15Feb2011
Winn-Dixie Sales Flat, Profits Down
Winn-Dixie Stores, Jacksonville, Fla., reported $2.1 billion in net sales for the second quarter of fiscal 2011, a 16-week period that ended on January 12.
Net sales were essentially flat compared to the same period in the prior fiscal year. Identical store sales, which exclude stores that opened or closed during the quarter, decreased 0.3% for the second quarter compared to the same period in the prior fiscal year. Identical store sales were negatively impacted this quarter by competitive activity and the continued mix shift from branded pharmaceutical to generic products, which were partially offset by inflationary price increases that were passed through in selected categories and an increase in sales in remodeled stores.
The Company’s identical store sales trend improved by 250 basis points compared to the first quarter of fiscal 2011, and 470 basis points compared to the fourth quarter of fiscal 2010. The Company continued to deliver sequential improvement in both transaction count and basket size as a result of the strategic adjustments to promotional activity in selected categories, as well as new merchandising and marketing initiatives.
Adjusted EBITDA was $27.4 million in the second quarter of fiscal 2011, a decrease of $5.1 million compared to the same period last year, but an increase of $34.3 million compared to the first quarter of fiscal 2011.
Peter Lynch, Chairman, CEO, and President, said, “We delivered significant improvements in both identical store sales and Adjusted EBITDA compared to last quarter, due largely to the strategic adjustments we made to our promotional activity and the implementation of sustainable merchandising and marketing initiatives tailored to meet the shopping needs of our guests.”
Mr. Lynch added, “As we move through the year, we will continue to manage inflation in key categories as efficiently as possible, while being mindful of consumers who are particularly cost conscious in this environment. While the economic environment in our key markets remains challenging, we are confident that we can continue to offer our guests better quality, service and value for their shopping dollars.”
Details of the Second Quarter Results
The Company reported a net loss of $24.0 million, or $0.43 per diluted share, compared to net income of $2.1 million or $0.04 per diluted share for the same period last year. This includes a net loss of $1.7 million, or $0.03 per diluted share for discontinued operations, as compared to a net loss from discontinued operations of $2.2 million or $0.04 per diluted share, in the second quarter of fiscal 2010.
For continuing operations, the Company reported a net loss of $22.3 million or $0.40 per diluted share, which includes a deferred tax expense of $7.9 million or $0.14 per diluted share, to reflect an increase in the Company’s valuation allowance on its deferred tax assets. Excluding this deferred tax expense, the Company’s net loss from continuing operations would have been $14.4 million or $0.26 per diluted share.
Gross profit on sales in the second quarter was $581.0 million, a decrease of $9.9 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin was 27.7% in the second quarter, compared to 28.2% in the second quarter of fiscal 2010, a decrease of 50 basis points. The decline in gross margin was attributable to a higher LIFO charge and an increase in other costs, which include inventory shrink and warehouse and transportation costs when compared to the same period in the prior fiscal year.
Operating and administrative expenses for the second quarter were $597.6 million, an increase of $11.6 million compared to the same period in the prior fiscal year. The increase in operating and administrative expense was due to increases in prior-years’ self-insurance reserve adjustment, depreciation, and payroll and payroll-related costs, partially offset by a decrease in share-based compensation and other costs.
28-Week Results Ended January 12, 2011
Net sales for the 28 weeks were $3.6 billion, a decrease of $33.0 million, compared to the same period in the prior fiscal year. Identical store sales for the 28 weeks, which exclude stores that opened or closed during the 28 weeks, decreased 1.4% compared to the same period in the prior fiscal year. The decline in identical store sales for the 28 weeks was attributable to a decrease in transaction count of 1.7%, partially offset by an increase in basket size of 0.3%.
