-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BE4e9I5oCwfqA8kAWc7etroT7pIVsxV945a1LSx6TgxJRbLSYBImuGlJM7keulkj ENuofY4OjLhgkhjytVSskA== 0000043300-96-000021.txt : 19961015 0000043300-96-000021.hdr.sgml : 19961015 ACCESSION NUMBER: 0000043300-96-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960907 FILED AS OF DATE: 19961011 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREAT ATLANTIC & PACIFIC TEA CO INC CENTRAL INDEX KEY: 0000043300 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 131890974 STATE OF INCORPORATION: MD FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04141 FILM NUMBER: 96642661 BUSINESS ADDRESS: STREET 1: 2 PARAGON DR CITY: MONTVALE STATE: NJ ZIP: 07645 BUSINESS PHONE: 2015739700 MAIL ADDRESS: STREET 1: 2 PARAGON DRIVE CITY: MONTVALE STATE: NJ ZIP: 07645 10-Q 1 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. FORM 10-Q 2ND QUARTER ENDED SEPTEMBER 7, 1996 Conformed Copy FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 7, 1996 Commission File Number 1-4141 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ---------------------------------------------- (Exact name of registrant as specified in charter) Maryland 13-1890974 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 Paragon Drive, Montvale, New Jersey 07645 - ------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 201-573-9700 ------------ - ------------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 7, 1996 ----- --------------------------------- Common stock - $1 par value 38,220,333 shares Executed Copy FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 7, 1996 Commission File Number 1-4141 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ---------------------------------------------- (Exact name of registrant as specified in charter) Maryland 13-1890974 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 Paragon Drive, Montvale, New Jersey 07645 - ------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 201-573-9700 ------------ - ------------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 7, 1996 ----- --------------------------------- Common stock - $1 par value 38,220,333 shares THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATEMENTS OF CONSOLIDATED OPERATIONS & RETAINED EARNINGS (Dollars in thousands, except per share figures) (Unaudited) 12 Weeks Ended 28 Weeks Ended September 7, September 9, September 7, September 9, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Sales $2,329,987 $2,341,171 $5,422,541 $5,476,685 Cost of merchandise sold (1,667,632) (1,672,068) (3,863,406) (3,897,770) ---------- ---------- ---------- ---------- Gross margin 662,355 669,103 1,559,135 1,578,915 Store operating, general and administrative expense (627,802) (639,242) (1,471,839) (1,502,170) ---------- ---------- ---------- ---------- Income from operations 34,553 29,861 87,296 76,745 Interest expense, net (15,476) (16,006) (36,247) (38,352) ---------- ---------- ---------- ---------- Income before income taxes 19,077 13,855 51,049 38,393 Provision for income taxes (5,083) (4,471) (15,176) (14,459) ---------- ---------- ---------- ---------- Net Income 13,994 9,384 35,873 23,934 Retained earnings at beginning of period 402,348 345,439 382,380 332,800 Cash dividends (1,911) (1,911) (3,822) (3,822) ---------- ---------- ---------- ---------- Retained earnings at end of period $ 414,431 $ 352,912 $ 414,431 $ 352,912 ========== ========== ========== ========== Earnings per share: Net Income $ .37 $ .25 $ .94 $ .63 ========== ========== ========== ========== Cash dividends $ .05 $ .05 $ .10 $ .10 ========== ========== ========== ========== Weighted average number of common and common equivalent shares outstanding 38,252,259 38,220,333 38,281,559 38,220,333 ========== ========== ========== ========== See Notes to Quarterly Report on Page 5. - 1 - THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) September 7, 1996 February 24, 1996 ------------------ ------------------ (Unaudited) ASSETS - ------ Current assets: Cash and short-term investments $ 117,999 $ 99,772 Accounts receivable 200,288 205,133 Inventories 832,240 826,510 Prepaid expenses and other assets 50,884 43,520 ---------- ---------- Total current assets 1,201,411 1,174,935 ---------- ---------- Property: Property owned 1,478,087 1,461,165 Property leased 87,638 93,379 ---------- --------- Property-net 1,565,725 1,554,544 Other assets 157,085 131,368 ---------- ---------- Total Assets $2,924,221 $2,860,847 ========== ========== See Notes to Quarterly Report on Page 5. -2- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) September 7, 1996 February 24, 1996 ------------------ ------------------ (Unaudited) LIABILITIES & SHAREHOLDERS' EQUITY - ---------------------------------- Current liabilities: Current portion of long-term debt $ 29,598 $ 13,040 Current portion of obligations under capital leases 12,901 13,125 Accounts payable 477,178 452,257 Book overdrafts 162,753 157,022 Accrued salaries, wages and benefits 125,576 127,133 Accrued taxes 52,916 59,407 Other accruals 145,412 161,984 ---------- ---------- Total current liabilities 1,006,334 983,968 ---------- ---------- Long-term debt 664,518 650,169 ---------- ---------- Obligations under capital leases 123,280 129,887 ---------- ---------- Deferred income taxes 122,110 120,904 ---------- ---------- Other