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 SECOND
QUARTER ENDED SEPTEMBER 10, 2005
MONTVALE, NJ - October 18, 2005 - The Great Atlantic & Pacific Tea Company, Inc.
(A&P, NYSE Symbol: GAP) announced unaudited fiscal 2005 second quarter and year
to date results for the 12 and 28 weeks ended September 10, 2005.
Sales for the second quarter were $2.2 billion, compared with $2.5 billion in
the second quarter of fiscal 2004. Comparable store sales in the U.S. declined
1.1% vs. year-ago. Because of the impact of Hurricane Katrina, comparable store
sales for the quarter and year to date exclude the sales of the New Orleans
business. Net income for the quarter was $592 million or $14.40 per diluted
share this year versus a loss of $1.67 per diluted share last year.
The current quarter's results include a gain of $919 million that relates to the
sale of A&P Canada less charges totaling $152 million for certain items that the
Company believes are of a non-operating nature. These items include $71 million
related to Midwest exit costs, $29 million related to early extinguishment of
debt, $25 million in restructuring costs including the sale of the distribution
operations to C&S, $12 million related to the Canadian hedging agreement, $10
million related to impairment charges on long-lived assets and $5 million
related to Hurricane Katrina. Last year's results include a one time charge of
$25 million related to the Canadian Food Basics settlement. Excluding these
non-operating items and the gain on the sale of A&P Canada, EBITDA for the
quarter was $53 million as compared to $48 million for the same period last
year. EBITDA for the Company's Canadian business, sold in August 2005, was $17
million for its results for an 8 week period in the current quarter versus $26
million for 12 weeks last year.
Sales for the 28 weeks year to date were $5.6 billion versus $5.8 billion in
fiscal year 2004. For the first half of the year, U.S. comparable store sales,
excluding New Orleans, declined 0.7%. Net income for year to date 2005 was $503
million or $12.47 per diluted share, compared with a loss of $2.78 per diluted
share for 2004.
Excluding previously announced non-operating items and the gain on the sale of
A&P Canada, EBITDA for the first half of fiscal years 2005 and 2004 was $155
million and $129 million, respectively. This includes $74 million of EBITDA for
the 24 weeks results of the Company's Canadian business this year versus $70
million for a 28 week period last year.
Christian Haub, Executive Chairman of the Board, said, "We made major progress
during the quarter in restructuring the company and forming the basis for a new
and sustainable A&P. Proceeds from the sale of A&P Canada completed during the
quarter are being utilized to strengthen our balance sheet and improve our
stores; and our investment position and relationship with METRO, Inc. in Canada
is generating income and other benefits that we believe have significant upside
potential going forward.
"In addition, the previously announced transfer of distribution operations to
C&S Wholesale Grocers proceeded, as we substantially reduce costs, improve
supply chain performance, and focus management and other resources strictly on
our retail business.
"Overall, our substantially improved balance sheet and lower cost structure now
positions us to restore profitability to our business, and to consider strategic
opportunities that are emerging in our industry," Mr. Haub said.
Eric Claus, President & Chief Executive Officer, said, "Our actions in the first
half set the stage for a leaner, more efficient and effective company going
forward. And we continue to move aggressively to reduce costs and improve
productivity. As the second half progresses, these actions will enable a retail
strategy that positions our conventional, fresh and discount store formats to
not only build our own loyal customer base, but also attract new customers. It
is the effective execution of these actions that will continue A&P's turnaround
to creating sustained profitability."
Founded in 1859, A&P is one of the nation's first supermarket chains. The
Company operates 417 stores in 10 states 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 10:00 AM Eastern Time today, at which members of the
Company's senior management team will discuss the Company's second quarter
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 November 15, 2005.
