EX-99.1 3 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

News

 

The Great Atlantic & Pacific Tea Company, Inc.

2 Paragon Drive

Montvale, NJ 07645

 

For financial questions, call William Moss

Vice President, Treasurer

(201) 571-4019

For non-financial questions, call Richard De Santa

Vice President, Corporate Affairs (201) 571-4495

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. ANNOUNCES

RESULTS FOR FIRST QUARTER 2003

 

MONTVALE, NJ – July 25, 2003 – The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol:GAP) announced unaudited fiscal 2003 first quarter results for the 16 weeks ended June 14, 2003.

 

Sales for the first quarter were $3.2 billion, compared with $3.1 billion in the first quarter of fiscal 2002. Comparable store sales decreased 0.1% vs. year-ago. Earnings per share were $.52 for the quarter, compared with $.05 in the prior year.

 

During the first quarter of fiscal 2003, the Company classified three businesses, northern New England, Kohl’s and Eight O’Clock Coffee, as discontinued operations since they are being divested. Excluding discontinued operations, ongoing operating loss per share in the quarter was $.53, compared with ongoing operating earnings of $.11 per share for first quarter last year.

 

EBITDA for the first quarter of fiscal 2003, based on ongoing operating earnings as shown on Schedule 3 of this release, was $72 million compared to $104 million in the prior year’s first quarter.

 

Christian Haub, Chairman of the Board, President & Chief Executive Officer, said, “We have maintained our focus on strengthening our financial position, lowering costs, stabilizing our U.S. business and continuing our success in Canada. Our program to divest non-strategic assets moved forward in the first quarter, with the sale of our retail operations in northern New England and Madison, Wisconsin.

 

“Clearly, the economic and operating environment continues to challenge top and bottom line progress. However, I am confident that the operating and merchandising disciplines

as well as cost management being implemented in our U.S. operations and strengthened in our Canadian operations will provide the foundation for better performance in the future.”

 

Founded in 1859, A&P was one of the nation’s first supermarket chains, and is today among North America’s largest. In the first quarter, the Company opened 7 new stores and remodeled or expanded 2 stores. The Company operates 667 stores in 12 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, Kohl’s, Sav-A-Center, Dominion, The Barn Markets and Food Basics and Ultra Food & Drug. The Company also manufactures and distributes the Eight O’Clock line of whole bean coffees. The Company invites investors to listen to an audio Webcast of its quarterly discussion of earnings by accessing a link on the “Investor Relations” page of its Website, www.aptea.com. The live broadcast is on Friday, July 25, 2003 at 11 AM Eastern Time, with replays available from the afternoon of July 25 through August 25.

 

Effective March 28, 2003, the Securities and Exchange Commission 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 “ongoing operating earnings” and “ongoing operating loss” to reflect what the company’s earnings would have been excluding certain identified major items, which we believe are of a non-operating or one-time nature. These items are reconciled to reported earnings on Schedules 2 and 3 of this release. We use the non-GAAP measure “EBITDA” to reflect a measure that we believe is of interest to investors. EBITDA is reconciled to Net Cash provided by Operating Activities on Schedule 3 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.

 

###

The Great Atlantic & Pacific Tea Company, Inc.

Schedule 1—GAAP Earnings for the 16 weeks ended June 14, 2003 and June 15, 2002

(Unaudited)

(In thousands, except share amounts and store data)

 

     16 Weeks Ended
  
     June 14, 2003
     June 15, 2002
  

Sales(1)

    $ 3,203,830     $ 3,093,776  

Cost of merchandise sold(2)

      (2,324,661 )     (2,211,961 )
    
 

Gross margin

      879,169       881,815  

Store operating, general and administrative expense(2) (3)

      (891,628 )     (856,601 )
    
 

(Loss) income from operations

      (12,459 )     25,214  

Interest expense

      (24,884 )     (26,752 )

Interest income

      2,139       1,959  
    
 

(Loss) income from continuing operations before income taxes(2)

      (35,204 )     421  

Benefit from income taxes

      14,862       368  
    
 

(Loss) income from continuing operations(2)

      (20,342 )     789  

Discontinued operations:(4)

                 

(Loss) income from operations of discontinued businesses, net of tax

      (11,459 )     1,086  

Gain on disposal of discontinued operations, net of tax

      52,081       —    
    
 

Income from discontinued operations

      40,622       1,086  
    
 

Net income

    $ 20,280     $ 1,875  
    
 

Net (loss) income per share—basic:(2)

                 

Continuing operations

    $ (0.53 )   $ 0.02  

Discontinued operations

      1.06       0.03  
    
 

Net income per share—basic

    $ 0.53     $ 0.05  
    
 

Net (loss) income per share—diluted:(2)

                 

Continuing operations

    $ (0.53 )   $ 0.02  

Discontinued operations

      1.05       0.03  
    
 

Net income per share—diluted

    $ 0.52     $ 0.05  
    
 

