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The Great Atlantic & Pacific Tea Company, Inc. Announces Results for Its Fourth Quarter and Fiscal Year Ended February 23, 2008
MONTVALE, N.J.-(Business Wire)-May 6, 2008 - The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol: GAP) announced improved fiscal 2007 fourth quarter and full year results for the 12 and 52 weeks ended February 23, 2008, which include for the first time the results of Pathmark Stores Inc.
Eric Claus, President and Chief Executive Officer, said, "The results in our retail operations have steadily improved during the last three years. This past year has seen the strongest top line sales trend in many years. The Pathmark integration is progressing smoothly with early assessments of potential synergies consistent with supporting the attainment of $150 million of projected synergies.
Another momentous milestone has been the signing of the new logistics contract with C&S Wholesale Grocers in March. This innovative ten-year agreement fully aligns distribution, procurement and warehousing goals which creates increased efficiencies across our distribution network improving service levels to all stores, and enabling both the Company and C&S to achieve substantial cost savings in the future."
Sales for the fourth quarter were $2.2 billion versus $1.3 billion last year. Comparable store sales increased 3.0%, which excludes sales for Pathmark stores acquired at the beginning of the fourth quarter. Comparable store sales for Pathmark, measured during the same period, increased 1.5%.
For the fourth quarter, excluding non-operating items, adjusted income from operations and EBITDA were $8.0 million and $72.2 million, respectively, and include $7 million of integration synergies. This compares to an adjusted loss from operations of $11.5 million and EBITDA of $24.0 million in last year's fourth quarter. The non-operating items excluded from adjusted income from operations are listed on Schedule 3 of the press release and adjusted EBITDA is reconciled to net cash from operating activities on Schedule 4.
For the fourth quarter, net loss from continuing operations was $44.6 million or $1.40 per diluted share versus a loss of $11.0 million or $0.26 per diluted share in the same period last year. These results are not adjusted for non-operating items.
Sales for the full year were $6.4 billion versus $5.4 billion in 2006. Comparable store sales increased 2.4%, which excludes sales for Pathmark stores. Comparable store sales for Pathmark increased 0.2% in the last twelve months.
Excluding non-operating items, fiscal 2007 adjusted loss from operations and EBITDA were $18.7 million and $159.4 million, respectively, and include $7 million of integration synergies. This compares to an adjusted loss from operations of $46.0 million and EBITDA of $102.7 million in fiscal 2006. The non-operating items excluded from adjusted income from operations are listed on Schedule 3 of the press release and adjusted EBITDA is reconciled to net cash from operating activities on Schedule 4.
Net income from continuing operations for fiscal 2007 was $87.0 million or $1.37 per diluted share compared to income of $12.8 million or $0.30 per diluted share for fiscal 2006. These results are not adjusted for non-operating items.
Eric Claus, President and Chief Executive Officer, stated, "This has been a year of substantial progress which has positioned the Company well to continue capturing leadership share. We remain intent on our targeted plans and strategic mission, with increased momentum from Pathmark's integration. The Company has realized numerous accomplishments that were diligently planned and efficiently executed. These achievements represent our continuous progression toward sustainable profitability and include:
— The acquisition of Pathmark
— Strategic market divestitures for realignment of the business in the Northeast core
— Consistent progress on fundamental retail key performance indicators
— Successful renovations in our Fresh, Discount, and Gourmet stores
— Aggressive private label penetration growth rate
— The strongest comparable store sales increases for one year, in over 8 years
Thanks to the hard work and dedication of our associates and management, we successfully completed the close of the Pathmark transaction with each milestone set thus far achieved, without any major obstacles. The collective energy garnered from this coming together has further fueled the drive to build our business."
Christian Haub, Executive Chairman of the Board, said, "I am pleased with the overall progress we made during the 4th quarter; results in our retail operations continued to improve despite a more uncertain economic environment. The first several months of integrating the Pathmark acquisition have gone very well. Our operating progress is directly attributable to the implementation of our strategy in the last three years including our format strategy built on proven and successful concepts that have generated positive sales and earnings, outsourcing distribution and gaining significant cost advantages and supply chain efficiencies as well as centralizing administration and reducing overhead costs dramatically.
The completion of the Pathmark transaction has certainly been the highlight of a very busy year. The accomplishment of all key integration milestones during the first several months and the realization of early synergies indicate that this transaction will be delivering on its promise. The addition of Pathmark's skilled talent, expansive store portfolio, formidable brand strength and fervent consumer reputation complements our consumer-centric, go-to-market strategy especially as we are facing a more difficult consumer environment.
2007 has been a momentous year, as the Company not only delivered improved results but also completed its strategic transformation. I am looking forward to continued progress in 2008 and beyond as we fully integrate Pathmark, further implement our format driven strategy and look for additional ways to grow our business and create value for our shareholders."
