2006 News Releases
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(212) 521-4835
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Kekst and Company
Michael Freitag
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COURT APPROVES WINN-DIXIE DISCLOSURE STATEMENT
Company to Begin Solicitation of Creditor Approval for
Plan of Reorganization
Confirmation Hearing Scheduled for October 13,
Positioning Winn-Dixie to Emerge From Chapter 11
by Late October
JACKSONVILLE, FL, August 4, 2006 – Winn-Dixie Stores, Inc. today announced that the U.S. Bankruptcy Court for the Middle District of Florida has approved the Disclosure Statement filed in connection with the company’s proposed Plan of Reorganization. The Court also authorized Winn-Dixie to begin soliciting approval from its creditors for the Plan of Reorganization. With these developments, Winn-Dixie remains on schedule to emerge from Chapter 11 protection as soon as late October.
As previously reported, Winn-Dixie expects to emerge from its reorganization with sufficient financing and liquidity to make significant investments in its current store base, to develop new stores, and to take other actions to position the business to compete effectively in its markets over the next several years. The company also expects to emerge with only a minimal amount of long-term debt on its balance sheet.
Winn-Dixie President and Chief Executive Officer Peter Lynch said, “Court approval of the Disclosure Statement and authorization to begin the solicitation of creditor approval of our Plan of Reorganization are two important steps on our path to emergence from bankruptcy. Our momentum continues to build in our business. Our associates are energized and excited about the progress we have made in our turnaround, and our customers are responding favorably to our continued focus on providing outstanding service and products.”
At a hearing Friday in Jacksonville, the Honorable Jerry A. Funk ruled that Winn-Dixie’s Disclosure Statement was adequate for the purposes of soliciting creditor approval for the Plan of Reorganization. A confirmation hearing for the Court to consider approval of the Plan of Reorganization has been scheduled for October 13. Later this month Winn-Dixie will begin mailing notice of the proposed confirmation hearing and begin the process of soliciting approvals for the Plan of Reorganization from qualified claim holders. The official committee of unsecured creditors in Winn-Dixie’s Chapter 11 proceedings has provided a letter to the company, to be mailed to creditors with the Disclosure Statement, recommending that creditors vote in favor of the Plan of Reorganization. Assuming the requisite approvals are received and the Court confirms the Plan under the company’s current timetable, Winn-Dixie will emerge from Chapter 11 protection in late October or early November 2006.
H. Jay Skelton, Chairman of the Winn-Dixie Board of Directors, said, "The Plan of Reorganization and Disclosure Statement represent the culmination of a concerted effort by a large number of people to get Winn-Dixie out of Chapter 11 and maximize its value to creditors. The creditors committee has provided assistance in brokering the compromise of the ‘substantive consolidation’ dispute that is included in the Plan and, without which, our Chapter 11 case could be mired in expensive litigation for many years. We also appreciate that the creditors committee has lent its support to our emergence from Chapter 11 by recommending to creditors a vote in favor of the Plan."
As previously reported, Winn-Dixie has received a commitment for up to $725 million in exit financing from Wachovia Bank. The exit financing, which will replace the company’s current debtor-in-possession (DIP) credit facility on the effective date of a Plan of Reorganization, will increase Winn-Dixie’s cash availability substantially. The Court approved the commitment letter for the exit financing on July 27.
If the company’s Plan of Reorganization is confirmed, current holders of Winn-Dixie’s equity will not receive any distributions following emergence and their equity interests will be cancelled once the Plan of Reorganization becomes effective.
About Winn-Dixie
Winn-Dixie Stores, Inc. is one of the nation’s largest food retailers. Founded in 1925, the company is headquartered in Jacksonville, FL. The company currently operates 527 stores in Florida,
Alabama, Louisiana, Georgia, and Mississippi. For more information, please visit www.winn-dixie.com.
Forward-Looking Statements
Certain statements made in this press release may constitute "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements involve certain risks
and uncertainties. Actual results may differ materially from the expected results described in the forward-looking statements. These forward-looking statements include and may be indicated by words
or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes," or "intends" and similar words and phrases. There are a number of factors that could cause
the Company's actual results to differ materially from the expected results described in the Company's forward-looking statements.
