2007 News Releases
(download in .pdf format)
For Immediate Release
NASDAQ: WINN
Investors:
(212) 521-4835
Media Only:
Michael Freitag or Wendi Kopsick
(212) 521-4800
|
JACKSONVILLE, FL, February 20, 2007 – Winn-Dixie Stores, Inc. (NASDAQ: WINN) today announced financial results for the 16 and 28 week periods ended January 10, 2007, and the filing of its quarterly report on Form 10-Q with the Securities & Exchange Commission.
During these periods, which constitute the company’s second quarter and first half of its 2007 fiscal year, Winn-Dixie continued to make progress in the implementation of its turnaround. Key points are:
- As of January 10, 2007, Winn-Dixie had approximately $500 million of liquidity, a significant increase from the end of the prior fiscal quarter. The company had no borrowings under its revolving credit facility.
- Identical store sales for the first half of the fiscal year increased 1.8% as compared to the same period in fiscal 2006. ID sales for the second quarter declined 0.5%, primarily as a result of unfavorable comparisons to large sales increases that occurred last year in areas affected by Hurricanes Katrina and Wilma.
- Winn-Dixie has initiated a store capital program, with 40 store remodels currently underway, of which 15 to 22 are expected to be completed by the end of the current fiscal year. The company plans to remodel about 75 stores annually in future fiscal years.
- The company has rebuilt and opened two stores in New Orleans that were closed due to Hurricane Katrina. Another store in New Orleans is currently being rebuilt and is expected to open next fall.
“We are continuing to make progress in many areas of our business plan,” said Winn-Dixie Chairman, CEO and President Peter Lynch. “Going forward, we remain committed to executing five key initiatives: rebuilding trust in our brand; investing capital in our stores; neighborhood marketing; Associate training and development; and focusing on profitable sales.”
As previously reported, Winn-Dixie’s plan of reorganization became effective and the company emerged from Chapter 11 bankruptcy protection on November 21, 2006. As the result of the application of fresh-start reporting in accordance with SOP 90-7, the company’s financial statements prior to November 16, 2006 (the “predecessor” periods) are not comparable with its financial statements for periods on or after November 16, 2006 (the “successor” periods). However, the company believes that the combined financial information of the predecessor and successor periods provides a useful comparison to prior year results for the purpose of better understanding financial and operational trends.
Liquidity and Capital Resources
As of January 10, 2007, Winn-Dixie had approximately $500 million of liquidity, comprised of $367 million of borrowing availability under its credit agreement and $133 million of cash and cash equivalents. The company anticipates that liquidity will decrease by approximately $80 million during the remainder of the fiscal year in connection with the acceleration of its store remodel and other capital expenditure programs and as it makes payments related to emergence from bankruptcy, offset by cash flow from operations and income tax refunds.
“We are pleased to have emerged from bankruptcy with virtually no debt and substantial borrowing capacity under our new Credit Facility,” said Lynch. “We are confident we have the liquidity we need to fund both our current business operations and our planned capital expenditure program.”
Sales
Identical store sales increased 1.8% in the first half of the fiscal year, but decreased 0.5% in the second quarter. Comparisons to large sales increases in the prior year in areas impacted by Hurricanes Katrina and Wilma negatively impacted overall second quarter identical store sales. During the second quarter, identical store sales increased 3.5% in areas not impacted in the prior year by Hurricanes Katrina or Wilma, but decreased by 6.7% in the areas significantly impacted by these storms. The company believes the decrease was due primarily to the absence in the current year of the substantial government and private assistance provided last year to local residents, as well as competitor stores and restaurants open this year that were closed last year in the aftermath of the storms. Sales results were driven by increases in the average basket, which on an identical store basis rose by 3.0% in the first half of the fiscal year, partially offset by reduced transaction counts, which declined by 1.1% during the same period.
“Overall, we are very pleased with our ID Store Sales for the first half of the fiscal year,” said Lynch. “Especially since we’re matching up against the sizeable sales spike that resulted from the influx of private and federal assistance dollars in areas impacted by Hurricanes Katrina and Wilma.”