Weighted average common shares outstanding:

                 

Basic

      38,515,806       38,450,102  
    
 

Diluted

      38,701,217       39,462,250  
    
 

Gross margin rate

      27.44 %     28.50 %
    
 

Store operating, general and administrative expense rate

      27.83 %     27.69 %
    
 

Number of stores operated at end of quarter

      667       692  
    
 

Number of franchised stores served at end of quarter

      64       68  
    
 

 

(1)   Included in sales for the 16 weeks ended June 14, 2003 and June 15, 2002, were wholesale sales to franchisees of $250.5 million and $221.2 million, respectively.
(2)   Cost of merchandise sold and store operating, general and administrative expense for the 16 weeks ended June 15, 2002 include amounts related to the Company’s asset disposition initiatives. These amounts are detailed on Schedule 2 attached.
(3)   During the 16 weeks ended June 15, 2002, the Company purchased in the open market $38 million of its 7.75% Notes due April 15, 2007. As a result, the Company recognized a pretax loss of $0.7 million ($0.4 million net of tax benefit of $0.3 million) during the 16 weeks ended June 15, 2002.
(4)   In February and March 2003, the Company decided to sell its operations located in Northern New England, Madison and Milwaukee, Wisconsin as well as its Eight O’Clock Coffee business. In April 2003, the sale of the Company’s stores in Northern New England and Madison, Wisconsin, were completed, generating proceeds of $137.6 million and resulting in a gain of $81.4 million ($52.1 million after tax).

The Great Atlantic & Pacific Tea Company, Inc.

Schedule 2—Adjustments to GAAP Earnings for the 16 Weeks Ended June 15, 2002

(Unaudited)

(In thousands, except share amounts and store data)

 

    

16 Weeks Ended

June 15, 2002

  
    

Asset

disposition

initiative

    

Loss on early

extinguishment

of debt

    

Gain on

proceeds from

the

demutualization

of a mutual

insurance

company

    

Total

adjustments

  

Sales

    $ —       $ —       $ —       $ —    

Cost of merchandise sold

      (860 )     —         —         (860 )
    
 
 
 

Gross margin

      (860 )     —         —         (860 )

Store operating, general and administrative expense

      (6,103 )     (684 )     1,717       (5,070 )
    
 
 
 

(Loss) income from operations

      (6,963 )     (684 )     1,717       (5,930 )

Interest expense

      —         —         —         —    

Interest income

      —         —         —         —    
    
 
 
 

(Loss) income from continuing operations before income taxes

      (6,963 )     (684 )     1,717       (5,930 )

Benefit from (provision for) income taxes

      2,869       287       (721 )     2,435  
    
 
 
 

(Loss) income from continuing operations

      (4,094 )     (397 )     996       (3,495 )

Discontinued operations:

                                 

(Loss) income from operations of discontinued businesses, net of tax

      —         —         —         —    

Gain on disposal of discontinued operations, net of tax

      —         —         —         —    
    
 
 
 

Income from discontinued operations

      —         —         —         —    
    
 
 
 

Net (loss) income

    $ (4,094 )   $ (397 )   $ 996     $ (3,495 )
    
 
 
 

Net (loss) income per share—basic:

                                 

Continuing operations

    $ (0.11 )   $ (0.01 )   $ 0.03     $ (0.09 )

Discontinued operations

    $ —       $ —       $ —       $ —    
    
 
 
 

Net (loss) income per share—basic

    $ (0.11 )   $ (0.01 )   $ 0.03     $ (0.09 )
    
 
 
 

Net (loss) income per share—diluted:

                                 

Continuing operations

    $ (0.10 )   $ (0.01 )   $ 0.03     $ (0.09 )

Discontinued operations

      —         —         —         —    
    
 
 
 

Net (loss) income per share—diluted

    $ (0.10 )   $ (0.01 )   $ 0.03     $ (0.09 )
    
 
 
 

Weighted average common shares outstanding:

                                 

Basic

      38,450,102       38,450,102       38,450,102       38,450,102  
    
 
 
 

Diluted

      39,462,250       39,462,250       39,462,250       39,462,250  
    
 
 
 

The Great Atlantic & Pacific Tea Company, Inc.

Schedule 3—Adjustments to GAAP Earnings for the 16 Weeks Ended June 14, 2003 and June 15, 2002

(Unaudited)

(In thousands, except share amounts and store data)

 

    

16 Weeks Ended

June 14, 2003

    

16 Weeks Ended

June 15, 2002

  
    

GAAP

Earnings

    

Adjustments

to be (added)

subtracted

(See Schedule 2)

   

Earnings

as Adjusted

    

GAAP

Earnings

    

Adjustments

to be (added)

subtracted

(See Schedule 2)

    

Earnings

as Adjusted

  
             
             
             

Sales

    $ 3,203,830     $ —      $ 3,203,830     $ 3,093,776     $ —       $ 3,093,776  

Cost of merchandise sold

      (2,324,661 )     —        (2,324,661 )     (2,211,961 )     (860 )     (2,211,101 )
    
