Conformed 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 24, 1996
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 No X
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 7, 1996 was $ 595,535,908.
The number of shares of common stock outstanding at May 7, 1996 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 1995 Annual
Report to Shareholders. The Registrant has filed with the S.E.C. since the
close of its last fiscal year ended February 24, 1996, 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 operated 1,014 stores
averaging 34,200 square feet per store as of February 24, 1996. In addition,
the Company began franchising its Canadian Food Basics stores in fiscal 1995.
As of February 24, 1996, the Company had 7 Food Basics Franchisee stores in
Canada averaging 25,400 square feet per store. On the basis of reported
sales for fiscal 1995, the Company believes that it is one of the ten largest
retail food chains in the United States and that it had 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, Sav-A-Center, Farmer Jack,
Kohl's, Food Emporium, Waldbaum's, Food Mart, Food Bazaar, Miracle Food Mart,
Ultra Mart, Futurestore, Dominion, Food Basics and Compass Foods, the Company
sells groceries, meats, fresh produce and other items commonly offered in
supermarkets. In addition, many stores have bakery, delicatessen, pharmacy,
floral, 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, and an ice cream plant. The products processed in these facilities
are sold under the Company's own brand names which include America's Choice,
Master Choice, Health Pride, Eight O'Clock, Bokar, Royale, Savings Plus, Jane
Parker and Wesley's Quaker Maid. 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
The Company is engaged in a continuing program of modernizing its corporate
operations and retail stores. During fiscal 1995, the Company expended
approximately $236 million for capital projects. The Company's plans for
fiscal 1996 anticipate capital expenditures of approximately $310 million
which include the opening of 39 new supermarkets and 1 new liquor store, the
remodeling or expansion of 94 stores and converting the format of 40 Canadian
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 relationships with its suppliers.
The Company maintains processing facilities which produce coffee, dairy and
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.
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Employees
As of the close of fiscal 1995, the Company had approximately 89,000
employees, of which 70% were employed on a part-time basis. Approximately
88% of the Company's employees are covered by union contracts.
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,
effective 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 1995 Annual Report to
Shareholders on pages 24 and 28 and is herein incorporated by reference.
- 2 -
ITEM 2. Properties
At February 24, 1996, the Company operated 1,014 retail stores.
Approximately 7% of the Company's stores are owned, while the remainder are
leased. These stores are geographically located as follows:
New England States:
Connecticut............. 56
Massachusetts........... 22
New Hampshire........... 1
Vermont................. 2
-----
Total................. 81
Middle Atlantic States:
District of Columbia.... 1
Delaware................ 8
Maryland................ 50
New Jersey.............. 111
New York................ 186
Pennsylvania............ 44
-----
Total................. 400
Mid-Western States:
Michigan................ 97
Wisconsin............... 51
-----
Total................. 148
Southern States:
Alabama................. 4
Georgia................. 45
Kentucky................ 2
Louisiana............... 26
Mississippi............. 7
North Carolina.......... 23
South Carolina.......... 8
Virginia................ 51
West Virginia........... 6
-----
Total................. 172
Total United States... 801
Ontario, Canada........... 213
-----
Total Stores.......... 1,014
=====
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The total area of all retail stores is approximately 34.7 million square feet
averaging 34,200 square feet per store. The stores built by the Company over
the past several years and those planned for fiscal 1996, generally range in
size from 50,000 to 65,000 square feet, of which approximately 65% to 70% is
utilized as selling area.
The Company operates two coffee roasting plants, two bakeries, one
delicatessen food kitchen, and an ice cream plant 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 $49 million as of February 24, 1996.
ITEM 3. Legal Proceedings
The information required is contained in the 1995 Annual Report to
Shareholders on page 28 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 1995.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The information required is contained in the 1995 Annual Report to
Shareholders on pages 29, 30 and 31 and is herein incorporated by reference.
ITEM 6. Selected Financial Data
The information required is contained on page 31 of the 1995 Annual Report to
Shareholders and is herein incorporated by reference.
ITEM 7. Management's Discussion and Analysis
The information required is contained in the 1995 Annual Report to
Shareholders on pages 15 through 18 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 1995 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 1995 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.
-4-
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.......... 66 Chairman of the Board and Chief Executive
Officer
Fred Corrado........ 56 Vice Chairman of the Board and Chief Financial
Officer
Christian W.E. Haub. 31 President and Chief Operating Officer
Peter J. O'Gorman... 57 Executive Vice President - International Store
and Product Development
Gerald L. Good...... 53 Executive Vice President - Marketing and
Merchandising
J. Wayne Harris..... 57 Executive Vice President - Canadian Operations
George Graham....... 46 Senior Vice President - Chief Merchandising
Officer
John D. Moffatt..... 48 Chairman and Chief Executive Officer -
The Great Atlantic & Pacific Company of Canada, Limited
Ivan K. Szathmary... 59 Senior Vice President - Chief Services Officer
Robert G. Ulrich.... 61 Senior Vice President - General Counsel
Corporate officers of the Company are elected annually and serve at the
pleasure of the Board of Directors; each of the executive officers, with the
exception of Mr. Moffatt, 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 as Vice Chairman of the Board on October 6, 1992. He
has also served as Chief Financial Officer since joining the Company in
January 1987. Mr. Corrado also served as Treasurer of the Company in 1987
and from April 18, 1989 through December 5, 1995. Mr. Corrado has been a
member of the Board of Directors of the Company since December 4, 1990, and
is currently the Vice Chairman of the Executive Committee and a member of the
Finance and Retirement Benefits Committees.
Mr. Haub was elected President and Chief Operating Officer of the Company on
December 7, 1993. Prior to assuming his present position he served as
Corporate Vice President, Development and Strategic Planning, since joining
the Company in 1991. Prior thereto and during the past five years, Mr. Haub
was a partner in the investment banking firm, Global Reach, which he had
joined from the investment banking firm of Dillon Read & Co., Inc. in New
York City. Mr. Haub has been a member of the Board of Directors of the
Company since December 3, 1991 and is a member of the Finance Committee.
Mr. O'Gorman was elected Executive Vice President - International Store and
Product Development on June 26, 1995. During the past five years he was
Executive Vice President - Development and Strategic Planning, and Executive
Vice President - Development.
Mr. Good was elected Executive Vice President - Marketing and Merchandising
on October 3, 1994. During the past five years and prior to assuming his
present position he served as Senior Vice President and Chairman, The Great
Atlantic & Pacific Company of Canada, Limited, Senior Vice President - Field
Administration, and as Vice President - Chief Administrative Officer.
-5-
Mr. Harris was elected Executive Vice President - Canadian Operations on
December 12, 1995. Prior thereto, he had been successively Executive Vice
President, Chairman Waldbaum's, Inc. and Chief Operating Officer - U.S.
Operations. In 1993 Mr. Harris was Senior Vice President - Northeast
Operations, and prior thereto Vice President - Operations Greater New York
Metropolitan area. 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.
Mr. Graham was elected Senior Vice President - Chief Merchandising Officer in
March 1990. Prior to assuming his present position he was President, Metro
Group of the Company.
Mr. Moffatt was elected Chairman and Chief Executive Officer of The Great
Atlantic & Pacific Company of Canada, Limited effective upon his hire on
September 1, 1994. Prior thereto and during the past five years he was
president of Cott Corporation's Control Brands Division in Ontario, and from
January 1989 to November 1992 he was President, Eastern Division, First
National Supermarkets in Windsor Locks, Connecticut.
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.
The Company has filed with the Commission since the close of its fiscal year
ended February 24, 1996 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 14 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 1995 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 1995 definitive proxy
statement on pages 1 and 7 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 1995 Annual Report to Shareholders. The
following required items, appearing on pages 19 through 30 of the 1995
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
-6-
2) Financial Statement 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) Management Compensation Exhibit 10)b) to Form 10-K
Agreements for the fiscal years ended
February 25, 1989,
February 24, 1990, and
Exhibit 10)a) for the fiscal
years ended
February 26, 1994, and
February 25, 1995
b) Supplemental Executive Exhibit 10)b) to Form 10-K
Retirement Plan, amended for the fiscal year ended
and restated February 27, 1993
c) 1975 Stock Option Plan, Exhibit 10) to Form 10-K for
as amended 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
e) 1994 Stock Option Plan Exhibit 10)e) to Form 10-K
for the fiscal year ended
February 25, 1995
f) 1994 Stock Option Plan Exhibit 10)f) to Form 10-K
for Non-Employee Directors for the fiscal year ended
February 25, 1995
g) Competitive Advance and Exhibit 10) to Form 10-Q
Revolving Credit Facilities for the quarter ended
Agreement dated as of December 2, 1995, filed on
December 12, 1995. Form SE.
-7-
Exhibit Incorporation by reference
Numbers Description (If applicable)
11) Not Applicable
12) Not Applicable
13) 1995 Annual Report to Shareholders
18) Not Applicable
21) Subsidiaries of Registrant
22) Not Applicable
23) Independent Auditors' Consent
24) Not Applicable
27) Financial Data Schedule
28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the fiscal year ended February
24, 1996.
