15, 2011, and (3) eliminating certain restrictions on the
Board of Directors' ability to amend the KESOP without shareholder approval.
If the holders of a majority of the outstanding shares of the Company's
Common Stock voting on the proposal in person or by proxy at the Annual Meeting
vote in favor of the approval of the amendments to the KESOP, the amendments
shall be deemed to have been approved by the Shareholders. In the event that the
affirmative vote of a majority of such shares is not obtained, such amendments
shall become null and void, the KESOP as in effect prior to the amendments shall
continue in full force and effect and the options granted to the 12 officers who
are not eligible employees under the KESOP as currently in effect, shall be
void.
Description of Key Employee Stock Option Plan
Under the KESOP, a committee appointed by the Board of Directors and
composed of two or more outside directors, may grant options at any time and
from time to time to persons who are eligible employees. If the amendments
described herein are approved by the shareholders, eligible employees will
include officers and other key employees selected by the committee. The options
to be granted shall be limited in total to a maximum aggregate of 2,000,000
shares (recognizing a 1995 split of the stock) as the committee in its sole
discretion deems advisable. The maximum number of shares that may be sold
pursuant to the KESOP, as well as the number of shares that may be purchased
pursuant to the exercise of any option outstanding thereunder, are subject to
anti-
<PAGE>
dilution provisions in the event of stock splits, certain stock dividends and
the like. The option price per share shall be the fair market value of the
Company's Common Stock on the date on which the option is granted. The closing
price of the Company's Common Stock as reported on the New York Stock Exchange
composite tape on June 24, 1998, was $48.6875. Options granted pursuant to the
plan may not be sold, pledged, assigned or transferred by their holders
otherwise than by will or the laws of descent and distribution and are
exercisable, during their respective lifetimes, only by such holders.
Each option shall become exercisable on and after such date as the
committee shall determine, but only after the end of a fiscal year for which the
Company earned a specified percentage return on equity, such percentage to be
determined by the committee at the time of grant. The period within which each
option granted under the KESOP may be exercised shall end not later than the
January 15th following the sixth fiscal year after the grant. If the amendments
described herein are approved by the shareholders, the current provision in the
KESOP that no options shall be exercisable later than January 15, 2011, would be
eliminated. The committee shall certify in writing prior to options becoming
exercisable that the percentage return on equity and any other material terms
under the KESOP were in fact satisfied.
The Board of Directors or the committee, if the shareholders approve
the amendments described herein, has the power, among other things, to add to,
amend or repeal any of the provisions of the KESOP; to suspend its operation for
any period; or to terminate it in whole or in part; without shareholder approval
unless shareholder approval is otherwise required by applicable law or the rules
of the New York Stock Exchange. No such addition, amendment, repeal, suspension
or termination shall in any way affect the rights of the holder of outstanding
options to purchase shares of Common Stock in accordance with the provisions of
the KESOP at the time of the option grant.
On July 27, 1998, effective June 15, 1998, options for an aggregate of
153,977 shares were granted for fiscal years 1998-99 and later, at an exercise
price of $41.506 per share to 20 executive officers of the Company who currently
are eligible to participate in the KESOP. Subject to shareholder approval of the
expansion of those eligible to participate in the KESOP, 27,300 share grants
also were made to 12 other officers. The options granted, subject to shareholder
approval, are set forth in the table below.
NEW PLAN BENEFITS
KEY EMPLOYEE STOCK OPTION PLAN
Name and Position Options Granted (#)
A. Dano Davis -
Chairman and Principal Executive Officer
James Kufeldt 29,323
President
Charles H. McKellar 14,493
Executive Vice President
Charles E. Winge 10,111
Senior Vice President
Richard J. Ehster 6,741
Vice President
Executive Group (20) 153,977
Non-executive Officer Employee Group (12) 27,300
<PAGE>
No stock option grants were approved for any other executive officers,
employees or directors of the Company for the 1998-99 fiscal year. It is not
possible to determine future awards under the KESOP or whether the options
granted for 1998-99 will become exercisable.
Federal Income Tax Consequences
Options granted under the KESOP may consist of incentive stock options
("ISOs"), within the meaning of Section 422 of the Code, and nonqualified stock
options ("NSOs"). ISOs and NSOs are treated differently for federal income tax
purposes. ISOs are intended to comply with the requirements of Section 422 of
the Code. NSOs need not comply with such requirements. Options granted under the
KESOP will not qualify as ISO's except to the extent that all of the
requirements of Code Section 422 are satisfied.
