-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jsEvbyiaV7HbpF0Z0D5PpNfDfu7yRMbFORW/Ecn2SKmMe+K2WxliTZNjQMKwPbMA oHn1BVfm2MXq2p+h3rjCmg== 0000043300-94-000016.txt : 19940803 0000043300-94-000016.hdr.sgml : 19940803 ACCESSION NUMBER: 0000043300-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940618 FILED AS OF DATE: 19940801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREAT ATLANTIC & PACIFIC TEA CO INC CENTRAL INDEX KEY: 0000043300 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 131890974 STATE OF INCORPORATION: MD FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04141 FILM NUMBER: 94541006 BUSINESS ADDRESS: STREET 1: 2 PARAGON DR CITY: MONTVALE STATE: NJ ZIP: 07645 BUSINESS PHONE: 2015739700 MAIL ADDRESS: STREET 1: 2 PARAGON DRIVE CITY: MONTVALE STATE: NJ ZIP: 07645 10-Q 1 FORM 10-Q Executed Copy FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 18, 1994 Commission File Number 1-4141 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ---------------------------------------------- (Exact name of registrant as specified in charter) Maryland 13-1890974 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 Paragon Drive, Montvale, New Jersey 07645 - - ------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 201-573-9700 ------------ - - ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 18, 1994 ----- ---------------------------- Common stock - $1 par value 38,220,333 shares THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATEMENTS OF CONSOLIDATED OPERATIONS & RETAINED EARNINGS (Dollars in thousands, except per share figures) (Unaudited) 16 Weeks Ended June 18, June 19, 1994 1993 ---------- ---------- Sales $3,225,359 $3,279,264 Cost of merchandise sold (2,312,715) (2,338,110) ---------- ---------- Gross margin 912,644 941,154 Store operating, general and administrative expense (880,866) (893,149) ---------- ---------- Income from operations 31,778 48,005 Interest expense (20,476) (19,105) ---------- ---------- Income before income taxes and cumulative effect 11,302 28,900 Provision for income taxes (4,057) (11,850) ---------- ---------- Income before cumulative effect 7,245 17,050 Cumulative effect on prior years of change in accounting principle: Postemployment benefits (4,950) - ---------- ---------- Net income 2,295 17,050 Retained earnings at beginning of period 529,179 555,796 Cash dividends (7,644) (7,644) ---------- ---------- Retained earnings at end of period $ 523,830 $ 565,202 ========== ========== Earnings per share: Income before cumulative effect $ .19 $ .45 Cumulative effect on prior years of change in accounting principle: Postemployment benefits (.13) - ---------- ---------- Net income $ .06 $ .45 ========== ========== Cash dividends $ .20 $ .20 ========== ========== Weighted average number of shares outstanding 38,220,333 38,220,376 ========== ========== See Notes to Quarterly Report on Page 5. - 1 - THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) June 18, 1994 Feb. 26, 1994 ------------- ------------- (Unaudited) ASSETS - - ------ Current assets: Cash and short-term investments $ 120,941 $ 124,236 Accounts receivable 200,072 190,954 Inventories 860,597 850,077 Prepaid expenses and other assets 71,213 65,072 ---------- ---------- Total current assets 1,252,823 1,230,339 ---------- ---------- Property: Property owned 1,551,234 1,564,745 Property leased 117,220 122,788 ---------- --------- Property-net 1,668,454 1,687,533 Other assets 181,461 180,823 ---------- ---------- Total Assets $3,102,738 $3,098,695 ========== ========== See Notes to Quarterly Report on Page 5. -2- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) June 18, 1994 Feb. 26, 1994 -------------- ------------- (Unaudited) LIABILITIES & SHAREHOLDERS' EQUITY - - ---------------------------------- Current liabilities: Current portion of long-term debt $ 79,170 $ 77,755 Current portion of obligations under capital leases 15,578 16,097 Accounts payable 490,443 458,875 Book overdrafts 173,962 196,818 Accrued salaries, wages and benefits 157,642 173,366 Accrued taxes 47,844 35,879 Other accruals 186,936 192,342 ---------- ---------- Total current liabilities 1,151,575 1,151,132 ---------- ---------- Long-term debt 581,925 544,399 ---------- ---------- Obligations under capital leases 156,547 162,866 ---------- ---------- Deferred income taxes 85,348 100,405 ---------- ---------- Other non-current liabilities 143,331 145,476 ---------- ---------- Shareholders' equity: Preferred stock--no par value; authorized--3,000,000 