Presentation on theme: "WINN-DIXIE STORES, INC. Sherry Isler ACG2021.OH1 Getting Better All The Time."— Presentation transcript:
WINN-DIXIE STORES, INC. Sherry Isler ACG2021.OH1 Getting Better All The Time
Executive Summary WINN-DIXIE STORES, INC. Winn-Dixie is in very serious financial trouble. The company has secured funding from a substantial loan tied to their filing of Chapter 11 Bankruptcy and has a plan of action to reorganize the company outlined in Peter Lynch’s letter to the shareholders. Peter Lynch is the new Chief Executive Officer for Winn-Dixie. In his letter to the shareholders he outlines his plan for reorganizing Winn-Dixie and decreases the company’s expenses/losses. Although Lynch’s letter is reassuring and nearly inspiring, the numbers speak for themselves. The financial statements for Winn-Dixie reveal a very vulnerable company with an uncertain future as a result of very significant loss in the past couple years. Winn-Dixie shareholders are holding stock that is not a stable investment, with the companies uncertain future, but the value of the stock is so low that it is not worth selling. The gamble of whether or not Winn-Dixie will be able to turn things around is more valuable, in my opinion, than selling off the stock at its current value. I would not advise anyone to buy any shares unless some time has elapsed and we see numbers with a trend moving out of the red in upcoming quarterly and annual reports.
Introduction Peter Lynch serves as President and Chief Executive Officer Corporate Headquarters: Winn-Dixie Stores, Inc. P.O. Box B Jacksonville, Florida 32203-0297 Analysis based on fiscal year ending June 30, 2005 Principal products/services: Substantially all stores offer grocery, meat, seafood, produce, deli, bakery, floral, health and beauty and other general merchandise items. Most stores include a pharmacy, and many stores offer photo labs and other special service departments. Winn-Dixie has 66 liquor stores and 25 fuel centers at it’s stores as of June 29, 2005. Main geographic area of activity: Florida, Alabama, Georgia, Louisiana, Mississippi, and the Bahamas
Audit Report Audit performed by independent audit firm KPMG LLP, Jacksonville, Florida In the auditors report the uncertainty of the companies future is clear. Winn-Dixie filed for reorganization under Chapter 11 of the US Bankruptcy Code. The financial statements do not reflect nor provide for the consequences of the bankruptcy proceedings. The auditors very delicately say that with the bankruptcy substantial changes in ownership are necessary. It is very clear the company’s future is “a going concern” with “substantial doubt” in the company’s ability to continue. Auditor's Report
Stock Market Information Company stock price, 0.63 52-Week Range (Low – High) 0.07 – 5.05 Dividends per share,N/A Date of above data,10/31/05 If I were a shareholder of Winn-Dixie stock I would hold my shares. The value of the shares is so low that it is not worth selling at this time. I would not buy any stock given there is no dividend earnings for shareholders and the uncertainty of the company’s future. But by holding there is the possibility of the value increasing in some time if the plans to improve Winn-Dixie’s current state are successful in the future. Winn-Dixie is not a stable or profitable investment currently.
Industry Situation and Company Plans The supermarket industry is a good industry in regards to future needs of consumers. However, Winn-Dixie supermarkets have a tarnished brand in the public eye and have a great challenge to improve their image/brand while undergoing major restructuring and it’s recent filing of Chapter 11 Bankruptcy while trying to stay afloat and continue. In addition to filing for reorganization under Ch. 11 Bankruptcy, Winn-Dixie has changed leadership. Former President and Chief Executive Officer, Frank Lazaran, was replaced by current President and Chief Executive Officer, Peter Lynch, in December 2004. Peter Lynch came to Winn-Dixie from Albertson’s, Inc. after 30 years in the grocery business working with companies that faced similar challenges as Winn- Dixie’s. Lynch acknowledges Winn-Dixie’s problems/challenges and has a plan to improve the company’s state.
