EX-99.1 2 y37342exv99w1.htm EX-99.1: PRESS RELEASE EX-99.1
 

News
(A&P Logoa)   EXHIBIT 99.1
The Great Atlantic & Pacific Tea Company, Inc.
2 Paragon Drive
Montvale, NJ 07645
Investor contact: William J. Moss
Vice President, Treasurer
(201) 571-4019
Press contact: Richard P. De Santa
Senior Director, Communications
(201) 571-4495
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ANNOUNCES
RESULTS FOR ITS FIRST QUARTER ENDED JUNE 16, 2007
 
STRATEGIC TRANSFORMATION CONTINUES WITH PATHMARK
ACQUISITION ON TRACK AND NON-CORE DIVESTITURES PROGRESSING
 
OPERATING RESULTS CONTINUE TO IMPROVE IN ITS CORE
NORTHEAST OPERATIONS
MONTVALE, NJ — July 20, 2007 — The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol: GAP) announced fiscal 2007 first quarter results for the 16 weeks ended June 16, 2007.
Sales for the first quarter in the Company’s core Northeast operations were $1.68 billion versus $1.65 billion last year, with comparable store sales increasing 1.0%. Total Company sales for the first quarter were $2.0 billion, comparable to $2.0 billion in last year’s first quarter. Total Company net loss for the quarter was $43 million or $1.03 per share versus a loss of $6 million or $0.15 per share last year. This quarter’s net loss of $43 million includes a loss of $125 million attributable to non-core operations in the Midwest and New Orleans, offset by a gain of $78 million from the sale of Metro Inc. shares.
The results for the first quarter of fiscal years 2007 and 2006 include items the Company considers non-operating in nature that management excludes when evaluating the results of the ongoing business. These items are listed on Schedule 3 of the press release. Excluding these items, adjusted loss from operations for the Northeast was $3.5 million as compared to a loss of $2.5 million in last year’s first quarter. Northeast EBITDA, excluding non-operating items, was $44 million versus $43 million in the first quarter of last year. Adjusted loss from operations and adjusted ongoing operating EBITDA for the

 

 

total Company was $8.5 million and $45 million, respectively, as compared to $3.4 million and $48 million in last year’s first quarter.
Christian Haub, Executive Chairman of the Board, said, “A&P’s strategic transformation continued on all key fronts in the first quarter. Top and bottom line results in our core business were further improved, our strategy to concentrate our retail activities in the Northeast by divesting non-core operations moved forward, and the closing process of the proposed Pathmark transaction is proceeding as planned.”
Eric Claus, President and Chief Executive Officer, said, “The continuing improvement of operations and merchandising combined with strict cost controls delivered our ninth consecutive quarter of year over year improved results. Although total Company sales for the quarter were impacted by the winding down of our since-closed Midwest operations, we are pleased with our performance in the Northeast market. Our core businesses posted positive comparable store sales and improved gross margins — attributable to more effective merchandising, more profitable fresh product distribution, good returns from our new Fresh stores, and strong improvement in our discount Food Basics group. On the cost side we suffered the impact of higher utility expenses but were still able to achieve overall improved results.
“During the quarter, we announced definitive plans to exit the Midwest and Southern markets, to focus all resources on growing our core Northeast business. The Farmer Jack group ceased operating as of July 7, with 43 stores sold and negotiations continuing for the balance. The sale process is also moving forward for the Sav-A-Center division based in New Orleans, which we expect to conclude by this Fall.
“With each quarter, we move closer to the realization of the New A&P as a sustainably profitable, diverse and consumer-focused Northeastern retailer. Our ongoing store development and operating improvements, and the transformational opportunity of adding Pathmark’s distinct customer appeal to our roster of formats, creates truly exciting prospects for the foreseeable future and beyond,” Mr. Claus said.
Founded in 1859, A&P is one of the nation’s first supermarket chains. The Company operates 337 stores in 8 states and the District of Columbia under the following trade names: A&P, Waldbaum’s, The Food Emporium, Super Foodmart, Super Fresh, Sav-A-Center and Food Basics.
The Company invites investors and other interested parties to listen to a live audio Webcast to be held at 11:00 AM Eastern Time today, at which members of the Company’s senior management team will discuss the Company’s first quarter financial results. The Webcast may be accessed through a link on the “Investors” page of the Company’s Website, www.aptea.com. Listeners who cannot participate in the live broadcast will be able to hear a recorded replay of the broadcast beginning this afternoon and available until August 17, 2007.