Gross profit on sales was $1.0 billion, a decrease of $34.4 million compared to the same period in the prior fiscal year. As a percentage of net sales, gross margin for the 28 weeks was 27.6%, compared to 28.3% in the same period in the prior fiscal year, a decrease of 70 basis points. The decline in gross margin as a percentage of net sales was attributable primarily to the negative impact of pricing and promotional programs (30 basis points) and a higher LIFO charge and an increase in other costs including inventory shrink and warehouse and transportation costs (40 basis points).
Operating and administrative expenses were $1.1 billion, an increase of $21.8 million compared to the same period in the prior fiscal year. The increase in operating and administrative expense was due to increases in prior-years’ self-insurance reserve adjustment, payroll and payroll-related costs, and depreciation, partially offset by a decrease in share-based compensation and other costs
Adjusted EBITDA for the 28 weeks was $20.5 million compared to $57.2 million in Adjusted EBITDA in the prior year period.
The Company reported a net loss of $100.8 million, or $1.82 per diluted share, compared to a net loss of $6.0 million or $0.11 per diluted share for the same period last year. This includes a net loss of $41.9 million or $0.76 per diluted share for discontinued operations, as compared to a net loss from discontinued operations of $4.6 million or $0.09 per diluted share, for the same period last year.
For continuing operations, the Company reported a net loss of $58.9 million or $1.06 per diluted share, which includes a deferred tax expense of $21.2 million or $0.38 per diluted share, to reflect an increase in the Company’s valuation allowance on its deferred tax assets. Excluding this deferred tax expense, the Company’s net loss from continuing operations would have been $37.7 million or $0.68 per diluted share.
Liquidity and Capital Resources
As of January 12, 2011, Winn-Dixie had approximately $530.3 million of liquidity, comprised of $421.7 million of borrowing availability under its credit agreement and $108.6 million of cash and cash equivalents. The Company noted that its liquidity is sufficient to continue funding its capital program through fiscal 2011, and it does not expect any borrowings under its credit facility during the fiscal year.
Fiscal 2011 Guidance
As previously announced, the Company expects Adjusted EBITDA for fiscal 2011, a 52-week period ending on June 29, 2011, to be in the range of $100 million to $130 million. The Company expects the economic environment in its key markets to remain challenging, and therefore expects to be at the low end of the guidance range. Among other factors, the Company’s Adjusted EBITDA guidance range is based on its current expectation that identical store sales for fiscal 2011 will be slightly negative to slightly positive, and that gross margin will be slightly lower than last year.
The Company expects Adjusted EBITDA to continue to improve during the remainder of the fiscal year based on sequential improvements in identical store sales as a result of adjustments to promotional practices and the implementation of additional merchandising and marketing initiatives. In addition, Adjusted EBITDA in fiscal 2011 is expected to benefit from $12 to $17 million of annualized savings related to the Company’s previously announced 30 non-remodeled store closures and headcount reductions, which began to be realized in the second quarter, as expected.
Capital Expenditures
Capital expenditures for fiscal 2011 are now expected to be approximately $132 million, a $26 million decrease from the Company’s prior expectations. The Company anticipates spending approximately $63 million on the store remodeling program and $69 million for retail store improvements and maintenance, IT systems, new store development, warehousing and transportation. The Company now expects to complete a total of five traditional store remodels and two transformational remodels in fiscal 2011. The remaining 15 transformational stores that were originally scheduled to be completed in fiscal 2011 are expected to be completed in the first half of fiscal 2012.
Mr. Lynch added, “Our transformational stores continue to exceed our expectations, but we feel it is appropriate to take a bit more time to refine, construct and launch the next set of these stores. This will enable us to be judicious with our resources while making sure we are creating the best possible shopping environment for our guests when we open the stores. We look forward to introducing these stores to our guests in the first half of fiscal 2012.”
