WINN-DIXIE STORES, INC.
5050 EDGEWOOD COURT o JACKSONVILLE, FLORIDA 32254-3699
Notice of Annual Meeting of Shareholders
To be held October 4, 2000
To all Shareholders of Winn-Dixie Stores, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Winn-Dixie Stores, Inc. (the "Company") will be held at the headquarters office
of the Company, 5050 Edgewood Court, Jacksonville, Florida at 9:00 a.m., local
time, on Wednesday, October 4, 2000, for the following purposes:
1. To elect two Class II Directors for terms expiring in 2003;
2. To vote on an amendment to increase the number of shares available for sale
under the Revised Winn-Dixie Stock Purchase Plan for Employees and to
reapprove and adopt such Plan, as amended;
3. To vote on an amendment to increase the number of shares available for sale
pursuant to options granted under the Key Employee Stock Option Plan and to
reapprove and adopt such Plan, as amended;
4. To ratify the appointment by the Board of Directors of the Company of KPMG
LLP as auditors of the Company for the fiscal year commencing June 29,
2000; and
5. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
NOTICE IS FURTHER GIVEN that the Board of Directors has fixed July 31,
2000, as the record date, and only holders of the Company's Common Stock of
record at the close of business on that date will be entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
Judith W. Dixon
Secretary
Jacksonville, Florida
August 25, 2000
EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN
THE EVENT A SHAREHOLDER DECIDES TO ATTEND THE MEETING, THE SHAREHOLDER MAY, IF
SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
WINN-DIXIE STORES, INC.
5050 Edgewood Court o Jacksonville, Florida 32254-3699
PROXY STATEMENT AND CONSOLIDATED FINANCIAL STATEMENTS
for
Annual Meeting of Shareholders
To be held October 4, 2000
-----------------------
GENERAL INFORMATION
The Board of Directors of Winn-Dixie Stores, Inc. (the "Company")
solicits your proxy for use at the 2000 Annual Meeting of Shareholders to be
held on Wednesday, October 4, 2000, at the Company's headquarters office at the
address above, commencing at 9:00 a.m., local time, and any adjournments
thereof. A form of proxy is enclosed. Any shareholder who executes and delivers
the proxy may revoke it at any time prior to its use.
The cost of soliciting the proxies will be borne by the Company.
Directors, officers and employees of the Company may solicit proxies by
telephone, telegram or personal interview. In addition, the Company will pay,
upon the request of brokers, dealers, banks and voting trustees, and their
nominees, who are holders of record of shares of the Company's stock on the
record date referred to below, the reasonable expenses incurred by them for
mailing copies of the Annual Report, this Notice of Meeting and Proxy Statement
and the enclosed form of proxy to the beneficial owners of such shares of stock.
The Annual Report of the Company to its shareholders for the 1999-2000
fiscal year is being mailed with this Proxy Statement to shareholders entitled
to vote at the Annual Meeting. The approximate date on which this Proxy
Statement and form of proxy are first being sent or given to shareholders is
August 25, 2000.
Securities and Exchange Commission ("SEC") rules require that an annual
report precede or be included with the Company's proxy materials. Shareholders
with multiple accounts may be receiving more than one annual report, which is
costly to the Company and may be inconvenient to these shareholders.
Shareholders who have not yet authorized the Company to discontinue mailing
extra reports may do so by marking the appropriate box on the proxy card for
selected accounts. Such an election will take effect at the end of the Company's
2000-2001 fiscal year. At least one account must continue to receive an annual
report. Eliminating these duplicate mailings will not affect receipt of future
proxy statements and proxy cards nor the mailing of dividend checks, dividend
reinvestment statements, or special notices. To resume the mailing of an annual
report to an account, please make a written request to: First Chicago Trust
Company of New York, P. O. Box 2500, Jersey City, New Jersey 07303-2500.
VOTING PROCEDURES
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the 2003
Annual Meeting of Shareholders, shareholders voting by proxy may vote in favor
of all nominees, withhold their votes as to all nominees or withhold their votes
as to specific nominees. With respect to the other proposals to be voted upon,
shareholders may vote in favor of a proposal, against a proposal or may abstain
from voting. Shareholders should specify their choices on the enclosed form of
proxy. If no specific instructions are given with respect to the matters to be
acted upon, the shares represented by a signed proxy will be voted FOR the
election of all nominees, FOR the proposal to amend the Revised Winn-Dixie Stock
Purchase Plan for Employees, FOR the proposal to amend the Key Employee Stock
Option Plan and FOR the proposal to ratify the appointment of KPMG LLP
1
<PAGE>
as independent auditors. Directors will be elected by a plurality of the votes
cast by the shareholders voting in person or by proxy at the Annual Meeting.
Approval of each other proposal will require the affirmative vote of the holders
of a majority of the shares of Common Stock voting on the proposal in person or
by proxy at the Annual Meeting. Abstentions are not included in determining
whether the requisite number of affirmative votes are received for the
proposals. Broker non-votes will not be included in vote totals and will have no
effect on the outcome of any vote. A broker non-vote generally occurs when a
broker who holds shares in street-name for a customer does not have authority to
vote on certain non-routine matters because its customer has not provided any
voting instructions on the matter.
If a shareholder is a participant in the Dividend Reinvestment Plan of
Winn-Dixie Stores, Inc., the proxy card serves as voting instruction for the
number of full shares in the dividend reinvestment plan account, as well as
other shares registered in the participant's name. If a shareholder is a
participant in the Winn-Dixie Stores, Inc. Profit Sharing/401(k) Plan (the
"Profit Sharing Plan"), the proxy card also will serve as voting instruction for
the trustee of the Profit Sharing Plan where all accounts are registered in the
same name. If voting instructions are not received for shares in the Profit
Sharing Plan, those shares will be voted in the same proportion as the shares in
such plan for which voting instructions are received.
Only owners of record of shares of Common Stock of the Company at the
close of business on July 31, 2000, are entitled to vote at the meeting or
adjournments or postponements thereof. Each owner of record on the record date
is entitled to one vote for each share of Common Stock of the Company so held.
On July 31, 2000, there were 139,614,151 shares of Common Stock of the Company
issued and outstanding.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board is divided into three classes of Directors. Each class of
Directors is elected to serve for a term of three years, so that the terms of
office of approximately one-third of the Directors will expire each year. At the
Annual Meeting of Shareholders, two Directors are to be elected in Class II to
hold office until the 2003 Annual Meeting of Shareholders or until their
successors are elected and qualified. The persons designated as nominees for
election as Directors in Class II are Allen R. Rowland and Ronald Townsend. Mr.
Rowland and Mr. Townsend are currently Directors of the Company. The Board of
Directors elected Mr. Rowland as a Director simultaneous with his election on
November 23, 1999 as the Company's President and Chief Executive Officer. On
August 9, 2000, the Board of Directors elected Mr. Townsend for the Class II
Director position vacated by Charles H. McKellar. Charles H. McKellar, who had
been Executive Vice President of the Company and who was a Class II Director
whose term was to expire at this year's annual meeting, retired from the Company
and as a Director in January, 2000. Robert D. Davis (who had been a Director
since 1972 and who was a Class II Director whose term expires at this year's
annual meeting) is retiring as a Director and will not be a candidate for
re-election. A successor to fill the vacancy that will be created by Mr. Davis'
retirement has not been designated. It is expected that sometime after the 2000
Annual Meeting the Board will either elect a successor to fill the vacancy or
amend the By-Laws of the Company to reduce the number of directors.
Should any one or more of these nominees become unable to serve for any
reason, or for good cause will not serve, which is not anticipated, the Board of
Directors may, unless the Board by resolution provides for a lesser number of
Directors, designate substitute nominees, in which event the persons named in
the enclosed proxy will vote proxies that otherwise would be voted for the named
nominees for the election of such substitute nominee or nominees.
Certain information with respect to each of the nominees and Directors
relating to principal occupations and directorships, and the approximate number
of shares of the Company's Common Stock beneficially owned by them, directly or
indirectly, has been furnished to the Company by such nominees and Directors.
The Board of Directors recommends a vote FOR both nominees.
2
<PAGE>
BOARD OF DIRECTORS OF WINN-DIXIE STORES, INC.
<TABLE>
<CAPTION>
Has Been a
Director
Name, Principal Occupation for Age as of Continuously
The Past Five Years, Directorships June 28, 2000 Since
------------ ----------------------------------- ------------- -----
CLASS II DIRECTOR NOMINEES
FOR TERMS EXPIRING IN 2003
<S> <C> <C>
Allen R. Rowland - November 1999 to present, President and Chief
-----------------
Executive Officer of the Company; 1996 - 1997, President and Chief
Operating Officer of Smith's Food and Drug Centers, Inc.;
1989 to 1996, Senior Vice President/Regional Manager of Albertson's, Inc.......56 1999
Ronald Townsend - 1996 to present, Communications Consultant;
----------------
1989-1996, President of Gannett Television Group, Gannett Co., Inc.;
also a director of Alltel Corporation and Bank of America August
Corporation....................................................................58 2000
INCUMBENT CLASS III DIRECTORS
WHOSE TERMS EXPIRE IN 2002
Armando M. Codina - For more than the last five years, Chairman of
------------------
the Board and Chief Executive Officer of Codina Group, Inc.; also a
Director of Quaker Oats Company, BellSouth Corporation, AMR, Inc. and
FPL Group, 53 1987
Inc..........................................................
Radford D. Lovett - For more than the last five years, Chairman of
------------------
the Board of Commodores Point Terminal Corporation; also a Director
of First Union Corporation, Florida Rock Industries, Inc. and Patriot
Transportation Holding, Inc........................................... 66 1983
Julia B. North - June 1999 to present, telecommunications consultant;
--------------
October 1997 to June 1999, President and CEO of VSI Enterprises, Inc.;
April 1996 to October 1997, President of Consumer Services, a business
unit of BellSouth Telecommunications, Inc.; for more than five years
prior thereto, Vice President of BellSouth Telecommunications, Inc.;
also a Director of VSI Enterprises, Inc. and Wisconsin Energy, Inc. .......52 1994
3
<PAGE>
Has Been a
Director
Name, Principal Occupation for Age as of Continuously
The Past Five Years, Directorships June 28, 2000 Since
------------ ----------------------------------- ------------- -----
INCUMBENT CLASS I DIRECTORS
WHOSE TERMS EXPIRE IN 2001
A. Dano Davis - For more than the last five years, Chairman of the
Board of the Company; 1989 to November 1999 Principal Executive
Officer of the Company; with the Company since 1968; also a Director
of First Union Corporation......................................... 55 1981
T. Wayne Davis - For more than the last five years, a private
----------------
investor; with the Company 1971-1987; Chairman of the Board of
Transit Group, Inc.; also a Director of Enstar Group, Inc. and Modis
Professional Services, Inc......................................... 53 1981
Carleton T. Rider - August 1993 to date, Senior Administrator, Mayo
-----------------
Foundation; 1985 to July 1993, Administrator, Mayo Clinic
Jacksonville; also a Director of St. Luke's Hospital, Jacksonville,
Florida............................................................ 55 1992
Charles P. Stephens - For more than the last five years, Vice
---------------------
President, Director and a principal stockholder of Norman W. Paschall
Co., Inc. (brokers, importers, exporters and processors of textile
fibers and by-products)............................................ 62 1982
</TABLE>
A. Dano Davis, T. Wayne Davis, Robert D. Davis (who served as a Class II
Director during the last fiscal year, but who is retiring as a Director) and
Charles P. Stephens' spouse are first cousins.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the
Company's Common Stock by each person who, as of June 28, 2000, is known to the
Company to be the beneficial owner of 5% or more of the Common Stock.
Name and Amount and
Address Nature of Percent
Of Beneficial Beneficial Of
Owner Ownership Class
----------------------- ------------- ---------
Davis Family (1) 58,893,864 41.82
c/o D.D.I., Inc.
4310 Pablo Oaks Court
Jacksonville, FL 32224
(1) Certain relatives of the four brothers who founded the Company, trusts,
estates, corporations and other entities involving them and their associates
(collectively, the "Davis Family") own beneficially for the Davis Family,
directly or indirectly, the shares listed in this table. These shares
include those listed for A. Dano Davis, Robert D. Davis, T. Wayne Davis and
Charles P. Stephens in the following table setting forth the beneficial
ownership by directors, nominees and executive officers.
4
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock by each of the directors and nominees, each of the
executive officers named in the Summary Compensation Table, and all of the
Company's directors and executive officers as a group as of June 28, 2000.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership (1)
-------------------------------------------------
Direct or Indirect
With Sole Indirect with
Voting and Shared Voting
Investment And Investment Percent
Name of Beneficial Owner Power Power Total Of Class
------------------------------------ --- -------------------- ---- ----------------------- -- ------------- -- ----------
<S> <C> <C> <C> <C>
Armando M. Codina.............. 24,230 --- 24,230 *
A. Dano Davis.................. 1,012,765 5,594,189 6,606,954 4.69
Robert D. Davis................ 107,347 8,004,359 8,111,706 5.76
T. Wayne Davis................. 372,897 2,049,627 2,422,524 1.72
Daniel G. Lafever.............. 98,061 --- 98,061 *
Radford D. Lovett.............. 21,498 --- 21,498 *
Raymond C. Lunn, Jr. .......... 86,153 --- 86,153 *
Richard P. McCook.............. 182,152 --- 182,152 .13
Charles H. McKellar............ 111,999 --- 111,999 *
Julia B. North................. 7,915 --- 7,915 *
Carleton T. Rider.............. 3,495 --- 3,495 *
Allen R. Rowland............... 550,000 --- 550,000 .39
Charles P. Stephens............ 22,358 2,644,899 2,667,257 1.89
Ronald Townsend................ --- --- --- ---
Charles E. Winge............... 42,209 --- 42,209 *
E. Ellis Zahra, Jr. ........... 119,137 --- 119,137 *
Directors and Executive Officers
as a Group (26 persons)........
3,089,926 18,293,074 21,383,000 15.18
</TABLE>
____________________
* Less than .1% of issued and outstanding shares of Common Stock of the Company.
(1) Includes shares held by the wives and children of certain of the persons
named, as to which such persons disclaim beneficial ownership. The numbers of
such shares so disclaimed are as follows: Robert D. Davis, 333,631; T. Wayne
Davis, 352,545; Daniel G. Lafever, 40; Radford D. Lovett, 148; Richard P.
McCook, 14,792; Charles H. McKellar, 20,197; Carleton T. Rider, 900; Charles P.
