Maryland
|
13-1890974
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Sales
|
$
|
1,638,694
|
$
|
1,918,279
|
$
|
3,869,340
|
$
|
4,483,209
|
||||||||
Cost of merchandise sold
|
(1,183,264
|
)
|
(1,354,931
|
)
|
(2,790,591
|
)
|
(3,155,193
|
)
|
||||||||
Gross margin
|
455,430
|
563,348
|
1,078,749
|
1,328,016
|
||||||||||||
Store operating, general and administrative expense
|
(506,902
|
)
|
(631,224
|
)
|
(1,295,629
|
)
|
(1,452,240
|
)
|
||||||||
Goodwill, trademark and long-lived asset impairment
|
(24,124
|
)
|
(30,250
|
)
|
(79,542
|
)
|
(35,648
|
)
|
||||||||
Loss from continuing operations before
|
||||||||||||||||
nonoperating income, interest expense, net and
|
||||||||||||||||
reorganization items, net
|
(75,596
|
)
|
(98,126
|
)
|
(296,422
|
)
|
(159,872
|
)
|
||||||||
Nonoperating income
|
8
|
2,177
|
91
|
10,454
|
||||||||||||
Interest expense, net
|
(37,829
|
)
|
(46,126
|
)
|
(86,283
|
)
|
(107,268
|
)
|
||||||||
Reorganization items, net
|
17,148
|
-
|
95,026
|
-
|
||||||||||||
Loss from continuing operations before income taxes
|
(96,269
|
)
|
(142,075
|
)
|
(287,588
|
)
|
(256,686
|
)
|
||||||||
(Provision for) benefit from income taxes
|
(1,562
|
)
|
(105
|
)
|
13,088
|
(245
|
)
|
|||||||||
Loss from continuing operations
|
(97,831
|
)
|
(142,180
|
)
|
(274,500
|
)
|
(256,931
|
)
|
||||||||
Discontinued operations:
|
||||||||||||||||
Loss from operations of discontinued businesses, net of income tax benefit of $1,464 and $2,606 for the 12 and 28 weeks ended September 10, 2011, respectively, and $0 for the 12 and 28 weeks ended September 11, 2010, respectively
|
(2,022
|
)
|
(10,853
|
)
|
(1,225
|
)
|
(17,968
|
)
|
||||||||
Gain on disposal of discontinued operations, net of income tax provision of $0 for the 12 and 28 weeks ended September 10, 2011 and September 11, 2010, respectively
|
-
|
-
|
-
|
79
|
||||||||||||
Reorganization items, net of income tax provision of $7 and $14,368 for the 12 and 28 weeks ended September 10, 2011, respectively, and $0 for the 12 weeks and 28 weeks ended September 11, 2010, respectively
|
8
|
-
|
19,841
|
-
|
||||||||||||
(Loss) income from discontinued operations
|
(2,014
|
)
|
(10,853
|
)
|
18,616
|
(17,889
|
)
|
|||||||||
Net loss
|
$
|
(99,845
|
)
|
$
|
(153,033
|
)
|
$
|
(255,884
|
)
|
$
|
(274,820
|
)
|
||||
Net (loss) income per share – basic:
|
||||||||||||||||
Continuing operations
|
$
|
(1.84
|
)
|
$
|
(2.72
|
)
|
$
|
(5.15
|
)
|
$
|
(4.98
|
)
|
||||
Discontinued operations
|
(0.04
|
)
|
(0.21
|
)
|
0.35
|
(0.33
|
)
|
|||||||||
Net loss per share – basic
|
$
|
(1.88
|
)
|
$
|
(2.93
|
)
|
$
|
(4.80
|
)
|
$
|
(5.31
|
)
|
||||
Net (loss) income per share – diluted:
|
||||||||||||||||
Continuing operations
|
$
|
(1.84
|
)
|
$
|
(2.75
|
)
|
$
|
(5.15
|
)
|
$
|
(14.64
|
)
|
||||
Discontinued operations
|
(0.04
|
)
|
(0.19
|
)
|
0.35
|
(0.94
|
)
|
|||||||||
Net loss per share – diluted
|
$
|
(1.88
|
)
|
$
|
(2.94
|
)
|
$
|
(4.80
|
)
|
$
|
(15.58
|
)
|
||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
53,852,470
|
53,778,502
|
53,852,470
|
53,618,284
|
||||||||||||
Diluted
|
53,852,470
|
56,970,721
|
53,852,470
|
18,949,997
|
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
Stockholders’
|
||||||||||||||||||||
28 Weeks Ended September 10, 2011
|
Shares
|
Amount
|
Capital
|
Loss
|
Deficit
|
Deficit
|
||||||||||||||||||
Balance at 2/26/2011, as previously reported
|
53,852,470 | $ | 53,852 | $ | 511,157 | $ | (75,309 | ) | $ | (1,630,664 | ) | $ | (1,140,964 | ) | ||||||||||
Retrospective change in accounting
|
||||||||||||||||||||||||
principle for inventory valuation
|
- | - | - | - | 11,329 | 11,329 | ||||||||||||||||||
Balance at 2/26/2011, as adjusted
|
53,852,470 | 53,852 | 511,157 | (75,309 | ) | (1,619,335 | ) | (1,129,635 | ) | |||||||||||||||
Net loss
|
- | - | - | - | (255,884 | ) | (255,884 | ) | ||||||||||||||||
Beneficial conversion feature accretion
|
||||||||||||||||||||||||
on preferred stock
|
- | - | (2,591 | ) | - | - | (2,591 | ) | ||||||||||||||||
Preferred stock financing fees amortization
|
- | - | (936 | ) | - | - | (936 | ) | ||||||||||||||||
Other share based awards
|
- | - | 1,991 | - | - | 1,991 | ||||||||||||||||||
Other comprehensive loss
|
- | - | - | (875 | ) | - | (875 | ) | ||||||||||||||||
Balance at 09/10/2011
|
53,852,470 | $ | 53,852 | $ | 509,621 | $ | (76,184 | ) | $ | (1,875,219 | ) | $ | (1,387,930 | ) | ||||||||||
28 Weeks Ended September 11, 2010
|
||||||||||||||||||||||||
Balance at 2/27/2010, as previously reported
|
55,868,129 | $ | 55,868 | $ | 526,421 | $ | (79,403 | ) | $ | (1,032,089 | ) | $ | (529,203 | ) | ||||||||||
Retrospective change in accounting
|
||||||||||||||||||||||||
principle for inventory valuation
|
- | - | - | - | 9,285 | 9,285 | ||||||||||||||||||
Balance at 2/27/2010, as adjusted
|
55,868,129 | 55,868 | 526,421 | (79,403 | ) | (1,022,804 | ) | (519,918 | ) | |||||||||||||||
Net loss
|
- | - | - | - | (274,820 | ) | (274,820 | ) | ||||||||||||||||
Beneficial conversion feature accretion
|
||||||||||||||||||||||||
on preferred stock
|
- | - | (2,591 | ) | - | - | (2,591 | ) | ||||||||||||||||
Dividends on preferred stock
|
- | - | (7,400 | ) | - | - | (7,400 | ) | ||||||||||||||||
Preferred stock financing fees amortization
|
- | - | (936 | ) | - | - | (936 | ) | ||||||||||||||||
Stock options exercised
|
4,834 | 5 | 23 | - | - | 28 | ||||||||||||||||||
Other share based awards
|
407,451 | 407 | (581 | ) | - | - | (174 | ) | ||||||||||||||||
Other comprehensive income
|
- | - | - | 380 | - | 380 | ||||||||||||||||||
Balance at 09/11/2010
|
56,280,414 | $ | 56,280 | $ | 514,936 | $ | (79,023 | ) | $ | (1,297,624 | ) | $ | (805,431 | ) |
Comprehensive Loss
|
12 Weeks Ended
|
28 Weeks Ended
|
|||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
||||
Net loss
|
$(99,845)
|
$(153,033)
|
$(255,844)
|
$(274,820)
|
|||
Pension and other postretirement benefits, net of tax of $0 and $1,719
|
|||||||
for the 12 and 28 weeks ended September 10, 2011, respectively,
|
|||||||
and $0 for the 12 and 28 weeks ended September 11, 2010,
|
|||||||
respectively
|
361
|
128
|
(875)
|
380
|
|||
Other comprehensive income (loss), net of tax
|
361
|
128
|
(875)
|
380
|
|||
Total comprehensive loss
|
$(99,484)
|
$(152,905)
|
$(256,759)
|
$(274,440)
|
|||
See Notes to Consolidated Financial Statements.
|
ASSETS
|
Sept. 10,
2011
|
February 26, 2011
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
301,569
|
$
|
352,607
|
||||
Restricted cash
|
4,180
|
1,731
|
||||||
Accounts receivable, net of allowance for doubtful accounts of $5,371 and
|
||||||||
$5,554 at September 10, 2011 and February 26, 2011, respectively
|
167,241
|
209,966
|
||||||
Inventories, net
|
398,586
|
452,289
|
||||||
Prepaid expenses and other current assets
|
42,989
|
36,329
|
||||||
Total current assets
|
914,565
|
1,052,922
|
||||||
Non-current assets:
|
||||||||
Property:
|
||||||||
Property owned, net
|
982,994
|
1,163,853
|
||||||
Property under capital leases, net
|
57,470
|
63,346
|
||||||
Property, net
|
1,040,464
|
1,227,199
|
||||||
Goodwill
|
110,412
|
110,412
|
||||||
Intangible assets, net
|
118,513
|
124,288
|
||||||
Other assets
|
156,351
|
141,357
|
||||||
Total assets
|
$
|
2,340,305
|
$
|
2,656,178
|
||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$
|
350,000
|
$
|
-
|
||||
Current portion of obligations under capital leases
|
4,031
|
-
|
||||||
Current portion of real estate liabilities
|
607
|
-
|
||||||
Accounts payable
|
152,893
|
119,245
|
||||||
Book overdrafts
|
16,841
|
23,722
|
||||||
Accrued salaries, wages and benefits
|
99,570
|
109,428
|
||||||
Accrued taxes
|
35,896
|
26,175
|
||||||
Other accruals
|
79,753
|
65,048
|
||||||
Total current liabilities
|
739,591
|
343,618
|
||||||
Non-current liabilities:
|
||||||||
Long-term debt
|
-
|
350,000
|
||||||
Long-term obligations under capital leases
|
47,288
|
-
|
||||||
Long-term real estate liabilities
|
184,837
|
-
|
||||||
Deferred real estate income
|
16,758
|
-
|
||||||
Other non-current liabilities
|
123,557
|
74,162
|
||||||
Total liabilities not subject to compromise
|
1,112,031
|
767,780
|
||||||
Liabilities subject to compromise
|
2,469,399
|
2,874,734
|
||||||
Total liabilities
|
3,581,430
|
3,642,514
|
||||||
Series A redeemable preferred stock – no par value, $1,000 redemption value; authorized – 700,000
|
||||||||
shares; issued - 179,020 shares at September 10, 2011 and February 26, 2011, respectively
|
146,805
|
143,299
|
||||||
Commitments and contingencies (Refer to Note 20)
|
||||||||
Stockholders’ deficit:
|
||||||||
Common stock – $1 par value; authorized – 260,000,000 shares; issued and outstanding
|
||||||||
– 53,852,470 shares at September 10, 2011 and February 26, 2011, respectively
|
53,852
|
53,852
|
||||||
Additional paid-in capital
|
509,621
|
511,157
|
||||||
Accumulated other comprehensive loss
|
(76,184
|
)
|
(75,309
|
)
|
||||
Accumulated deficit
|
(1,875,219
|
)
|
(1,619,335
|
)
|
||||
Total stockholders’ deficit
|
(1,387,930
|
)
|
(1,129,635
|
)
|
||||
Total liabilities and stockholders’ deficit
|
$
|
2,340,305
|
$
|
2,656,178
|
||||
See Notes to Consolidated Financial Statements.
|
28 Weeks Ended
|
||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(255,884
|
)
|
$
|
(274,820
|
)
|
||
Adjustments to reconcile net loss to net cash used in
|
||||||||
operating activities (see next page)
|
151,393
|
195,938
|
||||||
Other changes in assets and liabilities:
|
||||||||
Decrease in receivables
|
54,646
|
17,534
|
||||||
Decrease (increase) in inventories
|
37,590
|
(7,209
|
)
|
|||||
Increase in prepaid expenses and other current assets
|
(11,960
|
)
|
(7,560
|
)
|
||||
Increase in other assets
|
(14,549
|
)
|
(2,799
|
)
|
||||
(Decrease) increase in accounts payable
|
(9,662
|
)
|
13,319
|
|||||
(Decrease) increase in accrued salaries, wages and benefits, and taxes
|
(2,238
|
)
|
2,308
|
|||||
Increase in other accruals
|
80,169
|
5,917
|
||||||
Decrease in other non-current liabilities
|
(74,003
|
)
|
(36,952
|
)
|
||||
Other operating activities, net
|
129
|
(99
|
)
|
|||||
Payments for reorganization items
|
(23,984
|
)
|
-
|
|||||
Net cash used in operating activities
|
(68,353
|
)
|
(94,423
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Expenditures for property
|
(17,282
|
)
|
(43,447
|
)
|
||||
Proceeds from disposal of property
|
8,789
|
8,739
|
||||||
Proceeds from flood insurance
|
-
|
4,910
|
||||||
Proceeds from sale of assets held for sale
|
38,302
|
-
|
||||||
(Increase) decrease in restricted cash
|
(2,449
|
)
|
302
|
|||||
Proceeds from sale of pharmacy assets
|
4,785
|
-
|
||||||
Net cash provided by (used in) investing activities
|
32,145
|
(29,496
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of long-term debt
|
-
|
800
|
||||||
Principal payments on long-term debt
|
(99
|
)
|
(134
|
)
|
||||
Proceeds under revolving lines of credit
|
-
|
201,600
|
||||||
Principal payments on revolving lines of credit
|
-
|
(200,700
|
)
|
|||||
Principal payments on long-term real estate liabilities
|
(616
|
)
|
(631
|
)
|
||||
Principal payments on capital leases
|
(5,610
|
)
|
(6,317
|
)
|
||||
Decrease in book overdrafts
|
(6,881
|
)
|
(21,804
|
)
|
||||
Payments of financing fees for debtor-in-possession financing
|
(1,624
|
)
|
-
|
|||||
Deferred financing fees
|
-
|
(6
|
)
|
|||||
Dividends paid on preferred stock
|
-
|
(7,000
|
)
|
|||||
Proceeds from exercises of stock options
|
-
|
28
|
||||||
Net cash used in financing activities
|
(14,830
|
)
|
(34,164
|
)
|
||||
Net decrease in cash and cash equivalents
|
(51,038
|
)
|
(158,083
|
)
|
||||
Cash and cash equivalents at beginning of year
|
352,607
|
252,426
|
||||||
Cash and cash equivalents at end of period
|
$
|
301,569
|
$
|
94,343
|
||||
See Notes to Consolidated Financial Statements.
