Executed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Commission file number 1-4141
ended February 26, 1994
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 13-1890974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Paragon Drive, Montvale, New Jersey 07645
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-573-9700
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock - $1 par value New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at May 23, 1994 was $912,510,450.
The number of shares of common stock outstanding at May 23, 1994 was 38,220,333.
Documents Incorporated by Reference
The information required by Part I Items 1 (d) and 3, and Part II Items 5,
6, 7 and 8 are incorporated by reference from the Registrant's 1993 Annual
Report to Shareholders. The Registrant has filed with the S.E.C. since the
close of its last fiscal year ended February 26, 1994, a definitive proxy
statement. Certain information required by Part III, Items 10, 11, 12 and 13
is incorporated by reference from the proxy statement in this Form 10-K.
PART I
ITEM 1. Business
General
The Great Atlantic & Pacific Tea Company, Inc. ("A&P" or the "Company") is
engaged in the retail food business. The Company operates approximately
1,173 stores averaging 32,300 square feet per store. On the basis of
reported sales for fiscal 1993, the Company believes that it had the seventh
largest sales volume of any retail food chain in the United States and the
largest market share in metropolitan New York and Detroit and in the
Province of Ontario, the Company's largest single markets in the United
States and Canada.
Operating under the trade names A&P, Super Fresh, Family Mart, Farmer Jack,
Kohl's, Waldbaum's, Food Emporium, Food Mart, Food Bazaar, Miracle Food
Mart, Sav-A-Center, Ultra Mart, Futurestore, Dominion and Compass Foods, the
Company sells groceries, meats, fresh produce and other items commonly
offered in supermarkets. In addition, many stores have bakery,
delicatessen, fresh fish and cheese departments. National, regional and
local brands are sold as well as private label merchandise and generic (non-
branded) products. In support of its retail operations, the Company also
operates two coffee roasting plants, two bakeries, one delicatessen food
kitchen, an ice cream plant and (through a joint venture) a dairy. The
products processed in these facilities are sold under the Company's own
brand names which include A&P, Eight O'Clock, Bokar, Royale, Jane Parker,
Wesley's Quaker Maid, Master Choice, and America's Choice. All products
produced by A&P's food processing operations are sold in Company stores.
A&P also sells its coffee and ice cream products to unaffiliated retail
outlets outside of its marketing areas.
Building upon a broad base of A&P supermarkets, the Company has expanded and
diversified within the retail food business through the acquisition of other
supermarket chains and the development of several alternative store types.
The Company now operates its stores with merchandise, pricing and identities
tailored to appeal to different segments of the market, including buyers
seeking gourmet and ethnic foods, unusual produce, a wide variety of premium
quality private label goods and health and beauty aids along with the array
of traditional grocery products.
Modernization of Facilities
A&P is engaged in a continuing program of modernizing its corporate
operations and retail stores. During fiscal 1993, the Company expended
approximately $267 million for capital projects. The Company's plans for
fiscal 1994 anticipate capital expenditures of approximately $340 million
which include the opening of 35 new stores and the remodeling or expansion
of 120 stores. As usual, the Company is currently developing plans for
additional stores to be opened in the following fiscal year.
Sources of Supply
The Company obtains the merchandise sold in its stores from a variety of
suppliers located primarily in the United States and Canada. The Company
has long-standing and satisfactory relations with its suppliers.
The Company maintains processing facilities which produce coffee, deli
products and certain baked goods. The ingredients for coffee products are
purchased principally from Brazilian and Central American sources. Other
ingredients are obtained from domestic suppliers.
Employees
As of the close of fiscal 1993, the Company had approximately 94,000
employees, of which 68% were employed on a part-time basis. Approximately
89% of the Company's employees are covered by union contracts.
During fiscal year 1993, a labor strike caused a 14-week closure of 63
Miracle Food Mart and Ultra Mart stores in Ontario, Canada. Under Ontario
law, the Company could not hire replacement workers and, therefore, the
stores were closed for business. The strike was resolved and stores re-
opened on February 25, 1994. The new Miracle Food Mart labor agreement
ended a competitive cost disadvantage that the Miracle Food Mart stores have
labored under since their acquisition.
Competition
The supermarket business is highly competitive throughout the marketing
areas served by the Company and is generally characterized by low profit
margins on sales with earnings primarily dependent upon rapid inventory
turnover, careful cost controls and the ability to achieve high sales
volume. The Company competes for sales and store locations with a number of
national and regional chains as well as with many independent and
cooperative stores and markets.
Foreign Operations
The information required is contained in the 1993 Annual Report to
Shareholders on pages 24 and 25 and is herein incorporated by reference.
ITEM 2. Properties
At February 26, 1994, the Company operated 1,173 retail stores.
Approximately 7% of the Company's stores are owned, while the remainder are
leased. The stores are geographically located as follows:
New England States:
Connecticut............. 64
Maine................... 2
Massachusetts........... 31
New Hampshire........... 1
Rhode Island............ 4
Vermont................. 3
---
Total................. 105
Middle Atlantic States:
District of Columbia.... 1
Delaware................ 9
Maryland................ 52
New Jersey.............. 120
New York................ 203
Pennsylvania............ 51
---
Total................. 436
Mid-Western States:
Michigan................ 105
Wisconsin............... 58
---
Total................. 163
Southern States:
Alabama................. 10
Florida................. 3
Georgia................. 63
Kentucky................ 3
Louisiana............... 36
Mississippi............. 7
North Carolina.......... 34
South Carolina.......... 13
Virginia................ 54
West Virginia........... 8
---
Total................. 231
Total United States... 935
Ontario, Canada........... 238
-----
Total Stores.......... 1,173
=====
The total area of all retail stores is approximately 38 million square feet
averaging 32,300 square feet per store. The stores built by the Company
over the past several years and those planned for fiscal 1994, generally
range in size from 30,000 to 65,000 square feet, of which approximately 68%
is utilized as selling area.
The Company operates two coffee roasting plants, two bakeries, one
delicatessen food kitchen, an ice cream plant and (through a joint venture)
a dairy in the United States and Canada. In addition, the Company maintains
warehouses which service its store network.
The net book value of real estate pledged as collateral for all mortgage
loans amounted to approximately $82 million as of February 26, 1994.
ITEM 3. Legal Proceedings
The information required is contained in the 1993 Annual Report to
Shareholders on page 24 and is herein incorporated by reference.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1993.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The information required is contained in the 1993 Annual Report to
Shareholders on pages 29, 31 and 33 and is herein incorporated by reference.
ITEM 6. Selected Financial Data
The information required is contained on page 31 of the 1993 Annual Report
to Shareholders and is herein incorporated by reference.
ITEM 7. Management's Discussion and Analysis
The information required is contained in the 1993 Annual Report to
Shareholders on pages 17, 18 and 19 and is herein incorporated by reference.
ITEM 8. Financial Statements and Supplementary Data
(a) Financial Statements: The financial statements required to be filed
hereunder are described in Part IV, Item 14 of this report. Except for the
pages included herein by reference, the Company's 1993 Annual Report to
Shareholders is not deemed to be filed as part of this report.
(b) Selected Quarterly Financial Data: The information required is
contained on page 29 of the 1993 Annual Report to Shareholders and is herein
incorporated by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEMS 10 and 11. Directors and Executive Officers of the Registrant and
Executive Compensation
Executive Officers of the Company
Name Age Current Position
James Wood.......... 64 Chairman of the Board
and Chief Executive Officer
Fred Corrado........ 54 Vice Chairman of the Board,
Chief Financial Officer and Treasurer
Christian W.E. Haub 29 President and Chief Operating Officer
Michael J. Larkin... 52 Executive Vice President - Operations
Peter J. O'Gorman... 55 Executive Vice President -
Development and Strategic Planning
Gerald L. Good...... 51 Senior Vice President - Chairman, The Great
Atlantic and Pacific Tea Company,
Limited, Canada
George Graham....... 44 Senior Vice President,
Chief Merchandising Officer
J. Wayne Harris..... 55 Senior Vice President - Northeast Operations
Ivan K. Szathmary... 57 Senior Vice President and
Chief Services Officer
Robert G. Ulrich.... 59 Senior Vice President and General Counsel
Ernest H. Berthold.. 63 Vice President and Assistant to the
Chief Executive Officer
Corporate officers of the Company are elected annually and serve at the
pleasure of the Board of Directors; each of the executive officers is a
corporate officer.
Mr. Wood was elected Chairman of the Board and Chief Executive Officer on
April 29, 1980. From December 1988 to December 1993 and at other prior
times he also served as President. He is Chairman of the Executive
Committee and is an ex officio member of the Finance and Retirement Benefits
Committees of the Board.
Mr. Corrado was elected to the Board of Directors of the Company on December
4, 1990 and as Vice Chairman of the Board on October 6, 1992. Prior to
becoming Vice Chairman, he was Executive Vice President. He has served as
Chief Financial Officer since joining the Company in January 1987. He also
served as Treasurer of the Company in 1987 and was re-elected Treasurer on
April 18, 1989.
Mr. Haub was elected President of the Company on December 7, 1993. He has
served as a director since December 3, 1991 and is a member of the Finance
Committee. During the past 5 years and prior to assuming his present
position he served as Corporate Vice President and Assistant to the
Executive Vice President, Development and Strategic Planning, and prior to
joining the Company in 1991, Mr. Haub was a partner in the investment
banking firm, Global Reach, to which he had come from the investment banking
firm of Dillon Read & Co., Inc. in New York City. Prior thereto, in 1989 he
received his MBA from the University of Economics in Vienna, Austria and
between 1985 and 1989 he was a member of the Supervisory Board of LOWA
Warenhandel Gesellschaft mbH, an affiliate of Tengelmann.
Mr. Larkin was elected Executive Vice President - Operations in March 1990.
Prior thereto, he was Senior Vice President - East Coast Operations, and
subsequently, he has also served as Executive Vice President and Chief
Operating Officer.
Mr. O'Gorman was elected Executive Vice President - Development and
Strategic Planning in 1991. During the past five years and prior to assuming
his present position, he was successively Senior Vice President -
Development and Marketing and Executive Vice President - Development.
Mr. Good was elected Senior Vice President in March 1992. During the past
five years and prior to assuming his present position as Chairman, The Great
Atlantic and Pacific Tea Company, Limited, Canada in the Fall of 1992, he
served as Senior Vice President - Field Administration and as Vice President
- - - Chief Administrative Officer. Prior to returning to the Company in
October 1990, he had been President, International Business Interiors, Inc.
Mr. Graham was elected Senior Vice President - Chief Merchandising Officer
in March 1990. During the past five years and prior to assuming his present
position he was successively Vice President Merchandising, Metro Group and
President, Metro Group.
Mr. Harris was elected Senior Vice President - Northeast Operations in
October 1993. Prior to assuming his present position, he was Corporate Vice
President - Operations. During the past five years and prior to joining the
Company in September 1992, he was Group President, Cincinnati/Dayton
marketing area of the Kroger Company.
Dr. Szathmary was elected Senior Vice President and Chief Services Officer
in July 1986.
Mr. Ulrich was elected Senior Vice President and General Counsel of the
Company in April 1981.
Mr. Berthold was elected Vice President and Assistant to the Chief Executive
Officer on July 12, 1988.
In addition to the listed officers, Messrs. James W. Rowe, age 69, and James
L. Madden, age 65, were executive officers during fiscal year 1993.
Mr. Rowe retired from the Board of Directors effective July 13, 1993, where
he last served as Vice Chairman of the Executive Committee of the Board.
During the past five years, Mr. Rowe also had served as Vice Chairman of the
Board and Assistant to the Chief Executive Officer.
Mr. Madden was elected Senior Vice President - Operations in March 1990.
Immediately prior thereto, he was Senior Vice President - Canadian, Midwest
and Southern Operations. He retired at the end of fiscal year 1993.
The Company has filed with the Commission since the close of its fiscal year
ended February 26, 1994 a definitive proxy statement pursuant to Regulation
14A, involving the election of directors. Accordingly, the information
required in Items 10 and 11, except as provided above, appears on pages 1
through 12 and is incorporated by reference from the proxy statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required is contained in the Company's 1994 definitive proxy
statement on pages 1 and 5 and is herein incorporated by reference.
ITEM 13. Certain Relationships and Related Transactions
The information required is contained in the Company's 1994 definitive proxy
statement on pages 1 and 6 and is herein incorporated by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report
1) Financial Statements: The financial statements required by Item 8 are
included in the fiscal 1993 Annual Report to Shareholders. The
following required items, appearing on pages 20 through 30 of the 1993
Annual Report to Shareholders, are herein incorporated by reference:
Statements of Consolidated Operations
Statements of Consolidated Shareholders' Equity
Consolidated Balance Sheets
Statements of Consolidated Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
2) Financial Statement Schedules:
Page
I) Marketable Securities - Other Investments 9
V) Property, Plant and Equipment 10-11
VI) Accumulated Depreciation, Depletion
and Amortization of Property,
Plant and Equipment 12-13
IX) Short-Term Borrowings 14
X) Supplementary Income Statement Information 15
Independent Auditors' Report 16
All other schedules are omitted because they are not required or do not
apply, or the information is included elsewhere in the financial
statements or notes thereto.
