-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOaAX5pHt+MyyBOYgJIwuDTcQYduKXMCL6l0R+uHyjz9aM+uf5h6btJA2VJyXiK7 X0kC5OiwNtploJWRmNAQRQ== 0000107681-00-000002.txt : 20000427 0000107681-00-000002.hdr.sgml : 20000427 ACCESSION NUMBER: 0000107681-00-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000405 FILED AS OF DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINN DIXIE STORES INC CENTRAL INDEX KEY: 0000107681 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 590514290 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03657 FILM NUMBER: 609646 BUSINESS ADDRESS: STREET 1: 5050 EDGEWOOD CT CITY: JACKSONVILLE STATE: FL ZIP: 32224 BUSINESS PHONE: 9047835000 MAIL ADDRESS: STREET 1: P O BOX B CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: WINN & LOVETT GROCERY INC DATE OF NAME CHANGE: 19710927 FORMER COMPANY: FORMER CONFORMED NAME: WINN & LOVETT GROCERY CO DATE OF NAME CHANGE: 19671119 10-Q 1 3RD QUARTER, 2000 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 5, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ____________________ Commission File Number 1-3657 --------------------- WINN-DIXIE STORES, INC. (Exact name of registrant as specified in its charter) Florida 59-0514290 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5050 Edgewood Court, Jacksonville, Florida 32254-3699 (Address of principal executive offices) (Zip Code) (904) 783-5000 (Registrant's telephone number, including area code) Unchanged (Former name, former address and former fiscal year, if changed since last report) --------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No As of April 5, 2000 there were 144,498,517 shares outstanding of the registrant's common stock, $1 par value. ================================================================================ WINN-DIXIE STORES, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS Part I: Financial Information Page Condensed Consolidated Statements of Earnings (Unaudited), For the 12 and 40 Weeks Ended April 5, 2000 and March 31, 1999 1 Condensed Consolidated Balance Sheets (Unaudited), April 5, 2000 and June 30, 1999 2 Condensed Consolidated Statements of Cash Flows (Unaudited), For the 40 Weeks Ended April 5, 2000 and March 31, 1999 3 Notes to Condensed Consolidated Financial Statements (Unaudited) 4-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Part II: Other Information Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) Amounts in thousands except per share data For the 12 Weeks Ended ------------------------------------------- MOST RECENT QUARTER April 5, 2000 March 31, 1999 ------------------ --------------------- Net sales $ 3,199,356 3,203,524 Cost of sales 2,353,408 2,330,865 ------------------ --------------------- Gross profit 845,948 872,659 Operating & administrative expenses 846,907 795,839 ------------------ --------------------- Operating income (loss) (959) 76,820 Cash discounts & other income 24,569 26,324 Interest expense (6,907) (7,505) ------------------ --------------------- Earnings before income taxes 16,703 95,639 Provision for income taxes 6,430 36,821 ------------------ --------------------- Net earnings $ 10,273 58,818 ================== ===================== Basic earnings per share $ 0.07 0.40 ================== ===================== Diluted earnings per share $ 0.07 0.40 ================== ===================== Dividends per share $ 0.255 0.255 ================== ===================== For the 40 Weeks Ended ------------------------------------------- FISCAL YEAR-TO-DATE April 5, 2000 March 31, 1999 ------------------ --------------------- Net sales $ 10,637,551 10,658,486 Cost of sales 7,802,647 7,788,552 ------------------ --------------------- Gross profit 2,834,904 2,869,934 Operating & administrative expenses 2,813,001 2,725,088 ------------------ --------------------- Operating income 21,903 144,846 Cash discounts & other income 89,855 86,385 Interest expense (Note H) (40,297) (26,797) ------------------ --------------------- Earnings before income taxes 71,461 204,434 Provision for income taxes (Note H) 57,912 78,707 ------------------ --------------------- Net earnings $ 13,549 125,727 ================== ===================== Basic earnings per share $ 0.09 0.85 ================== ===================== Diluted earnings per share $ 0.09 0.85 ================== ===================== Dividends per share $ 0.765 0.765 ================== ===================== See accompanying notes to Condensed Consolidated Financial Statements. Page 1 WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Amounts in thousands Assets -------------------- Current Assets: Cash and cash equivalents $ 22,489 24,746 Trade and other receivables 140,199 188,314 Merchandise inventories less LIFO reserve 1,334,987 1,425,098 of $227,274 ($217,274 at June 30, 