SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 26, 2000
WINN-DIXIE STORES, INC.
(Exact name of registrant as specified in its charter)
Florida 1-3657 59-0514290
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
5050 Edgewood Court
Jacksonville, Florida 32254
(Address, including zip code, of principal executive offices)
(904) 783-5000
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Item 5. Other Events
The following are the consolidated financial statements of Winn-Dixie
Stores, Inc. (the "Company") as of June 28, 2000 and June 30, 1999, and for each
of the three years in the period ended June 28, 2000. These consolidated
financial statements contain the same information as the consolidated financial
statements included in Part II of the Company's Annual Report on Form 10-K filed
on August 10, 2000, with the exception of a new Note 15 which provides condensed
consolidating financial information for the Company and its guarantor
subsidiaries which may, from time to time, fully and unconditionally guarantee
debt securities issued by the Company.
The sole purpose of this Form 8-K, including the new Note 15, is to satisfy
the information requirements of Rule 3-10 of Regulation S-X and Rule 12h-5 of
the Federal securities laws with respect to such subsidiary guarantors.
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.
Allen R. Rowland Richard P. McCook
President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
<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 28, 2000 and June 30, 1999,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 28, 2000.
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 auditing standards generally
accepted in the United States of America. 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 28, 2000 and June 30, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 28, 2000, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Jacksonville, Florida
August 9, 2000
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 28, 2000, June 30, 1999 and June 24, 1998
<TABLE>
<CAPTION>
2000 1999* 1998
--------------- -------------- ---------------
Amounts in thousands except per share data
<S> <C> <C> <C>
Net sales..................................................... $ 13,697,547 14,136,503 13,617,485
Cost of sales, including warehousing and delivery expense..... 10,057,700 10,335,590 9,993,568
--------------- -------------- ---------------
Gross profit on sales...................................... 3,639,847 3,800,913 3,623,917
Operating and administrative expenses......................... 3,609,248 3,593,651 3,374,905
Restructuring and other non-recurring charges................. 396,029 - 18,080
--------------- -------------- ---------------
Operating (loss) income ................................... (365,430) 207,262 230,932
Cash discounts and other income, net.......................... 110,100 118,866 115,395
--------------- -------------- ---------------
(255,330) 326,128 346,327
--------------- -------------- ---------------
Interest:
Interest on capital lease obligations...................... 4,458 5,152 6,528
Other interest............................................. 42,623 24,496 22,007
--------------- -------------- ---------------
Total interest........................................... 47,081 29,648 28,535
--------------- -------------- ---------------
(Loss) earnings before income taxes........................... (302,411) 296,480 317,792
Income taxes.................................................. (73,516) 114,145 119,172
--------------- -------------- ---------------
Net (loss) earnings .......................................... $ (228,895) 182,335 198,620
=============== ============== ===============
Basic (loss) earnings per share............................... $ (1.57) 1.23 1.34
=============== ============== ===============
Diluted (loss) earnings per share............................. $ (1.57) 1.23 1.33
=============== ============== ===============
</TABLE>
* 53 Weeks
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 28, 2000 and June 30, 1999
2000 1999
-------------- ---------------
Amounts in thousands
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents................................................. $ 29,576 24,746
Trade and other receivables, less allowance for doubtful items of
$3,822,000 ($3,615,000 in 1999)........................................ 107,425 188,314
Merchandise inventories at lower of cost or market less LIFO reserve
of $232,368,000 ($217,274,000 in 1999)................................. 1,141,405 1,425,098
Prepaid expenses.......................................................... 58,739 46,963
Deferred income taxes.................................................... 134,777 112,869
-------------- ---------------
Total current assets.................................................... 1,471,922 1,797,990
-------------- ---------------
Cash surrender value of life insurance, net.................................. 14,035 24,072
Net property, plant and equipment............................................ 1,034,493 1,222,633
Intangible assets, net....................................................... 18,795 54,449
Non-current deferred income taxes............................................ 166,449 -
Other assets................................................................. 41,399 50,003
-------------- ---------------
$ 2,747,093 3,149,147
============== ===============
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Accounts payable.......................................................... $ 575,877 662,172
Short-term borrowings..................................................... 235,000 465,000
Reserve for insurance claims and self-insurance........................... 101,874 75,461
Reserve for restructuring expenses........................................ 52,721 -
Accrued wages and salaries................................................ 114,883 108,826
Accrued rent.............................................................. 88,247 65,411
Accrued expenses.......................................................... 164,502 122,641
Current obligations under capital leases.................................. 2,843 2,751
Income taxes payable...................................................... 85,606 10,739
-------------- ---------------
Total current liabilities............................................... 1,421,553 1,513,001
-------------- ---------------
Reserve for insurance claims and self-insurance.............................. 141,251 92,256
Obligations under capital leases ............................................ 32,239 38,493
Defined benefit plan ........................................................ 45,241 41,234
Long-term restructuring expenses ............................................ 143,188 -
Other liabilities............................................................ 95,786 53,084
-------------- ---------------
Shareholders' Equity:
Common stock of $1 par value. Authorized 400,000,000 shares; issued
140,830,197 shares in 2000 and 148,576,865 shares in 1999............... 140,830 148,577
Retained earnings......................................................... 727,005 1,259,597
Accumulated other comprehensive income.................................... - 3,069
Associates' stock loans.................................................. - (164)
-------------- ---------------
Total shareholders' equity.............................................. 867,835 1,411,079
-------------- ---------------
Commitments and contingent liabilities (Notes 6, 9, 11 and 13)
$ 2,747,093 3,149,147
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 28, 2000, June 30, 1999 and June 24, 1998
<TABLE>
<CAPTION>
2000 1999* 1998
------------- ------------- -------------
Amounts in thousands
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net (loss) earnings ......................................... $ (228,895) 182,335 198,620
Adjustments to reconcile net (loss) earnings to net cash
provided by operating activities:
Depreciation and amortization............................ 256,671 292,414 330,408