-8-
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 14, 1996 By: /s/ Fred Corrado
Fred Corrado
Vice Chairman of the Board and
Chief Financial Officer
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 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/ Henry W. Van Baalen Director
Henry W. Van Baalen
/s/ R.L. "Sam" Wetzel Director
R.L. "Sam" Wetzel
-9-
The above-named persons signed this report on behalf of the registrant on
May 14, 1996.
/s/ Kenneth A. Uhl Vice President, Controller May, 14, 1996
Kenneth A. Uhl Date
-10-
COMPARATIVE HIGHLIGHTS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands, except per share figures)
- -----------------------------------------------
Fiscal 1995 Fiscal 1994 Fiscal 1993
----------- ----------- -----------
Sales $10,101,356 $10,331,950 $10,384,077
Income (loss) from operations 151,734 (57,530) 68,280
Income (loss) before cumulative
effect of accounting change 57,224 (166,586) 3,959
Net income (loss) 57,224 (171,536) 3,959
Income (loss) per share before
cumulative effect of
accounting change 1.50 (4.36) .10
Net income (loss) per share 1.50 (4.49) .10
Cash dividends per share .20 .65 .80
Expenditures for property 236,139 214,886 267,329
Depreciation and amortization 225,449 235,444 235,910
Working capital 178,307 97,277 79,207
Shareholders' equity 822,785 774,914 994,417
Debt to total capitalization .49 .53 .45
Book value per share 21.53 20.27 26.02
New store openings 30 22 16
Number of stores at year end 1,014 1,108 1,173
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Fiscal 1995 Compared with 1994
Sales for fiscal 1995 were $10.1 billion, a net decrease of $231 million or
2.2% when compared to fiscal 1994 sales of $10.3 billion. U.S. sales
decreased $176 million or 2.1% compared to fiscal 1994. U.S. same store
sales, which include replacement stores, were down 0.2% from the prior year.
In Canada, sales of $1.7 billion were $55 million or 3.1% below fiscal 1994.
Canada same store sales, which include replacement stores, were down 1.6%
from the prior year.
During fiscal 1995, the Company opened 27 new supermarkets and 3 new liquor
stores, remodeled or expanded 76 stores, and closed 124 stores, of which 6
were converted to Food Basics Franchisee stores in Canada, and 8 in the Rhode
Island market which were sold to Edwards Super Food Stores in the first
quarter of fiscal 1995. The Company recorded sales to the Food Basics
Franchisees of $6 million in fiscal 1995. The Company closed 190 stores,
excluding replacement stores, since the beginning of fiscal 1994. The store
closures, excluding replacement stores, since the beginning of fiscal 1994
reduced comparative sales by approximately $422 million or 4.1% in fiscal
1995. The opening of 33 new stores, excluding 19 stores that replaced 21
older, outmoded stores, since the beginning of fiscal 1994 added
approximately $219 million or 2.1% to sales in fiscal 1995. Same store
sales, including replacement stores, for fiscal 1995 decreased 0.5% from the
prior year. Average weekly sales per store were approximately $179,600 in
fiscal 1995 versus $173,000 in fiscal 1994 for a 3.8% increase.
Gross margin as a percent of sales increased 0.6% to 29.1% for the current
year from 28.5% for the prior year resulting primarily from increased gross
margin rates in both the U.S. and Canada partially offset by increased
promotional price reductions in the U.S. The gross margin dollar decrease of
$8 million is primarily the result of a decrease in sales volume which had an
impact of decreasing margin by approximately $69 million, partially offset
by an increase in gross margin rates of $58 million and an increase in the
Canadian exchange rate of $3 million. The U.S. gross margin decreased $17
million principally as a result of decreased sales volume which resulted in
margins decreasing $50 million partially offset by an increase in gross
margin rates of $33 million. In Canada, gross margin increased $9 million,
primarily resulting from the effect of an increase in gross margin rates of
$25 million and a higher Canadian exchange rate resulting in an increase of
$3 million, offset by sales volume declines which impacted margins by $19
million.
Store operating, general and administrative expense of $2.8 billion in fiscal
1995 declined by approximately $90 million from fiscal 1994. The fiscal 1994
store operating, general and administrative expense includes charges of $27
million for employee buy-out costs incurred as a result of new labor
agreements entered into in Canada and $17 million to cover the cost of
closing 13 non-Miracle stores in Canada. As a percent of sales, store
operating, general and administrative expense for fiscal 1995 decreased to
27.6% from 27.8% for the prior year. U.S. expenses decreased $4 million,
principally as a result of lower store labor costs on reduced sales volume
and reduced advertising costs. Canadian expenses decreased $86 million, as a
result of the charges noted above of $27 million and $17 million recorded in
fiscal 1994, coupled with reduced store labor costs, reduced occupancy costs,
and a decrease in advertising costs.
Included under the Company's 1995 year-end balance sheet captions "Other
accruals" and "Other non-current liabilities" are amounts totaling
approximately $23 million associated with store closing liabilities. During
fiscal 1995 approximately $20 million was charged against the store closing
reserve.
During fiscal 1994, the Company recorded a charge of $127 million
representing the write-off of $50 million of goodwill and the write-down of
$77 million of fixed assets relating to Miracle Food Mart ("Miracle") stores
which were expected to continue to generate operating losses.
As of February 24, 1996, based on current information, the Company has no
reasonable basis to believe that there has been any further impairment of its
existing goodwill. There is currently no goodwill recorded relating to the
Canadian operations.
Interest expense increased $0.2 million from the previous year, primarily due
to increased Canadian borrowings and an increase in average interest rates.
U.S. interest expense decreased from the previous year, as a result of
decreased borrowings and a decrease in average interest rates on short-term
borrowings.
Income before taxes and cumulative effect of accounting change for fiscal
1995 was $81 million as compared to a loss of $129 million in fiscal 1994.
The fiscal 1994 loss included Canadian charges for the write-off of goodwill
and long-lived assets of $127 million, the employee termination/reassignment
program of $27 million and the provision for store closings of $17 million.
Income before taxes and cumulative effect of accounting change for U.S.
operations for fiscal 1995 was $73 million as compared to $81 million for
fiscal 1994, or an 8.9% decrease. For Canadian operations, income before
taxes and cumulative effect of accounting change for fiscal 1995 was $8
million as compared to a loss of $210 million for fiscal 1994, resulting in
an increase of $218 million.
During fiscal 1994, the Company recorded a valuation allowance of $119.6
million against Canadian deferred tax assets, which, based upon current
available evidence, are not likely to be realized. These deferred tax assets
result from tax loss carryforwards, fiscal 1994 operating losses and
deductible temporary differences arising from the Canadian write-off of
goodwill and long-lived assets.
The Company historically provided U.S. deferred taxes on the undistributed
earnings of the Canadian operations. During fiscal 1994, the Company made an
election to permanently reinvest prior years' earnings and, accordingly,
reversed deferred tax liabilities of $27 million associated with the
undistributed earnings of the Canadian operations. Further, this decision
also resulted in a direct charge to equity of approximately $20 million to
eliminate the deferred tax asset related to the Cumulative Translation
Adjustment.
During fiscal 1995, since the Canadian operations generated pretax earnings,
the Company reversed approximately $3.4 million of the valuation allowance.
Although Canada generated pretax earnings in fiscal 1995, the Company was
unable to conclude that realization of such deferred tax assets was more
likely than not due to pretax losses experienced by Canada in prior years.
Accordingly, at February 24, 1996 the Company is continuing to fully reserve
its Canadian net deferred tax assets. The valuation allowance will be
adjusted when and if, in the opinion of Management, significant positive
evidence exists which indicates that it is more likely than not that the
Company will be able to realize the Canadian deferred tax assets.
In addition, during fiscal 1995 the Company recorded a $6.5 million credit
relating to a refund of previously paid taxes in Canada.
Effective February 27, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). As a result, in fiscal 1994 the Company recorded an
after-tax charge of $5 million or $.13 per share as the cumulative effect of
this change on prior years.
Net income for fiscal 1995 was $57 million or $1.50 per share as compared to
a net loss for fiscal 1994 of $172 million or $4.49 per share. Fiscal 1995
net income included the $6.5 million Canadian tax refund. The fiscal 1994 net
loss included after-tax Canadian charges for the write-off of goodwill and
long-lived assets of $127 million, the employee termination/reassignment
program of $27 million, the provision for store closings of $17 million, a
reduction of deferred tax benefits previously recorded of $28 million and the
cumulative effect of adopting SFAS 112 of $5 million, offset by the reversal
of deferred tax liabilities of $27 million in the U.S. associated with the
undistributed earnings of the Canadian operations.
Excluding the U.S. reversal of the deferred tax liabilities associated with
undistributed earnings of $27 million recorded in fiscal 1994, net income
from U.S. operations decreased from $50 million or $1.31 per share in fiscal
1994 to $44 million or $1.15 per share in fiscal 1995. Excluding the above
fiscal 1994 Canadian charges and the fiscal 1995 Canadian tax refund, fiscal
1994 would have resulted in a net loss from Canadian operations of $45
million or $1.17 per share and fiscal 1995 would have resulted in net income
of $7 million or $.18 per share for a $52 million increase.
