 | Press Release |
WINN-DIXIE STORES, INC. | 5050 EDGEWOOD COURT | JACKSONVILLE, FLA. 32254 | (904) 783-5000
Winn-Dixie Stores Reports Second Quarter Fiscal 2010 Results,
Exceeds First Call Consensus Estimates
Highlights
| • | Adjusted EBITDA of $30.5 million, above First Call consensus estimates of $18.6 million |
| • | Gross margin of 28.2%, an increase of approximately 10 basis points from year-ago period |
| • | Liquidity remains strong; no borrowings under credit facility expected in fiscal 2010 |
JACKSONVILLE, Fla. (February 16, 2010) — Winn-Dixie Stores, Inc. (NASDAQ: WINN), today reported its financial results for the second quarter of fiscal 2010, a 16-week period that ended on January 6, 2010.
Net sales in the second quarter were $2.2 billion, a decrease of $74.5 million, or 3.3%, compared to the same period in the prior fiscal year. Net sales this quarter were impacted negatively by approximately $22 million due to non-recurring storm-related sales and six store closures that occurred in fiscal 2009.
Identical store sales, which exclude stores that opened or closed during the quarter, decreased 2.9% for the second quarter compared to the same period in the prior fiscal year. The Company’s 52 offensive remodel stores which are still within their first year of operation had a 4.9% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase. Identical store sales in both remodeled and non-remodeled stores were negatively impacted this quarter by a challenging economic environment, deflationary pressures, non-recurring storm-related sales and a mix shift from branded pharmaceutical products to generics.
Net income in the second quarter of fiscal 2010 was $2.1 million, or $0.04 per diluted share, compared to net income of $16.1 million, or $0.30 per diluted share, in the second quarter of fiscal 2009. The decrease in net income was due primarily to a non-recurring gain on an insurance settlement of $22.4 million ($13.8 million net of tax, or $0.25 per diluted share) in fiscal 2009.
Adjusted EBITDA was $30.5 million in the second quarter of fiscal 2010, compared to Adjusted EBITDA of $35.5 million in the same period last year. Adjusted EBITDA in the second quarter of fiscal 2009 included an estimated benefit of $1.7 million due to storm-related sales net of storm-related inventory losses and other costs.
Winn-Dixie Chairman, CEO, and President, Peter Lynch, said, “The challenging economic environment and deflationary pressures continue to impact sales for the entire supermarket industry. Despite negative identical store sales, we are pleased with our overall operating execution during the quarter. In particular, we maintained our gross margin rate through effective management of our promotional activity and reduced our operating expenses.”
Mr. Lynch continued, “It is clear that consumers remain very cautious with their spending, which has influenced our sales across the chain, primarily with respect to overall basket size. However, we increased transactions by 4.1% in our first-year offensive remodels compared to last year, and our customers are
continuing to respond positively to the changes we are making. Given the prevailing economic conditions, we will continue to be prudent with our capital spending and will selectively remodel a total of 60 stores in fiscal 2010 in locations where we believe we can generate the highest return on our investment.”
Details of the Second Quarter Results
Gross profit on sales in the second quarter was $613.5 million, a decrease of $19.0 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 28.2% in the second quarter, compared to 28.1% in the second quarter of fiscal 2009. The improvement in gross margin as a percentage of net sales was attributable primarily to a lower LIFO charge, offset by an increase in inventory shrink and higher warehouse expenses.
Other operating and administrative expenses for the second quarter were $610.9 million, a decrease of $9.3 million compared to the same period in the prior fiscal year. Excluding the Company’s adjustments to prior year self-insurance reserves, depreciation and amortization, and share-based compensation, other operating and administrative expenses for the second quarter were $585.4 million, a decrease of $14.1 million compared to the same period in the prior fiscal year. The decrease in other operating and administrative expenses was due primarily to lower payroll-related expenses, occupancy costs and utilities.
28-Week Results Ended January 6, 2010
Net sales for the 28 weeks were $3.8 billion, a decrease of $108.8 million, compared to the same period in the prior fiscal year. Net sales for the 28 weeks were impacted negatively by approximately $50 million due to non-recurring storm-related sales and six store closures that occurred in fiscal 2009.
Identical store sales, which exclude stores that opened or closed during the 28 weeks, decreased 2.3% compared to the same period in the prior fiscal year. The Company’s 52 offensive remodeled stores that are still within their first year of operation, had a 5.8% weighted average sales increase compared to the same period in the prior fiscal year, excluding the grand re-opening phase.