Deferred income taxes.................................... (189,046) 17,684 (17,040)
Defined benefit plan..................................... 4,007 4,132 3,650
Non-cash restructuring and other non-recurring charges... 375,346 - -
Reserve for insurance claims and self-insurance.......... 75,408 2,424 10,291
Stock compensation plans................................. (1,144) 2,459 (1,398)
Change in cash from:
Receivables............................................ 80,888 (42,148) 29,513
Merchandise inventories................................ 283,693 (20,181) (155,702)
Prepaid expenses....................................... (11,776) 8,596 3,813
Accounts payable....................................... (87,959) (1,191) 56,191
Income taxes........................................... 74,867 (1,380) (20,804)
Other current accrued expenses......................... 111,219 (8,783) 26,952
------------- ------------- -------------
Net cash provided by operating activities............ 743,279 436,361 464,494
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment, net.............. (213,874) (345,723) (369,636)
Decrease in investments and other assets..................... 17,756 10,582 43,785
------------- ------------- -------------
Net cash used in investing activities................ (196,118) (335,141) (325,851)
------------- ------------- -------------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings................. (230,000) 45,000 40,000
Payments on capital lease obligations........................ (2,612) (2,583) (2,653)
Purchase of common stock..................................... (162,272) (1,337) (21,055)
Proceeds of sales under associates' stock purchase plan...... 164 2,923 8,747
Dividends paid............................................... (148,966) (151,231) (150,923)
Other........................................................ 1,355 7,188 (3,309)
------------- ------------- -------------
Net cash used in financing activities................ (542,331) (100,040) (129,193)
------------- ------------- -------------
Increase in cash and cash equivalents........................... 4,830 1,180 9,450
Cash and cash equivalents at the beginning of the year.......... 24,746 23,566 14,116
------------- ------------- -------------
Cash and cash equivalents at end of the year.................... $ 29,576 24,746 23,566
============= ============= =============
Supplemental cash flow information:
Interest paid................................................ $ 23,058 21,958 20,316
Interest and dividends received.............................. $ 808 1,072 1,449
Income taxes paid............................................ $ 40,663 94,858 152,652
============= ============= =============
</TABLE>
*53 Weeks
See accompanying notes to consolidated financial statements.
<PAGE>
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended June 28, 2000, June 30, 1999 and June 24, 1998
<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> <C>
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
-------------- --------------- ----------------- --------------- ---------------
Comprehensive (loss) income:
Net (loss)............................ - (228,895) - - (228,895)
Realized gain on securities,
net of tax........................ - - (3,069) - (3,069)
-------------- --------------- ----------------- --------------- ---------------
Total comprehensive income............ - (228,895) (3,069) - (231,964)
Cash dividends, $1.02 per share.......... - (148,966) - - (148,966)
Common stock issued and stock
compensation expense.................. 131 (131) - - -
Common stock acquired.................... (7,878) (154,394) - - (162,272)
Stock options exercised.................. - (187) - - (187)
Associates' stock loans, payments........ - - - 164 164
Other.................................... - (19) - - (19)
-------------- --------------- ----------------- --------------- ---------------
Balances at June 28, 2000 $ 140,830 727,005 - - $ 867,835
============== =============== ================= =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands except per share data, unless otherwise noted
1 Summary of Significant Accounting Policies and Other Information
(a) Fiscal Year: The fiscal year ends on the last Wednesday in June. Fiscal
year 2000 and 1998 are comprised of 52 weeks. Fiscal year 1999 is comprised
of 53 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. All
subsidiaries are wholly owned and fully consolidated with the exception of
Bahamas Supermarkets Limited, which is owned approximately 78% by W-D
Bahamas Limited.
(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 84% of inventories consisting primarily of
merchandise in stores and distribution warehouses. Manufacturing, pharmacy
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 other assets at June 30, 1999 was
$32,466 which consisted primarily of marketable equity securities
categorized as available-for-sale. No amounts were on hand at June 28,
2000. 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) 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
continued Dollar amounts in thousands except per share
data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information, continued
(g) 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 for automobile and general liability and $1,000 for
workers' compensation. Self-insurance reserves are established for property
losses with a maximum annual aggregate of $5,000 and a $100 per occurrence
deductible after the aggregate is obtained. The Company is insured for
losses in excess of these limits.
(h) 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.
(i) Property, Plant and Equipment: Property, plant and equipment are stated at
historical cost. Depreciation is provided over the estimated useful lives
by the straight-line method. Store equipment depreciation is based on lives
varying from five to eight years. Transportation equipment is based on
lives varying from three to ten years. Warehouse and manufacturing
equipment is based on lives varying from five to ten years. Amortization of
improvements to leased premises is provided principally by the
straight-line method over the periods of the leases or the estimated useful
lives of the improvements, whichever is less.
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 undiscounted cash flows expected to be
generated by the asset. An impairment loss would be recorded for the excess
of net book value over the fair value of the asset impaired. The fair value
is estimated based on expected discounted future cash flows.
(j) Store Opening and Closing Costs: The costs of opening new stores and
closing old stores are charged to earnings in the year incurred. An expense
is recorded for the present value of expected future rent payments in the
year that a store closes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
continued Dollar amounts in thousands except per share
data, unless otherwise noted
1. Summary of Significant Accounting Policies and Other Information, continued
(k) Earnings Per Share: Earnings per common share are based on the weighted
average number of common shares outstanding. Diluted earnings per share
amounts are based on the weighted average number of common stock
outstanding plus the incremental shares that would have been outstanding
upon the assumed exercise of all diluted stock options, subject to
antidilution limitations.
The following weighted average number of shares of common stock were used
in the calculations for earnings per share.
2000 1999 1998
-------- ------- -----
Basic 145,445,416 148,309,653 148,504,349
Diluted 145,445,416 148,680,198 148,866,167
(l) Comprehensive Income: Comprehensive income is reflected on the Consolidated
Statements of Shareholders' Equity. Accumulated other comprehensive income
is comprised of unrealized gains/losses of available for sale securities.
(m) 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 8 - Stock Compensation Plans).
(n) 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 has no
derivatives to be measured.
