Winn Dixie Stores (WINN) 10-Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 9, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number 1-3657

WINN-DIXIE STORES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-0514290
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
5050 Edgewood Court, Jacksonville, Florida	32254-3699
(Address of principal executive offices)	(Zip Code)

(904) 783-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

As of February 6, 2008, 53,901,473 shares of Winn-Dixie Stores, Inc. common stock were outstanding.

FORM 10-Q

TABLE OF CONTENTS

		Page
	Part I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited)	1
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
	Part II – Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

Part I – Financial Information

Item 1. Financial Statements

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Successor					Predecessor
Amounts in thousands except per share data	16 weeks ended January 9, 2008			8 weeks ended January 10, 2007		8 weeks ended November 15, 2006
Net sales	$	2,246,968		1,164,192		1,066,852
Cost of sales, including warehouse and delivery expenses		1,647,942		873,034		784,245
Gross profit on sales		599,026		291,158		282,607
Other operating and administrative expenses		591,560		302,528		319,139
Impairment charges		210		—		18,743
Restructuring gain, net		—		—		(113	)
Operating income (loss)		7,256		(11,370	)	(55,162	)
Interest (income) expense, net (contractual interest for 8 weeks ended November 15, 2006, was $7,203)		(1,080	)	(566	)	3,108
Income (loss) before reorganization items and income taxes		8,336		(10,804	)	(58,270	)
Reorganization items, net gain		—		—		(338,449	)
Income tax expense (benefit)		4,265		(855	)	(12,567	)
Income (loss) from continuing operations		4,071		(9,949	)	292,746
Discontinued operations:
Income from discontinued operations		—		—		2,903
Gain on disposal of discontinued operations		—		—		1,093
Income from discontinued operations		—		—		3,996
Net income (loss)	$	4,071		(9,949	)	296,742
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.08		(0.18	)	2.07
Earnings from discontinued operations		—		—		0.03
Earnings (loss) per share	$	0.08		(0.18	)	2.10
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.08		(0.18	)	2.07
Earnings from discontinued operations		—		—		0.03
Diluted earnings (loss) per share	$	0.08		(0.18	)	2.10
Dividends per share	$	—		—		—
Weighted average common shares outstanding-basic		53,901		53,901		141,321
Weighted average common shares outstanding-diluted		54,176		53,901		141,321

See accompanying notes to condensed consolidated financial statements (unaudited).

1

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Successor					Predecessor
Amounts in thousands except per share data	28 weeks ended January 9, 2008			8 weeks ended January 10, 2007		20 weeks ended November 15, 2006
Net sales	$	3,867,866		1,164,192		2,676,678
Cost of sales, including warehouse and delivery expenses		2,822,485		873,034		1,969,641
Gross profit on sales		1,045,381		291,158		707,037
Other operating and administrative expenses		1,040,204		302,528		776,482
Impairment charges		210		—		20,778
Restructuring charge, net		—		—		786
Operating income (loss)		4,967		(11,370	)	(91,009	)
Interest (income) expense, net (contractual interest for 20 weeks ended November 15, 2006, was $15,766)		(2,515	)	(566	)	5,527
Income (loss) before reorganization items and income taxes		7,482		(10,804	)	(96,536	)
Reorganization items, net gain		—		—		(334,430	)
Income tax expense (benefit)		4,201		(855	)	(13,980	)
Income (loss) from continuing operations		3,281		(9,949	)	251,874
Discontinued operations:
Income from discontinued operations		—		—		2,333
Gain on disposal of discontinued operations		—		—		17,922
Income from discontinued operations		—		—		20,255
Net income (loss)	$	3,281		(9,949	)	272,129
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.06		(0.18	)	1.78
Earnings from discontinued operations		—		—		0.15
Basic earnings (loss) per share	$	0.06		(0.18	)	1.93
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.06		(0.18	)	1.78
Earnings from discontinued operations		—		—		0.15
Diluted earnings (loss) per share	$	0.06		(0.18	)	1.93
Dividends per share	$	—		—		—
Weighted average common shares outstanding-basic		53,901		53,901		141,317
Weighted average common shares outstanding-diluted		54,306		53,901		141,317

See accompanying notes to condensed consolidated financial statements (unaudited).

2

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Dollar amounts in thousands except par value	January 9, 2008		June 27, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	101,768	201,946
Marketable securities		40,000	4,836
Trade and other receivables, less allowance for doubtful receivables of $2,955 ($3,663 at June 27, 2007)		99,017	94,173
Insurance claims receivable		22,580	22,900
Income tax receivable		15,848	15,883
Merchandise inventories, less LIFO reserve of $9,987 ($5,107 at June 27, 2007)		652,424	641,458
Prepaid expenses and other current assets		41,970	40,982
Total current assets		973,607	1,022,178
Property, plant and equipment, net		379,736	300,174
Intangible assets, net		318,237	331,803
Other assets, net		17,114	16,736
Total assets	$	1,688,694	1,670,891
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current obligations under capital leases	$	7,218	6,289
Accounts payable		301,173	262,787
Reserve for self-insurance liabilities		71,675	73,451
Accrued wages and salaries		67,460	76,334
Accrued rent		34,887	39,685
Accrued expenses		80,068	83,763
Total current liabilities		562,481	542,309
Reserve for self-insurance liabilities		140,232	147,339
Long-term borrowings under credit facilities		—	14
Unfavorable leases		131,871	138,700
Obligations under capital leases		17,992	18,622
Other liabilities		29,249	26,966
Total liabilities		881,825	873,950
Commitments and contingent liabilities (Notes 1, 5, 6, 9)
Shareholders’ equity:
Common stock $0.001 par value. Authorized 400,000,000 shares; 54,000,000 shares issued; 53,901,473 shares outstanding at January 9, 2008 and June 27, 2007		54	54
Additional paid-in-capital		769,257	762,401
Retained earnings		31,746	28,465
Accumulated other comprehensive income		5,812	6,021
Total shareholders’ equity		806,869	796,941
Total liabilities and shareholders’ equity	$	1,688,694	1,670,891

See accompanying notes to condensed consolidated financial statements (unaudited).

3

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Successor					Predecessor
Amounts in thousands	28 weeks ended Jan. 9, 2008			8 weeks ended Jan. 10, 2007		20 weeks ended Nov. 15, 2006
Cash flows from operating activities:
Net income (loss)	$	3,281		(9,949	)	272,129
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss (gain) on sales of assets, net		145		367		(35,373	)
Reorganization items, net gain		—		—		(334,430	)
Impairment charges		210		—		20,857
Depreciation and amortization		43,963		9,981		36,274
Share-based compensation		6,856		147		11,609
Deferred income taxes		4,335		—		—
Change in operating assets and liabilities:
Favorable and unfavorable leases		1,753		531		—
Trade, insurance and other receivables		(4,524	)	(724	)	29,850
Merchandise inventories		(10,966	)	33,024		(31,564	)
Prepaid expenses and other current assets		(988	)	(8,441	)	(2,426	)
Accounts payable		33,899		(39,153	)	(20,458	)
Income taxes payable/receivable		(234	)	2,207		(2,944	)
Reserve for self-insurance liabilities		(9,082	)	2,160		(1,203	)
Accrued expenses and other		(16,427	)	(26,077	)	(4,278	)
Net cash provided by (used in) operating activities before reorganization items		52,221		(35,927	)	(61,957	)
Cash effect of reorganization items		—		—		(11,085	)
Net cash provided by (used in) operating activities		52,221		(35,927	)	(73,042	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(108,647	)	(10,988	)	(23,888	)
(Increase) decrease in investments and other assets, net		(7,695	)	17,001		15,067
Sales of assets		118		—		83,012
Purchases of marketable securities		(72,090	)	(860	)	(4,321	)
Sales of marketable securities		35,466		79		14,991
Other, net		—		(78	)	(308	)
Net cash (used in) provided by investing activities		(152,848	)	5,154		84,553
Cash flows from financing activities:
Gross borrowings on credit facilities		6,654		1,470		7,690
Gross payments on credit facilities		(6,668	)	(1,470	)	(47,690	)
Increase in book over-drafts		4,487		14,493		164
Principal payments on long-term debt and capital leases		(4,024	)	(142	)	(981	)
Debt issuance costs		—		(8,829	)	(366	)
Net cash provided by (used in) financing activities		449		5,522		(41,183	)
Decrease in cash and cash equivalents		(100,178	)	(25,251	)	(29,672	)
Cash and cash equivalents at beginning of period		201,946		157,871		187,543
Cash and cash equivalents at end of period	$	101,768		132,620		157,871

See accompanying notes to condensed consolidated financial statements (unaudited).

