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United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-3657
WINN-DIXIE STORES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0514290
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5050 Edgewood Court, Jacksonville, Florida 32254-3699
(Address of principal executive offices) (Zip Code)
Area Code (904) 783-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- ------------------------------------------
Common Stock Par Value New York Stock Exchange
$1.00 Per Share
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [|X|] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of common stock on June 28,
2000, as reported on the New York Stock Exchange was approximately
$1,155,565,928. Shares of common stock held by each executive officer and
director and by principal shareholders filing Schedules 13D and 13G have been
excluded in that such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of June 28, 2000, registrant had outstanding 140,830,197 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy
Statement in respect to the 2000 Annual Meeting of Shareholders are incorporated
by reference in Part III hereof, as more specifically described herein.
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TABLE OF CONTENTS
Page
Number
PART I
Business................................................................... 1
Properties................................................................. 7
Legal Proceedings.......................................................... 7
Submission of Matters to a Vote of Security Holders........................ 7
Executive Officers of the Registrant....................................... 8
PART II
Market for the Registrant's Common Equity and Related Shareholder Matters.. 9
Selected Financial Data.................................................... 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 10
Quantitative and Qualitative Disclosure about Market Risk.................. 10
Financial Statements and Supplemental Data................................. 10
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................ 10
PART III
The information required by Part III is hereby incorporated by
reference to Winn-Dixie Stores, Inc.'s definitive proxy statement
to be filed on or before August 25, 2000 in connection with its
Annual Meeting of Shareholders............................................. 10
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K............ 11
Signatures................................................................. 15
<PAGE>
PART I
ITEM 1: BUSINESS
General
Winn-Dixie Stores, Inc., organized in Florida on December 26, 1928, is
a major food retailer with 1,079 stores in fourteen states and the Bahama
Islands. According to published reports of sales at June 28, 2000, the Company
is one of the nation's largest supermarket retailers.
All of the Company's subsidiaries except Bahamas Supermarkets Limited
are wholly-owned. Except where the context indicates otherwise, the term
"Company" includes Winn-Dixie Stores, Inc. and all of its subsidiaries,
collectively.
On May 27, 2000, the Company agreed to acquire certain supermarket
operations of Gooding's Supermarkets, Inc. in the Orlando, Florida area. The
operations consist of 9 supermarkets averaging 47,300 square feet. Completion of
the sale is subject to governmental approvals and the satisfaction of other
customary conditions. This acquisition fits the Company's strategic direction of
seeking prime supermarket locations that offer potential for sales growth within
its core markets.
On June 22, 2000, the Company and The Kroger Co. terminated the
agreement for Kroger's acquisition of the Company's stores in Texas and Oklahoma
after receiving opposition from the Federal Trade Commission. Also, after
reevaluation, the Company believes there is opportunity to grow in this market.
The store base is modern with most of the stores being new or remodeled in the
last few years.
Based upon information monitored by the Company's operating
decision-makers to manage the business, the Company has determined that its
operations are within one reportable segment. Accordingly, financial information
on industry segments is omitted because, apart from the principal business of
operating retail self-service food stores, the Company has no other industry
segments.
1
<PAGE>
ITEM 1: BUSINESS, continued
Store Formats and Business Strategy
The business of the Company is the operation of a chain of retail
self-service food stores, which sell groceries, meats, seafood, fresh produce,
deli/bakery, pharmaceuticals and general merchandise items. The Company's stores
offer broad lines of merchandise, including nationally advertised and private
label brands and unbranded merchandise (principally meats, seafood and produce),
and generally operate on the basis of competitive pricing. Food items sold
include dry groceries, dairy products, baked goods, meats, poultry, fish, fresh
fruit, vegetables, frozen foods and other items commonly marketed by retail food
stores. The Company's stores also sell many general merchandise items, such as
magazines, soaps, paper products, health and cosmetic products, hardware and
numerous small household items. Many locations also offer departments such as
pharmacies, photo labs, dry cleaners as well as in-store banks that are operated
by independent third parties who rent space from the Company. Services provided
by the Company such as check cashing, money transfers, bill payments, money
orders and lottery tickets are incidental to the total business.
