A F RES H APPR O A C H
WINN-DIXIE STORES, INC. 2001 ANNUAL REPORT
W I N N D I X I E
2001 Financial Highlights 2 Letter to Shareholders 5 A Fresh Approach 9Directors & Management 17 Financial Review 19
NEWT H E N E W
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
(Dollars in thousands except per share data)
F I N A N C I A L I N F O R M A T I O N(Excluding non-recurring charges)
Sales
Per Store
Gross Profit
Percent To Sales
Operating & Administrative Expenses
Percent To Sales
Operating Income
Percent To Sales
EBITDA
Return On Average Equity
Depreciation & Amortization
Dividends Paid On Common Stock
AT YEAR END
Working Capital
Current Ratio
Total Shares Outstanding (000’s)
Stores In Operation
12,903,373
11,600
3,454,027
26.8%
3,180,297
24.7%
273,730
2.1%
457,289
17.0%
183,559
142,853
449,294
1.4
140,466
1,153
- 5.8
- 7.3
– 1.5
- 11.3
- 5.7
+ 94.6
+ 110.0
+ 15.1
+ 157.6
- 28.5
- 4.1
+ 792.0
+ 40.0
- 0.3
+ 6.9
P E R C E N T A G EC H A N G E2001 2 0 0 0
13,697,547
11,600
3,727,050
27.2%
3,586,351
26.2%
140,699
1.0%
397,370
6.6%
256,671
148,966
50,369
1.0
140,830
1,079
2000 2001
EBITDA(In millions of dollars)
397.4
457.3
2000 2001
EARNINGS PER SHARE0.52
1.00
F I N A N C I A L H I G H L I G H T S(E X C L U D I N G N O N-R E C U R R I N G C H A R G E S)
2 WINN-DIXIE 2001 2001 WINN-DIXIE 3
2000 2001
RETURN ONAVERAGE EQUITY(In percentages)
6.6
17.0 No Change
2001 WINN-DIXIE 5
D u r i ng this past fiscal ye a r, Winn-Dixie has taken af resh appro ach to our bus i ne s s. To d a y ’s Winn-Dixie isle a ne r, mo re efficient, and mo re ag i le than a year ago .Equally important, the company is totally dedicated toexc e l le nt cus to mer service. We have made some dra m a t i cc h a nges in opera t i o ns. It is especially satisfying toreport that the re s t r uc t u r i ng pro g ram anno u nced inApril 2000 was substantially imple me nt e d , a nd we areac h i ev i ng the de s i red re s u l ts. In fact, its impact hasa l re ady been re f lected in re d uced ex p e nses andi m p roved prof i t a b i l i t y.
S eve ral re s t r uc t u r i ng initiatives will have lo ng - t e r mi m p act on the company, improv i ng our retail sto res andi nc re a s i ng our ove rall efficiency. We are savinga p p roximately $400 million a ye a r, having comple t e d
re s t r uc t u r i ng ex p e nd i t u res of $552.2 million by fiscalye a r - e nd. Virtually all of the action items in there s t r uc t u r i ng plan have been ac c o m p l i s hed as of June27, 2001. Highlights inc l ude :
• Sharpened fo c us on total cus to mer satisfac t i o n ;• C e nt ralized func t i o ns such as ac c o u nt i ng, re a l
e s t a t e, pro c u re me nt and marke t i ng for betterc o nt rol and efficiency ;
• C losed 112 sto res and certain manu fac t u r i ng anddistribution cent e rs, all of which had beenu nde r p e r fo r m i ng assets ;
• Re formatted sto re layo u ts and re t rofitted mo rethan half the chain – “right - s i z i ng ” keyde p a r t me nts to inc rease prof i t a b i l i t y ;
• I nt ro d uced new me t hods to better managei n ve ntory; and
• Revamped perfo r m a nce-based inc e nt i ve plans.
S H A R E H O L D E R S:M E S S A G E T O O U R
In short, with these steps comple t e, we have mades u b s t a ntial pro g re s s. We have re t a i ned assets in ourt raditional stre ng t hs while chang i ng areas of opera t i o nsthat ne e ded improve me nt. Going fo r wa rd, our bus i ne s splan is to :
• Be the best supermarket opera tor in thene i g h b o r ho o d ;
• P rov i de the right pro d uc ts, exc e l le nt service andlow prices;
• Run prof i t a b le sto res targeted to our cus to me rs ;a nd
• Maintain stro ng market share in grow i ng marke ts.
Winn-Dixie has a tre me ndo us opportunity to grow botht he top- and botto m - l i ne by making the most of our sto rene t work infra s t r uc t u re. The re fo re, a major emphasis fo r
t he past year has been on improv i ng opera t i o ns andc re a t i ng efficiencies that will enable us to inc rease sale sper square foot of ex i s t i ng sto re s. Our re t rofitted andre de s i g ned sto res better enable us to compete in keym a r ke ts, as they are mo re cus to me r - f r i e ndly and cost-e f f e c t i ve.
As ano t her ex a m p le of do i ng bus i ness mo re effective l y,we lowe red our cost struc t u re, prov i d i ng cash that canbe re de p loyed els ew he re in the bus i ness mo re prof i t a b l y.A nd we have simplified our division struc t u re to prov i dea better fo u ndation for growth, inc l ud i ng the bene f i ts ofc e nt ralized ad m i n i s t ra t i ve func t i o ns.
W i t hout doubt, one of the major ac h i eve me nts in FY2001 has been the imple me ntation of cent ra l i z e dp ro c u re me nt. The new pro c u re me nt system enable s
Winn-Dixie to leve rage its buying powe r, with bene f i tss uch as lower cost of goods and re d uced inve nto r y. Thisp ro ject invo l ved significant company re s o u rc e s, yet willhelp improve marg i ns and inc rease efficiency lo ng-term. C e nt ralized pro c u re me nt is one of the new pro g ra msthat also enables division manage me nt to fo c us mo ret i me and re s o u rces on their key jobs — prov i d i ng
exc e l le nt service, grow i ng sales vo l u me, and supportings to re manage rs. The sto re manager position is becomingi nc re a s i ngly vital at our company. The re fo re, it isre c e i v i ng mo re organizational support such asadditional tra i n i ng. An important manage me nt conc e p tin Winn-Dixie’s culture is “Serva nt Leade rship,” the ide athat all our internal re s o u rces support the sto res inbetter serving our cus to me rs.
Ac q u i s i t i o ns played a key ro le in Winn-Dixie’ss t rategy in 2001. They will cont i nue to be an option,g i ven the right opportunities. In the past ye a r, weac q u i red nine Gooding ’s supermarke ts in the Orlandoa rea, a core market that of f e rs the potential for sale sg rowth. Even mo re significant l y, we ac q u i red 68 sto re sa nd 32 fuel cent e rs ow ned by Mississippi-based JitneyJ u ng le. The acquisition was ac c re t i ve to earnings andcash flow, and the other sy ne rgies we re imme d i a t e. Theac q u i red sto re base, which is served by two of ourex i s t i ng distribution cent e rs, has been easily int e g ra t e di nto our ex i s t i ng division struc t u re. Gooding ’s andJ i t ney Jung le join a family of bra nds that also inc l udeW i n n - D i x i e, Save Rite, Thriftway and City Marke ts.
In addition, as we move ahe ad with effo r ts to grows a le s, our emphasis will shift to new, targe t e dm a r ke t i ng and pro motional effo r ts. To this end, were c e ntly re t a i ned Cra me r - K rasselt, the nation’s fo u r t hl a rgest inde p e nde nt marke t i ng age ncy, as ad ve r t i s i ngage ncy of re c o rd. A new television ad ve r t i s i ng campaignwill be unve i led early in fiscal year 2002.
Of cours e, financial stre ngth is an important part ofour picture, ens u r i ng we have the re s o u rces to growt h rough acquisition, capital inve s t me nts, and ag g re s s i vem a r ke t i ng . In early 2001, we issued $300 million of8.875% Senior Notes Due 2008. The net proceeds of thisof f e r i ng, to ge t her with $400 million of net pro c e e d su nder our new $800 million credit fac i l i t y, re f i n a nc e di nde b t e d ness under Winn-Dixie’s ex i s t i ng credit fac i l i t i e sa nd the balance will be used for ge ne ral corpora t ep u r p o s e s.
T h ro u g hout the year we have cont i nued to stre ng t he nour manage me nt team to pre p a re for the future. DennisM. Sheehan, a lifelo ng ve t e ran of the grocery ind us t r y,jo i ned as Senior Vice Pre s i de nt of Real Estate, a positioncritical to our ex p a nsion. Richard C. Judd jo i ned us asVice Pre s i de nt of Wa re ho us i ng and Distribution fro mF le m i ng Companies, Inc., to enhance our lo g i s t i c scapabilities. Dean Dell Antonia, Vice President,Pe r fo r m a nce & Rewa rd Sys t e ms, came to us from Rite AidC o r p o ration, whe re he was Manag i ng Dire c tor ofC o m p e nsation and Bene f i ts. Grae me M. Harper, a seniorc o ns u l t a nt with Pricewa t e r ho use Coopers, was name dSenior Dire c tor of Risk Manage me nt. A. Bre nt Kailing ,p rev i o usly Vice Pre s i de nt of Opera t i o ns at Smith’s Fo o da nd Drugs, jo i ned Winn-Dixie as Division Manager of Fo r tWorth. Robert A. Rowe, Dire c tor of Special Pro je c ts, wa se lected Vice Pre s i de nt in charge of the Save Ritedivision. Most re c e nt l y, C. John Kistel, a vice pre s i de ntof the Penn Traffic group, jo i ned Winn-Dixie as ViceP re s i de nt of Gene ral Me rc h a nd i s e.
Our sinc e re appreciation is ex t e nded to the manyloyal associates for their effo r ts to improve cus to me rservice during a difficult time for the company. We arep ro ud of the way they have re s p o nded to the gre a t e rde m a nds placed upon them. For ex a m p le, we are cro s s -t ra i n i ng associates in seve ral de p a r t me nts to betters e r ve cus to me rs, re q u i r i ng mo re flexibility onassociates’ part than ever befo re. Their support in ourc o m m i t me nt to build rapport with cus to me rs andde l i ver cons i s t e ntly high service is inva l u a b le.
In conc l usion, we wo u ld like to we lc o me two newme m b e rs of the Board of Dire c to rs. Tillie K. Fow ler is afo r mer member of the U.S. Ho use of Re p re s e nt a t i ve s,a nd curre ntly is a partner in the law firm of Ho l l a nd &K n i g ht LLP. Also, Ro n a ld Tow ns e nd, a member of theb ro adcast ind ustry for mo re than 35 ye a rs, is ac o m mu n i c a t i o ns cons u l t a nt who was fo r merly Pre s i de ntof Gannett Te levision Group. Both of these new dire c to rsb r i ng new ex p e r i e nce and pers p e c t i ve to our board .
As a result of the changes made during the past fiscalye a r, our bus i ness has been re s t r uc t u red and re p o s i t i o ne d .We have a mo dern sto re infra s t r uc t u re in place and arei n ve s t i ng in the company ’s human potent i a l . We haves uccessfully re d uced ex p e nses and improved pro d uc t i v i t y.Winn-Dixie is better pre p a red to meet the challe nges oft he future. Our who le organization is now fo c used onde l i ve r i ng prof i t a b le growth for our share ho lde rs in theye a rs ahe ad .