(o) Business Reporting Segments: 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) Reclassification: Certain prior year amounts have been reclassified to
conform to the current year's presentation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,continued
Dollar amounts in thousands except per share data, unless otherwise noted
2. Trade and Other Receivables
Accounts receivable at year-end were as follows:
2000 1999
----------- ----------
Trade and other receivables.......... $ 92,821 96,984
Construction advances................ 18,426 94,945
----------- ----------
111,247 191,929
Less: Allowance for doubtful items..... 3,822 3,615
----------- ----------
$ 107,425 188,314
=========== ==========
3. Merchandise Inventories
At June 28, 2000, inventories valued by the LIFO method would have been
$232,368 higher ($217,274 higher at June 30, 1999) if they were stated
at the lower of FIFO cost or market. If the FIFO method inventory
valuation had been used, reported net (loss) would have been $9,283, or
$0.06 per diluted share lower in 2000, net earnings would have been
$2,691, or $0.02 per diluted share higher in 1999 and $7,411, or $0.05
per diluted share lower in 1998.
4. Intangible Assets, net
Intangible assets at year-end were as follows:
2000 1999
----------- -------------
Goodwill........................... $ 25,591 70,075
Other intangibles.................. 192 -
----------- -------------
25,783 70,075
Less: Accumulated amortization..... 6,988 15,626
----------- -------------
$ 18,795 54,449
=========== =============
Intangible assets are amortized over the estimated useful life not to
exceed 20 years for goodwill and 15 years for other intangibles. The
Company took a non-cash impairment charge of $32,115 for fiscal 2000 as
part of the Company's restructuring (see Note 13 - Restructuring and
Other Non-recurring Charges).
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
5. Net Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
2000 1999
------------- ---------------
<S> <C> <C> <C>
Land.............................................................. $ 17,180 11,343
Buildings......................................................... 67,246 29,134
Furniture, fixtures, machinery and equipment...................... 2,333,403 2,575,459
Transportation equipment.......................................... 135,733 140,715
Improvements to leased premises................................... 469,552 502,256
Construction in progress.......................................... 21,188 54,878
------------- ---------------
3,044,302 3,313,785
Less: Accumulated depreciation and amortization.................. 2,031,101 2,117,034
------------- ---------------
1,013,201 1,196,751
Leased property under capital leases, less accumulated
amortization of $32,951 ($33,291 in 1999)..................... 21,292 25,882
------------- ---------------
Net property, plant and equipment................................. $ 1,034,493 1,222,633
============= ===============
</TABLE>
The Company had no non-cash additions to leased property for 2000 or
1999. The Company had a non-cash impairment charge of $147,184 for
fiscal 2000 as part of the Company's restructuring (see Note 13 -
Restructuring and other non-recurring charges).
6. Income Taxes
Income tax expense (benefit) consists of:
Current Deferred Total
----------- ---------- -----------
2000
Federal.......... $ 111,358 (182,074) (70,716)
State............ 4,172 (6,972) (2,800)
---------- ---------- -----------
$ 115,530 (189,046) (73,516)
========== ========== ===========
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
========== =========== ===========
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
6. Income Taxes, continued
The following reconciles the expense (benefit) on the previous page to
the Federal statutory income tax rate:
<TABLE>
<CAPTION>
2000 1999 1998
------------ -------------- --------------
<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............................... (0.6) 4.4 3.8
Tax credits.......................................... (0.9) (0.6) (0.6)
Company owned life insurance (COLI).................. 9.6 0.7 (0.2)
Goodwill impairment.................................. 2.9 - -
Other, net........................................... (0.3) (1.0) (0.5)
------------ -------------- --------------
(24.3)% 38.5% 37.5%
============ ============== ==============
</TABLE>
The effective tax rate for fiscal 2000 reflects the effects of certain
restructuring expenses and COLI adjustments.
In addition to the provision for income taxes presented above, the
Company recorded deferred tax expense of $265 and $551 in fiscal 1999
and 1998, respectively, related to the unrealized gain on marketable
securities.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
6. 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
28, 2000, June 30, 1999 and June 24, 1998 are presented below:
<TABLE>
<CAPTION>
2000 1999 1998
------------- ------------ ------------
Deferred tax assets:
<S> <C> <C> <C> <C>
Reserve for insurance claims and self-insurance.......... $ 79,039 62,429 61,160
Reserve for vacant store leases.......................... 38,308 20,511 20,137
Unearned promotional allowance........................... 5,310 3,143 6,844
Reserve for accrued vacations............................ 13,463 14,225 14,172
State net operating loss carry forwards.................. 17,052 12,929 9,249
Excess of book over tax depreciation..................... 12,032 12,196 10,985
Excess of book over tax rent expense..................... 956 1,084 1,058
Excess of book over tax retirement expense............... 19,452 17,009 14,757
Uniform capitalization of inventory...................... 9,718 9,684 7,796
Restructuring costs...................................... 130,587 - -
Other, net............................................... 52,730 43,213 38,066
------------- ------------ -------------
Total gross deferred tax assets........................ 378,647 196,423 184,224
Less: Valuation allowance............................. 16,489 12,401 9,154
------------- ------------ -------------
Net deferred tax assets................................ 362,158 184,022 175,070
------------- ------------ -------------
Deferred tax liabilities:
Excess of tax over book depreciation..................... (46,308) (31,098) (11,958)
Undistributed earnings of the
Bahamas subsidiary..................... (4,761) (14,347) (12,616)
Other comprehensive income............................... - (1,921) (1,656)
Other, net............................................... (9,863) (26,397) (20,632)
------------- ------------ -------------
Total gross deferred tax liabilities................... (60,932) (73,763) (46,862)
------------- ------------ -------------
Net deferred tax assets................................ $ 301,226 110,259 128,208
============= ============ =============
</TABLE>
Noncurrent deferred income taxes of $689 for fiscal 1999 are included
in other liabilities in the accompanying consolidated balance sheet.
