Your SlideShare is downloading. ×
0
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
winn-dixie stores  2001_Annual_Report
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

winn-dixie stores 2001_Annual_Report

400

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
400
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. A F RES H APPR O A C H WINN-DIXIE STORES, INC. 2001 ANNUAL REPORT
  • 2. NEW WINN DIXIE THE NEW 2001 Financial Highlights 2 Letter to Shareholders 5 A Fresh Approach 9 Directors & Management 17 Financial Review 19
  • 3. 2001 FINANCIAL HIGHLIGHTS PERCENTAGE F O R T H E F I S C A L Y E A R J U N E 2 7, 2 0 0 1 2000 (EXCLUDING N O N- R E C U R R I N G C H A R G E S ) CHANGE (Dollars in thousands except per share data) FINANCIAL INFORMATION (Excluding non-recurring charges) - 5.8 Sales 12,903,373 13,697,547 17.0 Per Store 11,600 11,600 No Change - 7.3 Gross Profit 3,454,027 3,727,050 RETURN ON AVERAGE EQUITY – 1.5 Percent To Sales 26.8 % 27.2 % 6.6 (In percentages) - 11.3 Operating & Administrative Expenses 3,180,297 3,586,351 - 5.7 Percent To Sales 24.7% 26.2 % 2000 2001 + 94.6 Operating Income 273,730 140,699 + 110.0 Percent To Sales 2.1 % 1.0 % + 15.1 EBITDA 457,289 397,370 457.3 + 157.6 Return On Average Equity 17.0 % 6.6 % 397.4 - 28.5 Depreciation & Amortization 183,559 256,671 EBITDA (In millions of dollars) - 4.1 Dividends Paid On Common Stock 142,853 148,966 AT YEAR END 2000 2001 + 792.0 Working Capital 449,294 50,369 + 40.0 Current Ratio 1.4 1.0 - 0.3 Total Shares Outstanding (000’s) 140,466 140,830 1.00 + 6.9 Stores In Operation 1,153 1,079 0.52 EARNINGS PER SHARE 2000 2001 2 3 WINN-DIXIE 2001 2001 WINN-DIXIE
  • 4. During this past fiscal year, Winn-Dixie has taken a fresh approach to our business. Today’s Winn-Dixie is leaner, more efficient, and more agile than a year ago. Equally important, the company is totally dedicated to excellent customer service. We have made some dramatic changes in operations. It is especially satisfying to report that the restructuring program announced in April 2000 was substantially implemented, and we are achieving the desired results. In fact, its impact has already been reflected in reduced expenses and improved profitability. restructuring expenditures of $552.2 million by fiscal Several restructuring initiatives will have long-term year-end. Virtually all of the action items in the impact on the company, improving our retail stores and restructuring plan have been accomplished as of June increasing our overall efficiency. We are saving 27, 2001. Highlights include: approximately $400 million a year, having completed M E S S A G E T O O U R S H A R E H O L D E R S: • Sharpened focus on total customer satisfaction; • Centralized functions such as accounting, real estate, procurement and marketing for better control and efficiency; • Closed 112 stores and certain manufacturing and distribution centers, all of which had been underperforming assets; • Reformatted store layouts and retrofitted more than half the chain – “right-sizing” key departments to increase profitability; • Introduced new methods to better manage inventory; and • Revamped performance-based incentive plans. 5 2001 WINN-DIXIE
  • 5. In short, with these steps complete, we have made In addition, as we move ahead with efforts to grow substantial progress. We have retained assets in our sales, our emphasis will shift to new, targeted traditional strengths while changing areas of operations marketing and promotional efforts. To this end, we that needed improvement. Going forward, our business recently retained Cramer-Krasselt, the nation’s fourth plan is to: largest independent marketing agency, as advertising • Be the best supermarket operator in the agency of record. A new television advertising campaign neighborhood; will be unveiled early in fiscal year 2002. • Provide the right products, excellent service and Of course, financial strength is an important part of low prices; our picture, ensuring we have the resources to grow Winn-Dixie to leverage its buying power, with benefits Our sincere appreciation is extended to the many • Run profitable stores targeted to our customers; through acquisition, capital investments, and aggressive such as lower cost of goods and reduced inventory. This loyal associates for their efforts to improve customer and marketing. In early 2001, we issued $300 million of project involved significant company resources, yet will service during a difficult time for the company. We are • Maintain strong market share in growing markets. 8.875% Senior Notes Due 2008. The net proceeds of this help improve margins and increase efficiency long-term. proud of the way they have responded to the greater offering, together with $400 million of net proceeds Centralized procurement is one of the new programs demands placed upon them. For example, we are cross- Winn-Dixie has a tremendous opportunity to grow both under our new $800 million credit facility, refinanced that also enables division management to focus more training associates in several departments to better the top- and bottom-line by making the most of our store indebtedness under Winn-Dixie’s existing credit facilities time and resources on their key jobs — providing serve customers, requiring more flexibility on network infrastructure. Therefore, a major emphasis for and the balance will be used for general corporate associates’ part than ever before. Their support in our purposes. “be the best supermarket operator commitment to build rapport with customers and Throughout the year we have continued to strengthen deliver consistently high service is invaluable. our management team to prepare for the future. Dennis in the neighborhood ” In conclusion, we would like to welcome two new M. Sheehan, a lifelong veteran of the grocery industry, members of the Board of Directors. Tillie K. Fowler is a joined as Senior Vice President of Real Estate, a position former member of the U.S. House of Representatives, critical to our expansion. Richard C. Judd joined us as excellent service, growing sales volume, and supporting and currently is a partner in the law firm of Holland & the past year has been on improving operations and Vice President of Warehousing and Distribution from store managers. The store manager position is becoming Knight LLP. Also, Ronald Townsend, a member of the creating efficiencies that will enable us to increase sales Fleming Companies, Inc., to enhance our logistics increasingly vital at our company. Therefore, it is broadcast industry for more than 35 years, is a per square foot of existing stores. Our retrofitted and capabilities. Dean Dell Antonia, Vice President, receiving more organizational support such as communications consultant who was formerly President redesigned stores better enable us to compete in key Performance & Reward Systems, came to us from Rite Aid additional training. An important management concept of Gannett Television Group. Both of these new directors markets, as they are more customer-friendly and cost- Corporation, where he was Managing Director of in Winn-Dixie’s culture is “Servant Leadership,” the idea bring new experience and perspective to our board. effective. Compensation and Benefits. Graeme M. Harper, a senior that all our internal resources support the stores in As a result of the changes made during the past fiscal As another example of doing business more effectively, consultant with Pricewaterhouse Coopers, was named better serving our customers. year, our business has been restructured and repositioned. we lowered our cost structure, providing cash that can Senior Director of Risk Management. A. Brent Kailing, Acquisitions played a key role in Winn-Dixie’s We have a modern store infrastructure in place and are be redeployed elsewhere in the business more profitably. previously Vice President of Operations at Smith’s Food strategy in 2001. They will continue to be an option, investing in the company’s human potential. We have And we have simplified our division structure to provide and Drugs, joined Winn-Dixie as Division Manager of Fort given the right opportunities. In the past year, we successfully reduced expenses and improved productivity. a better foundation for growth, including the benefits of Worth. Robert A. Rowe, Director of Special Projects, was acquired nine Gooding’s supermarkets in the Orlando Winn-Dixie is better prepared to meet the challenges of centralized administrative functions. elected Vice President in charge of the Save Rite area, a core market that offers the potential for sales the future. Our whole organization is now focused on Without doubt, one of the major achievements in FY division. Most recently, C. John Kistel, a vice president growth. Even more significantly, we acquired 68 stores delivering profitable growth for our shareholders in the 2001 has been the implementation of centralized of the Penn Traffic group, joined Winn-Dixie as Vice and 32 fuel centers owned by Mississippi-based Jitney years ahead. procurement. The new procurement system enables President of General Merchandise. Jungle. The acquisition was accretive to earnings and cash flow, and the other synergies were immediate. The acquired store base, which is served by two of our existing distribution centers, has been easily integrated into our existing division structure. Gooding’s and A. Dano Davis Allen R. Rowland Jitney Jungle join a family of brands that also include Chairman of the Board President and Winn-Dixie, Save Rite, Thriftway and City Markets. Chief Executive Officer 6 7 WINN-DIXIE 2001 2001 WINN-DIXIE
  • 6. F R E S H I D E A S. Total Customer Satisfaction Delivering what the customer wants represents the future of Winn-Dixie. Customer service, attractive pricing, and modern store environments play vital roles in delivering a positive Winn-Dixie shopping experience. As part of our commitment to customer satisfaction, in the past fiscal year alone the company has ... 9 2001 WINN-DIXIE
  • 7. • Introduced new training programs in customer service, food safety and sanitation. The First Class Service initiative is a major example of an exciting new program. The main goals of First Class Service are to make customers our friends and to make Winn-Dixie a fun, desirable place to work. New programs to measure F R E S H AT T I T U D E S. customer satisfaction and to provide reward and recognition for top-performing employees also have been put into place. • Empowered store managers and division management to act aggressively to meet local customer needs. • Improved labor productivity so that more associates are available to interact with customers, and to shorten waiting lines at peak “rush” hours. 10 WINN-DIXIE 2001
  • 8. Many of the operational improvements this year strengthen our “speed to shelf” capabilities, providing the popular brands customers seek. We offer both national and regional brands, with many of the latter having cultural or ethnic appeal. A major growth opportunity for us is the Winn-Dixie line of store-brand products. These product lines carry higher margins than comparable national brands and promote customer loyalty. Winn-Dixie’s Chek soda, for example, holds a leading position in several markets, outselling prominent national brands. We have one of the leading F R E S H T H I N K I N G. store-brand programs in our industry. In fact, our high- quality manufacturing facilities are handling contract manufacturing for other companies. A long-standing Winn-Dixie strength has been our integrated supply line: manufacturing, distribution and retailing. The sweeping changes implemented in 2001 have bolstered this system and financial returns have shown it to be a highly effective business strategy for us. 13 2001 WINN-DIXIE
