Exhibit 99.1
[A&P LOGO]
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
Vice President, Corporate Affairs
(201) 571-4495
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ANNOUNCES
RESULTS FOR THIRD QUARTER ENDED DECEMBER 4, 2004
MONTVALE, NJ - January 7, 2005 - The Great Atlantic & Pacific Tea Company, Inc.
(A&P, NYSE Symbol: GAP) announced unaudited fiscal 2004 third quarter and year
to date results for the 12 and 40 weeks ended December 4, 2004.
Sales for the third quarter were $2.52 billion, compared with $2.48 billion in
the third quarter of fiscal 2003. Comparable store sales for company-operated
stores declined 1.0% vs. year-ago. The loss for the quarter was $1.96 per share
this year versus a loss of $0.66 per share last year.
The current quarter's results from continuing operations, as shown on Schedule
1, were a loss of $73 million or $1.89 per share and were in line with last
year's results of $73 million or $1.89 per share. The current year's results
include charges totaling $37 million related to certain items that the Company
believes are of a non-operating nature. These items include $35 million related
to impairment charges on long-lived assets in its Midwest operations, $1
million for costs related to the previously announced Canadian Food Basics
settlement, $4 million related to the reorganization announced on December 9,
offset by a $3 million reversal of prior year restructuring charges. Last year's
results include charges of $60 million related to asset impairment charges on
long-lived assets in its Midwest operations. Excluding these non-operating
items, EBITDA for the quarter was $48 million as compared to $42 million for the
same period last year.
Sales for the 40 weeks year to date were $8.29 billion versus $8.18 billion in
fiscal year 2003. Comparable store sales for company-operated stores declined
0.1%. The net loss per share was $4.74 for 2004, compared with a loss of $2.51
for 2003, which included earnings of $1.60 per share from discontinued
operations. Excluding the previously mentioned non-operating items, EBITDA for
the 40 weeks of fiscal years 2004 and 2003 was $164 million and $155 million,
respectively.
Christian Haub, Chairman of the Board and Chief Executive Officer, said,
"Although we remained unprofitable overall, we maintained market share in a
difficult sales environment, while achieving our second consecutive
year-over-year increase in operating results.
"Our Canadian operations produced another profitable performance with strong
results from our fresh food marketing initiatives, and an improving trend in our
Food Basics discount operations. We completed the acquisition of 24 previously
franchised Canadian Food Basics stores, and look forward to further improving
our discount business. Our U.S. operations continued to improve despite intense
competition in all markets, as U.S. operating results again contributed to our
EBITDA growth in the quarter.
"To accelerate our return to overall profitability, we have initiated
significant organizational changes in the U.S., including the management
consolidation announced on November 4, and the subsequent reorganization of U.S.
administration, support services and operating staff announced on December 9.
This will strengthen central management control, substantially reduce costs, and
drive the implementation of our Fresh and Discount retail strategies.
"Our near-term outlook remains conservative as we expect no major upturn in
consumer confidence and spending in the U.S., and therefore no easing of
competitive pressures. We will continue to manage costs, investment and
liquidity closely, maintain our successful growth course in Canada, and
implement our U.S. retail strategies, as the benefits of our leaner organization
and cost structure materialize," Mr. Haub said.
Founded in 1859, A&P, one of the nation's first supermarket chains, is today
among North America's largest. The Company operates 650 stores in 10 states, the
District of Columbia and Ontario, Canada under the following trade names: A&P,
Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack,
Sav-A-Center, Dominion, The Barn Markets, Food Basics and Ultra Food & Drug. The
Company invites investors to listen to an audio Webcast of its quarterly
discussion of earnings by accessing a link on the "Investor Relations" page of
its Website, www.aptea.com. The live broadcast is on Friday, January 7 at 11:00
AM Eastern Time, with replays available from the afternoon of January 7 through
February 4.
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. The Company believes the presentation of this measure 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, this measure is 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. EBITDA is reconciled to Net Cash
provided by Operating Activities on Schedule 1 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.
###
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SCHEDULE 1 - GAAP EARNINGS FOR THE 12 AND 40 WEEKS ENDED DECEMBER 4, 2004 AND
NOVEMBER 29, 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND STORE DATA)
12 Weeks Ended 40 Weeks Ended
--------------------------- -----------------------------
December 4, November 29, December 4, November 29,
2004 2003 2004 2003
------------ ------------ ----------- ----------------
AS RESTATED (4) AS RESTATED (4)
Sales (1) $ 2,523,759 $ 2,484,612 $ 8,294,617 $ 8,177,893
Cost of merchandise sold (1,827,221) (1,795,687) (5,982,570) (5,874,725)
------------ ------------ ------------ ------------
Gross margin 696,538 688,925 2,312,047 2,303,168
Store operating, general and administrative expense (2) (748,447) (771,367) (2,417,084) (2,416,262)
------------ ------------ ------------ ------------
Loss from operations (51,909) (82,442) (105,037) (113,094)
Interest expense (19,218) (18,383) (68,146) (61,212)
Interest income 485 80 2,094 1,434
Minority interest in earnings of consolidated franchisees 2,815 (205) 1,097 (33)
------------ ------------ ------------ ------------
Loss from continuing operations before income taxes (67,827) (100,950) (169,992) (172,905)
(Provision for) benefit from income taxes (4,924) 28,127 (8,768) 22,360
------------ ------------ ------------ ------------