A KESOP participant is not taxed on the grant or exercise of an ISO.
The difference between the fair market value of the shares on the exercise date
and the exercise price will, however, be a preference item for purposes of the
alternative minimum tax. If a participant holds the shares acquired upon
exercise of an ISO for at least two years following grant and at least one year
following exercise of the ISO, the participant will recognize gain, if any, for
the first time upon a subsequent disposition of such shares and such gain will
be treated as long-term capital gain for federal income tax purposes. The
measure of the gain is the difference between the proceeds received on
disposition and the participant's basis in the shares (which generally equals
the exercise price). If the participant disposes of stock acquired pursuant to
the exercise of an ISO before satisfying the one and two-year holding periods
described above, the participant could recognize both ordinary income and
capital gain in the year of disposition. The amount of the ordinary income would
be the lesser of: (i) the amount realized on disposition less the participant's
adjusted basis in the stock (usually the option exercise price), or (ii) the
amount by which the fair market value of the stock on the exercise date exceeds
the option price. The balance of the gain recognized on such disposition, if
any, will be capital gain. The Company is not entitled to an income tax
deduction on the grant or the exercise of an ISO or on the participant's
disposition of the shares after satisfying the holding period requirement,
described above. If the holding periods are not satisfied, the Company may be
entitled to an income tax deduction in the year the participant disposes of the
shares, in an amount equal to any ordinary income recognized by the participant.
Generally, a participant is not taxed on the grant of an NSO. Upon
exercise, however, the participant recognizes ordinary income equal to the
amount by which the fair market value of the shares exceeds the option price on
the date of the exercise. The Company is entitled to an income tax deduction in
the year of exercise in the amount recognized by the participant as ordinary
income. Any gain on a subsequent disposition of the shares will be long term
capital gain if the shares are held for at least 12 months following exercise.
The Company does not receive an income tax deduction for this gain.
Description of Proposed Amendments
Eligible Employees. Currently, eligible employees under the KESOP
include members of the Executive Committee of the Company (other than the
Chairman of the Board), Division Presidents and Division Managers. Under the
proposed amendment, the definition of those eligible to participate in the KESOP
would be expanded to include any officer or other key employee of the Company or
its subsidiaries who, in the judgment of the committee, is significantly
responsible for or materially contributes to the management, growth or
profitability of the business of the Company or its subsidiaries.
Maximum Period of Exercising Option. The maximum period within which an
option granted after June 1, 1994, may be exercised under the current KESOP is
not later than January 15th following the sixth fiscal year after the grant and
in no event later than January 15, 2011. Under the proposed amendment, grants
made under the KESOP in fiscal years 1998-99 and thereafter would continue to be
exercisable not later than January 15th following the sixth fiscal year after
the grant, but the January 15, 2011 ending date restriction set forth in the
KESOP would be eliminated.
<PAGE>
Ability of Board of Directors or Committee to Amend or Terminate the
KESOP. The KESOP sets forth four situations in which shareholder approval is
required for an amendment to the plan to become effective: (i) to increase the
aggregate number of shares of stock available under the plan, (ii) to permit the
granting of options to persons other than eligible employees, (iii) to decrease
the minimum option price, or (iv) to extend the maximum period within which an
option may be exercisable.
These shareholder approval requirements were originally included in the
KESOP primarily because of certain requirements set forth in the Securities
Exchange Act of 1934 as amended, and Rule 16b-3 promulgated thereunder. Prior to
1996, certain transactions under an employee benefit plan were exempted from the
short-swing trading rules of federal securities laws if the employee benefit
plan and any material amendments thereto (including any amendment that increased
the number of shares subject to the plan, changed the class of eligible insiders
or increased benefits) had been approved by the shareholders. Effective in 1996,
the Securities and Exchange Commission amended Rule 16b-3 and eliminated the
requirement for shareholder approval of employee benefit plans and material
amendments to the plans. If approved by the shareholders, the former shareholder
approval requirements set forth in the KESOP would be eliminated. The Board of
Directors or the committee would have the power to add to, amend or repeal any
of the provisions of the KESOP without shareholder approval unless shareholder
approval was required by applicable law or the rules of the New York Stock
Exchange. No such addition, amendment, repeal, suspension or termination shall
in any way affect the right of the holders of outstanding options to purchase
shares of Common Stock in accordance with the provisions of the KESOP at the
time of the grant of the options.