Winn-Dixie Stores, Inc., is one of the nation’s largest food retailers. Founded in 1925, the Company is headquartered in Jacksonville, FL. As of January 12, 2011, the Company operated 484 retail grocery locations, including 379 in-store pharmacies, in Florida, Alabama, Louisiana, Georgia, and Mississippi. For more information, please visit www.winndixie.com.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Dollar amounts in thousands except per share data
16 weeks ended
January 12, 2011 January 6, 2010
Amount % Amount %
Net sales $ 2,098,005 100.0 $ 2,094,335 100.0
Cost of sales, including warehouse and delivery expenses 1,517,014 72.3 1,503,491 71.8
Gross profit on sales 580,991 27.7 590,844 28.2
Operating and administrative expenses 597,637 28.5 586,046 28.0
Impairment charges 4,493 0.2 1,071 -
Operating (loss) income (21,139 ) (1.0 ) 3,727 0.2
Interest expense, net 1,974 0.1 1,419 0.1
(Loss) income from continuing operations before income tax (23,113 ) (1.1 ) 2,308 0.1
Income tax benefit (811 ) - (1,968 ) (0.1 )
Net (loss) income from continuing operations (22,302 ) (1.1 ) 4,276 0.2
Discontinued operations:
Loss from discontinued operations (1,008 ) - (2,181 ) (0.1 )
Loss on disposal of discontinued operations (695 ) - - -
Net loss from discontinued operations (1,703 ) - (2,181 ) (0.1 )
Net (loss) income $ (24,005 ) (1.1 ) $ 2,095 0.1
Basic and diluted (loss) earnings per share:
(Loss) earnings from continuing operations $ (0.40 ) 0.08
Loss from discontinued operations (0.03 ) (0.04 )
Basic and diluted (loss) earnings per share $ (0.43 ) 0.04
Weighted average common shares outstanding
- basic 55,700 54,905
- diluted 55,700 55,159
Adjusted (loss) earnings before interest, taxes, depreciation and amortization (EBITDA):
Net (loss) income $ (24,005 ) 2,095
Adjustments to reconcile net (loss) income to EBITDA:
Income tax benefit (811 ) (1,968 )
Depreciation and amortization 35,424 30,136
Favorable and unfavorable lease amortization, net 202 350
Interest expense, net 1,974 1,419
EBITDA 12,784 32,032
Adjustments to reconcile EBITDA to Adjusted EBITDA:
Net loss from discontinued operations 1,703 2,181
Impairment charges 4,493 1,071
Share-based compensation 2,404 6,167
Post-emergence bankruptcy-related professional fees 356 560
Self-insurance reserve prior-year adjustment 5,664 (7,721 )
VISA/MasterCard settlement - (1,788 )
Adjusted EBITDA $ 27,404 32,502
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Dollar amounts in thousands except per share data
28 weeks ended
January 12, 2011 January 6, 2010
Amount % Amount %
Net sales $ 3,642,355 100.0 $ 3,675,317 100.0
Cost of sales, including warehouse and delivery expenses 2,637,575 72.4 2,636,175 71.7
Gross profit on sales 1,004,780 27.6 1,039,142 28.3
Operating and administrative expenses 1,058,057 29.0 1,036,250 28.2
Impairment charges 4,493 0.1 4,156 0.1
Operating loss (57,770 ) (1.5 ) (1,264 ) 0.0
Interest expense, net 3,152 0.1 2,743 0.1
Loss from continuing operations before income tax (60,922 ) (1.6 ) (4,007 ) (0.1 )
Income tax benefit (1,977 ) (0.1 ) (2,650 ) (0.1 )
Net loss from continuing operations (58,945 ) (1.5 ) (1,357 ) 0.0
Discontinued operations:
Loss from discontinued operations (12,869 ) (0.3 ) (4,606 ) (0.1 )
Loss on disposal of discontinued operations (28,982 ) (0.8 ) - -
Net loss from discontinued operations (41,851 ) (1.1 ) (4,606 ) (0.1 )
Net loss $ (100,796 ) (2.6 ) $ (5,963 ) (0.1 )
Basic and diluted loss per share:
Loss from continuing operations $ (1.06 ) (0.02 )
Loss from discontinued operations (0.76 ) (0.09 )
Basic and diluted loss per share $ (1.82 ) (0.11 )
Weighted average common shares outstanding
- basic and diluted 55,516 54,792
Adjusted earnings (loss) before interest, taxes, depreciation and amortization (EBITDA):
Net loss $ (100,796 ) (5,963 )
Adjustments to reconcile net loss to EBITDA:
Income tax benefit (1,977 ) (2,650 )
Depreciation and amortization 62,222 52,763
Favorable and unfavorable lease amortization, net 301 479
Interest expense, net 3,152 2,743
EBITDA (37,098 ) 47,372
Adjustments to reconcile EBITDA to Adjusted EBITDA
Net loss from discontinued operations 41,851 4,606
Impairment charges 4,493 4,156
Share-based compensation 4,990 9,463
Post-emergence bankruptcy-related professional fees 616 1,098
Self-insurance reserve prior-year adjustment 5,664 (7,721 )
VISA/MasterCard settlement - (1,788 )
Adjusted EBITDA $ 20,516 57,186
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Dollar amounts in thousands except par value
ASSETS January 12, 2011 June 30, 2010
Current assets:
Cash and cash equivalents $ 108,562 152,327
Trade and other receivables, less allowance for doubtful
receivables of $3,257 ($3,730 at June 30, 2010) 65,429 63,356
Merchandise inventories, less LIFO reserve of
$44,536 ($38,268 at June 30, 2010) 598,986 658,040
Prepaid expenses and other current assets 27,428 28,096
Total current assets 800,405 901,819
Property, plant and equipment, net 671,598 680,936
Intangible assets, net 210,753 211,281
Deferred tax assets, non-current 40,407 40,697
Other assets, net 2,346 3,334
Total assets $ 1,725,509 1,838,067
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current obligations under capital leases $ 10,196 9,397
Accounts payable 307,197 345,955
Reserve for self-insurance liabilities 78,742 73,661
Accrued wages and salaries 65,632 65,417
Deferred tax liabilities 48,488 48,667
Accrued expenses 104,892 118,094
Total current liabilities 615,147 661,191
Reserve for self-insurance liabilities 111,997 109,240
Long-term borrowings under credit facilities - -
Unfavorable leases 87,463 99,049
Obligations under capital leases 33,054 20,075
Other liabilities 50,125 24,775
Total liabilities 897,786 914,330
Shareholders’ equity:
Common stock, $0.001 par value. Authorized 400,000,000 shares;
55,921,282 shares issued; 55,808,675 outstanding at January 12, 2011 and
55,187,440 shares issued; 55,074,833 outstanding at June 30, 2010. 56 55
Additional paid-in-capital 813,757 808,694
Retained earnings 9,167 109,963
Accumulated other comprehensive income 4,743 5,025
Total shareholders’ equity 827,723 923,737
Total liabilities and shareholders’ equity $ 1,725,509 1,838,067
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Amounts in thousands
28 weeks ended
January 12, 2011 January 6, 2010
Cash flows from operating activities:
Net loss $ (100,796 ) (5,963 )
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 62,470 53,266
Share-based compensation 4,990 9,463
Deferred income taxes 111 12
Other, net (2,283 ) 5,880
Change in operating assets and liabilities:
Trade, insurance and other receivables (2,073 ) (10,018 )
Merchandise inventories 59,054 11,978
Prepaid expenses and other current assets 668 447
Accounts payable and accrued expenses (35,982 ) (16,969 )
Reserve for self-insurance liabilities 7,838 (1,147 )
Net cash (used in) provided by operating activities (6,003 ) 46,949
