-----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, L4wW+PEU56syX9Ck6++1psiyxhoKdJiebBkBzx00wiiN+BVLyhuOf8UiPCsUCl7Y soca9TIB8fdFqR4GVqZVlg== 0000043300-97-000004.txt : 19970114 0000043300-97-000004.hdr.sgml : 19970114 ACCESSION NUMBER: 0000043300-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970113 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: 97504751 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 3RD QUARTER ENDED NOVEMBER 30, 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 November 30, 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 ------------ - ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 30, 1996 ----- ---------------------------------- Common stock - $1 par value 38,221,716 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 November 30, 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 ------------ - ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XXX NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 30, 1996 ----- --------------------------------- Common stock - $1 par value 38,221,716 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 share amounts) (Unaudited) 12 Weeks Ended 40 Weeks Ended November 30, December 2 November 30, December 2, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Sales $2,318,762 $2,293,597 $7,741,303 $7,770,282 Cost of merchandise sold (1,650,098) (1,627,476) (5,513,504) (5,525,246) ---------- ---------- ---------- ---------- Gross margin 668,664 666,121 2,227,799 2,245,036 Store operating, general and administrative expense (634,266) (636,886) (2,106,105) (2,139,056) ---------- ---------- ---------- ---------- Income from operations 34,398 29,235 121,694 105,980 Interest expense, net (16,557) (16,929) (52,804) (55,281) ---------- ---------- ---------- ---------- Income before income taxes 17,841 12,306 68,890 50,699 Provision for income taxes (3,750) (4,571) (18,926) (19,030) ---------- ---------- ---------- ---------- Net income 14,091 7,735 49,964 31,669 Retained earnings at beginning of period 414,431 352,912 382,380 332,800 Cash dividends (1,911) (1,911) (5,733) (5,733) ---------- ---------- ---------- ---------- Retained earnings at end of period $ 426,611 $ 358,736 $ 426,611 $ 358,736 ========== ========== ========== ========== Earnings per share: Net income $ .37 $ .20 $ 1.31 $ .83 ========== ========== ========== ========== Cash dividends $ .05 $ .05 $ .15 $ .15 ========== ========== ========== ========== Weighted average number of common and common equivalent shares outstanding 38,267,453 38,220,483 38,278,049 38,220,483 ========== ========== ========== ========== See Notes to Quarterly Report on Page 5. -1- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) November 30, 1996 February 24, 1996 ------------------ ------------------ (Unaudited) ASSETS - ------ Current assets: Cash and short-term investments $ 118,026 $ 99,772 Accounts receivable 206,305 205,133 Inventories 911,392 826,510 Prepaid expenses and other assets 36,576 43,520 ---------- ---------- Total current assets 1,272,299 1,174,935 ---------- ---------- Property: Property owned 1,497,040 1,461,165 Property leased 91,352 93,379 ---------- ---------- Property-net 1,588,392 1,554,544 Other assets 171,240 131,368 ---------- ---------- Total Assets $3,031,931 $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) November 30, 1996 February 24, 1996 ------------------ ------------------ (Unaudited) LIABILITIES & SHAREHOLDERS' EQUITY - ---------------------------------- Current liabilities: Current portion of long-term debt $ 15,525 $ 13,040 Current portion of obligations under capital leases 12,851 13,125 Accounts payable 474,892 452,257 Book overdrafts 227,079 157,022 Accrued salaries, wages and benefits 135,187 127,133 Accrued taxes 53,621 59,407 Other accruals 139,462 161,984 ---------- ---------- Total current liabilities 1,058,617 983,968 ---------- ---------- Long-term debt 712,576 650,169 ---------- ---------- Obligations under capital leases 126,882 129,887 ---------- ---------- Deferred income taxes 110,170 120,904 ---------- ---------- Other non-current liabilities 155,329 153,134 ---------- ---------- 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 and outstanding November 1996 - 38,221,716 shares, February 1996 - 38,220,333 shares 38,222 38,220 Capital surplus 453,159 453,121 Cumulative translation adjustment (49,635) (50,936) Retained earnings 426,611 382,380 ---------- ---------- Total shareholders' equity 868,357 822,785 ---------- ---------- Total liabilities and shareholders' equity $3,031,931 $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) 40 Weeks Ended November 30, December 2, 1996 1995 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 49,964 $ 31,669 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 176,737 174,697 Deferred income tax provision (benefit) (9,115) 5 (Gain) Loss on disposal of owned property 908 (1,451) (Increase) decrease in receivables (574) 19,557 Increase in inventories (82,508) (81,709) (Increase) decrease in prepaid expenses and other current assets 4,721 (4,676) Increase in other assets (27,583) (2,943) Increase in accounts payable 21,283 34,057 Increase (decrease) in accrued salaries, wages and benefits 7,579 (15,029) Increase (decrease) in accrued taxes (4,944) 918 Decrease in store closing reserves (6,969) (13,200) Increase (decrease) in other accruals and other liabilities (9,848) 10,535 Other (613) (1,144) --------- --------- Net cash provided by operating activities 119,038 151,286 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property (229,154) (165,953) Proceeds from disposal of property 12,242 26,294 --------- --------- Net cash used in investing activities (216,912) (139,659) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Changes in short-term debt 38,216 9,545 Proceeds under revolving