non-current liabilities 152,326 153,134 ---------- ---------- Shareholders' equity: Preferred stock--no par value; authorized--3,000,000 shares; issued--none - - Common stock--$1 par value; authorized-- 80,000,000 shares; issued--38,220,333 shares 38,220 38,220 Capital surplus 453,121 453,121 Cumulative translation adjustment (50,119) (50,936) Retained earnings 414,431 382,380 ---------- ---------- Total shareholders' equity 855,653 822,785 ---------- ---------- Total liabilities and shareholders' equity $2,924,221 $2,860,847 ========== ========== See Notes to Quarterly Report on Page 5. -3- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) 28 Weeks Ended Sept. 7,1996 Sept. 9, 1995 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $35,873 $ 23,934 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 122,798 122,740 Deferred income tax provision 2,556 5,837 (Gain) loss on disposal of owned property 519 (1,970) Decrease in receivables 4,973 29,743 Increase in inventories (5,376) (6,770) Increase in prepaid expenses and other current assets (8,938) (10,098) Increase in other assets (23,472) (2,967) Increase in accounts payable 24,762 42,702 Decrease in accrued salaries, wages and benefits (1,649) (11,368) Increase (decrease) in accrued taxes (6,202) 2,363 Decrease in store closing reserves (6,375) (7,126) Decrease in other accruals and other liabilities (4,364) (2,644) Other 536 (80) --------- --------- Net cash provided by operating activities 135,641 184,296 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property (150,367) (109,004) Proceeds from disposal of property 7,541 23,689 --------- --------- Net cash used in investing activities (142,826) (85,315) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Changes in short-term debt 56,187 26,492 Proceeds under revolving lines of credit and long-term borrowings 25,497 92,288 Payments on revolving lines of credit and long-term borrowings (51,092) (210,639) Increase in book overdrafts 5,590 7,102 Principal payments on capital leases (7,005) (7,885) Cash dividends (3,822) (3,822) --------- --------- Net cash provided by (used in) financing activities 25,355 (96,464) --------- --------- Effect of exchange rate changes on cash and short-term investments 57 1,034 --------- --------- NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 18,227 3,551 Cash and Short-Term Investments at Beginning of Period 99,772 128,930 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 117,999 $ 132,481 ========= ========= See Notes to Quarterly Report on Page 5. -4- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. NOTES TO QUARTERLY REPORT ------------------------- 1) BASIS OF PRESENTATION The consolidated financial statements for the 28 weeks ended September 7, 1996 and September 9, 1995 are unaudited, and in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. This Form 10-Q should be read in conjunction with the Company's consolidated financial statements and notes incorporated by reference in the 1995 Annual Report on Form 10-K. Certain reclassifications have been made to the prior periods' financial statements in order to conform to the current period presentation. 2) INCOME TAXES The income tax provisions recorded for the 28 week period ended in fiscal years 1996 and 1995 reflect the Company's estimated expected annual tax rates applied to their respective domestic and foreign financial results. For the 28 week period ended in fiscal years 1996 and 1995, the income tax provisions mainly reflect the taxes on U.S. income, as the Canadian income tax expense is principally offset by the reversal of its valuation allowance. As of September 7, 1996, a valuation allowance existed for the entire amount of the net deferred tax assets relating to the Canadian operations. During the 28 week period ended in fiscal 1996, the Canadian operations generated pretax earnings which resulted in the reversal of a portion of the valuation allowance. Although Canada generated pretax earnings, the Company was unable to conclude that the Canadian deferred tax assets are more likely than not to be realized. 3) OTHER ASSETS Other assets include notes receivable and equipment leases relating to Food Basics franchising operations. 4) NEW ACCOUNTING STANDARD Effective February 25, 1996 the Company adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company will continue to apply the methods prescribed by Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" with proforma disclosure of net income and earnings per share as if the fair value based method of SFAS 123 had been applied. -5- 5 COMMON STOCK A revision to the Maryland General Corporation Law has eliminated the concept of Treasury shares. Therefore, shares of common stock reacquired by a corporation constitute unissued shares. For financial reporting purposes, reacquired shares are recorded as reductions to issued common stock and to additional paid-in-capital. This change had no effect on total Shareholders' equity. -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS 12 WEEKS ENDED SEPTEMBER 7, 1996 --------------------------------- OPERATING RESULTS Sales for the second quarter ended September 7, 1996 of $2.3 billion decreased $11 million or 0.5% from the prior year second quarter. Contributing to this decrease is the Company's continuing program to eliminate