3) Exhibits:
Exhibit Incorporation by reference
Numbers Description (If applicable)
2) Not Applicable
3) Articles of Incorporation
and By-Laws
a) Articles of Incorporation Exhibit 3)a) to Form 10-K
as amended through for fiscal year ended
July 1987 February 27, 1988
b) By-Laws as amended through Exhibit 3)b) to Form 10-K
March 1989 for fiscal year ended
February 25, 1989
4) Instruments defining the Exhibit A to Form 10-Q
rights of security holders, for the quarter ended
including indentures August 27, 1977; and
Registration Statement
No. 33-14624 on Form S-3
filed May 29, 1987
9) Not Applicable
10) Material Contracts
a) Compensation Agreements Exhibit 10)b) to Form
10-K
for the Five Named for the fiscal years ended
Executive Officers February 25, 1989,
February 24, 1990 and
February 29, 1992
and attached
b) Supplemental Executive Exhibit 10)b) to Form 10-K
Retirement Plan, amended for the fiscal year
ended
and restated February 27, 1993
Exhibit Incorporation by reference
Numbers Description (If applicable)
c) 1975 Stock Option Plan, Exhibit 10) to Form 10-K
as amended for the fiscal year ended
February 23, 1985
d) 1984 Stock Option Plan, Exhibit 10)e) to Form 10-K
as amended for the fiscal year ended
February 23, 1991
11) Not Applicable
12) Not Applicable
13) 1993 Annual Report to Shareholders
18) Not Applicable
21) Subsidiaries of Registrant
22) Not Applicable
23) Independent Auditors' Consent
24) Not Applicable
27) Not Applicable
28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the fiscal year ended February
26, 1994.
SCHEDULE I
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
FOR THE FISCAL YEAR ENDED FEBRUARY 26, 1994
Amount at
which each
portfolio of
equity security
issues
and each
Number of other security
shares or Market value of issue carried
Name of issuer units-principal Cost of each issue at in the
and title of amount of bonds issue balance balance sheet
each issue and notes ($000) sheet date ($000)
Isosceles PLC units 1,364,102 units -0- (1) -0- (1) -0- (1)
- - ----------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED FEBRUARY 27, 1993
Isosceles PLC units 1,364,102 units -0- (1) -0- (1) -0- (1)
Notes: (1) During fiscal 1992, the Company recorded a provision for
potential loss on its total investment in Isosceles PLC.
SCHEDULE V
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
PROPERTY, PLANT & EQUIPMENT
(Dollars in thousands)
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS RETIREMENTS CHARGES/ AT END
OF PERIOD AT COST OR SALES (DEDUCTIONS) OF PERIOD
For The Fiscal Year Ended
February 26, 1994:
Land $96,491 $11,779 $(738) $(628)(2) $106,904
Buildings 229,658 24,828 (608) 3,435(1,2,3) 257,313
Equipment and leasehold
improvements 2,117,898 222,786 (80,232) (75,172)(1,2,3) 2,185,280
--------- ------- ------- ------- ---------
Subtotal 2,444,047 259,393 (81,578) (72,365) 2,549,497
Capitalized leased property:
Equipment 7,865 - (4,504) - 3,361
Real property 288,954 2,037 (27,590) (7,245)(2) 256,156
---------- -------- -------- -------- ---------
Total $2,740,866 $261,430$(113,672) $(79,610) $2,809,014
========== ======== ========= ======== ==========
For The Fiscal Year Ended
February 27, 1993:
Land $88,718 $8,808 $(355) $(680) (2) $96,491
Buildings 226,734 8,463 (2,160) (3,379) (1,2) 229,658
Equipment and leasehold
improvements 1,999,908 234,867 (56,620) (60,257) (1,2) 2,117,898
--------- ------- ------- ------- ---------
Subtotal 2,315,360 252,138 (59,135) (64,316) 2,444,047
Capitalized leased property:
Equipment 15,288 - (7,423) - 7,865
Real property 303,848 - (9,090) (5,804) (2) 288,954
---------- -------- -------- -------- ----------
Total $2,634,496 $252,138 $(75,648) $(70,120) $2,740,866
========== ======== ======== ======== ==========
Notes: (1) Includes write-off of fully depreciated assets.
(2) Includes effect of foreign currency translation.
(3) Includes reclassification of beginning balance from equipment to
buildings.
SCHEDULE V (continued)
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
PROPERTY, PLANT & EQUIPMENT
(Dollars in thousands)
BALANCE
AT ADDITIONS OTHER BALANCE
BEGINNING AT RETIREMENTS CHARGES/ AT END
OF PERIOD COST OR SALES (DEDUCTIONS) OF PERIOD
For The Fiscal Year Ended
February 29, 1992:
Land $89,289 $1,330 $(1,565) $(336)(2) $88,718
Buildings 220,087 11,061 (523) (3,891)(1,2) 226,734
Equipment and leasehold
improvements 1,928,040 144,727 (27,016) (45,843)(1,2) 1,999,908
--------- ------- ------- ------- ---------
Subtotal 2,237,416 157,118 (29,104) (50,070) 2,315,360
Capitalized leased property:
Equipment 17,033 - (1,745) - 15,288
Real property 302,574 11,091 (7,119) (2,698)(2) 303,848
---------- -------- -------- ------- ----------
Total $2,557,023 $168,209 $(37,968) $(52,768) $2,634,496
========== ======== ======== ======== ==========
Notes: (1) Includes write-off of fully depreciated assets.
(2) Includes effect of foreign currency translation.
SCHEDULE VI
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT & EQUIPMENT
(Dollars in thousands)
BALANCE ADDITIONS
AT CHARGED OTHER BALANCE
BEGINNING TO RETIREMENTS CHARGES/ AT END
OF PERIOD EXPENSE OR SALES (DEDUCTIONS) OF PERIOD
For The Fiscal Year Ended
February 26, 1994:
Buildings $56,757 $8,985 $(428) $(1,363)(1,2) $63,951
Equipment and leasehold
improvements 824,485 204,960 (58,560) (50,084)(1,2) 920,801
---------- ------- ------- ------- ---------
Subtotal 881,242 213,945 (58,988) (51,447) 984,752
Capitalized leased property:
Equipment 6,295 945 (4,504) - 2,736
Real property 149,185 14,724 (27,021) (2,895)(2) 133,993
---------- -------- -------- -------- ----------
Total $1,036,722 $229,614 $(90,513) $(54,342) $1,121,481
========== ======== ======== ======== ==========
For The Fiscal Year Ended
February 27, 1993:
Buildings $49,945 $8,367 $(431) $(1,124)(1,2) $56,757
Equipment and leasehold
improvements 703,929 197,638 (31,674) (45,408)(1,2) 824,485
------- ------- ------- ------- ---------
Subtotal 753,874 206,005 (32,105) (46,532) 881,242
Capitalized leased property:
Equipment 11,869 1,849 (7,423) - 6,295
Real property 143,973 15,669 (8,313) (2,144)(2) 149,185
-------- ------- ------- ------- ---------
Total $909,716 $223,523 $(47,841) $(48,676) $1,036,722
======== ======== ======== ======== ==========
Notes: (1) Includes write-off of fully depreciated assets.
(2) Includes effect of foreign currency translation.
SCHEDULE VI (continued)
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT & EQUIPMENT
(Dollars in thousands)
BALANCE ADDITIONS
AT CHARGED OTHER BALANCE
BEGINNING TO RETIREMENTS CHARGES/ AT END
OF PERIOD EXPENSE OR SALES (DEDUCTIONS) OF PERIOD
For The Fiscal Year Ended
February 29, 1992:
Buildings $43,476 $8,307 $(470) $(1,368)(1,2) $49,945
Equipment and leasehold
improvements 569,417 193,754 (19,659) (39,583)(1,2) 703,929
-------- ------- ------- ------- ---------
Subtotal 612,893 202,061 (20,129) (40,951) 753,874
Capitalized leased property:
Equipment 10,287 3,327 (1,745) - 11,869
Real property 135,594 16,374 (7,092) (903)(2) 143,973
-------- -------- -------- -------- --------
Total $758,774 $221,762 $(28,966) $(41,854) $909,716
======== ======== ======== ======== ========
Notes: (1) Includes write-off of fully depreciated assets.
(2) Includes effect of foreign currency translation.
SCHEDULE IX
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
SHORT-TERM BORROWINGS
(Dollars in thousands)
MAXIMUM AVERAGE WEIGHTED
CATEGORY OF WEIGHTED AMOUNT AMOUNT AVERAGE
AGGREGATE BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST
SHORT-TERM AT END INTEREST DURING DURING RATE DURING
BORROWINGS OF PERIOD RATE THE PERIOD THE PERIOD THE PERIOD
For The Fiscal
Year Ended
Feb. 26, 1994:
Bank
Borrowings $70,681 3.6% $110,000 $10,000 3.4%
For the Fiscal
Year Ended
Feb. 27, 1993:
Bank
Borrowings $ - - $74,000 $18,000 3.5%
For The Fiscal
Year Ended
Feb. 29, 1992:
Bank
Borrowings $50,000 4.2% $83,786 $36,965 5.5%
SCHEDULE X
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Dollars in thousands)
CHARGED TO COSTS
AND EXPENSES (1)
FISCAL YEARS ENDED
FEBRUARY FEBRUARY FEBRUARY
26, 1994 27, 1993 29, 1992
Advertising ......................... $163,105 $156,741 $185,654
Depreciation and amortization........ $235,910 $228,976 $224,641
(1) Items other than those shown are omitted because they do not exceed one
percent of total sales and revenues.
INDEPENDENT AUDITORS' REPORT
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.:
We have audited the consolidated financial statements of The Great Atlantic
& Pacific Tea Company, Inc. and its subsidiary companies as of February 26,
1994 and February 27, 1993, and for each of the three fiscal years in the
period ended February 26, 1994, and have issued our report thereon dated
April 28, 1994; such financial statements and report are included in your
1993 Annual Report to Shareholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of The Great
Atlantic & Pacific Tea Company, Inc. and its subsidiary companies, listed in
Item 14(a)(2). These financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche
April 28, 1994
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Great Atlantic & Pacific Tea Company, Inc.
(registrant)
Date May 17, 1994 By: /s/ Fred Corrado
(Signature)
Fred Corrado
Vice Chairman of the Board,
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and as of the date indicated.
/s/ James Wood Chairman of the Board,
James Wood Chief Executive Officer and Director
/s/ Fred Corrado Vice Chairman of the Board,
Fred Corrado Chief Financial Officer, Treasurer and
Director
/s/ Rosemarie Baumeister Director
Rosemarie Baumeister
/s/ Christopher F. Edley Director
Christopher F. Edley
/s/ Christian W.E. Haub Director
Christian W.E. Haub
/s/ Helga Haub Director
Helga Haub
/s/Barbara Barnes Hauptfuhrer Director
Barbara Barnes Hauptfuhrer
/s/ Paul C. Nagel, Jr. Director
Paul C. Nagel, Jr.
/s/ Eckart C. Siess Director
Eckart C. Siess
/s/ Fritz Teelen Director
Fritz Teelen
/s/ R.L. "Sam" Wetzel Director
R.L. "Sam" Wetzel
The above-named persons signed this report on behalf of the registrant on
May 17, 1994.
/s/Kenneth A. Uhl Vice President, Controller May 17, 1994
Kenneth A. Uhl Date
EXHIBIT INDEX
3) Incorporated by reference
4) Incorporated by reference
10)a) Incorporated by reference and attached
13) Attached
21) Attached
23) Attached
Exhibit 10)a)
February 3, 1994
Mr. James Wood
Chairman and Chief Executive Officer
The Great Atlantic & Pacific
Tea Company, Inc.
2 Paragon Drive
Montvale, NJ 07645
Dear Jim:
This letter is to confirm our understanding that,
effective as of this date, the phantom stock agreement dated
as of December 1, 1988 is amended in the following respects:
1. The references to "1995" in the first
unnumbered paragraph on page 1 and in paragraph 7 are
changed to "1998."
2. The referenced to "1995" in paragraphs 4, 10
and 11 (b) are changed to "2000" in each case.
3. In the third sentence of paragraph 8 the
reference to "20" is changed to "10".
We also confirm our understanding that a
termination of your employment on or after the expiration of
the term of employment as set forth in Section 1 of the
employment agreement between The Great Atlantic & p[Pacific
Tea Company, Inc. ("A&P") and you, dated December 1, 1988,
will not be deemed a termination of employment for purposes
of paragraph 6,7 or 10 of the phantom stock agreement. as
presently agreed between A&P and you, the term of employment
is to expire April 30, 1998.
Will you please indicate your agreement with the
above by signing in the space provided below.
Very truly yours,
Tengelmann
Warenhandelsgesellschaft
By: /s/ Erivan Karl Haub
2/15/94
Agreed:
/s/ James Wood
Exhibit 10)a)
AGREEMENT
THIS AGREEMENT is dated as of July 11, 1989
between THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC., a
Maryland corporation (hereinafter referred to as "Company")
and GEORGE GRAHAM (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Company desires to provide Employee, who is
Vice President of Company, with a bonus opportunity in an
amount equal to the increase in value of the shares of
common stock, $1 par value, of the Company (the "Common
Stock") in order to further the objectives of the Company.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth, and for other good and
valuable consideration, the parties hereto agree as follows:
1. The following terms shall have the following
respective meanings for all purposes of this Agreement:
(a) "Cause" shall have the same meaning as in the
Employment Agreement.
(b) "Closing Price" shall mean the average of the
last sale prices, regular way, of the Common Stock as
reported on the Consolidated Transaction Reporting System
for New York Stock Exchange issues on the date specified
(or, if the Common Stock is not traded on such date, on the
first preceding date on which the Common Stock was so
traded) and for the 29 consecutive New York Stock Exchange
trading days on which the Common Stock was so traded first
preceding such date; if the Common Stock is not so reported,
then such average shall be based on the last sale prices,
regular way, reported on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading; or, if the Common Stock is not so listed or
admitted on any exchange, then such average shall be based
upon the averages of the highest reported bid and lowest
reported offer prices as furnished by the National Quotation
Bureau Incorporated; or, if the Common Stock is not traded,
then the Closing Price shall be the fair market value of one
share of the Common Stock determined by the Evaluator as
provided in Paragraph 10.
