================================================================================
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-3657
-----------------------------------
WINN-DIXIE STORES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0514290
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5050 Edgewood Court, Jacksonville, Florida 32254-3699
(Address of principal executive offices) (Zip Code)
Area Code (904) 783-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock Par Value $1.00 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [|X|] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [|X|]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of common stock on June 30,
1999, as reported on the New York Stock Exchange was approximately
$3,257,877,527. Shares of common stock held by each executive officer and
director and by principal shareholders filing Schedules 13D and 13G have been
excluded in that such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of June 30, 1999, registrant had outstanding 148,576,620 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy
Statement in respect to the 1999 Annual Meeting of Shareholders are incorporated
by reference in Part III hereof, as more specifically described herein.
<PAGE>
TABLE OF CONTENTS
Page
Number
PART I
Business................................................................... 1
Properties................................................................. 5
Legal Proceedings.......................................................... 6
Submission of Matters to a Vote of Security Holders........................ 6
Executive Officers of the Registrant....................................... 7
PART II
Market for the Registrant's Common Equity and Related Shareholder Matters.. 8
Selected Financial Data.................................................... 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 8
Quantitative and Qualitative Disclosure about Market Risk.................. 9
Financial Statements and Supplementary Data................................ 9
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................. 9
PART III
The information required by Part III is hereby incorporated by
reference to Winn-Dixie Stores, Inc.'s definitive proxy statement
to be filed on or before August 27, 1999, in connection with its
Annual Meeting of Shareholders............................................. 10
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K............ 10
Signatures................................................................. 14
<PAGE>
PART I
ITEM 1: BUSINESS
General
Winn-Dixie Stores, Inc., organized in Florida on December 26, 1928, is
a major food retailer with 1,188 stores in fourteen states and the Bahama
Islands. According to published reports of sales at June 30, 1999, the Company
is one of the nation's largest supermarket retailers.
All of the Company's subsidiaries except Bahamas Supermarkets Limited
are wholly-owned. Except where the context indicates otherwise, the term
"Company" includes Winn-Dixie Stores, Inc. and all of its subsidiaries,
collectively.
Based upon information monitored by the Company's operating
decision-makers to manage the business, the Company has determined that its
operations are within one reportable segment. Accordingly, financial information
on industry segments is omitted because, apart from the principal business of
operating retail self-service food stores, the Company has no other industry
segments.
Store Formats and Business Strategy
The business of the Company is the operation of a chain of retail
self-service food stores, which sell groceries, meats, seafood, fresh produce,
deli/bakery, pharmaceuticals and general merchandise items. The Company's stores
offer broad lines of merchandise, including nationally advertised and private
label brands and unbranded merchandise (principally meats, seafood and produce),
and generally operate on the basis of competitive pricing. Food items sold
include dry groceries, dairy products, baked goods, meats, poultry, fish, fresh
fruit, vegetables, frozen foods and other items commonly marketed by retail food
stores. The Company's stores also sell many general merchandise items, such as
magazines, soaps, paper products, health and cosmetic products, hardware and
numerous small household items. Many locations have ancillary departments such
as pharmacies, photo labs, dry cleaners and in-store banks operated by
independent third parties who rent space from the Company. At June 30, 1999, the
Company operated 1,188 retail stores of which 447 were located in Florida, 127
in North Carolina, 116 in Georgia, 105 in Alabama, 76 in Louisiana, 75 in South
Carolina, 68 in Texas, 59 in Kentucky, 37 in Virginia, 23 in Tennessee, 20 in
Ohio, 15 in Mississippi, 13 in the Bahamas, 5 in Oklahoma and 2 in Indiana. Such
stores were operated under the names of "Winn-Dixie" (349), "Winn-Dixie
Marketplace" (802), "Thriftway" (26), "The City Meat Markets" (10) and "Buddies"
(1).
Support and Other Services
The following table shows the locations of the Company's distribution
centers and its manufacturing and processing plants, as well as the principal
products produced in the plants:
1
<PAGE>
ITEM 1: BUSINESS, continued
LOCATION FACILITIES
- ------------------------------------------------------------------------------
ALABAMA Montgomery Two distribution centers;
Plants: milk bottling and frozen pizza
FLORIDA Jacksonville Two distribution centers and a general
merchandise distribution center;
Plants: detergents; paper bags; and
coffee, tea and spices
Madison Plant: meat processing
Miami Distribution center; Plant: milk bottling
Orlando Distribution center
Bartow Plant: egg processing
Plant City Plants: ice cream and milk bottling
Pompano Distribution center
Sarasota Distribution center
Tampa Distribution center
GEORGIA Atlanta Distribution center
Fitzgerald Plants: jams, jellies, mayonnaise, salad
dressing, peanut butter and condiments;
canned and bottled carbonated beverages
Gainesville Plants: oleomargarine; natural cheese
cutting and wrapping, processed cheese
and pimento cheese
Valdosta Plants: crackers and cookies; and snacks
KENTUCKY Louisville Distribution center
LOUISIANA New Orleans Distribution center
Hammond Distribution center; Plant: milk bottling
NORTH CAROLINA Charlotte Distribution center
Raleigh Distribution center
High Point Plants: milk bottling and cultured products
SOUTH CAROLINA Greenville General merchandise distribution center;
Plants: ice cream and milk bottling
TEXAS Fort Worth Distribution center and a general
merchandise distribution center;
Plant: milk bottling
BAHAMAS Nassau Distribution center
2
<PAGE>
ITEM 1: BUSINESS, continued
An insignificant portion of the products produced by the manufacturing
plants is sold to others.
Types of products produced by the Company for sale in its stores are
described above. Services provided by the Company such as check cashing, money
transfers, bill payment, money orders and lottery tickets are incidental to the
total business.
The Company has not publicly announced, or otherwise made public,
information about any new product or industry segment which would require the
investment of a material amount of the assets of the Company or which otherwise
is material.
Sources of available raw materials are factors that do not affect the
Company in any different manner than they affect other manufacturers and
processors of the goods identified.
Patents and trademarks owned by the Company are not of material importance
to its operations.
Seasonality does not materially affect the business of the Company.
However, due to the influx of winter residents to the Sunbelt, Florida in
particular, and increased purchases of food items for the Thanksgiving and
Christmas holiday seasons, there is a seasonal sales increase during the period
of November - April each fiscal year.
The Company and other food retailers have no unusual working capital
requirements.
The business of the Company is not dependent upon a single or a few
customers. The Company does not sell goods or services in an amount which equals
10 percent or more of the Company's consolidated sales to any single customer or
group of customers under common control or to any affiliated group of customers.
Backlog ordering is not a factor in the business of the Company.
No portion of the business of the Company is subject to renegotiations of
profits or termination of contracts or subcontracts at the election of any
government.
Marketing and Competition
In all areas in which the Company operates, the business is highly
competitive with local and national food chain stores, as well as with
independent stores and markets. Many factors enter into the competition,
including price, quality of goods and services, product mix and convenience.
3
<PAGE>
ITEM 1: BUSINESS, continued
The retail food industry is extremely competitive. Each operating area
faces somewhat different competitive conditions. The major competitors for our
operating areas are A&P, Albertson's, Bi-Lo, Biggs, Bruno, H.E. Butt, Cub,
Delchamp/Jitney Jungle, Food Lion/Kash N Karry, Goodings, Hannaford,
Harris-Teeter, Hyde Park, Ingles, Kroger, Meijers, Minyards, Publix, Randall's,
Schwegmanns, Sedano's, Super K, Super Value, Wal-Mart Supercenter, U-Krops and
U-Save.
Additionally, local chains and wholesaler-supported independents are well
represented in all regions.
Winn-Dixie is considered a major competitor in all geographic areas in
which it competes.
The Company did not spend a material amount on Company-sponsored research
and development activities or on Company-sponsored research activities relating
to the development of new products, services or techniques, or the improvement
of existing products, services or techniques during any of the years in the
three-year period ended June 30, 1999.
Government Regulation
The Company's compliance with federal, state and local provisions
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment has not had, and is not expected
to have, a material effect on its capital expenditures, earnings or competitive
position.
Associates
At the end of fiscal 1999, the Company had 57,000 full-time and 75,000
part-time associates.