Founded in 1859, A&P is one of the nation's first supermarket chains. The Company operates 447 stores in 8 states and the District of Columbia under the following trade names: A&P, Waldbaum's, Pathmark, Best Cellars, The Food Emporium, Super Foodmart, Super Fresh 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 fourth 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 through midnight on Tuesday, June 2, 2008.
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, non-operating income, equity in earnings of Metro, Inc., discontinued operations, the 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; the failure to successfully integrate Pathmark's business and operations and realize synergies in the expected time frame. -0- *T The Great Atlantic & Pacific Tea Company, Inc. Schedule 1 - GAAP Earnings for the 12 and 52 weeks ended February 23, 2008 and February 24, 2007 (Unaudited) (In thousands, except share amounts and store data) 12 Weeks Ended 52 Weeks Ended ————————————- ————————————- February 23, February 24, February 23, February 24, 2008 2007 2008 2007 —————— —————— —————— —————— Sales $ 2,196,500 $ 1,265,773 $ 6,401,130 $ 5,369,203 Cost of merchandise sold (1,529,963) (874,299) (4,431,299) (3,702,883) —————— —————— —————— —————— Gross margin 666,537 391,474 1,969,831 1,666,320 Store operating, general and administrative expense (685,660) (398,991) (2,009,071) (1,693,490) —————— —————— —————— —————— Loss from operations (19,123) (7,517) (39,240) (27,170) Loss on sale of Canadian operations (645) (409) (436) (1,299) Gain on sale of Metro, Inc. - - 184,451 - Nonoperating income (1) 37,394 - 37,394 - Interest expense (2) (63,010) (15,717) (111,816) (65,884) Interest and dividend income 2,119 1,043 14,350 9,020 Equity in earnings of Metro, Inc. - 9,163 7,869 40,003 —————— —————— —————— —————— (Loss) income from continuing operations before income taxes (43,265) (13,437) 92,572 (45,330) (Provision for) benefit from income taxes (1,304) 2,449 (5,592) 58,081 —————— —————— —————— —————— (Loss) income from continuing operations (44,569) (10,988) 86,980 12,751 Discontinued operations: (Loss) income from operations of discontinued businesses, net of tax (17,181) 4,330 (196,848) 7,088 Gain (loss) on disposal of discontinued businesses, net of tax 227 (536) (50,812) 7,054 —————— —————— —————— —————— (Loss) income from discontinued operations (16,954) 3,794 (247,660) 14,142 —————— —————— —————— —————— Net (loss) income $ (61,523) $ (7,194) $ (160,680) $ 26,893 ============ ============ ============ ============ Net (loss) income per share - basic: Continuing operations $ (0.90) $ (0.26) $ 2.00 $ 0.31 Discontinued operations (0.34) 0.09 (5.69) 0.34 —————— —————— —————— —————— Net (loss) income per share - basic $ (1.24) $ (0.17) $ (3.69) $ 0.65 ============ ============ ============ ============ Net (loss) income per share - diluted: Continuing operations $ (1.40) $ (0.26) $ 1.37 $ 0.30 Discontinued operations (0.33) 0.09 (5.59) 0.34 —————— —————— —————— —————— Net (loss) income per share - diluted $ (1.73) $ (0.17) $ (4.22) $ 0.64 ============ ============ ============ ============ Weighted average common shares outstanding - basic 49,494,373 41,521,449 43,551,459 41,430,600 ============ ============ ============ ============ Weighted average common shares outstanding - diluted 50,667,417 41,521,449 44,295,214 41,902,358 ============ ============ ============ ============ Gross margin rate 30.35% 30.93% 30.77% 31.03% Store operating, general and administrative expense rate 31.22% 31.52% 31.39% 31.54% A&P depreciation and amortization $ 64,175 $ 41,979 $ 186,789 $ 177,754 ============ ============ ============ ============ Number of stores operated at end of quarter 447 406 447 406 ============ ============ ============ ============ (1)Non operating income reflects the marked-to-market adjustments related to the conversion features, financing warrants, and Series A and B warrants. (2)Interest expense includes one-time financing fees of $27.3 million related to the Bridge Loan Facility. *T -0- *T The Great Atlantic & Pacific Tea Company, Inc. Schedule 2 - Condensed Balance Sheet Data (Unaudited) (In millions, except per share and store data) February February 23, 24, 2008 2007 ———— ———— Cash and short-term investments $ 101 $ 86 Other current assets 783 663 ———— ———— Total current assets 884 749 Property-net 