|
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
|
||||||||
28 Weeks Ended
|
||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||
Depreciation and amortization
|
$
|
101,588
|
$
|
121,897
|
||||
Goodwill, trademark and long-lived asset impairment
|
79,542
|
35,648
|
||||||
Impairment of long-lived assets in the normal course of business
|
1,465
|
1,144
|
||||||
Self-insurance reserve
|
3,127
|
21,661
|
||||||
Nonoperating income
|
(91
|
)
|
(10,454
|
)
|
||||
Non-cash interest expense
|
10,104
|
23,258
|
||||||
Stock compensation expense (income)
|
1,509
|
(101
|
)
|
|||||
Pension withdrawal costs
|
13,923
|
-
|
||||||
Employee benefit related costs
|
2,111
|
6,713
|
||||||
Asset disposition initiatives relating to discontinued operations
|
-
|
4
|
||||||
Non-cash occupancy charges for locations closed in the normal course of business
|
1,580
|
466
|
||||||
Adjustment to occupancy reserves
|
92,773
|
-
|
||||||
Losses relating to Hurricane Irene
|
1,000
|
-
|
||||||
Gain on disposal of owned property and write-down of property, net
|
(499
|
)
|
(1,807
|
)
|
||||
Gain on disposal of discontinued operations
|
-
|
(79
|
)
|
|||||
Gain on sale of pharmacy assets
|
(4,785
|
)
|
-
|
|||||
Gain on sale of assets held for sale
|
(29,120
|
)
|
-
|
|||||
Amortization of deferred real estate income
|
(1,777
|
)
|
(2,412
|
)
|
||||
C&S contract effect
|
9,184
|
-
|
||||||
Provision for deferred income taxes
|
(1,719
|
)
|
-
|
|||||
Reorganization items, net relating to continuing operations
|
(95,026
|
)
|
-
|
|||||
Reorganization items, net relating to discontinued operations
|
(34,209
|
)
|
-
|
|||||
Financing fees
|
713
|
-
|
||||||
Total adjustments to net loss
|
$
|
151,393
|
$
|
195,938
|
||||
See Notes to Consolidated Financial Statements.
|
For the 12 Weeks Ended
September 10, 2011
|
For the 12 Weeks Ended
September 11, 2010
|
|||||||||||||||||||||||
As Computed under LIFO
|
As Reported under FIFO
|
Change: (Decrease) /
Increase
|
As Originally Reported
|
As Adjusted
|
Change: (Decrease) /
Increase
|
|||||||||||||||||||
Cost of merchandise sold
|
$
|
(1,184,105
|
)
|
$
|
(1,183,264
|
)
|
$
|
(841
|
)
|
$
|
(1,355,572
|
)
|
$
|
(1,354,931
|
)
|
$
|
(641
|
)
|
||||||
Gross margin
|
454,589
|
455,430
|
841
|
562,707
|
563,348
|
641
|
||||||||||||||||||
Loss from continuing operations before provision for income taxes
|
(97,110
|
)
|
(96,269
|
)
|
841
|
(142,716
|
)
|
(142,075
|
)
|
641
|
||||||||||||||
Provision for income taxes
|
(1,562
|
)
|
(1,562
|
)
|
-
|
(105
|
)
|
(105
|
)
|
-
|
||||||||||||||
Loss from continuing operations
|
(98,672
|
)
|
(97,831
|
)
|
841
|
(142,821
|
)
|
(142,180
|
)
|
641
|
||||||||||||||
Loss from discontinued operations
|
(2,014
|
)
|
(2,014
|
)
|
-
|
(10,853
|
)
|
(10,853
|
)
|
-
|
||||||||||||||
Net loss
|
(100,686
|
)
|
(99,845
|
)
|
841
|
(153,674
|
)
|
(153,033
|
)
|
641
|
||||||||||||||
Net (loss) income per share – basic:
|
||||||||||||||||||||||||
Continuing operations
|
$
|
(1.85
|
)
|
$
|
(1.84
|
)
|
$
|
0.01
|
$
|
(2.73
|
)
|
$
|
(2.72
|
)
|
$
|
0.01
|
||||||||
Discontinued operations
|
(0.04
|
)
|
(0.04
|
)
|
-
|
(0.21
|
)
|
(0.21
|
)
|
-
|
||||||||||||||
Net loss per share - basic
|
$
|
(1.89
|
)
|
$
|
(1.88
|
)
|
$
|
0.01
|
$
|
(2.94
|
)
|
$
|
(2.93
|
)
|
$
|
0.01
|
||||||||
Net (loss) income per share – diluted:
|
||||||||||||||||||||||||
Continuing operations
|
$
|
(1.85
|
)
|
$
|
(1.84
|
)
|
$
|
0.01
|
$
|
(2.76
|
)
|
$
|
(2.75
|
)
|
$
|
0.01
|
||||||||
Discontinued operations
|
(0.04
|
)
|
(0.04
|
)
|
-
|
(0.19
|
)
|
(0.19
|
)
|
-
|
||||||||||||||
Net loss per share - diluted
|
$
|
(1.89
|
)
|
$
|
(1.88
|
)
|
$
|
0.01
|
$
|
(2.95
|
)
|
$
|
(2.94
|
)
|
$
|
0.01
|
||||||||
For the 28 Weeks Ended
September 10, 2011
|
For the 28 Weeks Ended
September 11, 2010
|
|||||||||||||||||||||||
As Computed under LIFO
|
As Reported under FIFO
|
Change: (Decrease) /
Increase
|
As Originally Reported
|
As Adjusted
|
Change: (Decrease) /
Increase
|
|||||||||||||||||||
Cost of merchandise sold
|
$
|
(2,792,554
|
)
|
$
|
(2,790,591
|
)
|
$
|
(1,963
|
)
|
$
|
(3,156,690
|
)
|
$
|
(3,155,193
|
)
|
$
|
(1,497
|
)
|
||||||
Gross margin
|
1,076,786
|
1,078,749
|
1,963
|
1,326,519
|
1,328,016
|
1,497
|
||||||||||||||||||
Loss from continuing operations before benefit from (provision for) income taxes
|
(289,551
|
)
|
(287,588
|
)
|
1,963
|
(258,183
|
)
|
(256,686
|
)
|
1,497
|
||||||||||||||
Benefit from (provision for) income taxes
|
13,088
|
13,088
|
-
|
(245
|
)
|
(245
|
)
|
-
|
||||||||||||||||
Loss from continuing operations
|
(276,463
|
)
|
(274,500
|
)
|
1,963
|
(258,428
|
)
|
(256,931
|
)
|
1,497
|
||||||||||||||
Income (loss) from discontinued operations
|
18,616
|
18,616
|
-
|
(17,889
|
)
|
(17,889
|
)
|
-
|
||||||||||||||||
Net loss
|
(257,847
|
)
|
(255,884
|
)
|
1,963
|
(276,317
|
)
|
(274,820
|
)
|
1,497
|
||||||||||||||
Net (loss) income per share – basic:
|
||||||||||||||||||||||||
Continuing operations
|
$
|
(5.18
|
)
|
$
|
(5.15
|
)
|
$
|
0.03
|
$
|
(5.01
|
)
|
$
|
(4.98
|
)
|
$
|
0.03
|
||||||||
Discontinued operations
|
0.35
|
0.35
|
-
|
(0.33
|
)
|
(0.33
|
)
|
-
|
||||||||||||||||
Net loss per share - basic
|
$
|
(4.83
|
)
|
$
|
(4.80
|
)
|
$
|
0.03
|
$
|
(5.34
|
)
|
$
|
(5.31
|
)
|
$
|
0.03
|
||||||||
Net (loss) income per share – diluted:
|
||||||||||||||||||||||||
Continuing operations
|
$
|
(5.18
|
)
|
$
|
(5.15
|
)
|
$
|
0.03
|
$
|
(14.72
|
)
|
$
|
(14.64
|
)
|
$
|
0.08
|
||||||||
Discontinued operations
|
0.35
|
0.35
|
-
|
(0.94
|
)
|
(0.94
|
)
|
-
|
||||||||||||||||
Net loss per share - diluted
|
$
|
(4.83
|
)
|
$
|
(4.80
|
)
|
$
|
0.03
|
$
|
(15.66
|
)
|
$
|
(15.58
|
)
|
$
|
0.08
|
||||||||
As of September 10, 2011
|
||||||||||||
As Computed under LIFO
|
As Reported under FIFO
|
Change
|
||||||||||
Inventories, net
|
$
|
385,294
|
$
|
398,586
|
$
|
13,292
|
||||||
Accumulated deficit
|
(1,888,511
|
)
|
(1,875,219
|
)
|
13,292
|
As of February 26, 2011
|
||||||||||||
As Originally Reported
|
As Adjusted
|
Change
|
||||||||||
Inventories, net
|
$
|
440,960
|
$
|
452,289
|
$
|
11,329
|
||||||
Accumulated deficit
|
(1,630,664
|
)
|
(1,619,335
|
)
|
11,329
|
Fresh
|
Gourmet
|
Other
|
Total
|
|||||||||||||
Goodwill
|
$
|
116,032
|
$
|
12,110
|
$
|
5,974
|
$
|
134,116
|
||||||||
Accumulated impairment losses
|
(23,704
|
)
|
-
|
-
|
(23,704
|
)
|
||||||||||
Goodwill at February 26, 2011
|
$
|
92,328
|
$
|
12,110
|
$
|
5,974
|
$
|
110,412
|
||||||||
Goodwill
|
$
|
116,032
|
$
|
12,110
|
$
|
5,974
|
$
|
134,116
|
||||||||
Accumulated impairment losses
|
(23,704
|
)
|
-
|
-
|
(23,704
|
)
|
||||||||||
Goodwill at September 10, 2011
|
$
|
92,328
|
$
|
12,110
|
$
|
5,974
|
$
|
110,412
|
Weighted Average
|
Gross
|
Accumulated
|
Accumulated
|
|||||||||||||
Amortization
|
Carrying
|
Amortization at
|
Amortization at
|
|||||||||||||
Period (Years)
|
Amount
|
Sept. 10, 2011
|
Feb. 26, 2011
|
|||||||||||||
Loyalty card customer relationships
|
5
|
$
|
19,200
|
$
|
14,088
|
$
|
11,815
|
|||||||||
In-store advertiser relationships
|
20
|
14,720
|
2,774
|
2,378
|
||||||||||||
Pharmacy payor relationships
|
13
|
75,000
|
21,745
|
18,639
|
||||||||||||
Pathmark trademark
|
Indefinite
|
48,200
|
-
|
-
|
||||||||||||
Total
|
$
|
157,120
|
$
|
38,607
|
$
|
32,832
|
2011
|
$4,950
|
|
2012
|
9,670
|
|
2013
|
6,505
|
|
2014
|
6,505
|
|
2015
|
6,505
|
|
Thereafter
|
36,178
|
Fair Value Measurements at September 10, 2011 Using
|
||||||||||||||||
Quoted Prices
|
Significant Other
|
Significant
|
||||||||||||||
Total Carrying
|
in Active
|
Observable
|
Unobservable
|
|||||||||||||
Value at
|
Markets
|
Inputs
|
Inputs
|
|||||||||||||
September 10, 2011
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents
|
$
|
1,552
|
$
|
-
|
$
|
1,552
|
$
|
-
|
||||||||
Liabilities:
|
||||||||||||||||
Series B warrant
|
$
|
79
|
$
|
-
|
$
|
79
|
$
|
-
|
||||||||
Fair Value Measurements at Feb. 26, 2011 Using
|
||||||||||||||||
Quoted Prices
|
Significant Other
|
Significant
|
||||||||||||||
Total Carrying
|
in Active
|
Observable
|
Unobservable
|
|||||||||||||
Value at
|
Markets
|
Inputs
|
Inputs
|
|||||||||||||
Feb. 26, 2011
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents
|
$
|
1,553
|
$
|
-
|
$
|
1,553
|
$
|
-
|
||||||||
Liabilities:
|
||||||||||||||||
Series B warrant
|
$
|
170
|
$
|
-
|
$
|
170
|
$
|
-
|
At September 10, 2011
|
At February 26, 2011
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
Current portion of long-term debt
|
$
|
350,000
|
$
|
350,000
|
$
|
159
|
$
|
159
|
||||||||
Long-term debt – subject to compromise
|
905,235
|
399,612
|
1,255,225
|
765,577
|
At
Sept. 10, 2011
|
At
Feb. 26, 2011
|
|||||||||||||||||||||||
Other
|
Other
|
|||||||||||||||||||||||
Accruals
|
Accruals
|
|||||||||||||||||||||||
Prior to
|
Amounts
|
Prior to
|
Amounts
|
|||||||||||||||||||||
Financial
|
Classified as
|
Financial
|
Classified as
|
|||||||||||||||||||||
Statement
|
Subject to
|
Other
|
Statement
|
Subject to
|
Other
|
|||||||||||||||||||
Classification
|
Compromise(1)
|
Accruals
|
Classification
|
Compromise(1)
|
Accruals
|
|||||||||||||||||||
Self-insurance reserves
|
$
|
48,925
|
$
|
(42,136
|
)
|
$
|
6,789
|
$
|
47,792
|
$
|
(45,466
|
)
|
$
|
2,326
|
||||||||||
Deferred taxes
|
31,539
|
-
|
31,539
|
28,335
|
-
|
28,335
|
||||||||||||||||||
Closed locations reserves
|
1,210
|
(1,210
|
)
|
-
|
11,358
|
(11,358
|
)
|
-
|
||||||||||||||||
Damages claim for rejected leases
|
186,751
|
(186,751
|
)
|
-
|
106,642
|
(106,642
|
)
|
-
|
||||||||||||||||
Pension withdrawal liabilities
|
10,461
|
(10,461
|
)
|
-
|
10,461
|
(10,461
|
)
|
-
|
||||||||||||||||
GHI liability for employee benefits
|
8,095
|
(8,095
|
)
|
-
|
7,776
|
(7,776
|
)
|
-
|
||||||||||||||||
Accrued occupancy-related costs
|
||||||||||||||||||||||||
for open stores
|
41,988
|
(22,766
|
)
|
19,222
|
48,742
|
(24,523
|
)
|
24,219
|
||||||||||||||||
Deferred income
|
22,616
|
(12,026
|
)
|
10,590
|
23,299
|
(21,363
|
)
|
1,936
|
||||||||||||||||
Deferred real estate income
|
1,670
|
(824
|
)
|
846
|
2,508
|
(2,508
|
)
|
-
|
||||||||||||||||
Accrued audit, legal and other
|
12,047
|
(6,875
|
)
|
5,172
|
11,777
|
(8,118
|
)
|
3,659
|
||||||||||||||||
Accrued interest
|
52,991
|
(49,845
|
)
|
3,146
|
35,600
|
(33,921
|
)
|
1,679
|
||||||||||||||||
Other postretirement and
|
||||||||||||||||||||||||
postemployment benefits
|
2,931
|
(2,931
|
)
|
-
|
2,918
|
(2,918
|
)
|
-
|
||||||||||||||||
Accrued advertising
|
404
|
-
|
404
|
718
|
-
|
718
|
||||||||||||||||||
Other accruals
|
5,026
|
(2,981
|
)
|
2,045
|
10,181
|
(8,005
|
)
|
2,176
|
||||||||||||||||
Total
|
$
|
426,654
|
$
|
(346,901
|
)
|
$
|
79,753
|
$
|
348,107
|
$
|
(283,059
|
)
|
$
|
65,048
|
At
Sept. 10, 2011
|
At
Feb. 26, 2011
|
|||||||||||||||||||||||
Non-Current
|
Non-Current
|
|||||||||||||||||||||||
Liabilities
|
Liabilities
|
|||||||||||||||||||||||
Prior to
|
Amounts
|
Other
|
Prior to
|
Amounts
|
Other
|
|||||||||||||||||||
Financial
|
Classified as
|
Non-
|
Financial
|
Classified as
|
Non-
|
|||||||||||||||||||
Statement
|
Subject to
|
Current
|
Statement
|
Subject to
|
Current
|
|||||||||||||||||||
Classification
|
Compromise(1)
|
Liabilities
|
Classification
|
Compromise(1)
|
Liabilities
|
|||||||||||||||||||
Self-insurance reserves
|
$
|
383,565
|
$
|
(347,133
|
)
|
$
|
36,432
|
$
|
366,891
|
$
|
(354,704
|
)
|
$
|
12,187
|
||||||||||
Closed locations reserves
|
1,801
|
(1,801
|
)
|
-
|
39,192
|
(39,192
|
)
|
-