(c) "Disability" shall have the same meaning as
in the Employment Agreement.
(d) "Employment Agreement" shall mean the
Employment Agreement dated July 11, 1989 between Company and
Employee.
(e) "Spread" shall mean an amount equal to the
excess of the Closing Price over the base value of one Unit
as set forth in Paragraph 3 (and adjusted pursuant to
Paragraph 8).
2. Company hereby grants to Employee phantom share
units ("Units") with respect to 25,000 shares of the Common
Stock.
3. Each Unit shall have a base value of $50.
4. As soon as practicable on or after July 10, 1994,
except as provided in Paragraphs 6, 7 and 9, Company shall
pay Employee, by Company check, the value of the Units,
which shall be an amount equal to the spread on the first
business day preceding July 10, 1994 multiplied by the
number of Units credited to Employee pursuant to this
Agreement on such date. Employee shall have none of the
rights of a stockholder with respect to the Units. All
taxes on the payment to Employee or his legal representative
shall be paid by such person, and Company may withhold from
such payment such amount as is required of it by applicable
federal and state laws.
5. The Units shall not be transferable by Employee
otherwise than by will or the laws of descent and
distribution. More particularly (but without limiting the
generality of the foregoing), the Units and Employee's
rights under this Agreement may not be pledged or
hypothecated in any way and shall not be subject to
execution, attachment or similar process. Any attempted
transfer, pledge, hypothecation or other disposition of the
Units or of any rights hereunder contrary to the provisions
hereof, or the levy of any execution, attachment or similar
process upon the Units or such rights, shall be null and
void and without effect.
6. Notwithstanding the provisions of Paragraph 4, if
the employment of Employee shall be terminated (i) by
Company other than for Cause, (ii) by Employee's death or
(iii) by Employee's Disability, payment of the value of all
the Units then credited to him pursuant to this Agreement
shall be made by Company to Employee or, in the event of
Employee's Disability, either to Employee or his legal
representative or, in the event of Employee's death, to
Employee's surviving spouse or, in the absence of a
surviving spouse, to his legatee or legatees under his last
will or to his legal or personal representative or
distributees, on the twentieth business day following the
date of such termination, all as provided in Paragraph 4 but
using such date of termination as the date to compute the
value of the Units.
7. If the employment of Employee shall be terminated
(i) by Company for Cause or (ii) voluntarily by Employee
prior to July 10, 1994, this Agreement shall forthwith
terminate and no payment shall thereafter be made to
Employee with respect to the Units.
8. In the event of any stock dividend, split-up,
spin-off, recapitalization, combination or exchange of
shares, merger, consolidation, separation, reorganization,
liquidation or distribution of securities or assets (other
than cash dividends) occurring after the date hereof as a
result of which shares of any class shall be issued in
respect of the outstanding shares of the Common Stock, or
shares of the Common Stock shall be changed into the same or
a different number of shares of the same or a different
class or classes of securities, or assets are received with
respect to the Common Stock, then the Units credited to
Employee pursuant to this Agreement shall be appropriately
adjusted so that the value of the Units thereafter shall be
deemed to consist of the class and aggregate number of
shares, other securities or assets which, if a number of
shares of Common Stock (as authorized at the date hereof)
equal to the initial number of Units had been held by
Employee and not idsposed of, he would be holding, at the
time of payment of the value of the Units, as a result of
any and all such stock dividends, split-ups, spin-offs,
recapitalizations, combinations or exchanges of shares,
mergers, consolidations, separations, reorganizations or
liquidations or distributions, and the base value of a Unit
shall also be appropriately adjusted.
9. Notwithstanding the provisions of Paragraphs 4, 6
and 10, payment of the value of any Units pursuant to this
Agreement may be made, at the option of the Company, in
approximately equal annual installments over a period of up
to five years. Company shall notify Employee (or his legal
representative) at least ten business days prior to the date
of payment that it will make payment in installments,
specifying the number of installments. Unpaid amounts shall
bear interest at the prime lending rate publicly announced
by Citibank, N.A. at the beginning of each annual
installment period, such interest to be paid with each
installment payment.
10. (a) If the Common Stock is not publicly traded,
the payment to be made to Employee or his legal
representative, as the case may be, pursuant to this
Agreement shall be based upon the fair market value of one
share of the Common Stock as determined by an independent
appraiser (the "Evaluator") jointly selected by Company and
Employee or his legal representative. The Evaluator shall
be a nationally-recognized United States investment banking
firm which has not, during the two years preceding the date
of its selection, acted in any way on behalf of Company.
(b) For all purposes of this Agreement, if the
amount of any payment hereunder is to be determined by the
Evaluator, the value of one share of the Common Stock shall
be determined by the Evaluator, in the case of Paragraph 4,
as of the last day of the full fiscal quarter of Company
immediately preceding July 10, 1994 or, in the case of
Paragraph 6, as of the date of termination of Employee's
employment or, if that date is not the last day of a fiscal
quarter of Company, as of the last day of the immediately-
preceding full fiscal quarter of Company.
(c) Company shall make available to the Evaluator
all financial and other records, books and information
concerning Company as the Evaluator may reasonably request
in order to determine the fair market value of one share of
the Common Stock. The Evaluator shall determine such fair
market value on the assumption that Company is, and will
continue to be, a privately-held corporation without any
public market for the Common Stock. The determination by
the Evaluator of such fair market value shall be final and
binding on the parties hereto and their respective
successors and legal representatives for all purposes
whatsoever.
(d) If the amount of any payment hereunder is to
be determined by the Evaluator, payment of that price shall
be made at such place and time as shall be designated by
Company by notice to Employee (or his legal representative)
given not later than ten business days after the date on
which Company and Employee (or his legal representative)
receive the fair market value appraisal from the Evaluator.
The date so designated shall not be later than ten business
days after the delivery of such notice by Company.
11. All notices and requests hereunder shall be in
writing and delivered personally or sent by registered mail,
return receipt requested, postage prepaid, addressed as
follows:
To Company at: 2 Paragon Drive
Montvale, New Jersey 07645
Attention: Mr. James Wood, Chairman
With a Copy to: Robert G. Ulrich, Esquire
Senior Vice President and General
Counsel
To Employee at: 86 South Colonial Dive
Harrington Park, New Jersey 07640
or such other address as may be stated in notice given as
hereinbefore provided.
12. This Agreement and the Employment Agreement
contain the entire agreement between the parties hereto with
respect to the matters contemplated herein and supersede all
prior agreements or understandings among the parties hereto
relating to such matters. No modification of this Agreement
shall be effective unless in writing and signed by the party
against which it is sought to be enforced.
13. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey
without reference to the principles of conflict of laws.
IN WITNESS WHEREOF, Company has caused this Agreement to
be executed by a duly authorized officer, and Employee has
hereunto set his hand, all on the day and year first above
written.
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
By: /s/ Robert G. Ulrich
Title: Sr. Vice
President
/s/ George M. Graham
Exhibit 10)a)
EMPLOYMENT AGREEMENT
AGREEMENT DATED July 11, 1989, between THE GREAT
ATLANTIC & PACIFIC TEA COMPANY, INC., a Maryland corporation
(hereinafter called "Company" or "Employer"), and GEORGE
GRAHAM (hereinafter called "Employee").
1. Employment. Employer and Employee agree that the
terms and conditions of Employee's employment with the
Company are as set forth in this Agreement.
2. Term. Subject to the within provisions for
termination, the term of this Agreement shall be for five
(5) years beginning on July 11, 1989, and terminating on
July 10, 1994.
3. Compensation. For services rendered by Employee
under this Agreement, Employer shall pay a basic minimum
salary of $180,000 per year, payable in equal monthly or
other installments. During the term of this Agreement,
Employee shall also be entitled to participate in the
Company's Management Bonus Program pursuant to its terms,
the annual base to be $55,000 at the 100% participation
level.
4. It is understood and agreed that Employee shall
also receive an annual salary review as an officer of the
Company and other Company benefits, such as stock options;
pensions; vacations; life, health, accident and disability
insurance; death benefits and similar programs generally
available to other executives of Employer.
5. A special bonus opportunity pursuant to the
Agreement dated as of the date hereof by and between the
Company and the Employee which is attached hereto as Exhibit
A.
6. Duties. Employee is engaged to perform services
as a Vice President of the Company with the title of
President, Metro New York Group, or such other title as may
be designated by the Board of Directors or the Chief
Executive Officer of the Company. Employee agrees for the
term to render full time and exclusive services to the
Company as an executive employee, subject to the direction
and control of the Chief Executive Officer of the Company or
his designee and the Board of Directors of the Company and,
in connection therewith, to perform such duties as he shall
reasonably be directed by the Chief Executive Officer of the
Company or his designee or by the Board of Directors of the
Company.
7. Non disclosure of Confidential Information.
(a) The Employee understands, agrees and
acknowledges that the business of the Company and the
Company Affiliates, their expertise, their methods of
operations and their procedures and techniques [including,
without limitation, all of the Company's and the Company
Affiliates' equipment, apparatus, devices, designs,
operations, procedures, processes, inventions, operating
principles, methods of pricing, customer lists and records
of volume of business, marketing plans, lists of prospective
customers, lists of suppliers, records, data, plans and
products (collectively, "Business Information")] are highly
confidential and constitute a unique business asset of the
Company which is entitled to any protection the law may
afford as trade or business secrets or otherwise as
proprietary or confidential information of the Company or
the Company Affiliates. The Employee will, to the best of
his ability, affirmatively and continuously protect, in
accordance with this Employment Agreement, such Business
Information.
(b) The Employee shall disclose fully and promptly to
the Company, its successors or assigns, any and all
inventions, ideas, designs, devices, equipment, literary or
artistic creations, discoveries and improvements of any
sort, whether protectible by patent or not, which he has
heretofore conceived, developed, made or perfected, or may
hereafter conceive, develop, make or perfect, either alone
or jointly with another or others, during the term of this
Employment Agreement, and either during or outside normal
business hours, which pertains to any activities, business,
products or fields in which the Company or any Company
Affiliate is engaged or will be subsequently engaged during
the term of this Employment Agreement, or in which the
Company or any Company Affiliate has any direct or indirect
interest whatsoever. Any of the foregoing is hereinafter
referred to as an "Invention".
(c) The Employee hereby assigns and agrees to assign
during the term of this Employment Agreement to the Company,
its successors or assigns, all his right, title and interest
in and to any and all Inventions, and the Employee further
agrees, without charge to the Company but at its expense, to
execute, acknowledge and deliver all applications or other
papers and documents as may be necessary to obtain patents,
trademarks, copyrights or any other form of protection for
said Inventions and to vest title thereto in the Company,
its successors and assigns or nominees, and to give
testimony or furnish other data as the Company may
reasonably deem necessary to assist the Company in securing
or defending such inventions, trademarks or copyrights.
(d) The Employee agrees to keep current and adequate
written records of all Inventions, which records shall be
and remain the property of, and be available to, the Company
at all times.
(e) The Employee agrees that he will not at any time,
and will use his best efforts to ensure that none of his
agents or entities under his control or in which he has a
direct beneficial interest will at any time, except in the
ordinary course of the Employee's performance of his
services hereunder, without the prior written consent of the
Company, voluntarily reveal, divulge or make known to any
person, firm or corporation (other than the Company and
Company Affiliates) any Business Information or Invention,
or anything concerned therewith, and all such information
shall be kept confidential and shall not in any manner be
revealed by him to anyone except as provided herein; and all
documents, business records, supplier and customer lists,
prospective supplier and customer lists, reports and any
other documents, or any copies of any of the foregoing, kept
or made by him relating to any Business Information,
Invention or the business of the Company or any Company
Affiliate shall be and remain the property of the Company
and shall be surrendered to the Company upon termination of
this Employment Agreement.
(f) The Employee's obligations under this Paragraph 7
and under Paragraph 8 hereof shall require, among other
things, his full cooperation in the prosecution of any
litigation the Company or any Company Affiliate may initiate
and pursue against any person who may be deemed by the
Company or any Company Affiliate to have caused a violation
of this Paragraph 7 or of Paragraph 8 hereof, but shall not
require the Employee to initiate or pursue such remedies at
his own expense.
(g) As used in this Employment Agreement, a "Company
Affiliate" shall mean Company and any corporation or other
entity in which Company shall own or hold, either directly
or indirectly through one or more majority owned
subsidiaries or partnerships, at least a majority of the
equity interest.
8. Competition, etc. During the term of this
Employment Agreement and for a period of one year
thereafter, except with the prior written consent of the
Company:
(a) The Employee will not, and will use his best
efforts to ensure that none of his agents or entities under
his control or in which he has a direct or indirect
beneficial interest will, directly or indirectly (as
director, officer, partner, employee, manager, consultant,
independent contractor, advisor, stockholder or otherwise)
engage in areas of competition with, or own any interest in,
or provide any financing for, or perform any services for,
any business or organization which directly or indirectly
engages in areas of competition with any business conducted
by the Company or any Company Affiliate in any area where
such business of the Company or any Company Affiliate is
carried on; provided, however, that the provisions of this
Paragraph 8(a) shall not prohibit the Employee's ownership
of not more than one percent of the total shares of all
classes of stock outstanding of any publicly-held
corporation.