 
  
 
 
 

Gross margin

      879,169       —        879,169       881,815       (860 )     882,675  

Store operating, general and administrative expense

      (891,628 )     —        (891,628 )     (856,601 )     (5,070 )     (851,531 )
    
 
  
 
 
 

(Loss) income from operations

      (12,459 )     —        (12,459 )     25,214       (5,930 )     31,144  

Interest expense

      (24,884 )     —        (24,884 )     (26,752 )     —         (26,752 )

Interest income

      2,139       —        2,139       1,959       —         1,959  
    
 
  
 
 
 

(Loss) income from continuing operations before income taxes

      (35,204 )     —        (35,204 )     421       (5,930 )     6,351  

Benefit from (provision for) income taxes

      14,862       —        14,862       368       2,435       (2,067 )
    
 
  
 
 
 

(Loss) income from continuing operations

      (20,342 )     —        (20,342 )     789       (3,495 )     4,284  

Discontinued operations:

                                                

(Loss) income from operations of discontinued businesses, net of tax

      (11,459 )     —        (11,459 )     1,086       —         1,086  

Gain on disposal of discontinued operations, net of tax

      52,081       —        52,081       —         —         —    
    
 
  
 
 
 

Income (loss) from discontinued operations

      40,622       —        40,622       1,086       —         1,086  
    
 
  
 
 
 

Net income (loss)

    $ 20,280     $ —      $ 20,280     $ 1,875     $ (3,495 )   $ 5,370  
    
 
  
 
 
 

Net (loss) income per share—basic:

                                                

Continuing operations

    $ (0.53 )   $ —      $ (0.53 )   $ 0.02     $ (0.09 )   $ 0.11  

Discontinued operations

      1.06       —        1.06       0.03       —         0.03  
    
 
  
 
 
 

Net income (loss) per share—basic

    $ 0.53     $ —      $ 0.53     $ 0.05     $ (0.09 )   $ 0.14  
    
 
  
 
 
 

Net (loss) income per share—diluted:

                                                

Continuing operations

    $ (0.53 )   $ —      $ (0.53 )   $ 0.02     $ (0.09 )   $ 0.11  

Discontinued operations

      1.05       —        1.05       0.03       —         0.03  
    
 
  
 
 
 

Net income (loss) per share—diluted

    $ 0.52     $ —      $ 0.52     $ 0.05     $ (0.09 )   $ 0.14  
    
 
  
 
 
 

Weighted average common shares outstanding:

                                                

Basic

      38,515,806       38,515,806      38,515,806       38,450,102       38,450,102       38,450,102  
    
 
  
 
 
 

Diluted

      38,701,217       38,701,217      38,701,217       39,462,250       39,462,250       39,462,250  
    
 
  
 
 
 

Gross margin rate

      27.44 %            27.44 %     28.50 %             28.53 %
    
        
 
         

Store operating, general and administrative expense rate

      27.83 %            27.83 %     27.69 %             27.52 %
    
        
 
         

Depreciation and amortization

    $ 84,096            $ 84,096     $ 72,551             $ 72,551  
    
        
 
         

Reconciliation of GAAP cash flow measure to adjusted EBITDA:

                                                

Net cash provided by operating activities

                   $ 5,990                     $ 86,792  

Net interest expense

                     22,745                       24,793  

Adjustments from GAAP earnings (see Schedule 2)

                     —                         3,495  

Deferred income tax (provision) benefit

                     29,213                       (23,356 )

Working capital changes

                     16,380                       (18,203 )

Other, net

                     (2,691 )                     30,174  
                   
                 

Adjusted EBITDA

                   $ 71,637                     $ 103,695  
                   
                 

The Great Atlantic & Pacific Tea Company, Inc.

Schedule 4—Condensed Balance Sheet Data

(Unaudited)

(In millions, except per share and store data)

 

     June 14, 2003
    February 22, 2003

Cash and short-term investments

    $ 163    $ 199

Other current assets

      940      901
    
  

Total current assets

      1,103      1,100

Property-net

      1,585      1,609

Other assets

      182      176
    
  

Total assets

    $ 2,870    $ 2,885
    
  

Total current liabilities

    $ 1,163    $ 1,091

Total non-current liabilities

      1,149      1,296

Stockholders’ equity

      558      498
    
  

Total liabilities and stockholders’ equity

    $ 2,870    $ 2,885
    
  

Other Statistical Data

              

Total Debt and Capital Leases

    $ 792    $ 926

Temporary Investments

      47      78
    
  

Net Debt

    $ 745    $ 848

Total Retail Square Footage (in thousands)

      25,819      26,818

Book Value Per Share

    $ 14.48    $ 12.93
    

For the 16

weeks ended

June 14, 2003

   

For the 16

weeks ended

June 15, 2002

     
     

Capital Expenditures

    $ 57    $ 88