|
||||||||||||||||
Pension withdrawal liabilities
|
103,461
|
(103,461
|
)
|
-
|
86,735
|
(86,735
|
)
|
-
|
||||||||||||||||
GHI liability for employee benefits
|
93,751
|
(93,751
|
)
|
-
|
86,505
|
(86,505
|
)
|
-
|
||||||||||||||||
Pension plan benefits
|
130,085
|
(130,085
|
)
|
-
|
125,000
|
(125,000
|
)
|
-
|
||||||||||||||||
Other postretirement and
|
||||||||||||||||||||||||
postemployment benefits
|
38,956
|
(38,956
|
)
|
-
|
38,737
|
(38,737
|
)
|
-
|
||||||||||||||||
Loans on life insurance policies
|
61,943
|
-
|
61,943
|
61,943
|
-
|
61,943
|
||||||||||||||||||
Step rent liabilities
|
48,335
|
(24,214
|
)
|
24,121
|
56,287
|
(56,287
|
)
|
-
|
||||||||||||||||
Deferred income
|
22,402
|
(21,915
|
)
|
487
|
53,031
|
(53,031
|
)
|
-
|
||||||||||||||||
Deferred real estate income
|
14,094
|
(14,094
|
)
|
-
|
86,801
|
(86,801
|
)
|
-
|
||||||||||||||||
Unfavorable lease liabilities
|
795
|
(795
|
)
|
-
|
4,201
|
(4,201
|
)
|
-
|
||||||||||||||||
Other non-current liabilities
|
10,697
|
(10,123
|
)
|
574
|
11,348
|
(11,316
|
)
|
32
|
||||||||||||||||
Total
|
$
|
909,885
|
$
|
(786,328
|
)
|
$
|
123,557
|
$
|
1,016,671
|
$
|
(942,509
|
)
|
$
|
74,162
|
At
|
At
|
|||||||||||||||||||||||
September 10, 2011
|
February 26, 2011
|
|||||||||||||||||||||||
Indebtedness
|
Indebtedness
|
|||||||||||||||||||||||
Prior to
|
Amounts
|
Prior to
|
Amounts
|
|||||||||||||||||||||
Financial
|
Classified as
|
Financial
|
Classified as
|
|||||||||||||||||||||
Statement
|
Subject to
|
Statement
|
Subject to
|
|||||||||||||||||||||
Classification
|
Compromise(1)
|
Indebtedness
|
Classification
|
Compromise(1)
|
Indebtedness
|
|||||||||||||||||||
Debtor-in-Possession Credit Agreement, due June 14, 2012
|
$
|
350,000
|
$
|
-
|
$
|
350,000
|
$
|
350,000
|
$
|
-
|
$
|
350,000
|
||||||||||||
Related Party Promissory Note, due August 18, 2011
|
10,000
|
(10,000
|
)
|
-
|
10,000
|
(10,000
|
)
|
-
|
||||||||||||||||
5.125% Convertible Senior Notes, due June 15, 2011
|
165,000
|
(165,000
|
)
|
-
|
165,000
|
(165,000
|
)
|
-
|
||||||||||||||||
9.125% Senior Notes, due
December 15, 2011
|
12,840
|
(12,840
|
)
|
-
|
12,840
|
(12,840
|
)
|
-
|
||||||||||||||||
6.750% Convertible Senior Notes, due December 15, 2012
|
255,000
|
(255,000
|
)
|
-
|
255,000
|
(255,000
|
)
|
-
|
||||||||||||||||
11.375% Senior Secured Notes, due August 1, 2015
|
260,000
|
(260,000
|
)
|
-
|
260,000
|
(260,000
|
)
|
-
|
||||||||||||||||
9.375% Notes, due August 1, 2039
|
200,000
|
(200,000
|
)
|
-
|
200,000
|
(200,000
|
)
|
-
|
||||||||||||||||
Other
|
2,395
|
(2,395
|
)
|
-
|
2,544
|
(2,544
|
)
|
-
|
||||||||||||||||
Subtotal
|
1,255,235
|
(905,235
|
)
|
350,000
|
1,255,384
|
(905,384
|
)
|
350,000
|
||||||||||||||||
Less current portion of long-term debt
|
(350,000
|
)
|
-
|
(350,000
|
)
|
(159
|
)
|
159
|
-
|
|||||||||||||||
Long-term debt
|
$
|
905,235
|
$
|
(905,235
|
)
|
$
|
-
|
$
|
1,255,225
|
$
|
(905,225
|
)
|
$
|
350,000
|
•
|
the DIP Lenders agreed to lend up to $800.0 million in the form of a $350.0 million term loan and a $450.0 million revolving credit facility with a $250.0 million sublimit for letters of credit, in each case subject to the terms and conditions therein;
|
•
|
our Company’s and the Subsidiary Borrower’s obligations under the DIP Credit Agreement and the other specified loan documents are guaranteed by our Company’s certain other subsidiaries that are Debtors (“Subsidiary Guarantors” and, together with our Company and the Subsidiary Borrowers, the “Loan Parties”); and
|
•
|
the Loan Parties’ obligations under the DIP Credit Agreement and such other specified loan documents are secured by a security interest in, and lien upon, substantially all of the Loan Parties’ existing and after-acquired personal and real property, having the priority and subject to the terms therein and in the order(s) entered into by the Bankruptcy Court, as applicable.
|
Date
|
Minimum Cumulative EBITDA
|
December 31, 2011
|
10.0
|
January 28, 2012
|
25.0
|
February 25, 2012
|
40.0
|
March 24, 2012
|
55.0
|
April 21, 2012
|
70.0
|
May 19, 2012
|
85.0
|
June 16, 2012
|
100.0
|
At
|
At
|
||
September 10, 2011
|
February 26, 2011
|
||
Expected life
|
3.75 Years
|
4.29 Years
|
|
Volatility
|
121.2%
|
111.3%
|
|
Dividend yield range
|
0%
|
0%
|
|
Risk-free interest rate
|
0.31%
|
2.16%
|
At
|
At
|
|||||||
September 10, 2011
|
February 26, 2011
|
|||||||
Accounts payable
|
$
|
176,927
|
$
|
212,135
|
||||
Accrued salaries, wages, and benefits
|
10,949
|
10,939
|
||||||
Self-insurance reserves
|
389,269
|
400,170
|
||||||
Closed locations reserves
|
3,011
|
50,550
|
||||||
Damages claim for rejected leases
|
186,751
|
106,642
|
||||||
Pension withdrawal liabilities
|
113,922
|
97,196
|
||||||
GHI liability for employee benefits
|
101,846
|
94,281
|
||||||
Accrued occupancy-related costs for open stores
|
22,766
|
24,523
|
||||||
Deferred income
|
33,941
|
74,394
|
||||||
Deferred real estate income
|
14,918
|
89,309
|
||||||
Accrued audit, legal and other
|
6,875
|
8,118
|
||||||
Accrued interest
|
49,845
|
33,921
|
||||||
Other postretirement and postemployment benefits
|
41,887
|
41,655
|
||||||
Other accruals
|
2,981
|
8,005
|
||||||
Pension plan benefits
|
130,085
|
125,000
|
||||||
Step rent liabilities
|
24,214
|
56,287
|
||||||
Unfavorable lease liabilities
|
795
|
4,201
|
||||||
Other noncurrent liabilities
|
10,123
|
11,316
|
||||||
5.125% Convertible Senior Notes, due June 15, 2011
|
165,000
|
165,000
|
||||||
Related Party Promissory Note, due August 18, 2011
|
10,000
|
10,000
|
||||||
9.125% Senior Notes, due December 15, 2011
|
12,840
|
12,840
|
||||||
6.750% Convertible Senior Notes, due December 15, 2012
|
255,000
|
255,000
|
||||||
11.375% Senior Secured Notes, due August 1, 2015
|
260,000
|
260,000
|
||||||
9.375% Notes, due August 1, 2039
|
200,000
|
200,000
|
||||||
Other debt
|
2,473
|
2,714
|
||||||
Obligations under capital leases
|
53,649
|
121,058
|
||||||
Real estate liabilities
|
189,332
|
399,480
|
||||||
Total liabilities subject to compromise
|
$
|
2,469,399
|
$
|
2,874,734
|
For the 12 Weeks Ended
|
For the 28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Stock options
|
$
|
566
|
$
|
122
|
$
|
1,322
|
$
|
(246
|
)
|
|||||||
Restricted stock units
|
452
|
451
|
651
|
(291
|
)
|
|||||||||||
Common stock granted to Directors
|
-
|
187
|
(464
|
)
|
436
|
|||||||||||
Total stock-based compensation expense (income)
|
$
|
1,018
|
$
|
760
|
$
|
1,509
|
$
|
(101
|
)
|
For the 12 Weeks Ended
|
For the 28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Service cost
|
$
|
1,498
|
$
|
1,407
|
$
|
3,496
|
$
|
3,565
|
||||||||
Interest cost
|
6,628
|
6,662
|
15,465
|
15,591
|
||||||||||||
Expected return on plan assets
|
(6,950
|
)
|
(6,640
|
)
|
(16,745
|
)
|
(15,493
|
)
|
||||||||
Amortization of:
|
||||||||||||||||
Net prior service cost
|
21
|
-
|
49
|
81
|
||||||||||||
Actuarial loss
|
404
|
439
|
943
|
1,024
|
||||||||||||
Special termination benefits
|
-
|
350
|
-
|
400
|
||||||||||||
Net pension cost
|
$
|
1,601
|
$
|
2,218
|
$
|
3,208
|
$
|
5,168
|
For the 12 Weeks Ended
|
For the 28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Service cost
|
$
|
175
|
$
|
151
|
$
|
408
|
$
|
352
|
||||||||
Interest cost
|
431
|
428
|
1,006
|
999
|
||||||||||||
Amortization of:
|
||||||||||||||||
Net prior service credit
|
-
|
(198
|
)
|
-
|
(462
|
)
|
||||||||||
Actuarial gain
|
(63
|
)
|
(112
|
)
|
(148
|
)
|
(262
|
)
|
||||||||
Net postretirement benefits cost
|
$
|
543
|
$
|
269
|
$
|
1,266
|
$
|
627
|
For the 12 Weeks Ended
|
For the 28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
$800 million Debtor-in-Possession Credit Agreement
|
$
|
8,585
|
$
|
-
|
$
|
20,053
|
$
|
-
|
||||||||
$655 million Credit Agreement
|
341
|
3,104
|
1,052
|
7,109
|
||||||||||||
Related Party Promissory Note, due Aug. 18, 2011
|
-
|
138
|
-
|
325
|
||||||||||||
11.375% Senior Secured Notes, due Aug. 1, 2015
|
6,825
|
6,808
|
15,925
|
15,958
|
||||||||||||
9.125% Senior Notes, due Dec. 15, 2011
|
-
|
269
|
-
|
629
|
||||||||||||
5.125% Convertible Senior Notes, due June 15, 2011
|
-
|
1,941
|
-
|
4,542
|
||||||||||||
6.750% Convertible Senior Notes, due Dec. 15, 2012
|
-
|
3,950
|
-
|
9,245
|
||||||||||||
9.375% Notes, due August 1, 2039
|
-
|
4,280
|
-
|
10,095
|
||||||||||||
Obligations under capital leases and real estate liabilities
|
11,056
|
11,293
|
27,318
|
26,735
|
||||||||||||
Self-insurance and GHI interest
|
4,466
|
3,752
|
11,399
|
8,871
|
||||||||||||
GHI discount rate adjustment and COLI non-cash interest
|
6,380
|
3,759
|
10,021
|
7,648
|
||||||||||||
Amortization of deferred financing fees and discounts
|
159
|
6,647
|
491
|
15,381
|
||||||||||||
Other
|
17
|
194
|
24
|
769
|
||||||||||||
Subtotal
|
37,829
|
46,135
|
86,283
|
107,307
|
||||||||||||
Interest income
|
-
|
(9
|
)
|
-
|
(39
|
)
|
||||||||||
Interest expense, net
|
$
|
37,829
|
$
|
46,126
|
$
|
86,283
|
$
|
107,268
|
For the 12 Weeks
|
For the 28 Weeks
|
|||||||
Ended
|
Ended
|
|||||||
Sept. 10, 2011
|
Sept. 10, 2011
|
|||||||
Professional fees, net
|
$
|
(12,668
|
)
|
$
|
(29,836
|
)
|
||
US Trustee fees
|
(257
|
)
|
(512
|
)
|
||||
Write-off of balance sheet items related to rejected contracts, net - continuing operations
|
16,644
|
47,157
|
||||||
C&S contract effect
|
-
|
34,139
|
||||||
Reduction of closed locations reserve - continuing operations
|
13,429
|
44,078
|
||||||
Reorganization items, net - continuing operations
|
17,148
|
95,026
|
||||||
Write-off of balance sheet items related to rejected contracts, net - discontinued operations
|
(64
|
)
|
25,735
|
|||||
Reduction of closed locations reserve - discontinued operations
|
79
|
8,474
|
||||||
Provision for income taxes for reorganization items, net - discontinued operations
|
(7
|
)
|
(14,368
|
)
|
||||
Total reorganization items, net
|
$
|
17,156
|
$
|
114,867
|
As Reported
|
Adjustment
|
As Revised
|
||||||||
Benefit from (provision for) income taxes
|
$ |
3,798
|
$ |
33,146
|
$36,944
|
|||||
Loss from continuing operations
|
(673,400
|
)
|
33,146
|
(640,254
|
) | |||||
Income (loss) from discontinued operations
|
74,825
|
(33,146
|
)
|
41,679
|
||||||
Net (loss) income per share - basic
|
(11.45
|
)
|
0.01
|
(11.44
|
) |
For the 28 weeks Ended September 10, 2011
|
||||||||||||||||||||
Balance at
|
Interest
|
Balance at
|
||||||||||||||||||
2/26/2011
|
Accretion(1)
|
Adjustments(2)
|
Utilization(3)
|
9/10/2011
|
||||||||||||||||
2007 Events
|
||||||||||||||||||||
Occupancy
|
$
|
49,317
|
$
|
80
|
$
|
(6,818
|
)
|
$
|
-
|
$
|
42,579
|
|||||||||
Pension withdrawal
|
57,581
|
1,880
|
-
|
-
|
59,461
|
|||||||||||||||
2007 events total
|
106,898
|
1,960
|
(6,818
|
)
|
102,040
|
|||||||||||||||
2005 Event
|
||||||||||||||||||||
Occupancy
|
21,390
|
-
|
-
|
-
|
21,390
|
|||||||||||||||
2003 Events
|
||||||||||||||||||||
Occupancy
|
8,451
|
12
|
(1,641
|
)
|
(39
|
)
|
6,783
|
|||||||||||||
Total
|
$
|
136,739
|
$
|
1,972
|
$
|
(8,459
|
)
|
$
|
(39
|
)
|
$
|
130,213
|
|
(1)
|
The additions to occupancy and severance represent the interest accretion on future occupancy costs and future obligations for early withdrawal from multi-employer union pension plans which were recorded at present value at the time of the original charge. Interest accretion is recorded as a component of “Loss from operations of discontinued businesses” in our Consolidated Statements of Operations.