Fiscal 1994 Compared with 1993
Sales for fiscal 1994 were $10.3 billion, a net decrease of $52 million or
0.5% when compared to fiscal 1993 sales of $10.4 billion. U.S. sales
increased $75 million or 0.9% compared to fiscal 1993 despite the estimated
impact of a fiscal 1993 competitors' strike in the New York metropolitan
market which had a favorable effect on fiscal 1993 sales of approximately
0.3%. In the U.S., same store sales, which include replacement stores, were
up 1.4% excluding the estimated effect of last year's competitors' strike.
Canadian sales were $127 million or 6.6% below fiscal 1993. A lower fiscal
1994 Canadian exchange rate accounted for $110 million of this sales decline.
Canada's fiscal 1994 sales increased approximately $122 million due to a
labor strike in fiscal 1993 in 63 Miracle stores which caused the stores to
be closed for the last 14 weeks of the prior fiscal year. Excluding the
impact of a lower Canadian exchange rate and the strike closure of 63 Miracle
stores for 14 weeks of fiscal 1993, Canadian same store sales were down 7.0%
mainly due to the slow sales recovery of the Miracle stores following the
settlement of the labor strike on the last day of fiscal 1993.
The Company opened 16 new supermarkets and 6 new liquor stores, remodeled and
enlarged 55 stores and closed 87 stores during fiscal 1994. The opening of
38 new stores, excluding replacement stores, since the beginning of fiscal
1993 and the acquisition of Big Star stores in fiscal 1993 added
approximately 3.1% to comparable sales in fiscal 1994. The closure of 171
stores, excluding replacement stores, since the beginning of fiscal 1993
reduced comparative sales by approximately 3.1%. Average weekly sales per
store were approximately $173,000 in fiscal 1994 versus $167,000 in fiscal
1993 for a 3.6% increase.
During fiscal 1994, in an effort to combat the competitive situation in the
Metro Atlanta area, the Company closed 21 Atlanta stores and completed the
launching of its frequent shopper program which began late in fiscal 1993.
As a result, sales for the Metro Atlanta area improved, with same store sales
for the remaining stores up 7.0% over the prior year. However, in Atlanta,
the Company is still experiencing the influx of new competitors, and the
expected continuing high level of competitive openings and pricing activity
pose a threat to the sales and profitability of the Company's Atlanta
operations.
Gross margin as a percent of sales for both fiscal 1994 and 1993 approximated
28.5%. The gross margin dollars decrease of $15 million is a result of a
decline in the Canadian exchange rate of $29 million and a decrease in gross
margin rates, principally in Canada, of $3 million partially offset by an
increase in gross margin volume, principally in the U.S., of $17 million.
The U.S. gross margin dollars increased $51 million, as a result of an
increase in gross margin rates from 28.3% to 28.7% and the impact of the
aforementioned volume increase. The Canadian gross margin dollars decreased
$66 million, resulting from a decrease in gross margin rates from 29.3% to
27.7%, the impact of the exchange rate decline and a volume decline.
Store operating, general and administrative expense of $2.9 billion in fiscal
1994 declined slightly from fiscal 1993. As a percent of sales, such costs
approximated 27.8% in both fiscal 1994 and 1993. U.S. expenses increased $15
million, principally related to depreciation, outside services, store pre-
opening and labor costs. Canadian expenses decreased $31 million primarily
due to lower store labor costs on reduced sales volume, reduced occupancy
costs, a decrease in expenses related to prior year's Miracle strike and the
favorable impact of the decline in the Canadian exchange rate. The Canadian
decrease was partially offset by the cost of the termination/reassignment
program which was $27 million in fiscal 1994, compared to an early retirement
program charge of $17 million in fiscal 1993. The termination/reassignment
program was implemented in conjunction with the Company's decision to convert
a significant number of its Ontario-based stores to a low-cost format. In
addition, the Company recorded a $17 million charge in fiscal 1994 to cover
the cost of closing 13 non-Miracle stores in fiscal 1995.
Included under the Company's 1994 year-end balance sheet captions "Other
accruals" and "Other non-current liabilities" are amounts totaling
approximately $43 million associated with store closing liabilities, which
includes the $17 million recorded in fiscal 1994 for Canada as discussed
above. During fiscal 1994, approximately $15 million was charged against
these reserves, of which approximately $14 million related to the realignment
of store operations reserve established in fiscal 1992. See "Realignment of
Store Operations" footnote for further discussion.
During the third quarter of fiscal 1994 the Company recorded a charge of $127
million representing the write-off of $50 million of goodwill and the write-
down of $77 million of fixed assets relating to Miracle stores which continue
to generate operating losses.
In November 1993, the Miracle store employees went on strike for a 14-week
period. Since Canadian labor laws preclude the replacement of striking
workers, the strike resulted in a complete shutdown of all of the Miracle
stores. The strike was resolved on February 20, 1994 and the Company paid
$17 million in labor settlement costs. These stores were re-opened for
business commencing February 25, 1994. Following the strike, Management
instituted extensive and costly promotional campaigns designed to assist in
its goal of re-establishing pre-strike sales levels. When the Miracle strike
ended, Management determined that the goodwill balance associated with
Miracle stores would be recoverable over its remaining life. This conclusion
was based upon operating projections which comprehended (i) the historical
performance and market shares of the Miracle stores in pre-strike periods,
(ii) the labor savings projected to be realized as a result of the favorable
terms of the settlement (principally wage and benefit concessions and the
ability to use newly hired part-time employees after a certain level of full
and part-time union employment had been realized), and (iii) the regaining of
pre-strike sales and operating margins which was anticipated to occur because
of the implementation of extensive promotional programs in the Miracle
stores.
Management continued to assess the performance of the Miracle stores during
the post-strike period. The anticipated recovery of Miracle sales and
operating margins was not yet realized through June 18, 1994, the end of the
Company's first fiscal quarter or September 10, 1994, the end of the
Company's second fiscal quarter. Through the second quarter same store sales
and margins had declined significantly when compared to the prior year pre-
strike levels. At that time, Management concluded that the following factors
were the principal reasons why the recovery had not yet been realized: (i)
increased price competition from Miracle competitors in response to the
promotional activities implemented by Miracle, (ii) the inability to yet
utilize part-time employees (a key element of the strike settlement which
required increased sales levels to be effective) and (iii) the continuing
effects of the complete shutdown during the strike. Management continued to
believe that these negative trends were temporary and that more time was
required to determine the effectiveness of the promotional programs and the
changed competitive environment. Management continued to closely monitor the
operating performance and sales levels during the third quarter.
Despite the extensive promotional programs, in the period through December 3,
1994, the operating performance of Miracle did not improve and the negative
sales trends and deteriorating margin levels continued. Management believed
that the negative results which occurred subsequent to the strike were no
longer temporary and, accordingly, prior operating cash flow projections of
Miracle were revised. These revised projections indicated that the Miracle
goodwill balance would not be recovered over its remaining life and the full
amount thereof should be written-off.
Further, the levels of sales and operating cash flow achieved through the
first nine months of fiscal 1994, coupled with the reduced expectations of
future Miracle operations, indicated that Miracle's operating results would
not be sufficient to absorb the depreciation and amortization of certain of
its operating fixed assets. In order to measure this impairment, the Company
analyzed the projected operating performance of each store comprising the
Miracle division and reflected the impairment of the fixed assets
attributable to those stores which the Company believes will continue to
generate an operating loss before taking into account depreciation and
amortization expenses. The Company has no current plans to close Miracle
stores despite their negative performance and believes that the total
Canadian operations will be able to absorb their projected fixed costs. The
Company also believes that the fixed assets related to the Canadian
operations exclusive of Miracle are recoverable from operations over their
remaining useful lives.
Interest expense increased in fiscal 1994 when compared to fiscal 1993
primarily due to increased U.S. borrowings of $100 million in long-term Notes
issued in January, 1994 and an increase in average interest rates on short-
term borrowings.
Income (loss) before taxes and cumulative effect of accounting change for
fiscal 1994 was a loss of $129 million as compared to income of $7 million in
fiscal 1993. The fiscal 1994 loss included Canadian charges for the write-
off of goodwill and long-lived assets of $127 million, the employee
termination/reassignment program of $27 million and the provision for store
closings of $17 million. The fiscal 1993 income included a Canadian charge
of $17 million for an employee early retirement program and an estimated $23
million cost impact of the Canadian labor strike.
Income before taxes and cumulative effect of accounting change for U.S.
operations for fiscal 1994 was $81 million as compared to $52 million for
fiscal 1993, or a 54% increase. Excluding the above Canadian charges, loss
before taxes and cumulative effect of accounting change for Canadian
operations would have been $39 million for fiscal 1994 as compared to $5
million for fiscal 1993.
During fiscal 1994, the Company recorded a valuation allowance of $119.6
million against Canadian deferred tax assets, which, based upon current
available evidence, are not likely to be realized. These deferred tax assets
result from tax loss carryforwards, fiscal 1994 operating losses and
deductible temporary differences arising from the Canadian write-off of
goodwill and long-lived assets.
The Company historically provided U.S. deferred taxes on the undistributed
earnings of the Canadian operations. During fiscal 1994, the Company made an
election to permanently reinvest prior years' earnings and, accordingly,
reversed deferred tax liabilities of $27 million associated with the
undistributed earnings of the Canadian operations. Further, this decision
also resulted in a direct charge to equity of approximately $20 million to
eliminate the deferred tax asset related to the Cumulative Translation
Adjustment.