Bahamas
All sales of the Company are to customers within the United States and the
Bahama Islands. The Company exports an insignificant amount of merchandise to
its subsidiaries in the Bahamas, which operates 13 retail food stores as
outlined above.
4
<PAGE>
ITEM 2: PROPERTIES
Stores
All of the retail stores operated by the Company are on premises occupied
on a rental basis. See "Note 8 of the Notes to Consolidated Financial
Statements," page F-23, included herein.
Support Properties
The warehousing and distribution centers are rented under leases due to
expire as follows: Montgomery (perishable) - 2022; Raleigh - 2022; Orlando -
2021; Atlanta - 2019; Charlotte - 2019; Jacksonville (Edgewood) - 2019;
Louisville - 2019; Sarasota - 2019; Miami - 2018; Montgomery - 2018; New Orleans
- - 2018; Tampa - 2018; Fort Worth - 2016; Hammond - 2016; Jacksonville
(Commonwealth) - 2011; Nassau - 2011 and Pompano - 2003. All of these contain
renewal options, which vary from lease to lease.
An expansion and refurbishment of the corporate headquarters in
Jacksonville, Florida is under construction.
A new distribution center and retail support center is in the planning
stages in Jacksonville, Florida. The new facility will be leased. The existing
Jacksonville (Commonwealth) distribution center will be converted to a general
merchandise distribution center.
The Company is building a new frozen food freezer and will convert the
existing freezer into a perishable food cooler at the distribution center in
Charlotte, North Carolina. At our Greenville, South Carolina distribution
center, we are converting an existing distribution center into a general
merchandise and pharmaceutical distribution center.
The Company's Valdosta cracker and cookie, and snacks bakeries; Fort Worth
dairy plant; Madison meat processing plant; Plant City ice cream and milk
bottling plants; Miami reclaim center; and Gainesville oleomargarine and cheese
processing and packaging plants are owned in fee.
The Company's Jacksonville coffee, tea and spices processing, detergent and
bag plants; Montgomery milk bottling plant; and Hammond milk bottling plant are
situated at the leased warehousing and distribution center locations in those
cities. The Bartow egg processing plant; Greenville ice cream and milk bottling
plants and general merchandise distribution center; High Point milk bottling and
cultured products plants; Miami milk bottling plant; Montgomery frozen pizza
plant; and the Fitzgerald jam, jellies, mayonnaise, salad dressing, peanut
butter and condiments and canned and bottled carbonated beverage plants are
rented under leases.
All of the above support properties are considered to be in excellent
condition.
5
<PAGE>
ITEM 3: LEGAL PROCEEDINGS
See Note 9(d) and Note 13 of the Notes to Consolidated Financial
Statements, pages F-26 and F-28 included herein, regarding various claims and
lawsuits pending against the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended June 30, 1999.
6
<PAGE>
Executive Officers of the Registrant
Set forth below is certain information concerning the executive officers of
the Company during fiscal 1999:
<TABLE>
<CAPTION>
YEAR YEAR FIRST
AGE IN APPOINTED EMPLOYED
YEARS AT TO CURRENT BY
NAME 06-30-99 OFFICE HELD POSITION WINN-DIXIE
<S> <C> <C> <C> <C>
A. Dano Davis 54 Chairman of the Board 1988 1968
and Principal Executive Officer
James Kufeldt 60 President 1988 1961
C. H. McKellar 61 Executive Vice President 1988 1957
R. J. Brocato 55 Senior Vice President 1999 1963
H. E. Hess 59 Senior Vice President 1988 1958
R. A. Sevin 56 Senior Vice President 1997 1961
C. E. Winge 54 Senior Vice President 1988 1963
R. P. McCook 46 Financial Vice President 1984 1984
and Principal Financial Officer
L. H. May 54 Vice President 1989 1964
E. E. Zahra, Jr. 52 Vice President and General Counsel 1995 1995
D. H. Bragin 55 Treasurer and Principal Accounting 1985 1961
Officer
W. C. Calkins 60 Vice President 1987 1958
J. W. Critchlow (1) 52 Vice President 1988 1967
R. J. Ehster (1) 58 Vice President 1983 1958
J. D. Fitzgerald 49 Vice President 1998 1970
M. J. Istre (2) 48 Vice President 1999 1969
D. G. Lafever 50 Vice President 1990 1966
R. C. Lunn, Jr. 47 Vice President 1997 1969
H. E. Miller 67 Vice President 1984 1956
L. J. Sadlowski 58 Vice President 1983 1961
J. A. Schlosser 50 Vice President 1997 1967
M. A. Sellers 45 Vice President 1997 1973
J. T. White 51 Vice President 1999 1968
H. M. Solana, Jr. (2) 44 President, Winn-Dixie Raleigh, Inc. 1999 1971
</TABLE>
(1) Retired in June, 1999
(2) Elected in June, 1999
Mr. James Kufeldt, President of Winn-Dixie Stores, Inc. announced his
intent to retire after 38 years of service. Mr. Kufeldt will remain as President
until his successor is in place.
7
<PAGE>
Executive Officers of the Registrant, continued
Mr. R. J. Ehster, Vice President of Winn-Dixie Stores, Inc. and President
of the Miami Division of Winn-Dixie Stores, Inc., retired at the end of fiscal
1999 after 41 years of service. Mr. R. C. Lunn, Jr., Vice President of
Winn-Dixie Stores, Inc., resigned as President of Winn-Dixie Louisiana, Inc. and
was elected Division President of the Miami Division of Winn-Dixie Stores, Inc.
Mr. M. J. Istre, Retail Operations Superintendent of Winn-Dixie Louisiana,
Inc. was elected President of Winn-Dixie Louisiana, Inc. and Vice President of
Winn-Dixie Stores, Inc.
Mr. J. W. Critchlow, Vice President of Winn-Dixie Stores, Inc. and
President of Winn-Dixie Raleigh, Inc. retired at the end of fiscal 1999 after 31
years of service. Mr. H. M. Solana, Jr., Retail Operations Superintendent of the
Orlando Division of Winn-Dixie Stores, Inc. was elected President of Winn-Dixie
Raleigh, Inc.
All of the officers listed as executive officers of the registrant, with
the exception of Mr. E. E. Zahra, Jr., have been employed for the past five
years in either the same capacity as listed, or in a position with the Company
which was consistent in occupation with the present assignment. Prior to
becoming General Counsel, Mr. Zahra was the managing partner of the Jacksonville
office of LeBoeuf, Lamb, Greene & MacRae L.L.P., an international law firm.
Officers are elected annually by the Board of Directors and serve for a
one-year period or until their successors are elected. No officers have
employment contracts with the Company.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The number of record holders of the Company's common
stock as of June 30, 1999 was 48,084.
Information required by this Item concerning sales prices of the Company's
common stock and the frequency and amount of dividends is in "Note 12 of the
Notes to Consolidated Financial Statements," on page F-27 included herein.
ITEM 6: SELECTED FINANCIAL DATA
The information required by this Item is on page F-1 included herein.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is on page F-2 included herein.
8
<PAGE>
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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 30, 1999, 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 counter party to these interest rate swap
agreements exposes the Company to credit loss in the event of nonperformance.
However, the Company does not anticipate nonperformance by the counter party.
Since current short-term interest rates at June 30, 1999 are below the
7.19% rate of these contracts, the estimated negative value of these swaps was
approximately $7.9 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.
<TABLE>
<CAPTION>
Expected Maturity Dates
There-
2000 2001 2002 2003 2004 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 % 5.90 6.10 6.25 6.39 6.49 6.63 6.51
</TABLE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Financial statements and supplemental data are set forth in the "Index to
Consolidated Financial Statements, Supporting Schedules and Supplemental Data"
on page 16 included herein.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
between the Company and its auditors within the 24 months prior to June 30,
1999.
9
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11: EXECUTIVE COMPENSATION
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items is incorporated herein by reference
to the Company's definitive proxy statement to be filed in connection with its
1999 Annual Meeting of Shareholders.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) Financial Statements:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 16
included herein.
(2) Financial Statement Schedules:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 16
included herein.
(3) Exhibits:
Certain of the following exhibits which have heretofore
been filed with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities
Exchange Act of 1934 and which are designated in prior
filings as noted below, are hereby incorporated by
reference and made a part hereof:
10
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
3.1 Restated Articles of Incorporation as Previously filed as Exhibit 3.1 to Form
filed with the Secretary of State of 10-K for the year ended June 30, 1993, which
Florida. Exhibit is herein incorporated by reference.