4

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

1. Proceedings Under Chapter 11 of the Bankruptcy Code

General: The information below should be read in conjunction with Note 1 to the Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2007.

Emergence from Bankruptcy Protection: On February 21, 2005 (the “Petition Date”), Winn-Dixie Stores, Inc. and 23 then-existing direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (“Chapter 11” or the “Bankruptcy Code”) in the United States Bankruptcy Court (the “Court”). Two of the then-existing wholly-owned subsidiaries of Winn-Dixie Stores, Inc. (collectively with the Debtors, the “Company” or “Winn-Dixie”) did not file petitions under Chapter 11. On November 9, 2006, the Court entered its order confirming the Debtors’ modified plan of reorganization (the “Plan” or the “Plan of Reorganization”). Although certain objecting parties appealed the confirmation order, they did not seek a stay of the order. In the absence of a stay, the Debtors were free to implement the Plan notwithstanding the pendency of the appeals. The Plan became effective and the Debtors emerged from bankruptcy protection on November 21, 2006 (the “Effective Date”). Certain of the appeals remain pending while others have been dismissed by the Court as moot.

Upon emergence from bankruptcy protection, the Company adopted the “fresh-start reporting” provisions of the American Institute of Certified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”), effective November 15, 2006, which was the end of its immediately preceding accounting period. Under fresh-start reporting, a new reporting entity was deemed to have been created, and all assets and liabilities were revalued to their fair values.Accordingly, the Company’s financial statements for periods prior to November 15, 2006, are not comparable to its financial statements for periods on or after November 15, 2006. References to the “Successor” refer to Winn-Dixie on or after November 15, 2006, after application of fresh-start reporting; references to the “Predecessor” refer to Winn-Dixie prior to November 15, 2006.

Claims Resolution and Plan Distributions:As of January 9, 2008, 46.1 million shares had been distributed by the disbursing agent to holders of allowed unsecured claims that totaled $910.3 million in allowed amounts; 0.2 million shares were held by the disbursing agent for distribution to holders of allowed unsecured claims that totaled $4.9 million in allowed amounts, pending such holders satisfaction of tax requirements; and 7.7 million shares were held in reserve by the disbursing agent to satisfy remaining disputed unsecured claims. The claims resolution process remains on-going with respect to certain unsecured, secured, administrative and priority claims. The claims resolution process will continue until all claims are resolved.

5

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

Reorganization Items:Reorganization items were incurred by the Predecessor since the Petition Date as a direct result of the Debtors’ Chapter 11 filings, and were comprised of the following:

	Predecessor
	8 weeks ended Nov. 15, 2006			20 weeks ended Nov. 15, 2006
Gain on extinguishment of debt	$	(188,197	)	(188,197	)
Revaluation of assets and liabilities		(144,837	)	(144,837	)
Professional fees		22,467		31,192
Lease rejections		(34,983	)	(42,799	)
Employee costs		484		1,574
Interest income		(1,481	)	(3,583	)
Estimated claims adjustments and other, net		8,098		12,220
Reorganization items, net gain	$	(338,449	)	(334,430	)
Cash effect of reorganization items:
Professional fees	$	4,551		14,337
Interest income		(1,704	)	(3,683	)
Other		185		431
Total cash effect of reorganization items	$	3,032		11,085

Gain on extinguishment of debt reflected the restructuring of the Company’s capital structure and resulting discharge of pre-petition debt. Revaluation of assets and liabilities reflected adjustments from the revaluation of assets and liabilities and the write-off of the Predecessor’s equity accounts. Professional fees included financial, legal, real estate and valuation services directly associated with the reorganization process. Lease rejections related to the net non-cash gains that resulted from rejections of leases, primarily real estate leases, for which rejection damage estimates were less than amounts previously recorded as liabilities. Employee costs related to the Company’s key employee retention plan, by which certain key associates, including executive officers, were eligible for retention incentives. In accordance with SOP 90-7, from the Petition Date through the Effective Date, interest income was classified as a component of reorganization items. Estimated claims adjustments and other, net, related to increases and decreases to claims as resolved including reductions from potential claimants that did not file a proof of claim by the Court-established bar date.

2. Summary of Significant Accounting Policies and Other Matters

General: All information in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2007. See Note 3 to the Consolidated Financial Statements in that Form 10-K for a more detailed discussion of the Company’s significant accounting policies.

6

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

The Company: As of January 9, 2008, the Company operated as a major food retailer in five states in the southeastern United States. The Company operated 521 retail stores, with five fuel centers and 61 liquor stores at the retail stores. In support of its stores, the Company operated six distribution centers and three manufacturing facilities.

Estimates:The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues, and expenses, and disclosure of contingent assets and liabilities. The Company cannot determine future events and their effects with certainty. Therefore, the determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases, actuarial calculations. The Company periodically reviews these significant factors and makes adjustments when appropriate. Actual results could differ from those estimates.

During the 16 weeks ended January 9, 2008, the Company recorded an adjustment that reduced its self-insurance reserves by $18.3 million as a result of the actuarial study performed in the second quarter and primarily related to workers’ compensation claims. This adjustment decreased other operating and administrative expenses by $15.5 million and cost of sales by $2.8 million.

Basis of Presentation:As discussed in Note 1, the Company emerged from Chapter 11 protection on November 21, 2006, and adopted fresh-start reporting in accordance with SOP 90-7 as of the close of business on November 15, 2006. The Company’s emergence from reorganization resulted in a new reporting entity that had no retained earnings or accumulated deficit as of November 15, 2006.Accordingly, the Company’s consolidated financial statements for periods prior to November 15, 2006, are not comparable to its consolidated financial statements for periods on or after November 15, 2006.

Also in accordance with SOP 90-7, revenues, expenses, realized gains and losses, and provisions for losses that resulted from the reorganization are reported separately as reorganization items in the Predecessor’s consolidated statement of operations. Net cash used for reorganization items is disclosed separately in the Predecessor’s consolidated statement of cash flows.

The accompanying unaudited Condensed Consolidated Financial Statements are also prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 16 and 28 weeks ended January 9, 2008, are not necessarily indicative of the results that may be expected for the fiscal year ending June 25, 2008.

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

The condensed consolidated balance sheet as of June 27, 2007, was derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2007.

Cash and Cash Equivalents:Book overdrafts of $23.9 million and $19.4 million were classified as accounts payable in the Condensed Consolidated Balance Sheets as of January 9, 2008, and June 27, 2007, respectively.

Marketable Securities:As of January 9, 2008, the Company had short-term investments in Auction Rate Securities (ARS) of $40.0 million. The ARS have contractual terms from 30 to 40 years, but generally have interest rate reset dates that occur every 28 days and despite the long-term nature of their stated contractual maturities, management anticipates having the opportunity to liquidate these securities at ongoing auctions which are held in conjunction with the interest reset dates every 28 days. The investments in ARS are classified as available-for-sale on the Company’s Condensed Consolidated Balance Sheets. The investments are recorded at cost which approximates fair market value due to their variable interest rates, which typically resets every 28 days. As a result, no cumulative gross unrealized holding gains/losses from the investments have been realized. All income generated from these investments is recorded as interest income.

Earnings (Loss) Per Share:Basic earnings (loss) per common share is based on the weighted-average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share is based on the weighted-average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed vesting and exercise of all common stock equivalents (options, restricted stock and restricted stock units, collectively “CSEs”) using the treasury stock method, subject to anti-dilution limitations.

The calculation of diluted earnings per share includes 0.3 million and 0.4 million potentially dilutive CSEs for the 16 and 28 weeks ended January 9, 2008, respectively. Excluded from the calculation are approximately 3.2 million and 1.2 million anti-dilutive CSEs for the 16 and 28 weeks ended January 9, 2008, 1.1 million anti-dilutive CSEs for the 8 weeks ended January 10, 2007, and 6.5 million anti-dilutive CSEs for the 8 and 20 weeks ended November 15, 2006, respectively.

