The Great Atlantic & Pacific Tea Company, Inc. (A&P
or the Company) (NYSE:GAP) today announced the execution of
investment agreements between the Company and affiliates of The
Yucaipa Companies, LLC (�Yucaipa�), and partners of Tengelmann
Warenhandelsgesellschaft KG (�Tengelmann�) whereby Yucaipa will
invest $115 million and Tengelmann will invest $60 million for a
total purchase of $175 million of convertible preferred stock
pursuant to a private offering.
With these new funds, A&P will be able to strengthen its
balance sheet and have significantly increased liquidity available
to pursue its business strategy thereby better positioning the
Company to compete in the dynamic food retail industry. Under the
terms of their agreements, Yucaipa and Tengelmann will purchase
115,000 and 60,000 shares of convertible preferred stock,
respectively, each with an initial liquidation preference of
$1,000. On a fully diluted basis, Tengelmann will remain the
largest single shareholder with an ownership interest of 38.6
percent, with Yucaipa�s ownership interest increasing to 27.6
percent. In connection with the preferred stock investment,
A&P�s Board of Directors will be comprised of the nine current
directors plus two additional directors nominated by Yucaipa.
This transaction is conditioned upon, among other customary
conditions set forth in the investment agreements, the completion
of a private placement of the senior secured notes which the
Company separately announced today.
According to Christian Haub, Executive Chairman, A&P, and
Co-Chief Executive of Tengelmann, �This investment further
solidifies Tengelmann�s over 30 year commitment to the Company�s
success. Partnering with Yucaipa is an exciting opportunity to
collaborate with one of the most successful investors in the
supermarket industry, Ron Burkle. We believe this strategic
partnership has the potential to unlock significant shareholder
value and I look forward to working with Ron to make this a
reality.�
Ron Burkle, CEO Yucaipa stated, �I've known and respected
Christian for over a decade. We have had a great relationship and
we appreciate this opportunity to invest with them.�
�This deal reconfirms Tengelmann�s long-standing commitment to
this Company and our strategic plans. The addition of Yucaipa as a
significant investment partner provides the necessary resources to
successfully execute our strategies and navigate through this
difficult economy effectively with a focus on building sustainable
profitability in the longer-term,� said Eric Claus, President and
CEO of A&P.
The preferred stock has an 8 annual percent dividend payable
quarterly in cash, or a 9.5 percent annual dividend if paid in
additional preferred stock, and is convertible, under certain
conditions, at an initial conversion price of $5.00 per share. This
represents a premium of approximately 7.5% percent to yesterday�s
closing sale price of A&P�s common stock of $4.65. Tengelmann
and Yucaipa, as holders of the preferred shares, will have the
right to vote together with the holders of Common Stock on all
matters upon which the holders of Common Stock are entitled to
vote, on an as-converted basis, subject to certain New York Stock
Exchange stockholder approval requirements.
The Company also released its fiscal 2009 first quarter results
for the 16 weeks ended June 20, 2009. Sales for the first quarter
were $2.8 billion versus $2.9 billion last year. Comparable store
sales decreased 3.3%. For the first quarter, excluding
non-operating items, adjusted EBITDA was $80 million versus $96
million last year. Adjusted income from operations was $2.3 million
versus $16.2 million in last year�s first 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.
Reported loss from continuing operations was $58.3 million compared
to income of $2.8 million for last year�s first quarter.
Eric Claus, President and Chief Executive Officer, adds, �This
quarter was challenging for our Company as the retail market
continues to experience one of the most difficult economic
environments in history. Our decline in comparable store sales this
quarter was driven by a decline in the rate of our retail
inflation, more promotional purchases and customers buying
less.
We continue to see year-over-year increase in segment income
within our Fresh, Gourmet and Discount businesses. Our Price Impact
or Pathmark stores continue to be a challenge with year-over-year
decline in segment income, driven by negative comparable store
sales and lower gross margins, primarily resulting from higher
promotional spending and price investments. Although, in the
shorter term, this has negatively impacted our earnings, we believe
this strategic pricing investment will well-position us to generate
long-term growth overtime and once the overall economy
improves.�
�The current challenging economy continues to impact our
business. However, we are confident that our business optimization
initiatives supported by our strategic investment agreements will
benefit the Company and allow us to mitigate some of the
difficulties we are experiencing. We are working on improving our
results in revenues driven by our promotional and pricing
strategies as well as decreased costs through greater efficiencies
in labor and distribution while also benefiting from increased
private label penetration and lower stock losses during the
remainder of fiscal 2009,� stated Christian Haub, Executive
Chairman, A&P.
About A&P
Founded in 1859, A&P is one of the nation's first
supermarket chains. The Company operates 435 stores in 8 states and
the District of Columbia under the following trade names: A&P,
Waldbaum's, Pathmark, Pathmark Sav-a-Center, Best Cellars, The Food
Emporium, Super Foodmart, Super Fresh and Food Basics.
