EX-99.1 2 b407849_ex99-1.txt PRESS RELEASE EXHIBIT 99.1 [A&P LOGO] News 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 Vice President, Corporate Affairs (201) 571-4495 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ANNOUNCES RESULTS FOR FIRST QUARTER 2005 --------- COMPANY REPORTS EBITDA, ADJUSTED FOR NON-OPERATING ITEMS, OF $101 MILLION, UP FROM $81 MILLION IN PRIOR YEAR MONTVALE, NJ - July 22, 2005 - The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol: GAP) announced unaudited fiscal 2005 first quarter results for the 16 weeks ended June 18, 2005. Sales for the first quarter were $3.4 billion, compared with $3.3 billion in the first quarter of fiscal 2004. Comparable store sales decreased 0.3% vs. year-ago. The loss for the quarter was $2.28 per share this year versus a loss of $1.11 per share last year. Results from continuing operations, as shown on Schedule 1, were a loss of $89 million or $2.27 per share this quarter versus a loss of $41 million or $1.08 per share in last year's first quarter. The current year's results include charges totaling $68 million related to certain items that the Company believes are of a non-operating nature. These items include $50 million in restructuring costs, primarily related to the sale of the U.S. distribution operations to C&S, $15 million related to Midwest exit costs, and $3 million related to a Canadian dollar hedge. Last year's results included a $1 million restructuring charge. Excluding these items, EBITDA was $101 million for first quarter of fiscal 2005 versus $81 million for the same period of fiscal 2004. Christian Haub, Chairman of the Board and Chief Executive Officer, said, "Our Company's improvement continued in the first quarter. A&P Canada's fresh marketing initiatives, improving discount Food Basics operation and cost controls contributed to excellent results in Ontario. In the U.S., our fresh store development continued to generate excellent customer response, while the Food Basics stores produced a good sales trend as our improvement of that format continued. "We now look forward to the formation and development of The New A&P, as augmented by our major strategic accomplishments since the end of the quarter; namely the recently announced transfer of distribution operations, the pending sale of A&P Canada to METRO INC., and our executive leadership change going forward in the U.S. "Our objectives for the second quarter and beyond are to: o accelerate the improvement of our operating trends; o close our Canadian transaction and realize the de-leveraging of our balance sheet; o complete the remainder of our divestiture initiative; o continue rolling out our U.S. fresh stores and improving our discount operations; o and continue pursuing significant cost reduction opportunities, and shaping the organization of the New A&P." Founded in 1859, A&P, one of the nation's first supermarket chains, is today among North America's largest. The Company operates 637 stores in 10 states, the District of Columbia and Ontario, Canada under the following trade names: A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, Dominion, The Barn Markets, Food Basics and Ultra Food & Drug. 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 19, 2005. 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 measure "EBITDA" to evaluate the Company's liquidity and it is among the primary measures used by management for planning and forecasting of future periods. EBITDA is defined as earnings before interest, taxes, depreciation, amortization, minority interest, discontinued operations and cumulative effect of change in accounting principle. The Company believes the presentation of this measure 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, this measure is 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. EBITDA is reconciled to Net Cash provided by Operating Activities on Schedule 1 of this release. 2 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. ### 3 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SCHEDULE 1 - GAAP EARNINGS FOR THE 16 WEEKS ENDED JUNE 18, 2005 AND JUNE 19, 2004 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS AND STORE DATA)
16 Weeks Ended ------------------------------------ June 18, 2005 June 19, 2004 ------------- ------------- AS RESTATED (1) Sales $ 3,383,633 $ 3,280,299 Cost of merchandise sold (2,445,675) (2,360,303) ------------ ------------ Gross margin 937,958 919,996 Store operating, general and administrative expense (976,687) (921,074) ------------ ------------ Loss from operations (2) (38,729) (1,078) Interest expense (36,123) (34,392) Interest income 1,186 841 Minority interest in earnings of consolidated franchisees (1,536) (1,376) ------------ ------------ Loss from continuing operations before income taxes (75,202) (36,005) Provision for income taxes (13,865) (5,458) ------------ ------------ Loss from continuing operations (89,067) (41,463) Discontinued operations: Loss from operations of discontinued businesses, net of tax (168) (1,383) Gain on disposal of discontinued operations, net of tax - - ------------ ------------ Loss from discontinued operations (168) (1,383) ------------ ------------ Net loss $ (89,235) $ (42,846) ============ ============ Net loss per share - basic and diluted: Continuing operations $ (2.27) $ (1.08) Discontinued operations (0.01) (0.03) ------------ ------------ Net loss per share - basic and diluted $ (2.28) $ (1.11) ============ ============ Weighted average common shares outstanding: Basic 39,201,114 38,520,018 ============ ============ Diluted 39,201,114 38,520,018 ============ ============ Gross margin rate 27.72% 28.05% ============ ============ Store operating, general and administrative expense rate 28.87% 28.08% ============ ============ Depreciation and amortization $ 71,875 $ 80,846 ============ ============ Reconciliation of GAAP cash flow measure to EBITDA: Net cash provided by operating activities $ 1,231 $ 38,846 Net interest expense 34,937 33,551 Restructuring charge (48,549) 0 Deferred income taxes (5,430) (1,012) Working capital changes Accounts receivable (16,477) (24,840) Inventories 20,747 22,822 Prepaid expenses and other current assets 2,779 14,887 Accounts payable (6,824) (55,635) Accrued salaries, wages, benefits and taxes 19,054 6,813 Other accruals 7,277 27,899 Other assets 434 (362) Other non-current liabilities 11,689 12,415 Other, net 12,278 4,384 ------------ ------------ EBITDA $ 33,146 $ 79,768 ============ ============ Number of stores operated at end of quarter 637 628 ============ ============ Number of franchised stores served at end of quarter 42 66 ============ ============
(1) As previously reported, prior year results have been restated for changes in our accounting for leases primarily to correct the Company's accounting for landlord allowances. (2) Loss from operations includes charges totaling $68 million related to certain items that the Company believes are of a non-operating nature. These items include $50 million in restructuring costs, primarily related to the sale of the U.S. distribution operations to C&S, $15 million related to Midwest exit costs, and $3 million related to the Canadian dollar hedge. THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. Schedule 2 - Condensed Balance Sheet Data (Unaudited) (In millions, except per share and store data)
June 18, 2005 February 26, 2005 ------------- ----------------- Cash and short-term investments $ 171 $ 258 Other current assets 1,543 907 -------- -------- Total current assets 1,714 1,165 Property-net 1,003 1,516 Other assets 56 121 -------- -------- Total assets $ 2,773 $ 2,802 ======== ======== Total current liabilities $ 1,230 $ 1,078 Total non-current liabilities 1,388 1,490 Stockholders' equity 155 234 -------- -------- Total liabilities and stockholders' equity $ 2,773 $ 2,802 ======== ======== Other Statistical Data Total Debt and Capital Leases $ 689 $ 697 Total Long Term Real Estate Liabilities 330 328 Temporary Investments (74) (104) -------- -------- Net Debt $ 945 $ 921 Total Retail Square Footage (in thousands) 25,257 25,583 Book Value Per Share $ 3.86 $ 6.03 For the 16 For the 16 weeks ended weeks ended June 18, 2005 June 19, 2004 ------------- ------------- Capital Expenditures $ 70 $ 61