lines of credit and long-term borrowings 91,730 287,731 Payments on revolving lines of credit and long-term borrowings (67,532) (300,183) Increase (decrease) in book overdrafts 69,147 (7,789) Principal payments on capital leases (10,068) (11,133) Proceeds from stock options exercised 40 - Cash dividends (5,733) (5,733) --------- --------- Net cash provided by (used in) financing activities 115,800 (27,562) --------- --------- Effect of exchange rate changes on cash and short-term investments 328 485 --------- --------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 18,254 (15,450) Cash and Short-term Investments at Beginning of Period 99,772 128,930 --------- --------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 118,026 $ 113,480 ========= ========= 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 40 weeks ended November 30, 1996 and December 2, 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 40 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 40 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 November 30, 1996, a valuation allowance existed for the entire amount of the net deferred tax assets relating to the Canadian operations. During the 40 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 The increase in other assets is the result of notes receivable and equipment leases relating to the Food Basics Franchise business. 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- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS 12 WEEKS ENDED NOVEMBER 30, 1996 ------------------------------- OPERATING RESULTS Sales for the third quarter ended November 30, 1996 of $2.3 billion increased $25 million or 1.1% from last year. Contributing to this increase is the opening of 32 stores in new market areas since the beginning of the third quarter of fiscal 1995 which added approximately $55 million or 2.4% to sales in the third quarter of fiscal 1996. In addition, the Company had $61 million in wholesale sales relating to servicing 47 Food Basics Franchise stores as of November 30, 1996. The 32 new market area stores coupled with the wholesale sales, increased total Company sales by $116 million or 5% for the 12 weeks ended November 30, 1996. The closure of 110 stores, excluding replacement stores, since the beginning of the third quarter of fiscal 1995, of which 33 have been converted to Food Basics Franchise stores in Canada and 1 which will be converted to a Food Basics Franchise store later in the year, reduced comparative sales by approximately $96 million or 4.1% in the third quarter of 1996. Total Company same store sales for the third quarter, including replacement stores, increased by 0.3% from the prior year. Average weekly sales per supermarket were approximately $195,600 versus $182,100 for the corresponding period of the prior year for a 7.4% increase. Same store sales for U.S. operations, which include replacement stores, increased 0.2% from the prior year. In Canada, same store sales, which include replacement stores, increased 0.9% from the prior year. Gross margin as a percent of sales decreased 0.20% to 28.84% in the third quarter of fiscal 1996 from 29.04% for the third quarter of fiscal 1995, resulting primarily from decreased gross margin rates in Canada resulting from the lower margins of the Food Basics Franchise business partially offset by an increase in the retail supermarket margin. The gross margin dollar increase of $3 million is primarily the result of an increase in sales volume which had an impact of increasing margin by $7 million, partly offset by a decrease in gross margin rates of $3 million and a decrease in the Canadian exchange rate of $1 million. In the U.S., gross margin increased $8 million, primarily resulting from an increase in gross margin rates of $9 million partially offset by a decrease in sales volume which had an impact of decreasing margin by $1 million. In Canada, gross margin decreased $5 million, primarily resulting from the effect of a decrease in gross margin rates of $12 million and a decrease in the Canadian exchange rate of $1 million, partially offset by an increase in sales volume which had an impact of increasing margin by $8 million. The $12 million gross margin rate decrease in Canada is mainly the result of the lower margins provided by the Food Basics Franchise business. Store operating, general, and administrative expense as a percent of sales decreased to 27.35% from 27.77% for the corresponding period in the prior year resulting primarily from reduced store labor and occupancy costs in Canada as a result of the Food Basics Franchise business. Interest expense-net, decreased $0.4 million from the previous year, primarily due to an increase in interest income of $0.2 million, coupled with a $0.2 million decrease in interest expense resulting from decreases in average rates and capital lease interest expense in both the U.S. and Canada. -6- Income before income taxes for the 12 weeks ended November 30, 1996 was $17.8 million compared to $12.3 million for the comparable period in the prior year for an increase of approximately $5.5 million or 44.7%. The increase is mainly the result of higher gross margin of $2.5 million, lower store operating, general and administrative expenses of $2.6 million, and lower net interest expense of $0.4 million. The income tax provisions recorded for the 40 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 third quarter 1996 and 1995 provisions mainly reflect the taxes on the U.S. income, as the Canadian income tax expense is principally offset by the reversal of its income tax valuation allowance. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS 40 WEEKS ENDED NOVEMBER 30, 1996 ------------------------------------- OPERATING RESULTS Sales for the 40 weeks ended November 30, 1996 of $7.7 billion decreased $29 million or 0.4% from last year. Contributing to this decrease is that the Company closed 167 stores since the beginning of fiscal 1995, of which 40 have been converted to Food Basics Franchise stores in Canada and 1 which will be converted to a Food Basics Franchise store later in the year, and 8 which were sold in the Rhode Island market in the first quarter of fiscal 1995. The 167 store closures, excluding replacement stores, since the beginning of fiscal 1995 reduced comparative sales by approximately $363 million or 4.6% in the first three quarters of fiscal 1996. The opening of 32 stores in new market areas since the beginning of fiscal 1995 added approximately $205 million or 2.7% to sales in the first three quarters of fiscal 1996. In addition, the Company had $136 million in wholesale sales relating to servicing 47 Food Basics Franchise stores as of November 30, 1996. The 32 new market area stores coupled with the wholesale sales, increased total Company sales by $341 million or 4.4% for the 40 weeks ended November 30, 1996. Total Company same store sales, including replacement stores, for the 40 week period decreased 0.1% from the prior year. Average weekly sales per supermarket were approximately $194,500 versus $181,500 for the same period of the prior year for a 7.2% increase. Year to date sales for U.S. operations have declined, with same store sales, which include replacement stores, down 0.1% from the prior year. In Canada, year to date sales have decreased, with same store sales, including replacement stores, up 0.2% from the prior year. Gross margin as a percent of sales decreased 0.11% to 28.78% from 28.89% for the prior year resulting primarily from decreased gross margin rates in Canada resulting from the Food Basics Franchise business partially offset by an increase in the retail supermarket margin. The gross margin dollar decrease of $17 million is primarily the result of a decrease in sales volume which had an impact of decreasing margin by $9 million, lower gross margin rates of $5 million, and a lower Canadian exchange rate resulting in a decrease of $3 million. In the U.S., gross margin increased $13 million, primarily resulting from increased gross margin rates of $29 million, partially offset by a decrease in sales volume which had an impact of decreasing margin by $16 million. In Canada, gross margin decreased $30 million, primarily resulting from a decrease in gross margin rates of $34 million and a lower Canadian exchange rate resulting in a decrease of $3 million, partially offset by an increase in sales volume which had an impact of increasing margin by $7 million. The $34 million gross margin rate decrease in Canada is mainly the result of the lower margins provided by the Food Basics Franchise business. Store operating, general and adminstrative expense as a percent of sales decreased to 27.21% from 27.53% for the prior year resulting primarily from reduced store labor and occupancy costs in Canada as a result of the Food Basics Franchise business. Interest expense-net, decreased $2.5 million from the previous year primarily due to an increase in interest income of $1.2 million, coupled with a $1.3 million decrease in interest expense resulting from decreases in average rates and capital lease interest expense in both the U.S. and Canada. -8- Income before income taxes for the 40 week period ended November 30, 1996 was $68.9 million compared to $50.7 million for the comparable period of the prior year for an increase of approximately $18.2 million or 35.9%. The increase is mainly the result of lower store operating, general and administrative expenses of $33.0 million and lower net interest expense of $2.5 million, partially offset by lower gross margin of $17.3 million. The income tax provisions recorded in the first 40 week period of fiscal 1996 and 1995 reflects the Company's estimated expected annual tax rates applied to their respective domestic and foreign financial results. The first, second and third quarter 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 third quarter with working capital of $214 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 third 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 November 30, 1996, the Company had approximately $418 million available in credit facilities of which $344 million were committed facilities. The Company's loan agreements and certain of its notes contain various 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 November 30, 1996. For the 40 weeks ended November 30, 1996, capital expenditures totaled $229 million, which included 27 new stores and 60 remodels and enlargements. The Company expects to have capital expenditures of approximately $70 million in the fourth quarter of fiscal 1996. The Company's 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. -9- THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. PART II. OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- None Item 2. Changes in Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- None -10- 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: January 13, 1997 By: /s/ Kenneth A. Uhl --------------------------------------- Kenneth A. Uhl, Vice President and Controller (Chief Accounting Officer) -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: January 13, 1997 By: --------------------------------------- Kenneth A. Uhl, Vice President and Controller (Chief Accounting Officer) -11- EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. 10-Q FOR THE THIRD QUARTER ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS FEB-22-1997 NOV-30-1996 118026 0 206305 0 911392 1272299 1588392 0 3031931 1058617 839458 0 0 38222 830135 3031931 7741303 7741303 5513504 5513504 2106105 0 52804 68890 18926 49964 0 0 0 49964 1.31 1.31
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