A. Dano Davis A l len R. Row l a ndChairman of the Board P re s i de nt and
Chief Exe c u t i ve Officer
“be the best supermarket operator in the neighborhood”
2001 WINN-DIXIE 76 WINN-DIXIE 2001
2001 WINN-DIXIE 9
Total Customer Satisfaction
D e l i ve r i ng what the cus to mer wa nts re p re s e nts the
f u t u re of Winn-Dixie. Cus to mer service, attrac t i ve pricing ,
a nd mo dern sto re enviro n me nts play vital ro les in
de l i ve r i ng a positive Winn-Dixie sho p p i ng ex p e r i e nc e. As
part of our commitme nt to cus to mer satisfaction, in the
past fiscal year alo ne the company has ...
I D E A S.F R E S H
c us to mer satisfaction and to prov i de rewa rd and
recognition for to p - p e r fo r m i ng employees also have
been put into plac e.
• E m p owe red sto re manage rs and division manage me nt
to act ag g re s s i vely to meet local cus to mer ne e d s.
• I m p roved labor pro d uctivity so that mo re associates
a re ava i l a b le to int e ract with cus to me rs, and to sho r t e n
wa i t i ng lines at peak “rush” ho u rs.
• I nt ro d uced new tra i n i ng pro g ra ms in cus to me r
s e r v i c e, food safety and sanitation. The First Class
Service initiative is a major ex a m p le of an exc i t i ng new
p ro g ram. The main go a ls of First Class Service are to
m a ke cus to me rs our friends and to make Winn-Dixie a
fun, de s i ra b le place to work. New pro g ra ms to me a s u re
10 WINN-DIXIE 2001
F R E S H AT T I T U D E S.
M a ny of the operational improve me nts this ye a r
s t re ng t hen our “speed to shelf” capabilities, prov i d i ng
t he popular bra nds cus to me rs seek. We offer both
national and regional bra nd s, with many of the latter
h a v i ng cultural or ethnic appeal. A major grow t h
opportunity for us is the Winn-Dixie line of sto re - b ra nd
p ro d uc ts.
T hese pro d uct lines carry higher marg i ns than
c o m p a ra b le national bra nds and pro mote cus to me r
loya l t y. Winn-Dixie’s Chek soda, for ex a m p le, ho lds
a le ad i ng position in seve ral marke ts, outs e l l i ng
p ro m i ne nt national bra nd s. We have one of the le ad i ng
s to re - b ra nd pro g ra ms in our ind us t r y. In fact, our high-
quality manu fac t u r i ng facilities are hand l i ng cont rac t
m a nu fac t u r i ng for other companies.
A lo ng - s t a nd i ng Winn-Dixie stre ngth has been our
i nt e g rated supply line: manu fac t u r i ng, distribution
a nd re t a i l i ng. The swe e p i ng changes imple me nted in
2001 have bols t e red this system and financial re t u r ns
h a ve shown it to be a highly effective bus i ness stra t e g y
for us.
F R E S H
2001 WINN-DIXIE 13
T H I N K I N G.
The New Look of Winn-Dixie Store s
A ple a s a nt cus to mer sho p p i ng ex p e r i e nce he a v i l y
de p e nds on clean, we l l - s to c ked, cus to me r - f r i e ndly re t a i l
s to re s. Cre a t i ng a fresh look at Winn-Dixie sto re s, and
u p d a t i ng this new look to keep it curre nt, is a to p
priority for senior manage me nt .
• W i n n - D i x i e ’s sto re base has been revitalized, with
mo re than 60% of our sto res new or re mo de led in the
past five ye a rs. Approximately 50% of our sto res have
been improved in the past year alo ne.
• We are alre ady ac h i ev i ng inc re a s i ngly ac c u ra t e
i n ve ntory trac k i ng and greater purc h a s i ng leve rage
b e c a us e of our new cent ralized pro c u re me nt sys t e m .
• As appro p r i a t e, new “sto re within a sto re” conc e p ts
will be added, such as pet cent e rs, soft drink and snac k
c e nt e rs, ho us e ho ld cle a n i ng sections, or baby - ne e d s
c e nt e rs. New growth opportunities for us ra nge fro m
p h a r m acy opera t i o ns in our sto res to fuel cent e rs such as
t hose ac q u i red as part of Jitney Jung le. Also, the
c o m p a ny has seven prof i t a b le liquor sto res in opera t i o n
a nd ho lds additional liquor licenses for future ex p a ns i o n .
• P ro d uct fre s h ness - at the de l i / b a kery count e r, the
meat and seafood de p a r t me nts, pro d uc e, the dairy
s he l ves — is enhanced by new sto re fo r m a ts and cent ra l
p ro c u re me nt. Variety and quality are the hallmarks of our
p e r i s h a b les de p a r t me nts. And our new sto re layo u ts
e n a b le us to obtain the same amo u nt of reve nue in le s s
s p ac e, allow i ng mo re for grocery pro d uc ts and no n - fo o d
me rc h a nd i s e.
T he goal is to ens u re that First Class Service is a way of
life at Winn-Dixie, bring i ng our retail cus to me rs back to
us time and time again as their first sho p p i ng cho i c e.
14 WINN-DIXIE 2001
A F R E S H L O O K.
D I R E C T O R S & M A N A G E M E N TManagement and years of serv ice:
B o a rd of Dire c t o r sA. Dano DavisChairman
Allen R. RowlandPresidentChief Executive Officer
Armando M. CodinaChairman Codina Group, Inc.
T. Wayne Davis ChairmanTransit Group, Inc.
Tillie K. Fowler Partner Holland & Knight LLP
Radford D. Lovett ChairmanCommodores PointTerminal Corporation
Julia B. North Telecommunications Consultant
Carleton T. Rider Senior Administrator Mayo Foundation
Charles P. StephensVice President Norman W. Paschall Co., Inc.
Ronald TownsendCommunications Consultant
Audit CommitteeCorporate Governance CommitteeCompensation Committee
Executive CommitteeAllen R. Rowland, 2PresidentChief Executive OfficerChairman of the ExecutiveCommittee
Daniel G. Lafever, 34Senior Vice President Sales & Procurement
Richard P. McCook, 17Senior Vice President Chief Financial Officer
Dennis M. Sheehan, 1Senior Vice President Real Estate
John R. Sheehan, 2Senior Vice President Operations
August B. Toscano, 2Senior Vice President Human Resources
E. Ellis Zahra, Jr., 6Senior Vice President General Counsel
Vice Presidents/Division ManagersJ. Darryl Fitzgerald, 30Charlotte Division142 Stores
Michael J. Istre, 32New Orleans Division158 Stores
A. Brent KailingFort Worth Division76 Stores
Raymond C. Lunn, Jr., 32Miami Division148 Stores
Daniel J. Richardson, 35Montgomery Division 190 Stores
Robert A. Rowe, 1Save Rite Division11 Stores
Mark A. Sellers, 28Orlando Division 153 Stores
H. Matt Solana, Jr., 30 Raleigh Division127 Stores
Donald A. Weaver, 29Jacksonville Division136 Stores
Vice Presidents/Corporate OfficersW. R. (Bob) Baxley, 2Vice President Deli & Bakery
D. Michael Byrum, 28Vice PresidentCorporate Controller Chief Accounting Officer
Keith B. Cherry, 2Vice President Design & Construction
G. E. (Mic key) Clerc, Jr., 40Vice President Public Relations
Dean Dell Antonia, 1Vice President Performance and Reward Systems
Judith W. Dixon, 37Secretary
C. W. (Bill) Doolittle, 18Vice President Security
Randall L. Hutton, 34Vice President Government Relations
Richard C. (Dick) JuddVice President Warehousing and Distribution
C. John Kistel, Jr.Vice President General Merchandise
Ted M. Moon, 33Vice President Produce and Floral
Michael E. Nixon, 30Vice President Information Systems
Philip H. Payment, Jr., 30Vice President Grocery
Monty H. Powers, 30Vice President Meat & Seafood
Kellie D. Ross, 2Vice PresidentStrategic PlanningTreasurer
2001 WINN-DIXIE 17
Pictured from left to right: Carleton T. Rider, Julia B. North and Ronald Townsend
Pictured from left to right: T. Wayne Davis, Tillie K. Fowler, Charles P. Stephens and A. Dano Davis
Pictured from left to right: Radford D. Lovett, Armando M. Codina and Allen R. Rowland
F I N A N C I A LF I N A N C I A LR E V I E W
18 WINN-DIXIE 2001
2001 WINN-DIXIE 19
WINN-DIXIE STORES, INC. AND SUBSIDIARIESINDEX 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
SELECTED FINANCIAL DATA
Sales
Net sales
Percent (decrease) increase
Average annual sales per store
Earnings Summary
Gross profit
Percent of sales
LIFO (credit) charge
Operating and administrative expenses
Percent of sales
Restructuring and other non-recurring charges
Percent of sales
Company owned life insurance (COLI) tax case (after tax)
Percent of sales
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Percent of net earnings (loss) to sales
Percent of net earnings (loss) to average equity
Net earnings excluding COLI, restructuring and
other non-recurring charges
Basic earnings per share
Diluted earnings per share
Percent of net earnings to sales
Percent of net earnings to average equity
EBITDA
EBITDAR
EBITDA excluding restructuring and non-recurring charges
EBITDAR excluding restructuring and non-recurring charges
Dividends
Dividends paid
Percent of net earnings (loss)
Per share (present rate $1.02)
Common Stock (WIN)
Total shares outstanding (000,000)
NYSE – Common stock price range - High
- Low
12,903
(5.8
11.6
3,454
26.8
(12
3,180
24.7
147
1.1
3
0.0
45
0.32
0.32
0.4
5.5
139
1.00
0.99
1.1
17.0
310.0
658.1
457.3
805.3
142.9
315.3
1.02
140.5
33.12
13.44
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
13,698
(3.1
11.6
3,727
27.2
15
3,586
26.2
396
2.9
42
0.3
(229
(1.57
(1.57
(1.7
(20.1
75
0.52
0.52
0.5
6.6
1.3
325.8
397.4
721.9
149.0
(65.1
1.02
140.8
41.94
14.25
14,137
3.8
11.9
3,903
27.6
4
3,577
25.3
-
-
-
-
182
1.23
1.23
1.3
13.1
182
1.23
1.23
1.3
13.1
618.5
961.4
618.5
961.4
151.2
82.9
1.02
148.6
52.19
28.63
Dollars in millions except per share data2001 2000 1999*
20 WINN-DIXIE 2001
13,617
3.0
11.7
3,729
27.4
(12
3,365
24.7
18
0.1
-
-
199
1.34
1.33
1.5
14.7
210
1.41
1.41
1.5
15.5
676.7
985.9
694.8
1,004.0
150.9
76.0
1.02
148.5
59.25
33.69
1998 1997
13,219
2.0
11.3
3,411
25.8
3
3,070
23.2
-
-
-
-
204
1.36
1.36
1.5
15.3
204
1.36
1.36
1.5
15.3
632.8
911.6
632.8
911.6
144.2
70.5
0.96
148.9
42.38
29.88
* 53 weeks
)
)
)
)
)
)
)
)
)
)
SELECTED FINANCIAL DATA - continued
Financial Data
Cash flow information:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Capital expenditures, net
Depreciation and amortization
Working capital
Current ratio
Total assets
Obligations under capital leases
Present value of future rentals under operating leases
Long-term rental obligations on closed stores
Long-term debt
Total long-term obligations (Long-term debt + leases)
Long-term obligations to equity ratio
Comprehensive income (loss)
Shareholders’ equity
Book value per share
Ratio of earnings to fixed charges
Adjusted ratio of earnings to fixed charges
Taxes
Federal, state and local
Per diluted share
Stores
In operation at year-end
Opened and acquired during year
Closed or sold during year
Closed due to restructuring
Enlarged or remodeled during year
New/enlarged/remodeled in last five years
Percent to total stores in operation
Year-end retail square footage (000,000)
Average store size at year-end (000)
Other Year-end Data
Associates (000)
Shareholder accounts (000)
Shareholders per store
244.9
(443.6
290.2
313.3
183.6
449.3
1.4
3,042
29
2,550
154
697
3,430
4.4
43.7
772
5.52
1.2
1.8
215
1.53
1,153
94
19
1
11
706
61.2
51.1
44.3
119
48.8
42
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
743.3
(196.1
(542.3
213.0
256.7
50.4
1.0
2,747
32
2,408
220
-
2,660
3.1
(232.0
868
6.16
**
1.5
123
0.85
1,079
34
32
111
42
790
73.2
48.1
44.6
120
45.7
42
436.4
(335.1
(100.0
334.3
292.4
285.0
1.2
3,149
38
2,575
35
-
2,648
1.9
182.6
1,411
9.50
2.1
2.1
308
2.07
1,188
79
59
-
64
908
76.4
52.0
43.7
132
48.1
40
Dollars in millions except per share data2001 2000 1999*
2001 WINN-DIXIE 21
1998 1997
464.5
(325.9
(129.2
368.6
330.4
262.6
1.4
3,069
49
2,389
34
-
2,472
1.8
199.4
1,369
9.22
2.3
2.4
302
2.03
1,168
84
90
-
136
912
78.1
49.6
42.4
139
52.0
45
413.9
(477.7
45.7
423.1
291.2
220.1
1.2
2,921
54
2,048
25
-
2,127
1.6
206.4
1,337
8.98
2.5
2.5
285
1.90
1,174
83
87
-
79
805
68.6
47.8
40.7
136
55.2
47
* 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.