  • 9. The New Look of Winn-Dixie Stores A pleasant customer shopping experience heavily depends on clean, well-stocked, customer-friendly retail stores. Creating a fresh look at Winn-Dixie stores, and updating this new look to keep it current, is a top priority for senior management. • Winn-Dixie’s store base has been revitalized, with more than 60% of our stores new or remodeled in the past five years. Approximately 50% of our stores have been improved in the past year alone. • We are already achieving increasingly accurate inventory tracking and greater purchasing leverage because of our new centralized procurement system. • As appropriate, new “store within a store” concepts will be added, such as pet centers, soft drink and snack • Product freshness - at the deli/bakery counter, the centers, household cleaning sections, or baby-needs meat and seafood departments, produce, the dairy centers. New growth opportunities for us range from shelves — is enhanced by new store formats and central A F R E S H L O O K. pharmacy operations in our stores to fuel centers such as procurement. Variety and quality are the hallmarks of our those acquired as part of Jitney Jungle. Also, the perishables departments. And our new store layouts company has seven profitable liquor stores in operation enable us to obtain the same amount of revenue in less and holds additional liquor licenses for future expansion. space, allowing more for grocery products and non-food merchandise. The goal is to ensure that First Class Service is a way of life at Winn-Dixie, bringing our retail customers back to us time and time again as their first shopping choice. 14 WINN-DIXIE 2001
  • 10. & DIRECTORS MANAGEMENT Man ag e m en t an d yea rs o f s er v ic e: Vice Presidents/ Corporate Officers W. R. (Bob) Baxley, 2 Vice President Deli & Bakery Vice Presidents/ Division Managers D. Michael Byrum, 28 Vice President J. Darryl Fitzgerald, 30 Corporate Controller Charlotte Division Chief Accounting Officer 142 Stores Pictured from left to right: Carleton T. Rider, Julia B. North and Ronald Townsend Keith B. Cherry, 2 Michael J. Istre, 32 Vice President New Orleans Division Design & Construction 158 Stores Executive Committee G. E. (Mickey) Clerc, Jr., 40 A. Brent Kailing Vice President Allen R. Rowland, 2 Fort Worth Division Public Relations President 76 Stores Chief Executive Officer Dean Dell Antonia, 1 Chairman of the Executive Raymond C. Lunn, Jr., 32 Vice President Committee Miami Division Performance and Reward Systems Board of Directors 148 Stores Daniel G. Lafever, 34 Judith W. Dixon, 37 Senior Vice President A. Dano Davis Daniel J. Richardson, 35 Secretary Sales & Procurement Chairman Montgomery Division 190 Stores C. W. (Bill) Doolittle, 18 Richard P. McCook, 17 Allen R. Rowland Vice President Senior Vice President President Robert A. Rowe, 1 Security Chief Financial Officer Chief Executive Officer Save Rite Division 11 Stores Randall L. Hutton, 34 Dennis M. Sheehan, 1 Armando M. Codina Vice President Senior Vice President Chairman Mark A. Sellers, 28 Government Relations Real Estate Codina Group, Inc. Orlando Division 153 Stores Richard C. (Dick) Judd John R. Sheehan, 2 T. Wayne Davis Vice President Senior Vice President Chairman H. Matt Solana, Jr., 30 Pictured from left to right: T. Wayne Davis, Tillie K. Fowler, Charles P. Stephens and A. Dano Davis Warehousing and Distribution Operations Transit Group, Inc. Raleigh Division 127 Stores C. John Kistel, Jr. August B. Toscano, 2 Tillie K. Fowler Vice President Senior Vice President Partner Donald A. Weaver, 29 General Merchandise Human Resources Holland & Knight LLP Jacksonville Division 136 Stores Ted M. Moon, 33 E. Ellis Zahra, Jr., 6 Radford D. Lovett Vice President Senior Vice President Chairman Produce and Floral General Counsel Commodores Point Terminal Corporation Michael E. Nixon, 30 Vice President Julia B. North Information Systems Telecommunications Consultant Philip H. Payment, Jr., 30 Carleton T. Rider Vice President Senior Administrator Grocery Mayo Foundation Monty H. Powers, 30 Charles P. Stephens Vice President Vice President Meat & Seafood Norman W. Paschall Co., Inc. Kellie D. Ross, 2 Ronald Townsend Vice President Communications Consultant Strategic Planning Treasurer Pictured from left to right: Radford D. Lovett, Armando M. Codina and Allen R. Rowland Audit Committee Corporate Governance Committee Compensation Committee 17 2001 WINN-DIXIE
  • 11. FF INAN C I AAL I N A NCI L REVIEW 18 WINN-DIXIE 2001
  • 12. WINN-DIXIE STORES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, SUPPORTING SCHEDULES AND SUPPLEMENTAL DATA Selected Financial Data 20 Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Consolidated Financial Statements and Supplemental Data: Report of Management 26 Independent Auditors’ Report 27 Consolidated Statements of Operations, Years ended June 27, 2001, June 28, 2000 and June 30, 1999 28 Consolidated Balance Sheets, June 27, 2001 and June 28, 2000 29 Consolidated Statements of Cash Flows, Years ended June 27, 2001, June 28, 2000 and June 30, 1999 30 Consolidated Statements of Shareholders’ Equity, Years ended June 27, 2001, June 28, 2000 and June 30, 1999 31 Notes to Consolidated Financial Statements 32 19 2001 WINN-DIXIE
  • 13. SELECTED FINANCIAL DATA Dollars in millions except per share data 1999* 2001 2000 1998 1997 Sales Net sales 13,617 13,219 $ 12,903 13,698 14,137 Percent (decrease) increase 3.0 2.0 (5.8 ) (3.1 ) 3.8 Average annual sales per store 11.7 11.3 11.6 $ 11.6 11.9 Earnings Summary Gross profit 3,729 3,411 3,454 $ 3,727 3,903 Percent of sales 27.4 25.8 26.8 27.2 27.6 LIFO (credit) charge (12) 3 (12 ) $ 15 4 Operating and administrative expenses 3,365 3,070 3,180 $ 3,586 3,577 Percent of sales 24.7 23.2 24.7 26.2 25.3 Restructuring and other non-recurring charges 18 - 147 $ 396 - Percent of sales 0.1 - 1.1 2.9 - Company owned life insurance (COLI) tax case (after tax) - - 3 $ 42 - Percent of sales - - 0.0 0.3 - Net earnings (loss) (229 ) 199 204 $ 45 182 Basic earnings (loss) per share (1.57) 1.34 1.36 $ 0.32 1.23 Diluted earnings (loss) per share (1.57) 1.33 1.36 $ 0.32 1.23 Percent of net earnings (loss) to sales 1.5 1.5 0.4 (1.7 ) 1.3 Percent of net earnings (loss) to average equity 14.7 15.3 5.5 (20.1) 13.1 Net earnings excluding COLI, restructuring and other non-recurring charges 210 204 $ 139 75 182 Basic earnings per share 1.41 1.36 $ 1.00 0.52 1.23 Diluted earnings per share 1.41 1.36 $ 0.99 0.52 1.23 Percent of net earnings to sales 1.5 1.5 1.1 0.5 1.3 Percent of net earnings to average equity 15.5 15.3 17.0 6.6 13.1 EBITDA 676.7 632.8 $ 310.0 1.3 618.5 EBITDAR 985.9 911.6 $ 658.1 325.8 961.4 EBITDA excluding restructuring and non-recurring charges 694.8 632.8 $ 457.3 397.4 618.5 EBITDAR excluding restructuring and non-recurring charges 1,004.0 911.6 $ 805.3 721.9 961.4 Dividends Dividends paid 150.9 144.2 $ 142.9 149.0 151.2 Percent of net earnings (loss) (65.1) 76.0 70.5 315.3 82.9 Per share (present rate $1.02) 1.02 0.96 $ 1.02 1.02 1.02 Common Stock (WIN) Total shares outstanding (000,000) 148.5 148.9 140.5 140.8 148.6 NYSE – Common stock price range - High 59.25 42.38 $ 33.12 41.94 52.19 - Low 33.69 29.88 $ 13.44 14.25 28.63 * 53 weeks 20 WINN-DIXIE 2001
  • 14. SELECTED FINANCIAL DATA - continued Dollars in millions except per share data 1999* 2001 2000 1998 1997 Financial Data Cash flow information: 464.5 413.9 $ 743.3 436.4 Net cash provided by operating activities 244.9 (443.6 ) (325.9) (477.7 ) $ (196.1 ) (335.1) Net cash used in investing activities (129.2 ) 45.7 $ (542.3) (100.0) Net cash provided by (used in) financing activities 290.2 368.6 423.1 $ 213.0 334.3 Capital expenditures, net 313.3 330.4 291.2 $ 256.7 292.4 Depreciation and amortization 183.6 262.6 220.1 $ 50.4 285.0 Working capital 449.3 1.4 1.2 1.0 1.2 Current ratio 1.4 3,069 2,921 $ 2,747 3,149 Total assets 3,042 49 54 $ 32 38 Obligations under capital leases 29 2,389 2,048 $ 2,408 2,575 Present value of future rentals under operating leases 2,550 34 25 $ 220 35 Long-term rental obligations on closed stores 154 - - $ - - Long-term debt 697 2,472 2,127 $ 2,660 2,648 Total long-term obligations (Long-term debt + leases) 3,430 1.8 1.6 $ 3.1 1.9 Long-term obligations to equity ratio 4.4 199.4 206.4 $ (232.0) 182.6 Comprehensive income (loss) 43.7 1,369 1,337 $ 868 1,411 Shareholders’ equity 772 9.22 8.98 $ 6.16 9.50 Book value per share 5.52 2.3 2.5 ** 2.1 Ratio of earnings to fixed charges 1.2 2.4 2.5 1.5 2.1 Adjusted ratio of earnings to fixed charges 1.8 Taxes 302 285 $ 123 308 Federal, state and local 215 2.03 1.90 $ 0.85 2.07 Per diluted share 1.53 Stores 1,168 1,174 1,079 1,188 In operation at year-end 1,153 84 83 34 79 Opened and acquired during year 94 90 87 32 59 Closed or sold during year 19 - - 111 - Closed due to restructuring 1 136 79 42 64 Enlarged or remodeled during year 11 912 805 790 908 New/enlarged/remodeled in last five years 706 78.1 68.6 73.2 76.4 Percent to total stores in operation 61.2 49.6 47.8 48.1 52.0 Year-end retail square footage (000,000) 51.1 42.4 40.7 44.6 43.7 Average store size at year-end (000) 44.3 Other Year-end Data 139 136 120 132 Associates (000) 119 52.0 55.2 45.7 48.1 Shareholder accounts (000) 48.8 45 47 42 40 Shareholders per store 42 * 53 weeks ** For fiscal year ended June 28, 2000, earnings were inadequate to cover fixed charges due to non-recurring charges totaling $405 million relating to the restructuring and other non-recurring charges. The dollar amount of the coverage deficiency for the year ended June 28, 2000 was $302 million. 21 2001 WINN-DIXIE