Effective February 27, 1994, the Company adopted SFAS 112. As a result, the
Company recorded an after-tax charge of $5 million or $.13 per share as the
cumulative effect of this change on prior years.
Net loss for fiscal 1994 was $172 million or $4.49 per share as compared to
net income for fiscal 1993 of $4 million or $.10 per share. The fiscal 1994
net loss included after-tax Canadian charges for the write-off of goodwill
and long-lived assets of $127 million, the employee termination/reassignment
program of $27 million, the provision for store closings of $17 million, a
reduction of deferred tax benefits previously recorded of $28 million and the
cumulative effect of adopting SFAS 112 of $5 million, offset by the reversal
of deferred tax liabilities of $27 million in the U.S. associated with the
undistributed earnings of the Canadian operations. The fiscal 1993 net
income included an unfavorable after-tax effect of $14 million for the
Miracle strike and a $10 million charge for the Miracle employee early
retirement program.
Excluding the U.S. reversal of the deferred tax liabilities associated with
undistributed earnings of $27 million, net income of U.S. operations
increased over 50% from $33 million or $.86 per share in fiscal 1993 to $50
million or $1.31 per share in fiscal 1994. Excluding the above Canadian
charges, fiscal 1994 would have resulted in a net loss from Canadian
operations of $45 million or $1.17 per share as compared to $5 million or
$.13 per share for fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the 1995 fiscal year with working capital of $178 million
compared to $97 million and $79 million at February 25, 1995, and February
26, 1994, respectively. The Company had cash and short-term investments
aggregating $100 million at the end of fiscal 1995 compared to $129 million
and $124 million at the end of fiscal 1994 and 1993, respectively.
In December 1995, the Company executed an unsecured five year $400 million
U.S. credit agreement and a five year C$100 million Canadian credit agreement
with a syndicate of banks, enabling it to borrow funds on a revolving basis.
At the end of fiscal 1995, the Company had in excess of $375 million
available in credit facilities, of which approximately $360 million are
committed facilities. See "Indebtedness" footnote for further discussion.
On October 17, 1995, the Company's Canadian subsidiary, The Great Atlantic &
Pacific Company of Canada, Ltd. ("A&P Canada"), issued U.S. $75 million of
unsecured, non-callable 7.78% Notes due November 1, 2000 guaranteed by the
Company. The net proceeds from the issuance of these Notes were used to
repay indebtedness under the Canadian subsidiary's revolving credit facility.
In conjunction with the issuance of the U.S. $75 million Notes, A&P Canada
entered into a five year cross-currency swap agreement expiring November 1,
2000. The cross-currency swap agreement requires A&P Canada to make net
payments to the counterparty based on a fixed interest differential on a semi-
annual basis. The interest differential to be paid under the swap agreement
is accrued over the life of the agreement as an adjustment to the yield of
the 7.78% Notes and is recorded as interest expense. The Company is exposed
to credit losses in the event of nonperformance by the counterparty to its
currency swap. The Company anticipates, however, the counterparty will be
able to fully satisfy their obligations under the contracts.
The Company's loan agreements and certain of its notes contain various
financial covenants which require, among other things, minimum net worth and
maximum levels of indebtedness and lease commitments. The Company was in
compliance with all such financial covenants as of February 24, 1996.
During fiscal 1995, the Company funded its capital expenditures, debt
repayments and cash dividends through internally generated funds combined
with proceeds from bank borrowings.
U.S. bank borrowings were $95 million at February 24, 1996, as compared to
$168 million at February 25, 1995. U.S. bank borrowings during fiscal 1995
were at an average interest rate of 6.4% compared to 5.4% in fiscal 1994.
Canadian bank and commercial paper borrowings were $54 million and $115
million at February 24, 1996, and February 25, 1995, respectively. Canadian
bank and commercial paper borrowings during fiscal 1995 were at an average
interest rate of 8.4% compared to 7.0% in fiscal 1994.
For fiscal 1995, capital expenditures totaled $236 million, which included 27
new supermarkets, 3 new liquor stores, 76 remodels and enlargements and 7
stores which were converted to Food Basics Franchisee stores in Canada, of
which 6 were closed in fiscal 1995 and 1 was closed in fiscal 1994. The
Company had originally planned capital expenditures of approximately $205
million including 25 new supermarkets and 2 new liquor stores, and
approximately 51 remodels and expansions.
For fiscal 1996, the Company has planned capital expenditures of
approximately $310 million and plans to open 39 new supermarkets and 1 new
liquor store, remodel and expand 94 stores and convert approximately 40
stores to Food Basics Franchisee stores in Canada. 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 recoup its opening costs and become
profitable thereafter. Risks inherent in retail real estate investments are
primarily associated with competitive pressures in the marketplace. From
fiscal 1996 through fiscal 2000, the Company intends to improve the use of
technology through scanning and other technological advances to improve
customer service, store operations and merchandising and to intensify
advertising and promotions. The Company currently expects to close
approximately 70 stores in fiscal year 1996, of which approximately 20 will
be converted to Food Basics Franchisee stores in Canada.
The Company plans to open approximately 50 new supermarkets in fiscal 1997
and approximately 50 new supermarkets per year thereafter for several years,
with an attendant increase in square footage of approximately 3% per year,
and to remodel an average of 50 stores per year. The Company's concentration
will be on larger stores in the 50,000 to 65,000 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 $3.8 million for a new store and $1
million for a remodel or enlargement. Traditionally, the Company leases real
estate and expends capital on leasehold improvements and store fixtures and
fittings. 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.
At fiscal year end, the Company's existing senior debt rating was Baa3 with
Moody's Investors Service and BB+ with Standard & Poor's Ratings Group. A
change in either of these ratings could affect the availability and cost of
financing.
The Company's current cash resources, together with cash generated from
operations, will be sufficient for the Company's 1996 capital expenditure
program, mandatory scheduled debt repayments and dividend payments throughout
fiscal 1996.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"). SFAS 121 establishes accounting standards for the impairment
of long-lived assets, certain identifiable intangibles and goodwill related
to those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS 121 requires that (i) long-
lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and (ii)
long-lived assets and certain identifiable intangibles to be disposed of
generally be reported at the lower of carrying amounts or fair value less
cost to sell. The Company adopted the provisions of SFAS 121 during the
fourth quarter of fiscal 1995. The adoption of SFAS 121 did not have an
effect on the financial position or results of operations of the Company.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. SFAS 123 encourages all entities to adopt a
fair value based method of accounting for stock-based compensation plans in
which compensation cost is measured at the date the award is granted based on
the value of the award and is recognized over the employees' service period.
However, SFAS 123 allows an entity to continue to use the intrinsic value
based method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), with proforma
disclosures of net income and earnings per share as if the fair value based
method had been applied. APB 25 requires compensation expense to be
recognized over the employees' service period based on the excess, if any, of
the quoted market price of the stock at the date the award is granted or
other measurement date, as applicable, over an amount an employee must pay to
acquire the stock. SFAS 123 is effective for financial statements for fiscal
years beginning after December 15, 1995. The Company plans to adopt SFAS 123
during fiscal 1996 and to continue to apply the methods prescribed by APB 25.
STATEMENTS OF CONSOLIDATED OPERATIONS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands, except per share figures)
- -----------------------------------------------
Fiscal 1995 Fiscal 1994 Fiscal 1993
----------- ------------ -----------
Sales $10,101,356 $10,331,950 $10,384,077
Cost of merchandise sold (7,166,119) (7,388,495) (7,425,578)
----------- ----------- -----------
Gross margin 2,935,237 2,943,455 2,958,499
Store operating, general
and administrative expense (2,783,503) (2,873,985) (2,890,219)
Write-off of goodwill and
long-lived assets - (127,000) -
----------- ----------- ----------
Income (loss) from operations 151,734 (57,530) 68,280
Interest expense (73,143) (72,972) (63,318)
Interest income 2,501 1,054 1,599
----------- ----------- ----------
Income (loss) before income taxes
and cumulative effect of
accounting change 81,092 (129,448) 6,561
Provision for income taxes (23,868) (37,138) (2,602)
----------- ----------- ----------
Income (loss) before cumulative
effect of accounting change 57,224 (166,586) 3,959
Cumulative effect on prior years of
change in accounting principle:
Postemployment benefits - (4,950) -
----------- ---------- ----------
Net income (loss) $ 57,224 $ (171,536) $ 3,959
=========== ========== ==========
Earnings (loss) per share:
Income (loss) before cumulative
effect of accounting change $ 1.50 $ (4.36) $ .10
Cumulative effect on prior years of
change in accounting principle:
Postemployment benefits - (.13) -
----------- ---------- ----------
Net income (loss) per share $ 1.50 $ (4.49) $ .10
=========== ========== ==========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands)
- ----------------------
Fiscal 1995 Fiscal 1994 Fiscal 1993
----------- ----------- -----------
Common stock:
Balance at beginning of year $ 38,229 $ 38,229 $ 38,229
-------- -------- --------
Balance at end of year $ 38,229 $ 38,229 $ 38,229
======== ======== ========
Capital surplus:
Balance at beginning of year $453,475 $453,475 $453,475
-------- -------- --------
Balance at end of year $453,475 $453,475 $453,475
======== ======== ========
Cumulative translation adjustment:
Balance at beginning of year $(49,227) $(26,103) $(12,809)
Exchange adjustment, (net of tax
for fiscal 1993) (1,709) (3,317) (13,294)
Elimination of deferred income tax asset
(see "Income Taxes" footnote) - (19,807) -
-------- -------- --------
Balance at end of year $(50,936) $(49,227) $(26,103)
======== ======== ========
Retained earnings:
Balance at beginning of year $332,800 $529,179 $555,796
Net income (loss) 57,224 (171,536) 3,959
Cash dividends (7,644) (24,843) (30,576)
-------- -------- --------
Balance at end of year $382,380 $332,800 $529,179
======== ======== ========
Treasury stock, at cost:
Balance at beginning of year $ (363) $ (363) $ (361)
Purchase of Treasury stock - - (2)
-------- -------- --------
Balance at end of year $ (363) $ (363) $ (363)
======== ======== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
The Great Atlantic & Pacific Tea Company, Inc.
