Exhibit 99.1
News
The Great Atlantic & Pacific Tea Company, Inc.
2 Paragon Drive
Montvale, NJ 07645
Investor contact: William J. Moss
Vice President, Treasurer
(201) 571-4019
Press contact: Richard P. De Santa
Senior Director, Corporate Affairs
(201) 571-4495
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND FULL YEAR ENDED FEBRUARY 25, 2006
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COMPANY REPORTS FISCAL 2005 EBITDA, ADJUSTED FOR NON-OPERATING ITEMS, OF $127 MILLION, UP FROM $113 MILLION IN PRIOR YEAR
MONTVALE, NJ – May 9, 2006 – The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol: GAP) today announced its financial results for the fiscal 2005 fourth quarter and full year ended February 25, 2006.
U.S. sales for the 12 week fourth quarter were $1.6 billion, compared with $1.7 billion in the fourth quarter of fiscal 2004. Fiscal 2004 fourth quarter total sales of $2.6 billion include $853 million related to A&P Canada which was sold in August 2005. U.S. total comparable store sales increased 1.4% vs. year-ago. Net loss for the quarter was $39.1 million or $.95 per diluted share this year versus a loss of $5.7 million or $.15 per diluted share last year.
The results for the fourth quarter of fiscal years 2005 and 2004 include items the Company considers non-operating in nature that management excludes when evaluating the results of the U.S. ongoing business. These items are listed on Schedule 3 of the press release. Excluding these items, adjusted U.S. income from operations was $1.7 million in the fourth quarter of fiscal 2005 versus a loss of $18 million in last year’s fourth quarter. Adjusted U.S. ongoing operating EBITDA, which is reconciled to net cash from operating activities on Schedule 4, was $41 million in the fourth quarter of fiscal 2005 versus $28 million in last year’s fourth quarter.
U.S. sales for the 52 weeks of fiscal 2005 were $7.0 billion versus $7.3 billion in fiscal 2004. Total sales of $8.7 billion for this year and $10.8 billion for last year include sales of $1.7 billion and $3.5 billion, respectively, related to A&P Canada which was sold in August 2005. U.S. total comparable store sales increased 0.5%. Net income for the year was $393 million or $9.64 per diluted share which included the gain on the sale of Canada, compared with a loss of $188 million or $4.88 per diluted share for fiscal 2004.
Fiscal 2005 and fiscal 2004 results include the non-operating items listed on Schedule 3 of the press release. Excluding these items, adjusted U.S. loss from operations was $65 million in fiscal 2005 versus a loss of $89 million in fiscal 2004. Adjusted U.S. ongoing operating EBITDA, which is reconciled to net cash from operating activities on Schedule 4, was $127 million in fiscal 2005 versus $113 million in fiscal 2004.
Christian Haub, Executive Chairman of The Board of Directors, said, “Our successful strategic divestiture and reorganization initiatives in Fiscal 2005 strengthened our financial position, reduced operating costs and facilitated the launch of dynamic retail strategies to restore profitability and stimulate growth. The sale of A&P Canada transformed our balance sheet and provided a significant financial stake in Metro, Inc., an already successful entity that was further strengthened by the addition of our Canadian store operations.
“In the U.S., our reduction of overheads and improved operating and merchandising execution positively impacted fourth quarter results, and combined with exciting store development plans, set the stage for continuing financial progress through this fiscal year and beyond. In addition, our improved performance and financial resources also present the opportunity to participate in the expected consolidation of our industry.” Mr. Haub said.
Eric Claus, President & Chief Executive Officer, said “The dedicated efforts of our new leadership team and hard-working associates generated positive operating trends in the second half of Fiscal 2005. Our mid-year headquarters and field reorganization lowered costs and upgraded retail execution, producing solid improvements in identical store sales and ongoing operating EBITDA in the fourth quarter.