Stephens, 2,644,899; and Charles E. Winge, 1,046. The holdings set forth above
exclude 36,998,728 shares of Common Stock of the Company, included in the Davis
Family holdings shown on page 4 hereof, held by various entities as to which one
or more of A. Dano Davis, Robert D. Davis, Robert D. Davis' wife, T. Wayne
Davis, Charles P. Stephens and Charles P. Stephens' wife have direct or indirect
voting and/or investment powers, but no pecuniary interests, and as to which
they disclaim beneficial ownership.
The holdings set forth above include restricted shares awarded as Long-Term
Incentive Awards pursuant to the Company's Officer Compensation Program. Certain
shares are subject to forfeiture if certain performance goals are not met within
the three fiscal-year period expiring June 27, 2001, as follows: Mr. Lafever,
1,060 shares; Mr. Lunn, 964 shares; Mr. McCook, 1,328 shares; Mr. McKellar, 863
shares; Mr. Winge, 1,205 shares; and Mr. Zahra, 1,274 shares. Certain other
shares are subject to forfeiture if certain performance goals are not met within
the three fiscal-year period expiring June 26, 2002, as follows: Mr. Lafever,
1,262 shares; Mr. Lunn, 1,262 shares; Mr. McCook, 2,401 shares; Mr. Zahra, 1,914
shares; and Mr. Winge, 700 shares. The holdings for the 18 officers within the
Directors and Executive Officers group total 20,954 restricted shares.
The holdings set forth above also include restricted shares awarded as part of
the Company's retention and attraction program as follows: Mr. Lafever, 6,900
shares; Mr. Lunn, 6,900 shares; Mr. McCook, 13,125 shares; and Mr. Zahra, 10,464
shares. One-third of the shares vest each year beginning with the third year
from the date of grant, as long as the officer remains employed in his position.
The holdings for the 18 officers within the Directors and Executive Officers
group total 67,918 restricted shares.
5
<PAGE>
The holdings set forth above include equivalent shares credited to the Stock
Equivalent Accounts of Directors under the Directors' Deferred Fee Plan (see
"Directors' Fees"): Mr. Codina, 16,270 equivalent shares; Mr. R. D. Davis, 6,815
equivalent shares; Mr. T. W. Davis, 3,530 equivalent shares; Mr. Lovett, 14,686
equivalent shares; Mr. Rider, 2,595 equivalent shares; and Ms. North, 7,515
equivalent shares. These holdings are payable only in cash upon retirement.
The holdings set forth above also include the equivalent of: 794 shares credited
to Mr. Lafever's account; 1,400 shares credited to Mr. McCook's account; 10,147
shares credited to Mr. McKellar's account; and 156 shares credited to Mr.
Zahra's account, and allocated by each of them to the Company stock fund within
the Profit Sharing Plan, and a total of 18,044 shares for all executive officers
as a group in such fund.
These holdings also include shares under options granted on June 19, 1996, which
are not presently exercisable, of: Mr. Lafever, 10,000 shares; Mr. McCook,
12,000 shares; and Mr. Zahra, 12,000 shares. These holdings further include
shares under additional options granted on June 15, 1998, which are not
presently exercisable, of Mr. Lafever, 5,932 shares; Mr. Lunn, 5,393 shares; Mr.
McCook, 7,432 shares; and Mr. Zahra, 7,128 shares. These holdings further
include shares under options granted on June 15, 1999, which are not presently
exercisable, of Mr. Lafever, 6,202 shares, Mr. Lunn, 6,202 shares, Mr. McCook,
11,796 shares, and Mr. Zahra, 9,403 shares. The holdings further include 500,000
shares under options granted on November 23, 1999 to Mr. Rowland, 250,000 of
which are presently exercisable. These holdings further include shares under
additional options granted on January 28, 2000, which are not presently
exercisable of: Mr. Lafever, 48,506 shares; Mr. Lunn, 48,506 shares; Mr. McCook,
92,267 shares; and Mr. Zahra, 73,550 shares. All of these share options are more
fully described in the table on options on page 9.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC and the New York Stock Exchange. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it and written representations from certain
reporting persons that no Forms 5 were required for them, the Company believes
that during the Company's most recently completed fiscal year ended on June 28,
2000, all filing requirements applicable to its officers, directors, and greater
than ten percent beneficial owners were met, except that due to inadvertent
oversights, (i) J. W. Critchlow, former Vice-President of the Company, filed a
Form 5 that was approximately three days late, (ii) a limited partnership and
its general partner, (of which DDI, Inc., a Florida corporation controlled by
the Davis Family, is a limited partner and member, respectively) each filed a
Form 3 that was 25 days late, and (iii) Robert D. Davis reported 6,849 shares
late on his November, 1999 Form 4, such shares relating to a trust created by
his stepson of which Mr. Davis' wife is trustee.
MEETINGS OF THE BOARD AND COMMITTEES
During the most recently completed fiscal year, the Board of Directors
held four regular meetings and one special meeting and took action by unanimous
written consent in lieu of a meeting six times. The Board of Directors currently
has Audit, Corporate Governance and Compensation Committees. The Board of
Directors had a separate Nominating Committee from the beginning of the fiscal
year until April 19, 2000 when the Corporate Governance Committee was formed to,
among other things, perform the functions of the Nominating Committee. The Audit
Committee held two meetings and the Compensation Committee held three meetings,
during the 1999-2000 fiscal year. The Nominating Committee and Corporate
Governance Committee did not meet. All current Directors attended at least 75%
of the meetings of the Board and of the committees on which they served.
The Audit Committee is composed of Radford D. Lovett, Chairman, and Armando
M. Codina, Carleton T. Rider, Charles P. Stephens, and Julia B. North. The Audit
Committee, whose members are not officers, employees, or retired employees of
the Company, reviews the scope and results of the audit, approves types of
non-audit services provided to the Company and recommends selection of the
Company's independent auditors. It also reviews the scope of internal audits,
systems of internal controls and accounting policies and procedures. In April,
2000 the Audit Committee Charter was adopted by the Board of Directors. A copy
of the Charter is attached hereto as Exhibit A.
6
<PAGE>
The Nominating Committee was composed of T. Wayne Davis, Chairman, and A.
Dano Davis, Robert D. Davis, Radford D. Lovett and Charles P. Stephens. On April
19, 2000, the Board of Directors dissolved the Nominating Committee and
established the Corporate Governance Committee. The Corporate Governance
Committee is composed of Julia B. North, Chair, and Armando M. Codina, T. Wayne
Davis and Carleton T. Rider. The Corporate Governance Committee reviews the
selection criteria for directors and the selection of nominees to serve on the
Board of Directors, evaluates the performance of the Chief Executive Officer,
and develops, reviews, evaluates and makes recommendations to the Board of
Directors with respect to corporate governance issues.
The Compensation Committee, composed of Armando M. Codina, Chairman, and
Radford D. Lovett, Carleton T. Rider and Julia B. North, approves the Company's
compensation strategy to ensure that management employees are awarded
appropriately for their contributions to Company growth and profitability and
that the compensation strategy supports organization objectives and shareholder
interests. The Committee also establishes and reviews the salary, annual
incentive, long-term incentive, and benefit plans for officers and other
management employees. The Compensation Committee, whose members are not
officers, employees or retired employees of the Company, established and
reviewed whether performance goals were met under the Company's Officer
Compensation Programs for stock and cash compensation to be awarded for fiscal
year 1999-2000. The activities of the Compensation Committee are described
further in the Report on Executive Compensation beginning on page 12.
DIRECTORS' FEES
During the 1999-2000 fiscal year Directors were paid a retainer fee of
$12,000 per annum plus $3,000 for attendance at each regular meeting of the
Board of Directors and at each Committee meeting. Directors also were paid
$1,000 for each action by written consent in lieu of a meeting. Travel expenses
of Directors incurred in traveling to Committee and Board of Directors' meetings
also are reimbursed by the Company. Members of the Board of Directors who also
are employees are not paid Director's fees or fees for attending Committee
meetings.
A Director may elect to defer payment of all or any part of the above fees
until termination as a Director under a Deferred Fee Plan for Directors
effective June 30, 1988, with fees credited to an Income Account at a prime rate
of interest or to a Stock Equivalent Account based on the closing market price
of the Company's Common Stock on the date fees are earned. The deferred fees are
payable only in cash in a single payment or annual installments upon retirement.
Directors Armando M. Codina, T. Wayne Davis, Radford D. Lovett, Julia B. North
and Carleton T. Rider elected to participate in the Deferred Fee Plan during all
or part of the 1999-2000 fiscal year.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation of
the Chief Executive Officer and the four other most highly compensated executive
officers who served in such capacities as of June 28, 2000, which was the end of
the last completed fiscal year, as well as information concerning the
compensation of two other executive officers who retired during the last
completed fiscal year.
7
<PAGE>
<TABLE>
<CAPTION>
Long-term
Annual Compensation
CompensaAwards(1)
Fiscal Year Restricted Long-Term All Other
Ended Last Stock Incentive Compensa-
Name and Wednesday Salary (2) Award(3) Plan tion (4)
Principal Position in June ($) Bonus ($) ($) Options(#) Payouts ($) ($)
----- ----------- --------- ----------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
A. Dano Davis 2000 510,000 - - - - 35,737
Chairman of the Board 1999 500,000 - - - - 39,573
and former Principal 1998 397,952 202,062 - - - 44,860
Executive Officer
Allen R. Rowland 2000 421,795 210,000 - 500,000 - -
President and Chief
Executive Officer
(elected November 23,
1999)
Richard P. McCook 2000 350,000 115,000 55,125 11,796 - 21,996
Senior Vice President 1999 245,000 44,500 53,411 7,432 35,478 17,975
and Chief Financial 1998 178,037 59,236 51,605 - 40,395 15,939
Officer
E. Ellis Zahra, Jr. 2000 310,000 101,000 52,875 9,403 - 20,249
Senior Vice President 1999 235,000 43,500 51,667 7,128 34,320 18,517
and General Counsel 1998 172,224 44,803 49,920 - 39,076 17,930
Daniel G. Lafever 2000 238,750 38,050 44,000 6,202 - 21,319
Senior Vice President 1999 220,000 45,155 25,803 5,932 17,739 18,811
and Director of 1998 142,313 115,043 25,803 - 20,197 26,353
Operations
Raymond C. Lunn, Jr. 2000 230,000 28,545 40,000 6,202 - 26,396
Vice President and 1999 200,000 68,431 18,500 5,393 - 63,209
Miami Division 1998 92,500 128,476 - - - 40,439
President
Charles H. McKellar 2000 440,000 - 107,500 - - 29,832
Executive Vice 1999 430,000 - 144,968 14,493 98,183 33,024
President (Retired, 1998 362,420 129,376 140,066 - 111,788 39,222
January 2000)
Charles E. Winge 2000 306,000 - 75,000 - - 23,875
Senior Vice President 1999 300,000 17,567 64,480 10,111 42,831 27,309
(Retired, June 2000) 1998 214,934 160,319 62,300 - 48,766 21,309
</TABLE>
---------------
(1) Long-term compensation amounts are shown for years in which paid, although
earned in the prior year.
(2) Includes compensation amounts earned during the fiscal year but deferred
under the Company's 401(k) plan and amounts contributed under the Company's
Senior Corporate Officers' Management Security Plan (Mr. Davis, $7,467; Mr.
Rowland, $0; Mr. McCook, $6,642; Mr. Zahra, $11,618; Mr. Lafever, $9,940;
Mr. Lunn, $5,376; Mr. McKellar, $9,906; and Mr. Winge, $8,494.)
(3) Dividends are paid on restricted shares at the ordinary rate. Value is
determined based upon the closing market price of the Company's Common
Stock on the date of grant. Certain of these restricted shares vest, if at
all, over a period of three fiscal years from grant if certain performance
goals are attained, while certain others vest over a five-year period with
one-third of the shares vesting on each of the third, fourth and fifth
anniversary of the grant date. The aggregate of the three-year vesting
restricted shares held and their value at June 28, 2000, were: A. Dano
Davis, no shares; Allen R. Rowland, no shares; Mr. McCook, 3,729 shares,
$53,604; Mr. Zahra, 3,188 shares, $45,828; Mr. Lafever, 2,322 shares,
$33,379; Mr. Lunn, 2,226 shares, $31,999; Mr. McKellar, 863 shares,
$12,406; and Mr. Winge, 1,905 shares, $27,384. The aggregate of the
five-year vesting restricted shares held and their value at June 28, 2000,
were: Messrs. Davis, Rowland, McKellar and Winge, no shares; Mr. McCook,
13,125 shares, $188,672; Mr. Zahra, 10,464 shares, $150,420; Mr. Lafever,
6,900 shares, $99,188; and Mr. Lunn, 6,900 shares, $99,188. The values
above do not reflect the risk of forfeiture.
(4) Includes (a) Company contributions to the Company's Profit Sharing Plan of
$6,744, (b) Company matching payments under the Company's 401(k) Plan of
$2,400 for each of the named officers and (c) merchandising contest awards
of $3,746.74 for Mr. Lafever and $8,634.18 for Mr. Lunn. Also includes (a)
Company contributions to the Company's Supplemental Retirement Plan ("SRP")
for the 1999-2000 fiscal year of $16,419 for Mr. Davis, $0 for Mr. Rowland,
$4,199 for Mr. McCook, $3,827 for Mr. Zahra, $3,724 for Mr. Lafever, $3,706
for Mr. Lunn, $12,454 for Mr. McKellar, and $9,330 for Mr. Winge and (b)
Company matching 401(k) payments under the Company's SRP for the 1999-2000
fiscal year of $10,174 for Mr. Davis, $0 for Mr. Rowland, $8,652 for Mr.
McCook, $7,278 for Mr. Zahra, $4,703 for Mr.Lafever, $4,912 for Mr. Lunn,
$8,233 for Mr. McKellar, and $5,400 for Mr. Winge.
8
<PAGE>
Option Grants During the Fiscal Year Ended June 28, 2000
The following table sets forth all options to acquire shares of the
Company's Common Stock granted to the named executive officers relating to
fiscal years ended June 28, 2000, and later.
