NEWS
[A&P LOGO]
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 3, 2005
MONTVALE, NJ - January 6, 2006 - The Great Atlantic & Pacific Tea Company, Inc.
(A&P, NYSE Symbol: GAP) announced unaudited fiscal 2005 third quarter and year
to date results for the 12 and 40 weeks ended December 3, 2005.
For the third quarter, U.S. sales were $1.58 billion, compared with $1.67
billion in the third quarter of fiscal 2004. Fiscal 2004 third quarter total
sales of $2.52 billion include $850 million related to A&P Canada which was sold
in August 2005. U.S. total comparable store sales increased 1.8% vs. year-ago.
Excluding New Orleans, U.S. comparable store sales decreased 0.3% vs. year-ago.
Net loss for the quarter was $71 million or $1.74 per diluted share this year
versus a loss of $75 million or $1.96 per diluted share last year.
Reported EBITDA for the third quarter was negative $35 million this year versus
a positive $16 million for the third quarter of fiscal 2004. EBITDA for both
quarters includes items the Company considers non-operating in nature that
management excludes when evaluating the results of the U.S. on-going business.
The current quarter includes a $2 million benefit related to the Visa/Mastercard
lawsuit settlement, charges of $19 million related to Midwest operations exit
costs, net charges of $15 million in restructuring costs relating to the cost
reduction initiatives within administration and supply and logistics, charges of
$8 million related to impairment charges on long-lived assets, charges of $13
million related to store closures in New Orleans as a result of Hurricane
Katrina, charges of $3 million related to early extinguishment of debt and write
off of deferred financing fees for the prior credit facility and $4 million of
real estate related losses. Fiscal 2004 third quarter results include $27
million from A&P Canada, $9 million in one-time savings in employee benefit
costs, charges of $35 million related to impairment on long-lived assets, $1
million in net restructuring costs and $2 million of real estate related losses.
For the 40 weeks year to date, U.S. sales were $5.41 billion versus $5.61
billion in fiscal 2004. Total sales of $7.13 billion for the 40 weeks year to
date and $8.29 billion in fiscal 2004 include $1.72 billion and $2.68 billion in
sales, respectively, related to A&P Canada which was sold in August 2005. U.S.
total comparable store sales were unchanged from last year. Excluding New
Orleans, U.S. comparable store sales decreased 0.6% vs. year-ago. Net income for
the 40 weeks year to date was $432 million or $10.62 per diluted share which
included the gain on the sale of Canada, compared with a loss of $182 million or
$4.74 per diluted share for fiscal 2004.
Reported EBITDA for the 40 weeks year to date and fiscal 2004 was negative $101
million and positive $120 million, respectively. EBITDA for the 40 weeks year to
date includes $68 million from A&P Canada, a $2 million benefit related to the
Visa/Mastercard settlement, $22 million of real estate related gains, charges of
$105 million related to Midwest operations exit costs, $89 million in net
restructuring costs, charges of $18 million related to impairment charges on
long-lived assets, charges of $18 million related to Hurricane Katrina, charges
of $15 million related to the Canadian hedging agreement and charges of $33
million for early extinguishment of debt and write off of deferred financing
fees related to the prior credit facility. EBITDA for fiscal 2004 includes $64
million from A&P Canada, $9 million in one-time savings in employee benefit
costs, charges of $35 million related to impairment on long-lived assets, $2
million in net restructuring costs and $1 million of real estate related losses.
Christian Haub, Executive Chairman, said, "I am very encouraged by the progress
generated by our new management team in both reducing costs and improving sales
trends, especially through the latter stages of the third quarter. Accordingly,
our results, excluding special items, were significantly improved, a positive
sign that we are on track to achieve our profitability objectives as planned."
Eric Claus, President & Chief Executive Officer, said "I'm very proud of our
team's execution of key cost management, operating and selling strategies in the
third quarter. Our store level initiatives are clearly resonating with
customers, resulting in improved sales. These positive outcomes at such an early
stage of our rebuilding process bode well for the achievement of ongoing sales
momentum, and progress toward overall profitability by fiscal 2007.
"Going forward, we plan to continue to improve operating results by further
reducing costs, while marketing aggressively and investing to bring our store
facilities to new quality standards both on the fresh and discount sides." Mr.
Claus said.