3.1.1 Amendment adopted October 7, 1992, to Previously filed as Exhibit 3.1.1 to Form 10-K
Restated Articles of Incorporation. for the year ended June 30, 1993, which Exhibit
is herein incorporated by reference.
3.1.2 Amendment adopted October 5, 1994, to Previously filed as Exhibit 3.1.2 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended January 11, 1995, which
Exhibit is herein incorporated by reference.
3.1.3 Amendment adopted October 1, 1997, to Previously filed as Exhibit 3.1.3 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended September 17, 1997, which
Exhibit is herein incorporated by reference.
3.2 Restated By-Laws of the Registrant as Previously filed as Exhibit 3.2 to Form 10-K
amended through June 21, 1995. for the year ended June 28, 1995, which Exhibit
is herein incorporated by reference.
9.1 Agreement of Shareholders of D.D.I., Previously filed as Exhibit 9.1 to Form 10-K
Inc. (formerly Vadis Investments, Inc.) for the year ended June 30, 1993, which Exhibit
dated April 19, 1989. is herein incorporated by reference.
10.1 Annual Officer Incentive Compensation Previously filed as Exhibit 10.1 to Form 10-Q for
Plan, effective June 15, 1998. the quarter ended September 16, 1998, which
Exhibit is herein incorporated by reference.
</TABLE>
11
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
10.2 Long-term Officer Incentive Compensation Previously filed as Exhibit 10.3 to Form 10-K for
Plan as amended, effective June 27, 1991. the year ended June 30, 1993, which Exhibit is
herein incorporated by reference.
10.2.1 Restricted Stock Plan, effective Previously filed as Exhibit 10.2.1 to Form 10-Q
June 29, 1995. for the quarter ended January 10, 1996, which
Exhibit is herein incorporated by reference.
10.2.2 Performance-Based Restricted Stock Plan Previously filed as Exhibit 10.2 to Form 10-Q for
effective June 15, 1998. the quarter ended September 16, 1998, which
Exhibit is herein incorporated by reference.
10.3 Key Employee Stock Option Plan Previously filed as Exhibit 10.3 to Form 10-Q for
effective January 24, 1990 as amended the quarter ended September 16, 1998, which
effective June 15, 1998. Exhibit is herein incorporated by reference.
10.4 Supplemental Retirement Plan dated July Previously filed as Exhibit 10.6 to Form 10-K for
1, 1994. the year ended June 29, 1994, which Exhibit is
herein incorporated by reference.
10.5 Management Security Plan as amended and Previously filed as Exhibit 10.5 to Form 10-K for
restated effective June 30, 1982. the year ended June 26, 1996, which Exhibit is
herein incorporated by reference.
10.5.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.5.1 to Form 10-K
Management Security Plan. for the year ended June 26, 1996, which Exhibit
is herein incorporated by reference.
</TABLE>
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
10.6 Senior Corporate Officer's Management Previously filed as Exhibit 10.6 to Form 10-K for
Security Plan as amended and restated the year ended June 26, 1996, which Exhibit is
effective June 30, 1982. herein incorporated by reference.
10.6.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.6.1 to Form 10-K
Senior Corporate Officer's Management for the year ended June 26, 1996, which Exhibit
Security Plan. is herein incorporated by reference.
21.1 Subsidiaries of Winn-Dixie Stores, Inc.
23.1 Consent of KPMG LLP.
</TABLE>
(b) Reports on Form 8-K:
During the fourth quarter ended June 30, 1999, the Company filed
a current report on Form 8-K dated June 2, 1999 reporting that
James Kufeldt announced his resignation as President of
Winn-Dixie Stores, Inc., effective upon the election of his
successor.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WINN-DIXIE STORES, INC.
By /s/ A. DANO DAVIS
-----------------------
A. Dano Davis, Chairman
Date August 10, 1999
-----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ A. DANO DAVIS Chairman (Principal August 10, 1999
---------------------
(A. Dano Davis) Executive Officer) and Director
/s/ JAMES KUFELDT President and Director August 10, 1999
----------------------
(James Kufeldt)
/s/ RICHARD P. MCCOOK Financial Vice President August 10, 1999
-----------------------
(Richard P. McCook) (Principal Financial Officer)
/s/ DAVID H. BRAGIN Treasurer August 10, 1999
------------------------
(David H. Bragin) (Principal Accounting Officer)
/s/ ROBERT D. DAVIS Director August 10, 1999
------------------------
(Robert D. Davis)
14
<PAGE>
SIGNATURES, continued
/s/ T. WAYNE DAVIS Director August 10, 1999
----------------------
(T. Wayne Davis)
/s/ CHARLES H. MCKELLAR Director August 10, 1999
----------------------
(Charles H. McKellar)
/s/ RADFORD D. LOVETT Director August 10, 1999
-----------------------
(Radford D. Lovett)
/s/ CHARLES P. STEPHENS Director August 10, 1999
-----------------------
(Charles P. Stephens)
Director August 10, 1999
----------------------
(Armando M. Codina)
/s/ DAVID F. MILLER Director August 10, 1999
------------------------
(David F. Miller)
/s/ CARLETON T. RIDER Director August 10, 1999
------------------------
(Carleton T. Rider)
/s/ JULIA B. NORTH Director August 10, 1999
------------------------
(Julia B. North)
15
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,
SUPPORTING SCHEDULES AND SUPPLEMENTAL DATA
Selected Financial Data F-1
Management's Discussion and Analysis of Financial Condition and Results
of Operations F-2
Consolidated Financial Statements and Supplemental Data:
Independent Auditors' Report F-6
Report of Management F-7
Consolidated Statements of Earnings, Years ended
June 30, 1999, June 24, 1998 and June 25, 1997 F-8
Consolidated Balance Sheets, June 30, 1999 and June 24, 1998 F-9
Consolidated Statements of Cash Flows, Years ended
June 30, 1999, June 24, 1998 and June 25, 1997 F-10
Consolidated Statements of Shareholders' Equity, Years ended
June 30, 1999, June 24, 1998 and June 25, 1997 F-11
Notes to Consolidated Financial Statements F-12
Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule S-1
II Consolidated Valuation and Qualifying Accounts, Years ended
June 30, 1999, June 24, 1998 and June 25, 1997 S-2
All other schedules are omitted either because they are not applicable or
because information required therein is shown in the Financial Statements or
Notes thereto.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
1999* 1998 1997 1996 1995
Dollars in millions except per share data
<S> <C> <C> <C> <C> <C> <C>
Sales
Net sales........................................... $ 14,137 13,617 13,219 12,955 11,788
Percent increase.................................... 3.8 3.0 2.0 9.9 6.4
Average annual sales per store...................... $ 11.9 11.7 11.3 11.0 10.0
Earnings Summary
Gross profit........................................ $ 3,801 3,624 3,316 3,093 2,723
Percent of sales.................................. 26.9 26.6 25.1 23.9 23.1
LIFO charge (credit)................................ $ 4 (12) 3 10 7
Operating and administrative expenses............... $ 3,594 3,375 3,094 2,803 2,462
Percent of sales.................................. 25.4 24.8 23.4 21.6 20.9
Net earnings........................................ $ 182 199 204 256 232
Basic earnings per share.......................... $ 1.23 1.34 1.36 1.69 1.55
Diluted earnings per share........................ $ 1.23 1.33 1.36 1.68 1.55
Percent of net earnings to sales.................... 1.3 1.5 1.5 2.0 2.0
Percent of net earnings to average equity........... 13.1 14.7 15.3 19.9 20.3
EBITDA ................................................ $ 618.5 676.7 632.8 656.9 569.3
EBITDAR .............................................. $ 961.4 985.9 911.6 914.9 791.5
Dividends
Dividends paid...................................... $ 151.2 150.9 144.2 134.0 116.5
Percent of net earnings............................. 82.9 76.0 70.5 52.4 50.2
Per share (present rate $1.02)...................... $ 1.02 1.02 .96 .885 .78
Common Stock (WIN)
Total shares outstanding (000,000).................. 148.6 148.5 148.9 151.7 151.1
NYSE - Stock price range
Common - High................................... $ 52.19 59.25 42.38 38.38 28.94
Low.................................... $ 28.63 33.69 29.88 28.06 21.32
Financial Data
Cash flow information:
Net cash provided by operating activities......... $ 436.4 464.5 413.9 556.9 414.2
Net cash used in investing activities............. $ 335.1 325.9 477.7 387.9 379.3
Net cash provided by (used in) financing activities $ (100.0) (129.2) 45.7 (167.3) (35.9)
Capital expenditures, net........................... $ 345.7 369.6 423.1 362.0 371.6