 

 

Effective March 28, 2003, the Securities and Exchange Commission (“SEC”) adopted new rules related to disclosure of certain financial measures not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”). Such new rules require all public companies to provide certain disclosures in press release and SEC filings related to non-GAAP financial measures. We use the non-GAAP measures “Adjusted (loss) income from operations” and “EBITDA” to evaluate the Company’s liquidity and it is among the primary measures used by management for planning and forecasting of future periods. Adjusted (loss) income from operations is defined as (loss) income from operations adjusted for items the Company considers non-operating in nature that management excludes when evaluating the results of the ongoing business. EBITDA is defined as earnings before interest and dividend income, taxes, depreciation, amortization, equity in earnings of Metro, Inc., discontinued operations, the (loss) gain on the sale of Metro Inc. shares and the (loss) gain on the sale of A&P Canada. Ongoing, operating EBITDA is defined as EBITDA adjusted for items the Company considers non-operating in nature that management excludes when evaluating the results of the ongoing business. The Company believes the presentation of these measures is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by the Company’s management and makes it easier to compare the Company’s results with other companies that have different financing and capital structures or tax rates. In addition, these measures are also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the results of the Company to other companies in its industry. Ongoing, operating EBITDA is reconciled to Net Cash provided by Operating Activities on Schedule 4 of this release.
This release contains forward-looking statements about the future performance of the Company, which are based on Management’s assumptions and beliefs in light of the information currently available to it. The Company assumes no obligation to update the information contained herein. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements including, but not limited to: competitive practices and pricing in the food industry generally and particularly in the Company’s principal markets; the Company’s relationships with its employees and the terms of future collective bargaining agreements; the costs and other effects of legal and administrative cases and proceedings; the nature and extent of continued consolidation in the food industry; changes in the financial markets which may affect the Company’s cost of capital and the ability of the Company to access capital; supply or quality control problems with the Company’s vendors; and changes in economic conditions which affect the buying patterns of the Company’s customers.
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The Great Atlantic & Pacific Tea Company, Inc.
Schedule 1 — GAAP Earnings for the 16 weeks ended June 16, 2007 and June 17, 2006
(Unaudited)
(In thousands, except share amounts and store data)
                 
    16 Weeks Ended  
    June 16,     June 17,  
    2007     2006  
Sales
   $ 1,986,925     $ 1,994,428  
Cost of merchandise sold
     (1,386,601 )     (1,391,427 )
 
            
Gross margin
     600,324       603,001  
Store operating, general and administrative expense
     (714,519 )     (613,885 )
 
            
Loss from operations
     (114,195 )     (10,884 )
Loss on sale of Canadian operations
     (281 )     (326 )
Gain on sale of shares of Metro, Inc.
     78,388       —  
Interest expense
     (21,419 )     (21,371 )
Interest and dividend income
     4,666       4,503  
Equity in earnings of Metro, Inc.
     7,869       7,947  
 
            
Loss from continuing operations before income taxes
     (44,972 )     (20,131 )
Benefit from income taxes
     18,830       11,492  
 
            
Loss from continuing operations
     (26,142 )     (8,639 )
Discontinued operations:
                
(Loss) income from operations of discontinued businesses, net of tax
     (1,829 )     2,540  
Loss on disposal of discontinued operations, net of tax
     (15,192 )     (10 )
 
            
(Loss) income from discontinued operations
     (17,021 )     2,530  
 
            
Net loss
   $ (43,163 )   $ (6,109 )
 
            
 
                
Net (loss) income per share — basic and diluted:
                
Continuing operations
   $ (0.62 )   $ (0.21 )
Discontinued operations
     (0.41 )     0.06  
 
            
Net loss per share — basic & diluted
   $ (1.03 )   $ (0.15 )
 
            
Weighted average common shares outstanding — basic
     41,801,381       41,280,600  
 
            
Weighted average common shares outstanding — diluted
     41,801,381       41,280,600  
 
            
Gross margin rate
     30.21 %     30.23 %
Store operating, general and administrative expense rate
     35.96 %     30.78 %
Total depreciation and amortization
   $ 56,349     $ 54,947  
Number of stores operated at end of quarter
     403       405  
 
            

 

The Great Atlantic & Pacific Tea Company, Inc.
Schedule 2 — Condensed Balance Sheet Data
(Unaudited)
(In millions, except per share and store data)
                 
    June 16, 2007     February 24, 2007  
 
                
Cash and short-term investments
   $ 94     $ 86  
Other current assets
     850       663  
 
            
Total current assets
     944       749  
Property-net
     786       940  
Investment in Metro, Inc.
     411       —  
Equity investment in Metro, Inc.
     —       369  
Other assets
     167       54  
 
            
Total assets
   $ 2,308     $ 2,112  
 
            
 