Investors and other interested parties may listen to a
pre-recorded message accessed through a link under �Webcast Events�
on the �Investors� page of the Company�s Website, www.aptea.com,
which will be available through August 20, 2009.
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. The Company
uses the non-GAAP measures �Adjusted income (loss) from
operations�, �EBITDA� and �adjusted ongoing operating EBITDA� to
evaluate the Company�s liquidity and these are among the primary
measures used by management for planning and forecasting of future
periods. Adjusted income (loss) from operations is defined as
income (loss) 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 expense, interest and dividend income,
taxes, depreciation, amortization, the (loss) gain on the sale of
A&P Canada, the gain on the disposition of Metro, Inc.,
non-operating income, equity in earnings of Metro, Inc., and
discontinued operations. Adjusted 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. Adjusted ongoing,
operating EBITDA is reconciled to Net Cash used in 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: various operating factors and general economic
conditions; competitive practices and pricing in the food industry
generally and particularly in the Company�s principal geographic
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 capital 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 may 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 20, 2009
and June 14, 2008, and 53 weeks ended June 20, 2009
(Unaudited) (In thousands, except share amounts and store
data) � � � For the For the 16 Weeks Ended 53 Weeks Ended June
20, June 14, June 20, 2009
2008 (2)
2009 � Sales $ 2,790,243 $ 2,922,665 $ 9,383,764 Cost of
merchandise sold �
(1,945,374 ) �
(2,039,079 ) �
(6,519,445
) Gross margin 844,869 883,586 2,864,319 Store
operating, general and administrative expense �
(846,705 ) �
(881,495
) �
(2,915,032 ) (Loss)
income from operations (1,836 ) 2,091 (50,713 )
Nonoperating (loss) income (1)
(1,875 ) 48,597 66,392 Interest expense (54,248 ) (46,926 )
(164,913 ) Interest and dividend income �
41 � �
410 � �
222 � (Loss) income from
continuing operations before income taxes (57,918 ) 4,172 (149,012
) Provision for income taxes �
(386 ) �
(1,384 ) �
(1,685
) (Loss) income from continuing operations (58,304 )
2,788 (150,697 ) Discontinued operations: Loss from operations of
discontinued businesses, net of tax (6,856 ) (4,163 ) (61,076 )
Income on disposal of discontinued operations, net of tax �
- � �
2,639 � �
2,014 � Loss
from discontinued operations �
(6,856 ) �
(1,524 ) �
(59,062
) Net (loss) income
$
(65,160 ) $
1,264 �
$ (209,759
) � Net (loss) income per share - basic: Continuing
operations $ (1.10 ) $ 0.06 Discontinued operations �
(0.13 ) �
(0.03
) Net (loss) income per share - basic
$
(1.23 ) $ 0.03
� � Net (loss) per share - diluted: Continuing operations $ (3.36 )
$ (0.51 ) Discontinued operations �
(0.28
) �
(0.03 ) Net loss per
share - diluted
$ (3.64 )
$ (0.54 ) � � Weighted
average common shares outstanding - basic �
52,886,956
� �
49,786,027 � Weighted average common shares
outstanding - diluted �
24,782,040 � �
48,156,654 � � � Gross margin rate 30.28 % 30.23 %
30.52 % Store operating, general and administrative expense rate
30.35 % 30.16 % 31.06 % � � A&P depreciation and amortization $
77,788 $ 80,027 $ 258,752 � Number of stores operated at end of
period �
435 � �
446 � �
435
� �
(1)
�
Non operating income reflects the fair value adjustments related to
the conversion features, financing warrants, and Series A and
Series B warrants.
(2)
�
Operating results for the 16 weeks ended June 14, 2008 and 53 weeks
ended June 20, 2009 have been adjusted as a result of the
retrospective application of FSP APB 14-1, which was adopted during
the first quarter of fiscal 2009.