Depreciation and amortization....................... $ 292.4 330.4 291.2 248.3 200.9
Working capital..................................... $ 250.7 228.6 195.4 388.7 414.9
Current ratio....................................... 1.2 1.2 1.1 1.4 1.4
Total assets........................................ $ 3,149 3,069 2,921 2,649 2,472
Obligations under capital leases.................... $ 38 49 54 61 78
Comprehensive income................................ $ 182.6 199.4 206.4 - -
Shareholders' equity................................ $ 1,411 1,369 1,337 1,342 1,231
Book value per share................................ $ 9.50 9.22 8.98 8.85 8.14
Stores
In operation at year-end............................ 1,188 1,168 1,174 1,178 1,175
Opened and acquired during year..................... 79 84 83 61 108
Closed or sold during year.......................... 59 90 87 58 92
Enlarged or remodeled during year................... 64 136 79 128 86
New/enlarged/remodeled in last five years........... 908 912 805 743 654
Percent to total stores in operation.............. 76.4 78.1 68.6 63.1 55.7
Year-end retail square footage (000,000)............ 52.0 49.6 47.8 45.7 43.8
Average store size at year-end (000)................ 43.7 42.4 40.7 38.8 37.3
Other Year-end Data
Associates (000).................................... 132 139 136 126 123
Shareholder accounts (000).......................... 48.1 52.0 55.2 56.3 44.8
Shareholders per store.............................. 40 45 47 48 38
Taxes
Federal, state and local............................ $ 308 302 285 288 261
Per diluted share................................... $ 2.07 2.03 1.90 1.89 1.74
</TABLE>
F-1
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales for fiscal 1999, a 53 week year, were $14.1 billion, compared to
$13.6 billion and $13.2 billion for the 52 week years of 1998 and 1997,
respectively. This reflects a 3.8%, 3.0% and 2.0% increase in sales per year for
1999, 1998 and 1997, respectively. Average store sales increased 2.1%, 3.0% and
1.8% for each of the last three fiscal years, while identical store sales
decreased 0.9%, 0.3% and 0.9% for 1999, 1998 and 1997, respectively. Sales for
the 13 week fourth quarter of 1999 were $3.5 billion, compared to $3.3 billion
and $3.1 billion for the 12 week fourth quarter of 1998 and 1997, respectively.
For the fourth quarter, average store sales decreased 1.9% in 1999, increased
7.0% in 1998 and increased 1.2% in 1997. Identical store sales for the fourth
quarter decreased 3.9% in 1999, increased 3.1% in 1998 and decreased 1.8% in
1997.
In fiscal year 1999, the Company continued to increase its average store
size by opening and acquiring 79 stores, averaging 51,100 square feet, enlarging
or remodeling 64 stores and closing 59 smaller stores, averaging 33,600 square
feet.
As a percent of sales, gross profit margins were 26.9%, 26.6% and 25.1% in
fiscal 1999, 1998 and 1997, respectively. Operating margins improved with an
increase in the number of larger stores, added service departments and improved
pricing. Gross profit increased $1.2 million in the fourth quarter and $3.5
million for the year due to the change in depreciable lives as noted below.
During the second quarter of fiscal 1999, the Company voluntarily recalled
certain franks and sliced luncheon meats manufactured by its wholly-owned
subsidiary, Dixie Packers, Inc. As a result of this recall, year-to-date
operating margins were negatively impacted by approximately $20.0 million.
Approximately 86% of the Company's inventories are valued under the LIFO
(last-in, first-out) method. The LIFO calculations resulted in a pre-tax
decrease in gross profit of $4.4 million in 1999, an increase of $12.1 million
in 1998 and a decrease of $2.7 million in 1997.
Operating and administrative expenses, as a percent of sales, were 25.4%,
24.8% and 23.4% in fiscal 1999, 1998 and 1997, respectively. Our expenses were
impacted by increased training costs associated with our emphasis toward
increased customer service, occupancy costs and our "While You're at the
Marketplace" marketing campaign. During the second quarter of fiscal 1999, the
Company increased the estimated useful lives used to compute depreciation for
certain assets, principally store equipment (5 to 8 years) and leaseholds (8 to
15 years). Store equipment and leaseholds associated with larger, full-service
store formats are expected to have a longer life because of the types of
equipment and the expected timing of store remodels. In addition, the change
resulted in useful lives more consistent with the predominant industry practices
for these types of assets. The change has been accounted for as a change in
estimate and resulted in a reduction in operating and administrative expenses of
$15.7 million for the 13 weeks ended June 30, 1999 and $45.8 million for the 53
weeks ended June 30, 1999.
F-2
<PAGE>
Results of Operations, continued
Cash discounts and other income amounted to $118.9 million, $115.4 million
and $119.4 million in 1999, 1998 and 1997, respectively.
Interest expense totaled $29.6 million, $28.5 million and $22.1 million in
fiscal 1999, 1998 and 1997, respectively. Interest expense primarily reflects a
computation of interest on capital lease obligations and short-term borrowings.
The 1999 and 1998 increase in interest expense is due to an increase in
short-term borrowings.
Earnings before income taxes were $296.5 million, $317.8 million and $319.4
million in fiscal 1999, 1998 and 1997, respectively. The 1999 and 1998 decrease
in pre-tax earnings is primarily a result of the increase in operating expenses
as previously mentioned. The effective income tax rates were 38.5%, 37.5% and
36.0% for fiscal 1999, 1998 and 1997, respectively. 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 $182.3 million, or $1.23 per diluted share for
1999, $198.6 million, or $1.33 per diluted share for 1998 and $204.4 million, or
$1.36 per diluted share for 1997. The LIFO calculations decreased net earnings
by $2.7 million, or $.02 per diluted share in 1999, increased net earnings by
$7.4 million, or $0.05 per diluted share in 1998 and decreased net earnings by
$1.6 million, or $0.01 per diluted share in 1997.
Liquidity and Capital Resources
The Company's financial condition remains sound and strong at year end.
Cash and cash equivalents amounted to $24.7 million, $23.6 million and $14.1
million at the end of fiscal years 1999, 1998 and 1997, respectively. Cash
provided by operating activities amounted to $436.4 million in 1999, $464.5
million in 1998 and $413.9 million in 1997.
Net capital expenditures totaled $345.7 million, $369.6 million and $423.1
million in fiscal 1999, 1998 and 1997, 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 $800.0 million in
fiscal 1999 and projected to be $500.0 million in fiscal 2000. The Company has
no material construction or purchase commitments outstanding as of June 30,
1999.
Working capital amounted to $250.7 million and $228.6 million at the end of
fiscal years 1999 and 1998, respectively. Inventories on a FIFO (first-in,
first-out) basis increased $24.6 million in 1999 and $143.6 million 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 $482.0 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.
There was $300.0 million in commercial paper outstanding at the end of 1999,
compared to $420.0 million in commercial paper outstanding at the end of 1998.
The average interest rate on the commercial paper outstanding on June 30, 1999
was 5.4%, compared to 5.6% on June 24, 1998. Short-term borrowings against our
bank lines of credit were $165.0 million as of June 30, 1999 as compared to none
on June 24, 1998. The interest rate on the bank lines of credit on June 30,
1999, was 5.5%. 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. Excluding capital lease
obligations, the Company had no outstanding long-term debt as of June 30, 1999
or June 24, 1998.
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 continually evaluates its strategy to provide for its
short-term and long-term borrowing needs.
The Company is a party to various proceedings arising under federal, state
and local regulations protecting the environment. Management is of the opinion
that any liability that might result from any such proceedings will not have a
material adverse effect on the Company's financial condition or results of
operations.
Impact of Inflation
Winn-Dixie's primary costs, inventory and labor, increase with inflation.
Recovery of these costs has to come from improved operating efficiencies, 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.
