Jacksonville, FL–(HISPANIC PR WIRE)–August 28, 2007–Winn-Dixie Stores, Inc., (NASDAQ: WINN) today reported financial results for the fourth quarter and fiscal year ended June 27, 2007, and the filing of its Annual Report on Form 10-K with the Securities and Exchange Commission. Among other highlights for the fiscal year, the Company announced Adjusted EBITDA of $85.9 million, an increase of more than $100 million over the previous fiscal year’s Adjusted EBITDA loss of $27.8 million; a year-over-year increase in gross margin of 100 basis points coupled with positive identical store sales; and the initiation of a major store remodeling program.
Winn-Dixie Chairman, CEO, and President Peter Lynch said, “The 2007 fiscal year marked an important turning point for Winn-Dixie – not only because the Company emerged from Chapter 11 last fall, but also because we made significant progress in the initial stage of a multi-year turnaround plan. We built a strong foundation to support the implementation of our five key initiatives: rebuilding trust in our brand, investing capital in our stores, merchandising for the neighborhood, training and developing our Associates, and achieving profitable sales.”
Fiscal 2007 Fourth Quarter Results
Net sales in the fourth quarter amounted to $1.7 billion, an increase of $25.2 million, or 1.5%, as compared to the same period in the prior fiscal year. Identical store sales from continuing operations increased 1.3% during the fourth quarter. Net income for the quarter was $20.6 million, as compared to a loss of $17.2 million in the fourth quarter last year.
Gross profit on sales in the fourth quarter amounted to $468.2 million, an increase of $36.8 million as compared to the same period in the prior fiscal year. As a percentage of sales, gross margin was 27.9% in the fourth quarter as compared to 26.1% in the fourth quarter of the prior year, an increase of 180 basis points. The gross margin improvement was attributable primarily to cost reductions in procurement, warehousing and transportation, an increase in vendor allowances, and cost savings associated with the consolidation of the Company’s former Pompano distribution center into its Miami facility.
Other operating and administrative expenses for the fourth quarter amounted to $439.4 million, a decrease of $36.4 million as compared to the same period in the prior fiscal year. The decrease in other operating and administrative expenses for the fourth quarter was due primarily to favorable insurance claims development, primarily related to self-insured workers’ compensation, the elimination of vacant store lease expense, and lower depreciation and amortization expense.
Income from continuing operations before interest expense, income taxes, and depreciation and amortization expense, or EBITDA, as further adjusted for non-cash charges, reorganization items, and other items related to the Company’s emergence from bankruptcy (Adjusted EBITDA) amounted to $49.6 million for the fourth quarter of fiscal 2007, as compared to a loss of $19.9 million in the same period of the prior year, an increase of $69.5 million. The Adjusted EBITDA of $49.6 million in the fourth quarter includes an adjustment to self-insurance reserves of $20.6 million from favorable development of prior years’ insurance claims, primarily related to workers’ compensation. This adjustment decreased cost of sales by $3.2 million and other operating and administrative expenses by $17.4 million.
“We continue to make progress in executing on the fundamentals, such as improving gross margin, reducing expenses and implementing effective pricing and promotional programs,” added Lynch. “We are encouraged by our strong financial performance in the fourth quarter, which demonstrates that our focus on our five key initiatives is gaining traction.”
Fiscal Year 2007 Results
Net sales in fiscal 2007 were $7.2 billion, an increase of $68.1 million, or 1.0% as compared to fiscal 2006. Identical store sales from continuing operations increased 1.6% for the fiscal year.
Net income in fiscal 2007 was $300.6 million compared to a loss of $361.3 million in the prior fiscal year. The results for the fiscal year were impacted significantly by non-cash items, the largest of which were a $188.2 million gain in connection with the discharge of liabilities associated with the Company’s exit from Chapter 11 and a $144.8 million gain related to the revaluation of assets and liabilities as part of fresh start reporting. The Company emerged from Chapter 11 in November 2006.
Gross profit on sales in fiscal 2007 increased $85.8 million as compared to the same period in the prior fiscal year. As a percentage of sales, gross margin was 26.9% as compared to 25.9% in the prior fiscal year, an increase of 100 basis points. The gross margin improvement was attributable primarily to cost reductions in procurement, warehousing and transportation, reduced inventory shrink and an increase in vendor allowances.