) )
)
)
)
)
)
)
)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22 WINN-DIXIE 2001
Results of Operations Sales for fiscal 2001, a 52-week year, were $12.9 billion,
compared to fiscal 2000, $13.7 billion, a 52-week year, and fiscal1999, $14.1 billion, a 53-week year. This reflects a decrease of5.8% for fiscal 2001, a decrease of 3.1% for fiscal 2000 and anincrease of 3.8% in 1999. Average store sales decreased 0.6% forthe current year, decreased 1.2% in fiscal 2000 and increased2.1% in fiscal 1999. Identical store sales decreased 4.4%, 2.7%and 0.9% for 2001, 2000 and 1999, respectively.
Identical sales decreased largely as a result of the eliminationof unprofitable sales departments (deli/cafes, melon bars, saladbars, dry cleaners and selected floral, seafood and pharmacydepartments), the elimination of unprofitable sales items inremaining departments, a reduction in the number of 24-hours t o res and cons t r uc t ion disruptio ns from nu me rous storemo d i f ic a t io ns (re t rofits). The Company has substant ia l l ycompleted its planned store retrofits and believes that thisprogram has resulted in labor savings and other efficiencies. TheCompany believes that the store retrofits have enhanced theCompany’s competitive position and, in turn, will positivelyimpact the Company’s sales during fiscal 2002.
For the 52 weeks ended June 27, 2001, the Company opened94 new stores, averaging 38,500 square feet, closed 20 stores,averaging 34,800 square feet and enlarged or remodeled 11 storelocations, for a total of 1,153 locations in operation on June 27,2001, compared to 1,079 as of June 28, 2000. As of June 27,2001, retail space totaled 51.1 million square feet, a 6.2%increase over the prior year. The 94 store openings include 68Jitney Jungle stores and nine Gooding’s stores that werepurchased during fiscal 2001. The 20 store closings include onestore that closed in the second quarter of fiscal 2001, as part ofmanagement’s plan of restructuring.
As a percent of sales, gross profit margins were 26.8%, 27.2%and 27.6% in fiscal 2001, 2000 and 1999, respectively. Grossprofit dollars have decreased in the current year partially as aresult of the closing of 112 stores as part of management’s planof restructuring. In addition, gross profit has been negativelyimpacted by the elimina t ion of high gross profit, yetunprofitable, sales departments. Higher cost of goods sold wasi nc u r red du r i ng the Company’s tra ns i t ion to cent ra l i z e dmerchandise procurement at the beginning of the fiscal year.Since the first quarter, gross profit margins on a FIFO basis haveimproved. A continued focus on the Company’s shrink reductioninitiatives is expected to add to the improvements during fiscal2002.
Approximately 84% of the Company’s inventories are valuedunder the LIFO (last-in, first-out) method. The LIFO reserveadjustment resulted in a pre-tax increase in gross profit of $12.0million in 2001, a decrease of $15.1 million in 2000 and adecrease of $4.4 million in 1999.
O p e ra t i ng and adm i n i s t rative ex p e nses de c reased $406.1million in fiscal 2001 and increased $9.1 million and $212.2million in 2000 and 1999, respectively. As a percent of sales,
operating and administrative expenses were 24.7%, 26.2% and25.3% in fiscal 2001, 2000 and 1999, respectively. The decreasein operating and administrative expenses was primarily due to adecrease in retail and administrative operating expenses, such asp a y roll, de p re c ia t ion, re nt and leasehold impro v e me ntamortization. The expense reduction was an expected result ofthe restructuring and came primarily from the elimination of highlabor cost service departments and expense reductions from theretrofit activity, certain labor efficiency initiatives adopted bythe Company and from the closing of the division offices andretail stores.
Interest expense totaled $52.8 million, $47.1 million and$29.6 million in fiscal 2001, 2000 and 1999, respectively.Interest expense is primarily interest on short-term and long-term debt and interest on capital lease obligations. Interestexpense also reflects accrued interest relating to an unfavorableopinion from the U.S. Tax Court in October 1999 relating toCompany Owned Life Insurance (“COLI”) (see Note 7 - IncomeTaxes). Year-to-date, the interest expense on the COLI reservetotaled $5.5 million as compared to $19.7 million for theprevious year. Excluding interest on the COLI reserve, interestexpense has increased in the current year as compared to theprevious year due to an increase in the amount of total debtoutstanding and an increase in interest rates in fiscal 2001.
The Company capitalized interest totaling $5.9 million for theyear, related to construction of new stores and a warehousefacility in Baldwin, Florida.
Earnings (loss) before income taxes were $73.6 million,$(302.4) million and $296.5 million in fiscal 2001, 2000 and1999, respectively. The increase in pretax earnings for fiscal 2001is primarily due to the restructuring charge recorded in fiscal2000, and a decrease in operating and administrative expenses infiscal 2001. The effective income tax expense (benefit) rateswere 38.5%, (24.3)% and 38.5% for fiscal 2001, 2000 and 1999,respectively. The effective tax rate for fiscal 2000 reflects theeffects of certain restructuring expenses and COLI adjustments.
Net earnings (loss) amounted to $45.3 million, or $0.32 perdiluted share for 2001, $(228.9) million, or $(1.57) per dilutedshare for 2000 and $182.3 million, or $1.23 per diluted share for1999. The LIFO reserve adjustment increased net earnings by$7.4 million, or $0.05 per diluted share in 2001, increased thenet loss by $9.3 million, or $0.06 per diluted share in 2000, anddecreased net earnings by $2.7 million, or $0.02 per dilutedshare in 1999.
The following tables show the effect of the COLI adjustment,restructuring and other non-recurring charges on the quarter andyear.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Liquidity and Capital ResourcesCash and cash equivalents amounted to $121.1 million, $29.6
million and $24.7 million at the end of fiscal years 2001, 2000and 1999, respectively. Cash provided by operating activitiesamounted to $244.9 million in 2001, $743.3 million in 2000 and$436.4 million in 1999. The reduction in net cash provided byo p e ra t io ns is largely due to the inc rease in me rc h a nd i s einventories and cash payments related to the restructuring.I n v e nt o r ies inc reased due in part to add i t io nal invent o r ypurchased for the stores acquired in the current year.
Working capital amounted to $449.3 million, $50.4 million and$285.0 million in fiscal 2001, 2000 and 1999, respectively. Theincrease was due in part to the refinancing of the Company’sshort-term borrowings into long-term debt.
Net cash used in investing activities totaled $443.6 million,
$196.1 million and $335.1 million in fiscal 2001, 2000 and 1999,respectively. The increase in the current year was due to anincrease in capital expenditures and the acquisition of 77 retaillocations. Net capital expenditures totaled $313.3 million,$213.0 million and $334.3 million in fiscal 2001, 2000 and 1999,respectively. These expenditures were for new store locations,remodeling and enlarging of store locations and maintenance andexpansion of support facilities. The Company has no materialconstruction or purchase commitments outstanding as of June27, 2001.
Net cash provided by (used in) financing activities was $290.2million, $(542.3) million and $(100.0) million in 2001, 2000 and1999, respectively. The increase in the current year was dueprimarily to the net proceeds from the $800 million seniorsecured credit facilities (the “New Facilities”), the issuance of
Net sales
Cost of sales
Gross profit on sales
Operating and administrative expenses
Restructuring and other non-recurring charges
Operating income
Interest expense
Earnings before income tax
Income tax
Net earnings
Basic earnings per share
Diluted earnings per share
2,989,861
2,157,676
832,185
739,776
56,497
35,912
14,800
21,112
8,107
13,005
0.09
0.09
$
$
$
$
-
-
-
-
56,497
(56,497
887
(57,384
(22,049
(35,335
(0.25
(0.25
2,989,861
2,157,676
832,185
739,776
-
92,409
13,913
78,496
30,156
48,340
0.34
0.34
Quarter ending June 27, 2001As Reported Non-recurring
ChargesExcluding
Non-recurring
2001 WINN-DIXIE 23
Net sales
Cost of sales
Gross profit on sales
Operating and administrative expenses
Restructuring and other non-recurring charges
Operating income
Interest expense
Earnings before income tax
Income tax
Net earnings
Basic earnings per share
Diluted earnings per share
12,903,373
9,449,346
3,454,027
3,180,297
147,245
126,485
52,843
73,642
28,331
45,311
0.32
0.32
$
$
$
$
-
-
-
-
147,245
(147,245
5,512
(152,757
(58,768
(93,989
(0.68
(0.67
12,903,373
9,449,346
3,454,027
3,180,297
-
273,730
47,331
226,399
87,099
139,300
1.00
0.99
Year ending June 27, 2001As Reported Non-recurring
ChargesExcluding
Non-recurring
Dollar amounts in thousands except per share data
Dollar amounts in thousands except per share data
)
)
)
)
)
)
)
)
)
)
)
)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
$300 million in Senior Unsecured Notes (the “Notes”) and thesuspension of the stock repurchase program in the current year.See Note 8 - Debt for further discussion on the New Facilities andNotes.
The Company is a party to various proceedings arising underfederal, state and local regulations protecting the environment.Management is of the opinion that any liability that might resultfrom any such proceedings will not have a material adverse effecton the Company’s financial condition or results of operations.
Impact of Inflation Winn-Dixie’s primary costs, inventory and labor, increase with
inflation. Recovery of these costs has to come from improvedoperating efficiencies — including improvements in merchandiseprocurement — and, to the extent permitted by the competition,through improved gross profit margins.
Quantitative and Qualitative Disclosures About Market RiskAs part of the New Facilities (see Note 8 - Debt), the Company
obtained a $400 million six-year term loan with a variableinterest rate based on the one-month LIBOR. The Companyutilizes derivative financial instruments to reduce its exposure tomarket risks from changes in interest rates. The instrumentsprimarily used to mitigate these risks are interest rate swaps. Allderivative instruments held by the Company are designated ashighly effective cash flow hedges of interest rate risk on variablerate debt and, accordingly, the change in fair value of theseinstruments is recorded as a component of other comprehensiveincome.