Net Income and Adjusted EBITDA
Net income was $286.8 million and $262.2 million for the second quarter and first half of the fiscal year, respectively. These results were impacted significantly by non-cash items, the largest of which were a $188.2 million gain in connection with the discharge of liabilities associated with the company’s exit from Chapter 11 and a $144.8 million gain related to the revaluation of assets and liabilities as part of fresh-start reporting. Income from continuing operations before interest expense, income taxes, and depreciation and amortization expense, or EBITDA, as further adjusted for non-cash charges and other items related to the company’s emergence from bankruptcy (Adjusted EBITDA) was positive $1.4 million in the second quarter, as compared to a loss of $1.3 million in the same period of the prior year. For the first half of the fiscal year, Adjusted EBITDA was negative $9.7 million as compared to negative $12.1 million in the same period of the prior year.
“We are happy to report positive Adjusted EBITDA in the second quarter and we plan to build on that progress in the second half of the fiscal year,” Lynch said.
Gross Margin Rate and Operating Expense
Gross profit on sales increased $4.2 million and $18.8 million for the second quarter and first half of the fiscal year, respectively, as compared to the same periods in the prior fiscal year. As a percentage of sales, gross margin was 25.7% in the second quarter as compared to 25.3% in the same period of the prior year. For the first half of the fiscal year, gross margin as a percentage of sales was 26.0% as compared to 25.6% for the same period in the prior year.
The gross margin improvement of 40 basis points in both periods was due to operational improvements that reduced inventory shrink. Also, higher margins achieved in certain categories offset higher investment in promotional programs that were made in an effort to offset a portion of the prior year sales increases in hurricane impacted areas.
“We will maintain our focus on reducing shrink and managing expenses across our entire operation,” said Lynch. ”Both of these areas represent important opportunities for the continued improvement of our financial performance.”
Other operating and administrative expenses increased $15.0 million in the second quarter and $20.5 million for the first half of the fiscal year, in each case as compared to the same periods of the prior year. These increases reflected $9.8 million of bankruptcy-related items which impacted both periods.
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 522 stores in Florida, Alabama, Louisiana, Georgia, and Mississippi.
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 are based on our current plans and expectations and 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,” “continuing,” “ongoing,” “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 contemplated or implied by the Company’s forward-looking statements.
The Company faces a number of risks and uncertainties with respect to its continuing business operations and its attempt to increase its sales and gross profit margin, including, but not limited to: the Company’s ability to improve the quality of the Company’s stores and products; the Company’s success in achieving increased customer count and sales in remodeled and other stores; the results of the Company’s efforts to revitalize the corporate brand; the outcome of the Company’s programs to control or reduce operating and administrative expenses and to control inventory shrink; increases in utility rates or gasoline costs, which could impact consumer spending and buying habits and the cost of doing business; the availability and terms of capital resources and financing and its adequacy for the Company’s planned investment in store remodeling and other activity; the concentration of the Company’s locations in the southeastern United States, which increases its vulnerability to severe storm damage; general business and economic conditions in the southeastern United States, including consumer spending levels, population, employment and job re-growth in some of our markets, and the additional risks relating to limitations on insurance coverage following the catastrophic storms in recent years; pricing pressures and competitive factors, which could include pricing and marketing strategies from other food and/or drug retail chains, supercenters and non-traditional competitors; the ability of the Company to attract and retain key leadership; the Company’s ability to implement, maintain or upgrade information technology systems; the Company’s ability to successfully estimate self- insurance liabilities; changes in laws and other regulations affecting the Company’s industry; events that give rise to actual or potential food contamination, drug contamination or food-borne illness; the Company’s ability to use net operating loss carryforwards under the federal tax laws; and the outcome of litigation or legal proceedings.
Please refer to discussions of these and other factors in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2006, the Company’s Quarterly Report on Form 10-Q for the quarter ended January 10, 2007, 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.