1999) Deferred income taxes 119,173 112,869 Prepaid expenses 41,723 46,963 ------------- ------------- Total current assets 1,658,571 1,797,990 ------------- ------------- Investments and other assets 108,424 128,524 Net property, plant and equipment 1,203,179 1,222,633 ------------- ------------- Total assets $ 2,970,174 3,149,147 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 603,747 662,172 Short-term borrowings 342,950 465,000 Reserve for insurance claims and self-insurance 80,208 75,461 Accrued wages and salaries 121,025 108,826 Accrued rent 109,739 99,734 Accrued expenses 234,219 122,641 Current obligations under capital leases 2,686 2,751 Income taxes 26,628 10,739 ------------- ------------- Total current liabilities 1,521,202 1,547,324 ------------- ------------- Obligations under capital leases 36,589 38,493 Defined benefit plan 44,060 41,234 Reserve for insurance claims and self-insurance 117,530 92,256 Other liabilities 18,604 18,072 Deferred income taxes 28,104 689 ------------- ------------- Shareholders' equity: Common stock 144,499 148,577 Retained earnings 1,059,638 1,259,597 Accumulated other comprehensive income - 3,069 Associates' stock loans (52) (164) ------------- ------------- Total shareholders' equity 1,204,085 1,411,079 ------------- ------------- Total liabilities and shareholders' equity $ 2,970,174 3,149,147 ============= ============= - -------------------------------------------------------------------------------- See accompanying notes to Condensed Consolidated Financial Statements. Page 2 WINN-DIXIE STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Amounts in thousands For the 40 Weeks Ended ---------------------------------- FISCAL YEAR-TO-DATE April 5, 2000 March 31, 1999 --------------- -------------- Cash flows from operating activities: - ------------------------------------- Net earnings $ 13,549 125,727 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 200,679 229,695 Deferred income taxes 19,188 12,509 Defined benefit plan 2,826 3,094 Reserve for insurance claims and self-insurance 30,021 (4,525) Stock compensation plans 1,709 4,570 Change in cash from: Receivables 48,115 (31,872) Merchandise inventories 90,111 (44,948) Prepaid expenses 5,240 29,536 Accounts payable (58,361) (33,579) Income taxes 15,889 32,652 Other current accrued expenses 133,964 64,393 -------------- ------------- Net cash provided by operating activities 502,930 387,252 -------------- ------------- Cash flows from investing activities: Purchases of property, plant and equipment, net (177,999) (262,083) Decrease in investments and other assets 15,734 7,520 -------------- ------------- Net cash used in investing activities (162,265) (254,563) -------------- ------------- Cash flows from financing activities: Decrease in short-term borrowings (122,050) (26,000) Payments on capital lease obligations (2,131) (2,315) Purchase of common stock (106,672) (224) Proceeds of sales under associates' stock purchase plan 112 2,579 Dividends paid (112,338) (113,411) Other 157 7,245 -------------- ------------- Net cash used in financing activities (342,922) (132,126) -------------- ------------- Increase (decrease) in cash and cash equivalents (2,257) 563 Cash and cash equivalents at beginning of year 24,746 23,566 -------------- ------------- Cash and cash equivalents at end of period $ 22,489 24,129 ============== ============= Supplemental cash flow information: Interest paid $ 18,727 17,254 Interest and dividends received $ 519 476 Income taxes paid $ 20,912 33,472 ============== ============= See accompanying notes to Condensed Consolidated Financial Statements. Page 3 WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (A) Basis of Presentation: Financial information reflects all adjustments which, in the opinion of management, are necessary to reflect the results of operations and financial position for the quarters shown. These condensed financial statements should be read in conjunction with the fiscal 1999 Form 10-K Annual Report of the Company. The consolidated financial statements include the accounts of Winn-Dixie Stores, Inc. and its subsidiaries, which operate as a major food retailer in fourteen states and the Bahama Islands. (B) Change in Estimated Lives: During the second quarter of fiscal 1999, the Company increased the estimated useful lives used to compute depreciation for certain assets, principally store equipment (5 to 8 years) and leaseholds (8 to 15 years). Store equipment and leaseholds associated with larger, full-service store formats are expected to have a longer life because of the types of equipment and the expected timing of store remodels. In addition, the change results in useful lives more consistent with the predominant industry practices for these types of assets. The change has been accounted for