Loss from continuing operations (72,751) (72,823) (178,760) (150,545)
Discontinued operations: (3)
Income (loss) from operations of discontinued businesses, net of tax 110 (1,102) (929) (31,064)
(Loss) gain on disposal of discontinued operations, net of tax (2,702) 48,658 (2,702) 92,647
------------ ------------ ------------ ------------
(Loss) income from discontinued operations (2,592) 47,556 (3,631) 61,583
------------ ------------ ------------ ------------
Cumulative effect of change in accounting principle - FIN46R,
net of tax - - - (8,047)
------------ ------------ ------------ ------------
Net loss $ (75,343) $ (25,267) $ (182,391) $ (97,009)
============ ============ ============ ============
Net (loss) income per share - basic and diluted:
Continuing operations $ (1.89) $ (1.89) $ (4.64) $ (3.90)
Discontinued operations (0.07) 1.23 (0.10) 1.60
Cumulative effect of change in accounting principle - FIN46R - - - (0.21)
------------ ------------ ------------ ------------
Net loss per share - basic and diluted $ (1.96) $ (0.66) $ (4.74) $ (2.51)
============ ============ ============ ============
Weighted average common shares outstanding - basic 38,553,356 38,517,218 38,530,519 38,516,489
============ ============ ============ ============
Weighted average common shares outstanding - diluted 38,553,356 38,517,218 38,530,519 38,516,489
============ ============ ============ ============
Gross margin rate 27.60% 27.73% 27.87% 28.16%
Store operating, general and administrative expense rate 29.66% 31.05% 29.14% 29.55%
Depreciation and amortization $ 62,854 $ 64,622 $ 206,373 $ 213,402
============ ============ ============ ============
Reconciliation of GAAP cash flow measure to EBITDA:
Net cash provided by operating activities $ (67,439) $ (36,325) $ (15,500) $ (16,013)
Net interest expense 18,733 18,303 66,052 59,778
Deferred income taxes (2,667) (3,068) (431) (7,729)
Long lived asset / goodwill impairment charge (34,688) (60,082) (34,688) (60,082)
Working capital changes
Accounts receivable (8,157) (23,572) (39,527) (15,469)
Inventories 69,519 47,267 98,337 31,944
Prepaid expenses and other current assets 2,876 (2,207) 26,523 29,571
Accounts payable (31,472) 8,824 (79,389) (9,144)
Accrued salaries, wages, benefits and taxes 17,282 19,731 19,257 (5,263)
Other accruals 33,004 6,655 25,835 (2,114)
Other assets 10,809 (1,709) 22,666 (8,879)
Other non-current liabilities 1,839 (423) 8,353 21,297
Other, net 1,306 8,786 3,848 82,411
------------ ------------ ------------ ------------
EBITDA $ 10,945 $ (17,820) $ 101,336 $ 100,308
============ ============ ============ ============
Number of stores operated at end of quarter 650 645 650 645
============ ============ ============ ============
Number of franchised stores served at end of quarter 42 63 42 63
============ ============ ============ ============
(1) Included in sales for the 12 and 40 weeks ended December 4, 2004 were
franchisee sales of $203.5 million and $720.3 million, respectively,
compared to $216.0 million and $714.7 million, for the 12 and 40 weeks
ended November 29, 2003, respectively.
(2) During the 12 and 40 weeks ended December 4, 2004, and November 29, 2003,
the Company recorded $34.7 million and $60.1 million, respectively, in
impairment charges relating to the Midwest's long lived assets and
goodwill. These amounts were determined through internal analysis and an
external valuation performed by an independent third party appraiser,
primarily using the discounted cash flow approach.
(3) In February and March 2003, the Company decided to sell its operations
located in Northern New England, Madison and Milwaukee, Wisconsin as well
as its Eight O'Clock Coffee business. In April 2003, the Company
completed the sale of its stores in Northern New England and Madison,
Wisconsin, generating proceeds of $137.6 million and resulting in a gain
of $75.8 million ($44.0 million after tax). In November 2003, the Company
completed the sale of its Eight O'Clock Coffee business, generating
proceeds of $107.5 million and resulting in a gain of $75.1 million
($43.6 million after tax). In addition, during the third quarter of
fiscal 2003, the Company sold several of the previously closed Kohl's
stores, generating proceeds of $10.4 million and a gain of $6.4 million
($3.7 million after tax).
(4) Prior year results have been restated for (i.) revised Financial
Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities - an interpretation of 'Accounting Research
Bulletin No. 51,'" which relates to variable interest entities and, as a
result of the adoption of this standard, the Company has now consolidated
the financial results of its franchisees in Canada; (ii.) EITF Issue
03-10, "Application of EITF Issue No. 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor,
by Resellers to Sales Incentives Offered to Consumers by Manufacturers,"
which relates to the accounting for vendor supported promotions that
requires a reclassification between sales and cost of goods sold, but has
no impact on net loss; and (iii.) a change from LIFO to FIFO accounting
for certain inventories so that all inventory accounting in the Company
is on a FIFO basis.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SCHEDULE 2 - CONDENSED BALANCE SHEET DATA
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND STORE DATA)
AS RESTATED
December 4, February 28,
2004 2004
---------- ------------
Cash and short-term investments $ 177 $ 297
Other current assets 1,013 900
------- -------
Total current assets 1,190 1,197
Property-net 1,429 1,472
Other assets 129 115
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Total assets $ 2,748 $ 2,784
======= =======
Total current liabilities $ 1,180 $ 1,083
Total non-current liabilities 1,316 1,308
Stockholders' equity 252 393
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Total liabilities and stockholders' equity $ 2,748 $ 2,784
======= =======
Other Statistical Data
Total Debt and Capital Leases $ 923 $ 916
Temporary Investments 27 158
------- -------
Net Debt $ 896 $ 758
Total Retail Square Footage (in thousands) 25,648 24,724
Book Value Per Share $ 6.53 $ 10.20
For the 40 For the 40
weeks ended weeks ended
December 4, 2004 November 29, 2003
---------------- -----------------
Capital Expenditures $ 150 $ 109