(b) The Employee will not directly or indirectly
employ, solicit for employment, or advise or recommend to
any other person that they employ or solicit for employment,
any person whom he knows to be an employee of the Company or
any Company Affiliate, if such action by him would have an
adverse effect on the business, assets or financial
condition of the Company or any Company Affiliate.
(c) The provisions of this Paragraph 8 shall apply
during the term of this Employment Agreement and for one
year thereafter, provided, that if the Company shall
terminate the employment of the Employee other than pursuant
to the provisions of Paragraph 9 hereof, the provisions of
this Paragraph 8 shall not apply after the date of
termination, and provided further that, notwithstanding the
immediately-foregoing proviso and without limiting the
generality thereof, if the Company shall relieve the
Employee of all of his responsibilities hereunder but shall
continue to pay Employee his compensation due hereunder, the
provisions of this Paragraph 8 shall continue to apply for
so long as the Company shall continue to pay the Employee
such compensation.
(d) In connection with the foregoing provisions of
this Paragraph 8, the Employee represents that his economic
means and circumstances are such that such provisions will
not prevent him from providing for himself and his family on
a basis satisfactory to him. It is understood and agreed
that the covenants made by the Employee in this Paragraph 8
and in Paragraph 7 hereof are material to, and are being
relied upon by, the Company in entering into this Employment
Agreement.
9. Termination. Notwithstanding any provision of
this Employment Agreement to the contrary, the Employee's
employment hereunder and the Employee's right to receive
compensation therefor shall terminate prior to July 10,
1994, upon the occurrence of any of the following:
(a) Upon notice rendered to the Employee in good faith
by the Company, effective six months from the date of such
notice, in the event the Employee shall become disabled and
thereby rendered unable to perform the duties set forth
herein, provided such notice shall not be effective before
such condition has persisted for at least six months. In
the event of any disagreement as to the nature, extent or
duration of the Employee's disability, such matter shall be
determined by a licensed physician mutually satisfactory to
the Company and the Employee; provided, however, that the
Employee shall be regarded as disabled as specified in this
subparagraph in the event he shall refuse to submit to or
fail a medical examination by such physician or if such
physician is not agreed upon, by a licensed physician
selected by the Company.
(b) Upon the death of the Employee, effective as to
compensation, twelve months after the date of his death.
(c) Upon notice rendered to the Employee by the
Company, effective as of the date of such notice, in the
event of any material breach of the provisions of this
Employment Agreement by the Employee, or for other cause,
including conviction of a serious crime, dishonesty of the
Employee or willful disregard of the interest of the Company
or any Company Affiliate or other civil or criminal conduct
which is clearly detrimental to the welfare or security of
the Company.
In connection with the foregoing provisions of this
Paragraph 9 the Company's right of termination shall be in
addition to its right to seek damages for violation of, or
an injunction to restrain Employee from violating, any of
the covenants contained herein or any other relief under
this Employment Agreement, or otherwise, and such rights
shall survive termination of this Employment Agreement under
this Paragraph 9.
10. Other Relief. Notwithstanding any other
provisions herein contained, in the event of a violation of
the provisions of Paragraph 7 or 8 hereof, the Company may,
in addition to pursuing such other remedies as it may have
at law or in equity, obtain a temporary and/or permanent
injunction in an action in equity; the Employee hereby
acknowledges that the Company's remedy at law in such event
would be inadequate.
11. Return of Books, etc. Upon the expiration of the
term or termination in accordance herewith, the Employee
will promptly deliver to the Company all books, memoranda,
plans, records and written data of every kind relating to
any aspect of the business and affairs of the Company (or of
any Company Affiliate) which are then in his possession.
12. Severability. If for any reason any provision of
this Employment Agreement shall be held invalid, such
invalidity shall not affect any other provision of this
Employment Agreement not so held invalid, and all other such
provisions shall, to the full extent consistent with the
law, continue in full force and effect. If any such
provision shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, which,
together with all other provisions of this Employment
Agreement, shall likewise, to the full extent consistent
with law, continue in full force and effect.
13. Binding Agreement. This Employment Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective heirs, beneficiaries,
representatives, successors and assigns of the parties
hereto.
14. Entire Agreement. This Employment Agreement
embodies the entire agreements and understandings of the
parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings other
than those expressly set forth or referred to herein. This
Employment Agreement supersedes all prior agreements and
understandings between the parties with respect to such
subject matter. This Employment Agreement may be modified,
amended, waived or discharged only by a written instrument
duly executed by both of the parties hereto.
15. Notice. All notices, claims, requests, demands
and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Company, to:
The Great Atlantic & Pacific Tea Company,
Inc.
2 Paragon Drive
Montvale, New Jersey 07645
Attention: Robert G. Ulrich, Esquire
Senior Vice President and General
Counsel
(b) If to the Employee, to:
86 South Colonial Drive
Harrington Park, New Jersey 07640
16. Governing Law. This Employment Agreement shall be
governed by the laws of the State of New Jersey, without
regard to the conflicts of law rules thereof.
17. Waiver of Breach. Any waiver by one party to this
Employment Agreement of a breach of any provision of this
Employment Agreement by the other party shall not operate or
be construed as a waiver of any subsequent breach by the
other party.
18. Headings. The paragraph headings contained in
this Employment Agreement are solely for the purpose of
reference, are not part of the agreement of the parties, and
shall not affect in any way the meaning or interpretation of
this Employment Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been
duly executed and delivered by the duly authorized officers
of the Company and by the Employee as of the date first
above written.
THE GREAT ATLANTIC &
PACIFIC
TEA COMPANY, INC.
By: /s/ George Graham By: /s/ Robert G. Ulrich
EXHIBIT A.
AGREEMENT
THIS AGREEMENT is dated as of July 11, 1989
between THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC., a
Maryland corporation (hereinafter referred to as "Company")
and GEORGE GRAHAM (hereinafter referred to as "Employee").
W I T N E S S E T H:
WHEREAS, Company desires to provide Employee, who is
Vice President of Company, with a bonus opportunity in an
amount equal to the increase in value of the shares of
common stock, $1 par value, of the Company (the "Common
Stock") in order to further the objectives of the Company.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth, and for other good and
valuable consideration, the parties hereto agree as follows:
1. The following terms shall have the following
respective meanings for all purposes of this Agreement:
(a) "Cause" shall have the same meaning as in the
Employment Agreement.
(b) "Closing Price" shall mean the average of the
last sale prices, regular way, of the Common Stock as
reported on the Consolidated Transaction Reporting System
for New York Stock Exchange issues on the date specified
(or, if the Common Stock is not traded on such date, on the
first preceding date on which the Common Stock was so
traded) and for the 29 consecutive New York Stock Exchange
trading days on which the Common Stock was so traded first
preceding such date; if the Common Stock is not so reported,
then such average shall be based on the last sale prices,
regular way, reported on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading; or, if the Common Stock is not so listed or
admitted on any exchange, then such average shall be based
upon the averages of the highest reported bid and lowest
reported offer prices as furnished by the National Quotation
Bureau Incorporated; or, if the Common Stock is not traded,
then the Closing Price shall be the fair market value of one
share of the Common Stock determined by the Evaluator as
provided in Paragraph 10.
(c) "Disability" shall have the same meaning as
in the Employment Agreement.
(d) "Employment Agreement" shall mean the
Employment Agreement dated July 11, 1989 between Company and
Employee.
(e) "Spread" shall mean an amount equal to the
excess of the Closing Price over the base value of one Unit
as set forth in Paragraph 3 (and adjusted pursuant to
Paragraph 8).
2. Company hereby grants to Employee phantom share
units ("Units") with respect to 25,000 shares of the Common
Stock.
3. Each Unit shall have a base value of $50.
4. As soon as practicable on or after July 10, 1994,
except as provided in Paragraphs 6, 7 and 9, Company shall
pay Employee, by Company check, the value of the Units,
which shall be an amount equal to the spread on the first
business day preceding July 10, 1994 multiplied by the
number of Units credited to Employee pursuant to this
Agreement on such date. Employee shall have none of the
rights of a stockholder with respect to the Units. All
taxes on the payment to Employee or his legal representative
shall be paid by such person, and Company may withhold from
such payment such amount as is required of it by applicable
federal and state laws.
5. The Units shall not be transferable by Employee
otherwise than by will or the laws of descent and
distribution. More particularly (but without limiting the
generality of the foregoing), the Units and Employee's
rights under this Agreement may not be pledged or
hypothecated in any way and shall not be subject to
execution, attachment or similar process. Any attempted
transfer, pledge, hypothecation or other disposition of the
Units or of any rights hereunder contrary to the provisions
hereof, or the levy of any execution, attachment or similar
process upon the Units or such rights, shall be null and
void and without effect.
6. Notwithstanding the provisions of Paragraph 4, if
the employment of Employee shall be terminated (i) by
Company other than for Cause, (ii) by Employee's death or
(iii) by Employee's Disability, payment of the value of all
the Units then credited to him pursuant to this Agreement
shall be made by Company to Employee or, in the event of
Employee's Disability, either to Employee or his legal
representative or, in the event of Employee's death, to
Employee's surviving spouse or, in the absence of a
surviving spouse, to his legatee or legatees under his last
will or to his legal or personal representative or
distributees, on the twentieth business day following the
date of such termination, all as provided in Paragraph 4 but
using such date of termination as the date to compute the
value of the Units.
7. If the employment of Employee shall be terminated
(i) by Company for Cause or (ii) voluntarily by Employee
prior to July 10, 1994, this Agreement shall forthwith
terminate and no payment shall thereafter be made to
Employee with respect to the Units.
8. In the event of any stock dividend, split-up,
spin-off, recapitalization, combination or exchange of
shares, merger, consolidation, separation, reorganization,
liquidation or distribution of securities or assets (other
than cash dividends) occurring after the date hereof as a
result of which shares of any class shall be issued in
respect of the outstanding shares of the Common Stock, or
shares of the Common Stock shall be changed into the same or
a different number of shares of the same or a different
class or classes of securities, or assets are received with
respect to the Common Stock, then the Units credited to
Employee pursuant to this Agreement shall be appropriately
adjusted so that the value of the Units thereafter shall be
deemed to consist of the class and aggregate number of
shares, other securities or assets which, if a number of
shares of Common Stock (as authorized at the date hereof)
equal to the initial number of Units had been held by
Employee and not idsposed of, he would be holding, at the
time of payment of the value of the Units, as a result of
any and all such stock dividends, split-ups, spin-offs,
recapitalizations, combinations or exchanges of shares,
mergers, consolidations, separations, reorganizations or
liquidations or distributions, and the base value of a Unit
shall also be appropriately adjusted.
9. Notwithstanding the provisions of Paragraphs 4, 6
and 10, payment of the value of any Units pursuant to this
Agreement may be made, at the option of the Company, in
approximately equal annual installments over a period of up
to five years. Company shall notify Employee (or his legal
representative) at least ten business days prior to the date
of payment that it will make payment in installments,
specifying the number of installments. Unpaid amounts shall
bear interest at the prime lending rate publicly announced
by Citibank, N.A. at the beginning of each annual
installment period, such interest to be paid with each
installment payment.
10. (a) If the Common Stock is not publicly traded,
the payment to be made to Employee or his legal
representative, as the case may be, pursuant to this
Agreement shall be based upon the fair market value of one
share of the Common Stock as determined by an independent
appraiser (the "Evaluator") jointly selected by Company and
Employee or his legal representative. The Evaluator shall
be a nationally-recognized United States investment banking
firm which has not, during the two years preceding the date
of its selection, acted in any way on behalf of Company.
(b) For all purposes of this Agreement, if the
amount of any payment hereunder is to be determined by the
Evaluator, the value of one share of the Common Stock shall
be determined by the Evaluator, in the case of Paragraph 4,
as of the last day of the full fiscal quarter of Company
immediately preceding July 10, 1994 or, in the case of
Paragraph 6, as of the date of termination of Employee's
employment or, if that date is not the last day of a fiscal
quarter of Company, as of the last day of the immediately-
preceding full fiscal quarter of Company.
(c) Company shall make available to the Evaluator
all financial and other records, books and information
concerning Company as the Evaluator may reasonably request
in order to determine the fair market value of one share of
the Common Stock. The Evaluator shall determine such fair
market value on the assumption that Company is, and will
continue to be, a privately-held corporation without any
public market for the Common Stock. The determination by
the Evaluator of such fair market value shall be final and
binding on the parties hereto and their respective
successors and legal representatives for all purposes
whatsoever.
(d) If the amount of any payment hereunder is to
be determined by the Evaluator, payment of that price shall
be made at such place and time as shall be designated by
Company by notice to Employee (or his legal representative)
given not later than ten business days after the date on
which Company and Employee (or his legal representative)
receive the fair market value appraisal from the Evaluator.
The date so designated shall not be later than ten business
days after the delivery of such notice by Company.
11. All notices and requests hereunder shall be in
writing and delivered personally or sent by registered mail,
return receipt requested, postage prepaid, addressed as
follows:
To Company at: 2 Paragon Drive
Montvale, New Jersey 07645
Attention: Mr. James Wood, Chairman
With a Copy to: Robert G. Ulrich, Esquire
Senior Vice President and General
Counsel
To Employee at: 86 South Colonial Dive
Harrington Park, New Jersey 07640
or such other address as may be stated in notice given as
hereinbefore provided.
12. This Agreement and the Employment Agreement
contain the entire agreement between the parties hereto with
respect to the matters contemplated herein and supersede all
prior agreements or understandings among the parties hereto
relating to such matters. No modification of this Agreement
shall be effective unless in writing and signed by the party
against which it is sought to be enforced.
13. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey
without reference to the principles of conflict of laws.