In addition, the Company is in the process of piloting a liquor store
and two fuel centers. Based on the operating results of these test locations,
the Company will determine whether future investments in these areas should be
made.
Store locations by state and by format:
City Meat
State Total Winn-Dixie Marketplace Thriftway Markets Buddies
---------------- ------- ------------ ----------- ----------- -------- --------
Florida 429 66 363 - - -
North Carolina 114 56 58 - - -
Alabama 105 34 71 - - -
Georgia 94 14 80 - - -
Louisiana 75 17 58 - - -
Texas 69 14 54 - - 1
South Carolina 63 25 38 - - -
Kentucky 40 6 29 5 - -
Virginia 29 11 18 - - -
Ohio 17 - - 17 - -
Mississippi 14 5 9 - - -
Tennessee 12 4 8 - - -
Bahamas 12 3 - - 9 -
Oklahoma 5 4 1 - - -
Indiana 1 - 1 - - -
------- ------------ ----------- ----------- -------- --------
1,079 259 788 22 9 1
======= ============ =========== =========== ======== ========
2
<PAGE>
ITEM 1: BUSINESS, continued
Support and Other Services
The following table shows the locations of the Company's distribution
centers and its manufacturing and processing plants, as well as the principal
products produced in the plants:
LOCATION FACILITIES
------------------------------------------------------------------------------
ALABAMA Montgomery Distribution center; Plants: milk bottling and
------- frozen pizza
FLORIDA Jacksonville Two distribution centers and a general merchandise
------- distribution center; Plant: coffee, tea and spices
Madison Plant: meat processing
Miami Distribution center; Plant: milk bottling
Orlando Distribution center
Bartow Plant: egg processing
Plant City Plants: ice cream and milk bottling
Pompano Distribution center
Sarasota Distribution center
GEORGIA Atlanta Distribution center
-------
Fitzgerald Plants: jams, jellies, mayonnaise, salad dressing,
peanut butter and condiments; canned and bottled
carbonated beverages
Gainesville Plants: margarine; natural cheese cutting and
wrapping, processed cheese and pimento cheese
Valdosta Plants: crackers and cookies; and snacks
KENTUCKY Louisville Distribution center
--------
LOUISIANA New Orleans Distribution center
--------- Hammond Distribution center; Plant: milk bottling
NORTH
CAROLINA Charlotte Distribution center
--------
Raleigh Distribution center
High Point Plants: milk bottling and cultured products
SOUTH
CAROLINA Greenville General merchandise distribution center;
-------- Plants: ice cream and milk bottling
TEXAS Ft. Worth Distribution center and a general merchandise
----- distribution center; Plant: milk bottling
BAHAMAS Nassau Distribution center
-------
3
<PAGE>
ITEM 1: BUSINESS, continued
An insignificant portion of the products produced by the manufacturing
plants is sold to others. The Company believes that the sources of supply of
these products and raw materials used in manufacturing are adequate for its
needs and that the Company is not dependent upon a single or relatively few
suppliers.
The Company has not publicly announced, or otherwise made public,
information about any new product or industry segment that would require the
investment of a material amount of the assets of the Company or which otherwise
is material.
Sources of available raw materials are factors that do not affect the
Company in any different manner than they affect other manufacturers and
processors of the goods identified.
Patents and trademarks owned by the Company are not of material
importance to its operations.
Seasonality does not materially affect the business of the Company.
However, due to the influx of winter residents to the Sunbelt, Florida in
particular, and increased purchases of food items for the Thanksgiving and
Christmas holiday seasons, there is a seasonal sales increase during the period
of November - April each fiscal year.
The Company and other food retailers have no unusual working capital
requirements.
The business of the Company is not dependent upon a single or a few
customers. The Company does not sell goods or services in an amount which equals
10 percent or more of the Company's consolidated sales to any single customer or
group of customers under common control or to any affiliated group of customers.
Backlog ordering is not a factor in the business of the Company.