<TABLE>
<CAPTION>
Individual
Grants Potential realizable
value at assumed annual
rates of stock price
appreciation for
option term (4)
Percent of total
options granted Exercise or
Options to associates Base price Expiration
Name Granted (#) in fiscal year ($/Sh) Date 5% ($) 10% ($)
---- ----------- -------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. Dano Davis --- --- --- --- --- ---
Allen R. Rowland 500,000(1) 27.35% 27.00 11/23/09 8,743,749 23,074,985
Richard P. McCook 11,796(2) .64% 36.44 01/15/06 167,401 398,867
92,267(3) 5.0% 20.00 01/28/10 1,195,316 3,154,470
E. Ellis Zahra, Jr. 9,403(2) .51% 36.44 01/15/06 133,441 317,951
73,550(3) 4.02% 20.00 01/28/10 952,745 2,514,319
Daniel G. Lafever 6,202(2) .34% 36.44 01/15/06 88,015 209,713
48,506(3) 2.65% 20.00 01/28/10 628,332 1,658,186
Raymond C. Lunn, Jr. 6,202(2) .34% 36.44 01/15/06 88,015 209,713
48,506(3) 2.65% 20.00 01/28/10 628,332 1,658,186
Charles H. McKellar --- --- --- --- --- ---
Charles E. Winge --- --- --- --- --- ---
</TABLE>
(1) The exercise price of these options was the market value of the
Company's Common Stock on the date of grant. Fifty percent of the
options are currently exercisable and fifty percent are exercisable at
any time for a 9 year period after November 23, 2000.
(2) The exercise price of these options was the market value of the
Company's Common Stock on the date of grant. The grant was at the end
of the prior fiscal year, but related to the year ended June 28, 2000,
and thereafter. Options are exercisable on and after such date the
Company has earned an average return on equity of 17% or more for three
consecutive fiscal years, if the option was outstanding throughout the
three consecutive fiscal years. The officer must remain employed during
the option period, but the option may be exercised to the extent vested
within three months after cessation of employment for any reason other
than death, for which the period to exercise is one year. These options
will become exercisable on June 26, 2002, if earned.
(3) The exercise price of these options was the market value of the
Company's Common Stock on the date of grant. The grants were made at
various times during the 1999-2000 fiscal year and are exercisable in
20% increments each year over the next five years, if the officer
maintains his or her officer position.
(4) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using 5 percent and 10 percent appreciation rates set by the
Securities and Exchange Commission, compounded annually. These amounts,
therefore, are not intended to forecast possible future appreciation,
if any, of the Company's stock price. Additionally, these values do not
take into consideration the provisions of the options providing for
nontransferability, vesting requirements or termination of the options
following termination of employment.
9
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 28, 2000, and the number and value
of unexercised options held by such executive officers at fiscal year end.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Value Options at FY-End (#) Options at FY-End ($)(1)
-------------------------------- --------------------------------
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------- -------------- -------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
A. Dano Davis --- --- --- --- --- ---
Allen R. Rowland --- --- 250,000 250,000 --- ---
Richard P. McCook --- --- 123,495 --- ---
E. Ellis Zahra, Jr. --- --- --- 102,081 --- ---
Daniel G. Lafever --- --- --- 70,640 --- ---
Raymond C. Lunn, Jr. --- --- --- 60,101 --- ---
Charles H. McKellar --- --- --- --- --- ---
Charles E. Winge --- --- --- --- --- ---
-------------
</TABLE>
(1) The closing price of the Company's Common Stock of $14.375 as reported
on the New York Stock Exchange composite tape on June 28, 2000, less
the exercise price, was used in calculating the value of unexercised
options. The exercise price for the presently exercisable shares held
by Mr. Rowland is $27.00 for 250,000 shares. For information on the
unexercisable options see footnote 1 beginning on page 5. The exercise
prices for such options granted in 1996, 1998, 1999 and 2000 (other
than those granted to Mr. Rowland) are $34.63, $41.50, $36.44, and
$20.00 per share, respectively. The exercise price on Mr Rowland's
unexercisable options is $27.00.
Long-Term Incentive Plans - Awards In Last Fiscal Year
In connection with the 1999-2000 fiscal year Company's Officer
Compensation Program, the Company provided its officers with an opportunity to
earn shares of the Company's Common Stock and a contingent cash payment through
a Restricted Stock Plan. The restricted stock awards and contingent cash
payments under the Plan were designed to motivate the Company's officers to make
decisions and to act in the best interest of the Company's shareholders by
having the restricted stock vest when the Company's average total shareholder
return is greater than the average total shareholder return of its peer group
for a particular period. The awards made during fiscal year 1999-2000 cover the
three-year period ending in fiscal year 2001-2002. These restricted stock awards
are listed in the Summary Compensation Table.
The Company also provided during the 1999-2000 fiscal year, restricted
stock awards under a retention and attraction program whereby shares of the
Company's Common Stock were granted to the Company's key employees. One-third of
such shares vest each year beginning on the third year after the date granted,
as long as the key employee remains employed in his or her position. These stock
grants are listed in the Summary Compensation Table and are described further in
the Report on Executive Compensation beginning on page 12.
Employment Agreement
On November 23, 1999, the Company entered into an employment agreement
with Allen R. Rowland (the "Employment Agreement") to secure his services as
President and Chief Executive Officer of the Company. The Employment Agreement
is for an initial three-year term, with automatic one-year renewals unless the
Company or Mr. Rowland gives notice of non-renewal. If the Employment Agreement
is earlier terminated by the Company for any reason other than "cause", death or
disability, or by Mr. Rowland for "good reason", Mr. Rowland would be entitled
to certain payments and benefits. These include (i) payment of three times the
sum of the annual base salary being paid to Mr. Rowland at the time of
termination plus the target annual bonus for the year in which the termination
occurs, (ii) payment of Mr. Rowland's target entitlements under all long-term
incentive compensation plans as if he were employed on the relevant payment
dates and the target goals had been achieved, (iii) all benefits under the
Company's welfare benefit plans for 36 months from the date of termination, and
(iv) the acceleration of vesting rights and rights to exercise with respect to
all outstanding stock options and restricted stock. Cause is
10
<PAGE>
defined in the Employment Agreement to include willful misconduct materially
injurious to the Company or the conviction of, or pleading guilty or nolo
contendere to, a felony involving moral turpitude.
Mr. Rowland's compensation under the Employment Agreement includes (i)
an annual base salary of at least $700,000, which may be adjusted annually by
the Board, (ii) an initial bonus of $210,000 paid on June 28, 2000 and an annual
bonus of up to 120% of his salary, based on the degree of achievement of
performance goals established by the Board at the beginning of each fiscal year,
(iii) an option to purchase 500,000 shares of the Company's common stock, 50% of
which was exercisable on the date of grant and 50% of which will be 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, and (iv) such other benefits as executive officers of the Company
normally receive, including stock under the Company's Restricted Stock Plan and
options under the Company's Key Employee Stock Option Plan.
If the aggregate payments made and benefits provided to Mr. Rowland
pursuant to the Employment Agreement and any other payments and benefits
provided to Mr. Rowland from the Company (or its successors or assigns or an
entity that effectuates a change in control) that constitute parachute payments
as defined in 280G of the Internal Revenue Code would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), Mr.
Rowland would be entitled to receive an additional payment (a "Gross-Up
Payment"). The Gross-Up Payment would be in an amount such that after payment by
Mr. Rowland of all taxes (including interest or penalties) imposed on the
Gross-Up Payment, Mr. Rowland would retain from the Gross-Up Payment an amount
equal to the Excise Tax imposed upon the parachute payments.
The Employment Agreement prohibits Mr. Rowland from disclosing at any
time confidential information relating to the Company without the Company's
prior written consent. Mr. Rowland is also subject to non-competition and
non-solicitation obligations after his employment termination.
Termination of Employment Arrangements
Upon the retirement of James Kufeldt as President of the Company on
August 31, 1999, the Company entered into an agreement whereby Mr. Kufeldt will
perform consulting services for the Company on an as-needed basis over a
three-year period. The agreement contains provisions that prohibit Mr. Kufeldt
from disclosing confidential information, competing with the Company and
soliciting Company employees, customers or suppliers during the term of the
agreement. In accordance with the agreement, Mr. Kufeldt received a lump sum
payment of $45,760 on August 31, 1999, and a lump sum cash payment of $400,000
on July 1, 2000.
Change in Control Arrangements
Each of the executive officers named in the Summary Compensation Table
beginning on page 7, other than Mr. Davis and Mr. Rowland, participated in
fiscal year 1999-2000 in the Company's Restricted Stock Plan and Key Employee
Stock Option Plan. In August, 1999 the plans were amended to provide that the
restricted stock shall immediately vest and the options shall be immediately
exercisable upon a change in control. A change in control is defined under the
plans to include (i) any person (excluding the Davis Family, a Company employee
benefit plan or an entity owned by substantially all of the Company
shareholders) becoming the beneficial owner of at least 25% of the Company's
outstanding voting stock and in an amount in excess of that owned by the Davis
Family, (ii) a merger, consolidation, liquidation, or dissolution of the Company
or the sale of substantially all of the assets of the Company unless
substantially all of the Company's shareholders prior to such transaction own
more than 50% of the outstanding common stock and the combined voting power of
the stock entitled to vote in the election of directors of the post-transaction
corporation, or (iii) a failure of directors elected by the shareholders or
nominated by the Board of Directors at the beginning of any 24 consecutive month
period to continue to constitute a majority of the Board of Directors after such
period.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during the most
recently completed fiscal year were Armando M. Codina, Chairman, and Radford D.
Lovett, Carleton T. Rider and Ms. Julia B.North. During such time, no member of
the Compensation Committee was a current or former officer or employee of the
Company and no executive officer of the Company served as a director or as a
member of the compensation or equivalent committee of another entity, one of
whose executive officers served as a director of the Company or on the Company's
Compensation Committee.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that incorporated future filings, including this Proxy
Statement, the following sections titled "Report on Executive Compensation" and
"Stock Performance Graph" shall not be incorporated by reference into any such
filings.
REPORT ON EXECUTIVE COMPENSATION
The 1999-2000 Officer Compensation Program, as initially instituted in
August, 1999, was comprised of base salary and annual incentive bonuses. It also
included long-term incentives established pursuant to a Performance-Based
Restricted Stock Plan and a Key Employee Stock Option Plan ("KESOP"). In
November, 1999, after an extensive search, the Board of Directors selected Allen
R. Rowland, the former President of Smith's Food and Drug Centers, Inc. and
Senior Vice-President of Albertson's, Inc., as its President and Chief Executive
Officer. Mr. Rowland promptly initiated an overall analysis of the operations of
the Company, whereupon the Company concluded that a major operational
restructuring was necessary to improve the Company's efficiency and support of
its retail stores. As part of that process, the Company determined that
retaining and motivating certain of the Company's key employees and attracting
new key employees was important to the success of the restructuring. Therefore,
the Company revised the Officer Compensation Program, effective January, 2000,
to increase the base salary of certain key employees, to amend the
Performance-Based Restricted Stock Plan (as amended, the "Restricted Stock
Plan") to allow for additional grants of restricted stock to current and new key
employees with vesting provisions contingent upon continued employment for
certain periods of time, and to issue stock options to such employees with
exercise provisions also contingent upon continued employment for certain
periods of time. The Officer Compensation Program continued to reflect the
Company's compensation philosophy of fairly compensating executives for their
performance and contributions to the Company and of motivating executives to
achieve the Company's performance goals, while at the same time recognizing the
need to retain and attract employees in certain key positions to meet the
restructuring challenges.
Base Salary and Annual Incentives
The 1999-2000 Officer Compensation Program was composed of
comparatively conservative salaries and competitive annual incentives. Base
compensation under the 1999-2000 Program was based primarily upon comparative
market data, with positions assigned to ranges based on such data. The
compensation levels for the former Principal Executive Officer and the other
executives named in the Summary Compensation Table, except for Mr. Rowland, were
determined for both base salary and annual incentive targets by the Compensation
Committee on August 2, 1999. In April, 2000, the Compensation Committee
recommended and the Board of Directors approved the promotion of certain key
employees and an increase in their base salaries due to the recognized increased
responsibilities and demands that had been placed on these employees prior to
and as a result of the operational restructuring. Mr. Rowland's salary and
annual incentive targets were determined by the Compensation Committee and
approved by the Board of Directors effective upon his employment as the
President and Chief Executive Officer on November 23, 1999.
The performance goals for annual incentive awards were based on how
actual performance compared to sales and pre-tax profit goals set forth in a
business plan adopted at the beginning of the fiscal year. Each participant was
assigned a threshold, target and superior incentive opportunity as a percentage
of salary. Cash awards could range from 0% to 200+% of the participant's target
incentive opportunity. The performance review included the performance of the
participant's business unit and overall Company performance and results, and an
assessment of the participant's contribution to those results.
12
<PAGE>
Long-Term Incentives
Long-term incentive compensation was provided under the 1999-2000
Officer Compensation Program through the Company's Restricted Stock Plan and the
KESOP and through the granting of stock options. Under the Restricted Stock
Plan, grants of restricted stock that pay dividends were given to the
participants, but these shares do not vest unless and until certain performance
requirements are met over a pre-determined period. The performance measure
established by the Compensation Committee beginning with fiscal year 1999-2000
under the Restricted Stock Plan was based upon a comparative three-year average
total shareholder return ("TSR"). The TSR is the measure utilized in the Stock
Performance Graph in the Company's Annual Proxy Statement. The peer group used
for comparison purposes is the same as that used for the Stock Performance
Graph, which is the Standard & Poor's Retail (Food Chains) Index Group.
Recipients of performance-based restricted stock grants are eligible to receive
a contingent cash payment equal to the initial grant value of their awarded
restricted shares, if the shares vest. The cash payment is designed to encourage
continuing ownership of these shares by satisfying all or a portion of the
federal and state income tax obligations of the recipient resulting from their
vesting.
In January 2000, the Company amended the Restricted Stock Plan to give
the Company's Compensation Committee discretion to establish the performance
periods and requirements, if any, that must be satisfied before restrictions on
the stock will lapse. To assure, to the extent practical, the continued
employment and motivation of the Company's key employees and the attraction of
new key employees during the operational restructuring of the Company, grants
made in January 2000 through the end of the 1999-2000 fiscal year under the
Restricted Stock Plan vest after certain periods of continued employment. The
restrictions lapse and one-third of the stock granted vests each year beginning
with the third year from the date of grant.
The KESOP allows performance-based stock options to be granted to
officers and other key employees selected by the Compensation Committee.
Performance goals under the KESOP are based on a specified percentage return on
equity as determined by the Compensation Committee, exercisable on and after
such date as the Compensation Committee determines. On August 2, 1999, effective
June 15, 1999, options were granted for fiscal year 1999-2000. The options
granted are set forth in the table on page 9. Such options may not be fully
exercised unless the Company earns a 17% return on equity over a three-year
period.