The Company is exposed to credit-related losses in the eventof no n p e r fo r ma nce by count e r p a r t ies to these fina nc ia linstruments. However, counterparties to these agreements aremajor fina nc ial ins t i t u t io ns and the risk of loss due tononperformance is considered by management to be minimal. TheCompany does not hold or issue interest rate swaps for tradingpurposes.
The Company has entered into three interest rate swapagreements to hedge the interest rate risk associated with the$400 million outstanding in variable rate debt. The purpose ofthese swaps is to fix interest rates on variable rate debt andreduce certain exposures to interest rate fluctuation. At June 27,2001, the Company had interest rate swaps with a notionalamount of $400 million. The notional amounts do not representa measure of exposure to the Company.
The maturity and interest rate on the interest rate swaps areshown in the following table. The Company will pay thec o u nterparty int e rest at a fixed rate as noted and thecounterparty will pay the Company interest at a variable rate
equal to the one-month LIBOR (3.75% as of June 27, 2001).The fair value of the Company’s interest rate swaps is obtained
from dealer quotes. These values represent the estimated amountthe Company would receive or pay to terminate the agreement,taking into consideration the difference between the contractrate of interest and rates currently quoted for agreements ofsimilar terms and maturities. At June 27, 2001, the fair value ofthe Company’s interest rate swaps resulted in an unrealized lossof $2.6 million ($1.6 million after tax). The Company recordedthe unrealized loss in accumulated other comprehensive incomein shareholders’ equity. During the next 12 months, the Companywill incur interest expense including the effect of interest rateswaps at a weighted average rate of 7.54% on the $400 millionoutstanding in variable rate debt.
The Company measures effectiveness by the ability of interestrate swaps to offset cash flows associated with changes in theone-month LIBOR. To the extent that any of these contracts arenot considered effective, any changes in fair value relating to theineffective portion of these contracts are immediately recognizedin income. However, all of the contracts were effective during theperiod and no gain or loss was reported in earnings.
The following table presents the future principal cash flows andweighted-average interest rates expected on the Company’sexisting long-term debt instruments and interest rate swapagreements. Fair values have been determined based on quotedmarket prices as of June 27, 2001.
150,000
150,000
100,000
400,000
$
$
March 29, 2002
March 29, 2003
March 29, 2004
4.60 %
4.81 %
5.03 %
NotionalAmount
(in thousands)
Maturity Fixed Rate
24 WINN-DIXIE 2001
Liquidity and Capital Resources - continued
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Liabilities:
Long-term debt
Fixed rate
Average interest rate
Variable rate
Average interest rate
Interest rate derivatives
Interest rate swaps:
Notional amount
Average pay rate
Average receive rate
291
9.40
4,000
6.70
150,000
4.60
3.95
$
$
$
EXPECTED MATURITY DATEDollar amounts in thousands
2002 2003 2004 2005 2006 Thereafter Total FairValue
%
%
%
%
288
9.40
4,000
7.90
150,000
4.81
5.15
$
$
$
%
%
%
%
285
9.40
4,000
8.74
100,000
5.03
5.99
$
$
$
%
%
%
%
282
9.40
4,000
9.09
-
-
-
$
$
$
%
%
279
9.40
4,000
9.29
-
-
-
$
$
$
%
%
300,280
8.88
380,000
9.44
-
-
-
$
$
$
%
%
301,705
8.88
400,000
9.38
400,000
4.79
4.70
$
$
$
%
%
%
%
305,920
400,000
(2,580
$
$
$
Cautionary Statement Regarding Fo r wa rd - L o o k i n gInformation and Statements
This Annual Report cont a i ns certain info r ma t ion thatconstitutes “forward-looking statements” within the meaning ofthe Private Securities Litigation Reform Act, which involves risksand uncertainties. Actual results may differ materially from theresults described in the forward-looking statements. When usedin this document, the words “estimate,” “project,” “intend,”“believe” and other similar expressions, as they relate to theC o m p a ny, are int e nded to ide ntify such fo r w a rd - l o o k i ngstatements.
Such statements reflect the current views of the Company andare subject to certain risks and uncertainties that include, but arenot limited to:
• the Company’s ability to achieve successfully the long-termbenefits contemplated from the restructuring of operationsadopted by the Board of Directors on April 19, 2000, andwhich has been substantially completed;
• he ig ht e ned competition, inc l ud i ng specifically theintensification of price competition, the entry of newcompetitors, or the expansion of existing competitors in oneor more operating regions;
• changes in federal, state or local legislation or regulationsaffecting food manufacturing, food distribution, or foodretailing, including environmental compliance;
• t he availability and terms of fina nc i ng, inc l ud i ng inparticular the possible impact of changes in the ratingsassigned to the Company by nationally recognized ratingagencies; and
• general business and economic conditions in our operatingre g io ns, inc l ud i ng the rate of inflatio n / de f l a t ion andchanges in population, consumer demands and spending,types of employment and number of jobs.
Please refer to discussions of these and other factors in thisAnnual Report and other Company filings with the Securities andExchange Commission. The Company disclaims any intent orobligation to update publicly these forward-looking statements,whether as a result of new information, future events orotherwise.
2001 WINN-DIXIE 25
)
REPORT OF MANAGEMENT
The Company is responsible for the preparation, integrity and objectivity of the consolidated financial statementsand related information appearing in the Annual Report. The consolidated financial statements have been preparedin conformity with generally accepted accounting principles applied on a consistent basis and include amounts thatare based on management’s best estimates and judgments.
Management is also responsible for maintaining a system of internal controls that provides reasonable assurancethat the accounting records properly reflect the transactions of the Company, that assets are safeguarded and thatthe consolidated financial statements present fairly the financial position and operating results. As part of theCompany’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 toreview the results of audit reports and other accounting and financial reporting matters with the independentcertified public accountants and the internal auditors.
Allen R. Rowland Richard P. McCookPresident and Senior Vice President andChief Executive Officer Chief Financial Officer
26 WINN-DIXIE 2001
INDEPENDENT AUDITORS’ REPORT
The Shareholders and the Board of DirectorsWinn-Dixie Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Winn-Dixie Stores, Inc. and subsidiaries as ofJune 27, 2001 and June 28, 2000, and the related consolidated statements of operations, shareholders’ equity, andcash flows for each of the years in the three-year period ended June 27, 2001. These consolidated financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial 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 theresults 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, FloridaAugust 8, 2001
2001 WINN-DIXIE 27
WINN-DIXIE STORES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 27, 2001, June 28, 2000 and June 30, 1999
Net sales
Cost of sales, including warehousing and delivery expense
Gross profit on sales
Operating and administrative expenses
Restructuring and other non-recurring charges
Operating income (loss)
Interest:
Interest on capital lease obligations
Interest on company owned life insurance (COLI)
Other interest
Total interest
Earnings (loss) before income taxes
Income taxes
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Dividends per share
Weighted average common shares outstanding - basic
Weighted average common shares outstanding - diluted
Amounts in thousands except per share data1999*
* 53 WeeksSee accompanying notes to consolidated financial statements.
12,903,373
9,449,346
3,454,027
3,180,297
147,245
126,485
4,188
5,512
43,143
52,843
73,642
28,331
45,311
0.32
0.32
1.02
139,824
140,399
$
$
$
$
$
20002001
13,697,547
9,970,497
3,727,050
3,586,351
396,029
(255,330
4,458
19,707
22,916
47,081
(302,411
(73,516
(228,895
(1.57
(1.57
1.02
145,445
145,445
14,136,503
10,233,155
3,903,348
3,577,220
-
326,128
5,152
-
24,496
29,648
296,480
114,145
182,335
1.23
1.23
1.02
148,310
148,680
28 WINN-DIXIE 2001
)
)
)
)
)
)
WINN-DIXIE STORES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS June 27, 2001 and June 28, 2000
AssetsCurrent Assets:
Cash and cash equivalentsTrade and other receivables, less allowance for doubtful items of
$3,935 ($3,822 in 2000)Merchandise inventories less LIFO reserve of
$220,411 ($232,368 in 2000)Prepaid expensesDeferred income taxes
Total current assets
Cash surrender value of life insurance, netProperty, plant and equipment, netIntangible assets, netNon-current deferred income taxesOther assests, net
Total assets
Liabilities and Shareholders’ EquityCurrent Liabilities:
Short-term borrowingsCurrent portion of long-term debtCurrent obligations under capital leasesAccounts payableReserve for insurance claims and self-insurance Reserve for restructuring expensesAccrued wages and salariesAccrued rentAccrued expensesIncome taxes payable
Total current liabilitiesReserve for insurance claims and self-insuranceLong-term debtObligations under capital leasesDefined benefit planLong-term restructuring expensesOther liabilities
Total liabilitiesCommitments and contingent liabilities (Notes 7, 8, 9, 11 and 13)Shareholders’ Equity:
Common stock of $1 par value. Authorized 400,000,000 shares;140,466,235 shares outstanding in 2001 and 140,830,197 in 2000
Retaining earningsAccumulated other comprehensive incomeAssociates’ stock loans
Total shareholders’ equityTotal liabilities and shareholders’ equity
121,061
109,159
1,198,60234,643
135,7361,599,201
16,8761,146,654
92,875106,14579,919
3,041,670
-4,2913,270
599,850100,85043,385
109,18388,452
176,33224,294
1,149,907147,964697,41428,95349,027
118,74578,006
2,270,016
140,466634,694
(1,587(1,919
771,6543,041,670
$
$
$
$
Dollar amounts in thousands except par value2001 2000
See accompanying notes to consolidated financial statements.
29,576
107,425
1,141,40558,739
134,7771,471,922
14,0351,016,292
18,606166,44959,789
2,747,093
235,000-
2,843575,877101,87452,721
114,88388,247
164,50285,606
1,421,553141,251
-32,23945,241
143,18895,786
1,879,258
140,830727,005
--
867,8352,747,093
2001 WINN-DIXIE 29
))
WINN-DIXIE STORES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 27, 2001, June 28, 2000 and June 30, 1999
Cash flows from operating activities:Net earnings (loss) Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:Depreciation and amortizationDeferred income taxesDefined benefit planNon-cash restructuring and other non-recurring chargesReserve for insurance claims and self-insuranceStock compensation plansChange in operating assets and liabilities,
net of effects from acquisitions:Trade and other receivablesMerchandise inventoriesPrepaid expensesAccounts payableReserve for restructuring expensesIncome taxes payableOther current accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:Purchases of property, plant and equipment, net(Increase) decrease in investments and other assetsAcquisitions, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities:(Decrease) increase in short-term borrowingsProceeds from issuance of long-term debtDebt issuance costsPrincipal payments on long-term debtPrincipal payments on capital lease obligationsPurchase of common stockProceeds of sales under associates’ stock purchase planDividends paidOther
Net cash provided by (used in) financing activities
Increase in cash and cash equivalentsCash and cash equivalents at the beginning of the yearCash and cash equivalents at end of the year
Supplemental cash flow information:Interest paidInterest and dividends receivedIncome taxes paid
Amounts in thousands 1999*
* 53 WeeksSee accompanying notes to consolidated financial statements.