as a change in estimate and resulted in an increase in earnings before income tax of $14.4 million ($8.8 million after tax, or $0.06 per diluted share) for the 40 weeks ended April 5, 2000. (C) Impact of Franks and Sliced Luncheon Meat Recall: During the second quarter of fiscal 1999, the Company voluntarily recalled certain franks and sliced luncheon meats manufactured by its wholly-owned subsidiary, Dixie Packers, Inc. As a result of this recall, sales and profits were negatively impacted. The impact on earnings was approximately $10.5 million pre-tax ($6.4 million after tax, or $0.04 per diluted share). (D) Inventories: Merchandise inventories are stated at the lower of cost or market, approximately 86% of which are valued under the LIFO method. (E) LIFO: Results for the quarter reflect a pre-tax LIFO inventory charge of $3.0 million in fiscal 2000 and $3.0 million in fiscal 1999. The cumulative current year LIFO charge is $10.0 million, as compared with $11.0 million in fiscal 1999. If the FIFO method had been used, current quarter net earnings would have been $12.1 million, or $0.08 per diluted share, as compared with net earnings of $60.7 million, or $0.41 per diluted share in the previous year. The cumulative current year net earnings would have been $19.7 million, or $0.13 per diluted share, as compared with $132.4 million, or $0.89 per diluted share in the previous year. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs. Because these are subjected to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuations. Page 4 WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) cont'd. (F) Comprehensive Income: Comprehensive income for the quarters ended April 5, 2000 and March 31, 1999 was approximately $10.3 million and $57.8 million, respectively. Year-to-date, comprehensive income at April 5, 2000 and March 31, 1999 was approximately $10.5 million and $125.2 million, respectively. These amounts differ from net income due to changes in the net unrealized holding gains (losses) generated from available-for-sale securities. (G) Credit Arrangements: On January 4, 2000, the Company increased its authorized commercial paper program from $500.0 million to $700.0 million. In support of this program, or as an independent source of funds, the Company entered into a $700.0 million revolving credit facility, which is syndicated to a group of 17 banks, with The Chase Manhattan Bank as administrative agent. The facility was entered into on November 17, 1999 and is renewable on an annual basis. Outstanding amounts under the credit facility bear interest at certain floating rates as specified by the credit facility. The credit facility contains certain financial and non-financial covenants relating to the Company's operations, including maintaining certain financial ratios. In addition to the $700.0 million syndicated credit facility, the Company also has $35.0 million available in short-term lines of credit. As of April 5, 2000, the Company had $343.0 million in commercial paper and no amounts from short-term lines of credit outstanding, as compared to $300.0 million in commercial paper and $165.0 from short-term lines of credit outstanding on June 30, 1999. (H) Income Taxes: The provision for income taxes reflects management's best estimate of the effective tax rate expected for the fiscal year. The effective tax rate for fiscal years 2000 and 1999 is 38.5%. The Company reserved $30.4 million for taxes and $17.5 million for interest ($41.2 million after tax, or $0.28 per diluted share) after receiving an unfavorable opinion in October 1999 and a computational decision on January 11, 2000 from the U.S. Tax Court. The Tax Court upheld the Internal Revenue Service's position that interest related to loans on broad-based, company owned life insurance policies in 1993 was not deductible for income tax purposes. Congress passed legislation phasing out such deductions over a three-year period in the fall of 1996. The Company held such policies and deducted interest on outstanding loans from March 1993 through December 1997. Management disagrees with the Tax Court's decision and has appealed. While the ultimate outcome of this litigation cannot be predicted with certainty, in the opinion of management, the ultimate resolution of this matter will not have any additional material adverse impact on the Company's financial condition or results of operations. Page 5 WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) cont'd. (I) Earnings Per Share: The following weighted average number of shares of common stock was used in the calculation of earnings per share. The diluted weighted average number of shares includes the net shares that would be issued upon the exercise of stock options using the treasury stock method. Due to the loss reported for the second quarter of fiscal 2000, dilutive shares for the second quarter are not included in the current year-to-date calculation of the diluted weighted average. 