In January 2000, the Company also granted stock options to key
employees as part of the Company's retention and attraction program to assure,
to the extent practical, the continued employment and motivation of its then
current key employees. Stock options were also granted at various times during
the fiscal year to attract and retain new key employees. These options are
exercisable in 20% increments each year beginning on the completion of the first
year from the date of grant, if the key employee remains employed in his or her
key position. The options granted under the retention and attraction program are
also set forth in the table on page 9.
For participants to remain eligible for grants under the Restricted
Stock Plan and the KESOP, they must maintain a certain ownership interest in the
Company's stock. The number of shares that must be held is based on a multiple
of the participants' respective salaries and range from a high of five times the
base salary for the Chairman and the Chief Executive Officer, to a low of two
times the base salary for certain other corporate officers.
A. Dano Davis, who is currently Chairman of the Board of Directors and
was the Principal Executive Officer of the Company from the beginning of the
1999-2000 fiscal year until November 23, 1999, received a 2% increase in base
compensation from the prior fiscal year. Because of his substantial stock
ownership, Mr. Davis again chose not to participate in the restricted stock
aspects of the 1999-2000 Officer Compensation Program's long-term incentive
compensation for the 1999-2000 fiscal year. Had he participated, the grants made
in June of 1999 and
13
<PAGE>
January of 2000 for fiscal year 1999-2000 and later would have been in the
amount of approximately $191,250 of value of restricted stock and a cash payment
of $191,250, contingent on the stock vesting. The Principal Executive Officer
normally would participate in these plans.
Allen R. Rowland was elected President and Chief Executive Officer of
the Company on November 23, 1999. In connection with the negotiations to employ
Mr. Rowland, the Company obtained advice from independent consultants with
respect to the development of compensation and benefits to attract, motivate and
retain Mr. Rowland. Mr. Rowland's base salary, incentive compensation and
benefits were based upon a comparison of practices among the Company's
competitors and the need to employ a chief executive officer with experience in
handling operational challenges and restructurings in a similar or like
industry. As a result of its review the Compensation Committee recommended, and
the Board of Directors approved, the compensation and benefits set forth in the
employment agreement between the Company and Mr. Rowland. The agreement is
described in the section "Employment Agreement" beginning on page 10.
During fiscal year 1999-2000, Mr. Rowland received $421,795 of the $700,000
annual base salary set forth in the employment agreement. Mr. Rowland also
received an initial bonus of $210,000 and an option to purchase 500,000 shares
of the Company's Common Stock. Mr. Rowland did not participate in the Annual
Incentive Plan, Restricted Stock Plan or the KESOP under the 1999-2000 Officer
Compensation Program. Mr. Rowland did not receive any restricted stock nor stock
options under the Company's retention and attraction program.
Also included in the Company's compensation for its executive officers
are various employee benefits. Generally, the benefits offered to such persons
serve a different purpose than do the other components of compensation. In
general, these benefits provide protection against financial loss that can
result from illness, disability or death. Benefits offered to these employees
are mainly those that are offered to the Company's other employees, with some
variation primarily to promote tax efficiency and replacement of benefit
opportunities lost due to regulatory limits.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), precludes a public corporation from taking a federal income tax
deduction for compensation paid in excess of $1 million per year to certain
covered officers. Generally, covered officers would include the Company's
Chairman of the Board and former Principal Executive Officer, the President and
Chief Executive Officer and the four other officers named each year in the
Summary Compensation Table in the Proxy Statement. The limitation does not apply
to performance-based compensation, provided certain conditions are satisfied.
The Committee believes that any compensation realized in connection with the
Annual Incentive Plan, the KESOP, and certain performance-based restricted stock
grants under the Restricted Stock Plan, as well as compensation realized in
connection with the long-term incentives of the prior officer compensation
program, will continue to be deductible as performance-based compensation. The
Compensation Committee, however, retains the authority to authorize payments
that may not be deductible under the Code if it believes such payments would be
in the best interest of the Company and its shareholders.
This report is submitted by the members of the Compensation Committee:
Armando M. Codina, Chairman; Radford D. Lovett; Carleton T. Rider; and Julia B.
North.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
preceding five fiscal years ended June 28, 2000, compared with the cumulative
total returns of the S & P 500 Index and the S & P Retail (Food Chains) Index.
The comparison assumes $100 was invested on June 30, 1995, in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG WINN-DIXIE STORES, INC., THE S & P 500 INDEX
AND THE S&P RETAIL STORES (FOOD CHAINS) INDEX (1)
Starting
Basis
1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Winn-Dixie $100 $127 $137 $193 $143 $58
S & P 500 $100 $126 $170 $221 $271 $291
S & P Retail Stores - Food Chains $100 $138 $151 $214 $230 $175
(A) Peer Group $100 $142 $151 $218 $248 $178
(B) Peers + Winn-Dixie $100 $138 $147 $211 $221 $147
</TABLE>
Assumes Initial Investment of $100 and reinvestment of dividends
Note: Total Returns Based on Market Capitalization
Data and chart furnished by Zacks Investment Research, Inc.
---------------
(1) Includes, but is not limited to, the following companies: Albertson's,
Great A&P, Kroger, Safeway and Winn-Dixie.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Until November 1, 1999, Messrs. A. Dano Davis, Robert D. Davis and
Radford D. Lovett were shareholders and directors of American Heritage Life
Investment Corporation ("AHLIC") the parent company of American Heritage Life
Insurance Company (the "Insurance Company"). On November 1, 1999 AHLIC merged
into a subsidiary of the Allstate Corporation and the aforementioned individuals
resigned as directors. The Company is self-insured for purposes of employee
group, medical, accident and sickness insurance, with the Insurance Company
providing administrative services and expenses. During the fiscal year through
November 1, 1999, the Company paid the Insurance Company $1,720,430 for
administrative services, state premium taxes and expenses of the group medical
and accident plan. For group term life insurance provided to all Winn-Dixie
full-time employees through November 1, 1999, the Company paid the Insurance
Company $8,151,173 in net premiums on life insurance policies and $13,604,745 in
interest on policy loans to fund the corporate senior officers management
security plan and a similar contributory plan for other eligible key management
personnel. These plans also provide benefits to 873 participants including those
who have retired, terminated employment or are currently ineligible to
participate in the plans, and beneficiaries of deceased participants.
15
<PAGE>
In the fiscal year ended June 28, 2000, the Company received payments from
D.D.I., Inc., a Florida corporation controlled by the Davis Family, in the
aggregate amount of $58,286 for group insurance and office expenses.
DDI, INC. AGREEMENT OF SHAREHOLDERS
On April 19, 1989, an Agreement of Shareholders (the "Agreement") was
entered into by a Florida corporation now known as D.D.I., Inc. ("DDI") and its
shareholders to make provision for future disposition, voting and transfer of
its shares. DDI, which, as of June 28, 2000, owned directly and indirectly
40,787,328 shares of Common Stock of the Company, is controlled by the Davis
Family. Such shares are included in the Davis Family holdings shown on page 4
hereof.
Subject to certain exceptions, the Agreement prohibits disposition of
DDI shares by a DDI shareholder except with the written consent of DDI and all
of the other DDI shareholders. If any DDI shareholder desires to make a
disposition of shares of DDI, such shareholder must offer the shares to DDI, and
if DDI does not purchase all of the shares, then to the other DDI shareholders.
The Agreement also restricts transfers in the event of death, divorce, change in
beneficial interest in a trust or involuntary disposition and sets out
procedures for establishing fair market value, termination of the Agreement,
selection of a Board of Directors of DDI and increasing the capital surplus of
DDI, if necessary, to purchase DDI shares.
DDI shareholders who are parties to the Agreement include Robert D. Davis,
A. Dano Davis, T. Wayne Davis, and Charles P. Stephens, spouses, children,
grandchildren, relatives, in-laws, trusts for the benefit of Davis Family
members, and corporations and other entities controlled by them.
PROPOSAL 2 - AMENDMENT OF THE REVISED WINN-DIXIE
STOCK PURCHASE PLAN FOR EMPLOYEES
The Revised Winn-Dixie Stock Purchase Plan for Employees (the "Plan"),
permits the Company through a Board of Directors' Committee (the "Committee"),
to grant options to eligible employees to purchase shares of the Company's
Common Stock. Eligible employees include those employees who (i) have been
employed by the Company or a subsidiary of the Company for at least one year
prior to the date of grant of such options, (ii) are of legal age to purchase
stock in the state of their residence and (iii) are actively employed by the
Company or a subsidiary of the Company at the date of grant of such options.
The total number of shares available for issuance under the Plan is
36,173,236, of which 33,780,610 shares previously have been issued, leaving a
balance of only 2,392,626 shares for further offerings. Due to the large number
of employees eligible to participate in a stock offering under the Plan, the
Board of Directors approved an amendment to the Plan, subject to shareholder
approval, to increase the total number of shares available under the Plan by
4,000,000 shares. As so amended, the total number of shares authorized under the
Plan would be increased from 36,173,236 to 40,173,236, leaving a balance of
6,392,626 shares for future offerings.
Accordingly, the Company's shareholders are being asked to approve the
authorization of an additional 4,000,000 shares of the Company's Common Stock
for issuance under the Plan. Since under certain federal tax regulations any
change in the aggregate number of shares that may be issued under the Plan will
be considered to have created a new plan requiring shareholder approval within
12 months of such change, the shareholders also are being asked to re-approve
and readopt the Plan as amended by the amendment increasing the number of shares
that may be issued under the Plan. In the event the Company's shareholders do
not adopt the amendment increasing the number of shares that may be issued under
the Plan, such amendment shall become null and void and the Plan as in effect
prior to the amendment shall continue in full force and effect.
Description of Plan
The following summary of the Plan, as proposed to be amended, is
qualified in its entirety by reference to the text of the Plan, which is
attached hereto as Exhibit B. Under the Plan, the Committee determines from
time-to-time whether or not to grant options and, if options are to be granted,
what the option price per share will be. If any
16
<PAGE>
options are granted, they are granted to all eligible employees. Subject to the
share limitations of the Plan, each eligible employee is granted an option to
purchase up to a maximum number of shares of stock as may be determined by the
Committee. In addition, there are other limitations required by law with respect
to employees to whom options may be granted and as to the number of shares that
may be covered by such options. The option price, exercise period, option
payment provisions and all other terms and conditions of the options will be
uniform among all eligible employees.
The options expire at the end of the option period established by the
Committee. Because all eligible employees have the same ability to participate
in the Plan and the decision of whether to exercise options granted under the
Plan is an individual investment decision of the eligible employees, it is not
possible to determine the benefits that the executive officers of the Company
will receive under the Plan.
The Committee is authorized to set forth the methods in which eligible
employees may exercise their rights under the Plan. These may include any or all
of the following three methods or such other methods as the Committee may
determine: (i) tendering the full cash purchase price; (ii) tendering at least
$1.00 per share and executing and delivering a promissory note payable to the
Company for the balance of the purchase price; or (iii) tendering the balance of
a participant's account established to hold employee payroll deductions during
the offering period. If the promissory note method is authorized, eligible
employees may purchase up to a maximum of 50 shares by executing and delivering
a non-interest bearing promissory note and, subject to approval by the Committee
in its discretion from time-to-time at the time of granting options, up to an
additional 25 shares by executing and delivering an interest bearing promissory
note, the terms of which are determined by the Committee.
The Committee, in its discretion, may require that any shares purchased
pursuant to the Plan must first be tendered to the Company before such shares
can be sold. The Committee also may set the terms and conditions of the tender.
The maximum number of shares that may be sold pursuant to the Plan, as
well as the number of shares that may be purchased pursuant to the exercise of
any option outstanding thereunder, are subject to anti-dilution provisions in
the event of stock splits, certain stock dividends and similar events. Options
granted pursuant to the Plan may not be sold, pledged, assigned or transferred
by their holders. Upon the death of such holder, the option immediately ceases
and terminates.
Any changes to the Plan requiring shareholder approval under applicable
law or the rules of the New York Stock Exchange must be approved by the
shareholders of the Company. If shareholder approval is not obtained, the
changes shall not become effective and any Plan provisions attempted to be
changed shall continue in full force and effect.
Federal Income Tax Consequences
For federal income tax purposes, an employee will not realize income at
the date of grant or date of exercise of an option. If no disposition of shares
acquired pursuant to an option is made within the later of two years from the
date of grant or one year from the date of exercise of the option, then upon
subsequent disposition of the stock, ordinary income will be realized by the
employee to the extent of the lesser of (i) the amount by which the fair market
value of the stock at such disposition exceeds the option exercise price paid,
or (ii) the amount by which the fair market value of the stock on the date of
grant exceeds the option exercise price on the date of grant. No income tax
deduction will be allowed the Company for shares transferred to an employee,
provided such shares are held for the periods described above. If the shares are
disposed of before the end of the periods described above, the employee will
recognize ordinary income for the taxable year of the disposition equal to the
excess of the fair market value of the shares on the date of exercise over the
option exercise price paid, and the Company will, generally, be entitled to a
deduction equal to the amount of ordinary income recognized by the employee. To
the extent the amount received by an optionee upon disposition of option shares
exceeds the option exercise price paid, plus any ordinary income recognized by
the optionee under the rules described above, such excess will be treated as
capital gain for federal income tax purposes.
17
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General Information
The net proceeds from the sale of Common Stock pursuant to the Plan
will be added to the general funds of the Company. The Company is unable to
state at this time for what purposes such proceeds may be used other than as
working capital.
At June 28, 2000, the Company and its wholly owned subsidiaries had
approximately 120,000 employees of whom approximately 74,000 (including 11
executive officers) were eligible employees under the Plan.
The closing price of the Company's stock as reported on the New York
Stock Exchange Composite Listing on June 28, 2000, was $14.375 per share. The
market value of the 2,392,626 shares remaining available for sale under the Plan
on that date was $34,393,998.75.
The Board of Directors recommends a vote FOR Proposal 2.
PROPOSAL 3 - AMENDMENT OF THE
KEY EMPLOYEE STOCK OPTION PLAN
On August 9, 2000 the Board of Directors approved the amendment of the
Key Employee Stock Option Plan ("KESOP"), subject to shareholder approval, to
increase the total number of shares that may be sold pursuant to the exercise of
options granted under the KESOP from a maximum aggregate of two million shares
to a maximum aggregate of five million shares. As of June 28, 2000, out of the
two million available shares, 1,710,177 shares had been granted pursuant to the
KESOP, 474,506 of which have been cancelled and are again available for
issuance, leaving a total of 764,329 shares remaining available for subsequent
issuance. The proposed increase would allow options to continue to be granted to
eligible employees in keeping with the Company's desire to attract and retain
employees and long term compensation philosophy, all as more fully explained in
the Report on Executive Compensation beginning on page 12.