  • 15. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS operating and administrative expenses were 24.7%, 26.2% and Results of Operations 25.3% in fiscal 2001, 2000 and 1999, respectively. The decrease Sales for fiscal 2001, a 52-week year, were $12.9 billion, in operating and administrative expenses was primarily due to a compared to fiscal 2000, $13.7 billion, a 52-week year, and fiscal decrease in retail and administrative operating expenses, such as 1999, $14.1 billion, a 53-week year. This reflects a decrease of payroll, depreciation, rent and leasehold improvement 5.8% for fiscal 2001, a decrease of 3.1% for fiscal 2000 and an amortization. The expense reduction was an expected result of increase of 3.8% in 1999. Average store sales decreased 0.6% for the restructuring and came primarily from the elimination of high the current year, decreased 1.2% in fiscal 2000 and increased labor cost service departments and expense reductions from the 2.1% in fiscal 1999. Identical store sales decreased 4.4%, 2.7% retrofit activity, certain labor efficiency initiatives adopted by and 0.9% for 2001, 2000 and 1999, respectively. the Company and from the closing of the division offices and Identical sales decreased largely as a result of the elimination retail stores. of unprofitable sales departments (deli/cafes, melon bars, salad Interest expense totaled $52.8 million, $47.1 million and bars, dry cleaners and selected floral, seafood and pharmacy $29.6 million in fiscal 2001, 2000 and 1999, respectively. departments), the elimination of unprofitable sales items in Interest expense is primarily interest on short-term and long- remaining departments, a reduction in the number of 24-hour term debt and interest on capital lease obligations. Interest stores and construction disruptions from numerous store expense also reflects accrued interest relating to an unfavorable modifications (retrofits). The Company has substantially opinion from the U.S. Tax Court in October 1999 relating to completed its planned store retrofits and believes that this Company Owned Life Insurance (“COLI”) (see Note 7 - Income program has resulted in labor savings and other efficiencies. The Taxes). Year-to-date, the interest expense on the COLI reserve Company believes that the store retrofits have enhanced the totaled $5.5 million as compared to $19.7 million for the Company’s competitive position and, in turn, will positively previous year. Excluding interest on the COLI reserve, interest impact the Company’s sales during fiscal 2002. expense has increased in the current year as compared to the For the 52 weeks ended June 27, 2001, the Company opened previous year due to an increase in the amount of total debt 94 new stores, averaging 38,500 square feet, closed 20 stores, outstanding and an increase in interest rates in fiscal 2001. averaging 34,800 square feet and enlarged or remodeled 11 store The Company capitalized interest totaling $5.9 million for the locations, for a total of 1,153 locations in operation on June 27, year, related to construction of new stores and a warehouse 2001, compared to 1,079 as of June 28, 2000. As of June 27, facility in Baldwin, Florida. 2001, retail space totaled 51.1 million square feet, a 6.2% Earnings (loss) before income taxes were $73.6 million, increase over the prior year. The 94 store openings include 68 $(302.4) million and $296.5 million in fiscal 2001, 2000 and Jitney Jungle stores and nine Gooding’s stores that were 1999, respectively. The increase in pretax earnings for fiscal 2001 purchased during fiscal 2001. The 20 store closings include one is primarily due to the restructuring charge recorded in fiscal store that closed in the second quarter of fiscal 2001, as part of 2000, and a decrease in operating and administrative expenses in management’s plan of restructuring. fiscal 2001. The effective income tax expense (benefit) rates As a percent of sales, gross profit margins were 26.8%, 27.2% were 38.5%, (24.3)% and 38.5% for fiscal 2001, 2000 and 1999, and 27.6% in fiscal 2001, 2000 and 1999, respectively. Gross respectively. The effective tax rate for fiscal 2000 reflects the profit dollars have decreased in the current year partially as a effects of certain restructuring expenses and COLI adjustments. result of the closing of 112 stores as part of management’s plan Net earnings (loss) amounted to $45.3 million, or $0.32 per of restructuring. In addition, gross profit has been negatively diluted share for 2001, $(228.9) million, or $(1.57) per diluted impacted by the elimination of high gross profit, yet share for 2000 and $182.3 million, or $1.23 per diluted share for unprofitable, sales departments. Higher cost of goods sold was 1999. The LIFO reserve adjustment increased net earnings by incurred during the Company’s transition to centralized $7.4 million, or $0.05 per diluted share in 2001, increased the merchandise procurement at the beginning of the fiscal year. net loss by $9.3 million, or $0.06 per diluted share in 2000, and Since the first quarter, gross profit margins on a FIFO basis have decreased net earnings by $2.7 million, or $0.02 per diluted improved. A continued focus on the Company’s shrink reduction share in 1999. initiatives is expected to add to the improvements during fiscal The following tables show the effect of the COLI adjustment, 2002. restructuring and other non-recurring charges on the quarter and Approximately 84% of the Company’s inventories are valued year. under the LIFO (last-in, first-out) method. The LIFO reserve adjustment resulted in a pre-tax increase in gross profit of $12.0 million in 2001, a decrease of $15.1 million in 2000 and a decrease of $4.4 million in 1999. Operating and administrative expenses decreased $406.1 million in fiscal 2001 and increased $9.1 million and $212.2 million in 2000 and 1999, respectively. As a percent of sales, 22 WINN-DIXIE 2001
  • 16. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Quarter ending June 27, 2001 As Reported Non-recurring Excluding Dollar amounts in thousands except per share data Charges Non-recurring $ 2,989,861 - 2,989,861 Net sales 2,157,676 - 2,157,676 Cost of sales 832,185 - 832,185 Gross profit on sales 739,776 - 739,776 Operating and administrative expenses 56,497 56,497 - Restructuring and other non-recurring charges 35,912 (56,497 ) 92,409 Operating income 14,800 887 13,913 Interest expense 21,112 (57,384 ) 78,496 Earnings before income tax 8,107 (22,049 ) 30,156 Income tax $ 13,005 (35,335 ) 48,340 Net earnings $ 0.09 (0.25 ) 0.34 Basic earnings per share $ 0.09 (0.25 ) 0.34 Diluted earnings per share Year ending June 27, 2001 As Reported Non-recurring Excluding Dollar amounts in thousands except per share data Charges Non-recurring $ 12,903,373 - 12,903,373 Net sales 9,449,346 - 9,449,346 Cost of sales 3,454,027 - 3,454,027 Gross profit on sales 3,180,297 - 3,180,297 Operating and administrative expenses 147,245 147,245 - Restructuring and other non-recurring charges 126,485 (147,245 ) 273,730 Operating income 52,843 5,512 47,331 Interest expense 73,642 (152,757 ) 226,399 Earnings before income tax 28,331 (58,768 ) 87,099 Income tax $ 45,311 (93,989 ) 139,300 Net earnings $ 0.32 (0.68 ) 1.00 Basic earnings per share $ 0.32 (0.67 ) 0.99 Diluted earnings per share Liquidity and Capital Resources $196.1 million and $335.1 million in fiscal 2001, 2000 and 1999, Cash and cash equivalents amounted to $121.1 million, $29.6 respectively. The increase in the current year was due to an million and $24.7 million at the end of fiscal years 2001, 2000 increase in capital expenditures and the acquisition of 77 retail and 1999, respectively. Cash provided by operating activities locations. Net capital expenditures totaled $313.3 million, amounted to $244.9 million in 2001, $743.3 million in 2000 and $213.0 million and $334.3 million in fiscal 2001, 2000 and 1999, $436.4 million in 1999. The reduction in net cash provided by respectively. These expenditures were for new store locations, operations is largely due to the increase in merchandise remodeling and enlarging of store locations and maintenance and inventories and cash payments related to the restructuring. expansion of support facilities. The Company has no material Inventories increased due in part to additional inventory construction or purchase commitments outstanding as of June purchased for the stores acquired in the current year. 27, 2001. Working capital amounted to $449.3 million, $50.4 million and Net cash provided by (used in) financing activities was $290.2 $285.0 million in fiscal 2001, 2000 and 1999, respectively. The million, $(542.3) million and $(100.0) million in 2001, 2000 and increase was due in part to the refinancing of the Company’s 1999, respectively. The increase in the current year was due short-term borrowings into long-term debt. primarily to the net proceeds from the $800 million senior Net cash used in investing activities totaled $443.6 million, secured credit facilities (the “New Facilities”), the issuance of 23 2001 WINN-DIXIE
  • 17. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued Liquidity and Capital Resources - continued Notional Maturity Fixed Rate Amount $300 million in Senior Unsecured Notes (the “Notes”) and the (in thousands) suspension of the stock repurchase program in the current year. March 29, 2002 4.60 % $ 150,000 See Note 8 - Debt for further discussion on the New Facilities and March 29, 2003 4.81 % 150,000 Notes. March 29, 2004 5.03 % 100,000 The Company is a party to various proceedings arising under federal, state and local regulations protecting the environment. $ 400,000 Management is of the opinion that any liability that might result equal to the one-month LIBOR (3.75% as of June 27, 2001). from any such proceedings will not have a material adverse effect The fair value of the Company’s interest rate swaps is obtained on the Company’s financial condition or results of operations. from dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate the agreement, Impact of Inflation taking into consideration the difference between the contract Winn-Dixie’s primary costs, inventory and labor, increase with rate of interest and rates currently quoted for agreements of inflation. Recovery of these costs has to come from improved similar terms and maturities. At June 27, 2001, the fair value of operating efficiencies — including improvements in merchandise the Company’s interest rate swaps resulted in an unrealized loss procurement — and, to the extent permitted by the competition, of $2.6 million ($1.6 million after tax). The Company recorded through improved gross profit margins. the unrealized loss in accumulated other comprehensive income in shareholders’ equity. During the next 12 months, the Company Quantitative and Qualitative Disclosures About Market Risk will incur interest expense including the effect of interest rate As part of the New Facilities (see Note 8 - Debt), the Company swaps at a weighted average rate of 7.54% on the $400 million obtained a $400 million six-year term loan with a variable outstanding in variable rate debt. interest rate based on the one-month LIBOR. The Company The Company measures effectiveness by the ability of interest utilizes derivative financial instruments to reduce its exposure to rate swaps to offset cash flows associated with changes in the market risks from changes in interest rates. The instruments one-month LIBOR. To the extent that any of these contracts are primarily used to mitigate these risks are interest rate swaps. All not considered effective, any changes in fair value relating to the derivative instruments held by the Company are designated as ineffective portion of these contracts are immediately recognized highly effective cash flow hedges of interest rate risk on variable in income. However, all of the contracts were effective during the rate debt and, accordingly, the change in fair value of these period and no gain or loss was reported in earnings. instruments is recorded as a component of other comprehensive The following table presents the future principal cash flows and income. weighted-average interest rates expected on the Company’s The Company is exposed to credit-related losses in the event existing long-term debt instruments and interest rate swap of nonperformance by counterparties to these financial agreements. Fair values have been determined based on quoted instruments. However, counterparties to these agreements are market prices as of June 27, 2001. major financial institutions and the risk of loss due to nonperformance is considered by management to be minimal. The Company does not hold or issue interest rate swaps for trading purposes. The Company has entered into three interest rate swap agreements to hedge the interest rate risk associated with the $400 million outstanding in variable rate debt. The purpose of these swaps is to fix interest rates on variable rate debt and reduce certain exposures to interest rate fluctuation. At June 27, 2001, the Company had interest rate swaps with a notional amount of $400 million. The notional amounts do not represent a measure of exposure to the Company. The maturity and interest rate on the interest rate swaps are shown in the following table. The Company will pay the counterparty interest at a fixed rate as noted and the counterparty will pay the Company interest at a variable rate 24 WINN-DIXIE 2001