|
(2)
|
At each balance sheet date, we assess the adequacy of the balance of the remaining liability to determine if any adjustments are required as a result of changes in circumstances and/or estimates. These adjustments are recorded as a component of “Loss from operations of discontinued businesses” in our Consolidated Statements of Operations.
|
(3)
|
Occupancy utilization represents payments made during those periods for rent, common area maintenance and real estate taxes. Pension withdrawal utilization represents payments made to the union pension fund during the period.
|
2007 Events
|
2005 Event
|
2003 Events
|
Total
|
|||||||||||||
Total severance payments made to date
|
$
|
37,089
|
$
|
2,650
|
$
|
22,528
|
$
|
62,267
|
||||||||
Expected future pension withdrawal payments
|
59,461
|
-
|
-
|
59,461
|
||||||||||||
Total severance and pension withdrawal payments
expected to be incurred
|
96,550
|
2,650
|
22,528
|
121,728
|
||||||||||||
Total occupancy payments made to date
|
92,140
|
60,866
|
34,123
|
187,129
|
||||||||||||
Expected future occupancy payments,
|
||||||||||||||||
excluding interest accretion
|
42,579
|
21,390
|
6,783
|
70,752
|
||||||||||||
Total occupancy payments expected to be incurred,
|
||||||||||||||||
excluding interest accretion
|
$
|
134,719
|
$
|
82,256
|
$
|
40,906
|
$
|
257,881
|
||||||||
Total severance and occupancy payments made to date
|
$
|
129,229
|
$
|
63,516
|
$
|
56,651
|
$
|
249,396
|
||||||||
Expected future pension withdrawal and occupancy payments
|
||||||||||||||||
expected to be incurred, excluding interest accretion
|
102,040
|
21,390
|
6,783
|
130,213
|
||||||||||||
Total severance, pension withdrawal and occupancy payments expected to be incurred, excluding interest accretion
|
$
|
231,269
|
$
|
84,906
|
$
|
63,434
|
$
|
379,609
|
September 10, 2011
|
||||||||||||||||
2007 Events
|
2005 Event
|
2003 Events
|
Total
|
|||||||||||||
Other accruals
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Other non-current liabilities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Liabilities subject to compromise
|
$
|
102,040
|
$
|
21,390
|
$
|
6,783
|
$
|
130,213
|
||||||||
February 26, 2011
|
||||||||||||||||
2007 Events
|
2005 Event
|
2003 Events
|
Total
|
|||||||||||||
Other accruals
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Other non-current liabilities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Liabilities subject to compromise
|
$
|
106,898
|
$
|
21,390
|
$
|
8,451
|
$
|
136,739
|
For the 28 Weeks Ended September 10, 2011
|
||||||||||||||||||||
Balance at
|
Interest
|
Balance at
|
||||||||||||||||||
2/26/2011
|
Accretion(1)
|
Adjustments(2)
|
Utilization(3)
|
9/10/2011
|
||||||||||||||||
2011 Event
|
||||||||||||||||||||
Continuing Operations
|
||||||||||||||||||||
Occupancy
|
$
|
-
|
$
|
-
|
$
|
47,409
|
$
|
(1,630)
|
$
|
45,779
|
||||||||||
Severance and health benefits
|
2,738
|
-
|
1,154
|
(2,646)
|
1,246
|
|||||||||||||||
2011 event total
|
2,738
|
-
|
48,563
|
(4,276)
|
47,025
|
|||||||||||||||
2010 Event
|
||||||||||||||||||||
Continuing Operations
|
||||||||||||||||||||
Occupancy
|
29,353
|
-
|
-
|
(93)
|
29,260
|
|||||||||||||||
Severance and health benefits
|
239
|
-
|
159
|
(69)
|
329
|
|||||||||||||||
2010 event total
|
29,592
|
-
|
159
|
(162)
|
29,589
|
|||||||||||||||
2005 Event
|
||||||||||||||||||||
Continuing Operations
|
||||||||||||||||||||
Health benefits
|
445
|
-
|
-
|
(102)
|
343
|
|||||||||||||||
2005 event total
|
445
|
-
|
-
|
(102)
|
343
|
|||||||||||||||
2001 Event
|
||||||||||||||||||||
Continuing Operations
|
||||||||||||||||||||
Occupancy
|
2,127
|
-
|
166
|
-
|
2,293
|
|||||||||||||||
Discontinued Operations
|
||||||||||||||||||||
Occupancy
|
1,774
|
-
|
-
|
-
|
1,774
|
|||||||||||||||
2001 event total
|
3,901
|
-
|
166
|
-
|
4,067
|
|||||||||||||||
1998 Event
|
||||||||||||||||||||
Continuing Operations
|
||||||||||||||||||||
Occupancy
|
3,400
|
8
|
(109
|
) |
(254)
|
3,045
|
||||||||||||||
Pension withdrawals and health benefits
|
524
|
-
|
-
|
-
|
524
|
|||||||||||||||
1998 event total
|
3,924
|
8
|
(109
|
) |
(254)
|
3,569
|
||||||||||||||
Total
|
$
|
40,600
|
$
|
8
|
$
|
48,779
|
$
|
(4,794)
|
$
|
84,593
|
(1)
|
The additions to occupancy represent the interest accretion on future occupancy costs which were recorded at present value at the time of the original charge. These adjustments are recorded to “Store operating, general and administrative expense” for continuing operations and “Loss from operations of discontinued businesses” for discontinued operations in our Consolidated Statements of Operations.
|
(2)
|
At each balance sheet date, we assess the adequacy of the balance to determine if any adjustments are required as a result of changes in circumstances and/or estimates. These adjustments are recorded to “Store operating, general and administrative expense” and “Reorganization items, net” for continuing operations and “Loss from operations of discontinued businesses” for discontinued operations in our Consolidated Statements of Operations.
|
(3)
|
Occupancy utilization represents payments made during those periods for rent. Severance and benefits utilization represents payments made to terminated employees during the period.
|
2011
|
2010
|
2005
|
2001
|
1998
|
||||||||||||||||||||
Event
|
Event
|
Event
|
Event
|
Event
|
Total
|
|||||||||||||||||||
Total severance payments made to date
|
$
|
2,646
|
$
|
602
|
$
|
49,339
|
$
|
28,205
|
$
|
30,940
|
$
|
111,732
|
||||||||||||
Expected future severance payments
|
1,246
|
329
|
343
|
-
|
524
|
2,442
|
||||||||||||||||||
Total severance payments expected
|
||||||||||||||||||||||||
to be incurred
|
$
|
3,892
|
$
|
931
|
$
|
49,682
|
$
|
28,205
|
$
|
31,464
|
$
|
114,174
|
||||||||||||
Total occupancy payments made to date
|
$
|
1,630
|
$
|
882
|
$
|
13,856
|
$
|
67,283
|
$
|
120,226
|
$
|
203,877
|
||||||||||||
Expected future occupancy payments, excluding interest
|
||||||||||||||||||||||||
accretion
|
45,779
|
29,260
|
-
|
4,067
|
3,045
|
82,151
|
||||||||||||||||||
Total occupancy payments expected
|
||||||||||||||||||||||||
to be incurred, excluding interest
|
||||||||||||||||||||||||
accretion
|
$
|
47,409
|
$
|
30,142
|
$
|
13,856
|
$
|
71,350
|
$
|
123,271
|
$
|
286,028
|
||||||||||||
Total severance and occupancy
|
||||||||||||||||||||||||
payments made to date
|
$
|
4,276
|
$
|
1,484
|
$
|
63,195
|
$
|
95,488
|
$
|
151,166
|
$
|
315,609
|
||||||||||||
Expected future severance and
|
||||||||||||||||||||||||
occupancy payments, excluding
|
||||||||||||||||||||||||
interest accretion
|
47,025
|
29,589
|
343
|
4,067
|
3,569
|
84,593
|
||||||||||||||||||
Total severance and occupancy payments expected to be
|
||||||||||||||||||||||||
excluding interest accretion
|
$
|
51,301
|
$
|
31,073
|
$
|
63,538
|
$
|
99,555
|
$
|
154,735
|
$
|
400,202
|
September 10, 2011
|
||||||||||||||||||||||||
2011
|
2010
|
2005
|
2001
|
1998
|
||||||||||||||||||||
Event
|
Event
|
Event
|
Event
|
Event
|
Total
|
|||||||||||||||||||
Other accruals
|
$
|
1,246
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,246
|
||||||||||||
Other non-current liabilities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
Liabilities subject to compromise
|
$
|
45,779
|
$
|
29,589
|
$
|
343
|
$
|
4,067
|
$
|
3,569
|
$
|
83,347
|
||||||||||||
February 26, 2011
|
||||||||||||||||||||||||
2010
|
2005
|
2001
|
1998
|
|||||||||||||||||||||
Event
|
Event
|
Event
|
Event
|
Total
|
||||||||||||||||||||
Other accruals
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Other non-current liabilities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||
Liabilities subject to compromise
|
$
|
29,592
|
$
|
445
|
$
|
3,901
|
$
|
3,924
|
$
|
37,862
|
12 Weeks Ended
|
28 Weeks Ended
|
||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
||||
Stock options
|
4,164,109
|
3,123,723
|
4,564,145
|
2,475,006
|
|||
Warrants
|
6,965,858
|
7,652,135
|
6,965,858
|
686,277
|
|||
Performance restricted stock units
|
-
|
154,499
|
-
|
190,689
|
|||
Restricted stock units
|
666,420
|
926,387
|
696,750
|
1,015,039
|
|||
Financing warrant
|
11,278,988
|
11,278,988
|
11,278,988
|
11,278,988
|
|||
Preferred stock
|
35,804,000
|
35,000,000
|
35,804,000
|
35,000,000
|
|||
Convertible debt
|
11,278,988
|
8,086,769
|
11,278,988
|
11,278,988
|
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Loss from continuing operations
|
$ | (97,831 | ) | $ | (142,180 | ) | $ | (274,500 | ) | $ | (256,931 | ) | ||||
Preferred stock dividends
|
- | (3,093 | ) | - | (7,400 | ) | ||||||||||
Beneficial conversion feature amortization
|
(1,110 | ) | (1,110 | ) | (2,591 | ) | (2,591 | ) | ||||||||
Loss from continuing operations - basic
|
(98,941 | ) | (146,383 | ) | (277,091 | ) | (266,922 | ) | ||||||||
Adjustments for convertible debt (1)
|
- | (10,270 | ) | - | - | |||||||||||
Adjustments on Other financial liabilities (2)
|
- | - | - | (10,454 | ) | |||||||||||
Loss from continuing operations–diluted
|
$ | (98,941 | ) | $ | (156,653 | ) | $ | (277,091 | ) | $ | (277,376 | ) | ||||
Weighted average common shares outstanding
|
53,852,470 | 56,206,446 | 53,852,470 | 56,046,228 | ||||||||||||
Share lending agreement(3)
|
- | (2,427,944 | ) | - | (2,427,944 | ) | ||||||||||
Common shares outstanding–basic
|
53,852,470 | 53,778,502 | 53,852,470 | 53,618,284 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Convertible debt (1)
|
- | 3,192,219 | - | - | ||||||||||||
Convertible financial liabilities (2)
|
- | - | - | (34,668,287 | ) | |||||||||||
Common shares outstanding–diluted
|
53,852,470 | 56,970,721 | 53,852,470 | 18,949,997 |
(1)
|
We have debt instruments with a bifurcated conversion feature that were recorded at a significant discount. (Refer to Note 9 – Indebtedness and Other Financial Liabilities). For purposes of determining if an application of the “if-converted” method to these convertible instruments produces a dilutive result, we consider the combined impact of the numerator and denominator adjustments, including a numerator adjustment for gains and losses, which would have been incurred had the instruments been converted on the first day of the period presented.
|
(2)
|
Our Series B Warrants are classified as a liability because a third party has the right to determine their cash or share settlement. (Refer to Note 9 – Indebtedness and Other Financial Liabilities). These warrants are marked-to-market in our Consolidated Statements of Operations. For example, in periods when the market price of our common stock decreases, our income from continuing operations is increased. For purposes of determining if an application of the treasury stock method produces a dilutive result, we assume proceeds are used to repurchase common stock and we adjust the numerator similar to the adjustments required under the “if-converted” method. We consider the combined impact of the numerator and denominator adjustments, including a denominator adjustment to reduce shares, even when the average market price of our common stock for the period is below the warrant’s strike price.