Accordingly, the Company's shareholders are being asked to approve the
authorization of an additional three million shares that may be sold pursuant to
the exercise of options granted under the KESOP. Since under certain federal tax
regulations any change in the aggregate number of shares that may be sold
pursuant to the exercise of options granted under the KESOP will be considered
to have created a new plan requiring shareholder approval within 12 months of
such change, the shareholders also are being asked to re-approve and readopt the
KESOP as amended. In the event the Company's shareholders do not adopt the
amendment increasing the number of shares that may be sold pursuant to the
exercise of options granted under the KESOP, such amendment shall become null
and void, the Plan as in effect prior to the amendment shall continue in full
force and effect and any options granted under the KESOP which together with the
outstanding shares under the KESOP total more than two million, shall be void.
Description of Key Employee Stock Option Plan
The following summary of the KESOP, as proposed to be amended, is
qualified in its entirety by reference to the text of the KESOP, which is
attached hereto as Exhibit C. Under the KESOP, a committee appointed by the
Board of Directors and composed of two or more outside directors, may grant
options at any time and from time to time to persons who are eligible employees.
Such eligible employees include officers and other key employees selected by the
committee. Currently, the options that may be granted under the KESOP are
limited in total to a maximum aggregate of 2,000,000 shares as the committee in
its sole discretion deems advisable. The maximum number of shares that may be
sold pursuant to the KESOP, as well as the number of shares that may be
purchased pursuant to the exercise of any option outstanding thereunder, are
subject to anti-dilution provisions in the event of stock splits, certain stock
dividends and the like. The option price per share shall be the fair market
value of the Company's Common Stock on the date on which the option is granted.
The closing price of the Company's Common Stock as reported on the New York
Stock Exchange composite tape on June 28, 2000 was $14.375. Options granted
pursuant to the KESOP may not be sold, pledged, assigned or transferred by their
holders otherwise than by will or the laws of descent and distribution and are
exercisable, during their respective lifetimes, only by such holders.
18
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Each option shall become exercisable on and after such date and in
accordance with such requirements as the committee shall determine. The period
within which each option granted under the KESOP may be exercised shall end not
later than the January 15th following the sixth fiscal year after the grant. The
committee shall certify in writing prior to options becoming exercisable that
the requirements set by the committee at the time of grant and any other
material terms under the KESOP were in fact satisfied. All options granted
pursuant to the KESOP that are outstanding at the time of a change in control
shall immediately vest upon the occurrence of the change in control. What
constitutes a change in control is discussed in the section "Change in Control
Arrangements" on page 11.
The Board of Directors, or the committee, has the power, among other
things, to add to, amend or repeal any of the provisions of the KESOP, to
suspend its operation for any period, or to terminate it in whole or in part,
without shareholder approval unless shareholder approval is otherwise required
by applicable law or the rules of the New York Stock Exchange. No such addition,
amendment, repeal, suspension or termination shall in any way affect the rights
of the holder of outstanding options to purchase shares of Common Stock in
accordance with the provisions of the KESOP at the time of the option grant.
The impact on the executive officers and other officers of the Company
of the amendment to increase the number of shares that may be sold pursuant to
the exercise of options granted under the KESOP, is not determinable at this
time. Options granted under the KESOP for the 1999-2000 fiscal year are included
in the Summary Compensation Table beginning on page 7 and the Option Grants
table on page 9 and are discussed in the Report on Executive Compensation
beginning on page 12.
Federal Income Tax Consequences
Options granted under the KESOP may consist of incentive stock options
("ISOs"), within the meaning of Section 422 of the Code, and nonqualified stock
options ("NSOs"). ISOs and NSOs are treated differently for federal income tax
purposes. ISOs are intended to comply with the requirements of Section 422 of
the Code. NSOs need not comply with such requirements. Options granted under the
KESOP will not qualify as ISOs except to the extent that all of the requirements
of Code Section 422 are satisfied.
A KESOP participant is not taxed on the grant or exercise of an ISO.
The difference between the fair market value of the shares on the exercise date
and the exercise price will, however, be a preference item for purposes of the
alternative minimum tax. If a participant holds the shares acquired upon
exercise of an ISO for at least two years following grant and at least one year
following exercise of the ISO, the participant will recognize gain, if any, for
the first time upon a subsequent disposition of such shares and such gain will
be treated as long-term capital gain for federal income tax purposes. The
measure of the gain is the difference between the proceeds received on
disposition and the participant's basis in the shares (which generally equals
the exercise price). If the participant disposes of stock acquired pursuant to
the exercise of an ISO before satisfying the one and two-year holding periods
described above, the participant could recognize both ordinary income and
capital gain in the year of disposition. The amount of the ordinary income would
be the lesser of: (i) the amount realized on disposition less the participant's
adjusted basis in the stock (usually the option exercise price), or (ii) the
amount by which the fair market value of the stock on the exercise date exceeds
the option price. The balance of the gain recognized on such disposition, if
any, will be capital gain. The Company is not entitled to an income tax
deduction on the grant or the exercise of an ISO or on the participant's
disposition of the shares after satisfying the holding period requirement,
described above. If the holding periods are not satisfied, the Company may be
entitled to an income tax deduction in the year the participant disposes of the
shares, in an amount equal to any ordinary income recognized by the participant.
Generally, a participant is not taxed on the grant of an NSO. Upon
exercise, however, the participant recognizes ordinary income equal to the
amount by which the fair market value of the shares exceeds the option price on
the date of the exercise. The Company is entitled to an income tax deduction in
the year of exercise in the amount recognized by the participant as ordinary
income. Any gain on a subsequent disposition of the shares will be long term
capital gain if the shares are held for at least 12 months following exercise.
The Company does not receive an income tax deduction for this gain.
The Board of Directors recommends a vote FOR Proposal 3.
19
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PROPOSAL 4 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Action is to be taken at the Annual Meeting of Shareholders with
respect to the ratification of the appointment by the Board of Directors of the
Company of KPMG LLP as independent public accountants to audit the financial
statements of the Company for the fiscal year commencing June 29, 2000. KPMG LLP
has been regularly employed by the Company for many years to examine its books
and accounts and for other purposes, for which services KPMG's customary fees
have been paid.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting and will have an opportunity to make such statements as they may desire.
Such representatives are expected to be available to respond to appropriate
questions from shareholders.
The Board of Directors recommends a vote FOR Proposal 4.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholders are hereby notified that if they wish a proposal to be
included in the Company's Proxy Statement and form of proxy relating to the 2001
annual meeting of shareholders, a written copy of their proposal must be
received at the principal executive offices of the Company, 5050 Edgewood Court,
Jacksonville, Florida 32254-3699, no later than May 6, 2001. To ensure prompt
receipt by the Company, proposals should be sent by certified mail return
receipt requested. Proposals must comply with the proxy rules relating to
shareholder proposals in order to be included in the Company's proxy materials.
Shareholders who wish to submit a proposal for consideration at the Company's
2001 annual meeting of shareholders but who do not wish to submit the proposal
for inclusion in the Company's proxy statement pursuant to Rule 14a-8 as
promulgated under the Securities Exchange Act of 1934, as amended, must deliver
a copy of their proposal to the Company at its principal executive offices, 5050
Edgewood Court, Jacksonville, Florida 32254-3699, no later than July 20, 2001.
MISCELLANEOUS
The Company's audited financial statements and certain other financial
information for its fiscal year ended June 28, 2000, are included as pages F-1
to F-32, inclusive, annexed to this Proxy Statement.
As of the date of this Proxy Statement, Management does not know of any
other matter that will come before the meeting. In the event that any other
matter properly comes before the meeting and the Company did not receive notice
of such matter by July 13, 2000, then the persons named in the enclosed form of
proxy will be deemed to have discretionary authority to vote all proxies in
accordance with their judgment on such matter.
By Order of the Board of Directors
Judith W. Dixon
Secretary
August 25, 2000
EACH SHAREHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN
THE EVENT A SHAREHOLDER DECIDES TO ATTEND THE MEETING, THE SHAREHOLDER MAY, IF
SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
20
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EXHIBIT A
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
WINN-DIXIE STORES, INC.
Purpose
The purpose of the Audit Committee is to provide assistance to the
Board of Directors in fulfilling its oversight responsibilities relating to the
Company's financial statements and reporting processes, the independence and
performance of the Company's internal and external auditor, and the legal
compliance and ethics programs established by management and the Board of
Directors. The Audit Committee shall have the authority, as it deems necessary,
to confer with the Company's independent auditor, internal audit department and
management, to retain legal, accounting or other consultants to advise the Audit
Committee, and to conduct or authorize investigations into any matters within
the scope of the Audit Committee's responsibilities. In carrying out its
oversight responsibilities, the Audit Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the independent auditor's work.
Audit Committee Membership and Meetings
The Audit Committee shall consist of three or more members of the Board
of Directors, including an Audit Committee Chair, appointed by the Board of
Directors. Members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The Audit Committee
shall meet at least three times annually, or more frequently as circumstances
dictate. The Audit Committee shall maintain minutes of the meetings and
periodically report to the Board of Directors.
Audit Committee Responsibilities
The Audit Committee shall have a clear understanding with management
and the independent auditor that the independent auditor is ultimately
accountable to the Board of Directors and the Audit Committee. The Audit
Committee shall annually review the independence, performance and fees of the
independent auditor and recommend to the Board the selection of the independent
auditor. The Audit Committee and the Board of Directors shall have the ultimate
authority and responsibility to select, evaluate and, where appropriate, replace
the independent auditor.
The Audit Committee shall require that the independent auditor submit
to it on a periodic basis, formal written statements delineating all
relationships between the independent auditor and the Company. The Audit
Committee shall actively engage in a dialogue with the independent auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditor. If deemed necessary,
the Audit Committee shall recommend that the Board of Directors take appropriate
action to satisfy itself of the outside auditor's independence.
The Audit Committee shall discuss with the internal auditor and the
independent auditor the overall scope and plans for their respective audits and
the coordination of audit efforts between the independent auditor and the
internal audit department. The Audit Committee shall also discuss separately
with the internal auditor and the independent auditor, with and without
management, the results of the audits and the adequacy and effectiveness of the
Company's accounting and financial controls, including the Company's legal and
ethical compliance programs.
A-1
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The Audit Committee shall review the Company's interim financial
statements with management and the independent auditor prior to the filing of
the Company's quarterly reports on Form 10-Q and shall review and consider the
matters required to be discussed under generally accepted auditing standards.
The Chair of the Audit Committee may represent the entire Audit Committee for
the purposes of this review.
The Audit Committee shall review with management and the independent
auditor, the financial statements to be included in the Company's annual reports
on Form 10-K and shall review and consider with the independent auditor in
conjunction therewith, the matters required to be discussed under generally
accepted auditing standards.
The Audit Committee shall annually prepare a report to shareholders as
required by the Securities and Exchange Commission, to be included in the
Company's annual proxy statement.
The Audit Committee shall annually review and reassess the adequacy of
this Charter and recommend any proposed changes to the Board of Directors for
approval.
The Audit Committee shall perform such other duties and
responsibilities consistent with this Charter, the Company's organizational
documents, the New York Stock Exchange rules and governing law, as the Audit
Committee or the Board of Directors deems necessary or appropriate.
A-2
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EXHIBIT B
WINN-DIXIE STORES, INC.
REVISED STOCK PURCHASE PLAN FOR EMPLOYEES
(Changes made by the proposed amendment
have been marked.
Additions are underlined. Deletions are struck through.)
ARTICLE I
Designation and Purpose of the Plan
The Plan shall be known as the "Revised Winn-Dixie Stock Purchase Plan
for Employees" (the "Plan"). The purpose of the Plan is to encourage employees
of Winn-Dixie Stores, Inc. (the "Company") and of any "Subsidiary" (a
corporation in which all of the outstanding shares of capital stock of every
class shall, at the time or times in question, be owned by the Company or any
other Subsidiary of the Company) to purchase and own the Common Stock of
Winn-Dixie Stores, Inc., thereby promoting their increased interest in the
Company's affairs, growth and development.
ARTICLE II
Shares Available for Purchase
Subject to the anti-dilution provisions contained herein, a maximum of
40,173,236 shares of the Company's Common Stock, having a par value
of $1.00 per share, as constituted on November 30, 1995 (the "Stock"), whether
presently authorized and unissued or held in the Company's treasury or hereafter
reacquired by the Company, may be issued and sold upon the exercise of options
granted subsequent to October 2, 1964 pursuant to the Plan ("Options"). Such
40,173,236 shares shall consist of the 36,173,236 shares
of the Company's Common Stock heretofore authorized to be so issued and sold,
including shares which were authorized to be issued and sold upon the exercise
of options granted pursuant to the Company's now terminated Stock Purchase Plan
for Employees (adopted in 1958), as amended (the "1958 Plan"), which were not so
issued and sold, plus an additional 4,000,000 shares.
In the event that the Stock shall be split up, divided or otherwise
reclassified into a greater number of shares of Stock or of any other class of
Common Stock of the Company, the term "Stock" shall thereafter mean the Common
Stock of the Company into which the shares of Stock were so split up, divided or
otherwise reclassified; and the maximum number of shares of stock that may be
issued and sold under the Plan, and the remaining number of shares of Stock that
may thereafter be sold pursuant to the Plan or made subject to Options granted
to any Eligible Employee pursuant to the Plan, shall be correspondingly
increased. In case any dividend payable in shares of Stock is paid to the
holders of outstanding shares of Stock, the remaining number of shares of Stock
which may thereafter be sold pursuant to the Plan, and the remaining number of
shares of Stock which may thereafter be made subject to Options granted to any
Eligible Employee pursuant to the Plan shall be increased by the percentage
which the number of shares of Stock so paid as a dividend bears to the total
number of shares of Stock outstanding immediately prior to the payment of such
dividend; provided, however, that no such increase shall be made with respect to
any dividend aggregating less than 20% of the total number of shares of Stock
outstanding immediately prior to the payment thereof.