  • 18. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued EXPECTED MATURITY DATE Dollar amounts in thousands 2002 2003 2004 2005 2006 Thereafter Total Fair Value Liabilities: Long-term debt Fixed rate $ $ $ $ $ $ 300,280 $ 301,705 $ 305,920 291 288 285 282 279 Average interest rate 9.40 % 9.40 % 9.40 % 9.40 % 9.40 % 8.88 % 8.88 % Variable rate $ $ $ $ $ $ 380,000 $ 400,000 $ 400,000 4,000 4,000 4,000 4,000 4,000 Average interest rate 6.70 % 7.90 % 8.74 % 9.09 % 9.29 % 9.44 % 9.38 % Interest rate derivatives Interest rate swaps: $ (2,580) Notional amount $ 150,000 $ 150,000 $ 100,000 $ $ $ $ 400,000 - - - Average pay rate 4.60 % 4.81 % 5.03 % - - - 4.79 % Average receive rate 3.95 % 5.15 % 5.99 % - - - 4.70 % Cautionary Statement Regarding Forward-Looking • changes in federal, state or local legislation or regulations Information and Statements affecting food manufacturing, food distribution, or food This Annual Report contains certain information that retailing, including environmental compliance; constitutes “forward-looking statements” within the meaning of • the availability and terms of financing, including in the Private Securities Litigation Reform Act, which involves risks particular the possible impact of changes in the ratings and uncertainties. Actual results may differ materially from the assigned to the Company by nationally recognized rating results described in the forward-looking statements. When used agencies; and in this document, the words “estimate,” “project,” “intend,” • general business and economic conditions in our operating “believe” and other similar expressions, as they relate to the regions, including the rate of inflation/deflation and Company, are intended to identify such forward-looking changes in population, consumer demands and spending, statements. types of employment and number of jobs. Such statements reflect the current views of the Company and are subject to certain risks and uncertainties that include, but are Please refer to discussions of these and other factors in this not limited to: Annual Report and other Company filings with the Securities and Exchange Commission. The Company disclaims any intent or • the Company’s ability to achieve successfully the long-term obligation to update publicly these forward-looking statements, benefits contemplated from the restructuring of operations whether as a result of new information, future events or adopted by the Board of Directors on April 19, 2000, and otherwise. which has been substantially completed; • heightened competition, including specifically the intensification of price competition, the entry of new competitors, or the expansion of existing competitors in one or more operating regions; 25 2001 WINN-DIXIE
  • 19. 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 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 and Chief Executive Officer Chief Financial Officer 26 WINN-DIXIE 2001
  • 20. 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 27, 2001 and June 28, 2000, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 27, 2001. 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 27, 2001 and June 28, 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended June 27, 2001, in conformity with accounting principles generally accepted in the United States of America. Jacksonville, Florida August 8, 2001 27 2001 WINN-DIXIE
  • 21. WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 27, 2001, June 28, 2000 and June 30, 1999 Amounts in thousands except per share data 2001 2000 1999* 13,697,547 14,136,503 $ 12,903,373 Net sales 9,970,497 10,233,155 9,449,346 Cost of sales, including warehousing and delivery expense 3,727,050 3,903,348 3,454,027 Gross profit on sales 3,586,351 3,577,220 3,180,297 Operating and administrative expenses 396,029 - 147,245 Restructuring and other non-recurring charges (255,330 ) 326,128 126,485 Operating income (loss) Interest: 4,458 5,152 4,188 Interest on capital lease obligations 19,707 - 5,512 Interest on company owned life insurance (COLI) 22,916 24,496 43,143 Other interest 47,081 29,648 52,843 Total interest (302,411 ) 296,480 73,642 Earnings (loss) before income taxes (73,516 ) 114,145 28,331 Income taxes (228,895 ) 182,335 $ 45,311 Net earnings (loss) (1.57 ) 1.23 $ 0.32 Basic earnings (loss) per share (1.57 ) 1.23 $ 0.32 Diluted earnings (loss) per share 1.02 1.02 $ 1.02 Dividends per share 145,445 148,310 139,824 Weighted average common shares outstanding - basic 145,445 148,680 140,399 Weighted average common shares outstanding - diluted * 53 Weeks See accompanying notes to consolidated financial statements. 28 WINN-DIXIE 2001
  • 22. WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 27, 2001 and June 28, 2000 Dollar amounts in thousands except par value 2001 2000 Assets Current Assets: $ 121,061 Cash and cash equivalents 29,576 Trade and other receivables, less allowance for doubtful items of 109,159 $3,935 ($3,822 in 2000) 107,425 Merchandise inventories less LIFO reserve of 1,198,602 $220,411 ($232,368 in 2000) 1,141,405 34,643 Prepaid expenses 58,739 135,736 Deferred income taxes 134,777 1,599,201 Total current assets 1,471,922 16,876 Cash surrender value of life insurance, net 14,035 1,146,654 Property, plant and equipment, net 1,016,292 92,875 Intangible assets, net 18,606 106,145 Non-current deferred income taxes 166,449 79,919 Other assests, net 59,789 $ 3,041,670 Total assets 2,747,093 Liabilities and Shareholders’ Equity Current Liabilities: $ - Short-term borrowings 235,000 4,291 Current portion of long-term debt - 3,270 Current obligations under capital leases 2,843 599,850 Accounts payable 575,877 100,850 Reserve for insurance claims and self-insurance 101,874 43,385 Reserve for restructuring expenses 52,721 109,183 Accrued wages and salaries 114,883 88,452 Accrued rent 88,247 176,332 Accrued expenses 164,502 24,294 Income taxes payable 85,606 1,149,907 Total current liabilities 1,421,553 147,964 Reserve for insurance claims and self-insurance 141,251 697,414 Long-term debt - 28,953 Obligations under capital leases 32,239 49,027 Defined benefit plan 45,241 118,745 Long-term restructuring expenses 143,188 78,006 Other liabilities 95,786 2,270,016 Total liabilities 1,879,258 Commitments and contingent liabilities (Notes 7, 8, 9, 11 and 13) Shareholders’ Equity: Common stock of $1 par value. Authorized 400,000,000 shares; 140,466 140,466,235 shares outstanding in 2001 and 140,830,197 in 2000 140,830 634,694 Retaining earnings 727,005 (1,587 ) Accumulated other comprehensive income - (1,919 ) Associates’ stock loans - 771,654 Total shareholders’ equity 867,835 $ 3,041,670 Total liabilities and shareholders’ equity 2,747,093 See accompanying notes to consolidated financial statements. 29 2001 WINN-DIXIE
  • 23. WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 27, 2001, June 28, 2000 and June 30, 1999 Amounts in thousands 2001 2000 1999* Cash flows from operating activities: $ 45,311 182,335 Net earnings (loss) (228,895 ) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: 183,559 292,414 Depreciation and amortization 256,671 60,336 17,684 Deferred income taxes (189,046 ) 3,786 4,132 Defined benefit plan 4,007 68,774 - Non-cash restructuring and other non-recurring charges 395,053 5,689 2,424 Reserve for insurance claims and self-insurance 75,408 8,007 2,459 Stock compensation plans (1,144 ) Change in operating assets and liabilities, net of effects from acquisitions: (1,734 ) (42,148 ) Trade and other receivables 80,888 (39,962 ) (20,181 ) Merchandise inventories 283,693 25,416 8,596 Prepaid expenses (11,776 ) 23,009 (1,191 ) Accounts payable (87,959 ) (53,765 ) - Reserve for restructuring expenses - (61,312 ) (1,380 ) Income taxes payable 74,867 (22,226 ) (8,783 ) Other current accrued expenses 91,512 244,888 436,361 Net cash provided by operating activities 743,279 Cash flows from investing activities: (313,319 ) (334,283 ) Purchases of property, plant and equipment, net (212,990 ) (6,519 ) (858 ) (Increase) decrease in investments and other assets 16,872 (123,753 ) - Acquisitions, net of cash acquired - (443,591 ) (335,141 ) Net cash used in investing activities (196,118 ) Cash flows from financing activities: (235,000 ) 45,000 (Decrease) increase in short-term borrowings (230,000 ) 700,000 - Proceeds from issuance of long-term debt - (24,210 ) - Debt issuance costs - (257 ) - Principal payments on long-term debt - (2,857 ) (2,583 ) Principal payments on capital lease obligations (2,612 ) (17,003 ) (1,337 ) Purchase of common stock (162,272 ) 11,833 2,923 Proceeds of sales under associates’ stock purchase plan 164 (142,853 ) (151,231 ) Dividends paid (148,966 ) 535 7,188 Other 1,355 290,188 (100,040 ) Net cash provided by (used in) financing activities (542,331 ) 91,485 1,180 Increase in cash and cash equivalents 4,830 29,576 23,566 Cash and cash equivalents at the beginning of the year 24,746 $ 121,061 24,746 Cash and cash equivalents at end of the year 29,576 Supplemental cash flow information: $ 37,064 21,958 Interest paid 23,058 $ 2,327 1,072 Interest and dividends received 808 $ 29,307 94,858 Income taxes paid 40,663 * 53 Weeks See accompanying notes to consolidated financial statements. 30 WINN-DIXIE 2001
  • 24. WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Years ended June 27, 2001, June 28, 2000 and June 30, 1999 Amounts in thousands except per share data Common Retained Accumulated Associates’ Total Stock Earnings Other Stock Loans Shareholders’ Comprehensive Equity Income 148,531 $ 1,220,679 2,760 (3,087) 1,368,883 $ Balances at June 24, 1998 Comprehensive income: - 182,335 - - 182,335 Net earnings - - 309 - 309 Unrealized gain on securities, net of tax - 182,335 309 - 182,644 Total comprehensive income - (151,231 ) - (151,231) - Cash dividends, $1.02 per share Common stock issued and stock 33 2,189 - - 2,222 compensation expense (37 ) (1,300 ) - (1,337 ) - Common stock acquired 50 1,004 - - 1,054 Stock options exercised - - - 2,923 2,923 Associates’ stock loans, payments - 5,921 - - 5,921 Other 148,577 1,259,597 (164) 3,069 1,411,079 Balances at June 30, 1999 Comprehensive loss: - (228,895 ) - (228,895) - Net (loss) - - (3,069 ) (3,069) - Realized gain on securities, net of tax - (228,895 ) (3,069 ) (231,964) - Total comprehensive (loss) - (148,966 ) - (148,966) - Cash dividends, $1.02 per share Common stock issued and stock 131 (131 ) - - - compensation expense (7,878 ) (154,394 ) - (162,272) - Common stock acquired - (187 ) - (187) - Stock options exercised - - - 164 164 Associates’ stock loans, payments - (19 ) (19) - - Other 140,830 727,005 - - 867,835 Balances at June 28, 2000 Comprehensive income: - 45,311 - - 45,311 Net earnings Unrealized loss on derivative - - (1,587 ) (1,587) - instruments, net of tax - 45,311 (1,587 ) - 43,724 Total comprehensive income - (142,853 ) (142,853 ) - - Cash dividends, $1.02 per share Common stock issued and stock 811 20,988 - - 21,799 compensation expense (1,180 ) (15,823 ) (17,003) - - Common stock acquired 5 66 - - 71 Stock options exercised - - (1,919) (1,919) - Associates’ stock loans, payments $ 140,466 634,694 (1,587 ) (1,919) $ 771,654 Balances at June 27, 2001 See accompanying notes to consolidated financial statements. 31 2001 WINN-DIXIE