45,311
183,55960,3363,786
68,7745,6898,007
(1,734(39,96225,41623,009
(53,765(61,312(22,226244,888
(313,319(6,519
(123,753(443,591
(235,000700,000(24,210
(257(2,857
(17,00311,833
(142,853535
290,188
91,48529,576
121,061
37,0642,327
29,307
$
$
$$$
20002001
(228,895
256,671(189,046
4,007395,05375,408(1,144
80,888283,693(11,776(87,959
-74,86791,512
743,279
(212,99016,872
-(196,118
(230,000---
(2,612(162,272
164(148,966
1,355(542,331
4,83024,74629,576
23,058808
40,663
182,335
292,41417,6844,132
-2,4242,459
(42,148(20,181
8,596(1,191
-(1,380(8,783
436,361
(334,283(858
-(335,141
45,000---
(2,583(1,3372,923
(151,2317,188
(100,040
1,18023,56624,746
21,9581,072
94,858
30 WINN-DIXIE 2001
))
)))
))))
)
))))
)
)
)
)
))
)
)
)
))
)
)
))
)
))
))
)
))
)
)
WINN-DIXIE STORES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYYears ended June 27, 2001, June 28, 2000 and June 30, 1999
Balances at June 24, 1998
Comprehensive income:
Net earnings
Unrealized gain on securities, net of tax
Total comprehensive income
Cash dividends, $1.02 per share
Common stock issued and stock
compensation expense
Common stock acquired
Stock options exercised
Associates’ stock loans, payments
Other
Balances at June 30, 1999
Comprehensive loss:
Net (loss)
Realized gain on securities, net of tax
Total comprehensive (loss)
Cash dividends, $1.02 per share
Common stock issued and stock
compensation expense
Common stock acquired
Stock options exercised
Associates’ stock loans, payments
Other
Balances at June 28, 2000
Comprehensive income:
Net earnings
Unrealized loss on derivative
instruments, net of tax
Total comprehensive income
Cash dividends, $1.02 per share
Common stock issued and stock
compensation expense
Common stock acquired
Stock options exercised
Associates’ stock loans, payments
Balances at June 27, 2001
Amounts in thousands except per share data Total
Shareholders’Equity
See accompanying notes to consolidated financial statements.
Associates’Stock Loans
AccumulatedOther
ComprehensiveIncome
RetainedEarnings
Common Stock
148,531
-
-
-
-
33
(37
50
-
-
148,577
-
-
-
-
131
(7,878
-
-
-
140,830
-
-
-
-
811
(1,180
5
-
140,466
$
$
1,220,679
182,335
-
182,335
(151,231
2,189
(1,300
1,004
-
5,921
1,259,597
(228,895
-
(228,895
(148,966
(131
(154,394
(187
-
(19
727,005
45,311
-
45,311
(142,853
20,988
(15,823
66
-
634,694
2,760
-
309
309
-
-
-
-
-
-
3,069
-
(3,069
(3,069
-
-
-
-
-
-
-
-
(1,587
(1,587
-
-
-
-
-
(1,587
(3,087
-
-
-
-
-
-
-
2,923
-
(164
-
-
-
-
-
-
-
164
-
-
-
-
-
-
-
-
-
(1,919
(1,919
1,368,883
182,335
309
182,644
(151,231
2,222
(1,337
1,054
2,923
5,921
1,411,079
(228,895
(3,069
(231,964
(148,966
-
(162,272
(187
164
(19
867,835
45,311
(1,587
43,724
(142,853
21,799
(17,003
71
(1,919
771,654
$
$
2001 WINN-DIXIE 31
)
)
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)
)
)
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)
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)
)
)
)
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1. Summary of Significant Accounting Policies and OtherInformation
(a) The Company: Winn Dixie Stores, Inc. and its subsidiaries(the “Company”) operate as a major food retailer in fourteenstates and the Bahama Islands. As of June 27, 2001, theCompany operated 1,153 retail stores, 34 fuel centers and 7liquor stores. In support of its retail operations, theCompany has 16 warehouse distribution centers and 19manufacturing plants.
(b) Fiscal Year: The fiscal year ends on the last Wednesday inJune. Fiscal year 2001 and 2000 are comprised of 52 weeks.Fiscal year 1999 is comprised of 53 weeks.
(c) Basis of Consolidation: T he cons o l idated fina nc ia lstatements include the accounts of Winn Dixie Stores, Inc.and its subsidiaries. All subsidiaries are wholly owned andfully cons o l idated with the exc e p t ion of Bahama sSupermarkets Limited, which is owned approximately 78% byW-D Bahamas Limited. Significant inter-company accountsand transactions have been eliminated in consolidation.
(d) E s t i m a t e s : T he pre p a ra t ion of fina nc ial stateme nts inconformity with generally accepted accounting principlesrequires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actualresults could differ from those estimates.
(e) Revenue Recognition: Revenue is recognized at the pointof sale for retail sales.
(f) Cash and Cash Equivalents: Cash equivalents consist ofhighly liquid investments with a maturity of three months orless when purchased. Cash and cash equivalents are statedat cost plus accrued interest, which approximates market.
(g) Inventories: Inventories are stated at the lower of cost ormarket. The “dollar value” last-in, first-out (LIFO) methodis used to determine the cost of approximately 84% ofinventories consisting primarily of merchandise in stores anddistribution warehouses. Manufacturing, pharmacy andproduce inventories are valued at the lower of first-in, first-out (FIFO) cost or market. Elements of cost included inmanufacturing inventories consist of material, direct laborand plant overhead.
(h) Derivatives: The Company follows Statement of FinancialAccounting Standard No. 133, “Accounting for DerivativeInstruments and Hedging Activities” (“SFAS 133”). SFAS 133requires that all derivative instruments be recorded on thebalance sheet at their fair value. Changes in the fair value ofderivatives are recorded each period in current earnings orother comprehensive income, depending on whether aderivative is designated as part of a hedge transaction and,if it is, the type of hedge transaction.
(i) Income Ta xe s : D e f e r red tax assets and lia b i l i t ies arerecognized for the estimated future tax cons e q u e nc e sattributable to differences between the financial statementcarrying amounts of existing assets and liabilities and theirrespective tax bases. Deferred tax assets and liabilities aremeasured using the enacted tax rates in effect for the yearin which those temporary differences are expected to berecovered or settled.
(j) Self-insurance: Self-insurance reserves are established forautomobile and general liability, workers’ compensation andproperty loss costs based on claims filed and claims incurredbut not reported, with a maximum per occurrence of $2,000for automobile and general liability and $1,000 for workers’compensation. Self-insurance reserves are established forproperty losses with a maximum annual aggregate of $5,000($10,000 for named windstorm and wind driven rain) and a$100 per occurrence deductible after the aggregate isobtained. The Company is insured for losses in excess ofthese limits.
(k) P ro p e r t y, Plant and Equipment: P ro p e r t y, plant andequipment are stated at historical cost. Depreciation isprovided over the estimated useful lives by the straight-linemethod. Store equipment depreciation is based on livesvarying from five to eight years. Transportation equipmentis based on lives varying from three to ten years. Warehouseand manufacturing equipment is based on lives varying fromfive to ten years. Amortization of improvements to leasedpremises is provided principally by the straight-line methodover the periods of the leases or the estimated useful livesof the improvements, whichever is less.
The Company reviews its property, plant and equipment forimpairment whenever events or changes in circumstancesi nd icate the carrying value of an asset may not berecoverable. Recoverability is measured by comparison ofthe carrying amount to the net undiscounted cash flowsexpected to be generated by the asset. An impairment losswould be recorded for the excess of net book value over thefair value of the asset impaired. The fair value is estimatedbased on expected discounted future cash flows.
(l) Store Opening and Closing Costs: The costs of opening newstores and closing old stores are charged to earnings in theyear incurred. An expense is recorded for the present valueof expected future net rent payments in the year that a storecloses.
(m)Earnings Per Share: Earnings per common share are basedon the weig hted avera ge number of common share soutstanding. Diluted earnings per share amounts are basedon the weig hted avera ge number of common stockoutstanding, plus the incremental shares that would havebeen outstanding upon the assumed exercise of all dilutedstock options, subject to antidilution limitations.
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS Dollar amounts in thousands except per share data, unless otherwise noted
32 WINN-DIXIE 2001
1. Summary of Significant Accounting Policies and OtherInformation - continued
(m)Earnings Per Share, continuedThe following weighted average numbers of shares ofcommon stock were used in the calculations for earnings pershare.
(n) Comprehensive Income: Comprehensive income is reflectedon the Consolidated Statements of Shareholders’ Equity.Accumulated other comprehensive income is comprised ofunrealized gains/losses on derivative financial instrumentsand unrealized gains/losses of available for sale securities.
(o) Stock-Based Compensation: T he Company fo l l o w sS t a t e me nt of Fina nc ial Ac c o u nt i ng Standa rd No. 123,“Accounting for Stock-Based Compensation” (“SFAS 123”),which establishes a fair value-based method of accountingfor stock-based compensation plans.
(p) N ew Accounting Pro n o u n c e m e n t s : In July 2001, theFinancial Accounting Standards Board issued Statement ofFinancial Accounting Standards No. 142, “Accounting forGoodwill and Other Intangible Assets” (“SFAS 142”). SFASNo. 142 discontinues the practice of amortizing goodwill andindefinite lived intangible assets and initiates an annualreview for impairment. Impairment would be examined morefrequently if certain indicators are encountered. Intangibleassets with a determinable useful life will continue to beamortized over that period. The Company is currentlyassessing but has not yet determined the impact of SFAS 142on its financial position and results of operations. TheCompany plans to adopt SFAS 142 in the first quarter offiscal year 2002.
(q) Business Reporting Segments: Based on the informationmonitored by the Company’s operating decision-makers tomanage the business, the Company has identified that itsoperations are within one reportable segment. Accordingly,f i na nc ial info r ma t ion on industry segme nts is omittedbecause, apart from the principal business of operating retailself-service food stores, the Company has no other industrysegments. All sales of the Company are to customers withinthe United States and the Bahama Islands. All assets of theCompany are located within the United States and theBahama Islands. Sales and assets related to and located inthe Bahama Islands represent less than 1% of the Company’stotal sales and assets.
(r) Reclassification: Cash discounts and other income havebeen reclassified as a reduction of cost of sales andoperating and administrative expenses, respectively. Thereclassification reduced cost of sales for fiscal 2000 and
1999 by $87,203 and $102,435, re s p e c t i v e l y. There c l a s s i f ic a t ion re duced opera t i ng and adm i n i s t ra t i v eexpenses for fiscal 2000 and 1999 by $22,897 and $16,431,respectively. This reclassification is consistent with industrypractice. Certain other prior year amounts may have beenreclassified to conform to the current year’s presentation.
2. Trade and Other ReceivablesAccounts receivable at year-end
were as follows:
3. Merchandise InventoriesAt June 27, 2001, inventories valued by the LIFO method
would have been $220,411 higher ($232,368 higher at June 28,2000) if they were stated at the lower of FIFO cost or market. Ifthe FIFO method inventory valuation had been used, reported netearnings would have been $7,354, or $0.05 per diluted sharelower in 2001, net loss would have been $9,283, or $0.06 perdiluted share lower in 2000 and net earnings would have been$2,691, or $0.02 per diluted share higher in 1999.
4. Intangible Assets Intangible assets at year-end
were as follows:
G o o dwill is amortized over the estimated useful life not toexceed 20 years. The Company took a non-cash impairme nt chargeof $32,115 for fiscal 2000 as part of the Company’s re s t r uc t u r i ng(see Note 14 - Restruc t u r i ng and Other No n - re c u r r i ng Charge s ) .G o o dwill impairme nt is me a s u red as the differe nce between thec a r r y i ng value of the go o dwill and the discounted cash flows oft he opera t io ns that gave rise to the go o dwill. The re was no no n - c a s hi m p a i r me nt charge in fiscal 2001.