                
Total current liabilities
   $ 514     $ 558  
Total non-current liabilities
     1,235       1,123  
Stockholders’ equity
     559       431  
 
            
Total liabilities and stockholders’ equity
   $ 2,308     $ 2,112  
 
            
 
                
Other Statistical Data
                
 
                
Total Debt and Capital Leases
   $ 285     $ 348  
Total Long Term Real Estate Liabilities
     303       301  
Restricted Cash, Temporary Investments and Marketable Securities
     (205 )     (77 )
 
            
Net Debt
     383     $ 572  
Total Retail Square Footage (in thousands)
     16,467       16,538  
Book Value Per Share
   $ 13.35     $ 10.36  
                 
    For the 16     For the 16  
    weeks ended     weeks ended  
    June 16, 2007     June 17, 2006  
 
                
Capital Expenditures
   $ 51     $ 68  

 

The Great Atlantic & Pacific Tea Company, Inc.
Schedule 3 — Reconciliation of GAAP Loss from Operations to Adjusted Loss from Operations
for the 16 weeks ended July 16, 2007 and June 17, 2006
(Unaudited)
(In thousands, except share amounts and store data)
                                                 
    For the 16 weeks ended June 16, 2007     For the 16 weeks ended June 17, 2006  
    Northeast     Midwest     Total     Northeast     Midwest     Total  
 
                                                
As reported loss from operations
   $ (6,374 )   $ (107,821 )   $ (114,195 )   $ (7,976 )   $ (2,908 )   $ (10,884 )
 
                                    
Adjustments:
                                                
Midwest exit costs
     —       68,797       68,797       —       49       49  
Net restructuring costs
     1,537       —       1,537       3,238       —       3,238  
Pathmark acquisition
     427       —       427       —       —       —  
Labor buyout costs
     —       —       —       3,688       —       3,688  
Real estate related activity
     896       33,989       34,885       (1,400 )     1,870       470  
 
                                    
Total adjustments
     2,860       102,786       105,646       5,526       1,919       7,445  
 
                                    
Adjusted loss from operations
   $ (3,514 )   $ (5,035 )   $ (8,549 )   $ (2,450 )   $ (989 )   $ (3,439 )
 
                                    
Depreciation and amortization
   $ 47,712     $ 5,639     $ 53,351     $ 45,604     $ 6,136     $ 51,740  
 
                                    
Add: depreciation and amortization for discontinued operations
                     2,998                       3,207  
 
                                            
As reported depreciation and amortization
                   $ 56,349                     $ 54,947  
 
                                            

 

The Great Atlantic & Pacific Tea Company, Inc.
Schedule 4 — Reconciliation of GAAP Net Cash (Used In) Provided By Operating Activities to Adjusted EBITDA
for the 16 weeks ended June 16, 2007 and June 17, 2006
(Unaudited)
(In thousands, except share amounts and store data)
                 
    16 Weeks Ended  
    June 16,     June 17,  
    2007     2006  
Net cash provided by (used in) operating activities
   $ 27,631     $ (2,768 )
Adjustments to calculate EBITDA:
                
Net interest expense
     16,753       16,868  
Asset disposition initiatives
     (105,560 )     (7,251 )
Long lived asset impairment charges
     (451 )     (1,221 )
(Loss) gain on disposal of owned property
     (1,161 )     9,693  
Benefit from income taxes
     (18,830 )     (11,492 )
Income tax benefit
     21,978       11,300  
Other share based awards
     (2,821 )     (3,337 )
Proceeds from dividends from Metro, Inc.
     —       (1,702 )
Working capital changes
                
Accounts receivable
     (27,880 )     (44,021 )
Inventories
     (24,099 )     (3,866 )
Prepaid expenses and other current assets
     7,244       4,058  
Accounts payable
     11,933       (1,766 )
Accrued salaries, wages, benefits and taxes
     16,239       19,387  
Other accruals
     6,842       47,337  
Other assets
     11,446       2,620  
Other non-current liabilities
     809       14,220  
Other, net
     2,081       (3,996 )
 
            
Total A&P EBITDA
     (57,846 )     44,063  
 
            
Adjustments:
                
Midwest exit costs
     68,797       49  
Net restructuring costs
     1,537       3,238  
Pathmark acquisition
     427       —  
Labor buyout costs
     —       3,688  
Real estate related activity
     34,885       470  
Depreciation and amortization on discontinued operations
     (2,998 )     (3,207 )
 
            
Total adjustments
     102,648       4,238  
 
            
Adjusted A&P ongoing operating EBITDA
   $ 44,802     $ 48,301