WINN-DIXIE'S EXIT PLAN: BACK IN BLACK BY 2008

JON SPRINGER

JACKSONVILLE, Fla. - Winn-Dixie Stores last week filed a plan of reorganization in U.S. Bankruptcy Court here, signaling a 16-month stay in Chapter 11 is nearing an end.

The plan values the reorganized retailer at around $759 million, with 50 million new shares of stock to be distributed - or not distributed - among 21 classes of creditors. The company would be virtually free of debt and positioned to return to profitability in fiscal year 2008, according to company projections. Wachovia Bank would provide $725 million in new financing, providing the company the ability to make significant investments in its store base in 2007 and open new locations by 2008, said Peter Lynch, chief executive officer.

Following court approval of a disclosure statement filed last week, creditors will receive a final copy of the plan later this summer, and vote on whether to approve it by early October. That would allow the retailer to exit Chapter 11 protection later that month, according to Lynch.

Winn-Dixie's plan proposes to pay bondholders 95.6% of $310 million in claims. Product vendors, owed $218.9 million, would receive 70.9 cents on the dollar, as would landlords, who are owed $284.1 million. Participants in Winn-Dixie's retirement plan would receive 59.1% of the $87.8 million owed to them. A new nine-member board of directors would be named and new stock valued at around $15 per share would be issued.

Holders of Winn-Dixie's existing stock - including the founding Davis family, which owned around 36% of the company - will receive nothing.

Also last week, the official creditors committee in a report exonerated Winn-Dixie's management and directors of misconduct in relation to events leading to the Chapter 11 filing. Winn-Dixie, the report concluded, did not successfully adapt to a changing marketplace, though "not for lack of trying." Certain creditor constituencies, including shareholders and retirees, had raised these issues during the course of the bankruptcy proceedings but the committee found "no cause of action exists that could bring additional money into the estate."

Lynch, the CEO brought in shortly before the company filed bankruptcy in February 2005, in a press conference lauded company associates and creditors with their cooperation as the company made dramatic changes during its reorganization, including exiting 365 stores and six distribution centers; reducing expenses, inventories and shrink; and improving service, cleanliness and selection in stores. Lynch said he has begun talks with the board of directors to extend his employment agreement, set to expire in August, after the effective date of the reorganization. "I'm personally looking forward to a future with Winn-Dixie," Lynch said. "I enjoy the Jacksonville area and this is a great place to work."

Identical-store sales increases of 7.3% and 6.3% over the past two fiscal quarters, respectively, provide evidence the turnaround efforts have been effective, Lynch noted.

The disclosure detailed give-and-take between various creditor groups on the issue of consolidation of Winn-Dixie and its various subsidiaries. Under compromises reached last month, the 24 affiliated debtors will be treated as a single entity - a determination that according to creditors, avoided lengthy legal challenges and helped vendors and product suppliers recover around 6% more than they might have were Winn-Dixie deconsolidated. Negotiations between bondholders and retirees also netted retirees a greater recovery - and a Winn-Dixie discount card for each member of the class.

According to financial projections included with the plan, Winn-Dixie intends to increase sales from $7.8 billion in fiscal 2007 to $9.3 billion in fiscal 2011. It projects profit as a percentage of sales to slowly increase from 28% in 2007 to 28.2% by 2009; and EBITDA to increase fourfold, from $108.7 million in 2007 to $438.5 million in 2011.

Winn-Dixie projects a $53.2 million loss in 2007, but $13 million in earnings in fiscal 2008. Earnings would jump in subsequent years to $59.1 million, $103.7 million and $137.2 million.

Financial Projections for Winn-Dixie

Winn-Dixie's plan of reorganization, unveiled last week, includes a five-year projection of sales and earnings at the reorganized retailer. Though the company cautioned they are based on assumptions and are subject to change, Peter Lynch, chief executive officer, said last week he was "very confident in that plan."

FISCAL YEAR: 2007; 2008; 2009; 2010; 2011

Retail Sales: $7.29 B; $7.66 B; $8.19 B; $8.77 B; $9.29 B

Total gross profit: $2.0 M; $2.1 M; $2.3 M; $2.5 M; $2.6 M

% of retail sales: 28.0%; 28.1%; 28.2%; 28.2%; 28.2%

EBITDA: $108.7 M; $180.7 M; $272.2 M; $362.0 M; $438.5 M

Net Income (Loss): ($53.1 M); $13.1 M; $59.2 M; $103.7 M; $137.2 M