  • 25. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Dollar amounts in thousands except per share data, unless otherwise noted (i) Income Taxes: Deferred tax assets and liabilities are 1. Summary of Significant Accounting Policies and Other recognized for the estimated future tax consequences Information attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their (a) The Company: Winn Dixie Stores, Inc. and its subsidiaries respective tax bases. Deferred tax assets and liabilities are (the “Company”) operate as a major food retailer in fourteen measured using the enacted tax rates in effect for the year states and the Bahama Islands. As of June 27, 2001, the in which those temporary differences are expected to be Company operated 1,153 retail stores, 34 fuel centers and 7 recovered or settled. liquor stores. In support of its retail operations, the (j) Self-insurance: Self-insurance reserves are established for Company has 16 warehouse distribution centers and 19 automobile and general liability, workers’ compensation and manufacturing plants. property loss costs based on claims filed and claims incurred (b) Fiscal Year: The fiscal year ends on the last Wednesday in but not reported, with a maximum per occurrence of $2,000 June. Fiscal year 2001 and 2000 are comprised of 52 weeks. for automobile and general liability and $1,000 for workers’ Fiscal year 1999 is comprised of 53 weeks. compensation. Self-insurance reserves are established for (c) Basis of Consolidation: The consolidated financial property losses with a maximum annual aggregate of $5,000 statements include the accounts of Winn Dixie Stores, Inc. ($10,000 for named windstorm and wind driven rain) and a and its subsidiaries. All subsidiaries are wholly owned and $100 per occurrence deductible after the aggregate is fully consolidated with the exception of Bahamas obtained. The Company is insured for losses in excess of Supermarkets Limited, which is owned approximately 78% by these limits. W-D Bahamas Limited. Significant inter-company accounts (k) Property, Plant and Equipment: Property, plant and and transactions have been eliminated in consolidation. equipment are stated at historical cost. Depreciation is (d) Estimates: The preparation of financial statements in provided over the estimated useful lives by the straight-line conformity with generally accepted accounting principles method. Store equipment depreciation is based on lives requires management to make estimates and assumptions varying from five to eight years. Transportation equipment that affect the reported amounts of assets and liabilities, the is based on lives varying from three to ten years. Warehouse disclosure of contingent assets and liabilities at the date of and manufacturing equipment is based on lives varying from the financial statements and the reported amounts of five to ten years. Amortization of improvements to leased revenues and expenses during the reporting period. Actual premises is provided principally by the straight-line method results could differ from those estimates. over the periods of the leases or the estimated useful lives (e) Revenue Recognition: Revenue is recognized at the point of the improvements, whichever is less. of sale for retail sales. The Company reviews its property, plant and equipment for (f) Cash and Cash Equivalents: Cash equivalents consist of impairment whenever events or changes in circumstances highly liquid investments with a maturity of three months or indicate the carrying value of an asset may not be less when purchased. Cash and cash equivalents are stated recoverable. Recoverability is measured by comparison of at cost plus accrued interest, which approximates market. the carrying amount to the net undiscounted cash flows (g) Inventories: Inventories are stated at the lower of cost or expected to be generated by the asset. An impairment loss market. The “dollar value” last-in, first-out (LIFO) method would be recorded for the excess of net book value over the is used to determine the cost of approximately 84% of fair value of the asset impaired. The fair value is estimated inventories consisting primarily of merchandise in stores and based on expected discounted future cash flows. distribution warehouses. Manufacturing, pharmacy and (l) Store Opening and Closing Costs: The costs of opening new produce inventories are valued at the lower of first-in, first- stores and closing old stores are charged to earnings in the out (FIFO) cost or market. Elements of cost included in year incurred. An expense is recorded for the present value manufacturing inventories consist of material, direct labor of expected future net rent payments in the year that a store and plant overhead. closes. (h) Derivatives: The Company follows Statement of Financial (m) Earnings Per Share: Earnings per common share are based Accounting Standard No. 133, “Accounting for Derivative on the weighted average number of common shares Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 outstanding. Diluted earnings per share amounts are based requires that all derivative instruments be recorded on the on the weighted average number of common stock balance sheet at their fair value. Changes in the fair value of outstanding, plus the incremental shares that would have derivatives are recorded each period in current earnings or been outstanding upon the assumed exercise of all diluted other comprehensive income, depending on whether a stock options, subject to antidilution limitations. derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. 32 WINN-DIXIE 2001
  • 26. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 1999 by $87,203 and $102,435, respectively. The 1. Summary of Significant Accounting Policies and Other reclassification reduced operating and administrative Information - continued expenses for fiscal 2000 and 1999 by $22,897 and $16,431, (m)Earnings Per Share, continued respectively. This reclassification is consistent with industry The following weighted average numbers of shares of practice. Certain other prior year amounts may have been common stock were used in the calculations for earnings per reclassified to conform to the current year’s presentation. share. Shares 2000 1999 2001 2. Trade and Other Receivables Accounts receivable at year-end 139,823,835 148,309,653 Basic 145,445,416 were as follows: 140,399,055 148,680,198 Diluted 145,445,416 2001 2000 Trade and other receivables $ 113,067 92,821 (n) Comprehensive Income: Comprehensive income is reflected on the Consolidated Statements of Shareholders’ Equity. Constuction advances 27 18,426 Accumulated other comprehensive income is comprised of 113,094 111,247 unrealized gains/losses on derivative financial instruments Less: Allowances for doubtful items 3,935 3,822 and unrealized gains/losses of available for sale securities. $ 109,159 107,425 (o) 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 3. Merchandise Inventories for stock-based compensation plans. At June 27, 2001, inventories valued by the LIFO method (p) New Accounting Pronouncements: In July 2001, the would have been $220,411 higher ($232,368 higher at June 28, Financial Accounting Standards Board issued Statement of 2000) if they were stated at the lower of FIFO cost or market. If Financial Accounting Standards No. 142, “Accounting for the FIFO method inventory valuation had been used, reported net Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS earnings would have been $7,354, or $0.05 per diluted share No. 142 discontinues the practice of amortizing goodwill and lower in 2001, net loss would have been $9,283, or $0.06 per indefinite lived intangible assets and initiates an annual diluted share lower in 2000 and net earnings would have been review for impairment. Impairment would be examined more $2,691, or $0.02 per diluted share higher in 1999. frequently if certain indicators are encountered. Intangible assets with a determinable useful life will continue to be amortized over that period. The Company is currently 4. Intangible Assets assessing but has not yet determined the impact of SFAS 142 Intangible assets at year-end on its financial position and results of operations. The were as follows: Company plans to adopt SFAS 142 in the first quarter of 2001 2000 fiscal year 2002. (q) Business Reporting Segments: Based on the information monitored by the Company’s operating decision-makers to Goodwill $ 98,940 25,591 manage the business, the Company has identified that its Other intangibles 5,000 - operations are within one reportable segment. Accordingly, 103,940 25,591 financial information on industry segments is omitted Less: Accumulated amortization 11,065 6,985 because, apart from the principal business of operating retail $ 92,875 18,606 self-service food stores, the Company has no other industry segments. All sales of the Company are to customers within Goodwill is amortized over the estimated useful life not to the United States and the Bahama Islands. All assets of the exceed 20 years. The Company took a non-cash impairment charge Company are located within the United States and the of $32,115 for fiscal 2000 as part of the Company’s restructuring Bahama Islands. Sales and assets related to and located in (see Note 14 - Restructuring and Other Non-recurring Charges). the Bahama Islands represent less than 1% of the Company’s Goodwill impairment is measured as the difference between the total sales and assets. carrying value of the goodwill and the discounted cash flows of (r) Reclassification: Cash discounts and other income have the operations that gave rise to the goodwill. There was no non-cash been reclassified as a reduction of cost of sales and impairment charge in fiscal 2001. operating and administrative expenses, respectively. The reclassification reduced cost of sales for fiscal 2000 and 33 2001 WINN-DIXIE
  • 27. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 5. Property, Plant and Equipment Property, plant and equipment consists of the following: 2001 2000 $ 47,389 17,180 Land 189,178 67,246 Buildings 2,234,384 2,307,047 Furniture, fixtures, machinery and equipment 132,669 135,733 Transportation equipment 500,445 469,552 Improvements to leased premises 26,432 21,188 Construction in progress 3,130,497 3,017,946 2,002,814 2,022,946 Less: Accumulated depreciation 1,127,683 995,000 Leased property under capital leases, less accumulated 18,971 21,292 amortization of $34,833 ($32,951 in 2000) $ 1,146,654 1,016,292 Net property, plant and equipment The Company took a non-cash charge of $43,277 for fiscal fiscal 2000 as part of the Company’s restructuring (see Note 14 - 2001 due to losses on assets disposed of as a result of store Restructuring and Other Non-recurring Charges). retrofits and took a non-cash impairment charge of $147,184 for 6. Comprehensive Income Comprehensive income differs from net income because of the unrealized gain on investments in the prior year. Comprehensive change in the fair value of the Company’s interest rate swaps in income (loss) for fiscal 2001, 2000 and 1999 was $43,724, the current year and a reclassification adjustment of an $(231,964) and $182,644, respectively. 7. Income Taxes Income tax expense (benefit) consists of: Total Current Deferred 2001 58,508 25,086 $ (33,422 ) Federal 1,829 3,245 1,416 State 60,337 28,331 $ (32,006 ) 2000 (182,074 ) (70,716 ) $ 111,358 Federal (6,972 ) (2,800 ) 4,172 State (189,046 ) (73,516 ) $ 115,530 1999 16,110 95,380 $ 79,270 Federal 1,574 18,765 17,191 State 17,684 114,145 $ 96,461 34 WINN-DIXIE 2001