|
(3)
|
As of September 11, 2010, we had 5,634,002 of loaned shares under our share lending agreements, which were considered issued and outstanding. The obligation of the financial institutions to return the borrowed shares has been accounted for as prepaid forward contract and, accordingly, shares underlying this contract are removed from the computation of basic and diluted earnings per share, unless the borrower defaults on returning the related shares. On September 15, 2008, Lehman Europe, who is a party to a 3,206,058 share lending agreement with our Company filed under chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court and/or commenced equivalent proceedings in jurisdictions outside of the United States (collectively, the “Lehman Bankruptcy”). As such, we have included these loaned shares as issued and outstanding effective September 15, 2008 for purposes of computing our basic and diluted weighted average shares and (loss) income per share. During fiscal 2009, Bank of America, N.A., who is a party to our share lending agreement, returned 2,500,000 shares, eliminating our obligation to lend additional shares to them in the future. The returned shares were immediately retired, reducing our issued and outstanding shares. For the 12 and 28 weeks ended September 11, 2010, weighted average common shares relating to share lending agreements of 2,427,944 were excluded from the computation of earnings per share, respectively. As of September 10, 2011, there were no shares outstanding with Bank of America, N.A.
|
Sales by Category
|
||||||||||||||||
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Grocery (1)
|
$
|
1,129,790
|
$
|
1,310,388
|
$
|
2,667,075
|
$
|
3,069,232
|
||||||||
Meat (2)
|
315,746
|
375,868
|
744,457
|
867,350
|
||||||||||||
Produce (3)
|
193,158
|
232,023
|
457,808
|
546,627
|
||||||||||||
Total
|
$
|
1,638,694
|
$
|
1,918,279
|
$
|
3,869,340
|
$
|
4,483,209
|
(1)
|
The grocery category includes grocery, frozen foods, dairy, general merchandise/health and beauty aids, wine, beer & spirits, and pharmacy.
|
(2)
|
The meat category includes meat, deli, bakery and seafood.
|
(3)
|
The produce category includes produce and floral.
|
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Sales
|
||||||||||||||||
Fresh
|
$
|
815,520
|
$
|
976,952
|
$
|
1,943,092
|
$
|
2,255,521
|
||||||||
Pathmark
|
698,733
|
816,304
|
1,629,795
|
1,927,705
|
||||||||||||
Gourmet
|
55,714
|
55,122
|
138,508
|
137,994
|
||||||||||||
Other
|
68,727
|
69,901
|
157,945
|
161,989
|
||||||||||||
Total sales
|
$
|
1,638,694
|
$
|
1,918,279
|
$
|
3,869,340
|
$
|
4,483,209
|
||||||||
Segment (loss) income
|
||||||||||||||||
Fresh
|
$
|
434
|
$
|
10,255
|
$
|
(18,956
|
)
|
$
|
23,727
|
|||||||
Pathmark
|
(32,385
|
)
|
(27,771
|
)
|
(86,665
|
)
|
(52,579
|
)
|
||||||||
Gourmet
|
1,415
|
2,371
|
7,866
|
8,882
|
||||||||||||
Other
|
1,036
|
254
|
759
|
991
|
||||||||||||
Total segment loss
|
(29,500
|
)
|
(14,891
|
)
|
(96,996
|
)
|
(18,979
|
)
|
||||||||
Corporate (4)
|
(24,501
|
)
|
(28,955
|
)
|
(40,977
|
)
|
(76,197
|
)
|
||||||||
Reconciling items (5)
|
(21,595
|
)
|
(54,280
|
)
|
(158,449
|
)
|
(64,696
|
)
|
||||||||
Loss from operations
|
(75,596
|
)
|
(98,126
|
)
|
(296,442
|
)
|
(159,872
|
)
|
||||||||
Nonoperating income
|
8
|
2,177
|
91
|
10,454
|
||||||||||||
Interest expense, net
|
(37,829
|
)
|
(46,126
|
)
|
(86,283
|
)
|
(107,268
|
)
|
||||||||
Reorganization items, net
|
17,148
|
-
|
95,026
|
-
|
||||||||||||
Loss from continuing operations before income taxes
|
$
|
(96,269
|
)
|
$
|
(142,075
|
)
|
$
|
(287,588
|
)
|
$
|
(256,686
|
)
|
||||
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Segment depreciation and amortization – continuing operations
|
||||||||||||||||
Fresh
|
$
|
13,900
|
$
|
17,329
|
$
|
34,318
|
$
|
40,721
|
||||||||
Pathmark
|
15,564
|
19,761
|
37,764
|
46,532
|
||||||||||||
Gourmet
|
1,554
|
1,951
|
3,724
|
4,702
|
||||||||||||
Other
|
1,179
|
1,241
|
2,834
|
2,904
|
||||||||||||
Total segment depreciation and amortization – continuing operations
|
32,197
|
40,282
|
78,640
|
94,859
|
||||||||||||
Corporate
|
9,949
|
11,236
|
22,948
|
27,038
|
||||||||||||
Total depreciation and amortization – continuing operations
|
42,146
|
51,518
|
101,588
|
121,897
|
||||||||||||
Discontinued operations
|
-
|
-
|
-
|
-
|
||||||||||||
Total company depreciation and amortization
|
$
|
42,146
|
$
|
51,518
|
$
|
101,588
|
$
|
121,897
|
(4)
|
Represents a $4.1 million and $25.4 million decrease in corporate costs attributable to store-related activities, primarily benefits and occupancy costs which are not allocated to segments, for the 12 and 28 weeks ended September 10, 2011, respectively, and a $0.4 million and $9.8 million decline in corporate and administrative costs for the respective periods ended.
|
(5)
|
Reconciling items, which are not included in segment loss, consist of the following:
|
12 Weeks Ended
|
28 Weeks Ended
|
|||||||||||||||
Sept. 10, 2011
|
Sept. 11, 2010
|
Sept. 10, 2011
|
Sept. 11, 2010
|
|||||||||||||
Goodwill, trademark and long-lived asset impairment
|
$
|
(24,124
|
)
|
$
|
(30,250
|
)
|
$
|
(79,542
|
)
|
$
|
(35,648
|
)
|
||||
Net restructuring and other
|
688
|
(9,297
|
)
|
(2,801
|
)
|
(13,229
|
)
|
|||||||||
Net real estate related activity
|
7,119
|
2,179
|
(49,428
|
)
|
232
|
|||||||||||
Stock-based compensation (expense) income
|
(1,018
|
)
|
(760
|
)
|
(1,509
|
)
|
101
|
|||||||||
Pension withdrawal costs
|
-
|
-
|
(13,923
|
)
|
-
|
|||||||||||
Self-insurance adjustment
|
(699
|
)
|
(16,152
|
)
|
(699
|
)
|
(16,152
|
)
|
||||||||
Losses relating to Hurricane Irene
|
(1,000
|
)
|
-
|
(1,000
|
)
|
-
|
||||||||||
Inventory-related
|
(363
|
)
|
-
|
(363
|
)
|
-
|
||||||||||
C&S contract effect
|
(2,198
|
)
|
-
|
(9,184
|
)
|
-
|
||||||||||
Total reconciling items
|
$
|
(21,595
|
)
|
$
|
(54,280
|
)
|
$
|
(158,449
|
)
|
$
|
(64,696
|
)
|
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
·
|
Overview – a general description of our business and segment structure.
|
·
|
Operating Results – a discussion of the value drivers of our business; measurements; opportunities; challenges and risks; and initiatives.
|
·
|
Outlook – a discussion of certain trends or business initiatives for the remainder of fiscal 2011 to assist in understanding the business.
|
·
|
Results of Operations and Liquidity and Capital Resources – a discussion of results for the 12 weeks ended September 10, 2011 compared to the 12 weeks ended September 11, 2010; results for the 28 weeks ended September 10, 2011 compared to the 28 weeks ended September 11, 2010 and current and expected future liquidity.
|
·
|
Critical Accounting Estimates – a discussion of significant estimates made by Management.
|
·
|
Market Risk – a discussion of the impact of market changes in our Consolidated Financial Statements.
|
12 Weeks Ended
|
12 Weeks Ended
|
Favorable
|
||||||||||||||
September 10, 2011
|
September 11, 2010
|
(unfavorable)
|
% Change
|
|||||||||||||
(in millions, except percentages and per share data)
|
||||||||||||||||
Sales
|
$
|
1,638.7
|
$
|
1,918.3
|
$
|
(279.6
|
)
|
(14.6
|
)%
|
|||||||
Decrease in comparable store sales
|
(0.6
|
)%
|
(6.6
|
)%
|
N/A
|
N/A
|
||||||||||
Loss from continuing operations
|
$
|
(97.8
|
)
|
$
|
(142.2
|
)
|
$
|
44.4
|
|
31.2
|
%
|
|||||
Loss from discontinued operations
|
$
|
(2.0
|
)
|
$
|
(10.9
|
)
|
$
|
8.9
|
81.7
|
%
|
||||||
Net loss
|
$
|
(99.8
|
)
|
$
|
(153.0
|
)
|
$
|
53.2
|
34.8
|
%
|
||||||
Net loss per share - basic
|
$
|
(1.88
|
)
|
$
|
(2.93
|
)
|
$
|
1.05
|
35.8
|
%
|
||||||
Net loss per share - diluted
|
$
|
(1.88
|
)
|
$
|
(2.94
|
)
|
$
|
1.06
|
36.1
|
%
|
For the 12 Weeks Ended
|
||||||||
September 10, 2011
|
September 11, 2010
|
|||||||
(in thousands)
|
||||||||
Fresh
|
$
|
815,520
|
$
|
976,952
|
||||
Pathmark
|
698,733
|
816,304
|
||||||
Gourmet
|
55,714
|
55,122
|
||||||
Other
|
68,727
|
69,901
|
||||||
Total sales
|
$
|
1,638,694
|
$
|
1,918,279
|
Sales Volume
|
Gross Margin Rate
|
Total
|
||||||||||
Total company
|
$
|
(82.2
|
)
|
$
|
(25.7
|
)
|
$
|
(107.9
|
)
|
For the 12 Weeks Ended
|
||||||||
September 10, 2011
|
September 11, 2010
|
|||||||
(in thousands)
|
||||||||
Fresh
|
$
|
434
|
$
|
10,255
|
||||
Pathmark
|
(32,385
|
)
|
(27,771
|
)
|
||||
Gourmet
|
1,415
|
2,371
|
||||||
Other
|
1,036
|
254
|
||||||
Total segment loss
|
$
|
(29,500
|
)
|
$
|
(14,891
|
)
|
REORGANIZATION ITEMS, NET
|
28 Weeks Ended
|
28 Weeks Ended
|
Favorable
|
||||||||||||||
September 10, 2011
|
September 11, 2010
|
(unfavorable)
|
% Change
|
|||||||||||||
(in millions, except percentages and per share data)
|
||||||||||||||||
Sales
|
$
|
3,869.3
|
$
|
4,483.2
|
$
|
(613.9
|
)
|
(13.7
|
)%
|
|||||||
Decrease in comparable store sales
|
(2.7
|
)%
|
(6.9
|
)%
|
N/A
|
N/A
|
||||||||||
Loss from continuing operations
|
$
|
(274.5
|
)
|
$
|
(256.9
|
)
|
$
|
(17.6
|
)
|
(6.9
|
)%
|
|||||
Income (loss) from discontinued operations
|
$
|
18.6
|
$
|
(17.9
|
)
|
$
|
36.5
|
>100
|
%
|
|||||||
Net loss
|
$
|
(255.9
|
)
|
$
|
(274.8
|
)
|
$
|
18.9
|
|
6.9
|
%
|
|||||
Net loss per share - basic
|
$
|
(4.80
|
)
|
$
|
(5.31
|
)
|
$
|
0.51
|
|
9.6
|
%
|
|||||
Net loss per share - diluted
|
$
|
(4.80
|
)
|
$
|
(15.58
|
)
|
$
|
10.78
|
69.2
|
%
|
For the 28 Weeks Ended
|
||||||||
September 10, 2011
|
September 11, 2010
|
|||||||
(in thousands)
|
||||||||
Fresh
|
$
|
1,943,092
|
$
|
2,255,521
|
||||
Pathmark
|
1,629,795
|
1,927,705
|
||||||
Gourmet
|
138,508
|
137,994
|
||||||
Other
|
157,945
|
161,989
|
||||||
Total sales
|
$
|
3,869,340
|
$
|
4,483,209
|
Gross margin of $1,078.7 million decreased 174 basis points as a percentage of sales to 27.88% for the 28 weeks ended September 10, 2011 from gross margin of $1,328.0 million or 29.62% for the 28 weeks ended September 11, 2010 reflecting lower margins across all of our operating segments due to the lack of success of our lower price initiative in the first quarter of fiscal 2011 as described above in SALES as well as a reduction in vendor allowances that we have experienced during the bankruptcy.
|
The following table details the dollar impact of items affecting the gross margin dollar decrease from the 28 weeks ended September 10, 2011to the 28 weeks ended September 11, 2010 (in millions):
|
Sales Volume
|
Gross Margin Rate
|
Total
|
||||||||||
Total company
|
$
|
(181.8
|
)
|
$
|
(67.5
|
)
|
$
|
(249.3
|
)
|
Our SG&A expense was $1,295.6 million or 33.48% as a percentage of sales for the 28 weeks ended September 10, 2011, as compared to $1,452.2 million or 32.39% as a percentage of sales for the 28 weeks ended September 11, 2010.
|
SG&A expenses for the 28 weeks ended September 10, 2011 included (i) net real estate related costs of $90.3 million, or 233 basis points, of which $63.3 million and $26.2 million were attributed to occupancy reserve adjustments related to April store closings and Southern store closings, respectively (ii) pension withdrawal costs of $13.9 million, or 36 basis points recorded in connection with the partial withdrawal from the multi-employer union pension plan (iii) net restructuring and other costs of $2.8 million, or 7 basis points (iv) net stock-based compensation related expense of $1.5 million, or 4 basis points (v) losses related to Hurricane Irene of $1.0 million, or 3 basis points and (vi) self-insurance reserve adjustments of $0.1 million, or 0.5 basis points. These costs were partially offset by (vii) net real estate gains of $40.9 million, or 105 basis points, of which $29.1 million related to gain from the sale of Southern stores.