2000 1999 -------- ------ Basic: Quarter 144,376,340 148,322,564 Year-to-Date 146,396,906 148,312,179 Diluted: Quarter 144,620,686 148,697,412 Year-to-Date 146,569,969 148,689,831 (J) Common Stock: In April 2000, the Board of Directors authorized the repurchase, in either the open market or private transactions, of up to ten million shares of the Company's outstanding common stock. This is in addition to the five million share repurchase program announced on October 6, 1999. The Company can use its discretion on the timing of purchases based on open market conditions and available funds. To facilitate this program, the Company sold 1,000,000 put warrants, each of which entitles the holder to purchase one share of common stock at prices between $32.47 and $34.68. These warrants were exercised in December 1999. As of April 5, 2000, the Company had purchased 4.3 million shares of common stock under the repurchase program having an aggregate value of $106.7 million or $25.07 per share. (K) Business Reporting Segments: During fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 provides for the disclosure of financial information disaggregated by the way management organizes the segments of the enterprise for making operating decisions. Based on the information monitored by the Company's operating decision-makers to manage the business, the Company has identified that its operations were within one reportable segment. Accordingly, financial information on industry segments is omitted because, apart from the principal business of operating retail self-service food stores, the Company has no other industry segments. All sales of the Company are to customers within the United States and the Bahama Islands. All assets of the Company are located within the United States and the Bahama Islands. Sales and assets related to and located in the Bahama Islands represent less than 1% of the Company's total sales and assets. Page 6 WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) cont'd. (L) New Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. The Company intends to adopt SFAS 133 in the first quarter of fiscal year 2001. The Company is still determining how SFAS 133 will impact the financial statements. (M) Sale of Business: In November 1999, the Company agreed to sell substantially all of the assets of its wholly-owned subsidiary, Winn-Dixie Texas, Inc., to The Kroger Co. for cash. The assets consist of 69 stores in Texas, 5 stores in Oklahoma and the distribution center and a dairy plant in Fort Worth. Completion of the sale is subject to receipt of governmental approvals and the satisfaction of other customary conditions. (N) Litigation: There are pending against the Company various claims and lawsuits arising in the normal course of business, including suits charging violations of certain civil rights laws and various proceedings arising under federal, state or local regulations protecting the environment. Among the suits charging violations of certain civil rights laws, there are actions that purport to be class actions, and which allege sexual harassment, retaliation and/or a pattern and practice of race-based and gender-based discriminatory treatment of employees and applicants. The plaintiffs seek, among other relief, certification of the suits as proper class actions, declaratory judgment that the Company's practices are unlawful, back pay, front pay, benefits and other compensatory damages, punitive damages, injunctive relief and reimbursement of attorneys' fees and costs. The Company is committed to full compliance with all applicable civil rights laws. Consistent with this commitment, the Company has firm and long-standing policies in place prohibiting discrimination and harassment. The Company denies the allegations of the various complaints and is vigorously defending the actions. While the ultimate outcome of litigation cannot be predicted with certainty, in the opinion of management, the ultimate resolution of these actions will not have a material adverse effect on the Company's financial condition or results of operations. Page 7 WINN-DIXIE STORES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) cont'd. (N) Litigation, continued: In July 1999, the Company, without admitting any wrongdoing, reached a settlement with the named plaintiffs in a discrimination class action lawsuit filed on behalf of certain female and African-American present and former associates. The settlement has been approved by the U. S. District Court in Jacksonville, Florida, and the process of implementation will begin upon receipt of signed authorization from the Court. The settlement amount is