IN WITNESS WHEREOF, Company has caused this Agreement to
be executed by a duly authorized officer, and Employee has
hereunto set his hand, all on the day and year first above
written.
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
By: /s/ Robert G. Ulrich
Title: Sr. Vice
President
/s/ George M. Graham
Exhibit 10)a)
January 18, 1994
Mr. James Wood
Chairman and
Chief Executive Officer
The Great Atlantic & Pacific
Tea Company, Inc.
2 Paragon Drive
Montvale, New Jersey 07645
Dear Jim:
This letter is to confirm our agreement that the term
of employment purusant to Section 1 of the employment
agreement between the Company and you shall be extended for
the period to and including April 30, 1988, such extension
to take effect on, but not before, May 1, 1995.
Will you please indicate your agreement with such
extension by signing in the space below.
Very truly yours,
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
/s/ Robert G. Ulrich
Robert G. Ulrich
Senior Vice President
and General Consel
Agreed:
/s/ J. Wood
James Wood
19
Exhibit 13
COMPARATIVE HIGHLIGHTS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands, except per share figures)
Fiscal 1993 Fiscal 1992 Fiscal 1991
Sales $10,384,077 $10,499,465 $11,590,991
Income (loss) before cumulative
effect 3,959 (98,501) 70,664
Net income (loss) 3,959 (189,501) 70,664
Income (loss) per share before
cumulative effect .10 (2.58) 1.85
Net income (loss) per share .10 (4.96) 1.85
Cash dividends per share .80 .80 .80
Expenditures for property 267,329 204,870 161,902
Working capital 79,207 56,769 173,866
Current ratio 1.07 1.05 1.16
Shareholders' equity 994,417 1,034,330 1,253,106
Book value per share 26.02 27.06 32.79
Number of stores at year end 1,173 1,193 1,238
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Fiscal 1993 Compared with 1992
Sales for fiscal 1993 were $10.4 billion, a net decrease of $115 million or
1.1% when compared to fiscal 1992 sales of $10.5 billion. A lower Canadian
exchange rate accounted for $119 million of the sales decline. In addition,
a labor strike, causing a 14-week closure of 63 Miracle Food Mart and Ultra
Mart stores in Ontario, Canada, negatively impacted sales by an estimated
$166 million or 1.6%. Under Ontario law, the Company could not hire
replacement workers and, therefore, the stores were closed for business. The
strike was resolved and the stores were re-opened on February 25, 1994. The
new Miracle Food Mart labor agreement ended a competitive cost disadvantage
that the Miracle Food Mart stores have labored under since their acquisition.
The Company has recently instituted promotional campaigns to assist in
regaining sales. Assuming that Miracle Food Mart re-establishes its
historical sales levels, the Company anticipates that the new labor agreement
will have a positive impact on operating results.
After adjusting for the effects of the strike and the decline in the Canadian
exchange rate, sales were ahead of the prior year by $170 million or 1.6%.
Contributing to this increase were the acquisition of 48 Big Star stores in
the Atlanta, Georgia area on March 29, 1993, the opening of 16 new stores and
the remodeling of 111 stores during fiscal 1993. The acquisition of Big Star
stores and new store openings since the beginning of fiscal 1992 added
approximately $451 million or 4.3% to sales for the 1993 fiscal year. The
Company, in its continuing program to eliminate obsolete, unproductive
stores, closed 84 stores during fiscal 1993. The closure of stores since the
beginning of fiscal 1992 reduced comparative sales by approximately $274
million or 2.6%. Same store sales were 0.1% lower or approximately $7
million. Average weekly sales per store were approximately $168,100 in
fiscal 1993 versus $165,900 in fiscal 1992 for a 1.3% increase.
Same store sales for U.S. operations declined 0.5%. A competitor's 10-week
strike in fiscal 1992 in the Michigan region as well as the highly
competitive sales climate and overall lack of inflation had a significant
negative impact on this comparison. However, U.S. same store sales have
shown steady improvement which began in the third quarter of fiscal 1992,
culminating with a fourth quarter of fiscal 1993 comparative increase of
3.7%. In Canada, same store sales for the year, excluding the 63 stores
closed during the period affected by the strike, improved 1.7%, while same
store sales for the fourth quarter were 4.5% ahead of last year.
Gross margin as a percent of sales for both fiscal 1993 and 1992 approximated
28.5%. The gross margin dollar decrease of $29 million is primarily the
result of the unfavorable effect of the Canadian exchange rate of $32
million. The U.S. gross margin increased $38 million principally as a
result of increased volume of $52 million. A challenge in fiscal 1993 was
the progress in turning around the Big Star stores in Metro Atlanta, which
were acquired in March 1993. Atlanta has become an extremely competitive
situation, and the Company is experiencing significant pressure on margins
while launching a strong new marketing and merchandising program. In Canada,
gross margin declined $67 million, of which $52 million was caused by volume
declines primarily as a result of the aforementioned labor strike and $32
million due to the aforementioned Canadian exchange rate decline. Offsetting
this decline was an increase of 0.9% or $17 million in the gross margin
rate.
Store operating, general and administrative expense of $2.9 billion in fiscal
1993 remained relatively unchanged from prior year, with increased store
occupancy and store promotion costs offsetting decreased customer and
employee accident costs. As a percent of sales, such costs were 27.8% in
fiscal 1993 as compared to 27.6% in fiscal 1992. U.S. expenses increased $38
million, principally store labor related to the improved sales volume and
increased store occupancy costs. Canadian expenses decreased $48 million
primarily due to the decline in the Canadian exchange rate and reduced
expenses from store closures during the 14-week labor strike partially offset
by a $17 million charge for an early retirement program in the Miracle Food
Mart labor settlement.
Included under the Company's 1993 year-end balance sheet captions "Other
accruals" and "Other non-current liabilities" are amounts totaling
approximately $41 million associated with store closing liabilities. During
fiscal 1993 approximately $35 million were charged against these reserves,
which included approximately $27 million relating to the realignment of
store operations reserve established in the prior year. See "Realignment of
Store Operations" footnote for further discussion.
Interest expense decreased from the previous year primarily due to reduced
capital lease obligations and lower interest rates on bonds and short-term
borrowings partially offset by higher outstanding borrowings.
Income before income taxes and cumulative effect for fiscal 1993 was $7
million compared to a net loss of $172 million in fiscal 1992. The pre-tax
income for fiscal 1993 reflects income from U.S. operations of $52 million
offset by a loss in Canada of $45 million. The Canadian loss is primarily
attributable to the aforementioned labor strike, which adversely impacted pre-
tax income by an estimated $40 million. Excluding the $40 million impact
from the Canadian strike in fiscal 1993, the $151 million provision for the
Isosceles investment and the $43 million charge for realignment of store
operations in fiscal 1992, income before income taxes and cumulative effect
for fiscal 1993 increased $25 million or $.39 per share from fiscal 1992.
The income tax provision recorded in fiscal 1993 reflects the 1% increase in
the corporate tax rate, partially offset by retroactive targeted jobs tax
credits as prescribed in the Omnibus Budget Reconciliation Act of 1993. The
tax benefit recorded in fiscal 1992 resulted primarily from the provision for
the potential loss on Isosceles investment and the charge for realignment of
store operations, both recorded in fiscal 1992.
Fiscal 1992 Compared with 1991
Sales for fiscal 1992 were $10.5 billion, a 9.4% decrease when compared to
fiscal 1991 (a 53-week year) sales of $11.6 billion. The extra week in
fiscal 1991 and the decline in the Canadian exchange rate accounted for
approximately one-third of the reported sales decline. The remainder of the
sales decrease was attributable to the continued general slowdown of the
economy in our major markets (New York, Michigan and Ontario, Canada) and the
closing of 56 stores since the end of fiscal 1991. Sales by the Company's
United States small store sector, excluding Food Emporiums, in general have
lagged behind sales by the Company's other store formats. The Company has
been reducing the overall number of small stores in the United States and
intends to continue to do so over the next five years. See "Liquidity and
Capital Resources". The performance of the Company's Canadian operations has
had the greatest negative impact on the Company's overall sales during the
past two years. Canadian sales for fiscal 1992 were $2.2 billion as compared
to $2.6 billion in 1991.
During fiscal 1992, the Company opened 11 new stores and remodeled 102
existing stores. Same store sales declined 5.9% when comparing fiscal 1992
performance with that of 1991. However, same store sales during the fourth
quarter of fiscal 1992 showed improvement, declining only 3.1% when compared
to the fourth quarter of fiscal 1991.
Gross margin as a percent of sales for fiscal 1992 was 28.5% as compared to
27.7% in fiscal 1991. The increase in margin is primarily attributable to
the continued benefits derived from the Company's centralized purchasing
function and change in product mix, partially offset by special price
reductions and promotions.
Store operating, general and administrative expense declined slightly from
$3.0 billion in fiscal 1991 to $2.9 billion in fiscal 1992. As a percent of
sales, such costs were 27.6% in fiscal 1992 as compared to 26.0% in fiscal
1991. The increased percentage is a function of lower sales levels
experienced during fiscal 1992.
In fiscal 1992, the Company reassessed store operations in its markets and
closed certain stores and has identified certain other stores to be closed in
the future as part of its realignment of certain geographical areas in the
U.S. and Canada. Accordingly, the Company recorded a charge of $43 million
to cover the cost of these closings. This program, which included 72 stores,
is expected to be substantially completed by the end of fiscal 1995. Charges
related to this realignment include future rent, property taxes, common area
maintenance costs and equipment disposition costs. The Company anticipates
that these costs, which only include costs subsequent to the actual store
closing, will be paid principally over four years. This realignment program
is an integral part of the Company's long-term strategic and profit plans.
Included under the Company's 1992 year-end balance sheet captions "Other
accruals" and "Other non-current liabilities" are amounts totaling
approximately $60 million associated with store closing liabilities. See
"Realignment of Store Operations" footnote for further discussion.
Canada's pre-tax loss was $38.7 million in fiscal 1992, which included a
charge of $10 million associated with the aforementioned realignment of store
operations. In fiscal 1991, the Canadian operations posted a pre-tax profit
of $5.4 million. The fall off in pre-tax profit is attributable to the
decline in sales volume and the previously mentioned realignment charge.
Interest expense decreased when compared to the prior fiscal year primarily
as a result of lower interest rates.
During fiscal 1992, the Company recorded a provision for potential loss on
its total investment in Isosceles PLC of $151.2 million ($89.2 million after
giving effect for applicable income tax benefits associated with this
charge). See "Investment in Isosceles" footnote for further discussion.
Effective March 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106") and Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"). As a result, the Company recorded charges of $26.5 million (net of
applicable income tax benefits) and $64.5 million for SFAS 106 and SFAS 109,
respectively, as the cumulative effect of these changes on prior years.
The income tax benefit recorded is principally attributable to the provision
for the potential loss on Isosceles investment and the charge for realignment
of store operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the fiscal year with working capital of $79 million
compared to $57 million and $174 million at February 27, 1993 and February
29, 1992, respectively. The Company had cash and short-term investments
aggregating $124 million at the end of fiscal 1993 compared to $110 million
and $136 million at the end of fiscal 1992 and 1991, respectively. The
Company also has in excess of $300 million in various available credit
facilities. See "Indebtedness" footnote for further discussion.
During fiscal 1993, the Company financed its capital expenditures, debt
repayments, cash dividends and the acquisition of Big Star through internally
generated funds and with proceeds of the $200 million Senior Notes at 7.70%
issued in January 1994 and due in 2004. U.S. bank borrowings were $116
million at February 26, 1994 as compared to $120 million at February 27,
1993. U.S. bank borrowings during fiscal 1993 were at an average interest
rate of 3.4% compared to 3.5% in fiscal 1992.
For fiscal 1994, the Company has planned capital expenditures of
approximately $340 million for 35 new stores and approximately 120 remodels
and expansions as compared to 16 new stores and 111 remodels and expansions
in fiscal 1993. The Company plans to maintain at least this level of
expenditure each year through fiscal 1997. Eleven new stores, with a cost
approximating $40 million, which were included in the fiscal 1993 original
plan, have been delayed mainly to permit compliance with applicable
regulatory requirements. It has been the Company's experience over the past
several years that it typically takes 12 to 18 months after opening for a new
store to begin generating operating profit. Risks inherent in retail real
estate investments are primarily associated with competitive pressures in the
marketplace. From fiscal 1994 through fiscal 1998, the Company intends to
improve the use of technology through scanning and other technological
advances to improve customer service and store operations and merchandising,
to intensify advertising and promotion and to enhance purchasing and
merchandising. The Company expects to close approximately 50 stores per year
over fiscal years 1994 and 1995.
The Company's Five-Year Development Plan includes 175 new stores over the
next five years, with an attendant increase in net square footage of 3% per
year, and the remodeling of approximately 125 stores per year. The Company's
concentration will be on larger stores in the 50,000 to 60,000 square foot
range. Costs of each project will vary significantly based upon size,
marketing format, geographic area and development involvement required from
the Company. The planned costs of these projects average $3,000,000 for a
new store and $900,000 for a remodel or enlargement. Traditionally, the
Company leases real estate and expends capital on leasehold improvements and
store fixtures and fittings. Based upon current business conditions, the
Company anticipates that it may be required to increase its purchase and
development of real estate. Consistent with the Company's history, most new
store activity will be directed into those areas where the Company achieves
its best profitability. Remodeling and enlargement programs are normally
undertaken based upon competitive opportunities and usually involve updating
a store to a more modern and competitive format. Capital expenditures are
expected to increase each fiscal year through 1997.
At fiscal year end, the Company's existing senior debt rating was BBB- with
Standard & Poor's Ratings Group and Baa3 with Moody's Investors Service. A
change in either of these ratings could affect the availability and cost of
financing.