Founded in 1859, A&P is one of the nation's first supermarket chains. The
Company operates 407 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 third 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 February 3, 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. 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 3, 2005 AND DECEMBER 4, 2004
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND STORE DATA)
12 Weeks Ended
-------------------------------------------
December 3, 2005 December 4, 2004
---------------- ----------------
AS RESTATED (1)
Sales $ 1,580,942 $ 2,523,759
Cost of merchandise sold (1,116,399) (1,827,221)
----------- -----------
Gross margin 464,543 696,538
Store operating, general and administrative expense (546,100) (742,791)
----------- -----------
Loss from operations (2) (81,557) (46,253)
(Loss) gain on sale of Canadian operations (6,083) -
Interest expense (15,398) (24,874)
Interest income 4,803 485
Minority interest in earnings of consolidated franchisees - 2,815
Equity in earnings of Metro, Inc. 3,397 -
----------- -----------
(Loss) income from continuing operations before income taxes (94,838) (67,827)
Benefit from (provision for) income taxes 21,083 (4,924)
----------- -----------
(Loss) income from continuing operations (73,755) (72,751)
Discontinued operations:
Income (loss) from operations of discontinued businesses, net of tax 1,972 110
Gain (loss) on disposal of discontinued operations, net of tax 577 (2,702)
----------- -----------
Income (loss) from discontinued operations 2,549 (2,592)
----------- -----------
Net (loss) income $ (71,206) $ (75,343)
=========== ===========
Net (loss) income per share - basic:
Continuing operations $ (1.80) $ (1.89)
Discontinued operations 0.06 (0.07)
----------- -----------
Net (loss) income per share - basic $ (1.74) $ (1.96)
=========== ===========
Net (loss) income per share - diluted:
Continuing operations $ (1.80) $ (1.89)
Discontinued operations 0.06 (0.07)
----------- -----------
Net (loss) income per share - diluted $ (1.74) $ (1.96)
=========== ===========
Weighted average common shares outstanding - basic 40,997,714 38,553,356
=========== ===========
Weighted average common shares outstanding - diluted 40,997,714 38,553,356
=========== ===========
Gross margin rate 29.38% 27.60%
Store operating, general and administrative expense rate 34.54% 29.43%
Depreciation and amortization $ 46,274 $ 62,647
=========== ===========
Reconciliation of GAAP cash flow measure to EBITDA:
Net cash used in operating activities $ (92,322) $ (66,120)
Net interest expense 10,595 24,389
Asset disposition initiatives (15,691) 2,090
Restructuring charge (1,697) 0
Long lived asset impairment charges (17,966) (35,498)
Loss on extinguishment of debt 0 0
Loss on derivatives 0 0
(Loss) gain on disposal of owned property (1,591) (2,532)
(Benefit from) provision for income taxes (21,083) 4,924
Income taxes 17,585 (2,667)
Other share based awards (2,043) 0
Working capital changes
- -----------------------
Accounts receivable (1,273) (8,157)
Inventories (5,947) 69,519
Prepaid expenses and other current assets 8,369 2,842
Accounts payable 18,665 (31,472)
Accrued salaries, wages, benefits and taxes 32,029 17,282
Other accruals 44,559 33,004
Other assets (254) 10,213
Other non-current liabilities 4,371 2,073
Other, net (11,589) (3,496)
----------- -----------
EBITDA $ (35,283) $ 16,394
=========== ===========
Number of stores operated at end of quarter 407 650
=========== ===========
Number of franchised stores served at end of quarter - 42
=========== ===========
40 Weeks Ended
------------------------------------------
December 3, 2005 December 4, 2004
---------------- ----------------
AS RESTATED (1)
Sales $ 7,132,824 $ 8,294,617
Cost of merchandise sold (5,113,659) (5,982,570)
----------- -----------
Gross margin 2,019,165 2,312,047
Store operating, general and administrative expense (2,283,928) (2,398,230)
----------- -----------
Loss from operations (2) (264,763) (86,183)
(Loss) gain on sale of Canadian operations 912,468 -
Interest expense (76,783) (87,000)
Interest income 9,146 2,094
Minority interest in earnings of consolidated franchisees (1,131) 1,097
Equity in earnings of Metro, Inc. 3,397 -
----------- -----------
(Loss) income from continuing operations before income taxes 582,334 (169,992)
Benefit from (provision for) income taxes (152,885) (8,768)
----------- -----------
(Loss) income from continuing operations 429,449 (178,760)
Discontinued operations:
Income (loss) from operations of discontinued businesses, net of tax 1,704 (929)
Gain (loss) on disposal of discontinued operations, net of tax 577 (2,702)