obsolete, underperforming stores, and the consequent closing of 53 stores during the first half of fiscal 1996, which includes 7 replacement stores. Of the 53 store closings, 14 have already re-opened as Food Basics Franchise stores in Canada and 6 are scheduled to re-open later in the year as Food Basics Franchise stores. The closure of 126 stores, excluding replacement stores, since the beginning of the second quarter of fiscal 1995, of which 36 have been converted to Food Basics Franchise stores in Canada and 6 which will be converted to Food Basics Franchise stores later in the year, reduced comparative sales by approximately $102 million or 4.4% in the second quarter of 1996. The opening of 28 stores in new market areas since the beginning of the second quarter of fiscal 1995 added approximately $54 million or 2.3% to sales in the second quarter of fiscal 1996. As of September 7, 1996, the Company serviced 36 Food Basics Franchise stores to which the Company had wholesale sales of $41 million for the 12 weeks ended September 7, 1996. Same store sales for the second quarter, including replacement stores, remained flat from the prior year. Average weekly sales per store were approximately $191,600 versus $179,700 for the corresponding period of the prior year for a 6.6% increase. Same store sales for U.S. operations, which include replacement stores, remained flat from the prior year. In Canada, same store sales, which include replacement stores, decreased 0.3% from the prior year. Gross margin as a percent of sales decreased .15% to 28.43% in the second quarter of fiscal 1996 from 28.58% for the second quarter of fiscal 1995, resulting primarily from decreased gross margin rates in Canada and increased promotional price reductions in the U.S. The gross margin dollar decrease of $7 million is primarily the result of a decrease in sales volume which had an impact of decreasing margin by $14 million and a decrease in the Canadian exchange rate of $2 million, partially offset by an increase in gross margin rates of $9 million. In the U.S., gross margin increased $5 million, primarily resulting from an increase in gross margin rates of $8 million partially offset by a decrease in sales volume which had an impact of decreasing margin by $3 million. In Canada, gross margin decreased $12 million, primarily resulting from the effect of a decrease in sales volume which had an impact of decreasing margin by $11 million and a lower Canadian exchange rate resulting in a decrease of $2 million, partially offset by an increase in gross margin rates of $1 million. Store operating, general and administrative expense as a percent of sales decreased to 26.94% from 27.30% for the corresponding period in the prior year resulting primarily from reduced advertising costs in both the U.S. and Canada and reduced occupancy costs in Canada. -7- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ Interest expense-net decreased $0.5 million from the previous year, primarily due to an increase in interest income of $0.7 million. In both the U.S. and Canada, average borrowings increased while average interest rates decreased, resulting in interest expense increasing $0.2 million. Income before income taxes for the 12 weeks ended September 7, 1996 was $19.1 million compared to $13.9 million for the comparable period in the prior year for an increase of $5.2 million or 37.7%. The increase is mainly the result of lower store operating, general and administrative expenses of $11.4 million and lower net interest expense of $0.5 million, partially offset by lower gross margin of $6.7 million. The income tax provisions recorded for the 28 week period ended in fiscal years 1996 and 1995 reflect the Company's estimated expected annual tax rates applied to their respective domestic and foreign financial results. The second quarter 1996 and 1995 provisions mainly reflect the taxes on U.S. income, as the Canadian income tax expense is principally offset by the reversal of its income tax valuation allowance. MANAGEMENT'S DISCUSSION AND ANALYSIS 28 WEEKS ENDED SEPTEMBER 7, 1996 -------------------------------- OPERATING RESULTS Sales for the 28 weeks ended September 7, 1996 of $5.4 billion decreased $54 million or 1.0% from last year. Contributing to this decrease is that the Company closed 159 stores since the beginning of fiscal 1995, of which 32 have been converted to Food Basics Franchise stores in Canada and 6 which will be converted to Food Basics Franchise stores later in the year, and 8 which were sold in the Rhode Island market in the first quarter of fiscal 1995. The 159 store closures, excluding replacement stores, since the beginning of fiscal 1995 reduced comparative sales by approximately $267 million or 4.9% in the first two quarters of fiscal 1996. The opening of 28 stores in new market areas since the beginning of fiscal 1995 added approximately $150 million or 2.7% to sales in the first two quarters of fiscal 1996. As of September 7, 1996, the Company serviced 36 Food Basics Franchise stores to which the Company had year to date wholesale sales of $75 million. Same store sales, including replacement stores, for the 28 weeks decreased 0.2% from the prior year. Average weekly sales per store were approximately $189,300 versus $177,800 for the corresponding period of the prior year