The Company's current cash resources, together with income from operations,
are sufficient for the Company's 1994 capital expenditure program, scheduled
debt repayments and dividend payments in fiscal 1994.
IMPACT OF NEW ACCOUNTING STANDARD
During November 1992, Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits" ("SFAS 112") was issued.
SFAS 112 requires the accrual of postemployment benefits provided to former
or inactive employees after employment but before retirement. The Company
will adopt this statement effective February 27, 1994. The Company's current
accounting policy is to accrue for workers' compensation and other long-term
disability-related benefits and to expense other postemployment benefits,
such as severance and short-term disability, as incurred. Based upon the
Company's estimates, the impact of adopting SFAS 112 will not have a material
effect on the Company's consolidated financial statements.
STATEMENTS OF CONSOLIDATED OPERATIONS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands, except per share figures)
Fiscal 1993 Fiscal 1992 Fiscal 1991
Sales $10,384,077 $10,499,465 $11,590,991
Cost of merchandise sold (7,425,578) (7,511,910) (8,377,710)
Gross margin 2,958,499 2,987,555 3,213,281
Store operating, general
and administrative expense (2,890,219) (2,900,249) (3,009,427)
Realignment of store operations - (43,000) -
Income from operations 68,280 44,306 203,854
Interest expense (63,318) (66,436) (81,416)
Interest income 1,599 1,267 1,526
Provision for potential loss
on Isosceles investment - (151,238) -
Income (loss) before income taxes
and cumulative effect 6,561 (172,101) 123,964
Benefit (provision) for income taxes (2,602) 73,600 (53,300)
Income (loss) before cumulative effect3,959 (98,501) 70,664
Cumulative effect on prior years of
changes in accounting principles:
Income taxes - (64,500) -
Postretirement benefits - (26,500) -
Net income (loss) $ 3,959 $(189,501) $70,664
Earnings (loss) per share:
Income (loss) before cumulative effect $.10 $(2.58) $1.85
Cumulative effect on prior years of
changes in accounting principles:
Income taxes - (1.69) -
Postretirement benefits - (.69) -
Net income (loss) per share $.10 $(4.96) $1.85
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands)
Fiscal 1993 Fiscal 1992 Fiscal 1991
Common stock:
Balance beginning of year $38,229 $38,224 $38,219
Exercise of options - 5 5
$38,229 $38,229 $38,224
Capital surplus:
Balance beginning of year $453,475 $437,972 $437,949
Exercise of options and cumulative tax
effect of phantom share agreement - 15,503 23
$453,475 $453,475 $437,972
Cumulative translation adjustment:
Balance beginning of year $(12,809) $1,395 $9,679
Exchange adjustment (13,294) (14,204) (8,284)
$(26,103) $(12,809) $1,395
Retained earnings:
Balance beginning of year $555,796 $775,873 $735,778
Net income (loss) 3,959 (189,501) 70,664
Cash dividends (30,576) (30,576) (30,569)
$529,179 $555,796 $775,873
Treasury stock, at cost:
Balance beginning of year $(361) $(358) $(355)
Purchase of Treasury stock (2) (3) (3)
$(363) $(361) $(358)
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
The Great Atlantic & Pacific Tea Company, Inc.
February 26, February 27,
(Dollars in thousands) 1994 1993
Assets
Current assets:
Cash and short-term investments $124,236 $110,120
Accounts receivable 190,954 194,557
Inventories 850,077 856,319
Prepaid expenses and other assets 65,072 60,496
Total current assets 1,230,339 1,221,492
Property:
Land 106,904 96,491
Buildings 257,313 229,658
Equipment and leasehold improvements 2,185,280 2,117,898
Total-at cost 2,549,497 2,444,047
Less accumulated depreciation
and amortization (984,752) (881,242)
1,564,745 1,562,805
Property leased under capital leases 122,788 141,339
Property-net 1,687,533 1,704,144
Other assets 180,823 165,294
$3,098,695 $3,090,930
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $77,755 $104,660
Current portion of obligations
under capital leases 16,097 18,021
Accounts payable 458,875 512,604
Book overdrafts 196,818 161,851
Accrued salaries, wages and benefits 173,366 157,405
Accrued taxes 35,879 11,953
Other accruals 192,342 198,229
Total current liabilities 1,151,132 1,164,723
Long-term debt 544,399 414,301
Obligations under capital leases 162,866 182,066
Deferred income taxes 100,405 141,184
Other non-current liabilities 145,476 154,326
Shareholders' equity:
Preferred stock-no par value; authorized-3,000,000 shares; issued-none
Common stock-$1 par value; authorized-80,000,000 shares;
issued 38,229,490 shares 38,229 38,229
Capital surplus 453,475 453,475
Cumulative translation adjustment (26,103) (12,809)
Retained earnings 529,179 555,796
Treasury stock, at cost, 9,157 and
9,098 shares, respectively (363) (361)
Total shareholders' equity 994,417 1,034,330
$3,098,695 $3,090,930
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
Cash Flows From Operating Activities:
Net income (loss) $3,959 $(189,501) $70,664
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Provision for potential loss on Isosceles
investment - 151,238 -
Realignment of store operations - 43,000 -
Cumulative effect on prior years of changes
in accounting principles:
Income taxes - 64,500 -
Postretirement benefits - 26,500 -
Depreciation and amortization 235,910 228,976 224,641
Deferred income tax provision (benefit) on
income (loss) before cumulative effect(19,568) (87,800) 16,700
(Gain) loss on disposal of owned property 1,032 (2,472) 1,912
(Increase) decrease in receivables 1,936 (18,538) 13,074
Decrease in inventories 12,928 45,367 24,773
(Increase) decrease in other current assets(7,981) 1,906 (12,042)
Decrease in accounts payable (1,557) (50,761) (99,506)
Increase (decrease) in accrued expenses 46,292 (10,081) (37,657)
Decrease in store closing reserves (34,522) (7,944) (11,003)
Increase (decrease) in other accruals (23,586) 23,621 21,359
Other (1,237) (6,677) 5,303
Net cash provided by operating activities 213,606 211,334 218,218
Cash Flows From Investing Activities:
Expenditures for property (267,329) (204,870) (161,902)
Proceeds from disposal of property 19,464 12,573 7,090
Acquisition of business,
net of cash acquired (42,948) - -
Net cash used in investing activities (290,813) (192,297) (154,812)
Cash Flows From Financing Activities:
Proceeds from debt 218,524 8,839 13,257
Payment of debt (114,826) (32,788) (44,097)
Principal payments on capital leases (18,876) (18,565) (25,527)
Increase in book overdrafts 39,192 29,767 24,535
Cash dividends (30,576) (30,576) (30,569)
Proceeds from stock options exercised - 27 28
Purchase of Treasury stock (2) (3) (3)
Net cash provided by (used in)
financing activities 93,436 (43,299) (62,376)
Effect of exchange rate changes on cash and
short-term investments (2,113) (1,784) (954)
Net Increase (Decrease) in Cash and
Short-term Investments 14,116 (26,046) 76
Cash and Short-term Investments
at Beginning of Year 110,120 136,166 136,090
Cash and Short-term Investments
at End of Year $124,236 $110,120 $136,166
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the last Saturday in February. Fiscal
1993 ended February 26, 1994, fiscal 1992 ended February 27, 1993 and fiscal
1991 ended February 29, 1992. Fiscal 1993 and 1992 were each comprised of
52 weeks while fiscal 1991 was comprised of 53 weeks.
Common Stock
The principal shareholder of the Company, Tengelmann
Warenhandelsgesellschaft, owned 53.7% of the Company's common stock as of
February 26, 1994.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries.
Cash and Short-term Investments
Short-term investments that are highly liquid with an original maturity of
three months or less are included in cash and short-term investments and are
deemed to be cash equivalents. The carrying amount approximates fair value.
Inventories
Store inventories are valued principally at the lower of cost or market with
cost determined under the retail method. Other inventories are valued
primarily at the lower of cost or market with cost determined on a first-in,
first-out basis. Inventories of certain acquired companies are valued using
the last-in, first-out method, which was their practice prior to
acquisition.
Properties
Depreciation and amortization are provided on the straight-line basis over
the estimated useful lives of the assets. Buildings are depreciated based
on lives varying from twenty to fifty years and equipment based on lives
varying from three to ten years. Equipment and real property leased under
capital leases are amortized over the lives of the respective leases.
Properties designated for sale are classified as current assets.
Pre-opening Costs
The costs of opening new stores are expensed in the year incurred.
Earnings (Loss) Per Share
Earnings (loss) per share is based on the weighted average number of common
shares outstanding during the fiscal year which was 38,220,000 in fiscal
1993, 38,219,000 in fiscal 1992 and 38,211,000 in fiscal 1991. Stock
options outstanding had no material effect on the computation of earnings
(loss) per share.
Excess of Cost over Net Assets Acquired
The excess of cost over fair value of net assets acquired is amortized on a
straight-line basis over forty years. At each balance sheet date,
management reassesses the appropriateness of the goodwill balance based on
forecasts of cash flows from operating results on an undiscounted basis. If
the results of such comparison indicate that an impairment may be likely,
the Company will recognize a charge to operations at that time based upon
the difference between the present value of the expected cash flows from
future operating results (utilizing a discount rate equal to the Company's
average cost of funds at the time) and the then balance sheet value. The
recoverability of goodwill is at risk to the extent the Company is unable to
achieve its forecast assumptions regarding cash flows from operating
results. The Company estimates that the cash flows projected to be
generated on an undiscounted basis should be sufficient to recover the
goodwill balance over its remaining life.
Income Taxes
The Company provides deferred income taxes on temporary differences between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Investment tax credits are amortized over
the estimated useful lives of the related assets. As of the beginning of
fiscal 1992, the Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" ("SFAS 109").
Current Liabilities
Under the Company's cash management system, checks issued but not presented
to banks frequently result in overdraft balances for accounting purposes and
are classified as "Book overdrafts" in the balance sheet.
The Company accrues for vested and non-vested vacation pay. Liabilities for
compensated absences of $84 million and $87 million at February 26, 1994 and
February 27, 1993, respectively, are included in the balance sheet caption
"Accrued salaries, wages and benefits."
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements in order to conform to the current year presentation.
ACQUISITIONS
In March 1993, the Company acquired certain assets, including inventory, of
48 Big Star stores in the Atlanta, Georgia area for approximately $43
million. As of the acquisition date, the fair value of assets recorded was
$72 million and liabilities assumed were $48 million. The acquisition has
been accounted for as a purchase and, accordingly, the excess of cost over
the fair market value of net assets acquired of approximately $19 million
has been included in the balance sheet caption "Other assets."
REALIGNMENT OF STORE OPERATIONS
During fiscal 1992, the Company reassessed store operations in its markets
and has closed certain stores and has identified certain other stores to be
closed in the future as part of its realignment of certain operating
divisions in the United States and Canada. This program, which included 72
stores, is expected to be substantially completed by the end of fiscal 1995.
The Company recorded a charge of $43 million in fiscal 1992 to cover the
cost of these closings, including future rent, property taxes, common area
maintenance costs and equipment disposition costs. The Company anticipates
that these costs, which only include costs subsequent to the actual store
closing, will be paid principally over four years. During fiscal 1993,
store closing costs of approximately $27 million were charged to this
reserve, which did not include the costs associated with closing older and
outmoded stores which close in the ordinary course of business and tend to
be insignificant as these stores are generally near the end of their lease
term and have low net asset values. The Company believes that, within a
three to five year period, this program will have a positive effect on
future operations and cash flows.
INVESTMENT IN ISOSCELES
During fiscal 1992, the Company recorded a non-recurring pre-tax charge of
$151.2 million for the potential loss on its investment in Isosceles PLC
("Isosceles"). The Company's decision to record a provision for the
potential loss of its investment in Isosceles occurred in July 1992. The
Company monitored its investment in Isosceles through the analysis of
Isosceles' prepared business plans and cash flow projections. In September
of 1990 the Company chose not to participate in a recapitalization of
Isosceles resulting in a significant decline in its percentage ownership
position. Late in 1991, new management was appointed at Isosceles and in
June 1992 the Company was informed by new management that a significantly
different operating strategy would be implemented. The Company was further
informed by new Isosceles management that this new strategy would result in
substantially reduced operating results and that Isosceles shareholders had
suffered a significant diminution in the value of their holdings. Shortly
thereafter, the Company concluded that the recovery of any of its investment
in Isosceles had become remote and that it was appropriate to write-off its
entire investment.
INVENTORY
Approximately 24% of the Company's inventories are valued using the last-in,
first-out ("LIFO") method. Such inventories would have been $17 million and
$20 million higher at February 26, 1994 and February 27, 1993, respectively,
if the retail and first-in, first-out methods were used. During fiscal
1993, a LIFO credit was generated from reduced inventory quantities and a
lower internally generated price index. The effect of these reductions was
to decrease cost of goods sold by approximately $3 million and to increase
net earnings by $1.8 million or $.05 per share. The LIFO charge to earnings
per share for fiscal years 1992 and 1991 was $.01 and $.05, respectively.
LITIGATION
The Company is involved in various claims, administrative agency proceedings
and lawsuits arising out of the normal conduct of its business. Although
the ultimate outcome of these legal proceedings cannot be predicted with
certainty, the management of the Company believes that the resulting
liability, if any, will not have a material effect upon the Company's
consolidated financial statements or liquidity.
OPERATIONS IN GEOGRAPHIC AREAS
The Company has been engaged in the retail food business since 1859 and
currently does business principally under the names A&P, Waldbaum's, Food
Emporium, Super Fresh, Farmer Jack, Kohl's, Dominion and Miracle Food Mart.