approximately $33.0 million, which the Company will pay from accruals over the next seven years. In the opinion of management, the settlement will not have a material impact on the Company's financial condition or results of operations. See note (H) "Income Taxes" with respect to certain litigation pending before the U.S. Tax Court. (O) Subsequent Event: On April 19, 2000, the Board of Directors adopted management's "Plan of Restructuring". As a result of the restructuring, the Company will record a pre-tax charge of approximately $450 to $550 million ($275 to $336 million after tax, or $1.87 to $2.29 per diluted share). Approximately $400 million of the pre-tax charge ($245 million after tax, or $1.66 per diluted share) will be recorded in the fourth quarter of fiscal year 2000 with the balance in fiscal year 2001. The Company expects a reduction in expenses of approximately $400 million per year ($245 million after tax, or $1.66 per diluted share) one year following restructuring and going forward. Page 8 WINN-DIXIE STORES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This analysis should be read in conjunction with the Condensed Consolidated Financial Statements. Results of Operations Sales for the third quarter of fiscal 2000 were $3.2 billion, down $4.2 million, or 0.1%, compared with the same quarter last year. Year-to-date, sales were $10.6 billion, a $20.9 million decrease, or 0.2%, under the prior year. Identical store sales decreased 2.5% for the quarter and decreased 2.8% year-to-date. Comparable store sales, which include replacement stores, decreased 1.6% for the quarter and decreased 1.8% year-to-date. Average store sales decreased 0.7% for the quarter and decreased 1.0% year-to-date. For the 40 weeks ended April 5, 2000, the Company opened 30 new stores, averaging 53,800 square feet, closed 29 older stores, averaging 37,700 square feet and enlarged or remodeled 32 store locations, for a total of 1,189 locations in operation on April 5, 2000, compared to 1,182 last year. As of April 5, 2000, retail space totaled 52.7 million square feet, a 2.6% increase over the prior year. The Company plans to open 18 new stores and enlarge or remodel 19 stores during the fourth quarter. Gross profit decreased $26.7 million for the quarter and $35.0 million year-to-date. As a percent to sales, gross profit for the current quarter was 26.4%, compared to 27.2% in the same quarter of the previous year. Year-to-date, gross profit as a percent to sales was 26.6% in the current year, compared to 26.9% in the previous year. The decrease in the gross profit margins reflects an increase in cost of goods and an increase in promotional activity. During the second quarter of fiscal 1999, the Company voluntarily recalled certain franks and sliced luncheon meats manufactured by its wholly-owned subsidiary, Dixie Packers, Inc. As a result of this recall, the previous year operating margins were negatively impacted by approximately $10.5 million. Operating and administrative expenses increased $51.1 million for the current quarter and $87.9 million year-to-date. As a percent to sales, operating and administrative expenses for the current quarter were 26.5%, compared to 24.8% last year. Year-to-date, operating and administrative expenses, as a percent to sales, were 26.4% for the current year and 25.6% for the previous year. The increase for the quarter, as well as year-to-date, is primarily due to an increase in payroll and occupancy costs relating to new and enlarged stores and an increase in the number of pharmacies. During the second quarter of fiscal 1999, the Company increased the estimated useful lives used to compute depreciation for certain assets, principally store equipment (5 to 8 years) and leaseholds (8 to 15 years). Store equipment and leaseholds associated with larger, full-service store formats are expected to have a longer life because of the types of equipment Page 9 Results of Operations, continued and the expected timing of store remodels. In addition, the change resulted in useful lives more consistent with the predominant industry practices for these types of assets. The change has been accounted for as a change in estimate and resulted in a reduction in operating and administrative expenses of $14.4 million for the 40 weeks ended April 5, 2000. Cash discounts and other income totaled $24.6 million for the third quarter, compared to $26.3 million last year. Year-to-date, cash discounts and other income totaled $89.9 million, compared to $86.4 million last year. The increase in cash discounts and other income reflects a $5.2 million gain generated in the second quarter of fiscal 2000 from the sale of available-for-sale securities and a decrease in cash discounts as a result of a decrease in purchases of product for resale. Interest expense