1,901 940 Equity investment in Metro, Inc. - 369 Other assets 863 54 ———— ———— Total assets $ 3,648 $ 2,112 ======== ======== Total current liabilities $ 767 $ 558 Total non-current liabilities 2,463 1,123 Stockholders' equity 418 431 ———— ———— Total liabilities and stockholders' equity $ 3,648 $ 2,112 ======== ======== Other Statistical Data —————————————————————————— Total Debt and Capital Leases $ 940 $ 348 Total Long Term Real Estate Liabilities 370 301 Temporary Investments and Marketable Securities (25) (77) ———— ———— Net Debt $ 1,285 $ 572 Total Retail Square Footage (in thousands) 18,813 16,538 Book Value Per Share $ 7.32 $ 10.36 For the For the 52 52 weeks weeks ended ended February February 23, 24, 2008 2007 ———— ———— Capital Expenditures $ 123 $ 208 *T -0- *T The Great Atlantic & Pacific Tea Company, Inc. Schedule 3 - Reconciliation of GAAP (Loss) Income from Operations to Adjusted (Loss) Income from Operations for the 12 and 52 weeks ended February 23, 2008 and February 24, 2007 (Unaudited) (In thousands) 12 Weeks Ended 52 Weeks Ended —————————- —————————- February February February February 23, 24, 23, 24, 2008 2007 2008 2007 —————————- —————————- As reported loss from operations $(19,123) $ (7,517) $(39,240) $(27,170) ————- ————- ————- ————- Adjustments: Net restructuring costs - 2,432 4,420 9,994 Pathmark acquisition 20,933 - 27,694 - Real estate related activity (2,020) (2,367) (14,057) (11,186) Pension withdrawal costs 5,944 - 5,944 - LIFO provision 2,310 - 2,310 - IT services agreement with Metro, Inc. - (4,000) (5,792) (17,672) ————- ————- ————- ————- Total adjustments 27,167 (3,935) 20,519 (18,864) ————- ————- ————- ————- Adjusted Northeast income (loss) from operations $ 8,044 $(11,452) $(18,721) $(46,034) ========= ========= ========= ========= Northeast depreciation and amortization $ 64,175 $ 35,448 $178,152 $148,762 Discontinued operations depreciation and amortization - 6,531 8,637 28,992 ————- ————- ————- ————- Total A&P depreciation and amortization $ 64,175 $ 41,979 $186,789 $177,754 ========= ========= ========= ========= *T -0- *T 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 12 and 52 weeks ended February 23, 2008 and February 24, 2007 (Unaudited) (In thousands) 12 Weeks Ended 52 Weeks Ended —————————- —————————— February February February February 23, 24, 23, 24, 2008 2007 2008 2007 —————————- —————————— Net cash used in operating activities $(12,538) $ 79,586 $ (35,345) $ 36,722 Adjustments to calculate EBITDA: Depreciation and amortization on discontinued operations - (6,531) (8,637) (28,992) Net interest expense 60,891 14,674 97,466 56,864 Asset disposition initiatives (3,529) 1,534 (123,951) (2,139) Long lived asset impairment charges (8,106) (742) (11,657) (4,294) Gain on disposal of owned property 16,257 4,658 13,743 22,502 Loss (income) from operations of discontinued operations 17,181 (4,330) 196,848 (7,088) Financing fees relating to bridge loan facility (25,421) - (25,421) - Provision for (benefit from) income taxes 1,304 (2,449) 5,592 (58,081) Income tax benefit - 4,890 - 66,435 Other share based awards (1,757) (1,482) (9,039) (8,134) Proceeds from dividends from Metro, Inc. - (1,791) - (6,858) Working capital changes ——————————————- Accounts receivable (5,183) (12,961) (37,098) (62,741) Inventories (43,244) (31,137) (115,985) 1,264 Prepaid expenses and other current assets (24,134) (19,548) (9,904) (3,062) Accounts payable 45,429 8,978 72,714 19,199 Accrued salaries, wages, benefits and taxes (14,844) (21,306) 41,524 9,202 Other accruals 40,193 4,332 42,205 61,395 Other assets (16,018) (5,941) (12,887) (3,044) Other non-current liabilities 25,010 17,260 67,569 37,641 Other, net (6,439) 237 (8,825) (5,199) ————- ————- ————— ————- Total A&P EBITDA 45,052 27,931 138,912 121,592 ————- ————- ————— ————- Adjustments: Net restructuring costs - 2,432 4,420 9,994 Pathmark acquisition 20,933 - 27,694 - Real estate related activity (2,020) (2,367) (14,057) (11,186) Pension withdrawal costs 5,944 - 5,944 - LIFO provision 2,310 - 2,310 - IT services agreement with Metro, Inc. - (4,000) (5,792) (17,672) ————- ————- ————— ————- Total adjustments 27,167 (3,935) 20,519 (18,864) ————- ————- ————— ————- Adjusted A&P ongoing operating EBITDA $ 72,219 $ 23,996 $ 159,431 $102,728 ========= ========= ========== ========= *T
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