February 24, February 25,
(Dollars in thousands) 1996 1995
- --------------------- ------------ -----------
Assets
Current assets:
Cash and short-term investments $ 99,772 $ 128,930
Accounts receivable 205,133 205,619
Inventories 826,510 811,964
Prepaid expenses and other assets 52,687 47,218
---------- ----------
Total current assets 1,184,102 1,193,731
---------- ----------
Property:
Land 129,567 117,508
Buildings 321,830 287,340
Equipment and leasehold improvements 2,084,609 2,080,103
---------- ----------
Total-at cost 2,536,006 2,484,951
Less accumulated depreciation
and amortization (1,074,841) (1,018,708)
---------- ----------
1,461,165 1,466,243
Property leased under capital leases 93,379 107,494
---------- ----------
Property-net 1,554,544 1,573,737
Other assets 138,195 127,320
---------- ----------
$2,876,841 $2,894,788
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 13,040 $ 112,821
Current portion of obligations
under capital leases 13,125 14,492
Accounts payable 452,257 447,081
Book overdrafts 157,022 157,521
Accrued salaries, wages and benefits 148,960 158,109
Accrued taxes 59,407 51,345
Other accruals 161,984 155,085
---------- ----------
Total current liabilities 1,005,795 1,096,454
---------- ----------
Long-term debt 650,169 612,473
Obligations under capital leases 129,887 146,400
Deferred income taxes 130,071 118,579
Other non-current liabilities 138,134 145,968
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 (50,936) (49,227)
Retained earnings 382,380 332,800
Treasury stock, at cost, 9,157 shares (363) (363)
---------- ----------
Total shareholders' equity 822,785 774,914
---------- ----------
$2,876,841 $2,894,788
========== ==========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- --------------------- ----------- ----------- -----------
Cash Flows From Operating Activities:
Net income (loss) $ 57,224 $(171,536) $ 3,959
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Write-off of goodwill and
long-lived assets - 127,000 -
Cumulative effect on prior years of change
in accounting principle:
Postemployment benefits - 4,950 -
Depreciation and amortization 225,449 235,444 235,910
Deferred income tax provision (benefit) on
income (loss) before cumulative effect
of accounting change 9,496 20,836 (19,568)
(Gain) loss on disposal of owned property (3,177) (816) 1,032
(Increase) decrease in receivables 556 (15,197) 1,936
(Increase) decrease in inventories (13,103) 34,048 12,928
Increase in prepaid expenses and
other current assets (573) (1,341) (7,981)
Increase (decrease) in accounts payable 3,944 (9,996) (1,557)
Increase (decrease) in accrued expenses (4,251) 1,295 46,292
Increase (decrease) in store closing
reserves (18,240) 2,012 (34,522)
Increase (decrease) in other accruals
and other liabilities 16,518 (43,603) (19,438)
Other operating activities, net (11,873) (1,756) (5,385)
--------- --------- ---------
Net cash provided by operating activities 261,970 181,340 213,606
--------- --------- ---------
Cash Flows From Investing Activities:
Expenditures for property (236,139) (214,886) (267,329)
Proceeds from disposal of property 34,576 12,113 19,464
Acquisition of business,
net of cash acquired - - (42,948)
--------- --------- ---------
Net cash used in investing activities (201,563) (202,773) (290,813)
--------- --------- ---------
Cash Flows From Financing Activities:
Changes in short-term debt 25,598 (30,912) 12,410
Proceeds under revolving lines of credit
and long-term borrowings 594,613 229,447 237,340
Payments on revolving lines of credit
and long-term borrowings (683,442) (93,085) (146,052)
Principal payments on capital leases (17,953) (15,923) (18,876)
Increase (decrease) in book overdrafts (1,075) (37,720) 39,192
Cash dividends (7,644) (24,843) (30,576)
Purchase of Treasury stock - - (2)
--------- --------- ----------
Net cash provided by (used in)
financing activities (89,903) 26,964 93,436
--------- --------- ---------
Effect of exchange rate changes on cash and
short-term investments 338 (837) (2,113)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Short-term Investments (29,158) 4,694 14,116
Cash and Short-term Investments
at Beginning of Year 128,930 124,236 110,120
--------- --------- ---------
Cash and Short-term Investments
at End of Year $ 99,772 $ 128,930 $ 124,236
========= ========= =========
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. The Company operates retail
supermarkets in the United States and Canada. The U.S. operations are
mainly in the Eastern part of the U.S. and certain parts of the Midwest.
See the following footnotes for additional information on the Canadian
Operations: Operations in Geographic Areas, Write-off of Goodwill and Long-
Lived Assets, Income Taxes and Retirement Plans and Benefits.
Fiscal Year
The Company's fiscal year ends on the last Saturday in February. Fiscal
1995 ended February 24, 1996, fiscal 1994 ended February 25, 1995 and fiscal
1993 ended February 26, 1994. Fiscal 1995, fiscal 1994 and fiscal 1993 were
each comprised of 52 weeks.
Common Stock
The principal shareholder of the Company, Tengelmann
Warenhandelsgesellschaft, owned 53.98% of the Company's common stock as of
February 24, 1996.
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.
Inventories
Store inventories are valued principally at the lower of cost or market with
cost determined under the retail method. Warehouse and 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 or over
their economic useful lives, whichever is less. 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
and dilutive common equivalent shares outstanding during the fiscal year
which was 38,221,707 in fiscal 1995 and 38,220,333 in both fiscal 1994 and
1993. Stock options outstanding were considered common stock equivalents to
the extent that they were dilutive.
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 more
likely than not, 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 that time) and the 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. At February 24, 1996, the Company estimates that the
cash flows projected to be generated by the respective businesses on an
undiscounted basis should be sufficient to recover the existing goodwill
balance over its remaining life (see "Write-off of Goodwill and Long-Lived
Assets" footnote).
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") was issued by the Financial Accounting Standards Board in March
1995. The Company adopted the provisions of SFAS 121 during the fourth
quarter of fiscal 1995. SFAS 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. The Company
reviews the carrying values of its long-lived and identifiable intangible
assets for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable.
The Company has performed a review based upon groups of assets and the
undiscounted estimated future cash flows from such assets and determined
that the carrying value of such assets were recoverable from the respective
cash flows.
The adoption of SFAS 121 did not have an effect on the financial position or
results of operations of the Company.
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.
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 $80 million and $81 million at February 24, 1996 and
February 25, 1995, respectively, are included in the balance sheet caption
"Accrued salaries, wages and benefits."
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The accompanying balance sheets include liabilities with respect to self-
insured workers' compensation and general liability claims. The Company
determines the required liability of such claims based upon various
assumptions which include, but are not limited to, the Company's historical
loss experience, industry loss standards, projected loss development
factors, projected payroll, employee headcount and other internal data. It
is reasonably possible that the final resolution of some of these claims may
require significant expenditures by the Company in excess of its existing
reserves, over an extended period of time and in a range of amounts that
cannot be reasonably estimated.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements in order to conform to the current year presentation.
INVENTORY
Approximately 28.0% of the Company's inventories are valued using the last-
in, first-out ("LIFO") method. Such inventories would have been $14 million
and $15 million higher at February 24, 1996 and February 25, 1995,
respectively, if the retail and first-in, first-out methods were used.
During fiscal 1995, the Company recorded a LIFO charge of approximately $2
million. During fiscal 1994 and 1993, the Company recorded a LIFO credit of
approximately $2 million and $3 million, respectively. Liquidation of LIFO
layers in the periods reported did not have a significant effect on the
results of operations.
WRITE-OFF OF GOODWILL AND LONG-LIVED ASSETS
During the third quarter of fiscal 1994, the Company recorded a non-cash
charge of $127 million reflecting $50 million for the write-off of goodwill
related to the acquisition of Miracle Food Mart ("Miracle") stores in Canada
and $77 million for the write-down of certain Miracle fixed assets. Miracle
experienced a work stoppage for a 14-week period at the end of fiscal 1993.
Under Canadian labor laws the stores were closed during this time period.