B-1
<PAGE>
ARTICLE III
Eligible Employees
Options may be granted under the Plan only to employees of the Company
or of a Subsidiary, (1) who have an employment date of not less than one year
prior to the date of the offering, (2) who are of legal age to purchase stock in
the state of their residence, and (3) who are actively employed at the date of
the offering. "Actively employed" means on the payroll and not on leave of
absence (including workers' compensation, medical, military or other leaves).
Such employees are herein called "Eligible Employees."
ARTICLE IV
Option Price
The exercise price per share of Stock covered by any Option granted
pursuant to the Plan shall be determined by the Committee referred to in Article
V hereof, but shall be not less than the lesser of (1) 85% of the fair market
value of the Stock at the time such Option is granted or (2) an amount which
under the terms of the Option is not less than 85% of the fair market value of
the stock at the time the Option is exercised.
ARTICLE V
Granting of Options
A committee appointed by the Board of Directors of the Company,
consisting of two or more members of the Board of Directors (the "Committee")
shall, by decision of a majority thereof, determine from time to time in its
sole and final discretion until such time as all shares of Stock available for
purchase under the Plan have been sold, whether or not to grant Options to
Eligible Employees and, if Options are to be granted, the date on which such
Options shall be granted, the option price per share, the period of time during
which the Options can be exercised (not to exceed 27 months or a period of 5
years if the exercise price per share of Stock covered by the Option will be no
less than 85% of the fair market value of such Stock at the time of exercise of
the Option) and such other terms and conditions as the Committee, in its sole
discretion, deems appropriate.
If any Options are granted as aforesaid, Options shall be granted to
all employees who are Eligible Employees as of the date the Options are granted,
upon the following terms and conditions:
1. The Committee shall have the authority to limit the maximum
number of shares to be issued and sold upon the exercise of Options
granted at any time to a number not to exceed the number of shares then
authorized for sale pursuant to the Plan. Each Eligible Employee shall
be granted an Option for the purchase of such maximum number of shares
as the Committee may determine; provided, however, that no Eligible
Employee shall be granted an Option if such Employee, immediately after
the grant of such Option, would own, within the meaning of Section
423(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"), stock possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company or of a "parent
corporation" or "subsidiary corporation" of the Company, as defined in
Section 424(e) and (f) of the Code; and provided further, that no
employee shall be granted an Option which would permit such employee's
rights to purchase shares of stock of any class of the Company or of a
"parent corporation" or of a "subsidiary corporation" of the Company
(as defined above) pursuant to all employee stock purchase plans of the
Company and of any such "parent corporation" or "subsidiary
corporation" to accrue at a rate which would exceed an aggregate of
$25,000 of fair market value of such securities (determined at the time
such Option is granted) in any calendar year.
2. The Option price, exercise period, Option payment
provisions and all other terms and conditions of the Options shall be
uniform for all Eligible Employees.
B-2
<PAGE>
ARTICLE VI
Options Not Transferable
No Option granted to an employee to purchase shares of Stock pursuant
to the Plan may be sold, pledged, assigned or transferred in any manner during
such employee's lifetime, and upon the death of such employee said Option shall
immediately cease and terminate.
ARTICLE VII
Amendment, Suspension and Termination of the Plan
The Board of Directors of the Company shall have the power at any time
to add to, amend or repeal any of the provisions of the Plan, to suspend the
operation of the entire Plan or of any provision or provisions thereof for any
period or periods or to terminate the Plan in whole or in part, provided,
however, that no such addition, amendment, repeal, suspension or termination
shall in any way affect the rights of the holders of outstanding Options to
purchase shares of stock in accordance with the provisions hereof; and provided,
further, that any such addition, amendment or repeal which requires shareholder
approval pursuant to applicable law or the rules of the New York Stock Exchange
shall be subject to approval by the Stockholders of the Company or such
addition, amendment or repeal shall be null and void and any provision so
attempted to be changed shall continue in full force and effect.
ARTICLE VIII
Provisions with Respect to Granting of Options
Options shall be granted pursuant to the Plan only in accordance with
the provisions set forth in Article V and this Article VIII of the Plan.
For the purpose of determining whether an employee has been employed by
the Company and/or one or more Subsidiaries for less than one year, there shall
be included in the term of such employee's employment any period of employment
by any person, firm, organization or corporation all of whose outstanding shares
of capital stock of every class and/or all or substantially all of whose
operating assets and/or business shall have been acquired by the Company and/or
one or more of its Subsidiaries prior to the time as of which such determination
is made, and transfer from the employment of the Company to that of a Subsidiary
or vice versa, or from the employment of one Subsidiary to that of another
Subsidiary, shall not constitute a termination or interruption of the continuity
of employment.
If the Committee shall determine to grant Options as provided in the
Plan, such determination, and the exercise price per share of Stock covered
thereby, shall be communicated to all Eligible Employees within a reasonable
time thereafter in such manner as the Committee in its sole discretion shall
deem advisable.
No option shall be granted pursuant to the Plan unless a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
shares of Stock covered thereby shall have been filed with the Securities and
Exchange Commission or unless an exemption from registration in accordance with
regulations duly promulgated by said Commission under said Act shall then be
applicable, and no Option granted pursuant to the Plan shall be exercisable, and
no shares of Stock shall be sold or issued upon the exercise of any Option,
unless such a Registration Statement shall be in effect and a prospectus with
respect to such shares, which at the time of such exercise, sale or issue, as
the case may be, meets the requirements of Section 10(a) of said Act, shall then
be available for delivery to Eligible Employees or unless an exemption from
registration in accordance with regulations duly promulgated by said Commission
under said Act shall then be applicable.
B-3
<PAGE>
ARTICLE IX
Exercise of Options
The Committee shall determine upon the granting of Options, the methods
under which Eligible Employees may purchase shares of Stock upon exercise of
Options, which may include, but is not limited to, any or all of the following
three methods:
1. Any Eligible Employee who holds an Option may exercise said
Option at any time during which it is outstanding and not yet expired
in whole at any one time, or in part from time to time (provided that
each exercise shall be for ten or more shares of stock), by delivering
a duly executed subscription agreement to the Company or its duly
authorized agent or representative, such subscription agreement to be
accompanied by payment in full in cash for such shares at the exercise
price per share therefor.
2. Any Eligible Employee who holds an Option may exercise said
Option at any time during which it is outstanding and not yet expired
to the extent of a maximum of 50 shares (but subject to the proviso
that each such exercise shall be in increments of 5 shares but not less
than 10 shares), by delivering a duly executed subscription agreement
to the Company or its duly authorized agent or representative, such
subscription agreement to be accompanied by payment in cash in the
amount of at least $1.00 per share for each share purchased and by the
Eligible Employee's non-interest bearing promissory note for the
balance of the price of the shares to which such note relates at the
exercise price per share therefor. No Eligible Employee may purchase
more than an aggregate of 50 shares pursuant to Options granted whether
at one time or from time to time, through payment by such non-interest
bearing promissory note. Subject to approval by the Committee in its
discretion from time to time at the time of granting such Options, any
Eligible Employee who holds an Option and who has theretofore purchased
the maximum of 50 shares through the delivery of a non-interest bearing
promissory note as provided in paragraph 2 above may exercise said
Option at any time during the month for which it was granted, to the
extent of a maximum of 25 shares (but subject to the provision that
each such exercise shall be for 10,15, 20 or 25 shares), by delivering
a duly executed subscription agreement to the Company or its duly
authorized agent or representative, such subscription agreement to be
accompanied by payment in cash in the amount of at least $1.00 per
share for each share purchased and by the Eligible Employee's
promissory note, bearing interest at the rate determined by the
Committee at the time of granting such Option, for the balance of the
price of the shares to which such note relates at the exercise price
per share therefor. No Eligible Employee may purchase more than an
aggregate of 25 shares pursuant to Options granted after October 31,
1978 whether at one time or from time to time, through payment by such
interest bearing promissory notes.
3. Any Eligible Employee who holds an Option that is
outstanding and not yet expired may authorize a payroll deduction from
his/her pay for each payday during the time he/she holds such Option,
to be deposited in a non-interest bearing account maintained by the
Company for the purpose of funding the Eligible Employee's purchase of
stock upon the exercise of an Option; provided that such Eligible
Employee only may authorize a payroll deduction at the rate of 1% to
10% of his/her base pay, in effect, as of the date such deduction is
authorized by the Eligible Employee. The Eligible Employee may exercise
the Option at any time that it is outstanding and has not yet expired
by delivering a duly executed subscription agreement to the Company or
its duly authorized agent or representative such subscription agreement
to be accompanied by written notice from the Eligible Employee
directing the Company to apply the Eligible Employee's account balance
to the purchase of whole shares of stock pursuant to the exercise of
the Option. Any excess in such account after the payment of the stock
acquired upon the exercise of an Option will be refunded to the
Eligible Employee.
All payroll deductions made for a participant shall be credited to the
participant's account under the Plan which will be maintained by the Company. A
participant may not make any separate cash payment into his/her account. A
participant may elect payroll deductions to fund the purchase of stock pursuant
to the exercise of an Option only with respect to wages not yet earned. A
participant may not change the amount of his/her payroll deductions. Upon the
exercise of the Option, all payroll deductions for the participant shall cease.
If a participant goes on an authorized leave
B-4
<PAGE>
of absence, such participant may elect to withdraw the balance of his/her
account, discontinue payroll deductions but remain a participant in the Plan
during such leave of absence or authorize deductions to be made from any
payments by the Company to the participant, if any. At any time, a participant
may terminate his or her account and receive the balance of his/her account in
full.
Payment for any shares purchased otherwise than through delivery of
promissory notes or the application of payroll deduction accounts as provided in
paragraphs 2 and 3 above, or such other method as the Committee may determine,
shall be made in cash as provided in paragraph 1 above.
The Committee may require at the time of granting the Options that the
shares purchased pursuant to the exercise of an Option can be sold by the
Eligible Employee who purchased such shares or any successor in interest in the
event of such Eligible Employee's death, only by means of their tender to the
Company upon the following terms and conditions or such other terms and
conditions as the Committee may determine:
If such tender shall occur during the period of two years following the
purchase of the shares of Stock so purchased, the Company, if it shall accept
such tender, shall pay for such shares the same price paid to the Company by the
Eligible Employee therefor. If such tender shall occur more than two years after
the purchase of the shares of Stock so purchased, the Company, if it shall
accept such tender, shall pay for such shares the market price of such shares on
the date of the receipt by the Company of their tender to the Company.
In the subscription agreement, such Eligible Employee shall agree with
the Company that certificates for shares of Stock so purchased by such Employee
may bear the following legend:
"The shares of the Common Stock of Winn-Dixie Stores, Inc.
represented by this certificate are subject to the provisions
of Article IX of the Revised Stock Purchase Plan for
Employees, as amended, of Winn-Dixie Stores, Inc. Such shares
may be sold by the holder thereof only by means of their
tender to Winn-Dixie Stores, Inc. for the applicable
consideration set forth in such Article IX, unless the Company
shall not accept the tender of such shares, in which case the
shares may be sold by the holder thereof, free of any
restrictions or limitations."
In any case in which payment is made in part by promissory note, any
certificate representing the shares of Stock purchased shall be issued in the
name of the Eligible Employee so purchasing the same and shall be endorsed by
the Eligible Employee in blank (or accompanied by a duly executed stock power)
and delivered to and pledged with the Company as security for the note, and a
pledge agreement shall be entered into by such Eligible Employee and the
Company. The pledge agreement shall provide that (i) no certificate for pledged
shares of Stock shall be redelivered to the pledgor until the promissory note
(together with all interest thereon, if any) has been paid in full and (ii)
provided that there has been no default under the terms and provisions of the
promissory note, the Company will not cause the certificate for the pledged
shares of Stock to be transferred out of the name of the pledgor and the pledgor
shall have the right to vote such shares of Stock at all meetings of the
stockholders of the Company and shall receive all cash dividends paid on such
shares. The pledge agreement shall contain such other provisions as the Company
may deem advisable.
The principal of the promissory note shall be payable in equal
installments payable weekly or monthly depending upon whether the pledgor is
paid on a weekly or monthly basis, of such amount as may be determined by the
payroll department (which equal installments shall, in each case, be payable
over a period of three years), and the pledgor shall give a written
authorization to such payroll department, on such form or forms as may be
furnished by the Company, authorizing the deduction each week or month, as the
case may be, during the term of the note of the amount of such weekly or monthly
installment. Interest, if any, on the unpaid portion of such promissory note
shall accrue from the date thereof at the rate per annum determined by the
Committee at the time of granting the Option to which such promissory note
relates. The amount of accrued interest payable, if any, on each payment date
shall be added to the amount payable on account of principal, and shall be
included in the payroll deduction referred to in the preceding sentence. If the
pledgor shall cease to be employed by the Company and/or its Subsidiaries, the
pledgor shall continue to make the same payments as were made while the pledgor
was so employed until the promissory note shall be paid in full.
B-5
<PAGE>
In the event of a default in the prompt payment of accrued interest on
or any installment due on the principal of, any promissory note, unless such
interest or installment shall have been paid prior to the expiration of 10 days
after notice of such default to the pledgor, the principal balance, if not
already due and payable, shall become due and payable and the Company shall
thereafter be entitled:
(a) To collect and receive all dividends on the pledged shares; and
(b) To sell or cause to be sold at such price or prices as the
Company may deem best all or any of the pledged shares, without
demand of performance or notice of intention to sell.
The proceeds of any such sale and any monies collected, received or
otherwise realized by the Company from the pledged shares, shall be applied as
follows:
(a) To the expenses of such sale or realization and all other
expenses of the Company under the pledge agreement;
(b) To the payment of accrued interest, if any, then due and payable
on the note;
(c) To the payment of the principal of the note; and
(d) Any balance thereafter remaining shall be paid to the pledgor or
to whomsoever may be lawfully entitled to receive the same.
In the event that the balance due from the pledgor at the time of any
default exceeds the net proceeds from such sale, the pledgor shall be and remain
liable for such excess.
The date on which a duly executed subscription agreement shall be
received by the Company or its duly authorized agent or representative, in
accordance with any of the above methods, shall be deemed to be the "Date of
Subscription" with respect to the shares subscribed for, for all purposes of the
Plan.
ARTICLE X
Conditions on the Exercise of Options
The exercise of Options shall be subject to the following conditions:
1. Each employee exercising an Option must on each Date of
Subscription be an Eligible Employee.