Other operating and administrative expenses in fiscal 2007 decreased $26.3 million as compared to the prior fiscal year. The decrease in other operating and administrative expense for the fiscal year was driven primarily by a reduction of vacant store lease expense, lower rent expense and lower depreciation and amortization expense offset by post-emergence bankruptcy-related costs.
Adjusted EBITDA in fiscal 2007 was $85.9 million as compared to a loss of $27.8 million in the same period of the prior year, an increase of $113.7 million. Adjusted EBITDA for the 2007 fiscal year includes $20.6 million from favorable prior years’ insurance claims development, primarily related to self-insured workers’ compensation.
Store Remodel Program
Winn-Dixie embarked on a major store remodel initiative in fiscal 2007 and as of June 27, 2007, had completed 20 remodels. On a weighted average basis, recently completed remodels experienced an aggregate sales lift of approximately 12% in the period after completion of grand opening promotional activity. This sales lift is calculated as follows: for offensive remodels (i.e., remodeled stores that are not expected to contend with competitive new store openings in the current fiscal year), the increase is the store’s sales in the current period as compared to the store’s sales in the prior year period; and for defensive remodels, it is the store’s sales in the current period as compared to the store’s sales in the prior year period with the prior period’s sales reduced by an amount representing management’s assessment of the sales impact from a competitive new store opening.
“The store remodeling program is one of our most important initiatives,” Lynch said. “We are inviting the customers who left us to return to shop with us at the new improved Winn-Dixie. We are pleased with our initial results and we will continue to monitor our progress.”
Liquidity and Capital Resources
As of June 27, 2007, Winn-Dixie had approximately $592.9 million of liquidity, consisting of $201.9 million of cash and cash equivalents and $391.0 million of borrowing availability under its credit agreement. The Company’s liquidity increased by $19.5 million from the end of its third fiscal quarter, primarily as a result of cash flow from operations, offset somewhat by capital expenditures.
Fiscal 2008 Guidance
Winn-Dixie maintains a policy of not providing earnings guidance. However, due to its recent emergence from bankruptcy and its improved financial performance in the second half of fiscal 2007, the Company has determined that providing guidance on certain key financial metrics at this time will enhance investors’ understanding of the Company’s potential performance in fiscal 2008. This guidance is as follows:
— Identical store sales for fiscal 2008 are expected to be slightly positive.
— Gross margin in fiscal 2008 is expected to be slightly higher than in fiscal 2007, with most of the increase over the prior year occurring in the first two quarters.
— Adjusted EBITDA is expected to be positive in the first half of fiscal 2008. The Company anticipates that the substantial majority of its Adjusted EBITDA will be generated in the second half of fiscal 2008.
— In connection with the implementation of the Company’s turnaround plan, including the store remodeling program, Winn-Dixie’s financial results in fiscal 2008 will be impacted by certain non-cash items and other charges which, in the aggregate, are expected to exceed Adjusted EBITDA. Accordingly, the Company anticipates incurring a net loss for the year. These items include depreciation and amortization expense, non-cash stock compensation expense and other charges.
Conference Call and Webcast Information
The Company plans to host a live conference call and simultaneous audio webcast on Tuesday, August 28, 2007 from 8:30 AM to 9:30 AM Eastern Time which will include comments from senior management and a question and answer session. 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 site at http://www.winn-dixie.com under “About Us”. Parties interested in participating in this call should dial-in ten minutes prior to the start time at 877-502-9272 or 913-981-5581. A recording of the call will be available on the Investor Relations section of the Winn-Dixie website and, from August 28 through September 4, 2007, can also be accessed by calling 888-203-1112 or 719-457-0820. The replay passcode is 2771415.
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 520 stores in Florida, Alabama, Louisiana, Georgia, and Mississippi. For more information, please visit http://www.winn-dixie.com.
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, particularly in the first half of the fiscal year; the ability of the Company to attract, train and retain key leadership; the Company’s ability to implement, maintain or upgrade information technology systems, including programs to support retail pricing policies; the outcome of the Company’s programs to control or reduce operating and administrative expenses and to control inventory shrink; increases in utility rates or gasoline costs, which could impact consumer spending and buying habits and the cost of doing business; the availability and terms of capital resources and financing and its adequacy for the Company’s planned investment in store remodeling and other 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 27, 2007, and other Company filings with the Securities and Exchange Commission. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly revise or update these forward-looking statements, whether as a result of new information, future events or otherwise.
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