The labor dispute was settled and the stores re-opened for business on
February 25, 1994. The Company anticipated that the new labor agreement
would have a positive impact on operating results assuming historical sales
levels could be attained. Through the first half of fiscal 1994, the
Company expended significant promotional efforts in order to regain its pre-
strike sales levels. The sales performance through the first half of fiscal
1994 was disappointing and the Company continued to monitor Miracle's
performance through the third quarter. Sales performance in the third
quarter of fiscal 1994 continued to be negative when compared to pre-strike
sales levels. The Company, no longer believing that Miracle's negative
operating performance was temporary, revised its future expected cash flow
projections. These revised projections indicated that the goodwill balance
would not be recoverable over its remaining life. Further, these
projections indicated that the operating results of Miracle would not be
sufficient to absorb the depreciation and amortization of certain of its
operating fixed assets. Accordingly, Miracle's goodwill balance was written-
off and fixed assets relating to Miracle stores which were expected to
continue to generate operating losses were written-down as of the end of the
third quarter of fiscal 1994.
INDEBTEDNESS
Debt consists of:
February 24, February 25,
(Dollars in thousands) 1996 1995
- --------------------- ----------- -----------
9 1/8% Notes, due January 15, 1998 $200,000 $200,000
7.70% Senior Notes, due January 15, 2004 200,000 200,000
7.78% Notes due November 1, 2000 75,000 -
Mortgages and Other Notes, due
1996 through 2014 (average interest
rates at year end of 9.77% and
9.70%, respectively) 39,279 42,249
U.S. Bank Borrowings at 5.73%
and 6.60%, respectively 95,000 168,000
Canadian Commercial Paper at 6.20%
and 7.30%, respectively 7,977 21,085
Canadian Bank Borrowings at 6.03%
and 8.70%, respectively 46,223 94,373
Less unamortized discount on 9 1/8% Notes (270) (413)
-------- --------
663,209 725,294
-------- --------
Less current portion (13,040) (112,821)
-------- --------
Long-term debt $650,169 $612,473
======== ========
As of February 24, 1996, 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 January 15, 1998, and $200 million 7.70% Notes due
January 15, 2004.
On October 17, 1995, the Company's Canadian subsidiary, The Great Atlantic &
Pacific Company of Canada, Ltd.("A&P Canada"), issued U.S. $75 million of
unsecured, non-callable 7.78% Notes due November 1, 2000 guaranteed by the
Company. The net proceeds from the issuance of these Notes were used to
repay indebtedness under the Canadian subsidiary's revolving credit facility.
In conjunction with the issuance of the U.S. $75 million Notes, A&P Canada
entered into a five year cross-currency swap agreement expiring November 1,
2000. The cross-currency swap agreement requires A&P Canada to make net
payments to the counterparty based on a fixed interest differential on a semi-
annual basis. The interest differential to be paid under the swap agreement
is accrued over the life of the agreement as an adjustment to the yield of
the 7.78% Notes and is recorded as interest expense. The Company is exposed
to credit losses in the event of nonperformance by the counterparty to its
currency swap. The Company anticipates, however, the counterparty will be
able to fully satisfy its obligations under the contracts.
In December 1995, the Company executed an unsecured five year $400 million
U.S. credit agreement and a five year C$100 million Canadian credit
agreement with a syndicate of 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 amounting
to $50 million. Borrowings under these U.S. credit agreements were $95
million and $168 million at February 24, 1996, and February 25, 1995,
respectively. The Company pays a facility fee ranging from 3/16% to 1/2%
per annum on the Company's revolving credit facility. A&P Canada has a
C$100 million loan facility with outstanding borrowings of C$74 million at
February 24, 1996. In fiscal 1994, A&P Canada had a C$200 million loan
facility with outstanding borrowings of C$161 million at February 25, 1995.
The Company's loan agreements and certain of its notes contain various
financial covenants which require, among other things, minimum net worth and
maximum levels of indebtedness and lease commitments. The Company was in
compliance with all such financial covenants as of February 24, 1996.
The net book value of real estate pledged as collateral for all mortgage
loans amounted to approximately $49 million as of February 24, 1996.
Combined U.S. bank and Canadian bank and commercial paper borrowings of $139
million as of February 24, 1996 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: 1996-$13 million; 1997-$242
million; 1998-$44 million; 1999-$48 million; 2000-$78 million. Interest
payments on indebtedness were approximately $54 million for fiscal 1995, $52
million for fiscal 1994 and $41 million for fiscal 1993.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
(Dollars in thousands) February 24, 1996 February 25, 1995
- --------------------- ----------------- -----------------
Carrying Fair Carrying Fair
Liabilities: Amount Value Amount Value
-------- -------- -------- --------
9 1/8% Notes, due
January 15, 1998 $199,730 $209,440 $199,587 $202,000
-------- -------- -------- --------
7.70% Senior Notes, due
January 15, 2004 $200,000 $198,360 $200,000 $174,000
-------- -------- -------- --------
7.78% Notes due
November 1, 2000 $ 75,000 $ 75,713 $ - $ -
-------- -------- -------- --------
Total Indebtedness $663,209 $671,992 $725,294 $701,707
======== ======== ======== ========
Fair value for the public debt securities is based on quoted market prices.
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 24, 1996, and February 25, 1995. As of February 24, 1996, and
February 25, 1995, the carrying values of cash and short-term investments,
accounts receivable and accounts payable approximated fair values due to the
short-term maturities of these instruments.
At February 24, 1996, the fair value of the cross-currency swap agreement was
approximately $0.9 million. The fair value was determined by the
counterparty which is a widely recognized investment banker.
As of the end of fiscal 1995, the Company holds equity securities of both
common and cumulative preferred stock in Isosceles PLC which were written-
off in their entirety during fiscal 1992. There are no quoted market prices
for these securities and it is not practicable, considering the materiality
of these securities to the Company, to obtain an estimate of their fair
value. The Company believes that the fair value for these securities is
zero based upon Isosceles' current and prior year results.
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 also leases some
store equipment and trucks.
The consolidated balance sheets include the following:
February 24, February 25,
(Dollars in thousands) 1996 1995
- --------------------- ------------ ------------
Real property leased under capital leases $206,543 $238,906
Equipment leased under capital leases - 663
-------- --------
206,543 239,569
Accumulated amortization (113,164) (132,075)
-------- --------
$ 93,379 $107,494
======== ========
The Company did not enter into any new capital leases during fiscal 1995 and
1994. The Company entered into $2 million of new capital leases during
fiscal 1993. Interest paid as part of capital lease obligations was
approximately $18, $20 and $22 million in fiscal 1995, 1994 and 1993,
respectively.
Rent expense for operating leases consists of:
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- --------------------- ----------- ----------- -----------
Minimum rentals $154,439 $154,488 $151,289
Contingent rentals 5,890 6,619 6,883
-------- -------- --------
$160,329 $161,107 $158,172
======== ======== ========
Future minimum annual lease payments for capital leases and noncancelable
operating leases in effect at February 24, 1996 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 Property Leases
- ------ -------- ---------
1996 $ 29,685 $ 153,329
1997 27,740 145,958
1998 26,384 137,857
1999 24,237 129,399
2000 23,065 121,499
2001 and thereafter 130,532 1,072,075
-------- ----------
261,643 $1,760,117
==========
Less executory costs (2,485)
--------
Net minimum rentals 259,158
Less interest portion (116,146)
--------
Present value of net minimum rentals $143,012
========
INCOME TAXES
The components of income (loss) before income taxes and cumulative effect of
accounting change are as follows:
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- ---------------------- ----------- ----------- -----------
United States $73,364 $ 80,509 $ 52,280
Canadian 7,728 (209,957) (45,719)
------- --------- --------
Total $81,092 $(129,448) $ 6,561
======= ========= ========
The provision for income taxes before cumulative effect of accounting change
consists of the following:
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- --------------------- ----------- ----------- -----------
Current:
Federal $15,129 $ 8,577 $ 13,500
Canadian (5,622) 2,687 5,744
State and local 4,865 5,038 2,926
------- -------- --------
14,372 16,302 22,170
------- -------- --------
Deferred:
Federal 9,387 (9,922) 2,723
Canadian 3,448 (88,948) (22,486)
State and local 109 114 195
Canadian valuation
allowance (3,448) 119,592 -
------- -------- --------
9,496 20,836 (19,568)
------- -------- --------
$23,868 $ 37,138 $ 2,602
======= ======== ========
The deferred income tax provision (benefit) 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,
Canadian net operating tax loss carryforwards and the Canadian valuation
allowance.
The Canadian deferred income tax benefit for fiscal 1994 relates primarily
to net operating tax loss carryforwards, the write-off of goodwill and
certain long-lived assets and other temporary differences associated with
the Company's operations in Canada. Management has assessed the likelihood
of realizing the Canadian net deferred income tax assets and, based on all
available evidence, expects it is not likely that such assets will be
realized. Accordingly, during the third quarter of fiscal 1994, the Company
recorded a valuation allowance to reserve for previously recognized deferred
tax benefits and continued through the remainder of fiscal 1994 to provide a
valuation allowance against its deferred income tax benefits. At February
25, 1995, a valuation allowance existed for the entire amount of net
deferred income tax assets related to Canada. During fiscal 1995, since the
Canadian operations generated pretax earnings, the Company reversed
approximately $3.4 million of the valuation allowance. Although Canada
generated pretax earnings in fiscal 1995, the Company was unable to conclude
that realization of such deferred tax assets was more likely than not due to
pretax losses experienced by Canada in prior years. Accordingly, at
February 24, 1996, the Company is continuing to fully reserve its Canadian
net deferred tax assets. The valuation allowance will be adjusted when and
if, in the opinion of Management, significant positive evidence exists which
indicates that it is more likely than not that the Company will be able to
realize the Canadian deferred tax assets.