Comprehensive Income (Loss): Comprehensive income was $3.9 million and $3.1 million for the 16 and 28 weeks ended January 9, 2008, respectively. Comprehensive loss was $9.9

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

million for the 8 weeks ended January 10, 2007 and comprehensive income was $294.2 million and $270.5 million for the 8 and 20 weeks ended November 15, 2006, respectively. Other comprehensive income consists primarily of changes in post-retirement benefits.

Reclassifications and Revisions: Certain prior year amounts have been reclassified to conform to the current year’s presentation.

3. Merchandise Inventories

The Company uses the last-in, first-out (“LIFO”) method to value approximately 85% of its inventory. LIFO charges increased cost of sales by $3.6 million, $4.9 million and $0.7 million for the 16 and 28 weeks ended January 9, 2008, and the 8 weeks ended January 10, 2007, respectively. LIFO benefits decreased cost of sales by $2.5 million, and $1.8 million for the 8 and 20 weeks ended November 15, 2006, respectively.

An actual valuation of inventory under the LIFO method is made as of the end of each fiscal year based on the inventory levels and costs as of that date. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are estimates of future events and prices, interim results are subject to the final year-end LIFO inventory valuations.

4. Impairment Charges

The Company periodically estimates the future cash flows expected to result from the various long-lived assets and the residual values of such assets. In some cases, the Company concludes that the undiscounted cash flows are less than the carrying values of the related assets, resulting in impairment charges. Impairment charges of $0.2 million were recorded during the 16 and 28 weeks ended January 9, 2008, and no impairment charges were recorded during the 8 weeks ended January 10, 2007. Impairment charges of $18.7 million and $20.8 million related to continuing operations store facilities were recorded during the 8 and 20 weeks ended November 15, 2006, respectively, and $0.1 million related to discontinued operations were recorded during the 20 weeks ended November 15, 2006.

5. Income Taxes

Income tax expense of $4.3 million and $4.2 million was recognized for the 16 and 28 weeks ended January 9, 2008, respectively. The expense will not result in significant cash payments due to the availability of net operating loss (“NOL”) carryforwards as further described below. The income tax benefit that was recognized for the 8 weeks ended January 10, 2007, and the 8 and 20 weeks ended November 15, 2006, were attributable to the Company’s ability to carry back certain NOLs and certain refundable credits.

The Company maintains a full valuation allowance against substantially all of its net deferred tax assets. The valuation allowance will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets will be realized.

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

For the 16 and 28 weeks ended January 9, 2008, the Company recognized tax attributes that existed as of November 15, 2006, totaling $3.1 million and $4.2 million, respectively, and thereby reduced intangible assets by these amounts.

As of January 9, 2008, the Company had NOL carryforwards for federal income tax purposes of approximately $500 million that will begin to expire in fiscal 2025. As the Company settles the remaining bankruptcy claims, its NOL carryforwards will increase by an amount equal to the market value of shares distributed as of the date of distribution.

As of January 9, 2008, the Company had $18.8 million of unrecognized tax benefits which, if recognized, none of this amount would change the effective tax rate. The Company does not anticipate that it will record any significant change in its unrecognized tax benefits during fiscal 2008.

The Company executed a settlement with the Internal Revenue Service (“IRS”) in connection with the IRS’ examination of the Company’s federal income tax returns for fiscal years 2003 and 2004. The settlement has been reviewed and approved by the Joint Committee on Taxation. No payment of additional tax will be required as a result of the settlement.

6. Debt

On the Effective Date, Winn-Dixie Stores, Inc., and certain of its subsidiaries entered into an Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement, to be used for working capital and general corporate purposes, provides for a $725.0 million senior secured revolving credit facility, of which a maximum of $300.0 million may be utilized for letters of credit. The Credit Agreement matures November 21, 2011, at which time all amounts then outstanding under the agreement will be due and payable. At the request of the Company, under certain conditions the facility may be increased by up to $100.0 million. Obligations under the Credit Agreement are guaranteed by substantially all of the Company’s subsidiaries and are secured by senior liens on substantially all assets of the Company. Debt issuance costs of $9.2 million are being amortized over the term of the Credit Agreement. This Form 10-Q contains only a general description of the terms of the Credit Agreement and is qualified in its entirety by reference to the full Credit Agreement (filed as Exhibit 10.1 to the Form 8-K filed on November 28, 2006). The following capitalized terms have specific meanings as defined in the Credit Agreement: Agent, Borrowing Base, Capital Expenditures, EBITDA, Excess Availability, and Reserves.

During the 28 weeks ended January 9, 2008, the Company had no borrowings on the Credit Agreement, other than fees charged by the lender.

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

At the Company’s option, interest under the Credit Agreement is based on LIBOR or the bank’s prime rate (“Prime”), plus an applicable margin that varies based on the level of Excess Availability under the Credit Agreement. As of January 9, 2008, the rates in effect for the first $50.0 million borrowed were LIBOR plus 3.75% or Prime plus 2.0%, at the Company’s option. For amounts borrowed in excess of $50.0 million, the rates in effect as of January 9, 2008, were LIBOR plus 1.25% or Prime. Also in effect as of January 9, 2008, was a standby letter of credit fee of 1.25%. In addition, there is an unused line fee of 0.25%, a sub-facility letter of credit fee of 1.0%, and a letter of credit fronting fee of 0.25%.

The Credit Agreement contains various representations, warranties and covenants that are customary for such financings, including among others, reporting requirements and financial covenants. The financial covenants require that the Company maintain Excess Availability of at least $75.0 million to avoid triggering the financial covenants regarding (i) minimum consolidated EBITDA (as defined in the Credit Agreement) and (ii) minimum consolidated EBITDA less Capital Expenditures. At all times, Excess Availability, as defined, is not permitted to fall below $50.0 million, which effectively reduces the Company’s borrowing ability. In addition, certain covenants substantially restrict the Company’s ability to incur additional indebtedness, create liens, make certain investments, sell assets or pay dividends. The Company’s obligations under the Credit Agreement may be accelerated on certain events of default, including any breach of any of the representations, warranties or covenants made in the Credit Agreement. As of January 9, 2008, the Company was in compliance with all covenants.

Borrowing availability was $446.6 million as of January 9, 2008, as summarized below:

	January 9, 2008
Lesser of Borrowing Base or Credit Agreement capacity1	$	496,570
Outstanding borrowings		—
Excess Availability		496,570
Limitation on Excess Availability		(50,000	)
Borrowing availability	$	446,570

¹ Net of Reserves of $210.6 million, including $191.2 million related to outstanding letters of credit

As shown in the table above, availability under the Credit Agreement is determined net of Reserves, which are subject to revision by the Agent to reflect events or circumstances that adversely affect the value of the Borrowing Base assets. Accordingly, a determination by the Agent to increase Reserves would reduce availability.

Letters of credit are considered reserves against the borrowing availability. As of January 9, 2008, letters of credit totaling $191.2 million were issued under the Credit Agreement. Substantially all outstanding letters of credit related to workers’ compensation programs.

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

7. Retirement Plans

Post-retirement benefits

The Company provides medical insurance benefits to current and future retirees until age 65. Employees are eligible for benefits after attaining 55 years of age and ten years of full-time service with the Company. Other than retirees and active employees who had reached 55 years of age and had 20 years of service as of January 1, 2003, all covered individuals contribute amounts expected to be the full cost of coverage under the plan.

The components of net periodic benefit expense for the retiree medical plan and the death benefit continued by the Successor (see Defined Benefit Plan, below) consisted of the following:

	Successor				Predecessor
	16 weeks ended Jan. 9, 2008			8 weeks ended Jan. 10, 2007	8 weeks ended Nov. 15, 2006
Interest cost	$	418		87	148
Amortization of prior service cost		—		—	149
Amortization of actuarial gain		(114	)	—	—
Net periodic benefit expense	$	304		87	297
	Successor				Predecessor
	28 weeks ended Jan. 9, 2008			8 weeks ended Jan. 10, 2007	20 weeks ended Nov. 15, 2006
Interest cost	$	731		87	241
Amortization of prior service cost		—		—	532
Amortization of actuarial gain		(199	)	—	—
Net periodic benefit expense	$	532		87	773

Defined Benefit Plan

The Predecessor had a non-qualified defined benefit plan (the “Defined Benefit Plan”) that provided retirement and death benefits to certain executives and other members of management. The plan was a non-funded contributory plan. As of the Effective Date, the Defined Benefit Plan was terminated under the Plan of Reorganization. The Successor continued the death benefit portion, which is reported as part of the post-retirement benefit discussed above.