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
Trade and other receivables
Constuction advances
Less: Allowances for doubtful items
113,067
27
113,094
3,935
109,159
2001 2000
92,821
18,426
111,247
3,822
107,425
$
$
Goodwill
Other intangibles
Less: Accumulated amortization
98,940
5,000
103,940
11,065
92,875
2001 2000
25,591
-
25,591
6,985
18,606
$
$
2001 WINN-DIXIE 33
Basic
Diluted
145,445,416
145,445,416
2000 1999
148,309,653
148,680,198
139,823,835
140,399,055
2001Shares
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
5. Property, Plant and Equipment Property, plant and equipment consists of the following:
Land
Buildings
Furniture, fixtures, machinery and equipment
Transportation equipment
Improvements to leased premises
Construction in progress
Less: Accumulated depreciation
Leased property under capital leases, less accumulated
amortization of $34,833 ($32,951 in 2000)
Net property, plant and equipment
47,389
189,178
2,234,384
132,669
500,445
26,432
3,130,497
2,002,814
1,127,683
18,971
1,146,654
$
$
17,180
67,246
2,307,047
135,733
469,552
21,188
3,017,946
2,022,946
995,000
21,292
1,016,292
2001 2000
The Company took a non-cash charge of $43,277 for fiscal2001 due to losses on assets disposed of as a result of storeretrofits and took a non-cash impairment charge of $147,184 for
fiscal 2000 as part of the Company’s restructuring (see Note 14 -Restructuring and Other Non-recurring Charges).
6. Comprehensive IncomeComprehensive income differs from net income because of the
change in the fair value of the Company’s interest rate swaps int he curre nt year and a re c l a s s i f ic a t ion adjustme nt of an
unrealized gain on investments in the prior year. Comprehensiveincome (loss) for fiscal 2001, 2000 and 1999 was $43,724,$(231,964) and $182,644, respectively.
7. Income TaxesIncome tax expense (benefit) consists of:
2001
Federal
State
2000
Federal
State
1999
Federal
State
Total
(33,422
1,416
(32,006
111,358
4,172
115,530
79,270
17,191
96,461
$
$
$
$
$
$
DeferredCurrent
58,508
1,829
60,337
(182,074
(6,972
(189,046
16,110
1,574
17,684
25,086
3,245
28,331
(70,716
(2,800
(73,516
95,380
18,765
114,145
34 WINN-DIXIE 2001
)
)
)
)
)
)
)
)
7. Income Taxes - continuedThe following reconciles the expense (benefit) on the previous
page to the Federal statutory income tax rate:
Federal statutory income tax rate
State and local income taxes, net of federal income tax benefits
Tax credits
Company owned life insurance (COLI)
Goodwill impairment
Other, net
1999
35.0
2.8
(4.0
2.8
-
1.9
38.5
20002001
%
%
(35.0
(0.6
(0.9
9.6
2.9
(0.3
(24.3
%
%
35.0
4.4
(0.6
0.7
-
(1.0
38.5
%
%
The effective tax rate for fiscal 2000 reflects the effects of certain restructuring expenses and COLI adjustments.
Deferred tax assets:
Reserve for insurance claims and self-insurance
Reserve for vacant store leases
Unearned promotional allowance
Reserve for accrued vacations
State net operating loss carry forwards
Excess of book over tax depreciation
Other comprehensive income
Excess of book over tax rent expense
Excess of book over tax retirement expense
Uniform capitalization of inventory
Restructuring costs
Other, net
Total gross deferred tax assets
Less: Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Excess of tax over book depreciation
Undistributed earnings of the Bahamas subsidiary
Other comprehensive income
Other, net
Total gross deferred tax liabilities
Net deferred tax assets
1999
82,092
21,511
18,292
13,352
32,315
10,150
991
997
21,046
9,291
102,375
50,701
363,113
29,696
333,417
(84,640
(4,783
-
(2,113
(91,536
241,881
20002001
79,039
38,308
5,310
13,463
17,052
12,032
-
956
19,452
9,718
130,587
52,730
378,647
16,489
362,158
(46,308
(4,761
-
(9,863
(60,932
301,226
62,429
20,511
3,143
14,225
12,929
12,196
-
1,084
17,009
9,684
-
42,213
196,423
12,401
184,022
(31,098
(14,347
(1,921
(26,397
(73,763
110,259
$
$
2001 WINN-DIXIE 35
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
Components of net deferred tax assets
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
The Company believes the results of historical taxable income and the results of future operations will generate sufficient taxableincome to realize the deferred tax assets.
36 WINN-DIXIE 2001
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
7. Income Taxes - continuedThe Company reserved $30.4 million for taxes and $19.7
million for interest ($42.5 million after tax, or $0.29 per dilutedshare) after receiving an unfavorable opinion in October 1999and a computational decision on January 11, 2000 from the U.S.Tax Court. Additional interest totaling $5.5 million was accruedin fiscal 2001. Interest will continue to accrue until the matteris finally resolved. The Tax Court upheld the Internal RevenueService’s position that interest related to loans on broad-based,c o m p a ny owned life ins u ra nce polic ies in 1993 was no tdeductible for income tax purposes. The Eleventh Circuit Court
of Appeals issued an opinion on June 28, 2001 affirming the TaxCourt’s decision. Congress passed legislation phasing out suchdeductions over a three-year period in the fall of 1996. TheCompany held such policies and deducted interest on outstandingloans from March 1993 through December 1997. Managementdisagrees with the Tax Court’s decision and plans further appeal.While the ultimate outcome of this litigation cannot be predictedwith certainty, in the opinion of management, the ultimateresolution of this matter will not have any additional materialadverse impact on the Company’s financial condition or results ofoperations.
8. Debt
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
and interest payments and 10.0% of principal paid annually
Six-year $400,000 term loan; interest payable at LIBOR plus 2.75%
and $1,000 quarterly principal payments
8.875% senior notes due 2008; interest payable semiannually on
April 1 and October 1
Total
Less current portion
Long-term portion
-
-
-
1,705
400,000
300,000
701,705
4,291
697,414
$
$
235,000
-
-
-
-
-
235,000
235,000
-
2001 2000
On March 29, 2001, the Company replaced its short-termborrowings with $800 million in Senior Secured Credit Facilities(the “New Facilities,”) and issued $300 million of SeniorUnsecured Notes (the “Notes”). The New Facilities consist of a$200 million 364-day revolving credit facility, a $200 millionfive-year revolving credit facility, and a $400 million six-yearterm loan.
T he 364-day re v o l v i ng credit facility and the five-yearrevolving credit facility will be used to fund working capitalneeds, capital expenditures and general corporate purposes.
The New Facilities are secured by a first lien on essentially allof the Company’s assets and are guaranteed by the capital stock
of the Company’s subsidiaries.Pricing on the New Facilities is based on the corporate credit
ratings from Standard and Poor’s and Moody’s Investors Services.Based on the Company’s BBB-/Ba1 corporate ratings, the LIBORspread on the 364-day and five-year revolving credit facilities is2.50%. The Company also pays an unused commitment fee of37.5 basis points on the 364-day line of credit and 50 basispoints on the five-year line of credit. The LIBOR spread on thesix-year term loan is 2.75% at the Company’s current rating.
2001 WINN-DIXIE 37
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
The Company entered into interest rate swap agreements,which expire in one to three years on the six-year term loan, thateffectively converts the $400 million six-year term loan fromvariable to fixed rate debt. Under the terms of these agreements,the Company makes payments at a weighted average interest rateof 7.54% and receives a variable interest rate based on the one-month LIBOR. See Note 9 - Derivatives for further discussion ofthe Company’s interest rate swap activity. The Company incurredapproximately $24.2 million in debt issue costs related to theissuance of the New Facilities and the Notes. These debt issuecosts will be amortized over the life of the debt as additionalinterest expense.
The Company had no borrowings outstanding on the 364-daya nd five-year re v o l v i ng credit fa c i l i t ies and $400 millio noutstanding on the six-year term loan at June 27, 2001. As ofJune 27, 2001, the Company had $18.6 million in outstandingletters of credit used to support inventory purchases andinsurance obligations.
The Company issued $300 million in unsecured notes under as helf re g i s t ra t ion stateme nt filed with the Securities andExchange Commission in December 2000 (the “2000 RegistrationStatement”). The Notes are priced at 8.875%, pay interest
semiannually on April 1 and October 1 and mature on April 1,2008. At June 27, 2001, the Company’s outstanding fixed rateborrowings approximated fair market value. Additional securitiesup to $700 million remain available for issuance under theCompany’s 2000 Registration Statement.
T he New Facilities and Notes contain certain covena nts asde f i ned in the credit agre e me nt and inde nt u re, as ame nde d. TheC o m p a ny was in complia nce with all of these covena nts at June 27,2 0 0 1 .
Ag g regate principal ma t u r i t ies on long-term debt and capitalizedlease oblig a t io ns for each of the twelve-mo nth periods subsequentto June 27, 2001 are as fo l l o w s :
2002
2003
2004
2005
2006
Thereafter
Total
Long-term Debt
4,291
4,288
4,285
4,282
4,279
680,280
701,705
$
$
8. Debt - continued
38 WINN-DIXIE 2001
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
9. DerivativesT he Company follows Stateme nt of Fina nc ial Ac c o u nt i ng
Standards No. 133, “Accounting for Derivative Instruments andHedging Activities” (“SFAS 133”). SFAS 133 requires that allderivative instruments be recorded on the balance sheet at theirfair value. Changes in the fair value of derivatives are recordedeach period in current earnings or other comprehensive income,depending on whether a derivative is designated as part of ahedge transaction and, if it is, the type of hedge transaction.The Company adopted SFAS 133 in the first quarter of 2001.However, the Company had no derivatives to be measured at thetime of adoption.
As part of the New Facilities described in Note 8 - Debt, theCompany obtained a $400 million six-year term loan with avariable interest rate based on the one-month LIBOR. TheCompany utilizes derivative financial instruments to reduce itsexposure to market risks from changes in interest rates. Theinstruments primarily used to mitigate these risks are interestrate swaps. All derivative instruments held by the Company aredesignated as highly effective cash flow hedges of interest raterisk on variable rate debt and, accordingly, the change in fairvalue of these instruments is recorded as a component of othercomprehensive income.
T he Company is exposed to cre d i t - related losses in the event ofno n p e r fo r ma nce by count e r p a r t ies to these fina nc ial ins t r u me nt s.Ho w e v e r, count e r p a r t ies to these agre e me nts are major fina nc ia li ns t i t u t io ns, and the risk of loss due to no n p e r fo r ma nce isc o ns ide red by ma na ge me nt to be minimal. The Company does no thold or issue int e rest rate swaps for tra d i ng purposes.
The Company has entered into three interest rate swapagreements to hedge the interest rate risk associated with the$400 million outstanding in variable rate debt. The purpose ofthese swaps is to fix interest rates on variable rate debt andreduce certain exposures to interest rate fluctuation. At June 27,2001, the Company had interest rate swaps with a notionalamount of $400 million. The notional amounts do not representa measure of exposure of the Company.
The maturity and interest rate on the interest rate swaps areshown in the following table. The Company will pay thec o u nterparty int e rest at a fixed rate as no t e d, and thecounterparty will pay the Company interest at a variable rateequal to the one-month LIBOR (3.75% as of June 27, 2001).
The fair value of the Company’s interest rate swaps is obtainedfrom dealer quotes. These values represent the estimated amountthe Company would receive or pay to terminate the agreement,taking into consideration the difference between the contractrate of interest and rates currently quoted for agreements ofsimilar terms and maturities. At June 27, 2001, the fair value ofthe Company’s interest rate swaps resulted in an unrealized lossof $2.6 million ($1.6 million, net of tax). The Company recordedthe unrealized loss in accumulated other comprehensive incomein shareholders’ equity. During the next 12 months, the Companywill incur interest expense, including the effect of interest rateswaps at a weighted average rate of 7.54% on the $400 millionoutstanding in variable rate debt.