totaled $6.9 million for the current quarter, compared to $7.5 million for the comparable period last year. Year-to-date, interest expense totaled $40.3 million for the current year, compared to $26.8 million in the previous year. The increase in interest expense for the year reflects a $17.5 million interest reserve booked after receiving an unfavorable opinion from the U.S. Tax Court in October 1999. See note (H) "Income Tax." Earnings before income taxes were $16.7 million for the current quarter, compared to $95.6 million for the comparable period last year. Year-to-date, earnings before income taxes were $71.5 million and $204.4 million in the previous year. The decrease in pre-tax earnings is primarily a result of a decrease in the gross profit margin and an increase in the operating and administrative expenses as previously mentioned. Income taxes have been accrued at an effective rate of 38.5% for the current and previous years. This rate is expected to approximate the effective rate for the full 2000 fiscal year. The Company reserved $30.4 million for taxes after receiving an unfavorable opinion in October 1999 and a computational decision on January 11, 2000 from the U.S. Tax Court. See note (H) "Income Tax." Net earnings amounted to $10.3 million, or $0.07 per diluted share for the current quarter, compared to $58.8 million, or $0.40 per diluted share, for the comparable period last year. Year-to-date, net earnings amounted to $13.5 million, or $0.09 per diluted share, compared to $125.7 million, or $0.85 per diluted share, for the previous year. The LIFO charge reduced net earnings by $1.8 million, or $0.01 per diluted share, for the current quarter, compared to $1.8 million, or $0.01 per diluted share, in the previous year. Year-to-date, the LIFO charge reduced net earnings by $6.2 million, or $0.04 per diluted share, compared to $6.7 million, or $0.04 per diluted share, in the previous year. Page 10 Liquidity and Capital Resources The Company's financial condition remains sound and strong. Cash and cash equivalents amounted to $22.5 million at April 5, 2000, compared to $24.1 million at March 31, 1999. Net cash provided by operating activities amounted to $502.9 million for the 40 weeks ended April 5, 2000, compared to $387.3 million for the comparable period last year. Capital expenditures totaled $178.0 million, compared to $262.1 million for the comparable period last year. These expenditures were for new store locations, remodeling and enlargement of store locations, and maintenance and expansion of support facilities. Total capital investment in Company retail and support facilities, including operating leases, is estimated to be $500.0 million in 2000. The Company has no material construction or purchase commitments outstanding as of April 5, 2000. Working capital amounted to $137.4 million at April 5, 2000, compared to $250.7 million at June 30, 1999. On January 4, 2000, the Company increased its authorized commercial paper program from $500.0 million to $700.0 million. In support of this program, or as an independent source of funds, the Company entered into a $700.0 million revolving credit facility, which is syndicated to a group of 17 banks, with The Chase Manhattan Bank as administrative agent. The facility was entered into on November 17, 1999 and is renewable on an annual basis. Outstanding amounts under the credit facility bear interest at certain floating rates as specified by the credit facility. The credit facility contains certain financial and non-financial covenants relating to the Company's operations, including maintaining certain financial ratios. In addition to the $700.0 million syndicated credit facility, the Company also has $35.0 million available in short-term lines of credit. As of April 5, 2000, the Company had $343.0 million in commercial paper outstanding, as compared to $300.0 million in commercial paper outstanding on June 30, 1999. The average interest rate on the commercial paper outstanding on April 5, 2000 was 6.2%, as compared to 5.4% on June 30, 1999. The Company had no amounts in borrowings against short-term lines of credit as of April 5, 2000, as compared to $165.0 million on June 30, 1999. The interest rate on the short-term lines of credit on June 30, 1999 was 5.5%. Excluding capital leases, the Company had no outstanding long-term debt as of either April 5, 2000 or June 30, 1999. The Company's cash flow from operations and available credit facilities are considered adequate to fund the short-term and long-term capital needs of the Company. The Company is a party to various proceedings arising under federal, state and local regulations protecting the environment. Management is of the opinion that any liability that might result from any such proceedings will not have a material adverse