There can be no assurance that the Company's Chapter 11 reorganization process will be successful. Risk factors related to its efforts include, but are not limited to, the following: the Company's ability to continue as a going concern and fund its cash requirements through the effective date of a plan of reorganization; the ability of the Company to respond to any further unexpected developments that require the usage of a substantial amount of its liquidity; the ability of the Company to confirm and consummate the Plan of Reorganization (or an alternative plan), which depends on a number of factors, including the Bankruptcy Court’s approval of the Disclosure Statement related to the Plan of Reorganization, the Company’s ability to obtain creditor approval thereof, the Company’s ability to satisfy the conditions to obtaining exit financing, and the Bankruptcy Court’s confirmation of the Plan of Reorganization; the ability of the Company to operate under the terms of the DIP credit facility and to extend the term of the facility if required; risks associated with third parties seeking and obtaining court approval to modify or terminate the automatic stay, appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases; the potential adverse impact of the Chapter 11 cases on the Company's liquidity and results of operations; the Company's ability to maintain contracts that are critical to its operations; the ability of the Company to attract and retain customers; the ability of the Company to attract, motivate and retain key executives and associates; and potential adverse publicity.
In addition, the Company faces a number of risks with respect to its continuing business operations, including, but not limited to: the Company's ability to improve profitability and generate positive operating cash flow; the Company’s ability to sustain sales increases in the second and third quarter of fiscal 2006; the Company's ability to increase capital expenditures in the future to invest in its store base and other capital projects; the Company's response to the entry of new competitors into its markets, including traditional grocery store openings and the entry of non-traditional grocery retailers such as mass merchandisers, supercenters, warehouse club stores, dollar-discount stores, drug stores and conventional department stores; the Company's ability to reduce the level of operating losses experienced in recent years; the Company's ability to upgrade its information systems and implement new technology and business processes; the Company's ability to implement new customer service programs; the Company's ability to implement effective pricing and promotional programs; the Company's ability to successfully implement effective business continuity and IT recovery planning; the Company’s ability to reserve appropriately for self insurance liabilities; the Company's ability to maintain appropriate sanitation and quality standards in its stores and products; the Company's ability to resolve certain class action lawsuits successfully; the success of the Customer Reward Card program; changes in federal, state or local laws or regulations; general economic conditions in our operating regions; lack of inflation in food prices and narrow profit margins that characterize the retail food industry; stability of product costs; increases in labor and employee benefit costs, such as health care and pension expenses; changes in accounting standards, taxation requirements and bankruptcy laws.
Because the Company’s operations are concentrated in Florida and in the states along the Gulf Coast, it faces a number of risks related to possible hurricane and windstorm activity in the operating region. With respect to the continuing impact on operations from previous storms, risks include the Company’s ability to collect on the insurance coverage for damage resulting from Hurricane Katrina; the Company’s ability to re-open 10 stores that remain closed and for which there currently is no re-opening timeline; and future sales levels in the Company’s stores in the New Orleans market. With respect to future hurricane and windstorm activity, the Company faces additional risks resulting from increased financial exposure and increased property insurance premiums due to changes to the Company’s insurance coverage for fiscal year 2007. Although the Company has developed procedures for hurricane preparedness designed to reduce inventory losses, the most significant item of hurricane loss, and believes that its new hurricane preparedness procedures may be effective in reducing future losses, hurricanes and windstorms are inherently unpredictable and there can be no assurance that the impact of hurricanes and windstorms in the upcoming hurricane season, which began June 1, 2006, will not have a material adverse effect on its business, results of operation or liquidity.
Under the priority scheme established by the Bankruptcy Code, generally post-petition liabilities and pre-petition liabilities must be satisfied before shareholders are entitled to receive any distribution. As noted above, the Plan of Reorganization proposes no recovery for shareholders. Although the Plan of Reorganization provides estimated recoveries for unsecured creditors, the amount of any actual recoveries will not be determined until confirmation and implementation of a plan of reorganization. Nor can any assurance be given as to what recoveries, if any, will be assigned in the bankruptcy proceedings to unsecured creditors. The Plan of Reorganization proposes that holders of the Company’s unsecured debt will receive less, and potentially substantially less, than payment in full for their claims. For the foregoing reasons, the value of the Company’s common stock and unsecured debt is highly speculative.
Please refer to discussions of these and other factors in this news release, the Company’s Plan of Reorganization, the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2005, the Company’s Quarterly Report on Form 10-Q for the quarter ended April 5, 2006, and other Company filings with the Securities and Exchange Commission. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly revise or update these forward-looking statements, whether as a result of new information, future events or otherwise.
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News Release #7003