shares; issued--none - - Common stock--$1 par value; authorized-- 80,000,000 shares; issued--38,229,490 shares 38,229 38,229 Capital surplus 453,475 453,475 Cumulative translation adjustment (31,159) (26,103) Retained earnings 523,830 529,179 Treasury stock, at cost, 9,157 shares (363) (363) ---------- ---------- Total shareholders' equity 984,012 994,417 ---------- ---------- Total liabilities and shareholders' equity $3,102,738 $3,098,695 ========== ========== See Notes to Quarterly Report on Page 5. -3- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) 16 Weeks Ended June 18, 1994 June 19, 1993 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,295 $ 17,050 Adjustments to reconcile net income to cash provided by operating activities: Cumulative effect on prior years of change in accounting principle: Postemployment benefits 4,950 - Depreciation and amortization 75,019 73,899 Deferred income tax provision (benefit) on income before cumulative effect (529) 2,781 (Gain) loss on disposal of owned property (992) 1,463 (Increase) decrease in receivables (9,683) 4,402 (Increase)decrease in inventories (14,593) 490 Increase in other current assets (13,450) (9,535) Increase in accounts payable 33,670 29,797 Increase (decrease) in accrued salaries, wages and benefits (14,137) 4,878 Increase in accrued taxes 11,400 5,772 Decrease in store closing reserves (4,444) (16,133) Decrease in other accruals (7,458) (261) Other (8,822) 4,126 --------- --------- Net cash provided by operating activities 53,226 118,729 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property (65,395) (87,851) Proceeds from disposal of property 3,438 4,994 Acquisition of business, net of cash acquired - (42,948) --------- --------- Net cash used in investing activities (61,957) (125,805) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 42,705 47,690 Payment of long-term debt (2,769) (8,676) Increase (decrease)in book overdrafts (21,373) 7,537 Principal payments on capital leases (4,664) (5,827) Cash dividends (7,644) (7,644) Purchase of treasury stock - (1) --------- --------- Net cash provided by financing activities 6,255 33,079 --------- --------- Effect of exchange rate changes on cash and short-term investments (819) (504) --------- --------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (3,295) 25,499 Cash and Short-Term Investments at Beginning of Period 124,236 110,120 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 120,941 $ 135,619 ========= ========= See Notes to Quarterly Report on Page 5. -4- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. NOTES TO QUARTERLY REPORT ------------------------- 1) BASIS OF PRESENTATION The consolidated financial statements for the 16 weeks ended June 18, 1994 and June 19, 1993 are unaudited, and in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items, except for the cumulative effect adjustment associated with the adoption of Statement of Financial Accounting Standards ("SFAS") No. 112. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. This Form 10-Q should be read in conjunction with the Company's consolidated financial statements and notes incorporated by reference in the 1993 Annual Report on Form 10-K. Certain reclassifications have been made to the prior interim periods' financial statements in order to conform to the current period presentation. 2) ACCOUNTING CHANGE Effective February 27, 1994, the Company adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits". SFAS No. 112 requires the accrual of costs for preretirement postemployment benefits provided to former or inactive employees and the recognition of an obligation for these benefits. The Company's previous accounting policy had been to accrue for workers' compensation and a principle portion of long-term disability benefits and to expense other postemployment benefits, such as short-term disability, as incurred. As a result, the Company recorded a charge of $5.0 million, net of applicable income taxes of $3.9 million, as the cumulative effect of recording the obligation as of the beginning of the year. The effect of adopting the Statement will have an immaterial effect on the financial results before the cumulative effect of accounting change for the fiscal year. -5- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS 16 WEEKS ENDED JUNE 18, 1994 --------------------------------- OPERATING RESULTS Sales for the first quarter ended June 18, 1994 of $3.2 billion decreased $54 million or 1.6% from last year. A lower Canadian exchange rate adversely