Gross profit on sales was $1.1 billion, a decrease of $20.5 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 28.3%, compared to 28.0% in the same period in the prior fiscal year. The improvement in gross margin as a percentage of net sales was attributable primarily to a lower LIFO charge and lower transportation costs, offset by increases in inventory shrink.
Other operating and administrative expenses were $1.1 billion, a decrease of $8.3 million compared to the same period in the prior fiscal year. Excluding the Company’s adjustments to prior year self-insurance reserves, depreciation and amortization, and share-based compensation, other operating and administrative expenses for the 28 weeks were $1.0 billion, a decrease of $13.1 million compared to the same period in the prior fiscal year. The decrease in other operating and administrative expenses was due primarily to non-recurring storm-related expenses, lower utilities, occupancy costs and payroll-related expenses.
The Company reported a net loss of $6.0 million, or $0.11 per diluted share, compared to net income of $13.8 million, or $0.25 per diluted share, in the same period in the prior fiscal year. The decrease in net income was due primarily to a prior year gain on an insurance settlement of $22.4 million ($13.8 million net of tax, or $0.25 per diluted share) in fiscal 2009.
Adjusted EBITDA for the 28 weeks was $53.3 million compared to $62.5 million in Adjusted EBITDA in the prior year period. Adjusted EBITDA for the 28 weeks of fiscal 2009 included a benefit of
approximately $4.4 million due to storm-related sales net of storm-related inventory losses and other costs.
Liquidity and Capital Resources
As of January 6, 2010, Winn-Dixie had approximately $662.8 million of liquidity, comprised of $508.5 million of borrowing availability under its credit agreement and $154.3 million of cash and cash equivalents. The Company noted that its liquidity is sufficient to continue funding its capital program, and it does not expect any borrowings under its credit facility for fiscal 2010.
The Company’s capital expenditures for fiscal 2010 are now expected to be approximately $200 million, a $20 million decrease from its prior expectation. The reductions are expected in remodel and other expenditures.
Fiscal 2010 Guidance
The Company re-affirmed its guidance range of $140 to $160 million in Adjusted EBITDA for fiscal 2010. The Company expects the challenging economic environment to continue to affect its business for the remainder of the fiscal year, and therefore expects to be at the low end of the guidance range.
Conference Call and Webcast Information
The Company will host a live conference call and simultaneous audio webcast on Wednesday, February 17, 2010, from 8:30 AM to 9:30 AM Eastern Time. To access the simultaneous webcast of the conference call (a replay of which will be available later in the day), please go to the Company’s Investor Relations section athttp://www.winn-dixie.com under “Investors”. Parties interested in participating in this call should dial-in ten minutes prior to the start time at 888-680-0878 or 617-213-4855 access code 90847611. A recording of the call will be available on the Investor Relations section of the Winn-Dixie website from February 17, 2010, through February 24, 2010; it can also be accessed by calling 888-286-8010 or 617-801-6888. The replay passcode is 64292109.
About Winn-Dixie
Winn-Dixie Stores, Inc., is one of the nation’s largest food retailers. Founded in 1925, the Company is headquartered in Jacksonville, FL. The Company currently operates 515 retail grocery locations, including more than 400 in-store pharmacies, in Florida, Alabama, Louisiana, Georgia, and Mississippi. For more information, please visitwww.winn-dixie.com.
The Securities and Exchange Commission (“SEC”) has adopted rules related to disclosure of certain financial measures not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Such rules require all public companies to provide certain disclosures in press releases and SEC filings related to non-GAAP financial measures. We use the non-GAAP measure “Adjusted EBITDA” to evaluate the Company’s operating performance and it is among the primary measures used by management for planning and forecasting future periods. Adjusted EBITDA is defined as income from continuing operations before interest, income taxes, and depreciation and amortization expense, or EBITDA, and further adjusted for certain non-cash charges, reorganization items, self-insurance reserves, and items related to the Company’s emergence from bankruptcy. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by the Company’s management and makes it easier to compare the Company’s results with other companies that have different financing and capital structures or tax rates. In addition, this measure is also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the results of the Company to other peers in its industry. Adjusted EBITDA is reconciled to Net Income on the attached schedules of this release.
Forward-Looking Statements
Certain statements made in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are based on our current plans and expectations and involve certain risks and uncertainties. Actual results may differ materially from the expected results described in the forward-looking statements. These forward-looking statements include and may be indicated by words or phrases such as “anticipate,” “estimate,” “plan,” “expect,” “project,” “continuing,” “ongoing,” “should,” “will,” “believe,” or “intend” and similar words and phrases. There are many factors that could cause the Company’s actual results to differ materially from the expected results contemplated or implied by the Company’s forward-looking statements.