|
SG&A expenses for the 28 weeks ended September 11, 2010 included (i) net restructuring and other costs of $13.2 million, or 30 basis points and (ii) self-insurance reserve adjustments of $17.8 million, or 40 basis points. These costs were partially offset by net real estate related gains of $0.2 million, or 0.5 basis points and net stock-based compensation related income of $0.1 million, or 0.2 basis points, primarily due to forfeitures.
|
For the 28 Weeks Ended
|
||||||||
September 10, 2011
|
September 11, 2010
|
|||||||
(in thousands)
|
||||||||
Fresh
|
$
|
(18,956
|
)
|
$
|
23,727
|
|||
Pathmark
|
(86,665
|
)
|
(52,579
|
)
|
||||
Gourmet
|
7,866
|
8,882
|
||||||
Other
|
759
|
991
|
||||||
Total segment loss
|
$
|
(96,996
|
)
|
$
|
(18,979
|
)
|
REORGANIZATION ITEMS, NET
|
For the 28 Weeks Ended
|
|||
September 10, 2011
|
September 11, 2010
|
||
Net cash used in operating activities
|
$ (68,353
|
)
|
$ (94,423)
|
Net cash provided by (used) in investing activities
|
32,145
|
(29,496)
|
|
Net cash used in financing activities
|
(14,830
|
)
|
(34,164)
|
·
|
An increase in the current portion of our long-term debt due to the reclassification of our term loan under the DIP Credit Agreement, due June 14, 2012;
|
·
|
A decline in inventories primarily related to reduced number of open locations. We also experienced a decline in inventories of approximately $6.9 million for losses incurred by Hurricane Irene, which we expect to restock in our third quarter;
|
·
|
A decrease in accounts receivable, primarily related to 1) lower sales, 2) settlement of C&S pre-petition accounts receivable, 3) a reduction in vendor funding that we have experienced during the Bankruptcy, as well as, 4) an improvement in the collection rate from certain vendors since the Bankruptcy Filing;
|
·
|
An increase in accrued taxes attributed to timing of payment; and
|
·
|
An increase in other accruals resulting from the current portion of the allowable claim for damages pertaining to rejected leases that are expected to be settled upon our Company’s emergence from the Bankruptcy Filing.
|
·
|
A decrease in accounts payable attributed to the payment of certain pre-petition liabilities as permitted by various court orders;
|
·
|
A decline in accrued salaries, wages and benefits, primarily related to 1) reversal of the incentive compensation accrued for our executive and non-executive employees based on our operating results, as well as, 2) a decrease in accrued vacation;
|
·
|
A decrease in book overdrafts primarily due to the extension of payments terms with certain vendors resulting from the execution of trade agreements;
|
·
|
An increase in restricted cash that can only be used as collateral for our new Letter of Credit Agreement with our DIP Lender; and
|
·
|
An increase in prepaid expenses and other current assets primarily due to an increase in prepaid rent due to timing of payments.
|
At
|
At
|
|||||||
September 10, 2011
|
February 26, 2011
|
|||||||
Debtor-in-Possession Credit Agreement, due June 14, 2012
|
$
|
350,000
|
$
|
350,000
|
||||
Related Party Promissory Note, due August 18, 2011
|
10,000
|
10,000
|
||||||
5.125% Convertible Senior Notes, due June 15, 2011(1)
|
165,000
|
165,000
|
||||||
9.125% Senior Notes, due December 15, 2011(1)
|
12,840
|
12,840
|
||||||
6.750% Convertible Senior Notes, due December 15, 2012(1)
|
255,000
|
255,000
|
||||||
11.375% Senior Secured Notes, due August 1, 2015
|
260,000
|
260,000
|
||||||
9.375% Notes, due August 1, 2039(1)
|
200,000
|
200,000
|
||||||
Other
|
2,395
|
2,544
|
||||||
Subtotal
|
1,255,235
|
1,255,384
|
||||||
Less current portion of long-term debt
|
(350,000
|
)
|
(159
|
)
|
||||
Less long-term debt - subject to compromise
|
(905,235
|
)
|
(905,225
|
)
|
||||
Long-term debt
|
$
|
-
|
$
|
350,000
|
(1)
|
Represents public debt obligations.
|
•
|
the DIP Lenders agreed to lend up to $800.0 million in the form of a $350.0 million term loan and a $450.0 million revolving credit facility with a $250.0 million sublimit for letters of credit, in each case subject to the terms and conditions therein;
|
•
|
our Company’s and the Subsidiary Borrower’s obligations under the DIP Credit Agreement and the other specified loan documents are guaranteed by our Company’s certain other subsidiaries that are Debtors (“Subsidiary Guarantors” and, together with our Company and the Subsidiary Borrowers, the “Loan Parties”); and
|
•
|
the Loan Parties’ obligations under the DIP Credit Agreement and such other specified loan documents are secured by a security interest in, and lien upon, substantially all of the Loan Parties’ existing and after-acquired personal and real property, having the priority and subject to the terms therein and in the order(s) entered into by the Bankruptcy Court, as applicable.
|
Date
|
Minimum Cumulative EBITDA
|
December 31, 2011
|
10.0
|
January 28, 2012
|
25.0
|
February 25, 2012
|
40.0
|
March 24, 2012
|
55.0
|
April 21, 2012
|
70.0
|
May 19, 2012
|
85.0
|
June 16, 2012
|
100.0
|
·
|
Failure to execute on our turnaround strategy could adversely affect our Company’s liquidity, financial condition and results of operations.
|
·
|
As a result of the Bankruptcy Filing, our historical financial information may not be indicative of our future financial performance.
|
·
|
Operating during the Bankruptcy Filing may restrict our ability to pursue our strategic and operational initiatives.
|
· incur indebtedness;
|
· incur or create liens;
|
· dispose of assets;
|
· prepay certain indebtedness and make other restricted payments;
|
· enter into sale and leaseback transactions; and
|
· modify the terms of certain indebtedness and certain material contracts.
|
·
|
The Bankruptcy Filing may have an adverse effect on our business and results of operations.
|
·
|
We may not be able to remain in compliance with the requirements of the DIP Credit Agreement therefore the lending commitments under the DIP Credit Agreement may be terminated by the DIP Lender.
|
Date
|
Minimum Cumulative EBITDA
|
December 31, 2011
|
10.0
|
January 28, 2012
|
25.0
|
February 25, 2012
|
40.0
|
March 24, 2012
|
55.0
|
April 21, 2012
|
70.0
|
May 19, 2012
|
85.0
|
June 16, 2012
|
100.0
|
·
|
If we are unable to implement a plan of reorganization, we may not be able to restructure our Company’s debts and continue as a going concern.
|
·
|
As a result of approval and implementation of a proposed plan, should such occur, certain changes in ownership of our Company could occur, which could adversely affect our ability to utilize our significant net operating loss carry-forwards upon our emergence from the Bankruptcy Filing.
|
·
|
We may experience increased levels of employee attrition.
|
·
|
Trading in our securities during the pendency of the Bankruptcy Filing is highly speculative and poses substantial risks. Our common stock may be cancelled and holders of such common stock may not receive any distribution with respect to, or be able to recover any portion of, their investments.
|
·
|
Our common stock and 9 3/8% senior quarterly interest bonds are no longer listed on a national securities exchange and are quoted only on the Pink Sheets, which could negatively affect our stock price, bond price and marketplace liquidity.
|
·
|
Our substantial indebtedness could impair our financial condition and our ability to fulfill our debt obligations, including our obligations under the notes.
|
·
|
We are affected by increasing labor, benefit and other operating costs and a competitive labor market and are subject to the risk of unionized labor disruptions.
|
·
|
We may incur additional pension liabilities resulting from the sales or closures of our Company’s stores.
|
|
18.1
|
Preferability Letter of Independent Registered Public Accounting Firm
|
|
31.1
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Schema Document
|
|
101.CAL
|
XBRL Calculation Linkbase Document
|
|
101.LAB
|
XBRL Label Linkbase Document
|
|
101.PRE
|
XBRL Presentation Linkbase Document
|
|
101.DEF
|
XBRL Definition Linkbase Document
|
1.
|
I have reviewed this quarterly report on Form 10-Q of The Great Atlantic & Pacific Tea Company, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of The Great Atlantic & Pacific Tea Company, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Consolidated Statements Of Operations (Parenthetical) (USD $) In Thousands | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 10, 2011 | Sep. 11, 2010 | Sep. 10, 2011 | Sep. 11, 2010 | |
Consolidated Statements Of Operations | ||||
Tax benefit from discontinued operations | $ 1,464 | $ 0 | $ 2,606 | $ 0 |
Gain on disposal of discontinued operations, tax | 0 | 0 | 0 | 0 |
Reorganization items, income tax provision | $ 7 | $ 0 | $ 14,368 | $ 0 |
Interest Expense, Net | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 10, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense, Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense, Net |
14. Interest Expense, Net
Interest expense, net is comprised of the following (in thousands):
We recorded $8.6 million and $20.1 million in contractual interest for the DIP Credit Agreement during the 12 and 28 weeks ended September 10, 2011, respectively. We continued to record contractual interest for our $260 million 11.375% Senior Secured Notes due August 1, 2015 that were issued in August 2009. We did not record contractual interest expense of approximately $8.6 million and $22.6 million for the 12 and 28 weeks ended September 10, 2011, respectively, for our Related Party Promissory Note, due August 18, 2011, 9.125% Senior Notes, due December 15, 2011, 5.125% Convertible Senior Notes, due June 15, 2011, 6.750% Convertible Senior Notes, due December 15, 2012, and 9.375% Notes, due August 1, 2039, all of which are unsecured obligations for which we ceased accruing interest during the fourth quarter 2010 as a result of the Bankruptcy Filing. Debt discounts and deferred financing fees for all debt which is subject to compromise were reclassified into the carrying value of the respective indebtedness upon the Bankruptcy Filing and the balances were then adjusted to the face value of the debt. As a result of this reclassification, we ceased amortization of deferred financing fees and discounts effective as of the Bankruptcy Filing date. Although we have recorded interest accretion expense on obligations under capital leases and real estate liabilities, self-insurance reserves, GHI and corporate owned life insurance obligations, we have not made a final determination as to the value of any underlying assets or the rejection/assumption of any of the obligations that we have not assumed. Once a determination is made, the accretion of the interest expense may change. |
Document And Entity Information | 6 Months Ended | |
---|---|---|
Sep. 10, 2011 | Oct. 21, 2011 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 10, 2011 | |
Document Fiscal Year Focus | 2012 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | GREAT ATLANTIC & PACIFIC TEA CO INC | |
Entity Central Index Key | 0000043300 | |
Current Fiscal Year End Date | --02-25 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 53,852,470 |
Discontinued Operations | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Discontinued Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations |
17. Discontinued Operations
We have had multiple transactions throughout the years which met the criteria for discontinued operations. These events are described based on the year the transaction was initiated.
Summarized below is a reconciliation of the liabilities related to restructuring obligations resulting from these activities (in thousands):
(1) The additions to occupancy and severance represent the interest accretion on future occupancy costs and future obligations for early withdrawal from multi-employer union pension plans which were recorded at present value at the time of the original charge. Interest accretion is recorded as a component of "Loss from operations of discontinued businesses" in our Consolidated Statements of Operations.
(2) At each balance sheet date, we assess the adequacy of the balance of the remaining liability to determine if any adjustments are required as a result of changes in circumstances and/or estimates. These adjustments are recorded as a component of "Loss from operations of discontinued businesses" in our Consolidated Statements of Operations.
For the 28 weeks Ended September 10, 2011 During the 28 weeks ended September 10, 2011, we recorded adjustments for the 2007 and 2003 events to reduce occupancy liabilities by $6.8 million and $1.6 million, respectively, due to an estimated allowable claim amount for property leases that were rejected in Bankruptcy Court during the fiscal year.
(3) Occupancy utilization represents payments made during those periods for rent, common area maintenance and real estate taxes. Pension withdrawal utilization represents payments made to the union pension fund during the period.
Summarized below are the payments made to date from the time of the original charge and expected future payments related to these events (in thousands):
Payments to date were primarily for occupancy related costs such as rent, common area maintenance, real estate taxes, lease termination costs, severance, and benefits. The remaining obligation relates to expected future payments under long term leases and expected future payments for early withdrawal from multi-employer union pension plans. The expected completion dates for the 2007, 2005 and 2003 events are 2028, 2012 and 2012, respectively.
Summarized below are the amounts included in our balance sheet captions in our Company's Consolidated Balance Sheets related to these events (in thousands):
We evaluated the closed locations reserves balances as of September 10, 2011 based on current information and have concluded that they are adequate to cover future costs. We will continue to monitor the status of the vacant and subsidized properties, severance and benefits, and pension withdrawal liabilities, and adjustments to the closed locations reserves balances may be recorded in the future, if necessary. |
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Goodwill And Other Intangible Assets | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill And Other Intangible Assets | 3. Goodwill and Other Intangible Assets
The carrying values of our finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Our intangible assets that have finite useful lives are amortized over their estimated useful lives. Goodwill and other intangibles with indefinite useful lives that are not subject to amortization are tested for impairment in the fourth quarter of each fiscal year, or more frequently whenever events or changes in circumstances indicate that impairment may have occurred. The latest impairment assessment of goodwill and indefinite lived intangible assets was completed in the fourth quarter of fiscal 2010 for all of our reporting units in our reportable segments. This assessment concluded that there was no impairment.
Goodwill As part of our consideration of whether goodwill is recoverable, we have noted a decline in revenues and cash flows during the first half of fiscal 2011 from the projections used in the fourth quarter fiscal 2010 to evaluate the goodwill for the Waldbaum's reporting units. We determined we do not have a triggering event, as we continue to anticipate that expected savings from the recently negotiated C&S supply agreement and from the ongoing labor negotiations will improve future cash flows at the Waldbaum's reporting units to a level that will exceed the related carrying value of the assets. However, the most recent decline in cash flows does indicate that the estimated fair value of this reporting unit may not exceed the carrying value of the assets by as much as previously anticipated during our fourth quarter of fiscal 2010. It should be noted that the expected savings from the ongoing labor negotiations are not assured and if such savings are not realized, then the cash flow projections of this reporting unit would be lowered to such a level that it is likely the goodwill at this reporting unit would be impaired.