The Company believes the results of historical taxable income and the
results of future operations will generate sufficient taxable income to
realize the deferred tax assets.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
6. Income Taxes, continued
The Company reserved $30.4 million for taxes and $19.7 million for
interest ($42.5 million after tax, or $0.29 per diluted share) after
receiving an unfavorable opinion in October 1999 and a computational
decision on January 11, 2000 from the U.S. Tax Court. The Tax Court
upheld the Internal Revenue Service's position that interest related to
loans on broad-based, company owned life insurance policies in 1993 was
not deductible for income tax purposes. Congress passed legislation
phasing out such deductions over a three-year period in the fall of
1996. The Company held such policies and deducted interest on
outstanding loans from March 1993 through December 1997. Management
disagrees with the Tax Court's decision and has appealed. While the
ultimate outcome of this litigation cannot be predicted with certainty,
in the opinion of management, the ultimate resolution of this matter
will not have any additional material adverse impact on the Company's
financial condition or results of operations.
7. Financing
On January 4, 2000, the Company increased its authorized commercial
paper program from $500.0 million to $700.0 million. In support of this
program, or as an independent source of funds, the Company entered into
a $700.0 million revolving credit facility, which is syndicated to a
group of 17 banks, with The Chase Manhattan Bank as administrative
agent. The facility was entered into on November 17, 1999 and is
renewable on an annual basis. Outstanding amounts under the credit
facility bear interest at certain floating rates as specified by the
credit facility. The credit facility contains certain financial and
non-financial covenants relating to the Company's operations, including
maintaining certain financial ratios. The agreement was amended
effective June 27, 2000 to adjust certain financial covenants in
consideration of the Company's restructuring.
In addition to the $700.0 million syndicated credit facility, the
Company also has $35.0 million available in short-term lines of credit.
As of June 28, 2000, the Company had $235.0 million in commercial paper
and no amounts from short-term lines of credit outstanding, as compared
to $300.0 million in commercial paper and $165.0 from short-term lines
of credit outstanding on June 30, 1999.
8. Stock Compensation Plans:
The Company has several stock purchase and incentive plans to reward
employees and key executives of the Company. Under SFAS 123, other than
normal 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
8. Stock Compensation Plans, continued
Compensation costs resulted in income of $1.1 million and $1.4 million
in fiscal 2000 and 1998, respectively. The primary reason for the
income was due to the reversal of compensation expense previously
recognized for restricted shares that did not vest. Compensation costs
resulted in expense of $2.5 million in 1999.
The per share weighted fair value of the stock options granted in
fiscal 2000 and 1999 were $6.62 and $14.51, respectively. These amounts
were estimated on the date of the grant using the Black-Scholes option
pricing model under the following assumptions: risk-free interest rate
of 6.7% and 5.4%; dividend yield of 5.4% and 2.3%; expected lives of 7
years; and volatility of .38 and .30, respectively.
(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 lesser of 85% of the fair
market value at the date of grant or 85% of the fair market value
at the time of exercise. 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. No loans were outstanding at June 28, 2000 and $164 was
outstanding at June 30, 1999.
(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. The following table shows the number of
shares issued, forfeited and outstanding.
<TABLE>
<CAPTION>
Weighted
Average Number of shares
Issue Price Total FY 2000 FY1999 FY 1998
----------------- ------------ ------------ ------------ ------------
1998 Plan
<S> <C> <C> <C> <C> <C> <C>
Issued $ 37.25 149,743 - - 149,743
Forfeited 149,743 25,548 5,995 118,200
------------
Outstanding -
------------
1999 Plan
Issued $ 41.12 252,097 - 252,097 -
Forfeited 63,139 18,592 44,547 -
------------
Outstanding 188,958
------------
2000 Plan
Issued $ 25.75 239,030 239,030 - -
Forfeited 93,124 93,124 - -
------------
Outstanding 145,906
------------
Shares outstanding, June 28, 2000 334,864
============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
8. Stock Compensation Plans, continued
(b) Stock Compensation Plans, continued
The vesting of shares issued prior to January 2000 is contingent
upon certain specified goals being attained over a three year
period. The shares issued after such date vest one-third each
year beginning with the third year from the date of grant, based
on continued employment.
(c) Stock Option Plans: The Company has made shares of the Company's
stock available for grant under stock plans described below.
1. Key Employee: 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.
2. Retention and Attraction Program: As part of the Company's
retention and attraction program, 1,200,000 shares of the
Company's common stock were made available for grant to
various associates beginning in January 28, 2000 at an
exercise price equal to the Company's stock price at date of
grant. Options granted as part of the program are earned
over a five-year period, in 20% increments, if the associate
remains employed in their position at the end of each year.
3. CEO Stock Options: Pursuant to an employment agreement,
500,000 shares of the Company's common stock were made
available for grant at an exercise price of $27.00 per share
to the President and Chief Executive Officer of the Company.
Currently, 250,000 of the options are currently exercisable
and the remaining 250,000 are exercisable on November 23,
2000 or upon an earlier date if there is a change in control
or a termination of employment for other than cause, death
or disability or for good reason.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
8. Stock Compensation Plans, continued
(c) Stock Option Plans, continued
4. Options Outstanding:
Changes in options during the years ended June 28, 2000,
June 30, 1999 and June 24, 1998, were as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
------------------ ----------------------
<S> <C> <C> <C>
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
Granted....................................... 1,828,306 $ 23.34
Exercised..................................... (50,000) $ 22.44
Forfeited..................................... (886,234) $ 27.43
-------------- ------------------
Outstanding - June 28, 2000................... 1,329,507 $ 24.57
============== ==================
Exercisable - June 28, 2000.................. 277,000 $ 26.56
============== ==================
Shares available for additional grant......... 1,325,493
==============
</TABLE>
The following table sets forth information regarding options
outstanding at June 28, 2000.