Cash flows from investing activities:
Purchases of long-lived assets (44,644 ) (83,033 )
Sales of assets 10,316 322
Net cash used in investing activities (34,328 ) (82,711 )
Cash flows from financing activities:
Gross borrowings on credit facilities 7,762 5,794
Gross payments on credit facilities (7,762 ) (5,438 )
Increase in book overdrafts 3,258 12,742
Principal payments on capital leases (6,766 ) (5,964 )
Other, net 74 79
Net cash (used in) provided by financing activities (3,434 ) 7,213
Decrease in cash and cash equivalents (43,765 ) (28,549 )
Cash and cash equivalents at beginning of period 152,327 182,823
Cash and cash equivalents at end of period $ 108,562 154,274
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Amounts in thousands except per share data
12 Weeks
Ended
16 Weeks
Ended
12 Weeks
Ended
13 Weeks
Ended
53 Weeks
Ended
Sept. 16, 2009 Jan. 6, 2010 March 31, 2010 June 30, 2010 June 30, 2010
Net sales $ 1,580,982 2,094,335 1,623,279 1,681,522 6,980,118
Cost of sales, including warehouse and delivery expenses 1,132,684 1,503,491 1,161,085 1,190,933 4,988,193
Gross profit on sales 448,298 590,844 462,194 490,589 1,991,925
Operating and administrative expenses 450,204 586,046 440,109 473,846 1,950,205
Impairment charges 3,085 1,071 - 436 4,592
Operating (loss) income (4,991 ) 3,727 22,085 16,307 37,128
Interest expense, net 1,324 1,419 967 940 4,650
(Loss) income from continuing operations before income tax (6,315 ) 2,308 21,118 15,367 32,478
Income tax benefit (682 ) (1,968 ) (984 ) (672 ) (4,306 )
Net (loss) income from continuing operations (5,633 ) 4,276 22,102 16,039 36,784
Discontinued operations:
Loss from discontinued operations (2,425 ) (2,181 ) (1,221 ) (2,060 ) (7,887 )
Loss on disposal of discontinued operations
- - - - -
Net loss from discontinued operations (2,425 ) (2,181 ) (1,221 ) (2,060 ) (7,887 )
Net (loss) income $ (8,058 ) 2,095 20,881 13,979 28,897
Adjusted (loss) earnings before interest, taxes, depreciation and amortization (EBITDA):
Net (loss) income $ (8,058 ) 2,095 20,881 13,979 28,897
Adjustments to reconcile net (loss) income to EBITDA:
Income tax benefit (682 ) (1,968 ) (984 ) (672 ) (4,306 )
Depreciation and amortization 22,627 30,136 23,977 25,785 102,525
Favorable and unfavorable lease amortization, net 129 350 432 369 1,280
Interest expense, net 1,324 1,419 967 940 4,650
EBITDA 15,340 32,032 45,273 40,401 133,046
Adjustments to reconcile EBITDA to Adjusted EBITDA:
Net loss from discontinued operations 2,425 2,181 1,221 2,060 7,887
Impairment charges 3,085 1,071 - 436 4,592
Share-based compensation 3,296 6,167 4,021 3,500 16,984
Post-emergence bankruptcy-related professional fees 538 560 568 706 2,372
Self-insurance reserve prior-year adjustment - (7,721 ) - (4,606 ) (12,327 )
VISA/MasterCard settlement - (1,788 ) - - (1,788 )
Adjusted EBITDA $ 24,684 32,502 51,083 42,497 150,766
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA):
Dollar amounts in millions except per share data Fiscal 2011 Guidance
Low – End High – End
Net income / earnings (loss) $ (73 ) (43 )
Adjustments to reconcile net income/earnings (loss) to EBITDA:
Income taxes - -
Depreciation and amortization 120 120
Interest expense, net 6 6
EBITDA 53 83
Adjustments to reconcile EBITDA to Adjusted EBITDA
Discontinued operations 33 33
Share-based compensation 13 13
Post-emergence bankruptcy-related professional fees 1 1
Adjusted EBITDA $ 100 130
SOURCE: Winn-Dixie Stores, Inc.