F-4
<PAGE>
Year 2000 Compliance, continued
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 eighty-five percent (85%) complete. Winn-Dixie estimates that all
critical systems will be compliant with the century change by September 30,
1999.
The Company has budgeted approximately $26.3 million to address the Year
2000 issues, which includes the estimated costs of all modifications, the
salaries of associates and the fees of consultants addressing the issues.
Approximately $22.9 million of this amount had been expended through June 30,
1999.
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
September 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 30, 1999 and June 24, 1998, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1999. 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 30, 1999 and June 24, 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Jacksonville, Florida
August 2, 1999
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 divisional operations of the Company.
The Audit Committee of the Board of Directors, composed entirely of outside
directors, meets periodically to review the results of audit reports and other
accounting and financial reporting matters with the independent certified public
accountants and the internal auditors.
A. Dano Davis Richard P. McCook
Chairman of the Board Financial Vice President
and Principal Executive Officer and Principal Financial Officer
F-7
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended June 30, 1999, June 24, 1998 and June 25, 1997
<TABLE>
<CAPTION>
1999* 1998 1997
--------------- -------------- ---------------
Amounts in thousands except per share data
<S> <C> <C> <C> <C>
Net sales..................................................... $ 14,136,503 13,617,485 13,218,715
Cost of sales, including warehousing and delivery expense..... 10,335,590 9,993,568 9,902,862
--------------- -------------- ---------------
Gross profit on sales...................................... 3,800,913 3,623,917 3,315,853
Operating and administrative expenses......................... 3,593,651 3,374,905 3,093,767
Consolidation and distribution facility closing charge........ - 18,080 -
--------------- -------------- ---------------
Operating income........................................... 207,262 230,932 222,086
Cash discounts and other income, net.......................... 118,866 115,395 119,435
--------------- -------------- ---------------
326,128 346,327 341,521
--------------- -------------- ---------------
Interest:
Interest on capital lease obligations...................... 5,152 6,528 7,055
Other interest............................................. 24,496 22,007 15,024
--------------- -------------- ---------------
Total interest........................................... 29,648 28,535 22,079
--------------- -------------- ---------------
Earnings before income taxes.................................. 296,480 317,792 319,442
Income taxes.................................................. 114,145 119,172 114,999
--------------- -------------- ---------------
Net earnings.................................................. $ 182,335 198,620 204,443
=============== ============== ===============
Basic earnings per share...................................... $ 1.23 1.34 1.36
=============== ============== ===============
Diluted earnings per share.................................... $ 1.23 1.33 1.36
=============== ============== ===============
</TABLE>
* 53 Weeks
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and June 24, 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ---------------
Amounts in thousands
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents................................................. $ 24,746 23,566
Trade and other receivables, less allowance for doubtful items of
$3,615,000 ($2,623,000 in 1998)........................................ 188,314 146,166
Merchandise inventories at lower of cost or market less LIFO reserve
of $217,274,000 ($212,869,000 in 1998)................................. 1,425,098 1,404,917
Prepaid expenses.......................................................... 159,832 161,141
-------------- ---------------
Total current assets.................................................... 1,797,990 1,735,790
-------------- ---------------
Investments and other assets:
Cash surrender value of life insurance, net............................... 24,072 38,789
Other assets.............................................................. 104,452 101,661
-------------- ---------------
Total investments and other assets...................................... 128,524 140,450
-------------- ---------------
Deferred income taxes........................................................ - 22,626
Net property, plant and equipment............................................ 1,222,633 1,169,848
-------------- ---------------
$ 3,149,147 3,068,714
============== ===============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable.......................................................... $ 662,172 660,539
Short-term borrowings..................................................... 465,000 420,000
Reserve for insurance claims and self-insurance........................... 75,461 71,779
Accrued wages and salaries................................................ 108,826 107,590
Accrued rent.............................................................. 99,734 96,987
Accrued expenses.......................................................... 122,641 135,287
Current obligations under capital leases.................................. 2,751 2,908
Income taxes.............................................................. 10,739 12,119
-------------- ---------------
Total current liabilities............................................... 1,547,324 1,507,209
-------------- ---------------
Obligations under capital leases............................................. 38,493 48,580
Defined benefit plan......................................................... 41,234 37,102
Reserve for insurance claims and self-insurance.............................. 92,256 93,514
Other liabilities............................................................ 18,761 13,426
-------------- ---------------
Shareholders' equity:
Common stock of $1 par value. Authorized 400,000,000 shares; issued
148,576,865 shares in 1999 and 148,530,736 shares in 1998............... 148,577 148,531
Retained earnings......................................................... 1,259,597 1,220,679
Accumulated other comprehensive income.................................... 3,069 2,760
Associates' stock loans.................................................. (164) (3,087)
-------------- ---------------
Total shareholders' equity.............................................. 1,411,079 1,368,883
-------------- ---------------
Commitments and contingent liabilities (Notes 6, 8, 9 and 13)
$ 3,149,147 3,068,714
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1999, June 24, 1998 and June 25, 1997
<TABLE>
<CAPTION>
1999* 1998 1997
------------- ------------- -------------
Amounts in thousands
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................. $ 182,335 198,620 204,443
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization............................ 292,414 330,408 291,236
Deferred income taxes.................................... 17,684 (17,040) (17,988)
Defined benefit plan..................................... 4,132 3,650 3,919
Reserve for insurance claims and self-insurance.......... 2,424 10,291 (3,967)
Stock compensation plans................................. 2,459 (1,398) 10,086
Change in cash from:
Receivables............................................ (42,148) 29,513 (17,234)
Merchandise inventories................................ (20,181) (155,702) (70,089)
Prepaid expenses....................................... 8,596 3,813 (314)
Accounts payable....................................... (1,191) 56,191 3,914
Income taxes........................................... (1,380) (20,804) (9,631)
Other current accrued expenses......................... (8,783) 26,952 19,533
------------- ------------- -------------
Net cash provided by operating activities............ 436,361 464,494 413,908
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net.............. (345,723) (369,636) (423,105)
Decrease (increase) in investments and other assets.......... 10,582 43,785 (54,548)
------------- ------------- -------------
Net cash used in investing activities................ (335,141) (325,851) (477,653)
------------- ------------- -------------
Cash flows from financing activities:
Increase in short-term borrowings............................ 45,000 40,000 270,000
Payments on capital lease obligations........................ (2,583) (2,653) (2,713)
Purchase of common stock..................................... (1,337) (21,055) (94,500)
Proceeds of sales under associates' stock purchase plan...... 2,923 8,747 13,111
Dividends paid............................................... (151,231) (150,923) (144,165)
Other........................................................ 7,188 (3,309) 3,920
------------- ------------- -------------
Net cash provided by (used in) financing activities.. (100,040) (129,193) 45,653
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents................ 1,180 9,450 (18,092)
Cash and cash equivalents at the beginning of the year.......... 23,566 14,116 32,208
------------- ------------- -------------
Cash and cash equivalents at end of the year.................... $ 24,746 23,566 14,116
============= ============= =============
Supplemental cash flow information:
Interest paid................................................ $ 21,958 20,316 17,840
Interest and dividends received.............................. $ 1,072 1,449 1,183
Income taxes paid............................................ $ 94,858 152,652 142,684
============= ============= =============
</TABLE>
* 53 Weeks
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended June 30, 1999, June 24, 1998 and June 25, 1997
<TABLE>
<CAPTION>
Accumulated
Other Associates' Total
Common Retained Comprehensive Stock Shareholders
Stock Earnings Income Loans Equity
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
-------------- -------------- ------------------ --------------- ---------------
Balances at June 26, 1996 $ 151,685 1,215,556 - (24,945) 1,342,296
-------------- -------------- ------------------ --------------- ---------------
Comprehensive income:
Net earnings.......................... - 204,443 - - 204,443
Unrealized gain on securities,
net of tax....................... - - 1,964 - 1,964
-------------- --------------- ----------------- --------------- ---------------
Total comprehensive income............ - 204,443 1,964 - 206,407
Cash dividends, $0.96 per share.......... - (144,165) - - (144,165)
Common stock issued and stock
compensation expense.................. 135 7,461 - - 7,596
Common stock acquired.................... (2,949) (91,551) - - (94,500)
Stock options exercised.................. 5 (745) - - (740)
Associates' stock loans, payments........ - - - 13,111 13,111
Other.................................... - 7,489 - - 7,489
-------------- --------------- ----------------- --------------- ---------------
Balances at June 25, 1997 148,876 1,198,488 1,964 (11,834) 1,337,494
-------------- --------------- ----------------- --------------- ---------------
Comprehensive income:
Net earnings.......................... - 198,620 - - 198,620
Unrealized gain on securities,
net of tax........................ - - 796 - 796
-------------- --------------- ----------------- --------------- ---------------
Total comprehensive income............ - 198,620 796 - 199,416
Cash dividends, $1.02 per share.......... - (150,923) - - (150,923)
Common stock issued and stock
compensation expense.................. 76 (1,212) - - (1,136)
Common stock acquired.................... (501) (20,554) - - (21,055)
Stock options exercised.................. 80 (4,999) - - (4,919)
Associates' stock loans, payments........ - - - 8,747 8,747
Other.................................... - 1,259 - - 1,259
-------------- --------------- ----------------- --------------- ---------------
Balances at June 24, 1998 148,531 1,220,679 2,760 (3,087) $ 1,368,883
-------------- --------------- ----------------- --------------- ---------------
Comprehensive income:
Net earnings.......................... - 182,335 - - 182,335
Unrealized gain on securities,
net of tax........................ - - 309 - 309
-------------- --------------- ----------------- --------------- ---------------
Total comprehensive income............ - 182,335 309 - 182,644
Cash dividends, $1.02 per share.......... - (151,231) - - (151,231)
Common stock issued and stock
compensation expense.................. 33 2,189 - - 2,222
Common stock acquired.................... (37) (1,300) - - (1,337)
Stock options exercised.................. 50 1,004 - - 1,054
Associates' stock loans, payments........ - - - 2,923 2,923
Other.................................... - 5,921 - - 5,921
============== =============== ================= =============== ===============
Balances at June 30, 1999 $ 148,577 1,259,597 3,069 (164) $ 1,411,079
============== =============== ================= =============== ===============
</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 year 1999 is comprised of 53 weeks. Fiscal years ended 1998 and
1997 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 86% 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 were
$32,466,000 at June 30, 1999, and $29,110,000 at June 24, 1998,
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.