The Company faces a number of risks and uncertainties with respect to its continuing business operations and its attempt to increase its sales and gross profit margin, including, but not limited to: the Company’s ability to improve the quality of its stores and products; the Company’s success in achieving increased customer count and sales in remodeled and other stores; the results of the Company’s efforts to revitalize the corporate brand; competitive factors, which could include new store openings, price reduction programs and marketing strategies from other food and/or drug retail chains, supercenters and non-traditional competitors; the ability of the Company to effectively manage gross margin rates; the ability of the Company to attract, train and retain key leadership; the Company’s ability to implement, maintain or upgrade information technology systems; the outcome of the Company’s programs to control or reduce operating and administrative expenses and to control inventory shrink; increases in utility rates, gasoline costs and food prices, which could impact consumer spending and buying habits and the cost of doing business; the availability and terms of capital resources and financing and its adequacy for the Company’s planned investment in store remodeling and other activities; the concentration of the Company’s locations in the southeastern United States, which increases its vulnerability to severe storm damage; general business and economic conditions in the southeastern United States, including consumer spending levels, population, employment and job re-growth in some of our markets, and the additional risks relating to limitations on insurance coverage following the catastrophic storms in recent years; the Company’s ability to successfully estimate self-insurance liabilities; changes in laws and other regulations affecting the Company’s business; events that give rise to actual or potential food contamination, drug contamination or food-borne illness; the Company’s ability to use net operating loss carryforwards under the federal tax laws; and the outcome of litigation or legal proceedings.
Please refer to discussions of these and other factors in the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2009, and other Company filings with the SEC. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly revise or update these forward-looking statements, whether as a result of new information, future events or otherwise.
# # #
Investor Contact: | Media Contact: | |
Eric Harris | Robin Miller | |
Director of Investor Relations | Director of Communications | |
(904) 783-5033 | (904) 370-7715 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Dollar amounts in thousands except per share data | 16 weeks ended | |||||||||||||
| January 6, 2010 | January 7, 2009 | |||||||||||||
| Amount | % | Amount | % | |||||||||||
Net sales | $ | 2,175,589 | 100.0 | $ | 2,250,046 | 100.0 | ||||||||
Cost of sales, including warehouse and delivery expenses | 1,562,082 | 71.8 | 1,617,551 | 71.9 | ||||||||||
Gross profit on sales | 613,507 | 28.2 | 632,495 | 28.1 | ||||||||||
Other operating and administrative expenses | 610,890 | 28.1 | 620,236 | 27.5 | ||||||||||
Gain on insurance settlement | — | — | (22,430 | ) | (1.0 | ) | ||||||||
Impairment charges | 1,071 | — | 1,666 | 0.1 | ||||||||||
Operating income | 1,546 | 0.1 | 33,023 | 1.5 | ||||||||||
Interest expense, net | 1,419 | 0.1 | 1,591 | 0.1 | ||||||||||
Income before income taxes | 127 | — | 31,432 | 1.4 | ||||||||||
Income tax (benefit) expense | (1,968 | ) | (0.1 | ) | 15,330 | 0.7 | ||||||||
Net income | $ | 2,095 | 0.1 | $ | 16,102 | 0.7 | ||||||||
Basic and diluted earnings per share | $ | 0.04 | 0.30 | |||||||||||
Diluted earnings per share | $ | 0.04 | 0.30 | |||||||||||
Weighted average common shares outstanding-basic | 54,905 | 54,309 | ||||||||||||
Weighted average common shares outstanding-diluted | 55,159 | 54,571 | ||||||||||||
Basic and diluted earnings per share | $ | 0.04 | 0.30 | |||||||||||
Weighted average common shares outstanding | ||||||||||||||