The Company historically provided U.S. deferred taxes on the undistributed
earnings of the Canadian operations. During fiscal 1994, the Company made
an election to permanently reinvest prior years' earnings and, accordingly,
reversed deferred tax liabilities of $27 million associated with the
undistributed earnings of the Canadian operations. Further, in conjunction
with this decision, the Company recorded a direct charge to equity of
approximately $20 million to eliminate the deferred tax asset related to the
Cumulative Translation Adjustment.
The Company's Canadian net operating tax loss carryforwards of approximately
$192 million will expire between February 1999 and February 2003.
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.
A reconciliation of income taxes at the 35% federal statutory income tax
rate for fiscal 1995, 1994 and 1993 to income taxes as reported is as
follows:
(Dollars in thousands) Fiscal 1995 Fiscal 1994Fiscal 1993
- --------------------- ----------- ----------------------
Income taxes computed at federal
statutory income tax rate $28,382 $(45,307) $ 2,296
Effect of 1% statutory rate change - - 2,519
Targeted jobs tax credits - (1,300) (1,656)
State and local income taxes, net of
federal tax benefit 3,233 3,348 2,031
Tax rate differential relating
to Canadian operations (4,879) (12,775) (3,261)
Canadian valuation allowance (3,448) 119,592 -
Goodwill 580 580 673
Reduction of tax liabilities
associated with undistributed
earnings - (27,000) -
------- -------- -------
Income taxes, as reported $23,868 $ 37,138 $ 2,602
======= ======== =======
The tax rate differential relating to Canadian operations in the above table
includes a $6.5 million benefit related to a refund of previously paid
Canadian taxes.
Income tax payments for fiscal 1995, 1994 and 1993 were approximately $19,
$12 and $15 million, respectively.
The components of net deferred tax assets (liabilities) are as follows:
February 24, February 25,
(Dollars in thousands) 1996 1995
- --------------------- ------------ ------------
Current assets:
Insurance reserves $ 27,372 $ 22,976
Other reserves 8,172 11,240
Lease obligations 1,994 2,090
Pension obligations 11,137 9,331
Miscellaneous 4,968 5,033
-------- --------
53,643 50,670
-------- --------
Current liabilities:
Inventories (15,172) (15,382)
Health and Welfare (10,007) (10,071)
Miscellaneous (2,678) (2,165)
-------- --------
(27,857) (27,618)
-------- --------
Valuation allowance (2,660) (4,706)
-------- --------
Deferred income taxes included in
prepaid expenses and other assets $ 23,126 $ 18,346
======== ========
Non-current assets:
Alternative minimum tax credits $ - $ 23,500
Isosceles investment 42,617 42,617
Fixed assets 10,129 14,504
Other reserves 7,191 14,038
Lease obligations 20,519 21,228
Canadian loss carryforwards 85,494 78,709
Insurance reserves 8,820 8,400
Accrued postretirement and
postemployment benefits 28,569 27,798
Miscellaneous 17,727 17,365
--------- ---------
221,066 248,159
--------- ---------
Non-current liabilities:
Fixed assets (193,432) (204,674)
Pension obligations (20,619) (17,552)
Miscellaneous (25,800) (29,626)
--------- ---------
(239,851) (251,852)
--------- ---------
Valuation allowance (111,286) (114,886)
--------- ---------
Deferred income taxes $(130,071) $(118,579)
========= =========
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 cost are as follows:
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- --------------------- ----------- ----------- -----------
Service cost $ 9,340 $ 11,182 $ 10,665
Interest cost 23,976 22,858 22,997
Actual return on plan assets (42,724) (17,448) (61,730)
Net amortization and deferral 16,362 (9,246) 35,816
-------- -------- --------
Net pension cost $ 6,954 $ 7,346 $ 7,748
======== ======== ========
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 majority of plan assets
is invested in listed stocks and bonds. The funded status of the plans is
as follows:
1995 1994
---------------------- ----------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(Dollars in thousands) Benefits Assets Benefits Assets
- --------------------- ----------- ---------- ----------- ----------
Accumulated benefit obligation:
Vested $267,391 $ 36,396 $212,257 $ 41,243
Nonvested 3,393 1,776 3,218 1,119
-------- -------- -------- --------
$270,784 $ 38,172 $215,475 $ 42,362
======== ======== ======== ========
Projected benefit obligation $279,667 $ 40,324 $224,720 $ 44,012
Plan assets at fair value 333,100 16,752 270,939 25,368
-------- -------- -------- --------
Excess (deficiency) of assets
over projected benefit obligation 53,433 (23,572) 46,219 (18,644)
Unrecognized net transition
(asset) obligation (8,097) (78) (7,248) 218
Unrecognized net (gain) loss
from experience differences (9,271) 2,649 (9,232) (252)
Unrecognized prior service cost 3,357 4,115 3,609 3,808
Additional minimum liability - (4,614) - (2,522)
-------- -------- -------- --------
Prepaid pension asset
(pension liability) $ 39,422 $(21,500) $ 33,348 $(17,392)
======== ======== ======== ========
During the year ended February 25, 1995, the Company's Canadian subsidiary
and the United Food & Commercial Workers International Union, Locals 175 and
633, entered into an agreement which will result in the amalgamation of
three of the Company's Canadian defined benefit pension plans with the
Canadian Commercial Workers Industry Pension Plan ("CCWIPP"), effective July
1, 1994, subject to the approval of the CCWIPP trustees and the appropriate
regulatory bodies. Under the terms of this agreement, CCWIPP will assume
the assets and defined benefit liabilities of the three pension plans and
the Company will be required to make defined contributions to CCWIPP based
upon hours worked by its employees who are members of CCWIPP. The Company
expects that the necessary approvals will be received by June 1996. At
February 24, 1996, prepaid pension assets of approximately $13 million
related to the aforementioned plans are included in the above table.
Actuarial assumptions used to determine year-end plan status are as follows:
1995 1994
---------------- ---------------
U.S. Canada U.S. Canada
---- ------ ---- ------
Discount rate 7.00% 8.50% 8.50% 9.50%
Weighted average rate of
compensation increase 4.00% 4.00% 5.50% 4.00%
Expected long-term rate of
return on plan assets 8.00% 8.80% 8.50% 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 1996.
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 each of the three fiscal years in the period
ended February 24, 1996.
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 million in both fiscal 1995 and 1993 and $39 million
in fiscal 1994. 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.
Postretirement Benefits
The Company and its wholly-owned subsidiaries provide postretirement health
care and life benefits to certain union and non-union employees. The
Company recognizes the cost of providing postretirement benefits during
employees' active service period.
The components of net postretirement benefits cost are as follows:
(Dollars in millions) Fiscal 1995 Fiscal 1994 Fiscal 1993
- -------------------- ----------- ----------- -----------
Service cost $0.6 $0.6 $0.6
Interest cost 2.9 3.6 3.9
Net amortization and deferral (0.8) - -
---- ---- ----
Net postretirement
benefits cost $2.7 $4.2 $4.5
==== ==== ====
The unfunded status of the plans is as follows:
(Dollars in millions) Fiscal 1995 Fiscal 1994
- --------------------- ----------- -----------
Unfunded accumulated benefit obligation:
Retirees $19.1 $24.0
Fully eligible active plan participants 3.5 3.6
Other active plan participants 13.2 8.2
------ ------
35.8 35.8
------ ------
Unrecognized net gain from
experience differences 15.6 15.0
------ ------
Accrued postretirement costs $51.4 $50.8
====== ======
Assumed discount rate 7.0% 8.5%
====== ======
The assumed rate of future increase in health care benefit cost was 10.0% in
fiscal 1995 and is expected to decline to 5.0% by the year 2025 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 $3.3 million, respectively.
Postemployment Benefits
Effective February 27, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). SFAS 112 requires 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's previous accounting policy had been to accrue for workers'
compensation and a principal portion of long-term disability benefits and to
expense other postemployment benefits, such as short-term disability, as
incurred. As a result of adopting SFAS 112, the Company recorded a charge
of $5.0 million, net of applicable income taxes of $3.9 million, as the
cumulative effect of recording the obligation as of the beginning of fiscal
1994. The effect of adopting SFAS 112 had an immaterial effect on the
financial results before the cumulative effect of accounting change for
fiscal 1994.
STOCK OPTIONS
On March 18, 1994, the Board of Directors approved 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 or Stock
Appreciation Rights ("SAR's"). Options and SAR's issued under this plan are
granted at the fair market value of the Company's common stock at the date
of grant. 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 669,000
options and 10,000 SAR's were granted in fiscal 1995.
On March 18, 1994, the Board of Directors approved a 1994 Stock Option Plan
for Directors of the Company. This plan provides for the granting of up to
100,000 stock options, which are granted at the fair market value of the
Company's common stock at the date of grant. Options granted under this
plan in fiscal 1995 totaled 1,800.