Company Plans First step, obtained $800 million debtor-in- possession credit facility to provide company with liquidity during restructuring Restructuring operations: completing the sale or closure of stores in 14 Designated Market Areas (DMAs) and 3 distribution centers. Completion of this transition to downsize will take $100 million of expense out of the business, leaving Winn-Dixie with 60,000 Associates in 23 DMAs in five states and in the Bahamas US Securites and Exchange Commission Form 10-K
Company Plans Attract new customers: make improvements in each dept. beginning with perishables Higher quality from the field to the table Reviving the meat dept. to live up to the legacy Winn-Dixie has been known as The Beef People Getting better all the time Continue through remaining perishable depts. then focusing on Center Store Image: cleaning up the stores, reducing clutter, repairing and polishing the floors, and straightening up the shelves. Ensuring in stock every day. Peter Lynch's plan
Income Statement Multi-step format 200520042003 Gross Profit 2,537,8432,813,7903,133,246 Income from Operations (615,930)(73,127)303,145 Net Income (691,262)(50,795)236,118 *Amounts in thousands Winn-Dixie has experienced substantial losses from 2003 to 2005; the most substantial being from 2004 to 2005 with more than half a million dollars in loss.
Balance Sheet Assets = Liabilities + SE 1,928,0121,701,546 Liabilities 59,294917,345+ SE 1,987,3062,618,891 Assets 20042005 Winn-Dixie has over a half a million dollar difference less in assets in 2005 while liabilities are up $226,466 since 2004. Stockholder’s Equity changed the most, down $858,051 from 2004 to 2005.
Statement of Cash Flows Cash flows from operations are less than net income in 2005 and 2004. Winn-Dixie is down-sizing by selling and auctioning property and plants in order to reduce and manage it’s losses. Winn-Dixie’s main source of financing is currently an $800 million debtor-in-possession credit facility. Overall cash has decreased significantly over the past two years. Winn-Dixie experienced significant net losses and decline in liquidity by the end of the second quarter of fiscal 2005. Following this announcement and subsequent downgrades from the major debt rating agencies, the Company experienced a tightening of trade credit by many of its vendors and its primary bank eliminated its incoming and outgoing Automated Clearing House (“ACH”) float, both of which further reduced its liquidity.
Accounting Policies Merchandise inventories, primarily non-perishable merchandise in stores and distribution centers is determined using the LIFO method. Manufacturing, pharmacy, produce, and deli inventories are valued using the FIFO method. Property, plant and equipment are stated at historical cost. Interest costs on construction projects are capitalized as part of the costs of the newly constructed facilities. Depreciation expense is calculated by the straight-line method for financial statement purposes. Store equip. depreciation is based on lives from 5 to 8 years. Transportation equip. depreciation is based on lives from 3 to 10 years. Distribution and manufacturing equip. depreciation is based on lives from 5 to 10 years. Amortization of improvements to leased premises is provide mainly by the straight-line method over the terms of the leases or the estimated useful lives of the improvements, whichever is less.
Accounting Policies Topics of the notes to financial statements Proceedings Under Chapter 11 of the Bankruptcy Code Liquidity Summary of Significant Accounting Policies and Other Matters LIFO Property, Plant and Equipment, net Impairment Income Taxes Liabilities Subject to Compromise Debt Interest Expense Derivatives Retirement Plans Stock Compensation Plans Leases Reorganization Items, net Discontinued Operations and Restructuring Self Insurance Bank Agreement Termination Commitments and Contingencies New Accounting Pronouncements Subsequent Events Quarterly Results of Operations (Unaudited) Guarantor Subsidiaries Condensed Consolidating Statements of Operations Condensed Consolidating Balance Sheets Condensed Consolidating Statements of Cash Flows Consolidated Valuation and Qualifying Accounts
Financial Analysis Liquidity Ratios Receivables turnover and inventory turnover in 2005 is lower than in 2004. Average days’ sales and average days’ inventory on hand is up in 2005 from 2004. 20052004 Working Capital809,511411,932 Current Ratio3.031.44 Receivable turnover 31.4694.71 Average days’ sales uncollected 11.63.85 Inventory turnover 46.8369.65 Average days’ inventory on hand 7.795.24
Financial Analysis Profitability Ratios These numbers show that Winn-Dixie is not only not making profits, but in fact it is in the red; indicating the companies current financial state. 20052004 Profit margin (0.084)(0.01) Asset turnover 4.313.93 Return on assets (0.36)(0.04) Return on equity (1.71)(0.1)
Financial Analysis Solvency Ratio These ratios show Winn-Dixie is owned by creditors with the ratios above 1%. The 2005 ratio shows how serious Winn-Dixie’s financial state is in. Debt to equity ratio 200532.52 20041.85
Financial Analysis Market Strength Ratios Because Winn-Dixie has no earnings per share nor dividends per share in 2005 or 2004, the price/earnings per share and dividend yield cannot be calculated: Price/earnings per shareN/A Dividend yieldN/A
Winn-Dixie Stores, Inc. www.winn-dixie.com Getting better all the Time