The Company measures effectiveness by the ability of interestrate swaps to offset cash flows associated with changes in theone-month LIBOR. To the extent that any of these contracts arenot considered effective, any changes in fair value relating to theineffective portion of these contracts are immediately recognizedin income. However, all the contracts were effective during theperiod and no gain or loss was reported in earnings.
150,000
150,000
100,000
400,000
$
$
March 29, 2002
March 29, 2003
March 29, 2004
4.60 %
4.81 %
5.03 %
NotionalAmount
Maturity Fixed Rate
2001 WINN-DIXIE 39
10. Stock Compensation PlansThe Company has various stock option, stock purchase and
incentive plans to reward employees and key executives of theCompany. Under SFAS 123, other than normal purchase discountsunder the employee stock purchase plan, the fair value ofrestricted stock and options at date of grant under the restrictedstock plan and the key employee stock option plan are chargedto compensation costs over the vesting or performance period.
Compensation cost charged against income was $8.0 milliona nd $2.5 million in fiscal 2001 and 1999, re s p e c t i v e l y.Compensation costs resulted in income of $1.1 million in fiscal2000. The primary reason for the income in fiscal 2000 was dueto the reversal of compensation expense previously recognizedfor restricted stock that did not vest.
The per share weighted fair value of the stock options grantedin fiscal 2001 and 2000 is $3.09 and $6.62, respectively. Theseamounts were estimated on the date of the grant using the Black-Scholes option pricing model under the following assumptions:risk-free interest rate of 6.2% and 6.7%; dividend yield of 7.0%and 5.4%; expected lives of 6.5 and 7 years; and volatility of34.0% and 38.0%, respectively.
(a) Stock Purchase Plan: The Company has a stock purchaseplan in effect for associates. Under the terms of this Plan,the Company may grant options to purchase restricted sharesof the Company’s common stock at a price not less than thelesser of 85% of the fair market value at the date of grant or85% of the fair market value at the time of exercise. Thereare 5,481,835 shares of the Company’s common stockavailable for the grant of options under the Plan. Loans toassociates for the purchase of the Company’s common stockare reported in the consolidated financial statements as areduction of Shareholders’ Equity, rather than as a currentasset. The total number of loans outstanding as of June 27,2001 were $1.9 million. No loans were outstanding at June28, 2000.
(b) Restricted Stock Plan: The Company has a restricted stockplan. Under this plan, the Company issues restricted sharesof the Company’s common stock to certain eligible keyemployees de t e r m i ned by the Company’s compens a t io ncommittee. The following table shows the number of sharesissued, forfeited and outstanding.
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
1999 Plan
Issued
Forfeited
Outstanding
2000 Plan
Issued
Forfeited
Outstanding
2001 Plan
Issued
Forfeited
Shares Vested
Outstanding
Shares outstanding, June 27, 2001
FY 2001
TotalWeightedAverage
Issue Price
41.12
25.75
15.22
252,097
232,402
19,695
239,030
127,958
111,072
103,164
2,192
32,254
68,718
199,485
-
169,263
-
34,834
103,164
2,192
32,254
-
18,592
239,030
93,124
-
-
-
252,097
44,547
-
-
-
-
-
FY 2000 FY 1999
Number of shares
$
$
$
Restricted shares outstanding
10. Stock Compensation Plans - continued(b) Restricted Stock Plan, continued
The vesting of shares issued prior to January 2000 iscontingent upon certain specified goals being attained overa three-year period. The shares issued after such date vestover time. Some of the shares issued vest one-third eachyear beginning with the third year from the date of issue,based on continued employment. Some of the shares issuedvest one-third each year beginning on the first anniversaryof the date of grant, based on continued employment. Othershares issued vest one-fifth each year beginning on the firstanniversary date of the recipient’s employment with thecompany, based on continued employment.
(c) Stock Option Plans: The Company has made shares of theCompany’s stock available for grant under stock plansdescribed below.1. Key Employee: Under the Company’s Key Employee StockOption Plan, 5,000,000 shares of the Company’s commonstock were made available for grant at an exercise price ofno less than the market value at date of grant. Optionsgranted under this plan prior to June 1, 1998 are earned overa three-year perio d, if certain perfo r ma nce goals areattained; and options granted after June 1, 1998 but beforeJanuary, 2000 also are earned after three years, if certainperformance goals are attained. Options granted in or afterJanuary 2000 become exercisable over time. Some of theseoptions vest over a three-year period with one-third of theoptions vesting each year beginning on June 15, 2001.Other options vest over a five-year period with one-fifth ofoptions vesting each year beginning on the first anniversarydate of the recipient’s employment with the company.2 . Retention and At t raction Pro g ra m : As part of the Company ’ sretention and attraction program, 1,200,000 shares of theCompany’s common stock were made available for grant tokey employees beginning on January 28, 2000 at an exerciseprice equal to the Company’s stock price at date of grant.Options granted as part of the program are earned over afive-year period, with one-fifth of the options vesting eachyear beginning on January 28, 2001, if the associate remainsemployed in his or her position.3 . CEO Stock Options: P u r s ua nt to an employme nt agre e me nt ,the President and Chief Executive Officer of the Companyreceived an option to purchase 500,000 shares of theCompany’s common stock at an exercise price of $27.00 pershare. Currently all 500,000 of the options are exercisable.4. Directors’ Stock Plan: The Company has a stock plan fornon-employee directors. Under this plan, the Company mayissue stock or grant options for the purchase of theCompany’s common stock to eligible non-employee directors
de t e r m i ned by the Company’s Corporate Governa nc eCommittee. A total of 500,000 shares of the Company’scommon stock were made available for issuance and optiongrants. Stock options issued under the plan were exercisableimmediately at an exercise price equal to the Company’sstock price at the date of grant.5. Options Outstanding: Changes in options during theyears ended June 27, 2001, June 28, 2000 and June 30,1999, were as follows:
Options outstanding
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
Outstanding - June 24, 1998
Granted
Exercised
Forfeited
Outstanding - June 30, 1999
Granted
Exercised
Forfeited
Outstanding - June 28, 2000
Granted
Exercised
Forfeited
Outstanding - June 27, 2001
Exercisable - June 27, 2001
Shares available for additional grant
332,000
181,277
(50,000
(25,842
437,435
1,828,306
(50,000
(886,234
1,329,507
977,158
(5,000
(74,574
2,227,091
945,587
3,920,370
Number of Shares
WeightedAverage
OptionPrice Per
Share
29.76
41.51
21.06
35.65
35.27
23.34
22.44
27.43
24.57
14.71
14.25
19.37
20.44
21.81
$
$
$
40 WINN-DIXIE 2001
)
)
)
)
)
)
2001 WINN-DIXIE 41
$ 14.25 to 20.00
$ 21.31 to 27.00
$ 33.03 to 41.51
Weighted AverageRemaining Life
( Y e a r s )
Weighted AverageExercise Price
Number ofO p t i o n s
1,554,208
503,487
169,396
2,227,091
16.49
26.96
37.37
20.44
6.9
8.4
3.8
7.0
444,983
500,329
275
945,587
15.97
27.00
33.03
21.81
Number CurrentlyE x e r c i s a b l e
Weighted AverageExercise Prices
for CurrentlyE x e r c i s a b l e
11. Leases(a) Leasing Arrangements: There were 1,468 leases in effect on
store locations and other properties at June 27, 2001. Ofthese 1,468 leases, 25 store leases and 3 warehouse andmanufacturing facility leases are classified as capital leases.Substantially all store leases will expire during the nexttwenty years and the warehouse and manufacturing facilityleases will expire during the next 23 years. However, in thenormal course of business, it is expected that these leaseswill be renewed or replaced by leases on other properties .
The rental payments on substantially all store leases arebased on a minimum rental plus a contingent rental, whichis based on a percentage of the store’s sales in excess ofstipulated amounts. Most of the Company’s leases containrenewal options for five-year periods at fixed rentals.
(b) Leases: Leased property under capital leases by majorclasses are:
The following is a schedule by year of future minimum leasepayments on open facilities under capital and operating leases,together with the present value of the net minimum leasepayments as of June 27, 2001.
Store facilities
Warehouses and manufacturing
facilities
Less: Accumulated amortization
38,082
15,722
53,804
34,833
18,971
2001 2000
$
$
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
38,521
15,722
54,243
32,951
21,292
Fiscal Year:
2002
2003
2004
2005
2006
Later years
Total minimum lease payments
Less: Amount representing estimated
taxes, maintenance and
insurance costs included in
total minimum lease payments
Net minimum lease payments
Less: Amount representing interest
Present value of net minimum lease
payments
7,246
7,246
6,640
6,083
6,103
21,628
54,946
970
53,976
21,753
32,223
Capital Operating
356,001
352,003
346,590
336,752
323,039
2,987,575
4,701,960
$
$
Minimum rentals
Contingent rentals
323,117
1,380
324,497
2000 1999
341,296
1,581
342,877
Rental payments and contingent rentals under operating leasesare as follows:
347,130
878
348,008
2001
$
$
$
$
$
$
An expense is recorded for the present value of expected futurenet rent payments in the year a store closes. The accrued balanceat June 27, 2001 for stores that closed not related to therestructuring is $59,381.
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
Future lease payments
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
13. Commitments and Contingent Liabilities(a) Associate Benefit Pro g ra m s : T he Company has a
no nc o nt r i b u t o r y, trusteed profit sharing re t i re me nt pro g ra ma nd a cont r i b u t o r y, trusteed 401k re t i re me nt pro g ram, whic ha re in effect for eligible associates and may be ame nded ort e r m i nated at any time. Charges to earnings for cont r i b u t io nsto the pro g ra ms amo u nted to $42,317, $17,625 and $67,250in 2001, 2000 and 1999, re s p e c t i v e l y.
(b) Defined Benefit Plan: The Company has a ManagementSecurity Plan (MSP), which is a non-qualified defined benefitplan providing disability, death and retirement benefits to406 qualified active associates of the Company and 650former participants. Total MSP cost charged to operationswas $6,686, $6,104 and $6,132 in 2001, 2000 and 1999,respectively. The projected benefit obligation at June 27,2001 was approximately $50,822. The effective discountrate used in determining the net periodic MSP cost was 8.0%for 2001, 2000 and 1999.
Life insurance policies, which are not considered as MSPassets for liability accrual computations, were purchased tofund the MSP payments. These insurance policies are shownon the balance sheet at their cash surrender values, net ofpolicy loans aggregating $224,593 and $210,655 at June 27,2001 and June 28, 2000, respectively.
(c) Supplemental Retirement Plan: T he Company has adeferred compensation Supplemental Retirement Plan ineffect for eligible management associates. The Companyrecorded an asset and liability at June 27, 2001 and June 28,2000 in the amount of $16.6 million and $17.0 million,respectively.
(d) Litigation: There are pending against the Company variousclaims and lawsuits arising in the normal course of business,including suits charging violations of certain civil rights lawsand various proceedings arising under federal, state or localregulations protecting the environment.
Among the suits charging violations of certain civil rightslaws, there are actions that purport to be class actions, andwhich allege sexual harassment, retaliation and/or a patternand practice of race-based and gender-based discriminatorytreatment of employees and applicants. The plaintiffs seek,among other relief, certification of the suits as proper classactions, declaratory judgment that the Company’s practicesare unlawful, back pay, front pay, benefits and othercompensatory damages, punitive damages, injunctive reliefand reimbursement of attorneys’ fees and costs.
