A dramatically shrunken Winn-Dixie Stores Inc. filed a plan Thursday to emerge from its 16-month odyssey in bankruptcy as soon as late October.
The plan, which still has to be approved by creditors and a judge, will give most everybody involved a haircut to keep the Jacksonville grocer alive.
The plan would wipe out the value of all Winn-Dixie stock. Creditors would end up owning the company instead of all the cash they are owed. Holders of $310-million in notes stand to get 95 cents on the dollar; landlords and unpaid vendors, 71 cents; and unsecured creditors owed more than $3,000, 53 cents. Creditors owed less than $3,000 and the company's retirement plan would have to settle for 67 cents on the dollar. Pensioners would get a 10 percent discount on their groceries at Winn-Dixie for two years.
While the New York Stock Exchange stopped trading of Winn-Dixie stock on Feb. 22, 2005, shares continue to trade on the pink sheets market. After starting the day at 16 cents, however, shares plummeted and closed Thursday at 0.16 cents as many stockholders clinging to some hope of a payoff gave up the ghost.
Warring creditor committees that had threatened to file reorganization plans of their own last week came together to hammer out the deal.
"This is a very important milestone for us that reflects the spirit of cooperation among our creditors and the unwavering support of our employees,'' said Peter Lynch, president and chief executive officer of the Jacksonville grocer, which emerges with 527 stores, fewer than half its store count of 2004. ''The brand was badly tarnished, but we've spent a year cleaning it up and made a major-league effort improving customer service, our store experience and our selection - especially in perishables.''
The company also got what Lynch described as a more ''contemporized'' logo (gone is the big block lettering and the old Kwik Chek circle that lingered in the logo from a long-ago acquisition). Lynch promised a "dramatically'' different look for up to 50 stores that would be remodeled in the coming year. The company also has a new ad slogan of "getting better all the time'' intended to suggest continuous improvement.
The five-year plan would make Winn-Dixie virtually debt-free and provide the cash to remodel the 50 stores in 2007. The company, nonetheless, projects operating at a $53-million loss (half of it to pay bankruptcy bills) during its first year. The plan envisions profitability in the second year, with Winn-Dixie opening new stores in 2008.
Winn-Dixie's market share has been cut in half in the past five years as customers flocked to an onslaught of new Wal-Mart Supercenters or Publix Super Markets Inc. stores. While other grocery chains have been confronted with their inability to compete on price with Wal-Mart, no major chain in the country was as challenged as Winn-Dixie in as many places by Wal-Mart's offensive into the food business.
Since 1998, Winn-Dixie has pulled out of 18 major markets in nine states. Today, nearly two-thirds of its remaining 527 stores - 336 - are in its home state of Florida. And its footprint covers only seven major metro markets in five states stretching from New Orleans east into south Georgia and south through Florida. The chain has closed about a third of its stores in the Tampa Bay area and watched its market share plummet below 9 percent to fifth place.
In the past 16 months, the company also pared its work force from 79,000 employees to 55,000. Full-time workers have decreased from 33,000 to 24,000.
The company also closed half its distribution centers, sold most of its food plants and pocketed $32-million unloading two corporate jets.
After nine named storms disrupted Winn-Dixie markets in the past two years, hurricanes have taken a toll on expenses. Winn-Dixie's insurance carriers jacked up premiums and reduced coverage. As a result, the five-year plan includes salting away more than $200-million a year to cover potential hurricane damage from future storms. The company is counting on reopening nine stores in hurricane-ravaged New Orleans, but so far has been able to put only two of them back in business.
Critics have questioned whether Winn-Dixie is moving out of bankruptcy too quickly. But company officials say two quarters of identical store sales gains of 7 percent are ample evidence the company's new formula resonates with customers.
Lynch, the former Albertsons executive recruited to salvage Winn-Dixie three years ago, said the reorganization plan hinges on $100-million in expense reductions in 2007. But he declined to say store closings are over.
"We think we've done the majority of them, but if stores don't meet our profit criteria going forward, we will face closing them,'' he said.
Lynch, who earned about $1.15-million in the past year, is sharing the pain. About 1.5-million of his stock grants and options were vaporized by the bankruptcy. He is negotiating a new employment contract with what will be a new nine-member board.
"I'm looking forward to a future with Winn-Dixie,'' he said. "It's a great place to work.''
Mark Albright can be reached at email@example.com or (727) 893-8252.