The components of net periodic benefit expense and other amounts recognized in other comprehensive (loss) income for the Defined Benefit Plan through November 15, 2006 consisted of the following:

	Predecessor
	8 weeks ended Nov. 15, 2006		20 weeks ended Nov. 15, 2006
Interest cost	$	753	1,957
Recognized net actuarial loss		258	672
Net periodic benefit expense	$	1,011	2,629

12

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

8. Discontinued Operations and Restructuring

In evaluating whether elements of its restructuring plans qualify for discontinued operations classification, the Company considers each store to be a component of a business, as this is the lowest level at which the operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes. If the cash flows of a store to be exited will not be significant to the Company’s ongoing operations and cash inflows of nearby Company stores are not expected to increase significantly because of the exit, the results of operations of the store are reported in discontinued operations. Other components, including distribution centers and manufacturing operations, are classified as discontinued operations only if the Company determines that the related continuing cash flows will not be significant to its ongoing operations. Costs incurred to dispose of a location are included in gain on disposal of discontinued operations only if the location qualifies for discontinued operations classification; otherwise, such costs are reported as restructuring charges.

Fiscal 2007 Sales and Closures

During the 20 weeks ended November 15, 2006, the Company closed seven U.S. stores and sold its 78% ownership interest in Bahamas Supermarkets Limited, which owned all of the Company’s operations in The Bahamas. The sale of the Bahamian operations resulted in proceeds of $54.0 million and a gain on sale of $31.5 million, which was included in gain on disposal of discontinued operations for the 20 weeks ended November 15, 2006. Results of operations for six of the seven U.S. stores and the twelve stores and distribution center in The Bahamas were classified as discontinued operations.

Financial Information

Net sales from discontinued operations were $0.0 million and $24.2 million for the 8 and 20 weeks ended November 15, 2006. Net earnings from discontinued operations were $4.0 million and $20.3 million for the 8 and 20 weeks ended November 15, 2006, which included a gain on disposal of discontinued operations of $1.1 million and $17.9 million, respectively. Restructuring (gains) charges, net were $(0.1) million and $0.8 million for the 8 and 20 weeks ended November 15, 2006, respectively.

13

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

The following summarizes the costs included in restructuring and gain on disposal of discontinued operations:

	Predecessor
	8 weeks ended Nov. 15, 2006			20 weeks ended Nov. 15, 2006
Restructuring:
Gain on sale/retirement, net	$	(379	)	(465	)
Lease termination (gain) costs		(313	)	154
Employee termination costs		37		228
Other location closing costs		542		869
Restructuring (gain) charge, net	$	(113	)	786
Gain on disposal of discontinued operations:
Loss (gain) on sale/retirement, net	$	6		(30,296	)
Lease termination (gain) costs		(1,059	)	10,691
Employee termination gains		(112	)	(11	)
Other location closing costs		72		1,694
Net gain on disposal	$	(1,093	)	(17,922	)

9. Commitments and Contingencies

Bankruptcy-related Contingencies

The Debtors’ creditors generally filed proofs of claim with the Court. Through a claims resolution process and on objections of the Debtors, the Court reduced, reclassified and/or disallowed a significant number of claims for varying reasons, including claims that were duplicative, amended, without merit, misclassified or overstated. Many claims were resolved prior to the Effective Date through settlement or Court orders. This process will continue until all claims are resolved (see Note 1).

Litigation—Bankruptcy and pre-petition matters

On the Petition Date, Winn-Dixie Stores, Inc., and 23 of its then-existing subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The reorganization was jointly administered under the caption “In re: Winn-Dixie Stores, Inc., et al., Case No. 05-03817” by the Court. Two of the then-existing wholly-owned subsidiaries of Winn-Dixie Stores, Inc., did not file petitions under Chapter 11 of the Bankruptcy Code. On August 9, 2006, the Debtors filed their final plan of reorganization and related Court-approved disclosure statement. On October 10, 2006, the Company filed a modification to the plan to address objections to confirmation of the plan (the plan as modified, the “Plan” or the “Plan of Reorganization”). On November 9, 2006, the Court entered its order confirming the Plan of Reorganization.

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

In confirming the Plan, the Court overruled the objections to the Plan filed by, among others, several holders of landlord claims and the Florida tax collectors. Certain of the objecting parties, including four groups of landlord claimants and the Florida tax collectors, appealed the confirmation order to the United States District Court for the Middle District of Florida (the “District Court”). The issues placed on appeal by the landlord claimants derive from the substantive consolidation compromise contained in the Plan and the resulting treatment of landlord claims under the Plan. The issues placed on appeal by the Florida tax collectors relate to the treatment of ad valorem property taxes under the Plan, including the alleged immunity of the State of Florida and the jurisdiction of the Bankruptcy Court with respect to state taxes. None of the appealing parties sought to stay the effectiveness of the confirmation order, leaving the Debtors free to move forward to implement the Plan. The Debtors implemented the Plan on November 21, 2006, which became the effective date of the Plan. On July 5, 2007, the Debtors filed a motion to dismiss as moot the appeals filed by the landlord claimants. On October 10, 2007, the District Court entered its order granting the Debtors’ motion and dismissing the appeals filed by the landlord claimants. On November 9, 2007, the landlord claimants filed an appeal from the District Court’s dismissal order with the United States Court of Appeals for the Eleventh Circuit which is now pending before that Court. The Debtors do not believe that these appeals will have a material impact on the Plan or the Company.

As a result of the Company’s Chapter 11 filing, with certain exceptions or unless otherwise ordered by the Court, the automatic stay prevented parties from pursuing any pre-Petition Date claims and lawsuits, and all liabilities alleged against the Debtors in such claims and lawsuits were treated in the Company’s Chapter 11 cases either pursuant to the Plan or as otherwise ordered by the Court. Except as provided for in the Plan or as otherwise ordered by the Court, all pre-Petition Date claims have been discharged as against the Company. The discharge injunction imposed by the Plan should protect the Company from the assertion of these claims in the future. Claims and lawsuits based on such liabilities arising after the Petition Date but before the Effective Date generally were not subject to the automatic stay. Such claims, however, were generally subject to an administrative claims bar date imposed under the Plan. See Note 1 for additional information.

During the Chapter 11 case, the Company operated the business as debtors-in-possession pursuant to the Bankruptcy Code. As debtors-in-possession, the Company was authorized to continue to operate as an ongoing business, but could not engage in transactions outside the ordinary course of business without the approval of the Court, after notice and an opportunity for a hearing. Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, were stayed and other contractual obligations of the Debtors generally could not be enforced. The rights of creditors and ultimate payments by the Company under pre-petition obligations were addressed in the Plan of Reorganization. See Note 1 for additional information.

15

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

In February 2004, several putative class action lawsuits were filed in the District Court against the Company and certain present and former executive officers alleging claims under the federal securities laws. In March and April 2004, three other putative class action lawsuits were filed in the District Court against the Company and certain present and former executive officers and employees of the Company alleging claims under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), related to the Company’s Profit Sharing/401(k) Plan. By separate court orders, both the securities laws claims and the ERISA claims were consolidated and were to proceed as separate, single actions. As a result of the Company’s Chapter 11 filing, the automatic stay prevented the plaintiffs in these class action lawsuits from proceeding against the Company. Any such claims against the Company were subordinated under the Plan pursuant to the provisions of 11 U.S.C. §510(b) and were treated in the same manner as the Company’s existing shares, which were cancelled without any distribution, and such claims were discharged as against the Company. The discharge injunction imposed by the Plan will protect the Company from the assertion of these claims in the future. As to the individual co-defendants, on May 10, 2005, the District Court entered an order staying both lawsuits as to all parties and all issues in light of the Company’s Chapter 11 filing. Both lawsuits and the claims asserted against the individual co-defendants remain pending. On April 5, 2007, and May 1, 2007, the District Court entered orders lifting the stays in both lawsuits. On June 4, 2007, and June 11, 2007, the plaintiffs in both lawsuits filed amended and consolidated complaints against the individual defendants. On June 25, 2007, and July 22, 2007, the individual defendants filed motions to dismiss both lawsuits. On or about November 6, 2007, the individual defendants and applicable insurers reached agreements with plaintiffs to settle the ERISA-based litigation. On December 4, 2007, the District Court granted the individual defendants’ motion to dismiss the securities litigation.