affected sales by $51 million or 1.5%. In addition, a competitors' strike in the Northeast last year resulted in a current year sales decline of $29 million or 0.9%. Excluding the effects of the change in exchange rates and the effect of last year's competitor's strike, sales increased by $26 million or 0.8%. Contributing to this increase were the opening of 7 new stores during the first quarter of fiscal 1994. New store openings since the beginning of fiscal 1993 and the acquisition of Big Star stores during the prior year first quarter added approximately $115 million or 3.5% to sales in the first quarter of fiscal 1994. The Company, in its continuing program to eliminate obsolete, unproductive stores, closed 28 stores during the first quarter of fiscal 1994. The closure of stores since the beginning of fiscal 1993 reduced comparative sales by approximately $80 million or 2.4%. Same store sales, excluding the effect of last year's competitors' strike, were down $9 million or 0.3%. Average weekly sales per store were approximately $172,900 versus $168,100 for the corresponding period of the prior year for a 2.9% increase. Same store sales for U.S. operations were 1.1% ahead of prior year, after excluding last year's effect of the competitors' strike. In Canada, same store sales declined 5.6%, largely reflecting the slow return of sales for the Miracle Food Mart stores since the settlement of the Canadian labor strike on the last day of fiscal 1993. Gross margin as a percent of sales decreased 0.4% to 28.3% in the first quarter of 1994 from 28.7% for the first quarter of the prior year resulting primarily from increased special price reductions and reduced margins partly offset by increased buying allowances. The gross margin dollar decrease of $29 million is a result of a lower Canadian exchange rate ($13 million), a decrease in rates of $15 million and a decrease in volume of $1 million. The U.S. gross margin increased $16 million principally as a result of increased volume of $10 million. In Canada, gross margin declined $45 million, consisting of a decrease in rates of $20 million, a decrease due to the exchange rate decline of $13 million and volume declines of $12 million. Store operating, general and administrative expense as a percent of sales increased to 27.3% from 27.2% for the corresponding period in the prior year resulting primarily from increased costs and expenses associated with store occupancy and customer and employee accidents in both the U.S. and Canada partly offset by reduced labor costs in Canada. Interest expense increased from the previous year primarily due to increased U.S. borrowings of $100 million in Notes and an increase in interest rates on short-term borrowings partly offset by a decrease in the interest rate on long-term Notes from 8.12% to 7.70%. Income before income taxes and cumulative effect for the first quarter ended June 18, 1994 is $11.3 million compared to $28.9 million for the comparable period in the prior year. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ The income tax provision recorded in the first quarter of fiscal years 1994 and 1993 reflects the Company's estimated expected annual tax rates applied to their respective domestic and foreign financial results. Effective February 27, 1994, the Company adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits". As a result, the Company recorded a charge of $5.0 million or $.13 per share (net-of-tax) as the cumulative effect of this change on prior years. LIQUIDITY AND CAPITAL RESOURCES The Company ended the first quarter with working capital of $101 million compared to $79 million at the beginning of the fiscal year. The Company had cash and short-term investments aggregating $121 million at the end of the first quarter of fiscal 1994 compared to $124 million at the end of fiscal 1993. The Company has in excess of $300 million in various available credit facilities. These available cash resources, together with income from operations, are sufficient for the Company's capital expenditure program, mandatory scheduled debt repayments and dividend payments for fiscal 1994. -7- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. PART II. OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- None -8- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. Date: July 29, 1994 By: /s/ Kenneth A. Uhl --------------------------------------- Kenneth A. Uhl, Vice President and Controller (Chief Accounting Officer) -9- -----END PRIVACY-ENHANCED MESSAGE-----