  • 28. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 7. Income Taxes - continued The following reconciles the expense (benefit) on the previous page to the Federal statutory income tax rate: 2001 2000 1999 35.0 % (35.0 ) % 35.0 % Federal statutory income tax rate 2.8 (0.6 ) 4.4 State and local income taxes, net of federal income tax benefits (4.0 ) (0.9 ) (0.6 ) Tax credits 2.8 9.6 0.7 Company owned life insurance (COLI) - 2.9 - Goodwill impairment 1.9 (0.3 ) (1.0 ) Other, net 38.5 % (24.3 ) % 38.5 % The effective tax rate for fiscal 2000 reflects the effects of certain restructuring expenses and COLI adjustments. Components of net deferred tax assets 2001 2000 1999 Deferred tax assets: 82,092 79,039 62,429 $ Reserve for insurance claims and self-insurance 21,511 38,308 20,511 Reserve for vacant store leases 18,292 5,310 3,143 Unearned promotional allowance 13,352 13,463 14,225 Reserve for accrued vacations 32,315 17,052 12,929 State net operating loss carry forwards 10,150 12,032 12,196 Excess of book over tax depreciation 991 - - Other comprehensive income 997 956 1,084 Excess of book over tax rent expense 21,046 19,452 17,009 Excess of book over tax retirement expense 9,291 9,718 9,684 Uniform capitalization of inventory 102,375 130,587 - Restructuring costs 50,701 52,730 42,213 Other, net 363,113 378,647 196,423 Total gross deferred tax assets 29,696 16,489 12,401 Less: Valuation allowance 333,417 362,158 184,022 Net deferred tax assets Deferred tax liabilities: (84,640 ) (46,308) (31,098) Excess of tax over book depreciation (4,783 ) (4,761) (14,347) Undistributed earnings of the Bahamas subsidiary - - (1,921) Other comprehensive income (2,113 ) (9,863) (26,397) Other, net (91,536 ) (60,932 ) (73,763) Total gross deferred tax liabilities 241,881 301,226 110,259 $ Net deferred tax assets 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. 35 2001 WINN-DIXIE
  • 29. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 7. Income Taxes - continued of Appeals issued an opinion on June 28, 2001 affirming the Tax The Company reserved $30.4 million for taxes and $19.7 Court’s decision. Congress passed legislation phasing out such million for interest ($42.5 million after tax, or $0.29 per diluted deductions over a three-year period in the fall of 1996. The share) after receiving an unfavorable opinion in October 1999 Company held such policies and deducted interest on outstanding and a computational decision on January 11, 2000 from the U.S. loans from March 1993 through December 1997. Management Tax Court. Additional interest totaling $5.5 million was accrued disagrees with the Tax Court’s decision and plans further appeal. in fiscal 2001. Interest will continue to accrue until the matter While the ultimate outcome of this litigation cannot be predicted is finally resolved. The Tax Court upheld the Internal Revenue with certainty, in the opinion of management, the ultimate Service’s position that interest related to loans on broad-based, resolution of this matter will not have any additional material company owned life insurance policies in 1993 was not adverse impact on the Company’s financial condition or results of deductible for income tax purposes. The Eleventh Circuit Court operations. 8. Debt 2001 2000 $ - 235,000 Short-term borrowings 364-day $200,000 revolving credit facility; interest payable - - at LIBOR plus 2.5% Five-year $200,000 revolving credit facility; interest payable - - at LIBOR plus 2.5% Mortgage note payable; interest at 9.4% and monthly $22 principal 1,705 - and interest payments and 10.0% of principal paid annually Six-year $400,000 term loan; interest payable at LIBOR plus 2.75% 400,000 - and $1,000 quarterly principal payments 8.875% senior notes due 2008; interest payable semiannually on 300,000 - April 1 and October 1 701,705 235,000 Total 4,291 235,000 Less current portion $ 697,414 - Long-term portion On March 29, 2001, the Company replaced its short-term of the Company’s subsidiaries. borrowings with $800 million in Senior Secured Credit Facilities Pricing on the New Facilities is based on the corporate credit (the “New Facilities,”) and issued $300 million of Senior ratings from Standard and Poor’s and Moody’s Investors Services. Unsecured Notes (the “Notes”). The New Facilities consist of a Based on the Company’s BBB-/Ba1 corporate ratings, the LIBOR $200 million 364-day revolving credit facility, a $200 million spread on the 364-day and five-year revolving credit facilities is five-year revolving credit facility, and a $400 million six-year 2.50%. The Company also pays an unused commitment fee of term loan. 37.5 basis points on the 364-day line of credit and 50 basis The 364-day revolving credit facility and the five-year points on the five-year line of credit. The LIBOR spread on the revolving credit facility will be used to fund working capital six-year term loan is 2.75% at the Company’s current rating. needs, capital expenditures and general corporate purposes. The New Facilities are secured by a first lien on essentially all of the Company’s assets and are guaranteed by the capital stock 36 WINN-DIXIE 2001
  • 30. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 8. Debt - continued The Company entered into interest rate swap agreements, semiannually on April 1 and October 1 and mature on April 1, which expire in one to three years on the six-year term loan, that 2008. At June 27, 2001, the Company’s outstanding fixed rate effectively converts the $400 million six-year term loan from borrowings approximated fair market value. Additional securities variable to fixed rate debt. Under the terms of these agreements, up to $700 million remain available for issuance under the the Company makes payments at a weighted average interest rate Company’s 2000 Registration Statement. of 7.54% and receives a variable interest rate based on the one- The New Facilities and Notes contain certain covenants as month LIBOR. See Note 9 - Derivatives for further discussion of defined in the credit agreement and indenture, as amended. The the Company’s interest rate swap activity. The Company incurred Company was in compliance with all of these covenants at June 27, approximately $24.2 million in debt issue costs related to the 2001. issuance of the New Facilities and the Notes. These debt issue Aggregate principal maturities on long-term debt and capitalized costs will be amortized over the life of the debt as additional lease obligations for each of the twelve-month periods subsequent interest expense. to June 27, 2001 are as follows: Long-term Debt The Company had no borrowings outstanding on the 364-day and five-year revolving credit facilities and $400 million $ 2002 4,291 outstanding on the six-year term loan at June 27, 2001. As of June 27, 2001, the Company had $18.6 million in outstanding 2003 4,288 letters of credit used to support inventory purchases and 2004 4,285 insurance obligations. 2005 4,282 The Company issued $300 million in unsecured notes under a 2006 4,279 shelf registration statement filed with the Securities and Thereafter 680,280 Exchange Commission in December 2000 (the “2000 Registration $ Total 701,705 Statement”). The Notes are priced at 8.875%, pay interest 37 2001 WINN-DIXIE
  • 31. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted The maturity and interest rate on the interest rate swaps are 9. Derivatives shown in the following table. The Company will pay the The Company follows Statement of Financial Accounting counterparty interest at a fixed rate as noted, and the Standards No. 133, “Accounting for Derivative Instruments and counterparty will pay the Company interest at a variable rate Hedging Activities” (“SFAS 133”). SFAS 133 requires that all equal to the one-month LIBOR (3.75% as of June 27, 2001). derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, Notional Maturity Fixed Rate depending on whether a derivative is designated as part of a Amount hedge transaction and, if it is, the type of hedge transaction. $ 150,000 March 29, 2002 4.60 % The Company adopted SFAS 133 in the first quarter of 2001. 150,000 March 29, 2003 4.81 % However, the Company had no derivatives to be measured at the 100,000 March 29, 2004 5.03 % time of adoption. $ 400,000 As part of the New Facilities described in Note 8 - Debt, the Company obtained a $400 million six-year term loan with a variable interest rate based on the one-month LIBOR. The The fair value of the Company’s interest rate swaps is obtained Company utilizes derivative financial instruments to reduce its from dealer quotes. These values represent the estimated amount exposure to market risks from changes in interest rates. The the Company would receive or pay to terminate the agreement, instruments primarily used to mitigate these risks are interest taking into consideration the difference between the contract rate swaps. All derivative instruments held by the Company are rate of interest and rates currently quoted for agreements of designated as highly effective cash flow hedges of interest rate similar terms and maturities. At June 27, 2001, the fair value of risk on variable rate debt and, accordingly, the change in fair the Company’s interest rate swaps resulted in an unrealized loss value of these instruments is recorded as a component of other of $2.6 million ($1.6 million, net of tax). The Company recorded comprehensive income. the unrealized loss in accumulated other comprehensive income The Company is exposed to credit-related losses in the event of in shareholders’ equity. During the next 12 months, the Company nonperformance by counterparties to these financial instruments. will incur interest expense, including the effect of interest rate However, counterparties to these agreements are major financial swaps at a weighted average rate of 7.54% on the $400 million institutions, and the risk of loss due to nonperformance is outstanding in variable rate debt. considered by management to be minimal. The Company does not The Company measures effectiveness by the ability of interest hold or issue interest rate swaps for trading purposes. rate swaps to offset cash flows associated with changes in the The Company has entered into three interest rate swap one-month LIBOR. To the extent that any of these contracts are agreements to hedge the interest rate risk associated with the not considered effective, any changes in fair value relating to the $400 million outstanding in variable rate debt. The purpose of ineffective portion of these contracts are immediately recognized these swaps is to fix interest rates on variable rate debt and in income. However, all the contracts were effective during the reduce certain exposures to interest rate fluctuation. At June 27, period and no gain or loss was reported in earnings. 2001, the Company had interest rate swaps with a notional amount of $400 million. The notional amounts do not represent a measure of exposure of the Company. 38 WINN-DIXIE 2001