In July 2004, attorneys representing a purported shareholder forwarded to the Company’s Board of Directors a written demand that it commence a derivative legal proceeding on behalf of the Company against the Board of Directors and the Company’s officers and directors who served from May 6, 2002, through July 23, 2004. This demand contended that these various individuals violated their fiduciary duties to the Company by allegedly filing and issuing false and misleading financial statements, by allegedly causing the Company to engage in unlawful conduct or failing to oversee the Company to prevent such misconduct, and by allegedly receiving without entitlement certain retirement benefits, long-term compensation and bonuses. The Company believed that all of these claims were without merit. Moreover, any derivative claims belonged to the Company’s Chapter 11 estate and the automatic stay prevented any party other than the Company from pursuing such claims. Under the Plan, any such claims were released by the Company.

Litigation—Post-emergence matters

In December 2007, 26 current and former employees filed a putative class action lawsuit in the Circuit Court for Brevard County, Florida against Winn-Dixie Stores, Inc. alleging company-wide systemic age discrimination under the Florida Civil Rights Act with respect to the terms and conditions of their employment and that of others who were similarly-situated. The Company denies all allegations raised in the lawsuit, has answered the complaint and has filed motions asserting various defenses to the claims. The Company has also sought to

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WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

remove the case to the bankruptcy court on the ground that the action is, either partially or in its entirety, barred by the Company’s Plan of Reorganization. To date, these motions remain pending in the state and bankruptcy courts.

In January 2008, an African-American customer filed a putative class action lawsuit in the United States District Court for the Northern District of Alabama in Birmingham against Winn-Dixie Stores, Inc. alleging that the Company discriminates against customers on the basis of race with regard to its cash-back policies for customers writing checks. Specifically, the lawsuit alleges that the Company allows customers in stores located in predominantly white areas to write checks for amounts in excess of the purchase price of the sale and receive cash back but does not allow customers in stores located in predominantly black areas to do the same based on race. The Company denies all allegations raised in the lawsuit and will vigorously defend this action.

In addition, various claims and lawsuits arising in the normal course of business are pending against the Company, including claims alleging violations of certain employment or civil rights laws, claims relating to both regulated and non-regulated aspects of the business and claims arising under federal, state or local environmental regulations. The Company vigorously defends these actions.

While no one can predict the outcome of any pending or threatened litigation with certainty, the Company’s management believes that any resolution of these proceedings will not have a material adverse effect on its financial condition or results of operations.

10. New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the effect the adoption of SFAS 157 will have on its fiscal 2009 consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“SFAS 159”). This Statement permits entities to make an irrevocable election to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis. Unrealized gains and losses on items for which the fair value option is elected will be recognized in net earnings at each subsequent reporting date. SFAS 159 is effective for the Company’s fiscal year that begins June 26, 2008. The Company is currently evaluating the effect the adoption of SFAS 159 will have on its fiscal 2009 consolidated financial statements.

17

WINN-DIXIE STORES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollar amounts in thousands except per share data, unless otherwise stated

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will affect income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2010. Management has not yet determined the impact of SFAS 141R on the consolidated financial statements. As disclosed in Note 5, the Company currently maintains a full valuation allowance against substantially all of its net deferred tax assets. Benefits associated with recognition of tax attributes that existed at the time of emergence from bankruptcy protection currently reduce intangible assets. Upon adoption of SFAS141R, subsequent reversals of the valuation allowance will instead be reflected in income tax expense.

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. Unless specified to the contrary, all information herein is reported as of January 9, 2008, which was the end of our most recently completed fiscal quarter.

As a result of the application of fresh-start reporting as discussed below, the Company’s financial statements for periods prior to November 15, 2006, are not comparable to its financial statements for periods on or after November 15, 2006. References to the “Successor” refer to Winn-Dixie on or after November 15, 2006, after application of fresh-start reporting. References to the “Predecessor” refer to Winn-Dixie prior to November 15, 2006. References such as the “Company,” “we,” “our” and “us” refer to Winn-Dixie Stores, Inc. and its consolidated subsidiaries, whether Predecessor and/or Successor, as appropriate.

FORWARD-LOOKING STATEMENTS

Certain statements made in this report, and other written or oral statements made by us or on our behalf, may constitute “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management’s expectations, beliefs, plans, estimates or projections related to the future, are forward-looking statements within the meaning of these laws. 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.

All forward-looking statements, as well as our business and strategic initiatives, are subject to certain risks and uncertainties that could cause actual results to differ materially from expected results. Management believes that these forward-looking statements are reasonable. However, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Additional information concerning the risks and uncertainties and other factors that you may wish to consider are described in “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 27, 2007, and elsewhere in our filings with the Securities and Exchange Commission. A number of factors, many of which are described in “Item 1A: Risk Factors” in the Form 10-K could cause our actual results to differ materially from the expected results described in our forward-looking statements.

COMBINED FINANCIAL RESULTS OF THE PREDECESSOR AND SUCCESSOR

Management’s discussion and analysis of the results of operations compares the 16 and 28 weeks ended January 9, 2008, to the 16 and 28 weeks ended January 10, 2007. Management’s discussion of liquidity compares the 28 weeks ended January 9, 2008, to the 28 weeks ended January 10, 2007.

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Presentation of the combined financial information of the Predecessor and Successor is not in accordance with U.S. generally accepted accounting principles. However, we believe that for purposes of discussion and analysis in this Form 10-Q, the combined financial results provide management and investors a better perspective of the Company’s on-going financial and operational performance and trends. In addition, the application of fresh-start reporting will have a significant non-cash impact on our future results of operations, but will have no impact on the underlying cash flows of the Company.

PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

General. The information below should be read in conjunction with Note 1 to the Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended June 27, 2007.

Emergence from Bankruptcy Protection. On February 21, 2005 (the “Petition Date”), Winn-Dixie Stores, Inc. and 23 then-existing direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (“Chapter 11” or the “Bankruptcy Code”) in the United States Bankruptcy Court (the “Court”). Two of the then-existing wholly-owned subsidiaries of Winn-Dixie Stores, Inc. (collectively with the Debtors, the “Company” or “Winn-Dixie”) did not file petitions under Chapter 11. On November 9, 2006, the Court entered its order confirming the Debtors’ modified plan of reorganization (the “Plan” or the “Plan of Reorganization”). Although certain objecting parties appealed the confirmation order, they did not seek a stay of the order. In the absence of a stay, the Debtors were free to implement the Plan notwithstanding the pendency of the appeals. The Plan became effective and the Debtors emerged from bankruptcy protection on November 21, 2006 (the “Effective Date”). Certain of the appeals remain pending while others have been dismissed by the Court as moot.

Upon emergence from bankruptcy protection, we adopted the “fresh-start reporting” provisions of the American Institute of Certified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”), effective November 15, 2006, which was the end of its immediately preceding accounting period. Under fresh-start reporting, a new reporting entity was deemed to have been created, and all assets and liabilities were revalued to their fair values.

Claims Resolution and Plan Distributions.As of January 9, 2008, 46.1 million shares had been distributed by the disbursing agent to holders of allowed unsecured claims that totaled $910.3 million in allowed amounts; 0.2 million shares were held by the disbursing agent for distribution to holders of allowed unsecured claims that totaled $4.9 million in allowed amounts, pending such holders satisfaction of tax requirements; and 7.7 million shares were held in reserve by the disbursing agent to satisfy remaining disputed unsecured claims. The claims resolution process remains on-going with respect to certain unsecured, secured, administrative and priority claims. The claims resolution process will continue until all claims are resolved.

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RESULTS OF OPERATIONS

Continuing Operations

Net sales.Net sales for the 16 weeks ended January 9, 2008, were $2.2 billion, an increase of $15.9 million, or 0.7%, compared to the same period in the prior fiscal year. Net sales for the 28 weeks ended January 9, 2008, were $3.9 billion, an increase of $27.0 million, or 0.7%, compared to the same period in the prior fiscal year. Net sales primarily related to grocery and supermarket items. In aggregate, sales of the pharmacy, fuel, and floral departments comprised approximately 10% of retail sales for all periods reported in the accompanying Condensed Consolidated Statements of Operations.