<TABLE>
<CAPTION>
Weighted Weighted
Weighted Average Average
Average Remaining Number Exercise Prices
Number of Exercise Life Currently for Currently
Range Options Price (Years) Exercisable Exercisable
-------------- ---------- ------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$ 15.00 to 20.00 638,836 $ 19.44 9.5 - -
$ 22.44 to 27.00 527,000 26.77 8.6 277,000 26.56
$ 34.63 to 41.51 163,671 37.52 4.6 - -
------------ ------------- ----------- ---------- --------
1,329,507 $ 24.57 8.2 277,000 26.56
============ ============= =========== ========== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
9. Leases
(a) Leasing Arrangements: There were 1,403 leases in effect on store
locations and other properties at June 28, 2000. Of these 1,403
leases, 26 store leases and 3 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-two 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:
2000 1999
---- ----
Store facilities............................ $ 38,521 43,451
Warehouses and manufacturing facilities..... 15,722 15,722
-------- --------
54,243 59,173
Less: Accumulated amortization.............. 32,951 33,291
-------- --------
$ 21,292 25,882
======== ========
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
9. 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 28, 2000.
Capital Operating
Fiscal Year: -------- ----------
2001..................... $ 7,177 333,973
2002..................... 7,238 331,137
2003..................... 7,238 327,616
2004..................... 6,633 322,796
2005..................... 6,076 314,406
Later years.............. 25,295 3,110,401
-------- -----------
Total minimum lease payments........ 59,657 4,740,329
===========
Less: Amount representing estimated
taxes, maintenance and insurance
costs included in total minimum
lease payments................. 1,127
--------
Net minimum lease payments........... 58,530
Less: Amount representing interest.. 23,448
--------
Present value of net minimum lease payments..$ 35,082
========
Rental payments and contingent rentals under operating leases are as follows:
2000 1999 1998
---- ---- ----
Minimum rentals............... $ 323,117 341,296 307,289
Contingent rentals............ 1,380 1,581 1,869
---------- ----------- -----------
$ 324,497 342,877 309,158
========== =========== ===========
10. Shareholders' Equity: Comprehensive (loss) income for the year was
approximately $(232.0) million, $182.6 million and $199.4 million for
2000, 1999 and 1998, respectively. These amounts differ from net (loss)
earnings due to changes in the net unrealized holding gains and losses
generated from available-for-sale securities.
On April 19, 2000, the Board of Directors authorized the repurchase, in
either open market or private transactions, of up to ten million shares
of the outstanding common stock in addition to the five-million share
repurchase program announced on October 6, 1999. From this date through
June 28, 2000, the Company has repurchased 7,858,000 shares having an
aggregate value of $162.1 million or $20.62 per share.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
11. 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 $17,625, $67,250 and $67,250 in 2000, 1999 and 1998,
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 consists of 76 associates.
This group of retirees bears the entire cost 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 517 qualified active
associates of the Company and 477 former participants. Total MSP
cost charged to operations was $6,104, $6,132 and $5,406 in 2000,
1999 and 1998, respectively. The projected benefit obligation at
June 28, 2000 was approximately $47,626. The effective discount
rate used in determining the net periodic MSP cost was 8.0% for
2000, 1999 and 1998.
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 $210,655 and $204,855 at June 28, 2000 and June 30,
1999, respectively.
(c) Supplemental Retirement Plan: The Company has a deferred
compensation Supplemental Retirement Plan in effect for eligible
management associates. At June 28, 2000 and June 30, 1999, the
Company's liability under this program was $17.0 million and
$14.1 million, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
11. 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.
Among the suits charging violations of certain civil rights laws,
there are actions that 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.
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
female and African-American present and former associates. The
settlement has been approved by the U. S. District Court in
Jacksonville, Florida. Implementation of the settlement has been
stayed pending an appeal of the Court's denial of a motion to
intervene by a third party. The settlement amount is
approximately $33.0 million, which the Company will pay from
accruals over the next seven years.
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.
See Note 6 - Income Taxes with respect to certain litigation
pending before the U.S. Tax Court.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
12. 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 (the "Insurance Company"), a related party through
November 1, 1999, providing administrative services and expenses for
medical and accident claims. Total payments aggregating through
November 1, 1999 were $17,632. Payments for fiscal 1999 and 1998 were
$40,341 and $29,440, respectively.
13. Restructuring and Other Non-recurring Charges
On April 20, 2000, the Board of Directors approved and the Company
announced a major restructuring to improve the support of the retail
stores and the Company's overall efficiency. The restructuring plan
includes the actions listed below that have been or will be
implemented. The plan includes certain exit costs and employee
termination benefits that will be incurred within one year from the
commitment date.
Action Status
-------------------------------------------------------- --------------
Executive management reduction and realignment.......... Completed
Division management reduction and realignment........... Completed
Consolidation of division offices eliminating three
division offices - Tampa, Atlanta, and Midwest......... Completed
Closing of one warehouse facility- Tampa................ Completed
Closing of two manufacturing facilities
- Detergent and Bag Plants............................. Completed
Centralization of procurement, marketing and
merchandising.......................................... Completed
Eliminating approximately 11,000 positions.............. Completed
Closing of 116 unprofitable stores...................... Completed,
except for 5
stores being
further
evaluated
Retrofitting approximately 650 stores to improve
efficiency and customer service........................ In progress
As a result of the restructuring, the Company will record a pre-tax
charge of approximately $540 million ($345 million after tax or $2.37
per diluted share). The Company has recorded approximately $396 million
of the pre-tax charge ($256 million after tax or $1.76 per diluted
share) in the fourth quarter of fiscal 2000 and will record the balance
in fiscal 2001. A summary of the restructuring charges and the
remaining accrual at year-end follows:
<TABLE>
<CAPTION>
Employee Lease
Termination Termination Other Location Asset
Costs Costs Closing Costs Impairment Total
-------------- ------------ ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions $ 16,713 189,295 10,722 179,299 $ 396,029
Utilization 7,546 2,628 10,647 179,299 200,120
-------------- ------------ ---------------- ----------- -------------
Balance at 6/28/00 $ 9,167 186,667 75 - $ 195,909
============== ============ ================ =========== =============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
13 Restructuring and Other Non-recurring Charges - continued
In addition to the restructuring charge, an additional $8.9 million
($5.5 million after tax) was charged to cost of sales due to the write
off of inventories in stores and manufacturing plants that closed as
part of the restructuring plan.