(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.
F-12
<PAGE>
1. Summary of Significant Accounting Policies and Other Information, continued
(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 $3,000,000 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. 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.
During the second quarter of fiscal 1999, the Company increased the
estimated useful lives used to compute depreciation for certain
assets, principally store equipment (5 to 8 years) and leaseholds (8
to 15 years). Store equipment and leaseholds associated with larger,
full-service store formats are expected to have a longer life because
of the types of equipment and the expected timing of store remodels.
In addition, the change results in useful lives more consistent with
the predominant industry practices for these types of assets. The
change has been accounted for as a change in estimate and resulted in
an increase in earnings before income tax of $49.3 million ($30.1
million after tax, or $0.20 per diluted share) for the year ended June
30, 1999.
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.
F-13
<PAGE>
1. Summary of Significant Accounting Policies and Other Information, continued
(k) Store Opening and Closing Costs: The costs of opening new stores and
closing old stores are charged to earnings in the year incurred.
(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 affect the Company's earnings per share. All prior
period earnings per share amounts have been restated to conform with
the provisions of SFAS 128.
The following weighted average number of shares of common stock were
used in the calculations for earnings per share. The diluted weighted
average number of shares includes the net shares that would be issued
upon the exercise of stock options using the treasury stock method.
1999 1998 1997
-------- ------- -------
Basic 148,309,653 148,504,349 149,820,029
Diluted 148,680,198 148,866,167 150,231,820
(m) Comprehensive Income: The Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), effective June 25, 1998. SFAS 130 relates to the
change in the equity of a business during a reporting period from
transactions of the business. Comprehensive income for the year was
approximately $182.6 million, $199.4 million and $206.4 million for
1999, 1998 and 1997, respectively. These amounts differ from net
income due to changes in the net unrealized holding gains (losses)
generated from available-for-sale securities.
(n) Stock-Based Compensation: The Company follows Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), which establishes a fair value based method of
accounting for stock-based compensation plans. (see Note 7).
F-14
<PAGE>
1. Summary of Significant Accounting Policies and Other Information, continued
(o) Business Reporting Segments: During fiscal 1999, the Company adopted
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS
131 provides for the disclosure of financial information disaggregated
by the way management organizes the segments of the enterprise for
making operating decisions. Based on the information monitored by the
Company's operating decision makers to manage the business, the
Company has identified that its operations are within one reportable
segment. Accordingly, financial information on industry segments is
omitted because, apart from the principal business of operating retail
self-service food stores, the Company has no other industry segments.
All sales of the Company are to customers within the United States and
the Bahama Islands. All assets of the Company are located within the
United States and the Bahama Islands. Sales and assets related to and
located in the Bahama Islands represents less than 1% of the Company's
total sales and assets.
(p) New Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. The Company
intends to adopt SFAS 133 in the first quarter of fiscal year 2001.
The Company is still determining how SFAS 133 will impact the
financial statements.
(q) Reclassification: Certain prior year amounts have been reclassified to
conform with the current year's presentation.
F-15
<PAGE>
2. Accounts Receivable
Accounts receivable at year-end were as follows:
1999 1998
-------------- ---------------
Amount in thousands
Trade and other receivables...... $ 96,984 90,672
Construction advances............ 94,945 58,117
-------------- -------------
191,929 148,789
Less: Allowance for doubtful items.. 3,615 2,623
-------------- -------------
$ 188,314 146,166
============== =============
3. Inventories
At June 30, 1999, inventories valued by the LIFO method would have been
$217,274,000 higher ($212,869,000 higher at June 24, 1998) 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 $2,691,000, or $0.02 per diluted share higher, $7,411,000, or
$0.05 per diluted share lower and $1,624,000, or $0.01 per diluted
share higher in 1999, 1998 and 1997, respectively.
4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------- ---------------
Amounts in thousands
<S> <C> <C> <C>
Land.............................................................. $ 11,343 11,343
Buildings......................................................... 29,134 28,739
Furniture, fixtures, machinery and equipment...................... 2,575,459 2,356,376
Transportation equipment.......................................... 140,715 132,381
Improvements to leased premises................................... 502,256 457,931
Construction in progress.......................................... 54,878 69,365
------------- ---------------
3,313,785 3,056,135
Less: Accumulated depreciation and amortization.................. 2,117,034 1,919,432
------------- ---------------
1,196,751 1,136,703
Leased property under capital leases, less accumulated
amortization of $33,291,000 ($36,568,000 in 1998)............. 25,882 33,145
------------- ---------------
Net property, plant and equipment................................. $ 1,222,633 1,169,848
============= ===============
</TABLE>
The Company had no non-cash additions to leased property for 1999 or 1998.
F-16
<PAGE>
5. Income Taxes
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Current Deferred Total
------------- -------------- -------------
Amounts in thousands
<S> <C> <C> <C> <C>
1999
Federal..................................... $ 79,270 16,110 95,380
State....................................... 17,191 1,574 18,765
------------- -------------- -------------
$ 96,461 17,684 114,145
============= ============== =============
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
============= ============== =============
</TABLE>
The following reconciles the above provision to the Federal statutory
income tax rate:
<TABLE>
<CAPTION>
1999 1998 1997
------------ -------------- --------------
<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............................... 4.4 3.8 3.1
Tax credits.......................................... (0.6) (0.6) (0.6)
Life insurance....................................... 0.7 (0.2) (2.1)
Other, net........................................... (1.0) (0.5) 0.6
------------ -------------- --------------
38.5% 37.5% 36.0%
============ ============== ==============
</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 $265,000, $551,000 and $1,105,000 in
fiscal 1999, 1998 and 1997, respectively, related to the unrealized
gain on marketable securities.