No portion of the business of the Company is subject to renegotiations
of profits or termination of contracts or subcontracts at the election of any
government.
Marketing and Competition
In all areas in which the Company operates, the business is highly
competitive with local and national food chain stores, as well as with
independent stores and markets. Many factors enter into the competition,
including price, quality of goods and services, product mix and convenience.
4
<PAGE>
ITEM 1: BUSINESS, continued
The retail food industry is extremely competitive. Each operating area
faces somewhat different competitive conditions. The major competitors for our
operating areas are A&P, Albertson's, Bi-Lo, Bruno, H.E. Butt, Cub,
Delchamp/Jitney Jungle, Food Lion/Kash N Karry, Hannaford, Harris-Teeter,
Ingles, Kroger, Meijers, Minyards, Publix, Randall's/Tom Thumb, Safeway,
Sedano's, Super K, Super Value, Wal-Mart Supercenter, U-Krops and U-Save.
Additionally, local chains and wholesaler-supported independents are
well represented in all regions.
Winn-Dixie is considered a major competitor in all geographic areas in
which it competes.
In fiscal 2000, the Company entered into an agreement with Priceline
Webhouse Club to offer online shopping through the Priceline.com website. When
customers log onto www.priceline.com before making a trip to their Winn-Dixie
store, they can select their order and the price they want to pay. Once price is
accepted and confirmed, customers pick up their grocery purchases at a time and
day convenient to them.
The Company did not spend a material amount on Company-sponsored
research and development activities relating to the development of new products,
services or techniques, or the improvement of existing products, services or
techniques during any of the years in the three-year period ended June 28, 2000.
Government Regulation
The Company's compliance with federal, state and local provisions
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment has not had, and is not expected
to have, a material effect on its capital expenditures, earnings or competitive
position.
Associates
At the end of fiscal 2000, the Company had 53,000 full-time and 67,000
part-time associates. None of the 120,000 associates are covered by a collective
bargaining agreement.
Bahamas
All sales of the Company are to customers within the United States and
the Bahama Islands. The Company exports an insignificant amount of merchandise
to its subsidiary in the Bahamas, which operates 12 retail food stores as
outlined above.
5
<PAGE>
ITEM 1: BUSINESS, continued
Management Actions
On April 20, 2000, the Company announced a major restructuring to
improve the support of the retail stores and the Company's overall efficiency.
In addition, the Company's competitive position should improve with its ability
to focus on future growth. These changes are necessary to provide an effective
infrastructure to train and support operations management teams, resulting in
more efficient operations and in better serving the needs of the Company's
customers. The Company believes implementation of the restructuring plan will
help insure continued growth and improved performance for the Company and
increased value for shareholders.
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. The Company
expects a reduction in expenses of approximately $400 million per year ($246
million after tax or $1.69 per diluted share) approximately one year following
completion of the restructuring.
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.
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 that 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.
6
<PAGE>
ITEM 2: PROPERTIES
Stores
All of the retail stores operated by the Company are on premises
occupied on a rental basis. See "Note 9 of the Notes to Consolidated Financial
Statements," page F-25, included herein.
Support Properties
The warehousing and distribution centers, with the exception of the
facilities in Kentucky and Texas, are rented under leases due to expire within 3
to 22 years. All of these contain renewal options, which vary from lease to
lease.
The expansion and refurbishment of the corporate headquarters in
Jacksonville, Florida is now complete.
A new distribution center and retail support center is under
construction in Jacksonville, Florida with an expected completion in late 2000.
The existing Jacksonville (Commonwealth) distribution center will be converted
to a general merchandise distribution center.
The Company has completed building a new frozen food freezer and
converted the old freezer into a perishable food cooler at the distribution
center in Charlotte, North Carolina.
The Company's Valdosta cracker and cookie, and snacks bakeries; Fort
Worth dairy plant; Madison meat processing plant; Plant City ice cream and milk
bottling plants; Miami reclaim center; and Gainesville oleomargarine and cheese
processing and packaging plants are owned in fee. All other manufacturing
facilities are leased.
All of the above support properties are considered to be in excellent
condition.