The following table shows the number of people that were eligible for
severance under the restructuring plan.
Manufacturing
and Support
Retail Facilities Total
-------- --------------- --------
Eligible for severance............. 3,351 655 4,006
Number paid........................ 636 240 876
Became ineligible.................. 1,275 63 1,338
------- ---------------- --------
Number eligible at June 28, 2000... 1,440 352 1,792
As part of the Company's restructuring, all stores were evaluated based
on current and projected profitability. As part of this evaluation, the
Company performed an impairment review of its long-lived assets. During
this review, the Company identified impairment losses for assets to be
disposed of and assets to be held and used.
The impairment charge for assets to be disposed of related primarily to
the carrying value of equipment and leasehold improvements for the
stores, division offices, warehouse and manufacturing plants that were
closed as part of the restructuring discussed above. The impairment
charge was determined using the fair value less the cost to sell. The
amount of the impairment charge for assets to be disposed of included
in the restructuring charge table above is $77.9 million.
The impairment charge for assets to be held and used related primarily
to the carrying value of equipment, leasehold improvements and goodwill
for certain stores that will continue to be operated by the Company.
Projected future undiscounted cash flows were used to determine whether
the assets were impaired. For the assets that were determined to be
impaired, the impairment charge was calculated to be the difference
between the carrying value of the asset and the greater of discounted
cash flows and estimated fair value of the asset. Goodwill impairment
was measured as the difference between the carrying value of the
goodwill and the discounted cash flows of the operations that gave rise
to the goodwill. As a result, an impairment charge of $101.4 million
related to assets to be held and used was recognized, reducing the
carrying value of fixed assets and goodwill by $69.3 million and $32.1
million, respectively.
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 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
14. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of
operations for the years ended June 28, 2000 and June 30, 1999:
<TABLE>
<CAPTION>
Quarters Ended
Sept. 22 Jan. 12 April 5 June 28
2000 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks)
---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 3,162,171 4,276,024 3,199,356 3,059,996
Gross profit on sales................... $ 846,647 1,142,309 845,948 804,943
Net earnings (loss)..................... $ 22,069 (18,793) 10,273 (242,444)
Basic earnings (loss) per share......... $ 0.15 (0.13) 0.07 (1.70)
Diluted earnings (loss) per share....... $ 0.15 (0.13) 0.07 (1.70)
Net LIFO charge......................... $ 1,833 2,444 1,833 3,173
Net LIFO charge 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...................... $ 41.94-31.31 33.00-22.31 24.00-14.38 21.31-14.25
Quarters Ended
Sept. 16 Jan. 6 March 31 June 30
1999 (12 Weeks) (16 Weeks) (12 Weeks) (13 Weeks)
---- ---------- ---------- ---------- ----------
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 0.38
Diluted earnings per share.............. $ 0.10 0.35 0.40 0.38
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>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
14. Quarterly Results of Operations (Unaudited), continued
During 2000 and 1999, 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 1.0% to 1.1% and 1.1% to
0.3%, respectively.
<TABLE>
<CAPTION>
Fourth Quarter Results of Operations
June 28, 2000 June 30, 1999
(12 Weeks) (13 Weeks)
------------------ -----------------
<S> <C> <C> <C>
Net sales............................................... $ 3,059,996 3,478,017
Cost of sales........................................... 2,255,053 2,547,038
----------------- -----------------
Gross profit on sales................................... 804,943 930,979
Operating and administrative expenses................... 796,247 868,563
Restructuring and other non-recurring charges........... 396,029 -
----------------- -----------------
Operating (loss) income................................. (387,333) 62,416
Cash discounts and other income, net.................... 20,245 32,481
Interest expense........................................ (6,784) (2,851)
----------------- -----------------
(Loss) earnings before income taxes..................... (373,872) 92,046
Income taxes............................................ (131,428) 35,438
----------------- -----------------
Net (loss) earnings..................................... $ (242,444) 56,608
================= =================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries: The Company anticipates filing a registration
statement with the Securities and Exchange Commission to authorize the
issuance of up to $1 billion in debt securities. The debt securities may
be jointly and severally, fully and unconditionally guaranteed by
substantially all of the Company's operating subsidiaries. The guarantor
subsidiaries are 100% owned subsidiaries of the Company. Condensed
consolidating financial information for the Company and its guarantor
subsidiaries is as follows:
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(Amounts in thousands)
12 Weeks ended September 20, 2000
(unaudited)
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 1,308,057 1,632,805 - 2,940,862
Cost of sales 1,003,501 1,190,462 - 2,193,963
--------------- --------------- ---------------- -----------------
Gross profit 304,556 442,343 - 746,899
Operating & administrative expenses 297,842 417,280 - 715,122
Restructuring and other non-recurring charges 8,412 541 - 8,953
--------------- --------------- ---------------- -----------------
Operating (loss) income (1,698) 24,522 - 22,824
Equity in earnings of consolidated subsidiaries 15,081 - (15,081) -
Interest expense 7,518 - - 7,518
--------------- --------------- ---------------- -----------------
Earnings before income taxes 5,865 24,522 (15,081) 15,306
Income taxes (3,548) 9,441 - 5,893
--------------- --------------- ---------------- -----------------
Net earnings $ 9,413 15,081 (15,081) 9,413
=============== =============== ================ =================
52 Weeks ended June 28, 2000
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- -----------------
Net sales $ 6,012,112 7,685,435 - 13,697,547
Cost of sales 4,426,602 5,543,895 - 9,970,497
--------------- --------------- ---------------- -----------------
Gross profit 1,585,510 2,141,540 - 3,727,050
Operating & administrative expenses 1,525,112 2,061,239 - 3,586,351