- basic | 54,905 | 54,309 | ||||||||||||
- diluted | 55,159 | 54,571 | ||||||||||||
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA): | ||||||||||||||
Net income | $ | 2,095 | 16,102 | |||||||||||
Adjustments to reconcile net income to EBITDA: | ||||||||||||||
Income tax (benefit) expense | (1,968 | ) | 15,330 | |||||||||||
Depreciation and amortization | 30,413 | 29,363 | ||||||||||||
Favorable and unfavorable lease amortization, net | 208 | 806 | ||||||||||||
Interest expense, net | 1,419 | 1,591 | ||||||||||||
EBITDA | 32,167 | 63,192 | ||||||||||||
Adjustments to reconcile EBITDA to Adjusted EBITDA | ||||||||||||||
Impairment charges | 1,071 | 1,666 | ||||||||||||
Share-based compensation | 6,167 | 4,068 | ||||||||||||
Post-emergence bankruptcy-related professional fees | 560 | 773 | ||||||||||||
VISA / MasterCard Settlement | (1,788 | ) | (2,563 | ) | ||||||||||
Gain on insurance settlement | — | (22,430 | ) | |||||||||||
Self-insurance reserve adjustment | (7,721 | ) | (9,185 | ) | ||||||||||
Adjusted EBITDA | $ | 30,456 | 35,521 | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Dollar amounts in thousands except per share data | 28 weeks ended | |||||||||||||
| January 6, 2010 | January 7, 2009 | |||||||||||||
| Amount | % | Amount | % | |||||||||||
Net sales | $ | 3,817,162 | 100.0 | $ | 3,925,981 | 100.0 | ||||||||
Cost of sales, including warehouse and delivery expenses | 2,738,414 | 71.7 | 2,826,728 | 72.0 | ||||||||||
Gross profit on sales | 1,078,748 | 28.3 | 1,099,253 | 28.0 | ||||||||||
Other operating and administrative expenses | 1,080,024 | 28.3 | 1,088,338 | 27.7 | ||||||||||
Gain on insurance settlement | — | — | (22,430 | ) | (0.5 | ) | ||||||||
Impairment charges | 4,594 | 0.1 | 1,666 | — | ||||||||||
Operating (loss) income | (5,870 | ) | (0.1 | ) | 31,679 | 0.8 | ||||||||
Interest expense, net | 2,743 | 0.1 | 2,593 | 0.1 | ||||||||||
(Loss) income before income taxes | (8,613 | ) | (0.2 | ) | 29,086 | 0.7 | ||||||||
Income tax (benefit) expense | (2,650 | ) | (0.1 | ) | 15,254 | 0.4 | ||||||||
Net (loss) income | $ | (5,963 | ) | (0.1 | ) | $ | 13,832 | 0.3 | ||||||
Basic and diluted (loss) earnings per share | $ | (0.11 | ) | 0.25 | ||||||||||
Diluted (loss) earnings per share | $ | (0.11 | ) | 0.25 | ||||||||||
Weighted average common shares outstanding-basic | 54,792 | 54,272 | ||||||||||||
Weighted average common shares outstanding-diluted | 54,792 | 54,507 | ||||||||||||
Basic and diluted (loss) earnings per share | $ | (0.11 | ) | 0.25 | ||||||||||
Weighted average common shares outstanding | ||||||||||||||
- basic | 54,792 | 54,272 | ||||||||||||
- diluted | 54,792 | 54,507 | ||||||||||||
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA): | ||||||||||||||
Net (loss) income | $ | (5,963 | ) | 13,832 | ||||||||||
Adjustments to reconcile net (loss) income to EBITDA: | ||||||||||||||
Income tax (benefit) expense | (2,650 | ) | 15,254 | |||||||||||
Depreciation and amortization | 53,266 | 53,392 | ||||||||||||
Favorable and unfavorable lease amortization, net | 230 | 1,271 | ||||||||||||
Interest expense, net | 2,743 | 2,593 | ||||||||||||
EBITDA | 47,626 | 86,342 | ||||||||||||
Adjustments to reconcile EBITDA to Adjusted EBITDA | ||||||||||||||
Impairment charges | 4,594 | 1,666 | ||||||||||||
Share-based compensation | 9,463 | 7,503 | ||||||||||||
Post-emergence bankruptcy-related professional fees | 1,098 | 1,168 | ||||||||||||
VISA / MasterCard Settlement | (1,788 | ) | (2,563 | ) | ||||||||||
Gain on insurance settlement | — | (22,430 | ) | |||||||||||
Self-insurance reserve adjustment | (7,721 | ) | (9,185 | ) | ||||||||||
Adjusted EBITDA | $ | 53,272 | 62,501 | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Dollar amounts in thousands except par value | |||||
| Jan. 6, 2010 | June 24, 2009 | ||||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 154,274 | 182,823 | ||
Trade and other receivables, less allowance for doubtful receivables of $3,787 ($3,946 at June 24, 2009) | 78,024 | 70,115 | |||
Income tax receivable | 5,442 | 3,351 | |||