2. In case there shall not be a sufficient number of shares of Stock
available, either because of the limitations imposed by Article
II hereof, or because the Committee shall have limited the
maximum number of shares to be issued and sold in accordance with
the provisions of subparagraph 1 of the second paragraph of
Article V hereof, to issue all of the shares otherwise issuable
upon the exercise of Options, subscriptions pursuant to the
exercise of Options shall be filled in any manner determined by
the Committee.
ARTICLE XI
Pledged Stock
In the case of those shares payment for which was made in whole or in
part by promissory note, said shares shall be immediately redelivered to the
Company and pledged as security for the promissory note as provided in Article
IX hereof.
B-6
<PAGE>
ARTICLE XII
Rights of Employees
An Eligible Employee shall not have any rights as a stockholder of the
Company by virtue of any Option until the date of issue of the shares of Stock
purchased by such Eligible Employee pursuant to its exercise.
ARTICLE XIII
Interpretation of the Plan
Determinations of the Committee as to any question which may arise with
respect to the interpretation or administration of any provisions of the Plan
shall, unless otherwise determined by the Board of Directors of the Company, be
final. The Company may prescribe administrative rules under the Plan.
B-7
<PAGE>
EXHIBIT C
WINN-DIXIE STORES, INC.
Key Employee Stock Option Plan
(Changes made by the proposed amendment have been
marked. Additions are underlined.
Deletions are struck through.)
-------------------
ARTICLE I.
Designation and Purpose of Plan
The Plan shall be known as the "Winn-Dixie Key Employee Stock Option
Plan". The purpose of the Plan is to promote in the Company's key employees
additional incentive by inducing and enabling them to become part owners of the
business or to increase their share of its ownership through the exercise of
options granted pursuant to the Plan.
ARTICLE II.
Definitions
The following words and phrases wherever used herein shall, unless the
context otherwise indicates, have the following meanings:
1. "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.
2. A "Change in Control" shall mean:
(i) any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding (A) those
persons and entities included in the joint Schedule 13(G) filing
filed with the Securities and Exchange Commission on February 12,
1999, and all current or future heirs, successors and affiliates
to such persons and all trusts or other entities established or
maintained, or to be established or maintained, for the benefit
of such persons and their heirs, successors and affiliates
(collectively, the "Davis Family"), (B) any employee benefit plan
or related trust sponsored or maintained by the Company, and (C)
a corporation or other entity owned, directly or indirectly, by
all or substantially all of the shareholders of the Company
immediately prior to the transaction in substantially the same
proportions as their ownership of stock of the Company
("Person")), becoming the beneficial owner, directly or
indirectly, of twenty-five (25) percent or more of the
outstanding voting stock of the Company requiring the filing of a
report with the Securities and Exchange Commission under Section
13(d) of the Act; provided, that, at the time of the acquisition
of such beneficial ownership interest, such Person's beneficial
ownership interest in the Company exceeds that of the Davis
Family.
(ii) consummation of a merger, consolidation, liquidation or
dissolution of the Company, or the sale of all or substantially
all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, all or
substantially all of the shareholders of the Company immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than fifty (50) percent of the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such
Business Combination; or
C-1
<PAGE>
(iii)during any period of 24 consecutive months, individuals who at
the beginning of such period constitute the Board and any new
directors whose election by the Board or nomination for election
by the Company's shareholders was approved by a vote of at least
2/3 of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board.
3. "Committee" shall mean a committee of at least two persons appointed
by the Board of Directors of the Company each of whom shall be an
outside director of the Company.
4. "Company" shall mean Winn-Dixie Stores, Inc.
5. "Eligible Employee" shall mean an officer or other key employee of the
Company or its subsidiaries who, in the judgment of the Committee, is
significantly responsible for or materially contributes to the
management, growth or profitability of the business of the Company or
its subsidiaries.
6. "Option" shall mean any option granted or held pursuant to the
provisions of the Plan. Options shall be evidenced by forms prescribed
by the Committee.
7. "Optionee" shall mean any person who at the time in question holds any
Option which then remains unexercised in whole or in part and which
has not expired or terminated.
8. "Plan" shall mean this Winn-Dixie Key Employee Stock Option Plan.
9. "Return on Equity" shall mean the percentage which the net earnings of
the Company for a particular fiscal year bears to the average net
shareholder equity for such fiscal year, in each case as reflected in
the financial statements of the Company for such fiscal year as
reported in the Company's Annual Report to its stockholders.
10. "Stock" shall mean the Company's Common Stock, having a par value of
$1.00 per share, as constituted on June 1, 1998, whether presently
authorized and unissued or held in the Company's treasury, or
hereafter reacquired by the Company. In the event that any change in
the outstanding shares of Stock (including an exchange of the Stock
for stock or other securities of another corporation) occurs by reason
of a Stock dividend or split, recapitalization, merger, consolidation,
combination, exchange of shares or other similar corporate changes,
the remaining number of shares of Stock which may thereafter be sold
pursuant to the Plan and the remaining number of shares of Stock which
may thereafter be purchased pursuant to the exercise of any Option
then outstanding shall be appropriately adjusted by the Committee,
whose determination shall be conclusive; provided, however that
fractional shares shall be rounded to the nearest whole share. In the
event of any other change in the Stock, the Committee shall in its
sole discretion determine whether such change equitably requires a
change in the number or type of shares subject to any outstanding
Option and any adjustment made by the Committee shall be conclusive.
ARTICLE III.
Shares Available for Purchase
Subject to the anti-dilution provisions contained in the definition of
Stock in Article II hereof, except as provided in Article VII hereof, the
maximum number of shares of Stock which may be sold pursuant to the exercise of
Options shall be 5,000,000 . Except as provided in Article VII hereof, at
no time shall there be Options outstanding for the purchase of more than
5,000,000 shares of Stock (subject to said anti-dilution provisions) less
such number of shares as have previously been sold pursuant to the exercise of
Options. If an Option shall for any reason terminate or expire, any shares of
Stock covered by such Option immediately prior to its termination or expiration
shall again become available for sale pursuant to the exercise of other Options
granted or to be granted pursuant to the Plan.
C-2
<PAGE>
ARTICLE IV.
Granting Expiration and Termination of Options
The Committee shall, by a vote of a majority thereof, have the
exclusive power to grant Options to purchase shares of Stock to Eligible
Employees. Such Options may be granted at any time and from time to time to such
Eligible Employees, for such number of shares as the Committee in its sole
discretion deems advisable, but in no event more than one-half (1/2) of the
maximum number of shares authorized under the Plan to any single "Eligible
Employee". In all cases the option price per share shall be the fair market
value of the Stock on the date on which the Option is granted (but not less than
$1.00), and such Option shall be exercisable, subject to the provisions of
Article V hereof, within the option period, at the end of which period it shall
expire and become void to the extent that it then remains unexercised. The
option period within which each Option granted hereunder shall be exercisable
shall commence on such date as the Committee shall determine and shall end on
December 31, 1998, as to Options granted after June 1, 1992 and prior to May 31,
1994; and shall end not later than January 15th following the sixth full fiscal
year after the grant as to Options granted on May 31, 1994 or thereafter.
Subject to the provisions of Article V hereof, if the Optionee to whom
an Option was originally granted shall cease to be employed by the Company for
any reason other than death he or she may, within the three months next
succeeding such cessation of employment (unless such Option shall sooner
expire), exercise such Option to the extent that he or she was entitled to
exercise it as of the date of such cessation, and at the expiration of such
three months (unless it shall have sooner expires) such Option shall terminate
and become void to the extent that it then remains unexercised. Leaves of
absence may be granted to Optionees who are employees of the Company because of
illness or for such other reasons as the Committee may determine, without being
considered a termination or cessation of employment.
The Plan shall not confer upon any Eligible Employee or any Optionee
any right with respect to continuance of employment by the Company, nor shall it
interfere in any way with his or her right, or the Company's right, to terminate
his or her employment at any time.
In the event of the death, while in the employ of the Company, of an
Optionee to whom an option was originally granted, such Option shall be
exercisable (to the extent provided in Article V hereof) within one year of such
date of death (unless it shall sooner expire), but only (a) by the person or
persons to whom such Option shall pass by such Optionee's will or the laws of
descent and distribution, and (b) if and to the extent that he or she was
entitled to exercise such Option at the date of his or her death. At the end of
such one year period the Option (unless it shall have sooner expired) shall
terminate and become void to the extent that it then remains unexercised.
ARTICLE V.
Exercise of Options
Each Option granted pursuant to the Plan prior to June 1, 1998 shall
become exercisable on and after such date as the Committee shall determine, to
the extent of 50% of the shares of Stock covered thereby at any time after the
end of a fiscal year of the Company for which the Company earned a Return on
Equity of 20% or more, if such Option was outstanding throughout such fiscal
year. Each such Option shall become exercisable as to the remaining 50% of the
shares of Stock covered thereby at any time after the end of the second
consecutive fiscal year of the Company in each of which two consecutive fiscal
years the Company earned a Return on Equity of 20% or more, if such Option was
outstanding throughout such period of two consecutive years.
Each Option granted pursuant to the Plan on June 1, 1998 through May
30, 2000 shall become exercisable on and after such date as the Committee shall
determine that the Company has earned an average Return on Equity for three
consecutive fiscal years equal to or exceeding a percentage rate established by
the Committee at the time the Option is granted, if such Option was outstanding
throughout such period of three consecutive years.
C-3
<PAGE>
Each Option granted pursuant to the Plan on June 1, 2000 and thereafter
shall vest and become exercisable on such date and in accordance with such
requirements as the Committee shall determine, in its sole discretion, at the
time of grant.
All Options granted pursuant to the Plan that are outstanding at the
time of a Change in Control shall immediately vest upon the occurrence of the
Change in Control.
Subject to this Article V, any Optionee shall have the right to
exercise his or her Option in whole at any time or in part from time to time
(provided that each exercise shall be for 1,000 shares of Stock, as constituted
at the date of such exercise, or any multiple thereof unless such Option shall
be for less than 1,000 shares, in which event such exercise shall be for the
full number of shares represented by such Option) by submitting written notice
thereof to the Company or its duly authorized agent or representative, on such
form or forms as may be provided by the Company, accompanied by payment in full,
in cash, for the shares to be purchased.
ARTICLE VI.
Rights of Optionees
An Optionee shall not have any rights as a stockholder of the Company
by virtue of any Option until the date of issue of the certificate or
certificates for the shares of Stock purchased pursuant to its exercise.
No Option or any right thereunder of an Optionee to purchase shares of
Stock pursuant to the Plan may be sold, pledged, assigned or transferred
otherwise than by will or the laws of descent and distribution, and such Option
shall be exercisable, during the lifetime of the Optionee, only by the Optionee.
ARTICLE VII.
Effectiveness, Interpretation, Amendment,
Suspension and Termination of the Plan
The effectiveness of this Plan is subject to the condition that it
shall have been approved by the Shareholders of the Company within twelve months
after its adoption. Unless such approval by the Shareholders shall have been
obtained, this Plan and any Option granted pursuant hereto shall be null and
void and without effect.
Determinations of the Committee as to any question which may arise with
respect to the interpretation or administration of any provisions of the Plan
shall be final unless otherwise determined by the Board of Directors. The
Committee may require Eligible Employees to meet certain share ownership
obligations to receive grants under the Plan. The Committee may also prescribe
administrative rules under the Plan and may in its discretion appoint an
independent agent to act as Option Agent for Options granted pursuant to the
Plan and may empower such Option Agent to handle any or all administrative
maters with regard to Options granted by the Committee.
Unless shareholder approval otherwise is required by applicable law or
the rules of the New York Stock Exchange, the Committee or the Board of
Directors each shall have the power at any time to add to, amend or repeal any
of the provisions of the Plan (including the power to increase the maximum
number of shares of Stock which may be sold pursuant to the exercise of
Options), to suspend the operation of the entire Plan or of any provision or
provisions thereof for any period or periods or to terminate the Plan in whole
or in part. No such addition, amendment, repeal, suspension or termination shall
in any way affect the rights of the holders of outstanding Options to purchase
shares of Stock in accordance with the provisions hereof.
Notwithstanding the foregoing, unless authorized or ratified by the
holders of a majority of the shares of Common Stock of the Company present or
represented at a meeting thereof at which a quorum shall be present, no
amendment to the Plan shall become effective which shall extend the maximum
period within which an Option may be exercisable to any date later than December
31, 1998, as to Options granted after June 1, 1992 but prior to May 31, 1994.