The carrying amount of our goodwill was $110.4 million at September 10, 2011 and February 26, 2011, respectively. Our goodwill allocation by segment at September 10, 2011 and February 26, 2011 was as follows (in thousands):
Intangible Assets, net As part of our consideration of whether the definite lived intangible assets are recoverable, we have noted a decline in revenues and cash flows during the first half of fiscal 2011 from the projections used in the fourth quarter fiscal 2010 to evaluate the definite lived intangible assets for the Pathmark reporting unit. We determined we do not have a triggering event, as we continue to anticipate that expected savings from the recently negotiated C&S supply agreement and from the ongoing labor negotiations will improve future cash flows at the Pathmark reporting unit to a level that will exceed the related carrying value of the assets. However, the most recent decline in cash flows does indicate that the estimated fair value of this reporting unit may not exceed the carrying value of the assets by as much as previously anticipated during our fourth quarter of fiscal 2010. It should be noted that the expected savings from the ongoing labor negotiations are not assured and if such savings are not realized, then the cash flow projections of this reporting unit would be lowered to such a level that it is likely the definite lived intangible assets at this reporting unit would be impaired.
As part of our consideration of whether the indefinite lived intangible assets are recoverable, we have noted a decline in revenues and cash flows during the first half of fiscal 2011 from the projections used in the fourth quarter fiscal 2010 to evaluate the indefinite lived intangible assets for the Pathmark reporting unit. We determined that we do not have a triggering event. Further, any changes in sensitivity to changes in revenues or market royalty rates have not been significant.
Intangible assets acquired as part of our acquisition of Pathmark in December 2007 consisted of the following (in thousands):
The following table summarizes the estimated future amortization expense for our finite-lived intangible assets (in thousands):
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Asset Disposition Initiatives |
18. Asset Disposition Initiatives
In addition to the events described in Note 17 – Discontinued Operations, there were restructuring transactions which were not primarily related to our discontinued operations businesses. These events are referred to based on the year the transaction was initiated, as described below.
Summarized below is a reconciliation of the liabilities related to restructuring obligations resulting from these activities (in thousands):
(1) The additions to occupancy represent the interest accretion on future occupancy costs which were recorded at present value at the time of the original charge. These adjustments are recorded to "Store operating, general and administrative expense" for continuing operations and "Loss from operations of discontinued businesses" for discontinued operations in our Consolidated Statements of Operations. (2) At each balance sheet date, we assess the adequacy of the balance to determine if any adjustments are required as a result of changes in circumstances and/or estimates. These adjustments are recorded to "Store operating, general and administrative expense" and "Reorganization items, net" for continuing operations and "Loss from operations of discontinued businesses" for discontinued operations in our Consolidated Statements of Operations.
For the 28 weeks Ended September 10, 2011 For the 28 weeks ended September 10, 2011, we recorded an initial occupancy charge for the 2011 event related to the April store closings and the Southern store closings of $63.3 million and $26.2 million, respectively, partially offset by an adjustment of $27.8 million and $14.5 million, respectively, to reduce the occupancy liabilities to an estimated allowable claim amount due to property leases that were rejected in Bankruptcy Court during the 28 weeks of fiscal 2011. We also recorded an adjustment for the Southern stores of $0.2 million due to balance sheet reclassifications for real estate accounts. The initial occupancy charge of $63.3 million and related adjustment of $27.8 million for the April store closings impacted the Fresh, Pathmark and Other segments by $33.2 million, $27.6 million and $2.5 million, respectively, and $13.3 million, $14.3 million and $0.2 million, respectively. The Southern store closings all related to the Fresh segment. In addition, we recorded an initial severance charge for the 2011 Event related to the southern store closings of $2.8 million and adjustments of $0.2 million and ($1.8) million for the 2011 Event related to the April and Southern store closings, respectively. The Southern store closures were completed by July 9, 2011 and 12 of these stores were sold at auction, resulting in a gain of $29.1 million. For the 2010 Event, we recorded an adjustment of $0.2 million for additional severance and health benefits owed to severed employees. For the 2001 Event, we recorded an adjustment of $0.2 million to increase the occupancy liabilities to an estimated allowable claim amount due to property leases that were rejected in Bankruptcy Court during the 28 weeks of fiscal 2011. For the 1998 Event, we recorded an adjustment of $0.1 million to reduce the occupancy liabilities to an estimated allowable claim amount due to property leases that were rejected in Bankruptcy Court during the 28 weeks of fiscal 2011.
(3) Occupancy utilization represents payments made during those periods for rent. Severance and benefits utilization represents payments made to terminated employees during the period.
Summarized below are the payments made to date from the time of the original charge and expected future payments related to these events (in thousands):
Payments to date were primarily for occupancy related costs such as rent, common area maintenance, real estate taxes, lease termination costs, severance, and benefits. The remaining obligation relates to expected future payments under long-term leases and expected future payments for early withdrawal from multi-employer union pension plans. The expected completion dates for the 2011, 2010, 2005, 2001 and 1998 events are 2012, 2012, 2015, 2012 and 2013, respectively.
Summarized below are the amounts included in our balance sheet captions in our Company's Consolidated Balance Sheets related to these events (in thousands):
We evaluated the closed locations reserves balances as of September 10, 2011 based on current information and have concluded that they are adequate to cover future costs. We will continue to monitor the status of the vacant and subsidized properties, severance and benefits, and pension withdrawal liabilities, and adjustments to the closed locations reserves balances may be recorded in the future, if necessary.
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Income Taxes | 16. Income Taxes
During the 12 and 28 weeks ended September 10, 2011, our valuation allowance increased by $34.4 million and $95.6 million, respectively, to reflect generation of additional operating losses and increases to other deferred tax assets. In future periods, we will continue to record a valuation allowance against net deferred tax assets until such time as the certainty of the realization of future tax benefits can be reasonably assured.
Our Company is subject to U.S. federal income tax, as well as income tax in multiple state and foreign jurisdictions. As of September 10, 2011, with a few exceptions, we remain subject to examination by federal, state and local tax authorities for tax years 2005 through 2009. With a few exceptions, we are no longer subject to federal, state or local examinations by tax authorities for tax years 2004 and prior. At September 10, 2011 and February 26, 2011, we had unrecognized tax benefits of $0.6 million, which were recorded within deferred tax liabilities in "Other accruals" in our Consolidated Balance Sheets. We do not expect that the amount of our gross unrecognized tax positions will change significantly in the next 12 months. Any future decrease in our Company's gross unrecognized tax positions is not expected to affect our effective tax rate. Our Company classifies interest and penalty expense related to unrecognized tax benefits within "(Provision for) benefit from income taxes" in our Consolidated Statements of Operations. For the 12 and 28 weeks ended September 10, 2011 and September 11, 2010, respectively, no amounts were recorded for interest and penalties within "(Provision for) benefit from income taxes" in our Consolidated Statements of Operations.
The effective tax rate on continuing operations of (3.1%) and 4.5% for the 12 and 28 weeks ended September 10, 2011, respectively, and (0.07%) and (0.10%) for the 12 and 28 weeks ended September 11, 2010 respectively, varied from the statutory rate of 35%, primarily due to state and local income taxes, and the increase in our valuation allowance. The rate for the 12 and 28 weeks ended September 11, 2010 was also impacted by the mark to market of the Series B warrants issued in the acquisition of Pathmark.
At September 10, 2011, we had federal Net Operating Loss ("NOL") carry forwards of approximately $1.0 billion, which will expire between fiscal 2024 and 2031, some of which are subject to an annual limitation. The federal NOL carry forwards include $7.4 million related to the excess tax deductions for stock option plans that have yet to reduce income taxes payable. Upon utilization of these carry forwards, the associated tax benefits of approximately $2.6 million will be recorded in "Additional paid-in capital" in our Consolidated Balance Sheets. In addition, we had state loss carry forwards of $1.0 billion that will expire between fiscal 2011 and fiscal 2031. Our Company's general business credits consist of federal and state work incentive credits, which will expire between fiscal 2011 and fiscal 2030, some of which are subject to an annual limitation.
At September 10, 2011 and February 26, 2011, we had net current deferred tax liabilities of $31.5 million and $28.3 million, respectively, which were included in "Other accruals" in our Consolidated Balance Sheets and non-current deferred tax assets of $19.9 million and $16.7 million, respectively, which were recorded in "Other assets" in our Consolidated Balance Sheets.
Revision of Prior Period Financial Statements During the first quarter of fiscal 2011, our Company identified the amount of income tax benefit and income tax expense allocated to continuing operations and discontinued operations, respectively, for the fiscal year ended February 26, 2011 was improperly presented in our Consolidated Statements of Operations. The impact of this improper presentation, which results from the improper intraperiod allocation of income taxes, was an understatement of the "Benefit from income taxes" related to "Loss from continuing operations" and an understatement of the "Provision for income taxes" related to "Income from discontinued operations" of $33.1 million in our Consolidated Statements of Operations during the fiscal year ended February 26, 2011. The effect of this revision had no impact on our "Net loss" in our Consolidated Statements of Operations or "Net cash used in operating activities" in our Consolidated Statements of Cash Flows for the fiscal year ended February 26, 2011.
The following table presents the impact of this revision in our Company's Consolidated Statements of Operations for the fiscal year ended February 26, 2011 (in thousands):
The revisions described above will be reflected in our Company's Consolidated Financial Statements for the fiscal year ended February 25, 2012, which will be included in our Company's Annual Report on Form 10-K for the fiscal year ended February 25, 2012. |
Other Non-Current Liabilities | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Non-Current Liabilities | 8. Other Non-Current Liabilities
Other non-current liabilities at September 10, 2011 and February 26, 2011 were comprised of the following (in thousands):
(1) Refer to Note 10 – Liabilities subject to compromise for additional information. |
Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data | Sep. 10, 2011 | Feb. 26, 2011 |
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Consolidated Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts | $ 5,371 | $ 5,554 |
Series A redeemable preferred stock, no par value | ||
Series A redeemable preferred stock, redemption value | $ 1,000 | $ 1,000 |
Series A redeemable preferred stock, shares authorized | 700,000 | 700,000 |
Series A redeemable preferred stock, shares issued | 179,020 | 179,020 |
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 260,000,000 | 260,000,000 |
Common stock, shares issued | 53,852,470 | 53,852,470 |
Common stock, shares outstanding | 53,852,470 | 53,852,470 |
Valuation Of Long-Lived Assets | 6 Months Ended |
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Sep. 10, 2011 | |
Valuation Of Long-Lived Assets | |
Valuation Of Long-Lived Assets | 5. Valuation of Long-Lived Assets
We review the carrying values of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable.
Impairments due to closure or conversion in the normal course of business We review assets in stores planned for closure or conversion for impairment upon determination that such assets will not be used for their intended useful life. During the 12 and 28 weeks ended September 10, 2011, we recorded impairment charges on long-lived assets of $1.5 million for both periods related to locations that were closed or converted in the normal course of business, as compared to $0.6 million and $1.1 million in impairment losses recorded during the 12 and 28 weeks ended September 11, 2010, respectively. These amounts were recorded within "Store operating, general and administrative expense" in our Consolidated Statements of Operations.
Impairments due to store closures In February 2011, our Company obtained authority from the Bankruptcy Court to close 32 stores in six states as we continue to fully implement our comprehensive financial and operational restructuring. As a result, we recorded an impairment charge of $31.4 million during fiscal 2010, of which $19.4 million, $9.0 million and $3.0 million related to our Fresh, Pathmark, and Other reporting segments, respectively. These store closures were completed on April 16, 2011. We recorded an additional impairment charge of $0.4 million during the first quarter of fiscal 2011, of which $0.3 million and $0.1 million were attributed to our Pathmark and Fresh reporting segments, respectively. These amounts were recorded within "Goodwill, trademark, and long-lived asset impairment" in our Consolidated Statements of Operations.
In April and May 2011, our Company obtained approval from the Bankruptcy Court to sell, or alternatively, to close, an additional 25 stores located in Maryland, Delaware and the District of Columbia (the "Southern Stores"). During the first quarter of fiscal 2011, our Company held an auction whereby we agreed to sell our interests in 12 of our existing stores based in Maryland and the District of Columbia, all of which were a part of our Fresh reportable segment, for $38.3 million in cash which relates to fixed assets. The transactions closed during June and July 2011 resulting in a gain of $29.1 million, which was recorded within "Store operating, general and administrative expense" in our Consolidated Statements of Operations. During the 12 and 28 weeks ended September 10, 2011, we recorded an impairment charge of $0.1 million and $3.0 million, respectively, all of which pertained to our Fresh reporting segment. These amounts were recorded within "Goodwill, trademark, and long-lived asset impairment" in our Consolidated Statements of Operations. These store closures and sales were completed by July 9, 2011.
In the second quarter of fiscal 2010, our Company announced the closure of 25 stores in five states as we began the implementation and execution phase of our comprehensive financial and operational restructuring. As a result, we recorded an impairment charge of $23.7 million during the 12 weeks ended September 11, 2010. This amount was recorded within "Goodwill, trademark, and long-lived asset impairment" in our Consolidated Statements of Operations.
Impairments due to unrecoverable assets As part of the ongoing development of our Plan of Reorganization, during our second quarter of fiscal 2011, we refined our projected cash flows of baseline operations, before any potential cash flows that might result from capital improvements, for all locations. For those locations where the projected undiscounted cash flows did not exceed the net carrying value of the long-lived assets, we determined the fair value of the long-lived assets and recorded an impairment charge of $24.0 million and $76.1 million during the 12 and 28 weeks ended September 10, 2011, respectively, which related primarily to favorable leases and which also included capital leases and land and buildings, with a carrying amount of $99.5 million to their fair value of $75.5 million for the 12 weeks ended September 10, 2011. The impairment charge of $24.0 million and $76.1 million recorded during the 12 weeks and 28 weeks ended September 10, 2011, respectively, all related to our Pathmark reportable segment. These amounts were recorded within "Goodwill, trademark, and long-lived asset impairment" in our Consolidated Statements of Operations.
We recorded an impairment charge of $6.6 million and $12.0 million during the 12 and 28 weeks ended September 11, 2010, respectively, to partially write down stores' long-lived assets, which primarily consist of favorable leases and which also included capital leases and land and buildings, with a carrying amount of $22.0 million to their fair value of $15.4 million for the 12 weeks ended September 11, 2010. The impairment charge of $6.6 million during the 12 weeks ended September 11, 2010 all related to Pathmark. The impairment charge of $12.0 million recorded during the 28 weeks ended September 11, 2010 all related to Pathmark, with the exception of $0.9 million which related to SuperFresh. These amounts were recorded within "Goodwill, trademark, and long-lived asset impairment" in our Consolidated Statements of Operations.
The effects of changes in estimates of useful lives were not material to ongoing depreciation expense. Our projected cash flows of baseline operations include an estimate for expected savings from the recently negotiated C&S supply agreement and from the ongoing labor negotiations. If current operating levels do not improve or the expected cost savings from ongoing labor negotiations do not occur, there may be a need to take further actions which may result in additional future impairments on long-lived assets, including the potential for impairment of assets that are held and used. |
Liabilities Subject To Compromise | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Liabilities Subject To Compromise | 10. Liabilities Subject to Compromise
As a result of the Bankruptcy Filing, the payment of pre-petition indebtedness is subject to compromise or other treatment under a Plan of Reorganization. Generally, actions to enforce or otherwise effect payment of pre-Bankruptcy Filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtor authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of our Company's businesses and assets. Among other things, the Bankruptcy Court authorized us to pay certain pre-petition claims relating to employee wages and benefits, customers, vendors, and suppliers.