Identical store sales increased 0.5% and 0.4% for the 16 and 28 weeks ended January 9, 2008, respectively, compared to the same periods in the prior fiscal year. We define identical store sales as sales from continuing operations stores, including stores that we remodeled or enlarged during the period and excluding stores that opened or closed during the period.

The increase in our identical store sales for the 16 and 28 weeks ended January 9, 2008, was the result of an increase in basket size (average sales per customer visit on identical store sales) of 2.7% and 2.5% for the 16 and 28 weeks ended January 9, 2008, respectively, offset by a decrease in transaction count (number of customer visits on identical store sales) of 2.1% for the 16 and 28 weeks ended January 9, 2008.

We believe the increase in basket size is due to various factors including, but not limited to, overall food price inflation offset partially by the impact of changes in the mix of pharmaceutical products sold from name brand to generics.

Competition remains a key factor that negatively affects our identical store sales, particularly on the opening of a new competitor store. Based on our knowledge of competitor activity in our operating areas, we anticipate that competitor store openings will continue to affect our identical store sales. We consider competitive activity as we determine the schedule of stores to be remodeled.

Identical store sales increase for fiscal 2008 is expected to be slightly positive as compared to fiscal 2007.

Gross Profit on Sales. Gross profit on sales increased $25.3 million and $47.2 million for the 16 and 28 weeks ended January 9, 2008, respectively, compared to the same periods in the prior fiscal year. As a percentage of net sales, gross margin was 26.7% and 25.7% for the 16 weeks ended January 9, 2008, and January 10, 2007, respectively, and 27.0% and 26.0% for the 28 weeks ended January 9, 2008, and January 10, 2007, respectively.

For the 16 weeks ended January 9, 2008, the gross margin improved by approximately 100 basis points, as compared to the same period in the prior fiscal year. The improvement was attributable primarily to more effective management of promotional spending (80 basis points), operational improvements that reduced inventory shrink (20 basis points), and other items (25 basis points).

21

These improvements of 125 basis points were partially offset by an increase in the LIFO charge (25 basis points) due primarily to an increase in food inflation in the current year and inventory liquidations in the prior year. The 25 basis point improvement in other items includes favorable claims development on self-insurance, primarily workers’ compensation related to warehouse and delivery, of $2.8 million, or 12 basis points.

For the 28 weeks ended January 9, 2008, the gross margin improved by approximately 100 basis points as compared to the same period in the prior fiscal year. The improvement was attributable primarily to more effective management of promotional spending (80 basis points), operational improvements that reduced inventory shrink (15 basis points), and other items (20 basis points). These improvements of 115 basis points were partially offset by an increase in the LIFO charge (15 basis points) due primarily to an increase in food inflation in the current year and inventory liquidations in the prior year. The 20 basis point improvement in other items includes favorable claims development on self-insurance, primarily workers’ compensation related to warehouse and delivery, of $2.8 million, or 7 basis points.

As a percentage of sales, gross margin for the second half of fiscal 2008 is expected to be approximately equal to gross margin for the second half of fiscal 2007.

Other Operating and Administrative Expenses.Other operating and administrative expenses decreased $30.1 million and $38.8 million for the 16 and 28 weeks ended January 9, 2008, respectively, as compared to the same periods in the prior fiscal year. As a percentage of net sales, other operating and administrative expenses were 26.3% and 27.9% for the 16 weeks ended January 9, 2008, and January 10, 2007, respectively, and 26.9% and 28.1% for the 28 weeks ended January 9, 2008, and January 10, 2007, respectively.

For the 16 weeks ended January 9, 2008, operating and administrative expenses decreased as compared to the same period in the prior fiscal year due to emergence related expenses of $18.2 million that occurred in the prior fiscal year only, favorable claims development of $15.5 million recognized in the second quarter of fiscal 2008 as a result of our actuarial study performed and primarily related to self-insured workers’ compensation claims and a net increase in other operating and administrative expenses of $3.6 million primarily related to increased advertising expenses.

For the 28 weeks ended January 9, 2008, operating and administrative expenses decreased as compared to the same period in the prior fiscal year due to items that occurred in the prior year only that totaled $15.6 million, favorable claims development of $15.5 million recognized in the second quarter of fiscal 2008 as a result of our actuarial study performed and primarily related to self-insured workers’ compensation claims and a net decrease in other operating and administrative expenses totaling $7.7 million. This net decrease was primarily related to a reduction of $5.8 million of depreciation and amortization caused primarily by lower aggregate asset values resulting from fresh-start reporting revaluations, a reduction of $4.6 million resulting primarily from lower insurance premiums, offset by $2.8 million related to increased advertising expenses. The items that occurred in the prior year only were emergence related expenses of $21.5 million and $5.9 million of income in the prior year related to favorable vacant store lease buyouts.

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Impairment Charges. Impairment charges of $0.2 million were recorded during the 16 and 28 weeks ended January 9, 2008. Impairment charges of $18.7 million and $20.8 million related to continuing operations store facilities were recorded during the 8 and 20 weeks ended November 15, 2006 and $0.1 million related to discontinued operations were recorded during the 20 weeks ended November 15, 2006, respectively. No impairment charges were recorded in the 8 weeks ended January 10, 2007. See Part I, Item 1, Note 4 for further discussion of impairment charges.

Reorganization Items. The Successor recorded no reorganization items during the 16 and 28 weeks ended January 9, 2008, and the 8 weeks ended January 10, 2007. The Predecessor recorded reorganization items, net gain, of $338.4 million and $334.4 million for the 8 and 20 weeks ended November 15, 2006, respectively. See Part I, Item 1, Note 1 for further discussion of reorganization items.

Interest (Income) Expense, net. Interest (income) expense, net, is primarily interest on long-term and short-term debt and capital leases, offset by interest income. Net interest income was $1.1 million and $2.5 million for the 16 and 28 weeks ended January 9, 2008, respectively, compared to net interest expense of $2.5 million and $5.0 million for the 16 and 28 weeks ended January 10, 2007, respectively. In accordance with SOP 90-7, prior to November 15, 2006, interest income was classified within reorganization items rather than in interest (income) expense, net.

The increase in interest income for the 16 weeks ended January 9, 2008, was primarily due to an increase of $1.1 million of interest income on cash and marketable securities balances primarily related to a change in the classification of interest income subsequent to November 15, 2006 (as discussed above), and a $1.2 million decrease in interest expense on our credit facilities. Interest capitalized increased by $0.7 million for the 16 weeks ended January 9, 2008, as compared to the same period of the previous year.

The increase in interest income for the 28 weeks ended January 9, 2008, was primarily due to an increase of $3.2 million of interest income on cash and marketable securities balances primarily related to a change in the classification of interest income subsequent to November 15, 2006 (as discussed above), and a $3.1 million decrease in interest expense on our credit facilities. Interest capitalized increased by $1.3 million for the 28 weeks ended January 9, 2008, as compared to the same period of the previous year.

Income Taxes. Income tax expense for the 16 and 28 weeks ended January 9, 2008, was $4.3 million and $4.2 million, respectively, as compared to an income tax benefit of $13.4 million and $14.8 million for the 16 and 28 weeks ended January 10, 2007. The effective tax rate on continuing operations was an expense of 51.2% and 56.1% for the 16 and 28 weeks ended January 9, 2008, respectively, which differs from statutory rates primarily due to the impact of our prior year tax return to provision adjustment recorded in the second quarter of fiscal 2008. The effective tax rate on continuing operations was a benefit of 5.0% and 6.5% for the 16 and 28 weeks ended January 10, 2007, respectively, which differs from statutory rates due to the maintenance of a full valuation allowance and the benefit related to certain refundable credits and our ability to carry back certain NOLs.

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We maintain a full valuation allowance against substantially all of our net deferred tax assets. The valuation allowance will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets will be realized.

For the 16 and 28 weeks ended January 9, 2008, we recognized tax attributes that existed as of November 15, 2006, totaling $3.1 million and $4.2 million, respectively, and thereby reduced intangible assets by these amounts.