F-17
<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
30, 1999, June 24, 1998 and June 25, 1997 are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- ------------
Amounts in thousands
<S> <C> <C> <C>
Deferred tax assets:
Reserve for insurance claims and self-insurance.......... $ 62,429 61,160 57,169
Reserve for vacant store leases.......................... 20,511 20,137 14,521
Unearned promotional allowance........................... 3,143 6,844 12,520
Reserve for accrued vacations............................ 14,225 14,172 10,145
State net operating loss carry forwards.................. 12,929 9,249 7,410
Excess of book over tax depreciation..................... 12,196 10,985 11,033
Excess of book over tax rent expense..................... 1,084 1,058 1,482
Excess of book over tax retirement expense............... 17,009 14,757 12,565
Uniform capitalization of inventory...................... 9,684 7,796 6,797
Other, net............................................... 43,213 38,066 31,366
------------ -------------- ------------
Total gross deferred tax assets........................ 196,423 184,224 165,008
Less: Valuation allowance............................. 12,401 9,154 7,314
------------ -------------- ------------
Net deferred tax assets................................ 184,022 175,070 157,694
------------ -------------- ------------
Deferred tax liabilities:
Excess of tax over book depreciation..................... (31,098) (11,958) (16,312)
Undistributed earnings of the Bahamas subsidiary......... (14,347) (12,616) (10,680)
Other comprehensive income............................... (1,921) (1,656) (1,105)
Other, net............................................... (26,397) (20,632) (17,879)
------------ -------------- ------------
Total gross deferred tax liabilities................... (73,763) (46,862) (45,976)
------------ -------------- ------------
Net deferred tax assets................................ $ 110,259 128,208 111,718
============ ============== ============
</TABLE>
Current deferred income taxes of $112,869,000 and $105,582,000 for 1999
and 1998, respectively, are included in prepaid expenses in the
accompanying consolidated balance sheets. Noncurrent deferred income
taxes of $689,000 for fiscal 1999 are included in other liabilities 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-18
<PAGE>
6. Financing
(a) Credit Arrangements: The Company has available a $500.0 million
commercial paper program. As of June 30, 1999, there was $300.0
million outstanding, compared to $420.0 million outstanding on June
24, 1998. The average interest rate on the commercial paper
outstanding on June 30, 1999, was 5.4% as compared to 5.6% on June 24,
1998. The Company also has short-term lines of credit totaling $482.0
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. Short-term borrowings against our bank lines of credit were
$165.0 million as of June 30, 1999 as compared to none on June 24,
1998. The interest rate on the bank lines of credit on June 30, 1999,
was 5.5%. 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 30,
1999, the Company had outstanding four interest rate swap agreements,
having a notional principal amount of $50.0 million each, with an
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 counter
party to these interest rate swap agreements exposes the Company to
credit loss in the event of nonperformance. However, the Company does
not anticipate nonperformance by the counter party.
Since current short-term interest rates at June 30, 1999 are below the
7.19% rate of these contracts, the estimated negative value of these
swaps was approximately $7.9 million.
F-19
<PAGE>
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 per share fair value of the fiscal 1999 and 1997 grants under the
performance based stock option plan were estimated on the date of the
grant using the Black-Scholes option pricing model under the following
assumptions: risk-free interest rate of 5.4 % and 7.0%; dividend yield
of 2.3% and 2.8%; expected lives of 7 years; and volatility of .30 and
.225, respectively. The per share fair value of these options were
$14.51 and $9.84, respectively.
Compensation costs for these stock compensation plans resulted in
expense of $2.5 million in 1999. Compensation costs 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.
(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. There are 2,392,626 shares of the Company's common
stock available for the grant of options under the Plan. Loans to
associates for the purchase of the Company's common stock are reported
in the financial statements as a reduction of Shareholders' Equity,
rather than as a current asset. Loans outstanding were $164,000 and
$3,087,000 at June 30, 1999 and June 24, 1998, 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: 252,097 shares ($41.12) in
1999 (44,547 shares forfeited); 149,743 shares ($37.25) in 1998
(124,195 shares forfeited); and 150,338 shares ($35.21) in 1997
(120,318 shares forfeited). The vesting of these shares is contingent
upon certain specified goals being attained over a three year period.
F-20
<PAGE>
7. Stock Compensation Plans, continued
(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
prior to June 1, 1998 are earned over a two year period and options
granted after June 1, 1998 are earned after three years, if certain
performance goals are attained.
Changes in options under this plan during the years ended June 30,
1999, June 24, 1998 and June 25, 1997, were as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
----------- ----------------
<S> <C> <C> <C>
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
Granted.............................................. 181,277 $ 41.51
Exercised............................................ (50,000) $ 21.06
Forfeited............................................ (25,842) $ 35.65
----------- ----------------
Outstanding - June 30, 1999.......................... 437,435 $ 35.27
=========== ================
Exercisable - June 30, 1999......................... 77,000 $ 22.44
=========== ================
Shares available for additional grant................ 567,565
===========
</TABLE>
The following table sets forth information regarding options
outstanding at June 30, 1999.
<TABLE>
<CAPTION>
Weighted
Weighted Average
Weighted Average Number Exercise Prices
Number of Average Remaining Life Currently For Currently
Options Exercise Price (Years) Exercisable Exercisable
=============== ============= =============== ============== ============
<S> <C> <C> <C> <C> <C>
77,000 $ 22.44 1.5 77,000 $ 22.44
183,000 34.63 3.5 - -
177,435 41.51 5.5 - -
--------------- ------------- --------------- -------------- ------------
437,435 $ 35.27 4.0 77,000 $ 22.44
=============== ============= =============== ============== ============
</TABLE>
F-21
<PAGE>
8. Leases
(a) Leasing Arrangements: There were 1,454 leases in effect on store
locations and other properties at June 30, 1999. Of these 1,454
leases, 30 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.
The rental payments on substantially all store leases are based on a
minimum rental plus a contingent rental which is based on a percentage
of the store's sales in excess of stipulated amounts. Most of the
Company's leases contain renewal options for five-year periods at
fixed rentals.
(b) Leases: Leased property under capital leases by major classes are:
1999 1998
---- ----
Amounts in thousands
Store facilities............................. $ 43,451 53,991
Warehouses and manufacturing facilities...... 15,722 15,722
---------- ----------
59,173 69,713
Less: Accumulated amortization....... 33,291 36,568
---------- ----------
$ 25,882 33,145
========== ==========
F-22
<PAGE>
8. Leases, continued
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 30, 1999.
Capital Operating
------- ---------
Amounts in thousands
Fiscal Year:
2000.................................... $ 7,824 356,919
2001.................................... 7,829 351,833
2002.................................... 7,890 348,373
2003.................................... 7,890 345,303
2004.................................... 7,284 340,070
Later years............................. 34,348 3,329,313
----------- ------------
Total minimum lease payments.......... 73,065 5,071,811
============
Less: Amount representing estimated
taxes, maintenance and insurance
costs included in total minimum
lease payments............... 1,392
-----------
Net minimum lease payments............ 71,673
Less: Amount representing interest... 30,429
-----------
Present value of net minimum lease
payments.................. $ 41,244
===========
Rental payments under operating leases including, where applicable, real
estate taxes and other expenses are as follows:
1999 1998 1997
---- ---- ----
Amounts in thousands
Minimum rentals.................. $ 341,296 307,289 276,259
Contingent rentals............... 1,581 1,869 2,618
--------- --------- ---------
$ 342,877 309,158 278,877
========= ========= =========
F-23
<PAGE>
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,
$67,250,000 and $62,250,000 in 1999, 1998 and 1997, 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 86 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 600 qualified active
associates of the Company and 420 former participants. Total MSP cost
charged to operations was $6,132,000, $5,406,000 and $5,485,000 in
1999, 1998 and 1997, respectively. The projected benefit obligation at
June 30, 1999 was approximately $44,339,000. The effective discount
rate used in determining the net periodic MSP cost was 8.0% for 1999,
1998 and 1997.
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
$204,855,000 and $183,771,000 at June 30, 1999 and June 24, 1998,
respectively.
(c) Supplemental Retirement Plan: The Company has a deferred compensation
Supplemental Retirement Plan in effect for eligible management
associates. At June 30, 1999 and June 24, 1998, the Company's
liability under this program was $14.1 million and $11.8 million,
respectively.
F-24
<PAGE>
9. Commitments and Contingent Liabilities, continued
(d) Litigation: There are pending against the Company various claims and
lawsuits arising in the normal course of business, including suits
charging violations of certain civil rights laws and various
proceedings arising under federal, state or local regulations
protecting the environment. See Note 13 regarding one of these
lawsuits.
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 $40,341,000, $29,440,000 and $29,995,000 were made in 1999,
1998 and 1997, respectively.