The Board of Directors recommends a vote FOR Proposal 3.
PROPOSAL 4 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Action is to be taken at the Annual Meeting of Shareholders with
respect to the ratification of the appointment by the Board of Directors of the
Company of KPMG Peat Marwick LLP as independent public accountants to audit the
books of the Company for the fiscal year commencing June 25, 1998. KPMG Peat
Marwick LLP has been regularly employed by the Company for many years to examine
its books and accounts and for other purposes, for which services their
customary fees have been paid.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting and will have an opportunity to make such statements as they
may desire. Such representatives are expected to be available to respond to
appropriate questions from shareholders.
The Board of Directors recommends a vote FOR Proposal 4.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders are hereby notified that if they wish a proposal to be
included in the Company's Proxy Statement and form of proxy relating to the 1999
annual meeting of shareholders, a written copy of their proposal must be
received at the principal executive offices of the Company, 5050 Edgewood Court,
Jacksonville, Florida 32254-3699, no later than April 26, 1999. To ensure prompt
receipt by the Company, proposals should be sent by certified mail return
receipt requested. Proposals must comply with the proxy rules relating to
shareholder proposals in order to be included in the Company's proxy materials.
Shareholders who wish to submit a proposal for consideration at the Company's
1999 annual meeting of shareholders but who do not wish to submit the proposal
for inclusion in the Company's proxy statement pursuant to Rule 14a-8 as
promulgated under the Securities Exchange Act of 1934, as amended, must deliver
a copy of their proposal to the Company at its principal executive offices, 5050
Edgewood Court, Jacksonville, Florida 32254-3699, no later than July 12, 1999.
<PAGE>
MISCELLANEOUS
The Company's audited financial statements and certain other financial
information for its fiscal year ended June 24, 1998, are included as pages F-1
to F-26, inclusive, annexed to this Proxy Statement.
As of the date of this Proxy Statement, Management does not know of any
other matter that will come before the meeting. In the event that any other
matter properly comes before the meeting and the Company did not receive notice
of such matter by July 12, 1998, then the persons named in the enclosed form of
proxy will be deemed to have discretionary authority to vote all proxies in
accordance with their judgment on such matter.
By Order of the Board of Directors
Judith W. Dixon
Secretary
August 26, 1998
EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN
THE EVENT A SHAREHOLDER DECIDES TO ATTEND THE MEETING, THE SHAREHOLDER MAY, IF
SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
WINN-DIXIE STORES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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
<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
FORM OF PROXY
The Directors recommend a vote FOR Proposals 1, 2, 3 and 4.
FOR WITHHELD
1. Election of Directors
For all nominees listed below.
Class I (2001)
A. Dano Davis, T. Wayne Davis,
Carleton T. Rider and Charles P. Stephens
For, except vote withheld from
the following nominee(s):
__________________________________
FOR AGAINST ABSTAIN
2. Approve material terms of
compensation performance goals.
3. Approve amendments to the Key
Employee Stock Option Plan.
4. Ratification of KPMG Peat
Marwick LLP as auditors.
SPECIAL ACTION
Discontinue Annual Report Mailing for this account due to other Accounts at same
address. __________________
SIGNATURE(S)____________________________ Date _____________,1998
Please sign this proxy as name(s) appears above and return it promptly whether
or not you plan to attend the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the capacity in which
you are signing. If you do attend the meeting and decide to vote by ballot,
such vote will supersede this proxy.
<PAGE>
[LOGO]
Dear Fellow Shareholder:
The 70th Annual Meeting of Shareholders of Winn-Dixie Stores, Inc.,
will be held at the Prime Osborn Convention Center, in Room 102, 1000
West Water Street, Jacksonville, Florida, at 9:00 a.m. on Wednesday,
October 7, 1998.
The enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement describe the items to be considered and acted upon by the
shareholders at the meeting.
Whether you can or cannot attend, please sign, date and return your
proxy form as soon as possible so that your shares can be voted at the
meeting in accordance with your instructions. If you attend the
meeting, you may choose to revoke your proxy and vote personally. It
is important in either case that your shares be represented.