As of January 9, 2008, we had NOL carryforwards for federal income tax purposes of approximately $500 million that will begin to expire in fiscal 2025. As we settle the remaining bankruptcy claims, our NOL carryforwards will increase by an amount equal to the market value of shares distributed as of the date of distribution.

As of January 9, 2008, we had $18.8 million of unrecognized tax benefits which, if recognized, none of this amount would change the effective tax rate. We do not anticipate that we will record any significant change in our unrecognized tax benefit during fiscal 2008.

We executed a settlement with the Internal Revenue Service (“IRS”) in connection with the IRS’ examination of our federal income tax returns for fiscal years 2003 and 2004. The settlement is pending final approvals within the IRS. No payment of additional tax will be required as a result of the settlement.

Discontinued Operations and Restructuring

In evaluating whether elements of our restructuring plans qualify for discontinued operations classification, we consider each store to be a component of a business, as this is the lowest level at which the operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes. If the cash flows of a store to be exited will not be significant to our ongoing operations and cash inflows of our nearby stores are not expected to increase significantly because of the exit, the results of operations of the store are reported in discontinued operations. Other components, including distribution centers and manufacturing operations, are classified as discontinued operations only if we determine that the related continuing cash flows will not be significant to our ongoing operations. Costs incurred to dispose of a location are included in gain (loss) on disposal of discontinued operations only if the location qualifies for discontinued operations classification; otherwise, such costs are reported as restructuring charges.

Fiscal 2007 Sales and Closures.In early fiscal 2007, we closed seven U.S. stores and sold our 78% ownership interest in Bahamas Supermarkets Limited, which owned all of our operations in The Bahamas. The sale of the Bahamian operations resulted in proceeds of $54.0 million and a gain on sale of $31.5 million, which was included in gain on disposal of discontinued operations. Results of operations for six of the seven U.S. stores and the twelve stores and distribution center in The Bahamas were classified as discontinued operations.

Financial Information.Net sales from discontinued operations were $0.0 million and $24.2 million for the 8 and 20 weeks ended November 15, 2006, respectively. Net earnings from discontinued operations were $4.0 million and $20.3 million for the 8 and 20 weeks ended November 15, 2006,

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which included a gain on disposal of discontinued operations of $1.1 million and $17.9 million, respectively. Restructuring (gains) charges, net were $(0.1) million and $0.8 million for the 8 and 20 weeks ended November 15, 2006, respectively.

The following summarizes the costs included in restructuring and gain on disposal of discontinued operations (in thousands):

	Predecessor
	8 weeks ended Nov. 15, 2006			20 weeks ended Nov. 15, 2006
Restructuring:
Gain on sale/retirement, net	$	(379	)	(465	)
Lease termination (gain) costs		(313	)	154
Employee termination costs		37		228
Other location closing costs		542		869
Restructuring (gain) charge, net	$	(113	)	786
Gain on disposal of discontinued operations:
Loss (gain) on sale/retirement, net	$	6		(30,296	)
Lease termination (gain) costs		(1,059	)	10,691
Employee termination gains		(112	)	(11	)
Other location closing costs		72		1,694
Net gain on disposal	$	(1,093	)	(17,922	)

LIQUIDITY AND CAPITAL RESOURCES

Summary

As of January 9, 2008, we had $588.4 million of liquidity, comprised of $446.6 million of borrowing availability under the Credit Agreement and $141.8 million of cash and cash equivalents and marketable securities. The marketable securities, as further described in Note 2, were sold subsequent to January 9, 2008. We anticipate our capital expenditures for the remainder of fiscal 2008 will be funded substantially by cash flows from operations and working capital improvements. We believe that we have sufficient liquidity through borrowing availability, available cash and cash flows from operating activities to fund our cash requirements for existing operations and capital expenditures through the end of fiscal 2008. Based on borrowing availability and anticipated improvement in operating results, we believe that we will have sufficient resources beyond fiscal 2008 to operate our business and fund our capital-spending program.

Credit Agreement

On the Effective Date, Winn-Dixie Stores, Inc., and certain of our subsidiaries entered into an Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement, to be used for working capital and general corporate purposes, provides for a $725.0 million senior secured revolving credit facility, of which a maximum of $300.0 million may be utilized for letters of credit. The Credit Agreement matures November 21, 2011, at which time all amounts then

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outstanding under the agreement will be due and payable. At our request, under certain conditions the facility may be increased by up to $100.0 million. Obligations under the Credit Agreement are guaranteed by substantially all of our subsidiaries and are secured by senior liens on substantially all of our assets. Debt issuance costs of $9.2 million are being amortized over the term of the Credit Agreement. This Form 10-Q contains only a general description of the terms of the Credit Agreement and is qualified in its entirety by reference to the full Credit Agreement (filed as Exhibit 10.1 to the Form 8-K filed on November 28, 2006). The following capitalized terms have specific meanings as defined in the Credit Agreement: Agent, Borrowing Base, Capital Expenditures, EBITDA, Excess Availability, and Reserves.

We had no borrowings on the Credit Agreement, other than fees charged by the lender, during the 28 weeks ended January 9, 2008, and as of January 9, 2008, no amount was outstanding.

Borrowing availability was $446.6 million as of January 9, 2008, as summarized below (in thousands):

	January 9, 2008
Lesser of Borrowing Base or Credit Agreement capacity1	$	496,570
Outstanding borrowings		—
Excess Availability		496,570
Limitation on Excess Availability		(50,000	)
Borrowing availability	$	446,570

¹ Net of Reserves of $210.6 million, including $191.2 million related to outstanding letters of credit.

As shown in the table above, availability under the Credit Agreement is determined net of Reserves, which are subject to revision by the Agent to reflect events or circumstances that adversely affect the value of the Borrowing Base assets. Accordingly, a determination by the Agent to increase Reserves would reduce availability.

Letters of credit are considered reserves against the borrowing availability. As of January 9, 2008, letters of credit totaling $191.2 million were issued under the Credit Agreement. Substantially all outstanding letters of credit related to workers’ compensation programs.

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Historical Cash Flow Data

Cash flows from discontinued operations are reported with cash flows from continuing operations within operating, investing and financing activities. The table below sets forth certain Condensed Consolidated Statements of Cash Flows data for the 28 weeks ended January 9, 2008, and January 10, 2007 (in thousands):

	28 weeks ended January 9, 2008			28 weeks ended January 10, 2007
Cash provided by (used in):
Operating activities	$	52,221		(108,969	)
Investing activities		(152,848	)	89,707
Financing activities		449		(35,661	)

Operating Activities.For the 28 weeks ended January 9, 2008, net cash provided by operating activities was $52.2 million, primarily due to operating cash flows and changes in working capital items. For the 28 weeks ended January 10, 2007, net cash used in operating activities was $109.0 million due to bankruptcy-related payments made subsequent to emergence, a decrease in accounts payable and operating losses, offset by proceeds from insurance claims of $32.0 million.

Investing Activities.For the 28 weeks ended January 9, 2008, net cash used in investing activities was $152.8 million, primarily due to expenditures for our store-remodeling program, discussed below. In addition, we had a net increase in marketable securities of $36.6 million. For the 28 weeks ended January 10, 2007, net cash provided by investing activities was $89.7 million, primarily due to the receipt of approximately $54.0 million in proceeds from the sale of Bahamas Supermarkets, Limited.

Financing Activities. For the 28 weeks ended January 9, 2008, net cash provided by financing activities related primarily to increases in book overdrafts and for the 28 weeks ended January 10, 2007, net cash used in financing activities related primarily to payments on credit facilities.

Capital Expenditures.We expect capital expenditures in fiscal 2008 to total approximately $230.0 million, a reduction of our previous estimate of $250.0 million, due to timing of expenditures. Of this total, approximately $140.0 million is expected to be spent for our store-remodeling program. We initiated this program during fiscal 2007, and through January 9, 2008, had completed 47 remodels. In fiscal 2008 and future fiscal years, we plan to remodel approximately 75 stores annually.

In addition to the store-remodeling program, we anticipate that during fiscal 2008 we will spend approximately $90.0 million on other capital expenditures, including maintenance and other store-related projects, information technology projects, and back-up generators.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities. We believe that the policies below are our critical accounting policies, as they are most important to the portrayal of our financial condition and results, and require management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of inherently uncertain matters. See Part I, Item 1, Note 2 for further discussion of our accounting policies.