Sales in the table below reflect sales to unaffiliated customers in the
United States and Canada.
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
Sales:
United States $8,466,338 $8,286,270 $8,994,405
Foreign 1,917,739 2,213,195 2,596,586
Total $10,384,077 $10,499,465 $11,590,991
Income (Loss) From Operations:
United States $101,305 $68,987 $183,724
Foreign (33,025) (24,681) 20,130
Total $68,280 $44,306 $203,854
Assets:
United States $2,528,239 $2,425,291 $2,403,201
Foreign 570,456 665,639 890,066
Total $3,098,695 $3,090,930 $3,293,267
INDEBTEDNESS
Debt consists of:
February 26, February 27,
(Dollars in thousands) 1994 1993
9 1/8% Notes, due January 15, 1998 $200,000 $200,000
8 1/8% Notes, due January 15, 1994 - 100,000
7.70% Senior Notes, due January 15, 2004 200,000 -
Mortgages and Other Notes, due
1994 through 2014 (average interest
rates at year end of 9.1% and
9.0%, respectively) 52,032 60,976
U.S. Bank Borrowings at 3.6%
and 3.3%, respectively 116,000 120,000
Canadian Commercial Paper at 4.5%
and 6.8%, respectively 54,681 38,775
Less unamortized discount on Notes (559) (790)
622,154 518,961
Less current portion (77,755) (104,660)
Long-term debt $544,399 $414,301
As of February 26, 1994, the Company has outstanding a total of $400 million
of unsecured, non-callable public debt securities in the form of $200
million 9 1/8% Notes due 1998 and $200 million 7.70% Notes due 2004. As of
February 26, 1994, the fair values of these securities, based on quoted
market prices, were $214 million and $194 million, respectively. With
respect to all other indebtedness, Company management has evaluated such
debt instruments and has determined, based on interest rates and terms, that
the fair value of such indebtedness approximates carrying value at February
26, 1994.
The Company has a $250 million U.S. credit agreement with banks enabling it
to borrow funds on a revolving basis sufficient to refinance any outstanding
short-term borrowings. In addition, the U.S. has lines of credit with banks
in excess of $230 million. Borrowings under U.S. lines of credit were $116
million and $120 million at February 26, 1994 and February 27, 1993,
respectively. The Company pays a commitment fee ranging from 3/16% to 3/8%
per annum on the unused portion of the Company's revolving credit facility.
The Company's Canadian subsidiary has a C$100 million commercial paper
program. Canadian commercial paper borrowings were C$74 million and C$48
million at February 26, 1994 and February 27, 1993, respectively.
The Company's loan agreements contain certain financial covenants including
the maintenance of minimum levels of shareholders' equity and limitations on
the incurrence of additional indebtedness and lease commitments. The
Company was in compliance with such covenants as of February 26, 1994.
The net book value of real estate pledged as collateral for all mortgage
loans amounted to approximately $82 million as of February 26, 1994.
Combined U.S. bank and Canadian commercial paper borrowings of $100 million
as of February 26, 1994 are classified as non-current as the Company has the
ability and intent to refinance these borrowings on a long-term basis.
Maturities for the next five fiscal years are: 1994-$78 million; 1995-$28
million; 1996-$78 million; 1997-$205 million; 1998-$10 million. Interest
payments on indebtedness were approximately $41 million for fiscal 1993, $39
million for fiscal 1992 and $49 million for fiscal 1991.
LEASE OBLIGATIONS
The Company operates primarily in leased facilities. Lease terms generally
range up to twenty-five years for store leases and thirty years for other
leased facilities, with options to renew for additional periods. The
majority of the leases contain escalation clauses relating to real estate
tax increases and certain store leases provide for increases in rentals when
sales exceed specified levels. In addition, the Company leases some store
equipment and trucks.
The consolidated balance sheets include the following:
February 26, February 27,
(Dollars in thousands) 1994 1993
Real property leased under capital leases $256,156 $288,954
Equipment leased under capital leases 3,361 7,865
259,517 296,819
Accumulated amortization (136,729) (155,480)
$122,788 $141,339
The Company entered into $2 million of new capital leases during fiscal 1993
and $11 million during fiscal 1991. The Company did not enter into any new
capital leases in fiscal 1992. Interest paid as part of capital lease
obligations was approximately $22, $24 and $27 million in fiscal 1993, 1992
and 1991, respectively.
Rent expense for operating leases consists of:
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
Minimum rentals $153,914 $154,099 $156,981
Contingent rentals 6,883 7,957 9,146
$160,797 $162,056 $166,127
Minimum annual rentals for leases in effect at February 26, 1994 are shown
in the table below. All amounts are exclusive of lease obligations and
sublease rentals applicable to facilities for which reserves have previously
been established.
(Dollars in thousands) Capital Leases
Real Operating
Fiscal Equipment Property Leases
1994 $737 $35,698 $141,487
1995 16 33,227 137,245
1996 - 30,878 130,580
1997 - 28,897 125,090
1998 - 27,258 118,419
1999 and thereafter - 184,380 1,052,473
753 340,338 $1,705,294
Less executory costs - (3,309)
Net minimum rentals 753 337,029
Less interest portion (34) (158,785)
Present value of net minimum rentals $719 $178,244
INCOME TAXES
The components of income (loss) before income taxes and cumulative effect
are as follows:
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
United States $52,280 $(133,378) $118,612
Foreign (45,719) (38,723) 5,352
Total $6,561 $(172,101) $123,964
The provision (benefit) for income taxes consists of the following:
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
Current:
Federal $13,500 $21,800 $29,800
Canadian 5,744 (12,800) 2,100
State and local 2,926 5,200 4,700
22,170 14,200 36,600
Deferred:
Federal 2,723 (62,500) 11,300
Canadian (22,486) (5,400) (600)
State and local 195 (19,900) 6,000
(19,568) (87,800) 16,700
$2,602 $(73,600) $53,300
The deferred income tax provision results primarily from the impact of
temporary differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws.
The income tax provision recorded in fiscal 1993 reflects the increase in
the corporate tax rate of 1%, partially offset by retroactive targeted jobs
tax credits as prescribed by the Omnibus Budget Reconciliation Act of 1993.
The income tax benefit recorded in fiscal 1992 resulted primarily from the
provision for the potential loss on the Company's total investment in
Isosceles and the charge for realignment of store operations.
During fiscal 1991, the deferred income tax provision resulted primarily
from accelerated tax depreciation, insurance, leasing, employee benefits and
tax on undistributed earnings of Canadian subsidiaries.
The provision for income taxes includes amortization of investment tax
credits of approximately $1 and $2 million in fiscal 1992 and 1991,
respectively. For tax purposes, the Company has Canadian operating loss
carryforwards of approximately $107 million which expire between fiscal 1997
and fiscal 2000. Deferred income taxes of approximately $6.7 million have
not been provided on approximately $15 million of undistributed earnings of
the Canadian subsidiaries which are considered to be permanently invested.
A reconciliation of income taxes at the 35% federal statutory income tax
rate for 1993, and 34% for both 1992 and 1991 to income taxes as reported is
as follows:
(Dollars in thousands) Fiscal 1993 Fiscal 1992Fiscal 1991
Income taxes computed at federal
statutory income tax rate $2,296 $(58,514) $42,148
Effect of 1% statutory rate change 2,519 - -
Targeted jobs tax credits (1,656) - -
State and local income taxes, net of
federal tax benefit 2,031 (9,729) 7,066
Tax differential relating
to foreign operations (3,261) (4,969) (524)
Depreciation/amortization attributable to
excess cost over tax basis of certain assets 673 612 6,436
Amortization of investment tax credits - (1,000) (1,826)
Income taxes as reported $2,602 $(73,600) $53,300
As of the beginning of fiscal 1992, the Company adopted SFAS 109. As a
result, the Company reflected the cumulative effect on prior years of the
change in accounting principle by recording a charge of $64.5 million ($1.69
per share). In conjunction with the adoption of SFAS 109, the Company has
remeasured prior acquisitions which has resulted in an increase in
liabilities assumed of $22 million. In addition, the Company recorded a
$15.5 million tax benefit resulting from payments from the Company's
principal shareholder to the Company's Chief Executive Officer under a
phantom stock agreement. This amount has been recorded as a credit to the
Capital Surplus of the Company.
Income tax payments for fiscal 1993, 1992 and 1991 were approximately $15,
$34 and $41 million, respectively.
The components of net deferred tax assets (liabilities) are as follows:
February 26, February 27,
(Dollars in thousands) 1994 1993
Current assets:
Insurance reserves $22,536 $38,136
Other reserves 16,969 15,077
Lease obligations 2,210 2,299
Pension obligations 8,299 -
Miscellaneous 4,791 3,695
54,805 59,207
Current liabilities:
Inventories (15,802) (15,476)
Pension obligations - (2,699)
Miscellaneous (1,799) (1,212)
(17,601) (19,387)
Deferred income taxes included in
prepaid expenses and other assets $37,204 $39,820
Non-current assets:
Alternative minimum tax credits $39,600 $44,000
Provision for potential
loss on Isosceles investment 42,617 41,603
Other reserves 20,087 24,654
Lease obligations 22,280 22,382
Canadian loss carryforward 43,075 13,653
Insurance reserves 9,446 9,221
Other retiree benefits 17,884 17,311
Cumulative translation adjustment 19,189 8,902
Miscellaneous 8,591 3,377
222,769 185,103
Non-current liabilities:
Depreciation of fixed assets (247,039) (249,154)
Pension obligations (17,530) (16,309)
Undistributed earnings of
Canadian subsidiaries (24,922) (27,000)
Miscellaneous (33,683) (33,824)
(323,174) (326,287)
Deferred income taxes $(100,405) $(141,184)
RETIREMENT PLANS AND BENEFITS
Defined Benefit Plans
The Company provides retirement benefits to certain non-union and some union
employees under various defined benefit plans. The Company's defined
benefit pension plans are non-contributory and benefits under these plans
are generally determined based upon years of service and, for salaried
employees, compensation. The Company funds these plans in amounts
consistent with the statutory funding requirements.
The components of net pension costs (income) are as follows:
(Dollars in thousands) Fiscal 1993 Fiscal 1992 Fiscal 1991
Service cost $10,665 $10,630 $10,922
Interest cost 22,997 21,842 21,204
Actual return on plan assets (61,730) (16,685) (39,905)
Net amortization and deferral 35,816 (9,621) 12,642
Net pension cost $7,748 $6,166 $4,863
The Company's U.S. defined benefit pension plans are accounted for on a
calendar year basis while the Company's Canadian defined benefit pension
plans are accounted for on a fiscal year basis. The funding for these plans
is based on an evaluation of the assets and liabilities of each plan. The
majority of plan assets is invested in listed stocks and bonds. The funded
status of the plans is as follows:
1993 1992
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
Accum. Exceed Accum. Exceed
(Dollars in thousands) Benefits Assets Benefits Assets
Accumulated benefit obligation:
Vested $244,706 $36,351 $212,492 $31,934
Nonvested 3,360 1,335 6,497 1,204
$248,066 $37,686 $218,989 $33,138
Projected benefit obligation $264,500 $40,713 $235,858 $35,883
Plan assets at fair value 312,900 17,679 271,554 16,109
Excess (deficiency) of assets
over projected benefit obligation 48,400 (23,034) 35,696 (19,774)
Unrecognized net transition
(asset) obligation (10,974) 1,089 (12,729) 1,608
Unrecognized net (gain) loss
from experience differences (8,787) 2,590 (300) 806
Unrecognized prior service cost 4,247 4,500 5,463 4,798
Additional minimum liability - (5,184) - (4,552)
Prepaid pension asset
(pension liability) $32,886 $(20,039) $28,130 $(17,114)
Actuarial assumptions used to determine year-end plan status were as
follows:
1993 1992
U.S. Canada U.S. Canada
Discount rate 7.5% 8.25% 8% 9.25%
Weighted average rate of
compensation increase 4.5% 5% 5% 6%
Expected long-term rate of
return on plan assets 9% 9.25% 9% 9.25%
The impact of the changes in the actuarial assumptions has been reflected in
the funded status of the pension plans and the Company believes that such
changes will not have a material effect on net pension cost for fiscal 1994.
Defined Contribution Plans
The Company maintains a defined contribution retirement plan to which the
Company contributes 4% of eligible participants' salaries and a savings plan
to which eligible participants may contribute a percentage of eligible
salary. The Company contributes to the savings plan based on specified
percentages of the participants' eligible contributions. Participants
become fully vested in the Company's contributions after 5 years of service.
The Company's contributions charged to operations for both plans were
approximately $11 million in fiscal 1993 and approximately $10 million in
both fiscal 1992 and 1991.
The Company participates in various multi-employer union pension plans which
are administered jointly by management and union representatives and which
sponsor most full-time and certain part-time union employees who are not
covered by the Company's other pension plans. The pension expense for these
plans approximated $38, $39 and $40 million in fiscal 1993, 1992 and 1991,
respectively. The Company could, under certain circumstances, be liable for
unfunded vested benefits or other expenses of jointly administered
union/management plans. At this time, the Company has not established any
liabilities because such withdrawal from these plans is not probable or
reasonably possible.
Other Retiree Benefits
The Company and its wholly-owned subsidiaries provide postretirement health
care and life benefits to certain union and non-union employees. As of the
beginning of fiscal 1992, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106"). In accordance with SFAS 106,
the Company is required to recognize the cost of providing postretirement
benefits during employees' active service period. The Company's previous
accounting policy had been to expense benefit costs as incurred. As a
result, the Company recorded a cumulative charge of $26.5 million ($.69 per
share) as the after-tax effect (federal and state) of recording the
transition obligation as of the beginning of the year.