----------- -----------
Income (loss) from discontinued operations 2,281 (3,631)
----------- -----------
Net (loss) income $ 431,730 $ (182,391)
=========== ===========
Net (loss) income per share - basic:
Continuing operations $ 10.71 $ (4.64)
Discontinued operations 0.06 (0.10)
----------- -----------
Net (loss) income per share - basic $ 10.77 $ (4.74)
=========== ===========
Net (loss) income per share - diluted:
Continuing operations $ 10.56 $ (4.64)
Discontinued operations 0.06 (0.10)
----------- -----------
Net (loss) income per share - diluted $ 10.62 $ (4.74)
=========== ===========
Weighted average common shares outstanding - basic 40,075,391 38,530,519
=========== ===========
Weighted average common shares outstanding - diluted 40,634,565 38,530,519
=========== ===========
Gross margin rate 28.31% 27.87%
Store operating, general and administrative expense rate 32.02% 28.91%
Depreciation and amortization $ 164,042 $ 205,683
=========== ===========
Reconciliation of GAAP cash flow measure to EBITDA:
Net cash used in operating activities $ (160,523) $ (11,107)
Net interest expense 67,637 84,906
Asset disposition initiatives (100,372) 1,709
Restructuring charge (62,736) 0
Long lived asset impairment charges (29,108) (38,206)
Loss on extinguishment of debt (28,623) 0
Loss on derivatives (15,446) 0
(Loss) gain on disposal of owned property 25,836 (3,381)
(Benefit from) provision for income taxes 152,885 8,768
Income taxes (119,643) (431)
Other share based awards (6,970) 0
Working capital changes
- -----------------------
Accounts receivable 25,770 (39,527)
Inventories (33,432) 98,337
Prepaid expenses and other current assets 15,890 26,410
Accounts payable 89,717 (79,389)
Accrued salaries, wages, benefits and taxes 36,152 19,257
Other accruals (8,558) 25,835
Other assets 44 20,679
Other non-current liabilities 59,721 6,840
Other, net (8,962) (1,200)
----------- -----------
EBITDA $ (100,721) $ 119,500
=========== ===========
Number of stores operated at end of quarter 407 650
=========== ===========
Number of franchised stores served at end of quarter - 42
=========== ===========
(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 $60 million and $186
million for the 12 and 40 weeks ended December 3, 2005, respectively,
related to certain items that the Company believes are of a non-operating
nature. For the 12 and 40 weeks ended December 3, 2005, these items
included:
- $2 million of income related to the VISA/Mastercard lawsuit
settlement during both periods presented,
- $15 million and $89 million in restructuring costs, respectively,
primarily related to the sale of the U.S. distribution operations
to C&S,
- $19 million and $105 million, respectively, related to Midwest exit
costs,
- $8 million and $18 million, respectively, related to long-lived
asset impairment,
- $3 million and $33 million, respectively, related to the early
extinguishment of debt and write-off of deferred financing fees,
- $13 million and $18 million, respectively, relating to the impact
of Hurricane Katrina on our operations,
- $4 million relating to real estate losses and $22 million relating
to real estate gains, respectively,
- $68 million of income from A&P Canada for the 40 weeks ended
December 3, 2005,
- $15 million related to the Canadian dollar hedge for for the 40
weeks ended December 3, 2005.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SCHEDULE 2 - CONDENSED BALANCE SHEET DATA
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AND STORE DATA)
December 3, 2005 February 26, 2005
----------------- -----------------
Cash and short-term investments $128 $258
Other current assets 1,103 907
----------------- -----------------
Total current assets 1,231 1,165
Property-net 898 1,516
Equity investment in Metro, Inc. 331 0
Other assets 48 121
----------------- -----------------
Total assets $2,508 $2,802
================= =================
Total current liabilities $608 $1,078
Total non-current liabilities 1,199 1,490
Stockholders' equity 701 234
----------------- -----------------
Total liabilities and stockholders' equity $2,508 $2,802
================= =================
Other Statistical Data
- ----------------------
Total Debt and Capital Leases $282 $697
Total Long Term Real Estate Liabilities $277 328
Restricted Cash, Temporary Investments and Marketable
Securities (413) (104)
----------------- -----------------
Net Debt $146 $921
Total Retail Square Footage (in thousands) 16,547 25,583
Book Value Per Share $17.10 $6.03
For the 40 For the 40
weeks ended weeks ended
December 3, 2005 December 4, 2004
----------------- -----------------
Capital Expenditures $135 $164