“In executing our new strategic plan, we will accelerate development of the outstanding Fresh and Discount store prototypes we recently launched successfully in the Northeast, and introduce a significantly improved Gourmet format in New York City. In the Midwest, our improving Farmer Jack operations will be further revitalized with a quality and value emphasis refreshing its great tradition in the marketplace; while in New Orleans, our Sav-A-Center team goes forward after its remarkable and successful rebuilding effort in the wake of Hurricane Katrina – an accomplishment that has been a tremendous inspiration to our entire A&P family.
Mr. Claus concluded, “In Fiscal 2006, our team will maintain an unwavering focus on profitable store operations including both development and strict cost management, as we further intensify the drive toward our goal of profitability in Fiscal 2007, and dynamic growth thereafter.”
Founded in 1859, A&P is one of the nation’s first supermarket chains. The Company operates 405 stores in 9 states and the District of Columbia under the following trade names: A&P, Waldbaum’s, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center and Food Basics.
The Company invites investors and other interested parties to listen to a live audio Webcast to be held at 11:00 AM Eastern Time today, at which members of the Company’s senior management team will discuss the Company’s fourth quarter and full year financial results. The Webcast may be accessed through a link on the “Investors” page of the Company’s Website, www.aptea.com. Listeners who cannot participate in the live broadcast will be able to hear a recorded replay of the broadcast beginning this afternoon and available until June 6, 2006.
Effective March 28, 2003, the Securities and Exchange Commission (“SEC”) adopted new rules related to disclosure of certain financial measures not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”). Such new rules require all public companies to provide certain disclosures in press release and SEC filings related to non-GAAP financial measures. We use the non-GAAP measure “EBITDA” to evaluate the Company’s liquidity and it is among the primary measures used by management for planning and forecasting of future periods. EBITDA is defined as earnings before interest, taxes, depreciation, amortization, minority interest, equity in earnings of Metro, Inc., discontinued operations and the gain on the sale of A&P Canada. Ongoing, operating EBITDA is defined as EBITDA adjusted for items the Company considers non-operating in nature that management excludes when evaluating the results of the U.S. ongoing business. The Company believes the presentation of these measures is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by the Company’s management and makes it easier to compare the Company’s results with other companies that have different financing and capital structures or tax rates. In addition, these measures are also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the results of the Company to other companies in its industry. Ongoing, operating EBITDA is reconciled to Net Cash provided by Operating Activities on Schedule 4 of this release.
This release contains forward-looking statements about the future performance of the Company, which are based on Management’s assumptions and beliefs in light of the information currently available to it. The Company assumes no obligation to update the information contained herein. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements including, but not limited to: competitive practices and pricing in the food industry generally and particularly in the Company’s principal markets; the Company’s relationships with its employees and the terms of future collective bargaining agreements; the costs and other effects of legal and administrative cases and proceedings; the nature and extent of continued consolidation in the food industry; changes in the financial markets which may affect the Company’s cost of capital and the ability of the Company to access capital; supply or quality control problems with the Company’s vendors; and changes in economic conditions which affect the buying patterns of the Company’s customers.
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The Great Atlantic & Pacific Tea Company, Inc.