Sincerely,
/s/ A. Dano Davis
A. Dano Davis
Chairman and Principal Executive Officer
5050 Edgewood Court - Jacksonville, FL 32254-3699
<PAGE>
WINN-DIXIE STORES, INC.
5050 EDGEWOOD COURT - JACKSONVILLE, FLORIDA 32254-3699
Proxy Solicited on Behalf of the Board of Directors for the Annual
Meeting of Shareholders on October 7, 1998.
The undersigned hereby appoints A. DANO DAVIS, ROBERT D. DAVIS and T.
WAYNE DAVIS or any of them, as proxies, with full power of
substitution, to vote all shares of Common Stock that the undersigned
would be entitled to vote if personally present, at the Annual Meeting
of Shareholders of the Company on October 7, 1998, and at any
adjournment thereof, upon all subjects that may properly come before
the meeting, including the matters described in the proxy statement
furnished herewith, and any matters of which the Company did not
receive notice by July 14, 1998, subject to any directions indicated on
the other side of this card.
If no directions are given, the proxies will vote for (1) the election
of all nominees listed below, (2) the Directors' proposals 2, 3 and 4
listed on the other side of the card, and (3) at their discretion, on
any other matters that may properly come before the meeting or any
adjournments thereof and any matters of which the Company did not
receive notice by July 14, 1998. The undersigned hereby revokes any
proxy heretofore given to any person or persons whomsoever (other than
the proxies named above) to vote such Common Stock and ratifies and
confirms all that the proxies named above may or shall do by virtue
hereof.
Nominees for election as Class I Directors are: A. Dano Davis, T. Wayne
Davis, Carleton T. Rider and Charles P. Stephens.
This card also provides voting instructions for shares held in the
dividend reinvestment plan and, if registrations are identical, shares
held in the Winn-Dixie Stores, Inc. Profit Sharing/401(k) Plan, as
described in the proxy statement.
Your vote is important. Please sign and date on the reverse and return
promptly in the enclosed postage-paid envelope or otherwise to
Inspectors of Election, Winn-Dixie Stores, Inc., P.O. Box 8999,
Edison, NJ 08818-9999, so that your shares can be represented at the
meeting.
<PAGE>
Corporate Profile
Winn-Dixie Stores, Inc., is one of the nation's largest retail food
chains. As of June 24, 1998, the Company operated 1,168 supermarkets in
14 states and the Bahamas. The Company also operated a network of
distribution centers, processing and manufacturing plants and a fleet
of trucks, providing a comprehensive support system.
Company Direction
Winn-Dixie is dedicated to providing our customers with the best
quality, variety and service, at competitive prices and creating
value for our customers, associates and shareholders.
Toward that end, we are engaged in a program of store openings,
enlargements and remodelings to better serve our current and future
customers. We also are adding a variety of new services to our
locations to appeal to the changing needs and tastes of supermarket
shoppers.
Our goal is to be the supermarket of choice in the Sunbelt and we will
aggressively pursue our opportunities to increase our market share
within our operating area.
<PAGE>
APPENDIX
WINN-DIXIE STORES, INC.
Key Employee Stock Option Plan
(Effective January 24, 1990)
(Revised June 22, 1992, effective June 1, 1992;
June 22, 1994; July 25, 1994; July 27, 1998, effective June 1, 1998)
ARTICLE I.
Designation and Purpose of Plan
The Plan shall be known as the "Winn-Dixie Key Employee Stock Option Plan". The
purpose of the Plan is to promote in the Company's key employees additional
incentive by inducing and enabling them to become part owners of the business or
to increase their share of its ownership through the exercise of options granted
pursuant to the Plan.
ARTICLE II.
Definitions
The following words and phrases wherever used herein shall, unless the context
otherwise indicates, have the following meanings:
1. "Committee" shall mean a committee of at least two persons appointed
by the Board of Directors of the Company each of whom shall be an
outside director of the Company.
2. "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.
3. "Company" shall mean Winn-Dixie Stores, Inc.
4. "Eligible Employee" shall mean an officer or other key employee of the
Company or its subsidiaries who, in the judgment of the Committee, is
significantly responsible for or materially contributes to the
management, growth or profitability of the business of the Company or
its subsidiaries.