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, discontinued operations and the gain on the
sale of A&P Canada. 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 28 WEEKS ENDED SEPTEMBER 10,
2005 AND SEPTEMBER 11, 2004 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND STORE DATA)
12 Weeks Ended 28 Weeks Ended
------------------------------ -------------------------------
September 10, September 11, September 10, September 11,
2005 2004 2005 2004
------------- ------------- ------------- -------------
AS RESTATED (1) AS RESTATED (1)
Sales $ 2,168,249 $ 2,490,559 $ 5,551,882 $ 5,770,858
Cost of merchandise sold (1,551,585) (1,795,046) (3,997,260) (4,155,349)
------------ ------------ ------------ ------------
Gross margin 616,664 695,513 1,554,622 1,615,509
Store operating, general and
administrative expense (761,730) (734,365) (1,737,828) (1,655,439)
------------ ------------ ------------ ------------
Loss from operations (2) (145,066) (38,852) (183,206) (39,930)
Gain on sale of Canadian operations 919,140 -- 918,551 --
Interest expense (25,262) (27,734) (61,385) (62,126)
Interest income 3,157 768 4,343 1,609
Minority interest in earnings of
consolidated franchisees 405 (342) (1,131) (1,718)
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 752,374 (66,160) 677,172 (102,165)
(Provision for) benefit from income taxes (160,103) 1,614 (173,968) (3,844)
------------ ------------ ------------ ------------
Income (loss) from continuing operations 592,271 (64,546) 503,204 (106,009)
Discontinued operations:
(Loss) income from operations of
discontinued businesses, net of tax (296) 344 (464) (1,039)
------------ ------------ ------------ ------------
(Loss) income from discontinued operations (296) 344 (464) (1,039)
------------ ------------ ------------ ------------
Net income (loss) $ 591,975 $ (64,202) $ 502,740 $ (107,048)
============ ============ ============ ============
Net income (loss) per share - basic:
Continuing operations $ 14.65 $ (1.68) $ 12.65 $ (2.75)
Discontinued operations (0.01) 0.01 (0.01) (0.03)
------------ ------------ ------------ ------------
Net income (loss) per share - basic $ 14.64 $ (1.67) $ 12.64 $ (2.78)
============ ============ ============ ============
Net income (loss) per share - diluted:
Continuing operations $ 14.41 $ (1.68) $ 12.48 $ (2.75)
Discontinued operations (0.01) 0.01 (0.01) (0.03)
------------ ------------ ------------ ------------
Net income (loss) per share - diluted $ 14.40 $ (1.67) $ 12.47 $ (2.78)
============ ============ ============ ============
Weighted average common shares
outstanding - basic 40,434,194 38,521,685 39,758,780 38,520,732
============ ============ ============ ============
Weighted average common shares
outstanding - diluted 41,107,153 38,521,685 40,325,089 38,520,732
============ ============ ============ ============
Gross margin rate 28.44% 27.93% 28.00% 27.99%
Store operating, general and
administrative expense rate 35.13% 29.49% 31.30% 28.69%
Depreciation and amortization $ 45,893 $ 62,190 $ 117,768 $ 143,036
============ ============ ============ ============
Reconciliation of GAAP cash flow measure to EBITDA:
Net cash (used in) provided by operating activities $ (69,432) $ 16,167 $ (68,201) $ 55,013
Net interest expense 22,105 26,966 57,042 60,517
Asset disposition initiatives (69,256) 680 (84,681) (381)
Restructuring charge (12,490) 0 (61,039) 0
Loss on extinguishment of debt (28,623) 0 (28,623) 0
Loss on derivatives (12,504) 0 (15,446) 0
Provision for (benefit from) income taxes 160,103 (1,614) 173,968 3,844
Other non-current income taxes (137,228) 0 (137,228) 0
Deferred income taxes 5,430 3,248 0 2,236
Working capital changes
Accounts receivable 43,520 (6,530) 27,043 (31,370)
Inventories (48,232) 5,996 (27,485) 28,818
Prepaid expenses and other current assets 4,742 8,681 7,521 23,568
Accounts payable 77,876 7,718 71,052 (47,917)
Accrued salaries, wages, benefits and taxes (14,931) (4,838) 4,123 1,975
Other accruals (60,394) (35,068) (53,117) (7,169)
Other assets (136) 10,828 298 10,466
Other non-current liabilities 43,661 (7,648) 55,350 4,767
Other, net (3,384) (1,248) 13,985 (1,261)
------------ ------------ ------------ ------------
EBITDA $ (99,173) $ 23,338 $ (65,438) $ 103,106
============ ============ ============ ============
Number of stores operated at end of quarter 417 630 417 630
============ ============ ============ ============
Number of franchised stores served at end of quarter -- 65 -- 65
============ ============ ============ ============
(1) As previously reported, prior year results have been restated for
changes in our accounting for leases primarily to correct the Company's
accounting for landlord allowances.
(2) Loss from operations included charges totaling $152 million and $220
million for the 12 and 28 weeks ended September 10, 2005, respectively,
related to certain items that the Company believes are of a non-operating
nature. For the 12 and 28 weeks ended September 10, 2005, these items
included $25 million and $75 million in restructuring costs, respectively,
primarily related to the sale of the U.S. distribution operations to C&S,
$71 million and $86 million, respectively, related to Midwest exit costs,
$10 million related to long-lived asset impairment for both periods
presented, $12 million and $15 million, respectively, related to the
Canadian dollar hedge, $29 million related to the early extinguishment of
debt for both periods presented, and $5 million relating to the impact of
Hurricane Katrina on our operations for both periods presented.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
Schedule 2 - Condensed Balance Sheet Data
(Unaudited)
(In millions, except per share and store data)
September 10, 2005 February 26, 2005
------------------- ------------------
Cash and short-term investments $363 $258
Other current assets 984 907
------------------- ------------------
Total current assets 1,347 1,165
Property-net 950 1,516
Equity investment in Metro, Inc. 327 0
Other assets 47 121
------------------- ------------------
Total assets $2,671 $2,802
=================== ==================
Total current liabilities $698 $1,078
Total non-current liabilities 1,207 1,490
Stockholders' equity 766 234
------------------- ------------------
Total liabilities and stockholders' equity $2,671 $2,802
=================== ==================
Other Statistical Data
Total Debt and Capital Leases $284 $697
Total Long Term Real Estate Liabilities $277 328
Temporary Investments and Marketable Securities (532) (104)
------------------- ------------------
Net Debt $29 $921
Total Retail Square Footage (in thousands) 17,009 25,583
Book Value Per Share $18.77 $6.03
For the 28 For the 28
weeks ended weeks ended
September 10, 2005 September 11, 2004
------------------- ------------------
Capital Expenditures $110 $107