Schedule 1 – GAAP Earnings for the 12 and 52 weeks ended February 25, 2006 and February 26, 2005
(Unaudited)
(In thousands, except share amounts and store data)
| 12 Weeks Ended | 52 Weeks Ended | ||||||||||||
| February 25, 2006 | February 26, 2005 | February 25, 2006 | February 26, 2005 | ||||||||||
| Sales | $ | 1,607,523 | $ | 2,560,294 | $ | 8,740,347 | $ | 10,854,911 | |||||
| Cost of merchandise sold | (1,121,616 | ) | (1,831,201 | ) | (6,235,275 | ) | (7,813,771 | ) | |||||
| Gross margin | 485,907 | 729,093 | 2,505,072 | 3,041,140 | |||||||||
| Store operating, general and administrative expense | (541,802 | ) | (715,832 | ) | (2,825,730 | ) | (3,114,062 | ) | |||||
| (Loss) income from operations | (55,895 | ) | 13,261 | (320,658 | ) | (72,922 | ) | ||||||
| (Loss) gain on sale of Canadian operations | (339 | ) | — | 912,129 | — | ||||||||
| Interest expense | (15,465 | ) | (27,107 | ) | (92,248 | ) | (114,107 | ) | |||||
| Interest income | 4,311 | 682 | 13,457 | 2,776 | |||||||||
| Minority interest in earnings of consolidated franchisees | — | (325 | ) | (1,131 | ) | 772 | |||||||
| Equity in earnings of Metro, Inc. | 4,404 | — | 7,801 | — | |||||||||
| (Loss) income from continuing operations before income taxes | (62,984 | ) | (13,489 | ) | 519,350 | (183,481 | ) | ||||||
| Benefit from (provision for) income taxes | 23,958 | 8,240 | (128,927 | ) | (528 | ) | |||||||
| (Loss) income from continuing operations | (39,026 | ) | (5,249 | ) | 390,423 | (184,009 | ) | ||||||
| Discontinued operations: | |||||||||||||
| (Loss) income from operations of discontinued businesses, net of tax | (78 | ) | (458 | ) | 1,626 | (1,387 | ) | ||||||
| Gain (loss) on disposal of discontinued operations, net of tax | 4 | — | 581 | (2,702 | ) | ||||||||
| (Loss) income from discontinued operations | (74 | ) | (458 | ) | 2,207 | (4,089 | ) | ||||||
| Net (loss) income | $ | (39,100 | ) | $ | (5,707 | ) | $ | 392,630 | $ | (188,098 | ) | ||
| Net (loss) income per share – basic: | |||||||||||||
| Continuing operations | $ | (0.95 | ) | $ | (0.14 | ) | $ | 9.69 | $ | (4.77 | ) | ||
| Discontinued operations | (0.00 | ) | (0.01 | ) | 0.05 | (0.11 | ) | ||||||
| Net (loss) income per share – basic | $ | (0.95 | ) | $ | (0.15 | ) | $ | 9.74 | $ | (4.88 | ) | ||
| Net (loss) income per share – diluted: | |||||||||||||
| Continuing operations | $ | (0.95 | ) | $ | (0.14 | ) | $ | 9.59 | $ | (4.77 | ) | ||
| Discontinued operations | (0.00 | ) | (0.01 | ) | 0.05 | (0.11 | ) | ||||||
| Net (loss) income per share – diluted | $ | (0.95 | ) | $ | (0.15 | ) | $ | 9.64 | $ | (4.88 | ) | ||
| Weighted average common shares outstanding – basic | 41,042,838 | 38,651,664 | 40,301,132 | 38,558,598 | |||||||||
| Weighted average common shares outstanding – diluted | 41,042,838 | 38,651,664 | 40,725,942 | 38,558,598 | |||||||||
| Gross margin rate | 30.23 | % | 28.48 | % | 28.67 | % | 28.02 | % | |||||
| Store operating, general and administrative expense rate | 33.70 | % | 27.96 | % | 32.33 | % | 28.69 | % | |||||
| United States depreciation and amortization | $ | 43,287 | $ | 46,057 | $ | 196,387 | $ | 201,987 | |||||
| Canada depreciation and amortization | — | 16,365 | 10,942 | 66,118 | |||||||||
| Total A&P depreciation and amortization | $ | 43,287 | $ | 62,422 | $ | 207,329 | $ | 268,105 | |||||
| Number of stores operated at end of quarter | 405 | 647 | 405 | 647 | |||||||||
| Number of franchised stores served at end of quarter | — | 42 | — | 42 | |||||||||
The Great Atlantic & Pacific Tea Company, Inc.