C-4
<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-3
Consolidated Financial Statements and Supplemental Data:
Report of Management F-8
Independent Auditors' Report F-9
Consolidated Statements of Operations, Years ended
June 28, 2000, June 30, 1999 and June 24, 1998 F-10
Consolidated Balance Sheets, June 28, 2000 and June 30, 1999 F-11
Consolidated Statements of Cash Flows, Years ended
June 28, 2000, June 30, 1999 and June 24, 1998 F-12
Consolidated Statements of Shareholders' Equity, Years ended
June 28, 2000, June 30, 1999 and June 24, 1998 F-13
Notes to Consolidated Financial Statements F-14
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
2000 1999* 1998 1997 1996
---- ---- ---- ---- ----
Sales Dollars in millions except per share data
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 13,698 14,137 13,617 13,219 12,955
Percent (decrease) increase......................... (3.1) 3.8 3.0 2.0 9.9
Average annual sales per store...................... $ 11.6 11.9 11.7 11.3 11.0
Earnings Summary
Gross profit........................................ $ 3,640 3,801 3,624 3,316 3,093
Percent of sales.................................. 26.6 26.9 26.6 25.1 23.9
LIFO charge (credit)................................ $ 15 4 (12) 3 10
Operating and administrative expenses............... $ 3,609 3,594 3,375 3,094 2,803
Percent of sales.................................. 26.4 25.4 24.8 23.4 21.6
Restructuring and other non-recurring charges....... $ 396 - 18 - -
Percent of sales.................................. 2.9 - .1 - -
Company owned life insurance (COLI) tax case (after tax) $ 42 - - - -
Percent of sales.................................. .3 - - - -
Net (loss) earnings................................. $ (229) 182 199 204 256
Basic (loss) earnings per share................... $ (1.57) 1.23 1.34 1.36 1.69
Diluted (loss) earnings per share................. $ (1.57) 1.23 1.33 1.36 1.68
Percent of net (loss) earnings to sales........... (1.7) 1.3 1.5 1.5 2.0
Percent of net (loss) earnings to average equity.. (20.1) 13.1 14.7 15.3 19.9
Net earnings excluding COLI, restructuring and
other non-recurring charges..................... $ 75 182 210 204 256
Basic earnings per share.......................... $ .52 1.23 1.41 1.36 1.69
Diluted earnings per share........................ $ .52 1.23 1.41 1.36 1.68
Percent of net earnings to sales.................. .5 1.3 1.5 1.5 2.0
Percent of net earnings to average equity......... 6.6 13.1 15.5 15.3 19.9
EBITDA ............................................... $ 1.3 618.5 676.7 632.8 656.9
EBITDAR ............................................. $ 325.8 961.4 985.9 911.6 914.9
EBITDA excluding restructuring and
non-recurring charges............................. $ 397.4 618.5 694.8 632.8 656.9
EBITDAR excluding restructuring and
non-recurring charges............................. $ 721.9 961.4 1,004.0 911.6 914.9
Dividends
Dividends paid...................................... $ 149.0 151.2 150.9 144.2 134.0
Percent of net (loss) earnings...................... (65.1) 82.9 76.0 70.5 52.4
Per share (present rate $1.02)...................... $ 1.02 1.02 1.02 .96 .885
Common Stock (WIN)
Total shares outstanding (000,000).................. 140.8 148.6 148.5 148.9 151.7
NYSE - Common stock price range - High............ $ 41.94 52.19 59.25 42.38 38.38
- Low $ 14.25 28.63 33.69 29.88 28.06
Financial Data
Cash flow information:
Net cash provided by operating activities......... $ 743.3 436.4 464.5 413.9 556.9
Net cash used in investing activities............. $ 196.1 335.1 325.9 477.7 387.9
Net cash (used in) provided by financing activities $ (542.3) (100.0) (129.2) 45.7 (167.3)
Capital expenditures, net........................... $ 213.9 345.7 369.6 423.1 362.0
Depreciation and amortization....................... $ 256.7 292.4 330.4 291.2 248.3
Working capital..................................... $ 50.4 285.0 262.6 220.1 403.8
Current ratio....................................... 1.0 1.2 1.4 1.2 1.5
Total assets........................................ $ 2,747 3,149 3,069 2,921 2,649
Obligations under capital leases.................... $ 32 38 49 54 61
Present value of future rentals under operating leases $ 2,408 2,575 2,389 2,048 1,851
Long-term rental obligations on closed stores....... $ 220 35 34 25 15
Total long-term obligations (Long-term debt + leases) $ 2,660 2,648 2,472 2,127 1,927
Long-term obligations to equity ratio............... $ 3.1 1.9 1.8 1.6 1.4
Comprehensive (loss) income......................... $ (232.0) 182.6 199.4 206.4 -
Shareholders' equity................................ $ 868 1,411 1,369 1,337 1,342
Book value per share................................ $ 6.16 9.50 9.22 8.98 8.85
Taxes
Federal, state and local............................ $ 123 308 302 285 288
Per diluted share................................... $ .85 2.07 2.03 1.90 1.89
* 53 Weeks
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA -continued
2000 1999* 1998 1997 1996
---- ---- ---- ---- ----
Dollars in millions except per share data
Stores
<S> <C> <C> <C> <C> <C>
In operation at year-end............................ 1,079 1,188 1,168 1,174 1,178
Opened and acquired during year..................... 34 79 84 83 61
Closed or sold during year.......................... 32 59 90 87 58
Closed due to restructuring......................... 111 - - - -
Enlarged or remodeled during year................... 42 64 136 79 128
New/enlarged/remodeled in last five years........... 790 908 912 805 743
Percent to total stores in operation.............. 73.2 76.4 78.1 68.6 63.1
Year-end retail square footage (000,000)............ 48.1 52.0 49.6 47.8 45.7
Average store size at year-end (000)................ 44.6 43.7 42.4 40.7 38.8
Other Year-end Data
Associates (000).................................... 120 132 139 136 126
Shareholder accounts (000).......................... 45.7 48.1 52.0 55.2 56.3
Shareholders per store.............................. 42 40 45 47 48
* 53 Weeks
</TABLE>
F-2
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales for fiscal 2000, a 52 week year, were $13.7 billion, compared to
fiscal 1999, $14.1 billion, a 53 week year, and fiscal 1998, $13.6 billion, a 52
week year. This reflects a decrease of 3.1% for fiscal 2000 and an increase of
3.8% and 3.0% in 1999 and 1998, respectively. Excluding the effect of fiscal
1999 being a 53 week year and the effect of closing stores in the fourth quarter
of fiscal 2000 as part of the Company's restructuring plan, sales remained flat
in fiscal 2000 compared to fiscal 1999. Average store sales decreased 1.2% for
the current year and increased 2.1% and 3.0% in fiscal 1999 and 1998,
respectively. Identical store sales decreased 2.7%, 0.9% and 0.3% for 2000, 1999
and 1998, respectively.
Sales for the 12 week fourth quarter of 2000 were $3.1 billion,
compared to $3.5 billion for the 13 week fourth quarter of fiscal 1999 and $3.3
billion for the 12 week fourth quarter of 1998. For the fourth quarter, average
store sales decreased 1.9% both in fiscal 2000 and 1999 while 1998 increased
7.0%. Identical store sales for the fourth quarter decreased 3.9% in fiscal
2000, decreased 3.9% in 1999 and increased 3.1% in 1998. Comparable stores
sales, which include replacement stores, decreased 3.5% for the quarter and
decreased 1.9% year-to-date.
The Company believes that its program to retrofit approximately 650
stores during fiscal 2001 will not only result in labor and other efficiencies,
but will improve the stores' customer appeal which should enhance the Company's
competitive position and, in turn, positively impact the Company's sales.
For the 52 weeks ended June 28, 2000, the Company opened 34 new stores,
averaging 52,300 square feet, closed 143 stores, averaging 41,400 square feet
and enlarged or remodeled 42 store locations, for a total of 1,079 locations in
operation on June 28, 2000, compared to 1,188 last year. As of June 28, 2000,
retail space totaled 48.1 million square feet, a 7.5% decrease over the prior
year. The 143 store closings includes 111 stores that closed as part of the
Company's announced restructuring plan with five additional stores to be further
evaluated during fiscal 2001. Adjusted for the stores included in the
restructuring, retail space would have increased 1.8% over last year.
As a percent of sales, gross profit margins were 26.6%, 26.9% and 26.6%
in fiscal 2000, 1999 and 1998, respectively. Gross profit margins have remained
relatively constant over the three years. The decrease in the gross profit
dollars for fiscal 2000 is primarily due to the decrease in sales from the
stores that closed as part of the restructuring and the effect of the 53 week
year in 1999. In addition, the Company had a charge to gross profit of
approximately $8.9 million related to the restructuring. The Company believes
its transition to centralized merchandise procurement and shrink reduction
initiatives will result in improved efficiencies that will increase gross
margins. Approximately 84% 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 $15.1 million in 2000, a decrease of $4.4 million in
1999 and an increase of $12.1 million in 1998.
F-3
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations -continued
Results of Operations, continued
Operating and administrative expenses, as a percent of sales, were
26.4%, 25.4% and 24.8% in fiscal 2000, 1999 and 1998, respectively. Operating
and administrative expenses continue to be negatively impacted by payroll and
occupancy costs related to the Company's direction of building larger,
full-service stores. The Company believes its restructuring effort, including
the retrofit of 650 stores, will result in more efficient operations and a
decrease in payroll dollars.
Cash discounts and other income amounted to $110.1 million, $118.9
million and $115.4 million in 2000, 1999 and 1998, respectively. The decrease in
cash discounts and other income for fiscal 2000 is primarily due to a reduction
in merchandise purchases. The reduction in purchases is due to the store
closings from restructuring and an initiative to minimize excess inventory.
Interest expense totaled $47.1 million, $29.6 million and $28.5 million
in fiscal 2000, 1999 and 1998, respectively. Interest expense primarily reflects
a computation of interest on capital lease obligations and short-term
borrowings. The increase in interest expense for the year reflects a $19.7
million interest reserve recorded after receiving an unfavorable opinion from
the U.S. Tax Court in October 1999 (see Note 6 - Income Taxes).
(Loss) earnings before income taxes were $(302.4) million, $296.5
million and $317.8 million in fiscal 2000, 1999 and 1998, respectively. The
pretax loss for fiscal 2000 is primarily due to the restructuring charge,
increase in operating and interest expenses, and decrease in gross profit
dollars as previously mentioned. The effective income tax (benefit) expense
rates were (24.3)%, 38.5% and 37.5% for fiscal 2000, 1999 and 1998,
respectively. The effective tax rate for fiscal 2000 reflects the effects of
certain restructuring expenses and Company Owned Life Insurance ("COLI")
adjustments.
Net (loss) earnings amounted to $(228.9) million, or $(1.57) per
diluted share for 2000, $182.3 million, or $1.23 per diluted share for 1999 and
$198.6 million, or $1.33 per diluted share for 1998. The LIFO calculations
increased the net loss by $9.3 million, or $0.06 per diluted share in 2000,
decreased net earnings by $2.7 million, or $0.02 per diluted share in 1999 and
increased net earnings by $7.4 million, or $0.05 per diluted share in 1998.
F-4
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations -continued
Results of Operations, continued
The following tables show the effect of the company owned life
insurance adjustment, restructuring and other non-recurring charges on the
quarter and year.
<TABLE>
<CAPTION>
Non-recurring Excluding
Charges Non-recurring
Quarter ending June 28, 2000 As Reported
------------------------------------------------------ ---------------- --------------- ----------------
<S> <C> <C> <C>
Net sales.......................................... $ 3,059,996 - 3,059,996
Cost of sales .................................... 2,255,053 8,940 2,246,113
---------------- --------------- ----------------
Gross profit on sales ............................. 804,943 (8,940) 813,883
Operating and administrative expenses.............. 796,247 - 796,247
Restructuring and other non-recurring
charges............................................ 396,029 396,029 -
---------------- --------------- ----------------
Operating (loss) income............................ (387,333) (404,969) 17,636
Cash discounts and other income.................... 20,245 - 20,245
Interest expense (6,784) (2,207) (4,577)
---------------- --------------- ----------------
(Loss) earnings before income tax.................. (373,872) (407,176) 33,304
Income tax .................................... (131,428) (144,250) 12,822
---------------- --------------- ----------------
Net (loss) earnings ............................... $ (242,444) (262,926) 20,482
================ =============== ================
Basic (loss) earnings per share.................... $ (1.70) (1.84) 0.14
================ =============== ================
Diluted (loss) earnings per share.................. $ (1.70) (1.84) 0.14
================ =============== ================
Non-recurring Excluding
Charges Non-recurring
Year ending June 28, 2000 As Reported
------------------------------------------------------ ---------------- --------------- ----------------
Net sales.......................................... $ 13,697,547 - 13,697,547
Cost of sales .................................... 10,057,700 8,940 10,048,760
---------------- --------------- ----------------
Gross profit on sales ............................. 3,639,847 (8,940) 3,648,787
Operating and administrative expenses.............. 3,609,248 - 3,609,248
Restructuring and other non-recurring
charges............................................ 396,029 396,029 -
---------------- --------------- ----------------
Operating (loss) income............................ (365,430) (404,969) 39,539
Cash discounts and other income.................... 110,100 - 110,100
Interest expense .................................. (47,081) (19,707) (27,374)
---------------- --------------- ----------------
(Loss) earnings before income tax.................. (302,411) (424,676) 122,265
Income tax ........................................ (73,516) (120,588) 47,072
---------------- --------------- ----------------
Net (loss) earnings ............................... $ (228,895) (304,088) 75,193
================ =============== ================
Basic (loss) earnings per share.................... $ (1.57) (2.09) 0.52
================ =============== ================
Diluted (loss) earnings per share.................. $ (1.57) (2.09) 0.52
================ =============== ================
</TABLE>
F-5
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations -continued
Results of Operations, continued
Cost of sales were negatively impacted by the write off of inventory in
the stores and manufacturing plants that closed as part of the restructuring
plan. Restructuring and other non-recurring charges reflect location closing
costs, lease termination costs and asset impairments (see Note 13 -
Restructuring and Other Non-recurring Charges). Interest expense reflects the
year-to-date amount of accrued interest due to the Company's recent court
decision on company owned life insurance (see Note 6 - Income Taxes).
Liquidity and Capital Resources
Cash and cash equivalents amounted to $29.6 million, $24.7 million and
$23.6 million at the end of fiscal years 2000, 1999 and 1998, respectively. Cash
provided by operating activities amounted to $743.3 million in 2000, $436.4
million in 1999 and $464.5 million in 1998. The increase for fiscal 2000 is
primarily due to the reduction in merchandise inventories and accounts
receivable.
Net capital expenditures totaled $213.9 million, $345.7 million and
$369.6 million in fiscal 2000, 1999 and 1998, 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 $400.0
million in fiscal 2000 and projected to be $450.0 million in fiscal 2001. The
Company will be retrofitting approximately 650 stores to improve efficiency and
customer service. The Company estimates capital expenditures on this project to
total approximately $85 million in fiscal 2001. The Company has no material
construction or purchase commitments outstanding as of June 28, 2000.
Working capital amounted to $50.4 million and $285.0 million at the end
of fiscal years 2000 and 1999, respectively. Inventories on a FIFO (first-in,
first-out) basis decreased $268.6 million in 2000 and increased $24.6 million in
1999.
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
F-6
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations -continued
Liquidity and Capital Resources - continued
commercial paper and $165.0 million from short-term lines of credit outstanding
on June 30, 1999. The average interest rate on the commercial paper outstanding
on June 28, 2000 was 7.0%, as compared to 5.4% on June 30, 1999. The interest
rate on the short-term 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.
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
Company's outstanding common stock in addition to the five-million share
repurchase program announced on October 6, 1999. As of June 28, 2000, the
Company had repurchased 7,858,000 shares having an aggregate value of $162.1
million or $20.62 per share.
Excluding lease obligations, the Company had no outstanding long-term
debt as of June 28, 2000 or June 30,1999.
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 the competition, through improved
gross profit margins.
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-7
<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.
Allen R. Rowland Richard P. McCook
President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
F-8
<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
F-9
<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.
F-10
<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.
F-11
<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.
F-12
<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
F-13
<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.
F-14
<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.
F-15
<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.
F-16
<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).
F-17
<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
========== =========== ===========
F-18
<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.
F-19
<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.
F-20
<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.
F-21
<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>
F-22
<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.
F-23
<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>
F-24
<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
======== ========
F-25
<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.
F-26
<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.
F-27
<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.
F-28
<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>
F-29
<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.
F-30
<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>
F-31
<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>
F-32