Restructuring and other non-recurring charges 112,869 283,160 - 396,029
--------------- --------------- ---------------- -----------------
Operating loss (52,471) (202,859) - (255,330)
Equity in earnings of consolidated subsidiaries (155,776) - 155,776 -
Interest expense 44,132 2,949 - 47,081
--------------- --------------- ---------------- -----------------
Loss before income taxes (252,379) (205,808) 155,776 (302,411)
Income taxes (23,484) (50,032) - (73,516)
--------------- --------------- ---------------- -----------------
Net loss $ (228,895) (155,776) 155,776 (228,895)
=============== =============== ================ =================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries, continued:
53 Weeks ended June 30, 1999
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 6,103,021 8,033,482 - 14,136,503
Cost of sales 4,490,544 5,742,611 - 10,233,155
--------------- --------------- ---------------- -----------------
Gross profit 1,612,477 2,290,871 - 3,903,348
Operating & administrative expenses 1,461,761 2,115,459 - 3,577,220
Restructuring and other non-recurring charges - - - -
--------------- --------------- ---------------- -----------------
Operating income 150,716 175,412 - 326,128
Equity in earnings of consolidated subsidiaries 105,687 - (105,687) -
Interest expense 26,086 3,562 - 29,648
--------------- --------------- ---------------- -----------------
Earnings before income taxes 230,317 171,850 (105,687) 296,480
Income taxes 47,982 66,163 - 114,145
--------------- --------------- ---------------- -----------------
Net earnings $ 182,335 105,687 (105,687) 182,335
=============== =============== ================ =================
52 Weeks ended June 24, 1998
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------------- --------------- ---------------- -----------------
Net sales $ 5,813,528 7,803,957 - 13,617,485
Cost of sales 4,298,072 5,589,952 - 9,888,024
--------------- --------------- ---------------- -----------------
Gross profit 1,515,456 2,214,005 - 3,729,461
Operating & administrative expenses 1,368,285 1,996,769 - 3,365,054
Restructuring and other non-recurring charges - 18,080 - 18,080
--------------- --------------- ---------------- -----------------
Operating income 147,171 199,156 - 346,327
Equity in earnings of consolidated subsidiaries 121,380 - (121,380) -
Interest expense 23,587 4,948 - 28,535
--------------- --------------- ---------------- -----------------
Earnings before income taxes 244,964 194,208 (121,380) 317,792
Income taxes 46,344 72,828 - 119,172
--------------- --------------- ---------------- -----------------
Net earnings $ 198,620 121,380 (121,380) 198,620
=============== =============== ================ =================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries, continued:
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Amounts in thousands)
12 Weeks ended September 20, 2000
(unaudited)
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Merchandise inventories $ 274,677 888,555 - 1,163,232
Other current assets 254,181 44,367 - 298,548
-------------- -------------- ---------------- -----------------
Total current assets 528,858 932,922 - 1,461,780
Net property, plant and equipment 455,454 695,280 - 1,150,734
Other noncurrent assets 217,730 14,764 - 232,494
Investments in and advances to/from subsidiaries 795,616 - (795,616) -
-------------- -------------- ---------------- -----------------
Total assets $ 1,997,658 1,642,966 (795,616) 2,845,008
============== ============== ================ =================
Account payable $ 247,843 286,458 - 534,301
Short-term borrowings 465,000 - - 465,000
Other current liabilities 264,475 294,473 - 558,948
-------------- -------------- ---------------- -----------------
Total current liabilities 977,318 580,931 - 1,558,249
Other noncurrent liabilities 192,746 266,419 - 459,165
Common stock of $1 par value 139,553 6,285 (6,285) 139,553
Retained earnings 688,041 789,331 (789,331) 688,041
-------------- -------------- ---------------- -----------------
Total liabilities and stockholders' equity $ 1,997,658 1,642,966 (795,616) 2,845,008
============== ============== ================ =================
52 Weeks ended June 28, 2000
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- -------------- ---------------- -----------------
Merchandise inventories $ 354,424 786,981 - 1,141,405
Other current assets 202,605 127,912 - 330,517
-------------- -------------- ---------------- -----------------
Total current assets 557,029 914,893 - 1,471,922
Net property, plant and equipment 440,874 593,619 - 1,034,493
Other noncurrent assets 224,926 15,752 - 240,678
Investments in and advances to/from subsidiaries 724,970 - (724,970) -
-------------- -------------- ---------------- -----------------
Total assets $ 1,947,799 1,524,264 (724,970) 2,747,093
============== ============== ================ =================
Account payable $ 352,732 223,145 - 575,877
Short-term borrowings 235,000 - - 235,000
Other current liabilities 304,608 306,068 - 610,676
-------------- -------------- ---------------- -----------------
Total current liabilities 892,340 529,213 - 1,421,553
Other noncurrent liabilities 187,624 270,081 - 457,705
Common stock of $1 par value 140,830 6,285 (6,285) 140,830
Retained earnings 727,005 718,685 (718,685) 727,005
-------------- -------------- ---------------- -----------------
Total liabilities and stockholders' equity $ 1,947,799 1,524,264 (724,970) 2,747,093
============== ============== ================ =================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries, continued:
53 Weeks ended June 30, 1999
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
-------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Merchandise inventories $ 417,343 1,007,755 - 1,425,098
Other current assets 192,738 180,154 - 372,892
-------------- -------------- ---------------- -----------------
Total current assets 610,081 1,187,909 - 1,797,990
Net property, plant and equipment 519,140 703,493 - 1,222,633
Other noncurrent assets 68,858 59,666 - 128,524
Investments in and advances to/from subsidiaries 1,509,745 - (1,509,745) -
-------------- -------------- ---------------- -----------------
Total assets $ 2,707,824 1,951,068 (1,509,745) 3,149,147
============== ============== ================ =================
Account payable $ 421,943 240,229 - 662,172
Short-term borrowings 465,000 - - 465,000
Other current liabilities 259,648 126,181 - 385,829
-------------- -------------- ---------------- -----------------
Total current liabilities 1,146,591 366,410 - 1,513,001
Other noncurrent liabilities 153,223 71,844 - 225,067
Common stock of $1 par value 148,577 6,565 (6,565) 148,577
Retained earnings 1,259,433 1,506,249 (1,503,180) 1,262,502
-------------- -------------- ---------------- -----------------