Schedule 2 – Condensed Balance Sheet Data
(Unaudited)
(In millions, except per share and store data)
| February 25, 2006 | February 26, 2005 | |||||
| Cash and short-term investments | $ | 230 | $ | 258 | ||
| Other current assets | 980 | 907 | ||||
| Total current assets | 1,210 | 1,165 | ||||
| Property-net | 898 | 1,516 | ||||
| Equity investment in Metro, Inc. | 339 | — | ||||
| Other assets | 52 | 121 | ||||
| Total assets | $ | 2,499 | $ | 2,802 | ||
| Total current liabilities | $ | 610 | $ | 1,078 | ||
| Total non-current liabilities | 1,217 | 1,490 | ||||
| Stockholders' equity | 672 | 234 | ||||
| Total liabilities and stockholders' equity | $ | 2,499 | $ | 2,802 | ||
| Other Statistical Data | ||||||
| Total Debt and Capital Leases | $ | 282 | $ | 697 | ||
| Total Long Term Real Estate Liabilities | 297 | 328 | ||||
| Restricted Cash, Temporary Investments and Marketable Securities | (465 | ) | (104 | ) | ||
| Net Debt | $ | 114 | $ | 921 | ||
| Total Retail Square Footage (in thousands) | 16,509 | 25,583 | ||||
| Book Value Per Share | $ | 16.32 | $ | 6.03 | ||
| For the 52 | For the 52 | |||||
| weeks ended | weeks ended | |||||
| February 25, 2006 | February 26, 2005 | |||||
| Capital Expenditures | $ | 191 | $ | 216 | ||
The Great Atlantic & Pacific Tea Company, Inc.
Schedule 3 – Reconciliation of GAAP (Loss) Income from Operations to Adjusted (Loss) Income from Operations
for the 12 and 52 weeks ended February 25, 2006 and February 26, 2005
(Unaudited)
(In thousands, except share amounts and store data)
| 12 Weeks Ended | 52 Weeks Ended | ||||||||||||
| February 25, | February 26, | February 25, | February 26, | ||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||
| As reported (loss) income from operations | $ | (55,895 | ) | $ | 13,261 | $ | (320,658 | ) | $ | (72,922 | ) | ||
| Adjustments: | 10,375 | — | 115,271 | — | |||||||||
| Midwest exit costs | |||||||||||||
| Net restructuring costs, primarily related to the sale of the U.S. distribution operations to C&S | 29,241 | 7,856 | 118,648 | 9,959 | |||||||||
| Long-lived asset impairment | — | — | 17,728 | 34,688 | |||||||||
| Early extinguishment of debt and write-off of deferred financing fees | — | — | 33,031 | (764 | ) | ||||||||
| Impact of Hurricane Katrina | 867 | — | 19,034 | — | |||||||||
| Workers compensation state assessment charges | 9,689 | — | 9,689 | — | |||||||||
| Self-Insurance reserve adjustment | — | 27,256 | — | 27,256 | |||||||||
| Employee benefit costs | — | — | — | (8,600 | ) | ||||||||
| Real estate related activity | 7,410 | (23,798 | ) | (14,863 | ) | (22,536 | ) | ||||||
| Visa / Mastercard lawsuit settlement | — | — | (1,547 | ) | — | ||||||||
| Canadian dollar hedge | — | — | 15,446 | — | |||||||||
| Canada income from operations | — | (42,194 | ) | (57,224 | ) | (56,321 | ) | ||||||
| Total adjustments | 57,582 | (30,880 | ) | 255,213 | (16,318 | ) | |||||||
| Adjusted United States income (loss) from operations | $ | 1,687 | $ | (17,619 | ) | $ | (65,445 | ) | $ | (89,240 | ) | ||
| As reported United States depreciation and amortization | $ | 43,287 | $ | 46,057 | $ | 196,387 | $ | 201,987 | |||||
| Adjustments: | |||||||||||||
| Accelerated depreciation on leasehold improvements | (4,250 | ) | — | (4,250 | ) | — | |||||||
| Adjusted United States depreciation and amortization | $ | 39,037 | $ | 46,057 | $ | 192,137 | $ | 201,987 | |||||
The Great Atlantic & Pacific Tea Company, Inc.