effect on the Company's consolidated earnings or financial position. Page 11 Impact of Inflation The Company's primary costs, inventory and labor, increase with inflation. Recovery of these costs must come from improved operating efficiencies and, to the extent permitted by our competition, through improved gross profit margins. Year 2000 Compliance In 1996, the Company created a Year 2000 Project Office to address potential problems within the Company's operations that could result from the century change in the Year 2000. The Project Office identified the critical computer-based systems and applications (including embedded systems) that might not be Year 2000 compliant. Before the end of 1999, the Project Office implemented revisions or replacements necessary to make these critical systems compliant, conducted tests of the revised systems and transitioned the compliant systems into the everyday operations of the Company. The Company also examined its relationships with certain key outside vendors and others with whom it had significant business relationships regarding their Year 2000 compliance and developed strategies for working with them through the century change. The Company expenditure was approximately $27.1 million to address the Year 2000 issues, which included the estimated costs of all systems modifications, the salaries of associates and the fees of consultants addressing the issues. As of the date of this filing, the Company has not experienced any material adverse effects on the operations or results of operations of the Company relating to the Year 2000 issues associated with its systems or those of third parties with whom it has significant business relationships. Cautionary Statement Regarding Forward-Looking Information and Statements This Form 10-Q contains certain information that constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, which involves risks and uncertainties. Actual results may differ materially from the results described in the forward-looking statements. When used in this document, the words, "estimate," "project," "intend" and "believe" and other similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. Such statements reflect the current views of the Company and are subject to certain risks and uncertainties that include, but are not limited to, growth, competition, inflation, pricing and margin pressures, law and taxes. Please refer to discussions of these and other factors in this Form 10-Q and other Company filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. Page 12 WINN-DIXIE STORES, INC. AND SUBSIDIARIES Part II - Other Information Item 5. Other Information The following retirements were announced effective June 28, 2000: Roy J. Brocato, Senior Vice President and Director of Merchandising; Howard E. Hess, Senior Vice President and Regional Director; Ron A. Sevin, Senior Vice President and Regional Director; Charles E. Winge, Senior Vice President and Regional Director; William C. Calkins, Vice President and President of Jacksonville Division; Harold E. Miller, Vice President and President of Montgomery Division; James Schlosser, Vice President and President of Midwest Division; Joe T. White, Vice President and President of Atlanta Division; and David H. Bragin, Treasurer. In April 2000, the following officers were elected: Dan G. Lafever, Senior Vice President and Director of Operations; Richard P. McCook, Senior Vice President and Chief Financial Officer; John R. Sheehan, Senior Vice President and Director of Sales and Procurement; August B. Toscano, Senior Vice President and Director of Human Resources; E. Ellis Zahra, Jr., Senior Vice President and General Counsel; Daniel J. Richardson, Vice President and President of Montgomery Division; Mark A. Sellers, Vice President and President of Orlando Division; and Don A. Weaver, Vice President and President of Jacksonville Division. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (b) Report on Form 8-K There were no reports on Form 8-K filed for the quarter ended April 5, 2000. Page 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WINN-DIXIE STORES, INC. Date: April 26, 2000 RICHARD P MC COOK ---------------------------- Richard P. McCook Senior Vice President and Chief Financial Officer Date: April 26, 2000 D. MICHAEL BYRUM ---------------------------- D. Michael Byrum Corporate Controller and Chief Accounting Officer Page 14 EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3ND QUARTER 10-Q
5 All amounts in thousands except per share data. 1,000 3-MOS JUN-28-2000 Apr-05-2000 22,489 0 140,199 0 1,334,987 1,658,571 1,203,179 0 2,970,174 1,521,202 0 0 0 144,499 1,059,638 2,970,174 10,637,551 10,637,551 7,802,647 2,813,001 0 0 40,297 71,461 57,912 13,549 0 0 0 13,549 0.09 0.09
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