  • 32. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 10. Stock Compensation Plans The Company has various stock option, stock purchase and (a) Stock Purchase Plan: The Company has a stock purchase incentive plans to reward employees and key executives of the plan in effect for associates. Under the terms of this Plan, Company. Under SFAS 123, other than normal purchase discounts the Company may grant options to purchase restricted shares under the employee stock purchase plan, the fair value of of the Company’s common stock at a price not less than the restricted stock and options at date of grant under the restricted lesser of 85% of the fair market value at the date of grant or stock plan and the key employee stock option plan are charged 85% of the fair market value at the time of exercise. There to compensation costs over the vesting or performance period. are 5,481,835 shares of the Company’s common stock Compensation cost charged against income was $8.0 million available for the grant of options under the Plan. Loans to and $2.5 million in fiscal 2001 and 1999, respectively. associates for the purchase of the Company’s common stock Compensation costs resulted in income of $1.1 million in fiscal are reported in the consolidated financial statements as a 2000. The primary reason for the income in fiscal 2000 was due reduction of Shareholders’ Equity, rather than as a current to the reversal of compensation expense previously recognized asset. The total number of loans outstanding as of June 27, for restricted stock that did not vest. 2001 were $1.9 million. No loans were outstanding at June The per share weighted fair value of the stock options granted 28, 2000. in fiscal 2001 and 2000 is $3.09 and $6.62, respectively. These (b) Restricted Stock Plan: The Company has a restricted stock amounts were estimated on the date of the grant using the Black- plan. Under this plan, the Company issues restricted shares Scholes option pricing model under the following assumptions: of the Company’s common stock to certain eligible key risk-free interest rate of 6.2% and 6.7%; dividend yield of 7.0% employees determined by the Company’s compensation and 5.4%; expected lives of 6.5 and 7 years; and volatility of committee. The following table shows the number of shares 34.0% and 38.0%, respectively. issued, forfeited and outstanding. Restricted shares outstanding Number of shares Total Weighted Average FY 2001 FY 2000 FY 1999 Issue Price 1999 Plan $ 41.12 Issued 252,097 - - 252,097 Forfeited 232,402 169,263 18,592 44,547 Outstanding 19,695 2000 Plan $ 25.75 Issued 239,030 - 239,030 - Forfeited 127,958 34,834 93,124 - Outstanding 111,072 2001 Plan $ 15.22 Issued 103,164 103,164 - - Forfeited 2,192 2,192 - - Shares Vested 32,254 32,254 - - Outstanding 68,718 Shares outstanding, June 27, 2001 199,485 39 2001 WINN-DIXIE
  • 33. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted determined by the Company’s Corporate Governa nc e 10. Stock Compensation Plans - continued Committee. A total of 500,000 shares of the Company’s (b) Restricted Stock Plan, continued common stock were made available for issuance and option The vesting of shares issued prior to January 2000 is grants. Stock options issued under the plan were exercisable contingent upon certain specified goals being attained over immediately at an exercise price equal to the Company’s a three-year period. The shares issued after such date vest stock price at the date of grant. over time. Some of the shares issued vest one-third each 5. Options Outstanding: Changes in options during the year beginning with the third year from the date of issue, years ended June 27, 2001, June 28, 2000 and June 30, based on continued employment. Some of the shares issued 1999, were as follows: vest one-third each year beginning on the first anniversary of the date of grant, based on continued employment. Other Options outstanding shares issued vest one-fifth each year beginning on the first Number Weighted anniversary date of the recipient’s employment with the of Shares Average company, based on continued employment. Option (c) Stock Option Plans: The Company has made shares of the Price Per Company’s stock available for grant under stock plans Share described below. Outstanding - June 24, 1998 332,000 29.76 $ 1. Key Employee: Under the Company’s Key Employee Stock Granted 181,277 41.51 Option Plan, 5,000,000 shares of the Company’s common Exercised (50,000 ) 21.06 stock were made available for grant at an exercise price of Forfeited (25,842 ) 35.65 no less than the market value at date of grant. Options granted under this plan prior to June 1, 1998 are earned over Outstanding - June 30, 1999 437,435 35.27 a three-year period, if certain performance goals are Granted 1,828,306 23.34 attained; and options granted after June 1, 1998 but before Exercised (50,000 ) 22.44 January, 2000 also are earned after three years, if certain Forfeited (886,234 ) 27.43 performance goals are attained. Options granted in or after Outstanding - June 28, 2000 1,329,507 24.57 January 2000 become exercisable over time. Some of these Granted 977,158 14.71 options vest over a three-year period with one-third of the options vesting each year beginning on June 15, 2001. Exercised (5,000) 14.25 Other options vest over a five-year period with one-fifth of Forfeited (74,574 ) 19.37 options vesting each year beginning on the first anniversary Outstanding - June 27, 2001 2,227,091 20.44 $ date of the recipient’s employment with the company. Exercisable - June 27, 2001 945,587 21.81 $ 2. Retention and Attraction Program: As part of the Company’s Shares available for additional grant 3,920,370 retention and attraction program, 1,200,000 shares of the Company’s common stock were made available for grant to key employees beginning on 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, with one-fifth of the options vesting each year beginning on January 28, 2001, if the associate remains employed in his or her position. 3. CEO Stock Options: Pursuant to an employment agreement, the President and Chief Executive Officer of the Company received an option to purchase 500,000 shares of the Company’s common stock at an exercise price of $27.00 per share. Currently all 500,000 of the options are exercisable. 4. Directors’ Stock Plan: The Company has a stock plan for non-employee directors. Under this plan, the Company may issue stock or grant options for the purchase of the Company’s common stock to eligible non-employee directors 40 WINN-DIXIE 2001
  • 34. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 10. Stock Compensation Plans - continued (c) Stock Option Plans, continued The following table sets forth information regarding options outstanding at June 27, 2001. Options Exercisable Number of Weighted Average Weighted Average Number Currently Weighted Average Options Exercise Price Remaining Life Exercisable Exercise Prices (Years) for Currently Exercisable 1,554,208 $ 14.25 to 20.00 $ 16.49 6.9 444,983 $ 15.97 503,487 $ 21.31 to 27.00 26.96 8.4 500,329 27.00 169,396 $ 33.03 to 41.51 37.37 3.8 275 33.03 2,227,091 $ 20.44 7.0 945,587 $ 21.81 11. Leases (a) Leasing Arrangements: There were 1,468 leases in effect on Future lease payments Capital Operating store locations and other properties at June 27, 2001. Of these 1,468 leases, 25 store leases and 3 warehouse and Fiscal Year: manufacturing facility leases are classified as capital leases. Substantially all store leases will expire during the next 2002 $ 7,246 356,001 twenty years and the warehouse and manufacturing facility 2003 7,246 352,003 leases will expire during the next 23 years. However, in the 2004 6,640 346,590 normal course of business, it is expected that these leases 2005 6,083 336,752 will be renewed or replaced by leases on other properties . 2006 6,103 323,039 The rental payments on substantially all store leases are Later years based on a minimum rental plus a contingent rental, which 21,628 2,987,575 is based on a percentage of the store’s sales in excess of Total minimum lease payments 54,946 4,701,960 stipulated amounts. Most of the Company’s leases contain renewal options for five-year periods at fixed rentals. Less: Amount representing estimated taxes, maintenance and (b) Leases: Leased property under capital leases by major insurance costs included in classes are: 2001 2000 total minimum lease payments 970 Net minimum lease payments 53,976 $ 38,521 Store facilities 38,082 Less: Amount representing interest 21,753 Warehouses and manufacturing Present value of net minimum lease 15,722 facilities 15,722 payments $ 32,223 54,243 53,804 32,951 Less: Accumulated amortization 34,833 Rental payments and contingent rentals under operating leases $ 21,292 18,971 are as follows: 2000 1999 2001 The following is a schedule by year of future minimum lease Minimum rentals 323,117 341,296 $ 347,130 payments on open facilities under capital and operating leases, Contingent rentals 1,380 1,581 878 together with the present value of the net minimum lease 324,497 342,877 $ 348,008 payments as of June 27, 2001. An expense is recorded for the present value of expected future net rent payments in the year a store closes. The accrued balance at June 27, 2001 for stores that closed not related to the restructuring is $59,381. 41 2001 WINN-DIXIE
  • 35. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 12. Shareholders’ Equity On April 19, 2000, the Board of Directors authorized the During the second quarter of fiscal 2001, approximately repurchase, in either open market or private transactions, of up 910,000 shares were purchased for cash and credit by associates to 10,000,000 shares of the outstanding common stock in under the Revised Winn-Dixie Stock Purchase Plan for Employees, addition to the 5,000,000 share repurchase program announced for an aggregate value of $13.7 million. The total amount of on October 6, 1999. From October 6, 1999 through September cash received at the time of sale was $10.3 million, with the 20, 2000, the Company repurchased 9,034,400 shares having an remainder to be paid by associates over 12 months beginning aggregate cost of $179.0 million or $19.82 per share. No shares January 2001. were repurchased under the program during the three quarters ended June 27, 2001. (d) Litigation: There are pending against the Company various 13. Commitments and Contingent Liabilities claims and lawsuits arising in the normal course of business, (a) Associate Benefit Programs: The Company has a including suits charging violations of certain civil rights laws noncontributory, trusteed profit sharing retirement program and various proceedings arising under federal, state or local and a contributory, trusteed 401k retirement program, which regulations protecting the environment. are in effect for eligible associates and may be amended or Among the suits charging violations of certain civil rights terminated at any time. Charges to earnings for contributions laws, there are actions that purport to be class actions, and to the programs amounted to $42,317, $17,625 and $67,250 which allege sexual harassment, retaliation and/or a pattern