The unfunded status of the plans was as follows:
(Dollars in millions) Fiscal 1993 Fiscal 1992
Unfunded accumulated benefit obligation:
Retirees $28.2 $28.6
Fully eligible active plan participants 4.9 5.0
Other active plan participants 13.8 14.0
46.9 47.6
Unrecognized net gain from
experience differences 2.0 -
Accrued postretirement costs $48.9 $47.6
Assumed discount rate 7.5% 8.0%
Service cost benefits earned and interest cost on the projected benefit
obligation were $0.6 million and $3.9 million, respectively, in fiscal 1993.
The assumed rate of future increase in health care benefit cost was 12.75%
in fiscal 1993 and is expected to decline to 4.75% by the year 2023 and
remain at that level thereafter. The effect of a one-percentage-point
increase in the assumed health care cost trend rate for each future year on
the net postretirement health care cost and the accumulated postretirement
benefit obligation would be $0.4 million and $4.1 million, respectively.
Postemployment Benefits
During November 1992, Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits" ("SFAS 112") was issued.
SFAS 112 is effective for fiscal years which began after December 15, 1993
and will require the accrual of costs for preretirement postemployment
benefits provided to former or inactive employees and the recognition of an
obligation for these benefits. The Company will adopt this statement
effective February 27, 1994, and, based upon the Company's estimate, it will
not have a material effect on its financial statements.
STOCK OPTIONS
The Company had a 1984 Stock Option Plan for its officers and key employees,
which expired on February 1, 1994. The 1984 Stock Option Plan, which
provided for the granting of 1,500,000 shares, was amended as of July 10,
1990 to increase by 1,500,000 the number of options available for grant as
either options or Stock Appreciation Rights ("SAR's"). Each option was
available for grant at the fair value of the Company's common stock on the
date the option was granted. SAR's allow the optionee, in lieu of
purchasing stock, to receive cash in an amount equal to the excess of the
fair market value of common stock on the date of exercise over the option
price. A total of 1,270,000 SAR's was granted in fiscal 1993.
A summary of option transactions is as follows:
Price Range
Shares Per Share
Outstanding February 29, 1992 1,190,875 $ 5.50 -$65.13
Granted 15,000 23.00 - 24.38
Cancelled or expired (2,500) 39.75
Options exercised (5,000) 5.50
SAR's exercised (4,250) 21.50
Outstanding February 27, 1993 1,194,125 $21.50 -$65.13
Granted 1,270,000 23.38 - 26.00
Cancelled or expired (35,000) 23.38 - 52.38
Outstanding February 26, 1994 2,429,125 $21.50 -$65.13
Exercisable at:
February 27, 1993 967,375 $21.50 -$65.13
February 26, 1994 1,252,125 $21.50 -$65.13
On March 18, 1994, the Board of Directors approved (subject to shareholder
approval) the 1994 Stock Option Plan for its officers and key employees.
The 1994 Stock Option Plan provides for the granting of 1,500,000 shares as
either options/SAR's. Options/SAR's issued under this plan will be granted
at the fair market value of the Company's common stock at the date of grant.
Also on March 18, 1994, the Board of Directors approved (subject to
shareholder approval) the 1994 Stock Option Plan for Non-Employee Directors.
This plan provides for the grant of up to 100,000 stock options. Options
issued under this plan will be granted at the fair market value of the
Company's common stock at the date of grant. Pursuant to this plan, options
for 18,000 shares were granted to nine (9) directors as of March 18, 1994.
SUMMARY OF QUARTERLY RESULTS
(unaudited)
The table below summarizes the Company's results of operations by quarter
for fiscal 1993 and 1992. The first quarter of each fiscal year contains
sixteen weeks while the other quarters each contain twelve weeks.
(Dollars in thousands, First Second Third Fourth Total
except per share figures)Quarter Quarter Quarter Quarter Year
1993
Sales $3,279,264$2,399,368$2,342,935$2,362,510 $10,384,077
Gross margin 941,154 690,493 665,579 661,273 2,958,499
Income (loss) from
operations 48,005 23,778 13,386 (16,889) 68,280
Net income (loss) 17,050 5,957 379 (19,427) 3,959
Per share data:
Net income (loss) .45 .15 .01 (.51) .10
Cash dividends .20 .20 .20 .20 .80
Market price:
High 35.000 34.000 30.000 29.000
Low 23.125 27.875 24.875 23.750
Number of stores at
end of period 1,210 1,203 1,191 1,173
1992
Sales $3,316,249$2,431,827$2,375,809$2,375,580 $10,499,465
Gross margin 946,664 697,749 667,773 675,369 2,987,555
Income (loss) from
operations 60,069 27,837 10,525 (54,125) 44,306
Income (loss) before
cumulative effect (66,434) 7,641 422 (40,130) (98,501)
Cumulative effect on prior
years of changes in
accounting principles:
Income taxes (64,500) - - - (64,500)
Postretirement
benefits (26,500) - - - (26,500)
Net income (loss) (157,434) 7,641 422 (40,130) (189,501)
Per share data:
Income (loss) before
cumulative effect (1.74) .20 .01 (1.05) (2.58)
Cumulative effect on prior
years of changes in
accounting principles:
Income taxes (1.69) - - - (1.69)
Postretirement benefits (.69) - - - (.69)
Net income (loss) (4.12) .20 .01 (1.05) (4.96)
Cash dividends .20 .20 .20 .20 .80
Market price:
High 34.375 29.125 28.000 27.000
Low 29.375 25.625 21.625 22.625
Number of stores at
end of period 1,224 1,214 1,204 1,193
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The management of The Great Atlantic & Pacific Tea Company, Inc. has
prepared the consolidated financial statements and related financial data
contained in this Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles appropriate to our
business and, by necessity and circumstance, include some amounts which were
determined using management's best judgments and estimates with appropriate
consideration to materiality. Management is responsible for the integrity
and objectivity of the financial statements and other financial data
included in this report. To meet this responsibility, management maintains
a system of internal accounting controls to provide reasonable assurance
that assets are safeguarded and that accounting records are reliable.
Management supports a program of internal audits and internal accounting
control reviews to provide assurance that the system is operating
effectively.
The Board of Directors pursues its responsibility for reported financial
information through its Audit Review Committee. The Audit Review Committee
meets periodically and, when appropriate, separately with management,
internal auditors and the independent auditors, Deloitte & Touche, to review
each of their respective activities.
/s/James Wood /s/Fred Corrado
James Wood Fred Corrado
Chairman of the Board Vice Chairman of the Board,
and Chief Executive Officer Chief Financial Officer and
Treasurer
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of The Great Atlantic & Pacific
Tea Company, Inc.:
We have audited the accompanying consolidated balance sheets of The Great
Atlantic & Pacific Tea Company, Inc. and its subsidiary companies as of
February 26, 1994 and February 27, 1993 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of
the three fiscal years in the period ended February 26, 1994. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Great Atlantic &
Pacific Tea Company, Inc. and its subsidiary companies at February 26, 1994
and February 27, 1993 and the results of their operations and their cash
flows for each of the three fiscal years in the period ended February 26,
1994 in conformity with generally accepted accounting principles.
/s/Deloitte & Touche
Parsippany, New Jersey
April 28, 1994
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands, except per share figures)
Fiscal 1993 Fiscal 1992 Fiscal 1991 Fiscal 1990Fiscal 1989
(52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks)
Operating Results
Sales $10,384,077 $10,499,465 $11,590,991 $11,390,943 $11,147,997
Income (loss) before
cumulative effect 3,959 (98,501) 70,664 150,954 146,698
Cumulative effect on
prior years of
changes in
acctg. principles:
Income taxes - (64,500) - - -
Postretirement
benefits - (26,500) - - -
Net income (loss) 3,959 (189,501) 70,664 150,954 146,698
Per Share Data
Income (loss) before
cumulative effect .10 (2.58) 1.85 3.95 3.84
Cumulative effect on
prior years of
changes in
acctg. principles:
Income taxes - (1.69) - - -
Postretirement benefits - (.69) - - -
Net income (loss) .10 (4.96) 1.85 3.95 3.84
Cash dividends .80 .80 .80 .775 .675
Financial Position
Current assets 1,230,339 1,221,492 1,255,908 1,319,894 1,211,592
Current liabilities 1,151,132 1,164,723 1,082,042 1,203,643 1,131,411
Working capital 79,207 56,769 173,866 116,251 80,181
Current ratio 1.07 1.05 1.16 1.10 1.07
Total assets 3,098,695 3,090,930 3,293,267 3,415,045 2,967,297
Long-term deb t 544,399 414,301 486,129 532,510 329,286
Capital lease
obligations 162,866 182,066 206,003 220,892 233,564
Equity
Shareholders' equity 994,417 1,034,330 1,253,106 1,221,270 1,092,164
Book value per share 26.02 27.06 32.79 31.96 28.59
Weighted average shares
outstanding 38,220,000 38,219,000 38,211,000 38,206,000 38,198,000
Number of registered
shareholders 11,831 12,309 12,871 14,210 15,045
Other
Number of employees 94,000 90,000 94,600 99,300 91,000
Number of stores at
year end 1,173 1,193 1,238 1,275 1,215
Total store area
(square feet) 37,908,000 37,741,000 38,742,000 39,353,000 36,369,000
SHAREHOLDER INFORMATION
Executive Offices
Box 418
2 Paragon Drive
Montvale, NJ 07645
Telephone 201-573-9700
Transfer Agent and Registrar
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
Telephone 212-936-5100
Independent Auditors
Deloitte & Touche
Two Hilton Court
Parsippany, New Jersey 07054
Shareholder Inquiries, Publications and Address Changes
Shareholders, security analysts, members of the media and others interested
in further information about the Company are invited to contact the
Corporate Affairs Department at the Executive Offices in Montvale, New
Jersey.
Correspondence concerning address changes should be directed to:
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
Telephone 212-936-5100
Form 10-K
Copies of Form 10-K filed with the Securities and Exchange Commission will
be provided to shareholders upon written request to the Secretary at the
Executive Offices in Montvale, New Jersey.
Annual Meeting
The Annual meeting of Shareholders will be held at 10:00 a.m. on Tuesday,
July 12, 1994 at the Park Ridge Marriott Hotel, Park Ridge, New Jersey.
Shareholders are cordially invited to attend.
Common Stock
Common stock of the Company is listed and traded on the New York Stock
Exchange under the ticker symbol "GAP" and has unlisted trading privileges
on the Boston, Midwest, Philadelphia, Cincinnati, and Pacific Stock
Exchanges. The stock is reported in newspapers and periodical tables as
"GtAtPc."
Exhibit 21
SUBSIDIARIES
STATE
COMPANIES INCORPORATED
A&P Wine and Spirits, Inc.
Massachusetts
ANP Properties I Corp. Delaware
ANP Sales Corp. Maryland
APG III, Inc. South
Dakota
APW Produce Company, Inc. New York
APW Supermarket Corporation Delaware
APW Supermarkets, Inc. New York
Big Star, Inc. Georgia
175946 Canada Inc. (NRO) Canada
The Great Atlantic and Pacific Tea Company, Limited (NRO)
Canada
The Great Atlantic & Pacific Company of Canada, Limited
d/b/a A&P and New Dominion Canada
A&P Drug Mart Limited Ontario
A&P Properties Limited Ontario
New Miracle Food Mart, Inc. Canada
Borman's, Inc. d/b/a Farmer Jack Delaware
Compass Foods, Inc. Delaware
Family Center, Inc. d/b/a Family Mart Delaware
Futurestore Food Markets, Inc. Delaware
The Great Atlantic & Pacific Tea Company of Vermont, Inc.
Vermont
Kohl's Food Stores, Inc. Wisconsin
Kwik Save Inc.
Pennsylvania
LO-LO Discount Stores, Inc. Texas
Richmond, Incorporated
d/b/a Pantry Pride & Sun, Inc. Delaware
St. Pancras Company Limited Bermuda
St. Pancras Too, Limited Bermuda
Shopwell, Inc. d/b/a Food Emporium Delaware
Southern Acquisition Corporation Delaware
Southern Development, Inc. of Delaware Delaware
Super Fresh Food Markets, Inc. Delaware
Super Fresh Food Markets of Maryland, Inc. Maryland
Super Fresh/Sav-A-Center, Inc. Delaware
Super Fresh Food Markets of Virginia, Inc. Delaware
Super Market Service Corp.
Pennsylvania
Super Plus Food Warehouse, Inc. Delaware
Supermarket Distribution Service Corp. New Jersey
Supermarket Distribution Service - Florence, Inc. New Jersey
Supermarket Distribution Services, Inc. Delaware
Supermarket Systems, Inc. Delaware
The South Dakota Great Atlantic & Pacific Tea Company, Inc.
South Dakota
Transco Service-Milwaukee, Inc. New Jersey
Waldbaum, Inc. d/b/a Waldbaum, Inc. and Food Mart New York
W.S.L. Corporation New Jersey
2008 Broadway, Inc. New York
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 2-92428 on Form S-8, Post Effective Amendment No. 7 to Registration
Statement No. 2-59290 on Form S-8 and Post Effective Amendment No. 3 to
Registration Statement No. 2-73205 on Form S-8 of our reports dated
April 28, 1994, appearing in and/or incorporated by reference in this
Annual Report on Form 10-K of The Great Atlantic & Pacific Tea Company,
Inc. for the year ended February 26, 1994.
/s/ Deloitte & Touche
May 23, 1994