ITEM 3: LEGAL PROCEEDINGS
See Note 11(d) of the Notes to Consolidated Financial Statements, page
F-28 included herein, regarding various claims and lawsuits pending against the
Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended June 28, 2000.
7
<PAGE>
Executive Officers of the Registrant
Set forth below is certain information concerning the executive
officers of the Company as of June 28, 2000:
<TABLE>
<CAPTION>
YEAR YEAR FIRST
AGE IN APPOINTED EMPLOYED
YEARS AT TO CURRENT BY
NAME 06-28-00 OFFICE HELD POSITION WINN-DIXIE
---- ------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
A. Dano Davis 55 Chairman of the Board 1988 1968
A. R. Rowland 56 President and 1999 1999
(elected November, 1999) Chief Executive Officer
D. G. Lafever 51 Senior Vice President and 2000 1966
Director of Operations
R. P. McCook 47 Senior Vice President and 1984 1984
Chief Financial Officer
J. R. Sheehan 42 Senior Vice President and 2000 2000
Director of Sales and Procurement
A. B. Toscano 38 Senior Vice President and 2000 2000
Director of Human Resources
E. E. Zahra, Jr. 53 Senior Vice President and 1995 1995
General Counsel
D. M. Byrum 47 Vice President, Corporate Controller 2000 1972
and Chief Accounting Officer
K. D. Ross 31 Vice President, Strategic Planning 2000 2000
and Treasurer
Division Presidents:
J. D. Fitzgerald 50 Vice President 1998 1970
M. J. Istre 49 Vice President 1999 1969
R. C. Lunn, Jr. 48 Vice President 1997 1969
D. J. Richardson 50 Vice President 2000 1966
M. A. Sellers 46 Vice President 1997 1973
H. M. Solana, Jr. 45 Vice President 1999 1971
D. A. Weaver 44 Vice President 2000 1972
The following executive officers retired at the end of the fiscal year:
D. H. Bragin 56 Treasurer 1985 1961
H. E. Hess 60 Senior Vice President 1988 1958
R. A. Sevin 57 Senior Vice President 1997 1961
C. E. Winge 55 Senior Vice President 1988 1963
L. J. Sadlowski 59 Vice President 1983 1961
J. A. Schlosser 51 Vice President 1997 1967
J. T. White 52 Vice President 1999 1968
8
</TABLE>
<PAGE>
Executive Officers of the Registrant, continued
All of the officers listed as executive officers of the registrant, with
the exception of Mr. Allen Rowland, Mr. John Sheehan, Mr. August Toscano and Ms.
Kellie Ross, have been employed for the past five years in either the same
capacity as listed, or in a position with the Company which was consistent in
occupation with the present assignment.
Prior to becoming President and Chief Executive Officer, Mr. Rowland
was President and Chief Operating Officer of Smith's Food & Drug Centers from
1996 to 1997 and, prior to that, was a Senior Vice President with Albertson's.
Senior Vice President and Director of Sales and Procurement, Mr.
Sheehan was Executive Vice President of Pathmark Stores, Inc., Carteret, New
Jersey from 1997 to 2000. For the 16 years preceding 1997, Mr. Sheehan was
employed at Albertson's, most recently as Director of Operations, Southern
California Division.
Senior Vice President and Director of Human Resources, Mr. Toscano was Vice
President, Human Resources of Burger King Corporation, Miami, Florida from 1999
to 2000. From 1998 to 1999, Mr. Toscano was International Human Resources Vice
President, Citibank, Fort Lauderdale, Florida. Mr. Toscano was Senior Director
of Human Resources for Tricon Global Restaurants from 1994 to 1998.
Vice President, Strategic Planning and Treasurer, Ms. Ross was Audit Manager of
Arthur Andersen LLP, Jacksonville, Florida from 1999 to 2000. From 1997 to 1999,
Ms. Ross was Corporate Controller for Armor Holding, Inc. Ms. Ross was Assistant
Controller for PSS World Medical, Inc. from 1995 to 1997.