in 2001, 2000 and 1999, respectively. and practice of race-based and gender-based discriminatory (b) Defined Benefit Plan: The Company has a Management treatment of employees and applicants. The plaintiffs seek, Security Plan (MSP), which is a non-qualified defined benefit among other relief, certification of the suits as proper class plan providing disability, death and retirement benefits to actions, declaratory judgment that the Company’s practices 406 qualified active associates of the Company and 650 are unlawful, back pay, front pay, benefits and other former participants. Total MSP cost charged to operations compensatory damages, punitive damages, injunctive relief was $6,686, $6,104 and $6,132 in 2001, 2000 and 1999, and reimbursement of attorneys’ fees and costs. respectively. The projected benefit obligation at June 27, The Company is committed to full compliance with all 2001 was approximately $50,822. The effective discount applicable civil rights laws. Consistent with this rate used in determining the net periodic MSP cost was 8.0% commitment, the Company has firm and long-standing for 2001, 2000 and 1999. policies in place prohibiting discrimination and harassment. Life insurance policies, which are not considered as MSP The Company denies the allegations of the various assets for liability accrual computations, were purchased to complaints and is vigorously defending the actions. fund the MSP payments. These insurance policies are shown While the ultimate outcome of litigation cannot be on the balance sheet at their cash surrender values, net of predicted with certainty, in the opinion of management, the policy loans aggregating $224,593 and $210,655 at June 27, ultimate resolution of these actions will not have a material 2001 and June 28, 2000, respectively. adverse effect on the Company’s financial condition or (c) Supplemental Retirement Plan: The Company has a results of operations. deferred compensation Supplemental Retirement Plan in See Note 7 - Income Taxes with respect to certain effect for eligible management associates. The Company litigation pending before the U.S. Tax Court. recorded an asset and liability at June 27, 2001 and June 28, 2000 in the amount of $16.6 million and $17.0 million, respectively. 42 WINN-DIXIE 2001
  • 36. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 14. Restructuring and Other Non-recurring Charges On April 20, 2000, the Board of Directors approved and the or $1.76 per diluted share) in the fourth quarter of fiscal 2000. Company announced a major restructuring to improve the support Charges totaling $147.2 million ($90.6 million after tax or $0.64 of the retail stores and the Company’s overall efficiency. per diluted share) were recorded in the current year. A summary As a result of the restructuring, the Company recorded of the restructuring charges and the remaining accrual follows: expenses of approximately $396 million ($256 million after tax Restructuring charge Employee Lease Other Asset Asset Removal Total Termination Termination Location Impairment & Related Costs Costs Closing Costs Costs $ 16,713 Additions 189,295 10,722 179,299 - 396,029 $ (7,546) (2,628) Utilization (10,647 ) (179,299) - (200,120) 9,167 Balance at 6/28/00 186,667 75 - - 195,909 2,153 Additions 19,889 12,348 43,277 71,634 149,301 (2,018) Adjustments - (38) - - (2,056) (9,302) (44,426) Utilization (12,385 ) (43,277) (71,634) (181,024) $ - Balance at 6/27/01 162,130 - - - 162,130 $ The adjustment to employee termination costs represents the impairments are the expenses involved in the retrofit of selected accrued severance for employees in closed stores where the stores. In addition, other asset impairments were recorded as employees subsequently became ineligible for severance. The part of the restructuring. The addition to lease termination costs addition to other location closing costs includes travel expenses, reflects the updated estimate of the remaining liability. inventory retagging and employee relocation costs in connection The following table shows the number of people that are with the restructuring. Asset removal and related costs and asset eligible for severance under the restructuring plan. Severence eligibility Retail Manufacturing Total and Support Facilities 655 4,006 3,351 Eligible for severence 240 876 636 Number paid 63 1,338 1,275 Became ineligible 352 1,792 1,440 Number eligible at June 28, 2000 258 675 417 Number paid 94 1,117 1,023 Became ineligible - - - Number eligible at June 27, 2001 43 2001 WINN-DIXIE
  • 37. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 14. Restructuring and Other Non-recurring Charges improvements and goodwill for certain stores that will continue - continued to be operated by the Company. Projected future undiscounted As part of the Company’s restructuring in fiscal year 2000, all cash flows were used to determine whether the assets were stores were evaluated based on current and projected impaired. For the assets that were determined to be impaired, profitability. As part of this evaluation, the Company performed the impairment charge was calculated to be the difference an impairment review of its long-lived assets. During this review, between the carrying value of the asset and the greater of the Company identified impairment losses for assets to be discounted cash flows and estimated fair value of the asset. disposed of and assets to be held and used. Goodwill impairment was measured as the difference between the The impairment charge for assets to be disposed of related carrying value of the goodwill and the discounted cash flows of primarily to the carrying value of equipment and leasehold the operations that gave rise to the goodwill. As a result, an improvements for the stores, division offices, warehouse and impairment charge of $101.4 million related to assets to be held manufacturing plants that were closed as part of the and used was recognized in fiscal 2000, reducing the carrying restructuring discussed above. The impairment charge was value of fixed assets and goodwill by $69.3 million and $32.1 determined using the fair value less the cost to sell. The amount million, respectively. of the impairment charge for assets to be disposed of included in Any remaining expenditures relating to retrofits are not the restructuring charge for fiscal 2000 was $77.9 million. considered to be material to the Company’s operations and will The impairment charge for assets to be held and used related be included as a component of operating and administrative primarily to the carrying value of equipment, leasehold expense. 15. Business Combinations In October 2000, the Company acquired nine Gooding’s Mississippi, Alabama and Louisiana. The acquisition was accounted supermarkets in Orlando, Florida. The acquisition was accounted for for as a purchase. Proforma results of the Gooding’s and Jitney as a purchase. On January 11, 2001, the Company acquired 68 Jungle acquisitions, assuming the transactions were consummated stores, 32 fuel stations and other assets owned by Jitney Jungle at the beginning of 2001 and 2000, would not be materially Stores of America, Inc. The acquired assets are located in different from the results reported. 44 WINN-DIXIE 2001
  • 38. WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Dollar amounts in thousands except per share data, unless otherwise noted 16. Quarterly Results of Operations (Unaudited) The following is a summary of the unaudited quarterly results of operations for the years ended June 27, 2001 and June 28, 2000: Quarterly results Quarters Ended Sept. 20 Jan. 10 April 4 June 27 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks) 2001 Net sales $ 2,940,862 3,956,338 3,016,312 2,989,861 Gross profit on sales $ 746,899 1,061,114 813,829 832,185 Net earnings $ 9,413 12,169 10,724 13,005 Basic earnings per share $ 0.07 0.09 0.08 0.09 Diluted earnings per share $ 0.07 0.09 0.08 0.09 Net LIFO charge (credit) $ 1,845 2,460 1,845 (13,504 ) Net LIFO charge (credit) per diluted share $ 0.01 0.02 0.01 (0.10 ) Dividends per share $ 0.170 0.340 0.255 0.255 Market price range $ 15.44-13.44 23.13-13.56 30.35-16.88 33.12-25.01 Quarters Ended Sept. 22 Jan. 12 April 5 June 28 (12 Weeks) (16 Weeks) (12 Weeks) (12 Weeks) 2000 Net sales $ 3,162,171 4,276,024 3,199,356 3,059,996 Gross profit on sales $ 869,592 1,169,681 865,419 822,358 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 During 2001 and 2000, 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 (0.8)% and 1.0% to 1.1%, respectively. Fourth Quarter Results of Operations June 27, 2001 June 28, 2000 12 Weeks 12 Weeks 2,989,861 3,059,996 Net sales $ 2,157,676 2,237,638 Cost of sales 832,185 822,358 Gross profit on sales 739,776 793,417 Operating and administrative expenses 56,497 396,029 Restructuring and other non-recurring charges 35,912 (367,088 ) Operating income (loss) 14,800 6,784 Interest expense 21,112 (373,872) Earnings (loss) before income taxes 8,107 (131,428 ) Income taxes 13,005 (242,444 ) Net earnings (loss) $ 45 2001 WINN-DIXIE
  • 39. SHAREHOLDER INFORMATION Shareholder Communications Corporate Headquarters Please address any inquiries or comments to: Winn-Dixie Stores, Inc. P.O. Box B EquiServe Trust Company, N. A. Jacksonville, Florida 32203-0297 Transfer Agent and Registrar Internet Address: www.winn-dixie.com Winn-Dixie Stores, Inc. P.O. Box 2500 Jersey City, New Jersey 07303-2500 Transfer Agent and Registrar EquiServe Trust Company, N. A. Toll-Free Number: 1-888-U-CALL-WD P.O. Box 2500 (1-888-822-5593) Jersey City, New Jersey 07303-2500 For Hearing Impaired: 1-201-222-4955 Independent Auditors Internet Address: www.equiserve.com KPMG LLP or Jacksonville, Florida Shareholder Relations Winn-Dixie Stores, Inc. P.O. Box B Dividend Reinvestment Jacksonville, Florida 32203-0297 The Company's Dividend Reinvestment Plan allows our shareholders who own at least 10 shares in certificate form to The Company's ann ual report to the Securities and Exchange reinvest dividends on Winn-Dixie common stock automatically, Commission on Form 10-K may be obtained by any shareholder, without service charges or brokerage fees. Participating free of charge, upon written request to the Company or can be shareholders may also supplement the amount invested with retrieved through Winn-Dixie's website. voluntary cash investments on the same cost-free basis. Approximately 71% of the Company's shareholders participate in the Dividend Reinvestment Plan. More information may be Stock Market Listing obtained by contacting EquiServe Trust Company, N. A. New York Stock Exchange Symbol: WIN Direct Deposit The Company offers direct deposit of dividends to our Annual Shareholders’ Meeting shareholders. More information may be obtained by contacting You are cordially invited to attend the meeting to be held EquiServe Trust Company, N. A. Wednesday, October 10, 2001, 9:00 a.m., at the headquarters office of the Company at 5050 Edgewood Court, Jacksonville, Florida. Formal notice of the meeting, a proxy and proxy statement are being mailed to shareholders who are of record as of the close of business on August 6, 2001. 46 WINN-DIXIE 2001
  • 40. OHIO INDIANA 17 1 VIRGINIA 28 KENTUCKY 40 Operating Area NORTH CAROLINA TENNESSEE Total Stores - 1,153 109 12 OKLAHOMA SOUTH CAROLINA 5 62 MISSISSIPPI GEORGIA 69 94 ALABAMA 118 TEXAS 71 LOUISIANA FLORIDA 79 436 BAHAMAS 12

×