for a 6.5% increase. Year to date sales for U.S. operations have declined, with same store sales, which include replacement stores, down 0.3% from the prior year. In Canada, year to date sales have decreased, with same store sales, including replacement stores, remaining flat from the prior year. -8- Gross margin as a percent of sales decreased .08% to 28.75% from 28.83% for the prior year resulting primarily from decreased gross margin rates in Canada and increased promotional price reductions in the U.S., partially offset by decreased promotional price reductions in Canada. The gross margin dollar decrease of $20 million is primarily the result of a decrease in sales volume which had an impact of decreasing margin by $38 million and a lower Canadian exchange rate resulting in a decrease of $2 million, partially offset by an increase in gross margin rates of $20 million. In the U.S., gross margin increased $4 million, primarily resulting from increased gross margin rates of $20 million, partially offset by a decrease in sales volume which had an impact of decreasing margin by $16 million. In Canada, gross margin decreased $24 million, primarily resulting from a decrease in sales volume which had an impact of decreasing margin by $22 million and a lower Canadian exchange rate resulting in a decrease of $2 million. Store operating, general and administrative expense as a percent of sales decreased to 27.14% from 27.43% for the prior year resulting primarily from reduced advertising costs in both the U.S. and Canada and reduced store labor costs and occupancy costs in Canada. Interest expense-net, decreased $2.1 million from the previous year primarily due to an increase in interest income of $1 million, coupled with a $1.1 million decrease in interest expense resulting from decreases in average rates and capital lease interest expense in both the U.S. and Canada. Income before income taxes for the 28 week period ended September 7, 1996 was $51.0 million compared to $38.4 million for the comparable period of the prior year for an increase of approximately $12.6 million or 33%. The increase in mainly the result of lower store operating, general and administrative expenses of $30.3 million and lower net interest expense of $2.1 million, partially offset by lower gross margin of $19.8 million. The income tax provisions recorded in the first 28 week period of fiscal years 1996 and 1995 reflects the Company's estimated expected annual tax rates applied to their respective domestic and foreign financial results. The first and second quarter 1996 and 1995 provisions mainly reflect the taxes on U.S. income, as the Canadian income tax expense is principally offset by the reversal of its income tax valuation allowance. LIQUIDITY AND CAPITAL RESOURCES The Company ended the second quarter with working capital of $195 million compared to $191 million at the beginning of the fiscal year. The Company had cash and short-term investments aggregating $118 million at the end of the second quarter of fiscal 1996 compared to $100 million at the end of fiscal 1995. The Company has a U.S. $400 million and a Canadian $75 million unsecured, five year revolving credit agreement which expires in December, 2000. In addition, the Company also has various uncommitted lines of credit with numerous banks. As of September 7, 1996, the Company had approximately $395 million available in credit facilities of which $380 million were committed facilities. -9- The Company's loan agreements and certain of its notes contain various financial covenants which require among other things, minimum net worth and maximum levels of indebtedness and lease commitments. The Company was in compliance with all such covenants as of September 7, 1996. For the 28 weeks ended September 7, 1996, capital expenditures totaled $150 million, which included 17 new stores and 48 remodels and enlargements. The Company expects to have additional capital expenditures of approximately $160 million throughout the remainder of fiscal 1996. These available cash resources, together with income from operations, are sufficient for the Company's capital expenditure program, mandatory scheduled debt repayments and dividend payments for fiscal 1996. -10- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. PART II. OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None - Matters were previously reported on the First Quarter ended June 15, 1996 Form 10-Q. Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- None -11- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. Date: October 11, 1996 By: /s/ Kenneth A. Uhl --------------------------------------- Kenneth A. Uhl, Vice President and Controller (Chief Accounting Officer) -12- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. Date: October 11, 1996 By: --------------------------------------- Kenneth A. Uhl, Vice President and Controller (Chief Accounting Officer) -12- EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. 10-Q FOR THE SECOND QUARTER ENDED SEPTEMBER 7, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS FEB-22-1997 SEP-7-1996 117999 0 200288 0 832240 1201411 1565725 0 2924221 1006334 787798 0 0 38220 817433 2924221 5422541 5422541 3863406 3863406 1471839 0 36247 51049 15176 35873 0 0 0 35873 .94 .94
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