Officers are elected annually by the Board of Directors and serve for a
one-year period or until their successors are elected.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The principal market on which the Company's common stock is traded is
the New York Stock Exchange. The number of record holders of the Company's
common stock as of June 28, 2000 was 45,668.
Information required by this Item concerning sales prices of the
Company's common stock and the frequency and amount of dividends is in "Note 14
of the Notes to Consolidated Financial Statements," on page F-30 included
herein.
ITEM 6: SELECTED FINANCIAL DATA
The information required by this Item is on page F-1 included herein.
9
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is on page F-3 included herein.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not have any material exposure to market risk
associated with activities in derivative financial instruments, other financial
instruments and derivative commodity instruments.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Financial statements and supplemental data are set forth in the "Index
to Consolidated Financial Statements, Supporting Schedules and Supplemental
Data" on page 17 included herein.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
between the Company and its auditors within the 24 months prior to June 28,
2000.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11: EXECUTIVE COMPENSATION
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items is incorporated herein by
reference to the Company's definitive proxy statement to be filed in connection
with its 2000 Annual Meeting of Shareholders.
10
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) Financial Statements:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 17
included herein.
(2) Financial Statement Schedules:
See "Index to Consolidated Financial Statements,
Supporting Schedules and Supplemental Data" on page 17
included herein.
(3) Exhibits:
Certain of the following exhibits which have heretofore
been filed with the Securities and Exchange Commission
under the Securities Act of 1933 or the Securities
Exchange Act of 1934 and which are designated in prior
filings as noted below, are hereby incorporated by
reference and made a part hereof:
11
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
3.1 Restated Articles of Incorporation as Previously filed as Exhibit 3.1 to
filed with the Secretary of State of Form 10-K for the year ended June 30, 1993, which
Florida. Exhibit is herein incorporated by reference.
3.1.1 Amendment adopted October 7, 1992, to Previously filed as Exhibit 3.1.1 to Form 10-K
Restated Articles of Incorporation. for the year ended June 30, 1993, which Exhibit
is herein incorporated by reference.
3.1.2 Amendment adopted October 5, 1994, to Previously filed as Exhibit 3.1.2 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended January 11, 1995, which
Exhibit is herein incorporated by reference.
3.1.3 Amendment adopted October 1, 1997, to Previously filed as Exhibit 3.1.3 to Form 10-Q
Restated Articles of Incorporation. for the quarter ended September 17, 1997, which
Exhibit is herein incorporated by reference.
3.2 Restated By-Laws of the Registrant as
amended through June 15, 2000.
9.1 Agreement of Shareholders of D.D.I., Previously filed as Exhibit 9.1 to Form 10-K
Inc. (formerly Vadis Investments, Inc.) for the year ended June 30, 1993, which Exhibit
dated April 19, 1989. is herein incorporated by reference.
10.1 Annual Officer Incentive Compensation Previously filed as Exhibit 10.1 to Form 10-Q for
Plan, effective June 15, 1998. the quarter ended September 16, 1998, which
Exhibit is herein incorporated by reference.
</TABLE>
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
10.2 Long-term Officer Incentive Compensation Previously filed as Exhibit 10.3 to Form 10-K for
Plan as amended, effective June 27, 1991. the year ended June 30, 1993, which Exhibit is
herein incorporated by reference.
10.2.1 Restricted Stock Plan, as amended Previously filed as Exhibit 10.2.1 to Form 10-Q
effective August 2, 1999. for the quarter ended September 22, 1999, which
Exhibit is herein incorporated by reference.
10.2.2 Performance-Based Restricted Stock Plan Previously filed as Exhibit 10.2.2 to Form 10-Q
as amended effective August 2, 1999. for the quarter ended September 22, 1999, which
Exhibit is herein incorporated by reference.
10.2.3 Amendment to the Performance-Based
Restricted Stock Plan effective January
26, 2000.
10.3 Key Employee Stock Option Plan Previously filed as Exhibit 10.3 to Form 10-Q for
effective January 24, 1990 as amended the quarter ended September 22, 1999, which
effective August 2, 1999. Exhibit is herein incorporated by reference.