The Great Atlantic &
Pacific Tea Company, Inc. Schedule 2 - Condensed Balance
Sheet Data (Unaudited) (In millions, except per share
and store data) � � � � June 20, 2009
February 28, 2009 (1)
� Cash and short-term investments $119 $175 � Other current assets
722 744 � Total current assets 841 919 � Property-net 1,675 1,724 �
Other assets 896 902 � Total assets $3,412 $3,545 � Total current
liabilities $715 747 � Total non-current liabilities 2,468 2,508 �
Stockholders' equity 229 290 � Total liabilities and stockholders'
equity $3,412 $3,545 �
Other Statistical Data � Total
Debt and Capital Leases $1,058 $1,085 Total Long Term Real Estate
Liabilities 333 330 Temporary Investments and Marketable Securities
(25) (74) Net Debt $1,366 $1,341 � Total Retail Square Footage (in
thousands) 18,331 18,386 � Book Value Per Share $3.95 $5.03 � � �
For the 16 For the 16 weeks ended weeks ended June 20, 2009 June
14, 2008 � Capital Expenditures $27 $30 � � (1) Certain balances as
of February 28, 2009 have been adjusted as a result of the
retrospective application of FSP APB 14-1, which was adopted during
the first quarter of fiscal 2009. �
The Great Atlantic &
Pacific Tea Company, Inc. Schedule 3 - Reconciliation of
GAAP (Loss) Income from Operations to Adjusted Income from
Operations for the 16 weeks ended June 20, 2009 and June 14,
2008, and 53 weeks ended June 20, 2009 (Unaudited)
(In thousands) � � � � For the For the 16 weeks ended 53
Weeks ended June 20, June 14, June 20, 2009 � � 2008 2009 � � As
reported (loss) income from operations
$
(1,836 ) $
2,091 $ (50,713
) Adjustments: Net restructuring costs - - 440
Pathmark integration costs 2,397 11,930 24,509 Real estate related
activity (2,233 ) 750 37,178 Benefit related costs - - 481 Pension
withdrawal costs 2,445 - 31,356 Visa/Mastercard lawsuit settlement
- - (2,230 ) LIFO provision 1,238 1,416 7,639 Net loss on
marketable securities �
261 � �
- �
2,421 � Total adjustments �
4,108 � �
14,096 �
101,794 � Adjusted income from
operations
$ 2,272 �
$
16,187 $ 51,081 � � � �
Continuing operations depreciation and amortization $ 77,788 $
80,027 258,752 Discontinued operations depreciation and
amortization �
- � �
- �
- �
Total A&P depreciation and amortization
$
77,788 �
$ 80,027
$ 258,752 �
The Great Atlantic &
Pacific Tea Company, Inc. Schedule 4 - Reconciliation of
GAAP Net Cash Used in Operating Activities to Adjusted EBITDAR
for the 16 weeks ended June 20, 2009 and June 14, 2008, and 53
weeks ended June 20, 2009 (Unaudited) (In
thousands) � � � � For the 16 Weeks Ended 53 Weeks ended June
20, June 14, June 20, 2009
2008(1)
2009 � Net cash used in operating activities $ (3,309 ) $ (5,415 )
(340 ) Adjustments to calculate EBITDA: Net interest expense 54,207
46,516 164,691 Non-cash interest expense (12,877 ) (7,863 ) (31,665
) Asset disposition initiatives 1,012 1,757 (38,962 ) Long lived
asset impairment charges (1,056 ) (781 ) (14,344 ) Occupancy
charges for normal store closures (1,260 ) (2,900 ) (20,071 ) Gain
on disposal of owned property 3,256 532 1,638 Loss from operations
of discontinued operations 6,856 4,163 61,076 Provision for income
taxes 386 1,384 1,685 Pension withdrawal costs (2,445 ) - (31,356 )
LIFO reserve (1,238 ) (1,416 ) (7,639 ) Stock compensation expense
(2,853 ) (4,846 ) (3,701 )
Working capital changes
Accounts receivable (19,948 ) 3,477 5,200 Inventories (4,063 )
17,947 (43,899 ) Prepaid expenses and other current assets 5,661
14,423 (10,395 ) Accounts payable (6,307 ) (46,823 ) 34,666 Accrued
salaries, wages, benefits and taxes 12,326 23,531 9,972 Other
accruals 20,803 (281 ) 8,447 Other assets 5,131 8,574 22,288 Other
non-current liabilities 21,029 30,451 97,562 Other, net �
641 � �
(312 ) �
3,186 � Total A&P EBITDA �
75,952 � �
82,118 � �
208,039 � Adjustments: � Net
restructuring costs - - 440 Pathmark integration costs 2,397 11,930
24,509 Real estate related activity (2,233 ) 750 37,178 Benefit
related costs - - 481 Pension withdrawal costs 2,445 - 31,356
Visa/Mastercard lawsuit settlement - - (2,230 ) LIFO provision
1,238 1,416 7,639 Net loss on marketable securities �
261 � �
- � �
2,421 � Total
adjustments �
4,108 � �
14,096 � �
101,794 � Adjusted A&P ongoing operating EBITDA
$ 80,060 �
$
96,214 �
$ 309,833 � � Rent
expense
$ 173,545 � Adjusted A&P
ongoing operating EBITDAR
$ 483,378 � �
(1)
�
Certain balances for the 16 weeks ended June 14, 2008 and for the
53 weeks ended June 20, 2009 have been adjusted as a result of the
retrospective application of FSP APB 14-1, which was adopted during
the first quarter of fiscal 2009.
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