Winn-Dixie files Chapter 11 reorganization to address financial and operational challenges
Winn-Dixie files Chapter 11 reorganization to address financial and operational challenges
JACKSONVILLE, FL -- Winn-Dixie Stores Inc. announced Feb. 21 that in order to address the financial and operational challenges that have hampered its performance, the company and 23 of its U.S. subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The filings were made in the evening of Feb. 21 in the U.S. Bankruptcy Court for the Southern District of New York.
All 920 Winn-Dixie stores in eight states and the Bahamas are open and serving customers. The company's Customer Reward Card is being honored as usual, and all other customer programs and policies, including those pertaining to coupons, gift cards and refunds, remain in effect, according to a company news release.
Winn-Dixie intends to use the reorganization process to take additional action to improve its operations and financial performance and strengthen its business. The company said it is moving forward with new sales and merchandising initiatives to improve its customers' shopping experience and help drive sales growth across its chain.
In addition, as part of its Chapter 11 restructuring, the company will implement further asset rationalization, additional asset sales and expense reduction plans to enhance productivity and take best advantage of its asset base. The company is also taking steps to substantially reduce its lease obligations on previously closed stores.
To fund its continuing operations during the restructuring, Winn-Dixie has secured an $800 million debtor-in-possession financing facility from Wachovia Bank N.A. Subject to court approval, the DIP credit facility, which replaces the company's previous $600 million credit line, will be used to supplement the company's cash flow during the reorganization process.
Following the recent announcement of Winn-Dixie's second-quarter financial results, in which the company reported increased losses and reduced liquidity, coupled with subsequent credit downgrades from the major debt rating agencies, Winn-Dixie experienced a tightening of trade credit from some of its vendors, which further reduced its cash availability. As a result, the company concluded, after consultation with its advisors, that its interests and the interests of its creditors, associates, customers, and the communities in which it operates will be best served by continuing its turnaround by reorganizing under Chapter 11 of the Bankruptcy Code.
Peter Lynch, president and chief executive officer of Winn-Dixie, said in the news release: "We intend to use this reorganization process to take the actions necessary to position Winn-Dixie for future success. This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores. We deeply regret any adverse impact the Chapter 11 filing may have on our associates, vendors, shareholders and business partners. However, having spent the last two months taking an in-depth look at the company and visiting over 50 stores across our chain, I am convinced that the Chapter 11 process will give us the opportunity we need to restructure our finances, strengthen our business performance and achieve a sustained turnaround at Winn-Dixie."
Mr. Lynch continued, "We will focus on increasing sales quickly and cost-effectively across the chain by improving the execution of merchandising and sales-focused initiatives, reinvigorating the company's store associates, and restoring a sales-driven culture across the organization. These plans include enhancing Winn-Dixie's perishables offerings and other product merchandising as well as implementing store sales competitions and other initiatives to motivate associates to drive sales."
In addition, Mr. Lynch said, Winn-Dixie intends to:
--Evaluate the performance of every store and the terms of every lease in the company's real estate portfolio with the objective of achieving a rationalized store "footprint" that allows the company to operate profitably and increase cash flow and return on invested capital.
--Seek Bankruptcy Court approval to immediately terminate the leases of two warehouses and approximately 150 stores that were closed previously, resulting in an annual cash savings of approximately $60 million.
--Pursue all opportunities to further reduce annual expenses and to sell non-core assets, including all remaining manufacturing operations.
No final decisions regarding any additional store closings or market departures, beyond those previously announced by the company, have been made at this time. The company will announce any such decisions at a later date.
Winn-Dixie Stores Inc. is one of the nation's larger food retailers. Founded in 1925, the company is headquartered in Jacksonville, FL.
The filings were made in the evening of Feb. 21 in the U.S. Bankruptcy Court for the Southern District of New York.
All 920 Winn-Dixie stores in eight states and the Bahamas are open and serving customers. The company's Customer Reward Card is being honored as usual, and all other customer programs and policies, including those pertaining to coupons, gift cards and refunds, remain in effect, according to a company news release.
Winn-Dixie intends to use the reorganization process to take additional action to improve its operations and financial performance and strengthen its business. The company said it is moving forward with new sales and merchandising initiatives to improve its customers' shopping experience and help drive sales growth across its chain.
In addition, as part of its Chapter 11 restructuring, the company will implement further asset rationalization, additional asset sales and expense reduction plans to enhance productivity and take best advantage of its asset base. The company is also taking steps to substantially reduce its lease obligations on previously closed stores.
To fund its continuing operations during the restructuring, Winn-Dixie has secured an $800 million debtor-in-possession financing facility from Wachovia Bank N.A. Subject to court approval, the DIP credit facility, which replaces the company's previous $600 million credit line, will be used to supplement the company's cash flow during the reorganization process.
Following the recent announcement of Winn-Dixie's second-quarter financial results, in which the company reported increased losses and reduced liquidity, coupled with subsequent credit downgrades from the major debt rating agencies, Winn-Dixie experienced a tightening of trade credit from some of its vendors, which further reduced its cash availability. As a result, the company concluded, after consultation with its advisors, that its interests and the interests of its creditors, associates, customers, and the communities in which it operates will be best served by continuing its turnaround by reorganizing under Chapter 11 of the Bankruptcy Code.
Peter Lynch, president and chief executive officer of Winn-Dixie, said in the news release: "We intend to use this reorganization process to take the actions necessary to position Winn-Dixie for future success. This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores. We deeply regret any adverse impact the Chapter 11 filing may have on our associates, vendors, shareholders and business partners. However, having spent the last two months taking an in-depth look at the company and visiting over 50 stores across our chain, I am convinced that the Chapter 11 process will give us the opportunity we need to restructure our finances, strengthen our business performance and achieve a sustained turnaround at Winn-Dixie."
Mr. Lynch continued, "We will focus on increasing sales quickly and cost-effectively across the chain by improving the execution of merchandising and sales-focused initiatives, reinvigorating the company's store associates, and restoring a sales-driven culture across the organization. These plans include enhancing Winn-Dixie's perishables offerings and other product merchandising as well as implementing store sales competitions and other initiatives to motivate associates to drive sales."
In addition, Mr. Lynch said, Winn-Dixie intends to:
--Evaluate the performance of every store and the terms of every lease in the company's real estate portfolio with the objective of achieving a rationalized store "footprint" that allows the company to operate profitably and increase cash flow and return on invested capital.
--Seek Bankruptcy Court approval to immediately terminate the leases of two warehouses and approximately 150 stores that were closed previously, resulting in an annual cash savings of approximately $60 million.
--Pursue all opportunities to further reduce annual expenses and to sell non-core assets, including all remaining manufacturing operations.
No final decisions regarding any additional store closings or market departures, beyond those previously announced by the company, have been made at this time. The company will announce any such decisions at a later date.
Winn-Dixie Stores Inc. is one of the nation's larger food retailers. Founded in 1925, the company is headquartered in Jacksonville, FL.
