Winn-Dixie Files For Bankruptcy

[David]

Failed here in N.Texas. Seems as if they are failing elsewhere. AP

Winn-Dixie seeks bankruptcy
JACKSONVILLE, Fla. (AP) — Supermarket giant Winn-Dixie Stores (WIN), which has struggled to compete with Wal-Mart Supercenters and other grocery chains, said Tuesday that it has filed for bankruptcy reorganization.

The filing came less than two weeks after Winn-Dixie reported declining revenue and increased losses.

Winn-Dixie and 23 of its U.S. subsidiaries filed for Chapter 11 reorganization late Monday in U.S. Bankruptcy Court for the Southern District of New York, the company said.

The company, based in Jacksonville, also announced Tuesday that it has secured an $800 million credit line from Wachovia Bank to help pay for its reorganization. The credit line, subject to court approval, replaces the company's previous $600 million credit line. (Related: Read Winn-Dixie's bankruptcy filing.)

The company plans to use the reorganization to improve operations and financial performance and to reduce expenses and decide how to use its assets to make its stores more productive, a news release said.

"This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores," said Peter Lynch, president and chief executive officer. The former Albertsons executive was hired in December to turn Winn-Dixie around.

The company said 920 Winn-Dixie stores in eight states and the Bahamas are open. It has about 80,000 employees.

But Winn-Dixie said it will seek court approval to terminate leases of two warehouses and about 150 stores that were closed previously, for an annual cash savings of approximately $60 million. It also plans to sell all its remaining manufacturing operations to cut expenses, the release said.

Winn-Dixie Stores is one of the largest food retailers in the nation and ranks 162 on the Fortune 500 list.

But the company reported earlier this month that, for the three months ended Jan. 12, it lost $399.7 million, or $2.84 a share, compared with a loss of $79.5 million, or 57 cents a share, for the same quarter last year.

Second-quarter revenue was $3.08 billion, compared with $3.23 billion a year ago.

Excluding $258 million in restructuring and income tax charges and $72.2 million in expenses related to discontinued operations, the company lost $69.4 million or 50 cents a share — exceeding the loss of 11 cents a share forecast by analysts.

Tuesday's news release cited the company's problematic second quarter, which led to "subsequent credit downgrades from the major debt rating agencies" and "a tightening of trade credit from some of its vendors, which further reduced its cash availability."

After the supermarket chain posted a $399.7 million second-quarter loss and saw its liquidity dip to dangerous levels, many analysts and financial experts believed the chain was headed for reorganization under Chapter 11.

Jason D. Whitmer, an analyst for FTN Midwest Research, was one of those predicting the company's slip into bankruptcy.

"I like Peter Lynch, but he probably came in too late to fix a bigger problem," Whitmer said. "It has been like this for a while — a slippery slope. There hasn't been a lot of positive news."

For the first six months of this fiscal year, Winn-Dixie reported sales of $5.41 billion on a net loss of $552.8 million or $3.93 a share, compared with sales of $5.65 billion on a net loss of $78.3 million or 56 cents a share, for the same period in 2004.

Both Standard & Poor's Rating Services and Moody's Investor Services have lowered Winn-Dixie's credit ratings. In early December, Winn-Dixie was dropped from the Standard & Poor's 500 index after recording the worst performance in 2003 in the select stock index.

Winn-Dixie's stock closed at $1.40 a share Friday. Its 52-week high was $8.42 a share. In May 2002, the company shares were trading at $19.41.