Fresh-start reporting. We emerged from Chapter 11 protection on November 21, 2006. We adopted fresh-start reporting in accordance with SOP 90-7 as of the close of business on November 15, 2006.

We applied various valuation methods to calculate the reorganization value of the Successor. These methods included (i) a guideline company approach, in which valuation multiples observed from industry participants were considered and comparisons were made between our expected performance relative to other industry participants to determine appropriate multiples to apply to our financial metrics; (ii) review and analysis of several recent transactions of companies determined to be similar to us; and (iii) a calculation of the present value of the future cash flows based on our projections as included in the disclosure statement related to the Plan. The cash flows, taken from the Plan, were projected over five years, using discount rates of 15% to 25% and an assumed tax rate of 35%. In the disclosure statement related to the Plan, the reorganization value of Winn-Dixie was determined to be approximately $625 million to $890 million, with an approximate midpoint of $759 million. The reorganization value was determined using numerous projections and assumptions that are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, there can be no assurance that the estimates, assumptions and amounts reflected in the valuation will be realized.

In accordance with SFAS No. 141, “Business Combinations” (“SFAS 141”), we allocated the reorganization value to our assets and liabilities. Management considered a number of factors, including valuations or appraisals, in determining the fair values of assets. Liabilities were revalued at present values using appropriate current interest rates. Deferred taxes were determined in accordance with U.S. generally accepted accounting principles. In addition to revaluing existing assets and liabilities, we recorded certain previously unrecognized assets and liabilities, including favorable and unfavorable leases and other intangibles. The sum of the amounts assigned to assets and liabilities exceeded the reorganization value. In accordance with SFAS 141, we allocated this excess as a reduction of asset values (to property, plant and equipment and intangible assets) on a pro-rata basis.

Long-lived assets. We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When such events occur, we compare the carrying amount of the asset to our best estimate of the net undiscounted cash flows expected to result from the use and eventual disposition of the asset. If this comparison indicates that there is impairment, we record an impairment loss for the excess of net book value over the fair value of the impaired asset. We estimate the fair value based on the best information available, including prices for similar assets and the results of other valuation techniques.

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Factors such as changes in economic conditions and changes in operating performance significantly affect our judgments and estimates related to the expected useful lives and cash flows of long-lived assets. Adverse changes in these factors could cause us to recognize a material impairment charge.

Intangible assets.We report intangible assets in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets,” which requires that an intangible asset with indefinite useful economic life not be amortized, but instead be separately tested for impairment using a fair-value approach. The evaluation of possible impairment of intangible assets is affected by factors such as changes in economic conditions and changes in operating performance. These factors could cause us to recognize a material impairment charge as we assess the ongoing expected cash flows and carrying amounts of intangible assets.

Self-insurance.We self-insure for certain insurable risks, primarily workers’ compensation, business interruptions, general liability, automobile liability and property losses, as well as employee medical benefits. We obtain insurance coverage for catastrophic property and casualty exposures, as well as risks that require insurance by law or contract. We estimate the liabilities related to self-insured programs with the assistance of an independent actuary. The accounting estimates for self-insurance liabilities include both known and incurred but not reported insurance claims and reflect certain actuarial assumptions and management judgments regarding claim reporting and settlement patterns, judicial decisions, legislation, economic conditions and the effect of our Chapter 11 filings. Unanticipated changes in these factors may materially affect our Consolidated Financial Statements.

Income taxes.We recognize deferred tax assets and liabilities for estimated future tax consequences that are attributable to differences between the financial statement bases of assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using the enacted tax rates for the year in which we expect those temporary differences to be recovered or settled. We adjust the valuation allowance against our net deferred tax assets based on our assessment of the likelihood of realization of such assets in the future; such adjustments may be material. Although we believe that the estimates and judgments used to prepare our various tax returns are reasonable and appropriate, such returns are subject to audit by the respective tax authorities.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of January 9, 2008, we had no derivative instruments that increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks. We do not use derivatives for speculative purposes. Our current exposure to market risks results primarily from changes in interest rates, principally with respect to our Credit Agreement, which is a variable rate financing agreement. As of January 9, 2008, we had no amount outstanding under the Credit Agreement. We currently do not use swaps or other interest rate protection agreements to hedge this risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of January 9, 2008, the Chief Executive Officer and the Chief Financial Officer, together with a disclosure review committee appointed by the Chief Executive Officer, evaluated the Company’s disclosure controls and procedures. Based on the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of January 9, 2008, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended January 9, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II – Other Information

Item 1. Legal Proceedings

See Part I, Item 1, Note 9 for a discussion of legal proceedings.

Item 1A. Risk Factors

The risks described in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended June 27, 2007, could materially and adversely affect our business, financial condition and results of operations. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 27, 2007. Additional information concerning those risks and uncertainties and other factors that you may wish to consider are contained elsewhere in our filings with the Securities and Exchange Commission.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

The 2007 Annual Meeting of Shareholders of the Company took place on November 7, 2007.

Three matters were submitted to a vote at the meeting:

1. Election of the nine current directors for terms expiring at the 2008 shareholders meeting.

2. Approval of an amendment to the equity incentive plan that would increase the number of shares that may be issued under the plan by 2,188,000 shares.

3. Ratification of the appointment of KPMG LLP as the independent registered public accounting firm for fiscal 2008.

With respect to the election of directors, the votes were as follows:

Board of Directors, for terms expiring in 2008	Shares For	Shares Against/Withheld
Evelyn V. Follit	41,767,129	101,713
Charles P. Garcia	41,768,862	99,980
Yvonne R. Jackson	40,119,484	1,749,358
Gregory P. Josefowicz	41,640,962	227,860
Peter L. Lynch	41,573,366	295,476
Jeffrey C. Girard	41,770,062	98,780
James P. Olson	41,769,862	98,980
Terry Peets	40,120,507	1,748,335
Richard E. Rivera	40,118,607	1,750,235

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With respect to the amendment to the equity incentive plan, the vote was: 30,774,860 shares for; 3,864,098 shares against/withheld; 3,947,972 shares abstained; 3,281,913 broker non-votes.

With respect to the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the fiscal year 2008, the vote was: 41,641,985 shares for; 34,578 shares against/withheld; 192,278 shares abstained; no broker non-votes.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

Exhibit Number	Description of Exhibit	Incorporated by Reference From
2.1	Order Confirming Joint Plan of Reorganization of Winn-Dixie Stores, Inc. and Affiliated Debtors entered November 9, 2006.	Previously filed as Exhibit 99.2 to Form 8-K on November 15, 2006, which Exhibit is herein incorporated by reference.
3.1	Amended and Restated Certificate of Incorporation of Winn-Dixie Stores, Inc.	Previously filed as Exhibit 3.1 to Form 8-A/A on November 21, 2006, which Exhibit is herein incorporated by reference.
3.2	Amended and Restated By-laws of Winn-Dixie Stores, Inc.	Previously filed as Exhibit 3.2 to Form 8-A/A on November 21, 2006, which Exhibit is herein incorporated by reference.
10.1	Winn-Dixie Stores, Inc. Amended and Restated Equity Incentive Plan.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WINN-DIXIE STORES, INC.
Date: February 19, 2008	/s/ BENNETT L. NUSSBAUM
	Bennett L. Nussbaum
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer and Duly Authorized Officer)
Date: February 19, 2008	/s/ D. MICHAEL BYRUM
	D. Michael Byrum
	Vice President, Corporate Controller and Chief Accounting Officer
	(Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit	Incorporated by Reference From
2.1	Order Confirming Joint Plan of Reorganization of Winn-Dixie Stores, Inc. and Affiliated Debtors entered November 9, 2006.	Previously filed as Exhibit 99.2 to Form 8-K on November 15, 2006, which Exhibit is herein incorporated by reference.
3.1	Amended and Restated Certificate of Incorporation of Winn-Dixie Stores, Inc.	Previously filed as Exhibit 3.1 to Form 8-A/A on November 21, 2006, which Exhibit is herein incorporated by reference.
3.2	Amended and Restated By-laws of Winn-Dixie Stores, Inc.	Previously filed as Exhibit 3.2 to Form 8-A/A on November 21, 2006, which Exhibit is herein incorporated by reference.
10.1	Winn-Dixie Stores, Inc. Amended and Restated Equity Incentive Plan.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.