F-25
<PAGE>
11. Consolidation and Distribution Facility Closing
In 1998, the Company began its consolidation of the 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 center which is
being converted into a general merchandise and pharmaceutical
distribution center; and the reorganization of the Raleigh and
Charlotte divisions. The Company experienced a nonrecurring
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 30, 1999 and June 24, 1998:
<TABLE>
<CAPTION>
Quarters Ended
Sept. 16 Jan. 6 March 31 June 30
1999 (12 Weeks) (16 Weeks) (12 Weeks) (13 Weeks)
---- ---------- ---------- ---------- ----------
Dollars in thousands except per share data
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 3,190,755 4,264,207 3,203,524 3,478,017
Gross profit on sales................... $ 841,275 1,156,000 872,659 930,979
Net earnings............................ $ 14,550 52,359 58,818 56,608
Basic earnings per share................ $ 0.10 0.35 0.40 .38
Diluted earnings per share.............. $ 0.10 0.35 0.40 .38
Net LIFO charge (credit)................ $ 2,444 2,444 1,833 (4,030)
Net LIFO charge (credit) per diluted
share................................. $ 0.01 0.02 0.01 (0.02)
Dividends per share..................... $ 0.170 0.340 0.255 0.255
Market price range...................... $ 52.19-36.25 46.50-28.63 46.69-36.94 38.50-33.06
</TABLE>
<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................................. $ 0.02 0.02 0.01 (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>
F-26
<PAGE>
12. Quarterly Results of Operations (Unaudited), continued
During 1999 and 1998, 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 1.1% to 0.3% and 1.2% to
(0.7)%, respectively.
<TABLE>
<CAPTION>
Fourth Quarter Results of Operations
June 30, 1999 June 24, 1998
(13 Weeks) (12 Weeks)
------------------ -----------------
Amounts in thousands
<S> <C> <C> <C>
Net sales............................................... $ 3,478,017 3,250,161
Cost of sales........................................... 2,547,038 2,402,838
----------------- -----------------
Gross profit on sales................................... 930,979 847,323
Operating & administrative expenses..................... 868,563 798,444
Consolidation and distribution facility closing......... - 18,080
----------------- -----------------
Operating income........................................ 62,416 30,799
Cash discounts and other income, net.................... 32,481 28,444
Interest expense........................................ (2,851) (4,827)
----------------- -----------------
Earnings before income taxes............................ 92,046 54,416
Income taxes............................................ 35,438 20,406
----------------- -----------------
Net earnings............................................ $ 56,608 34,010
================= =================
</TABLE>
13. Subsequent Event
In July 1999, the Company, without admitting any wrongdoing, reached a
settlement with the named plaintiffs in a discrimination class action
lawsuit filed on behalf of certain present and former associates. The
settlement has been presented to the U. S. District Court in
Jacksonville, Florida for preliminary approval and class notice. The
settlement amount is approximately $33 million, which the Company will
pay from accruals over the next seven years. In the opinion of
management, the settlement, if approved, will not have a material
impact on the Company's financial condition or results of operations.
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors
Winn-Dixie Stores, Inc.:
Under date of August 2, 1999, we reported on the consolidated balance sheets of
Winn-Dixie Stores, Inc. and subsidiaries as of June 30, 1999 and June 24, 1998,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 30, 1999,
as contained in the annual report on Form 10-K for the year 1999. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index on page 16 of the annual report on Form 10-K for the year
1999. This consolidated financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, the consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Jacksonville, Florida
August 2, 1999
S-1
<PAGE>
<TABLE>
<CAPTION>
Schedule II
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended June 30, 1999, June 24, 1998 and June 25, 1997
(Amounts in thousands)
Balance at Additions Deductions Balance at
beginning charged from end
Description of year to income reserves of year
- ------------------------------------------------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended June 30,1999:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 2,623 14,506 13,514 3,615
============ =========== ============ ============
Reserves not deducted from assets:
Reserves for nsurance claims and self-insurance:
- Current $ 71,779 98,857 95,175 75,461
- Noncurrent 93,514 - 1,258 92,256
------------ ----------- ------------ ------------
$ 165,293 98,857 96,433 167,717
============ =========== ============ ============
Year ended June 24,1998:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,699 13,995 13,071 2,623
============ =========== ============ ============
Reserves not deducted from assets:
Reserves for insurance claims and self-insurance:
- Current $ 60,219 87,893 76,333 71,779
- Noncurrent 94,783 - 1,269 93,514
------------ ----------- ------------ ------------
$ 155,002 87,893 77,602 165,293
============ =========== ============ ============
Year ended June 25,1997:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,860 14,318 14,479 1,699
============ =========== ============ ============
Reserves not deducted from assets:
Reserves for insurance claims and self-insurance:
- Current $ 61,760 81,194 82,735 60,219
- Noncurrent 97,209 - 2,426 94,783
============ =========== ============ ============
$ 158,969 81,194 85,161 155,002
============ =========== ============ ============
</TABLE>
S-2
Exhibit 21.1
WINN-DIXIE STORES, INC.
SUBSIDIARIES OF REGISTRANT
The Registrant (Winn-Dixie Stores, Inc.) has no parents.
The following list includes all of the subsidiaries of the Registrant
except fifteen wholly-owned inactive domestic subsidiaries of the Registrant
and/or its subsidiaries.
All of the subsidiaries listed below are included in the Consolidated
Financial Statements. The Consolidated Financial Statements also include the
fifteen presently inactive domestic subsidiaries mentioned above.
Each of the following subsidiaries is owned by the Registrant except
that two subsidiaries, the names of which are indented, are owned by the
subsidiary named immediately above each indentation. All subsidiaries are
wholly-owned except for Bahamas Supermarkets Limited, which is owned
approximately 78% by W-D (Bahamas) Limited.
Subsidiary State of Incorporation
Astor Products, Inc. Florida
Deep South Products, Inc. Florida
Dixie Packers, Inc. Florida
Fairway Food Stores Co., Inc. Florida
Monterey Canning Co. California
Save Rite Foods, Inc. Florida
W-D (Bahamas) Limited Bahama Islands
Bahamas Supermarkets Limited Bahama Islands
The City Meat Markets Limited Bahama Islands
WD Brand Prestige Steaks, Inc. Florida
Winn-Dixie Atlanta, Inc. Florida
Winn-Dixie Charlotte, Inc. Florida
Winn-Dixie Louisiana, Inc. Florida
Winn-Dixie Midwest, Inc. Florida
Winn-Dixie Montgomery, Inc. Kentucky
Winn-Dixie Raleigh, Inc. Florida
Winn-Dixie Texas, Inc. Texas
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Shareholders and the Board of Directors
Winn-Dixie Stores, Inc.:
We consent to the incorporation by reference in the Registration Statement Nos.
33-42278 and 33-50039 on Form S-8 of Winn-Dixie Stores, Inc. of our reports
dated August 2, 1999, relating to the consolidated balance sheets of Winn-Dixie
Stores Inc. and subsidiaries as of June 30, 1999 and June 24, 1998; and the
related consolidated statements of earnings, shareholders' equity, and cash
flows and related consolidated financial statement schedule for each of the
years in the three year period ended June 30, 1999, which reports appear in the
June 30, 1999 annual report on Form 10-K of Winn-Dixie Stores, Inc.
KPMG LLP
Jacksonville, Florida
August 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> All amounts in thousands except per share data.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 24,746
<SECURITIES> 0
<RECEIVABLES> 188,314
<ALLOWANCES> 0
<INVENTORY> 1,425,098
<CURRENT-ASSETS> 1,797,990
<PP&E> 1,222,633
<DEPRECIATION> 292,414
<TOTAL-ASSETS> 3,149,147
<CURRENT-LIABILITIES> 1,547,324
<BONDS> 0
0
0
<COMMON> 148,577
<OTHER-SE> 1,262,502
<TOTAL-LIABILITY-AND-EQUITY> 3,149,147
<SALES> 14,136,503
<TOTAL-REVENUES> 14,136,503
<CGS> 10,335,590
<TOTAL-COSTS> 3,593,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,648
<INCOME-PRETAX> 296,480
<INCOME-TAX> 114,145
<INCOME-CONTINUING> 182,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 182,335
<EPS-BASIC> 1.23
<EPS-DILUTED> 1.23
</TABLE>