Total liabilities and stockholders' equity $ 2,707,824 1,951,068 (1,509,745) 3,149,147
============== ============== ================ =================
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Amounts in thousands)
12 Weeks ended September 20, 2000
(unaudited)
Guarantor
Parent Subsidiaries Eliminations Consolidated
------------- -------------- --------------- ----------------
Net cash (used in) provided by operating activities $ (86,257) 61,669 - (24,588)
------------- -------------- --------------- ----------------
Purchases of property, plant & equipment, net (32,668) (130,236) (162,904)
(Increase) decrease in other assets (52,575) 727 55,565 3,717
------------- -------------- --------------- ----------------
Net cash (used in) provided by investing activities (85,243) (129,509) 55,565 (159,187)
------------- -------------- --------------- ----------------
Increase in short-term borrowings 230,000 - - 230,000
Purchases of common stock (16,962) - - (16,962)
Dividends paid (24,525) - - (24,525)
Other (11,728) 56,801 (55,565) (10,492)
------------- -------------- --------------- ----------------
Net cash provided by (used in) financing activities 176,785 56,801 (55,565) 178,021
------------- -------------- --------------- ----------------
Increase (decrease) in cash and cash equivalents 5,285 (11,039) - (5,754)
Cash and cash equivalents at the beginning of the year 15,157 14,419 - 29,576
------------- -------------- --------------- ----------------
Cash and cash equivalents at end of the quarter $ 20,442 3,380 - 23,822
============= ============== =============== ================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries, continued:
52 Weeks ended June 28, 2000
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
--------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net cash (used in) provided by operating activities $ (7,582) 750,861 - 743,279
--------- -------------- --------------- ----------------
Purchases of property, plant & equipment, net (91,741) (122,133) (213,874)
Decrease (increase) in other assets 639,380 7,375 (628,999) 17,756
--------- -------------- --------------- ----------------
Net cash provided by (used in) investing activities 547,639 (114,758) (628,999) (196,118)
--------- -------------- --------------- ----------------
Decrease in short-term borrowings (230,000) - - (230,000)
Purchases of common stock (162,272) - - (162,272)
Dividends paid (148,966) - - (148,966)
Other (1,510) (628,582) 628,999 (1,093)
--------- -------------- --------------- ----------------
Net cash (used in) provided by financing activities (542,748) (628,582) 628,999 (542,331)
--------- -------------- --------------- ----------------
(Decrease) increase in cash and cash equivalents (2,691) 7,521 - 4,830
Cash and cash equivalents at the beginning of the year 17,848 6,898 - 24,746
--------- -------------- --------------- ----------------
Cash and cash equivalents at end of the year $ 15,157 14,419 - 29,576
========= ============== =============== ================
53 Weeks ended June 30, 1999
Guarantor
Parent Subsidiaries Eliminations Consolidated
------------ -------------- --------------- ----------------
Net cash provided by operating activities $ 121,999 314,362 - 436,361
------------ -------------- --------------- ----------------
Purchases of property, plant & equipment, net (152,146) (193,577) - (345,723)
Decrease (increase) in other assets 131,599 14,294 (135,311) 10,582
------------ -------------- --------------- ----------------
Net cash used in investing activities (20,547) (179,283) (135,311) (335,141)
------------ -------------- --------------- ----------------
Increase in short-term borrowings 45,000 - - 45,000
Purchases of common stock (1,337) - - (1,337)
Dividends paid (151,231) - - (151,231)
Other 7,078 (134,861) 135,311 7,528
------------ -------------- --------------- ----------------
Net cash used in (provided by) financing activities (100,490) (134,861) 135,311 (100,040)
------------ -------------- --------------- ----------------
Increase in cash and cash equivalents 962 218 - 1,180
Cash and cash equivalents at the beginning of the year 16,886 6,680 - 23,566
------------ -------------- --------------- ----------------
Cash and cash equivalents at end of the year $ 17,848 6,898 - 24,746
============ ============== =============== ================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Dollar amounts in thousands except per share data, unless otherwise noted
15. Guarantor Subsidiaries, continued:
52 Weeks ended June 24, 1998
<TABLE>
Guarantor
Parent Subsidiaries Eliminations Consolidated
------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 178,794 285,700 - 464,494
------------- -------------- --------------- ----------------
Purchases of property, plant & equipment, net (116,437) (253,199) - (369,636)
Decrease (increase) in other assets 69,210 46,912 (72,337) 43,785
------------- -------------- --------------- ----------------
Net cash used in investing activities (47,227) (206,287) (72,337) (325,851)
------------- -------------- --------------- ----------------
Increase in short-term borrowings 40,000 - - 40,000
Purchases of common stock (21,055) - - (21,055)
Dividends paid (150,923) - - (150,923)
Other 1,222 (70,774) 72,337 2,785
------------- -------------- --------------- ----------------
Net cash used in (provided by) financing activities (130,756) (70,774) 72,337 (129,193)
------------- -------------- --------------- ----------------
Increase in cash and cash equivalents 811 8,639 - 9,450
Cash and cash equivalents at the beginning of the year 16,075 (1,959) - 14,116
------------- -------------- --------------- ----------------
Cash and cash equivalents at end of the year $ 16,886 6,680 - 23,566
------------- -------------- --------------- ----------------
</TABLE>
The Company allocates all cost incurred by its headquarters which is not
specifically identifiable, to each subsidiary based on its relative size to the
company as a whole.
Taxes payable and deferred taxes are obligation of the Company. Expenses related
to both current and deferred income taxes are allocated to each subsidiary based
on the consolidated company's effective tax rates.
Expenses incurred by the guarantor subsidiaries if they operated on a
stand-alone basis may or may not have been higher were it not for the benefit
derived from related party transactions and the headquarter functions described
above.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired: Not applicable
(b) Pro forma financial information: Not applicable
(c) Exhibits : Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 26, 2000 Winn-Dixie Stores, Inc.
By: /s/ ALLEN R. ROWLAND
----------------
Allen R. Rowland
President and
Chief Executive Officer