We have been paying and intend to continue to pay undisputed post-petition claims in the normal course of business. In addition, we may reject pre-petition executory contracts and unexpired leases with respect to our operations, with the approval of the Bankruptcy Court. Any damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as "Liabilities subject to compromise" in our Consolidated Balance Sheets. We previously notified all known claimants subject to the bar date of their need to file a proof of claim with the Bankruptcy Court. A bar date is the date by which claims against our Company must be filed if the claimants disagree with the amounts included in our schedule of assets and liabilities filed with the Bankruptcy Court and wish to receive any distribution in the Bankruptcy Filing. The bar date of June 17, 2011 set by the Bankruptcy Court has passed. Thus far, claimants filed over nine thousand claims against our Company, asserting approximately $27.9 billion worth of liabilities. Our Company and our retained professionals are continuing to review and analyze the proofs of claim submitted by claimants and will investigate any material differences between these claims and liability amounts estimated by our Company. If necessary, in the event of a claims dispute, the Bankruptcy Court will make a final determination whether such claims should be allowed and, if so, the appropriate amount of such allowed claims. The ultimate amount of such liabilities is not determinable at this time.
Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. The amounts currently classified as "Liabilities subject to compromise" may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events. We expect that certain amounts currently classified as "Liabilities subject to compromise" may in fact be paid in the normal course of business as they come due. Any resulting changes in classification will be reflected in subsequent financial statements.
Liabilities subject to compromise consist of the following (in thousands):
Rejected Leases During the 12 and 28 weeks ended September 10, 2011, we rejected 19 and 63 of our leases, respectively, through the bankruptcy process, reducing the closed locations reserves balance associated with these leases by $13.5 million and $52.6 million, respectively, net to the allowable claim for damages of $186.8 million as of September 10, 2011. The remaining closed locations reserves balance of $3.0 million pertains to locations for which the leases have not been rejected. In connection with the rejected leases during the 12 and 28 weeks ended September 10, 2011, the related deferred real estate income, unfavorable lease liabilities, obligations under capital leases and real estate liabilities were written off, all which were recorded to "Reorganization items, net" in our Consolidated Statements of Operations. Refer to Note 15 – Reorganization Items, Net, for further discussion of our rejected leases.
Assumed Leases During the 12 weeks ended September 10, 2011, our Company assumed 330 real estate leases, including leases for shopping center tenants as well as leases for subleased locations. In connection with the assumption of the leases, the related liability balances previously classified as "Liabilities subject to compromise" were reclassified to the respective balance sheet captions in our Consolidated Balance Sheets. In addition, all undisputed cure amounts related to these leases in the amount of $6.8 million have been paid to the landlords.
Non-debtor Financing Agreements Intercompany financing agreements with foreign non-Debtor subsidiaries of $94.1 million are not reflected in the above liabilities subject to compromise table as these amounts were eliminated on a consolidated basis. |
Hurricane Irene and Impact On Our Company Stores | 6 Months Ended |
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Sep. 10, 2011 | |
Hurricane Irene and Impact On Our Company Stores | |
Hurricane Irene and Impact On Our Company Stores | 6. Hurricane Irene and Impact on our Company Stores
In August 2011, Hurricane Irene had a major effect on certain portions of the Northeast region and resulted in the significant interruption of business for eleven of our Company stores. As of September 10, 2011, nine of these stores had fully resumed operations. We are currently working to re-open one other store and the remaining impacted store is currently providing limited sales of merchandise.
We maintain insurance coverage for this type of loss which provides for reimbursement from losses resulting from property damage, loss of product as well as business interruption coverage. As of the balance sheet date, we were able to determine that we incurred impairment losses of $5.3 million for property, plant and equipment that was damaged as a result of the Hurricane, as well as an inventory loss of $6.9 million. We also determined that we incurred $0.8 million in other related hurricane costs, which has been recorded in "Store operating, general and administrative expense" in our Consolidated Statements of Operations.
Our Company is currently assessing the remaining extent of our losses in the Northeast region and we expect to recover the losses caused by Hurricane Irene in excess of our estimated insurance deductible of approximately $1.0 million, which was recorded in "Store operating, general and administrative expense" in our Consolidated Statements of Operations for the 12 and 28 weeks ended September 10, 2011. We recorded approximately $12.0 million in receivable related to the amount we expect to recover for impairment and out-of-pocket expenses in excess of our estimated insurance deductible. |
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Fair Value Measurements | 4. Fair Value Measurements
The accounting guidance for fair value measurement defines and establishes a framework for measuring fair value. Inputs used to measure fair value are classified based on the following three-tier fair value hierarchy:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Directly or indirectly observable inputs other than Level 1 quoted prices in active markets. Our Level 2 liabilities include warrants, which are valued using the Black-Scholes pricing model with inputs that are observable or can be derived from or corroborated by observable market data. In addition, our investments in money market funds, which are considered cash equivalents, are classified as Level 2, as they are valued based on their reported Net Asset Value (NAV).
Level 3 – Unobservable inputs that are supported by little or no market activity whose value is determined using pricing models, discounted cash flows, or similar methodologies, as well as instruments for which the determination of fair value requires significant judgment or estimation.
A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of September 10, 2011 and February 26, 2011 (in thousands):
There were no transfers in and out of Level 1 and Level 2 fair value measurements during the 12 and 28 weeks ended September 10, 2011.
Level 3 Valuations We did not have any financial assets or liabilities classified as Level 3 within the fair value hierarchy as of September 10, 2011 and February 26, 2011.
Nonfinancial Assets and Liabilities Measured on a Nonrecurring Basis. Fair value measurements of our nonfinancial assets and nonfinancial liabilities on a nonrecurring basis using Level 3 inputs are primarily used in the impairment analyses of our goodwill and other indefinite-lived intangible assets, our long-lived assets and closed locations occupancy costs. Long-lived assets and closed locations occupancy costs were measured at fair value on a nonrecurring basis using Level 3 inputs, as unobservable inputs were used to measure their fair value. Refer to Note 5 – Valuation of Long-Lived Assets, Note 17 – Discontinued Operations and Note 18 – Asset Disposition Initiatives for more information relating to the valuation of these assets and liabilities.
Long-Term Debt The following table provides the carrying values recorded in our Consolidated Balance Sheets and the estimated fair values of financial instruments as of September 10, 2011 and February 26, 2011 (in thousands):
Our DIP Credit Agreement is classified as a current liability as of the balance sheet date. Our long-term debt includes borrowings under a related party promissory note and our unsecured debt securities. The fair value of our debt securities are determined based on quoted market prices for such notes in non-active markets. |
Consolidated Statements Of Comprehensive Loss (Parenthetical) (USD $) In Thousands | 3 Months Ended | 6 Months Ended | ||
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Sep. 10, 2011 | Sep. 11, 2010 | Sep. 10, 2011 | Sep. 11, 2010 | |
Consolidated Statements Of Comprehensive Loss | ||||
Pension and other post retirement benefits, tax effect | $ 0 | $ 0 | $ 1,719 | $ 0 |
Subsequent Events | 6 Months Ended |
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Sep. 10, 2011 | |
Subsequent Events | |
Subsequent Events | 22. Subsequent Events
On September 21, 2011, our Company and certain of its U.S. subsidiaries, each as a borrower, entered into the Second Amendment to the DIP Credit Agreement with the Agent and the DIP Lenders. The Second Amendment to the DIP Credit Agreement changes the measurement intervals for Minimum Excess Availability (as defined in the DIP Credit Agreement) requirements and reduces its Minimum Cumulative EBITDA (as defined in the DIP Credit Agreement) requirements to have them measured beginning with respect to the period ending December 31, 2011 rather than prior to such time as required by the DIP Credit Agreement, provided that if our Company has filed a Plan of Reorganization reasonably satisfactory to the DIP Lenders prior to December 31, 2011, then the measurement period for the Minimum Cumulative EBITDA covenant will be measured beginning on February 25, 2012.
The above summary of material terms of the Second Amendment to the DIP Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety, by the complete text of the Second Amendment to the DIP Credit Agreement.
On September 26, 2011, our company assumed an additional 52 real estate leases, including leases for sub-leased locations. Any resulting changes in the classification of related liability balances will be reflected in our subsequent financial statements. |
Basis Of Presentation | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Basis Of Presentation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis Of Presentation | 1. Basis of Presentation
The accompanying Consolidated Statements of Operations, Consolidated Statements of Stockholders' Deficit and Comprehensive Loss, and Consolidated Statements of Cash Flows for the 12 and 28 weeks ended September 10, 2011 and September 11, 2010, and the Consolidated Balance Sheets at September 10, 2011 and February 26, 2011 of The Great Atlantic & Pacific Tea Company, Inc. ("we", "our", "us" or "our Company") are unaudited and, in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary for a fair statement of financial position and results of operations for such periods. The Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes contained in our Fiscal 2010 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year.
The Consolidated Financial Statements include the accounts of our Company and all subsidiaries. All intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform to current year presentation.
Bankruptcy Filing On December 12, 2010, our Company and all of our U.S. subsidiaries (the "Debtors") filed voluntary petitions for relief (the "Bankruptcy Filing") under chapter 11 of title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York in White Plains (the "Bankruptcy Court"), which are being jointly administered under case number 10-24549. Management's decision to initiate the Bankruptcy Filing was in response to, among other things, our Company's deteriorating liquidity and management's conclusion that the challenges of successfully implementing additional financing initiatives and of obtaining necessary cost concessions from our Company's business and labor partners, was negatively impacting our Company's ability to implement our previously announced turnaround strategy. Our Company's non-U.S. subsidiaries, which are immaterial on a consolidated basis and have no retail operations, were not part of the Bankruptcy Filing.
We are currently operating as debtors-in-possession pursuant to the Bankruptcy Filing and continuation of our Company as a going-concern is contingent upon, among other things, the Debtors' ability (i) to comply with the terms and conditions of the DIP Credit Agreement described in Note 9 – Indebtedness and Other Financial Liabilities; (ii) to develop a plan of reorganization and obtain confirmation of that plan under the Bankruptcy Code; (iii) to reduce debt and other liabilities through the bankruptcy process; (iv) to return to profitability, including by securing necessary near-term cost concessions from our business and labor partners; (v) to generate sufficient cash flow from operations; and (vi) to obtain financing sources to meet our future obligations. The uncertainty regarding these matters raises substantial doubt about our ability to continue as a going concern.
Our Company was required to apply the FASB's provisions of Reorganizations effective on December 12, 2010, which is applicable to companies in chapter 11, which generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Bankruptcy Filing petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the Consolidated Statements of Operations beginning in the year ended February 26, 2011. The balance sheet must distinguish pre-Bankruptcy Filing liabilities subject to compromise from both those pre-Bankruptcy Filing liabilities that are not subject to compromise and from post-Bankruptcy Filing liabilities. As discussed in Note 9 - Indebtedness and Other Financial Liabilities, currently the Senior Secured Notes totaling $260.0 million have priority over the unsecured creditors of our Company. Based upon the uncertainty surrounding the ultimate treatment of the Notes in our reorganization plan, including the potential that these Notes may be impaired, these Notes are classified as "Liabilities subject to compromise" in our Consolidated Balance Sheets. Our Company continues to evaluate creditors' claims for other claims that may also have priority over unsecured creditors. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be approved by the Bankruptcy Court, even if they may be settled for lesser amounts as a result of the plan of reorganization. In addition, cash used in reorganization items must be disclosed separately in our Consolidated Statements of Cash Flows.
Supply Agreement On June 2, 2011, our Company entered into a definitive supply agreement with C&S Wholesale Grocers, Inc. ("C&S") effective May 29, 2011, whereby C&S will provide warehousing, transportation, procurement, purchasing and ancillary services (the "Services") in support of a substantial portion of our Company's supply chain. This agreement replaced the warehousing, logistics, procurement and purchasing agreement under which the parties had been operating since 2008.
The term of the agreement is through the effective date of our Company's plan of reorganization in its Bankruptcy Filing but may be extended by either party for a term concurrent with a fixed volume commitment based upon wholesale purchases of merchandise resulting in a term of approximately seven years. The cost structure of the agreement is a combination of a fixed cost and variable upcharge pricing model. The charges are subject to adjustment due to volume change or other material changes to the operating assumptions of the agreement.
Our Company expects it will realize a run-rate of more than $50 million in annual savings commencing with our Company's emergence from the Bankruptcy Filing pursuant to a plan of reorganization. The agreement provides our Company with important service enhancements, including detailed service specifications and key performance measures. The agreement also permits our Company to maintain product standards and specifications for all merchandise purchased for resale in our Company's stores.
Assumed Leases During the 12 weeks ended September 10, 2011, our Company assumed 330 real estate leases, including leases for shopping center tenants as well as leases for subleased locations. In connection with the assumption of the leases, the related liability balances previously classified as "Liabilities subject to compromise" were reclassified to the respective balance sheet captions in our Consolidated Balance Sheets. In addition, all undisputed cure amounts related to these leases in the amount of $6.8 million have been paid to the landlords.
Significant Accounting Policies A summary of our significant accounting policies may be found in our Annual Report on Form 10-K for the year ended February 26, 2011. Except for as described below, there have been no changes in these policies during the 28 weeks ended September 10, 2011.
Change in Accounting Policy Effective June 19, 2011, our Company changed its method of valuing inventories held at our Pathmark stores from the last-in first-out ("LIFO") method to the first-in first-out ("FIFO") method. As previously noted, our Company entered into a definitive supply agreement with C&S effective May 29, 2011 to provide Services in support of a substantial portion of our Company's supply chain. As a result of the agreement with C&S, our Company began transitioning our inventory to different warehouses such that, beginning in our second fiscal quarter, the Pathmark inventory is no longer separately segregated and managed. Our Company believes that the FIFO method of inventory valuation is preferable under GAAP and improves financial reporting because it conforms all of our Company's inventories to a consistent inventory method and the use of FIFO better aligns costing with our Company's forecasting and procurement decisions. As described in the accounting guidance for accounting changes and error corrections, the comparative Consolidated Financial Statements of prior periods presented have been adjusted to apply the new accounting method retrospectively.
The following line items within the Consolidated Statements of Operations were affected by the change in accounting policy (in thousands, except for per share data):
The following line items within the Consolidated Balance Sheets were affected by the change in accounting policy (in thousands):
There was no impact on net cash provided by operating activities as a result of this change in accounting policy. |
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