5. "Option" shall mean any option granted or held pursuant to the
provisions of the Plan. Options shall be evidenced by forms prescribed
by the Committee.
6. "Optionee" shall mean any person who at the time in question holds any
Option which then remains unexercised in whole or in part and which
has not expired or terminated.
7. "Plan" shall mean this Winn-Dixie Key Employee Stock Option Plan.
8. "Return on Equity" shall mean the percentage which the net earnings of
the Company for a particular fiscal year bears to the average net
shareholder equity for such fiscal year, in each case as reflected in
the financial statements of the Company for such fiscal year as
reported in the Company's Annual Report to its stockholders.
9. "Stock" shall mean the Company's Common Stock, having a par value of
$1.00 per share, as constituted on June 1, 1998, whether presently
authorized and unissued or held in the Company's treasury, or
hereafter reacquired by the Company. In the event that any change in
the outstanding shares of Stock (including an exchange of the Stock
for stock or other securities of another corporation) occurs by reason
of a Stock dividend or split, recapitalization, merger, consolidation,
combination, exchange of shares or other similar corporate changes,
the remaining number of shares of Stock which may thereafter be sold
pursuant to the Plan and the remaining number of shares of Stock which
may thereafter be purchased pursuant to the exercise of any Option
then outstanding shall be appropriately adjusted by the Committee,
whose determination shall be conclusive; provided, however that
fractional shares shall be rounded to the nearest whole share. In the
event of any other change in the Stock, the Committee shall in its
sole discretion determine whether such change equitably requires a
change in the number or type of shares subject to any outstanding
Option and any adjustment made by the Committee shall be conclusive.
ARTICLE III.
Shares Available for Purchase
Subject to the anti-dilution provisions contained in the definition of Stock in
Article II hereof, except as provided in Article VII hereof, the maximum number
of shares of Stock which may be sold pursuant to the exercise of Options shall
be 2,000,000. Except as provided in Article VII hereof, at no time shall there
be Options outstanding for the purchase of more than 2,000,000 shares of Stock
(subject to said anti-dilution provisions) less such number of shares as have
previously been sold pursuant to the exercise of Options. If an Option shall for
any reason terminate or expire, any shares of Stock covered by such Option
immediately prior to its termination or expiration shall again become available
for sale pursuant to the exercise of other Options granted or to be granted
pursuant to the Plan.
ARTICLE IV.
Granting Expiration and Termination of Options
The Committee shall, by a vote of a majority thereof, have the exclusive power
to grant Options to purchase shares of Stock to Eligible Employees. Such Options
may be granted at any time and from time to time to such Eligible Employees, for
such number of shares as the Committee in its sole discretion deems advisable,
but in no event more than one-half (1/2) of the maximum number of shares
authorized under the Plan to any single "Eligible Employee". In all cases the
option price per share shall be the fair market value of the Stock on the date
on which the Option is granted (but not less than $1.00), and such Option shall
be exercisable, subject to the provisions of Article V hereof, within the option
period, at the end of which period it shall expire and become void to the extent
that it then remains unexercised. The option period within which each Option
granted hereunder shall be exercisable shall commence on such date as the
Committee shall determine and shall end on December 31, 1998, as to Options
granted after June 1, 1992 and prior to May 31, 1994; and shall end not later
than January 15th following the sixth full fiscal year after the grant as to
Options granted on May 31, 1994 or thereafter.
Subject to the provisions of Article V hereof, if the Optionee to whom an Option
was originally granted shall cease to be employed by the Company for any reason
other than death he or she may, within the three months next succeeding such
cessation of employment (unless such Option shall sooner expire), exercise such
Option to the extent that he or she was entitled to exercise it as of the date
of such cessation, and at the expiration of such three months (unless it shall
have sooner expires) such Option shall terminate and become void to the extent
that it then remains unexercised. Leaves of absence may be granted to Optionees
who are employees of the Company because of illness or for such other reasons as
the Committee may determine, without being considered a termination or cessation
of employment.
The Plan shall not confer upon any Eligible Employee or any Optionee any right
with respect to continuance of employment by the Company, nor shall it interfere
in any way with his or her right, or the Company's right, to terminate his or
her employment at any time.