10.4 Supplemental Retirement Plan dated July
1, 1994, as amended effective June 15,
2000.
10.5 Management Security Plan as amended and Previously filed as Exhibit 10.5 to Form 10-K for
restated effective June 30, 1982. the year ended June 26, 1996, which Exhibit is
herein incorporated by reference.
10.5.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.5.1 to Form 10-K
Management Security Plan. for the year ended June 26, 1996, which Exhibit
is herein incorporated by reference.
</TABLE>
13
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
continued
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Incorporated by Reference From
<S> <C> <C>
10.6 Senior Corporate Officer's Management Previously filed as Exhibit 10.6 to Form 10-K for
Security Plan as amended and restated the year ended June 26, 1996, which Exhibit is
effective June 30, 1982. herein incorporated by reference.
10.6.1 Amendment effective May 1, 1992, to Previously filed as Exhibit 10.6.1 to Form 10-K
Senior Corporate Officer's Management for the year ended June 26, 1996, which Exhibit
Security Plan. is herein incorporated by reference.
21.1 Subsidiaries of Winn-Dixie Stores, Inc.
23.1 Consent of KPMG LLP.
</TABLE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the quarter ended
June 28, 2000.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WINN-DIXIE STORES, INC.
By /S/ A. DANO DAVIS
-----------------------
A. Dano Davis, Chairman
Date August 9, 2000
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ A. DANO DAVIS Chairman and Director August 9, 2000
---------------
(A. Dano Davis)
/S/ ALLEN R. ROWLAND President and Director August 9, 2000
------------------ (Chief Executive Officer)
(Allen R. Rowland)
/S/ RICHARD P. MCCOOK Senior Vice President August 9, 2000
------------------- (Chief Financial Officer)
(Richard P. McCook)
/S/ D. MICHAEL BYRUM Corporate Controller August 9, 2000
------------------ (Chief Accounting Officer)
(D. Michael Byrum)
/S/ ROBERT D. DAVIS Director August 9, 2000
-----------------
(Robert D. Davis)
15
<PAGE>
SIGNATURES, continued
/S/ T. WAYNE DAVIS Director August 9, 2000
----------------
(T. Wayne Davis)
/S/ RADFORD D. LOVETT Director August 9, 2000
-------------------
(Radford D. Lovett)
/S/ CHARLES P. STEPHENS Director August 9, 2000
---------------------
(Charles P. Stephens)
/S/ ARMANDO M. CODINA Director August 9, 2000
-------------------
(Armando M. Codina)
/S/ CARLETON T. RIDER Director August 9, 2000
-------------------
(Carleton T. Rider)
/S/ JULIA B. NORTH Director August 9, 2000
----------------
(Julia B. North)
16
<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
Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule S-1
II Consolidated Valuation and Qualifying Accounts, Years
ended June 28, 2000, June 30, 1999 and June 24, 1998 S-2
All other schedules are omitted either because they are not applicable or
because information required therein is shown in the Financial Statements or
Notes thereto.
17
<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
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
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors
Winn-Dixie Stores, Inc.:
Under date of August 9, 2000, we reported on the 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,
as contained in the annual report on Form 10-K for the year 2000. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index on page 17 of the annual report on Form 10-K for the year
2000. This consolidated financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, the consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Jacksonville, Florida
August 9, 2000
S-1
<PAGE>
<TABLE>
<CAPTION>
Schedule II
WINN-DIXIE STORES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended June 28, 2000, June 30, 1999 and June 24, 1998
(Amounts in thousands)
Balance at Additions Deductions Balance at
beginning charged from end
Description of year to income reserves of year
------------------------------------------------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Year ended June 28, 2000:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 3,615 19,021 18,814 3,822
============ =========== ============ ============
Year ended June 30,1999:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 2,623 14,506 13,514 3,615
============ =========== ============ ============
Year ended June 24,1998:
Reserves deducted from assets to which they apply:
Allowance for doubtful receivables $ 1,699 13,995 13,071 2,623
============ =========== ============ ============
</TABLE>
S-2