Merchandise inventories, less LIFO reserve of $42,042 ($39,252 at June 24, 2009) | 653,503 | 665,481 | |||
Prepaid expenses and other current assets | 32,124 | 32,571 | |||
Total current assets | 923,367 | 954,341 | |||
Property, plant and equipment, net | 623,553 | 591,712 | |||
Intangible assets, net | 218,009 | 225,732 | |||
Deferred tax assets, non-current | 38,109 | 37,987 | |||
Other assets, net | 4,307 | 5,277 | |||
Total assets | $ | 1,807,345 | 1,815,049 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
Current liabilities: | |||||
Current obligations under capital leases | $ | 10,873 | 10,888 | ||
Accounts payable | 348,363 | 333,471 | |||
Reserve for self-insurance liabilities | 75,796 | 71,744 | |||
Accrued wages and salaries | 67,577 | 80,796 | |||
Accrued rent | 27,775 | 35,274 | |||
Deferred tax liabilities | 45,926 | 45,792 | |||
Accrued expenses | 84,073 | 81,240 | |||
Total current liabilities | 660,383 | 659,205 | |||
Reserve for self-insurance liabilities | 112,197 | 117,396 | |||
Long-term borrowings under credit facilities | 356 | — | |||
Unfavorable leases | 104,530 | 110,936 | |||
Obligations under capital leases | 23,787 | 24,378 | |||
Other liabilities | 23,639 | 24,036 | |||
Total liabilities | 924,892 | 935,951 | |||
Shareholders’ equity: | |||||
Common stock, $0.001 par value. Authorized 400,000,000 shares; 55,033,137 shares issued; 54,934,610 outstanding at Jan. 6, 2010 and 54,582,067 shares issued; 54,483,540 outstanding at June 24, 2009. | 55 | 54 | |||
Additional paid-in-capital | 801,108 | 791,567 | |||
Retained earnings | 75,103 | 81,066 | |||
Accumulated other comprehensive income | 6,187 | 6,411 | |||
Total shareholders’ equity | 882,453 | 879,098 | |||
Total liabilities and shareholders’ equity | $ | 1,807,345 | 1,815,049 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Amounts in thousands | 28 weeks ended | ||||||
| Jan. 6, 2010 | Jan. 7, 2009 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (5,963 | ) | 13,832 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Loss (gain) on sales of assets, net | 68 | (20 | ) | ||||
Impairment charges | 4,594 | 1,666 | |||||
Gain on insurance settlement | — | (22,430 | ) | ||||
Depreciation and amortization | 53,266 | 53,392 | |||||
Deferred income taxes | 12 | 15,254 | |||||
Share-based compensation | 9,463 | 7,503 | |||||
Change in operating assets and liabilities: | |||||||
Favorable and unfavorable leases, net | 230 | 1,271 | |||||
Trade, insurance and other receivables | (7,927 | ) | 13,651 | ||||
Merchandise inventories | 11,978 | (12,436 | ) | ||||
Prepaid expenses and other current assets | 447 | 8,454 | |||||
Accounts payable | 2,150 | (29,473 | ) | ||||
Income taxes payable/receivable | (2,811 | ) | 451 | ||||
Reserve for self-insurance liabilities | (1,147 | ) | (395 | ) | |||
Accrued expenses and other | (17,411 | ) | (14,256 | ) | |||
Net cash provided by operating activities | 46,949 | 36,464 | |||||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (78,860 | ) | (107,405 | ) | |||
(Increase) decrease in investments and other assets, net (4,173) | 6,017 | ||||||
Sales of assets | 322 | 433 | |||||
Proceeds from insurance | — | 17,601 | |||||
Net cash used in investing activities | (82,711 | ) | (83,354 | ) | |||
Cash flows from financing activities: | |||||||
Gross borrowings on credit facilities | 5,794 | 7,740 | |||||
Gross payments on credit facilities | (5,438 | ) | (7,798 | ) | |||
Increase (decrease) in book overdrafts | 12,742 | (4,710 | ) | ||||
Principal payments on capital leases | (5,964 | ) | (4,561 | ) | |||
Proceeds from sales under Employee Stock Purchase Plan | 79 | — | |||||
Cash received from exercised share options | — | — | |||||
Net cash provided by (used in) financing activities | 7,213 | (9,329 | ) | ||||
Decrease in cash and cash equivalents | (28,549 | ) | (56,219 | ) | |||
Cash and cash equivalents classified as assets held for sale | — | — | |||||
Cash and cash equivalents at beginning of period | 182,823 | 201,275 | |||||
Cash and cash equivalents at end of period | $ | 154,274 | 145,056 | ||||