Schedule 4 – Reconciliation of GAAP Net Cash (Used In) Provided By Operating Activities to Adjusted EBITDA
for the 12 and 52 weeks ended February 25, 2006 and February 26, 2005
(Unaudited)
(In thousands, except share amounts and store data)
| 12 Weeks Ended | 52 Weeks Ended | ||||||||||||
| February 25, | February 26, | February 25, | February 26, | ||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||
| Net cash (used in) provided by operating activities | $ | 79,808 | $ | 125,565 | $ | (80,715 | ) | $ | 114,458 | ||||
| Adjustments to calculate EBITDA: | |||||||||||||
| Net interest expense | 11,154 | 26,425 | 78,791 | 111,331 | |||||||||
| Asset disposition initiatives | (7,696 | ) | (261 | ) | (108,068 | ) | 1,448 | ||||||
| Restructuring charge | (14,318 | ) | — | (77,054 | ) | — | |||||||
| Long lived asset impairment charges | (5,067 | ) | (5,111 | ) | (34,175 | ) | (43,317 | ) | |||||
| Loss on extinguishment of debt | — | — | (28,623 | ) | — | ||||||||
| Loss on derivatives | — | — | (15,446 | ) | — | ||||||||
| (Loss) gain on disposal of owned property | (1,049 | ) | 32,085 | 24,787 | 28,704 | ||||||||
| (Benefit from) provision for income taxes | (23,958 | ) | (8,240 | ) | 128,927 | 528 | |||||||
| Decrease (increase) in income tax reserve | 21,564 | 1,801 | (98,079 | ) | 1,370 | ||||||||
| Other share based awards | (2,008 | ) | — | (8,978 | ) | — | |||||||
| Working capital changes | |||||||||||||
| Accounts receivable | 30,360 | 10,304 | 56,130 | (29,223 | ) | ||||||||
| Inventories | (76,089 | ) | (85,723 | ) | (109,521 | ) | 12,614 | ||||||
| Prepaid expenses and other current assets | (16,475 | ) | (20,386 | ) | (585 | ) | 6,024 | ||||||
| Accounts payable | 11,625 | 33,094 | 101,342 | (46,295 | ) | ||||||||
| Accrued salaries, wages, benefits and taxes | (4,738 | ) | 4,913 | 31,414 | 24,170 | ||||||||
| Other accruals | (40,373 | ) | 8,286 | (48,931 | ) | 34,121 | |||||||
| Other assets | 7,300 | (1,638 | ) | 7,344 | 19,041 | ||||||||
| Other non-current liabilities | 16,588 | (49,431 | ) | 76,309 | (42,591 | ) | |||||||
| Other, net | 764 | 4,000 | (8,198 | ) | 2,800 | ||||||||
| Total A&P EBITDA | (12,608 | ) | 75,683 | (113,329 | ) | 195,183 | |||||||
| Adjustments: | |||||||||||||
| Midwest exit costs | 10,375 | — | 115,271 | — | |||||||||
| Net restructuring costs, primarily related to the sale of the U.S. distribution operations to C&S | 24,991 | 7,856 | 114,398 | 9,959 | |||||||||
| Long-lived asset impairment | — | — | 17,728 | 34,688 | |||||||||
| Early extinguishment of debt and write-off of deferred financing fees | — | — | 33,031 | (764 | ) | ||||||||
| Impact of Hurricane Katrina | 867 | — | 19,034 | — | |||||||||
| Workers compensation state assessment charges | 9,689 | — | 9,689 | — | |||||||||
| Self-Insurance reserve adjustment | — | 27,256 | — | 27,256 | |||||||||
| Employee benefit costs | — | — | — | (8,600 | ) | ||||||||
| Real estate related activity | 7,410 | (23,798 | ) | (14,863 | ) | (22,536 | ) | ||||||
| Visa / Mastercard lawsuit settlement | — | — | (1,547 | ) | — | ||||||||
| Canadian dollar hedge | — | — | 15,446 | — | |||||||||
| Canada EBITDA | — | (58,559 | ) | (68,166 | ) | (122,439 | ) | ||||||
| Total adjustments | 53,332 | (47,245 | ) | 240,021 | (82,436 | ) | |||||||
| Adjusted United States ongoing operating EBITDA | $ | 40,724 | $ | 28,438 | $ | 126,692 | $ | 112,747 | |||||