The Company is committed to full compliance with alla p p l icable civil rig hts laws. Cons i s t e nt with thiscommitment, the Company has firm and long-standingpolicies in place prohibiting discrimination and harassment.T he Company de n ies the allegatio ns of the vario u sc o m p l a i nts and is vigo rously de f e nd i ng the actio ns.
While the ultimate outcome of litigation cannot bepredicted with certainty, in the opinion of management, theultimate resolution of these actions will not have a materialadverse effect on the Company’s financial condition orresults of operations.
See Note 7 - Income Taxes with respect to certainlitigation pending before the U.S. Tax Court.
42 WINN-DIXIE 2001
12. Shareholders’ EquityOn April 19, 2000, the Board of Directors authorized the
repurchase, in either open market or private transactions, of upto 10,000,000 shares of the outstanding common stock inaddition to the 5,000,000 share repurchase program announcedon October 6, 1999. From October 6, 1999 through September20, 2000, the Company repurchased 9,034,400 shares having anaggregate cost of $179.0 million or $19.82 per share. No shareswere repurchased under the program during the three quartersended June 27, 2001.
During the second quarter of fiscal 2001, approximately910,000 shares were purchased for cash and credit by associatesunder the Revised Winn-Dixie Stock Purchase Plan for Employees,for an aggregate value of $13.7 million. The total amount ofcash received at the time of sale was $10.3 million, with theremainder to be paid by associates over 12 months beginningJanuary 2001.
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
14. Restructuring and Other Non-recurring ChargesOn April 20, 2000, the Board of Directors approved and the
Company announced a major restructuring to improve the supportof the retail stores and the Company’s overall efficiency.
As a result of the restructuring, the Company recordedexpenses of approximately $396 million ($256 million after tax
or $1.76 per diluted share) in the fourth quarter of fiscal 2000.Charges totaling $147.2 million ($90.6 million after tax or $0.64per diluted share) were recorded in the current year. A summaryof the restructuring charges and the remaining accrual follows:
The adjustment to employee termination costs represents theaccrued severance for employees in closed stores where theemployees subsequently became ineligible for severance. Theaddition to other location closing costs includes travel expenses,inventory retagging and employee relocation costs in connectionwith the restructuring. Asset removal and related costs and asset
impairments are the expenses involved in the retrofit of selectedstores. In addition, other asset impairments were recorded aspart of the restructuring. The addition to lease termination costsreflects the updated estimate of the remaining liability.
The following table shows the number of people that areeligible for severance under the restructuring plan.
Additions
Utilization
Balance at 6/28/00
Additions
Adjustments
Utilization
Balance at 6/27/01
AssetImpairment
Other Location
Closing Costs
LeaseTermination
Costs
189,295
(2,628
186,667
19,889
-
(44,426
162,130
10,722
(10,647
75
12,348
(38
(12,385
-
179,299
(179,299
-
43,277
-
(43,277
-
-
-
-
71,634
-
(71,634
-
396,029
(200,120
195,909
149,301
(2,056
(181,024
162,130
Asset Removal& Related
Costs
T o t a lEmployeeTermination
Costs
16,713
(7,546
9,167
2,153
(2,018
(9,302
-
2001 WINN-DIXIE 43
$
$
Eligible for severence
Number paid
Became ineligible
Number eligible at June 28, 2000
Number paid
Became ineligible
Number eligible at June 27, 2001
Total
3,351
636
1,275
1,440
417
1,023
-
Manufacturingand Support
Facilities
Retail
655
240
63
352
258
94
-
4,006
876
1,338
1,792
675
1,117
-
)
)
)
)
)
)
)
)
)
) )
)
)
)
Restructuring charge
Severence eligibility
$
$
44 WINN-DIXIE 2001
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
14. Restructuring and Other Non-recurring Charges- continued
As part of the Company’s restructuring in fiscal year 2000, alls t o res were evaluated based on curre nt and pro j e c t e dprofitability. As part of this evaluation, the Company performedan impairment review of its long-lived assets. During this review,the Company identified impairment losses for assets to bedisposed of and assets to be held and used.
The impairment charge for assets to be disposed of relatedprimarily to the carrying value of equipment and leaseholdimprovements for the stores, division offices, warehouse andma nu fa c t u r i ng plants that were closed as part of there s t r uc t u r i ng discussed above. The impairme nt charge wasdetermined using the fair value less the cost to sell. The amountof the impairment charge for assets to be disposed of included inthe restructuring charge for fiscal 2000 was $77.9 million.
The impairment charge for assets to be held and used relatedp r i marily to the carrying value of equipme nt, leaseho l d
improvements and goodwill for certain stores that will continueto be operated by the Company. Projected future undiscountedcash flows were used to determine whether the assets wereimpaired. For the assets that were determined to be impaired,the impairment charge was calculated to be the differencebetween the carrying value of the asset and the greater ofdiscounted cash flows and estimated fair value of the asset.Goodwill impairment was measured as the difference between thecarrying value of the goodwill and the discounted cash flows ofthe operations that gave rise to the goodwill. As a result, animpairment charge of $101.4 million related to assets to be heldand used was recognized in fiscal 2000, reducing the carryingvalue of fixed assets and goodwill by $69.3 million and $32.1million, respectively.
Any remaining expenditures relating to retrofits are notconsidered to be material to the Company’s operations and willbe included as a component of operating and administrativeexpense.
15. Business CombinationsIn October 2000, the Company acquired nine Gooding ’ s
s u p e r ma r kets in Orlando, Florida. The acquisition was accounted fo ras a purc h a s e. On Ja nuary 11, 2001, the Company acquired 68s t o re s, 32 fuel statio ns and other assets owned by Jitney Jung l eS t o res of Ame r ica, Inc. The acquired assets are located in
Mississippi, Alabama and Louisia na. The acquisition was account e dfor as a purc h a s e. Profo r ma results of the Gooding’s and Jitne yJ u ngle acquisitio ns, assuming the tra ns a c t io ns were cons u m ma t e dat the beginning of 2001 and 2000, would not be ma t e r ia l l yd i f f e re nt from the results re p o r t e d.
2001 WINN-DIXIE 45
WINN-DIXIE STORES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continuedDollar amounts in thousands except per share data, unless otherwise noted
16. Quarterly Results of Operations (Unaudited)T he fo l l o w i ng is a summary of the una udited quarterly results of opera t io ns for the years ended June 27, 2001 and June 28, 2000:
Quarterly re s u l t s
2001
Net sales
Gross profit on sales
Net earnings
Basic earnings per share
Diluted earnings per share
Net LIFO charge (credit)
Net LIFO charge (credit) per diluted share
Dividends per share
Market price range
2,940,862
746,899
9,413
0.07
0.07
1,845
0.01
0.170
15.44-13.44
3,956,338
1,061,114
12,169
0.09
0.09
2,460
0.02
0.340
23.13-13.56
3,016,312
813,829
10,724
0.08
0.08
1,845
0.01
0.255
30.35-16.88
2,989,861
832,185
13,005
0.09
0.09
(13,504
(0.10
0.255
33.12-25.01
Sept. 20(12 Weeks)
Jan. 10(16 Weeks)
Quarters EndedApril 4
(12 Weeks)June 27
(12 Weeks)
$
$
$
$
$
$
$
$
$
2000
Net sales
Gross profit on sales
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Net LIFO charge
Net LIFO charge per diluted share
Dividends per share
Market price range
3,162,171
869,592
22,069
0.15
0.15
1,833
0.01
0.170
41.94-31.31
4,276,024
1,169,681
(18,793
(0.13
(0.13
2,444
0.02
0.340
33.00-22.31
3,199,356
865,419
10,273
0.07
0.07
1,833
0.01
0.255
24.00-14.38
3,059,996
822,358
(242,444
(1.70
(1.70
3,173
0.02
0.255
21.31-14.25
Sept. 22(12 Weeks)
Jan. 12(16 Weeks)
Quarters EndedApril 5
(12 Weeks)June 28
(12 Weeks)
$
$
$
$
$
$
$
$
$
During 2001 and 2000, the fourth quarter results reflect a change from the estimate of inflation used in the calculation of LIFOinventory to the actual rate experienced by the Company of 1.0% to (0.8)% and 1.0% to 1.1%, respectively.
Net sales
Cost of sales
Gross profit on sales
Operating and administrative expenses
Restructuring and other non-recurring charges
Operating income (loss)
Interest expense
Earnings (loss) before income taxes
Income taxes
Net earnings (loss)
June 28, 200012 Weeks
June 27, 200112 Weeks
2,989,861
2,157,676
832,185
739,776
56,497
35,912
14,800
21,112
8,107
13,005
3,059,996
2,237,638
822,358
793,417
396,029
(367,088
6,784
(373,872
(131,428
(242,444
Fourth Quarter Results of Operations
$
$
)
)
)
)
)
)
)
)
)
)
)
)
46 WINN-DIXIE 2001
SHAREHOLDER INFORMATION
Shareholder CommunicationsPlease address any inquiries or comments to:
EquiServe Trust Company, N. A.Transfer Agent and RegistrarWinn-Dixie Stores, Inc.P.O. Box 2500Jersey City, New Jersey 07303-2500
Toll-Free Number: 1-888-U-CALL-WD(1-888-822-5593)
For Hearing Impaired: 1-201-222-4955
Internet Address: www.equiserve.comorShareholder RelationsWinn-Dixie Stores, Inc.P.O. Box BJacksonville, Florida 32203-0297
The Company's annual report to the Securities and ExchangeCommission on Form 10-K may be obtained by any shareholder,free of charge, upon written request to the Company or can beretrieved through Winn-Dixie's website.
Stock Market ListingNew York Stock ExchangeSymbol: WIN
Annual Shareholders’ MeetingYou are cord ially invited to attend the me e t i ng to be he l d
We d ne s da y, October 10, 2001, 9:00 a.m., at the he a d q uarters of f ic eof the Company at 5050 Edgewood Court, Ja c k s o n v i l l e, Florida .
Formal notice of the meeting, a proxy and proxy statement arebeing mailed to shareholders who are of record as of the close ofbusiness on August 6, 2001.
Corporate HeadquartersWinn-Dixie Stores, Inc.P.O. Box BJacksonville, Florida 32203-0297Internet Address: www.winn-dixie.com
Transfer Agent and RegistrarEquiServe Trust Company, N. A.P.O. Box 2500Jersey City, New Jersey 07303-2500
Independent AuditorsKPMG LLPJacksonville, Florida
Dividend ReinvestmentT he Company's Divide nd Reinvestme nt Plan allows our
shareholders who own at least 10 shares in certificate form toreinvest dividends on Winn-Dixie common stock automatically,w i t hout service charges or bro ke ra ge fees. Pa r t ic i p a t i ngshareholders may also supplement the amount invested withv o l u ntary cash investme nts on the same cost-free basis.Approximately 71% of the Company's shareholders participate inthe Dividend Reinvestment Plan. More information may beobtained by contacting EquiServe Trust Company, N. A.
Direct DepositThe Company offers direct deposit of dividends to our
shareholders. More information may be obtained by contactingEquiServe Trust Company, N. A.
FLORIDA436
GEORGIA94
SOUTH CAROLINA62
NORTH CAROLINA109
VIRGINIA28
ALABAMA118
MISSISSIPPI69
LOUISIANA79
TEXAS71
OKLAHOMA5
TENNESSEE12
KENTUCKY40
OHIO17INDIANA
1
BAHAMAS12
Operating AreaTotal Stores - 1,153