In the event of the death, while in the employ of the Company, of an Optionee to
whom an option was originally granted, such Option shall be exercisable (to the
extent provided in Article V hereof) within one year of such date of death
(unless it shall sooner expire), but only (a) by the person or persons to whom
such Option shall pass by such Optionee's will or the laws of descent and
distribution, and (b) if and to the extent that he or she was entitled to
exercise such Option at the date of his or her death. At the end of such one
year period the Option (unless it shall have sooner expired) shall terminate and
become void to the extent that it then remains unexercised.
ARTICLE V.
Exercise of Options
Each Option granted pursuant to the Plan prior to June 1, 1998 shall become
exercisable on and after such date as the Committee shall determine, to the
extent of 50% of the shares of Stock covered thereby at any time after the end
of a fiscal year of the Company for which the Company earned a Return on Equity
of 20% or more, if such Option was outstanding throughout such fiscal year. Each
such Option shall become exercisable as to the remaining 50% of the shares of
Stock covered thereby at any time after the end of the second consecutive fiscal
year of the Company in each of which two consecutive fiscal years the Company
earned a Return on Equity of 20% or more, if such Option was outstanding
throughout such period of two consecutive years.
Each Option granted pursuant to the Plan on June 1, 1998 and thereafter shall
become exercisable on and after such date as the Committee shall determine that
the Company has earned an average Return on Equity for three consecutive fiscal
years equal to or exceeding a percentage rate established by the Committee at
the time the Option is granted, if such Option was outstanding throughout such
period of three consecutive years.
Subject to the preceding two paragraphs hereof, any Optionee shall have the
right to exercise his or her Option in whole at any time or in part from time to
time (provided that each exercise shall be for 1,000 shares of Stock, as
constituted at the date of such exercise, or any multiple thereof unless such
Option shall be for less than 1,000 shares, in which event such exercise shall
be for the full number of shares represented by such Option) by submitting
written notice thereof to the Company or its duly authorized agent or
representative, on such form or forms as may be provided by the Company,
accompanied by payment in full, in cash, for the shares to be purchased.
ARTICLE VI.
Rights of Optionees
An Optionee shall not have any rights as a stockholder of the Company by virtue
of any Option until the date of issue of the certificate or certificates for the
shares of Stock purchased pursuant to its exercise.
No Option or any right thereunder of an Optionee to purchase shares of Stock
pursuant to the Plan may be sold, pledged, assigned or transferred otherwise
than by will or the laws of descent and distribution, and such Option shall be
exercisable, during the lifetime of the Optionee, only by the Optionee.
ARTICLE VII.
Effectiveness, Interpretation, Amendment,
Suspension and Termination of the Plan
The effectiveness of this Plan is subject to the condition that it shall have
been approved by the Shareholders of the Company within twelve months after its
adoption. Unless such approval by the Shareholders shall have been obtained,
this Plan and any Option granted pursuant hereto shall be null and void and
without effect.
Determinations of the Committee as to any question which may arise with respect
to the interpretation or administration of any provisions of the Plan shall be
final unless otherwise determined by the Board of Directors. The Committee may
require Eligible Employees to meet certain share ownership obligations to
receive grants under the Plan. The Committee may also prescribe administrative
rules under the Plan and may in its discretion appoint an independent agent to
act as Option Agent for Options granted pursuant to the Plan and may empower
such Option Agent to handle any or all administrative maters with regard to
Options granted by the Committee.
Unless shareholder approval otherwise is required by applicable law or the rules
of the New York Stock Exchange, the Committee or the Board of Directors each
shall have the power at any time to add to, amend or repeal any of the
provisions of the Plan (including the power to increase the maximum number of
shares of Stock which may be sold pursuant to the exercise of Options), to
suspend the operation of the entire Plan or of any provision or provisions
thereof for any period or periods or to terminate the Plan in whole or in part.
No such addition, amendment, repeal, suspension or termination shall in any way
affect the rights of the holders of outstanding Options to purchase shares of
Stock in accordance with the provisions hereof.
Notwithstanding the foregoing, unless authorized or ratified by the holders of a
majority of the shares of Common Stock of the Company present or represented at
a meeting thereof at which a quorum shall be present, no amendment to the Plan
shall become effective which shall extend the maximum period within which an
Option may be exercisable to any date later than December 31, 1998, as to
Options granted after June 1, 1992 but prior to May 31, 1994.