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 SAR's. Each option was available for grant at the fair
market value of the Company's common stock on the date the option was
granted.
A summary of SAR transactions is as follows:
Officers and Key Employees
- -------------------------- Price Range
Shares Per Share
--------- ---------------
Outstanding February 27, 1993 1,179,125 $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 2,414,125 $21.50 - $65.13
Cancelled or expired (26,500) 39.75 - 59.00
Exercised (2,500) 23.38
--------- ---------------
Outstanding February 25, 1995 2,385,125 $21.50 - $65.13
Granted 10,000 21.88
Cancelled or expired (166,750) 23.38 - 46.38
Exercised (75,625) 21.50 - 24.75
--------- ---------------
Outstanding February 24, 1996 2,152,750 $21.50 - $65.13
========= ===============
Exercisable at:
February 25, 1995 1,575,625 $21.50 - $65.13
February 24, 1996 1,666,500 $21.50 - $65.13
========= ===============
A summary of option transactions is as follows:
Officers, Key Employees and
Board of Directors
- --------------------------- Price Range
Shares Per Share
------ ----------------
Outstanding February 27, 1993 15,000 $27.63
------- ---------------
Outstanding February 26, 1994 15,000 $27.63
Granted 69,800 21.50 - 26.50
------- ---------------
Outstanding February 25, 1995 84,800 $21.50 - $27.63
Granted 670,800 21.88 - 27.88
Cancelled or expired (10,000) 27.88
------- ---------------
Outstanding February 24, 1996 745,600 $21.50 - $27.88
======= ===============
Exercisable at:
February 25, 1995 11,250 $27.63
February 24, 1996 34,100 $21.50 -$27.63
======= ==============
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS 123
encourages all entities to adopt a fair value based method of accounting for
stock-based compensation plans in which compensation cost is measured at the
date the award is granted based on the value of the award and is recognized
over the employees' service period. However, SFAS 123 allows an entity to
continue to use the intrinsic value based method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), with proforma disclosures of net income and earnings per share
as if the fair value based method had been applied APB 25 requires
compensation expense to be recognized over the employees' service period
based on the excess, if any, of the quoted market price of the stock at the
date the award is granted or other measurement date, as applicable, over an
amount an employee must pay to acquire the stock. SFAS 123 is effective for
financial statements for fiscal years beginning after December 15, 1995.
The Company plans to adopt SFAS 123 during fiscal 1996 and to continue to
apply the methods prescribed by APB 25.
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, Sav-A-Center, Dominion, Miracle
Food Mart and Food Basics. Sales in the table below reflect sales to
unaffiliated customers in the United States and Canada.
(Dollars in thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
- --------------------- ----------- ----------- -----------
Sales:
United States $ 8,365,327 $ 8,540,871 $ 8,466,338
Foreign 1,736,029 1,791,079 1,917,739
----------- ----------- -----------
Total $10,101,356 $10,331,950 $10,384,077
=========== =========== ===========
Income (Loss) From Operations:
United States $ 125,118 $ 137,804 $ 101,305
Foreign 26,616 (195,334) (33,025)
----------- ----------- -----------
Total $ 151,734 $ (57,530) $ 68,280
=========== =========== ===========
Assets:
United States $2,454,347 $ 2,482,108 $ 2,528,239
Foreign 422,494 412,680 570,456
---------- ----------- -----------
Total $2,876,841 $ 2,894,788 $ 3,098,695
========== =========== ===========
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 closed certain stores and 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, was
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. These costs, which only included costs subsequent to the
actual store closings, were paid principally over four years. During fiscal
1995 and fiscal 1994, store closing costs of approximately $2 million and
$14 million, respectively, 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. As of February 24, 1996, the Company had utilized the total
amount of this reserve.
In the third quarter of fiscal 1994, the Company recorded a charge in Store
operating, general and administrative expense of $17 million to cover the
cost of closing 13 non-Miracle stores in Canada during fiscal 1995. The
Company utilized $13 million of this reserve in fiscal 1995 and expects to
utilize the remaining portion of this reserve during fiscal 1996. As of
February 24, 1996, all of the stores were closed.
SUMMARY OF QUARTERLY RESULTS
(unaudited)
The table below summarizes the Company's results of operations by quarter
for fiscal 1995 and 1994. 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
- ------------------------ ------- ------- ------- ------- -----
1995
Sales $3,135,514$2,341,171$2,293,597$2,331,074$10,101,356
Gross margin 909,812 669,103 666,121 690,201 2,935,237
Depreciation and
amortization 70,400 52,340 51,957 50,752 225,449
Income from operations 46,884 29,861 29,235 45,754 151,734
Interest expense 22,873 16,197 17,159 16,914 73,143
Net income 14,550 9,384 7,735 25,555 57,224
Per share data:
Net income .38 .25 .20 .67 1.50
Cash dividends .05 .05 .05 .05 .20
Market price:
High 26.250 28.625 28.875 24.875
Low 19.000 23.875 20.000 19.500
Number of stores at
end of period 1,082 1,063 1,043 1,014
- ----------------------------------------------------------------------------
1994
Sales $3,225,359$2,390,914$2,345,597$2,370,080 $10,331,950
Gross margin 912,644 680,911 670,572 679,328 2,943,455
Depreciation and
amortization 75,019 57,063 53,522 49,840 235,444
Income (loss) from
operations 31,778 25,868 (144,568) 29,392 (57,530)
Interest expense 20,809 16,807 17,446 17,910 72,972
Income (loss) before
cumulative effect
of accounting change 7,245 6,057 (185,665) 5,777 (166,586)
Cumulative effect on prior
years of change in
accounting principle:
Postemployment benefits(4,950) - - - (4,950)
Net income (loss) 2,295 6,057 (185,665) 5,777 (171,536)
Per share data:
Income (loss) before
cumulative effect
of accounting change .19 .16 (4.86) .15 (4.36)
Cumulative effect on prior
years of change in
accounting principle:
Postemployment benefits (.13) - - - (.13)
Net income (loss) .06 .16 (4.86) .15 (4.49)
Cash dividends .20 .20 .20 .05 .65
Market price:
High 27.375 24.500 27.125 23.000
Low 22.625 19.875 21.625 17.375
Number of stores at
end of period 1,152 1,123 1,111 1,108
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 reasonable 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 LLP, 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
and Chief Executive Officer Chief Financial Officer
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 24, 1996 and February 25, 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of
the three fiscal years in the period ended February 24, 1996. 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 24, 1996
and February 25, 1995 and the results of their operations and their cash
flows for each of the three fiscal years in the period ended February 24,
1996 in conformity with generally accepted accounting principles.
As discussed in Notes to Consolidated Financial Statements, in fiscal 1994
the Company changed its method of accounting for postemployment benefits to
conform with Statement of Financial Accounting Standards No. 112.
/s/Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1996
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
The Great Atlantic & Pacific Tea Company, Inc.
(Dollars in thousands,
except per share figures)
- ------------------------
Fiscal 1995 Fiscal 1994 Fiscal 1993 Fiscal 1992Fiscal 1991
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
----------- ----------- ----------- ----------------------
Operating Results
Sales $10,101,356 $10,331,950 $10,384,077 $10,499,465 $11,590,991
Income (loss) from
operations 151,734 (57,530) 68,280 44,306 203,854
Depreciation and
amortization 225,449 235,444 235,910 228,976 224,641
Interest expense 73,143 72,972 63,318 66,436 81,416
Income (loss) before
cumulative effect
of accounting
changes 57,224 (166,586) 3,959 (98,501) 70,664
Cumulative effect on
prior years of
changes in
accounting principles:
Postemployment
benefits - (4,950) - - -
Income taxes - - - (64,500) -
Postretirement
benefits - - - (26,500) -
Net income (loss) 57,224 (171,536) 3,959 (189,501) 70,664
Per Share Data
Income (loss) before
cumulative effect
of accounting
changes 1.50 (4.36) .10 (2.58) 1.85
Cumulative effect on
prior years of
changes in
accounting principles:
Postemployment benefits - (.13) - - -
Income taxes - - - (1.69) -
Postretirement benefits - - - (.69) -
Net income (loss) 1.50 (4.49) .10 (4.96) 1.85
Cash dividends .20 .65 .80 .80 .80
Book value per share 21.53 20.27 26.02 27.06 32.79
Financial Position
Current assets 1,184,102 1,193,731 1,230,339 1,221,492 1,255,908
Current liabilities1,005,795 1,096,454 1,151,132 1,164,723 1,082,042
Working capital 178,307 97,277 79,207 56,769 173,866
Current ratio 1.18 1.09 1.07 1.05 1.16
Expenditures for
property 236,139 214,886 267,329 204,870 161,902
Total assets 2,876,841 2,894,788 3,098,695 3,090,930 3,293,267
Current portion of
long-term debt 13,040 112,821 77,755 104,660 55,953
Current portion of
capital
lease obligations 13,125 14,492 16,097 18,021 18,604
Long-term debt 650,169 612,473 544,399 414,301 486,129
Long -term portion of
capital lease
obligations 129,887 146,400 162,866 182,066 206,003
Total debt 806,221 886,186 801,117 719,048 766,689
Debt to total
capitalization .49 .53 .45 .41 .38
Equity
Shareholders' equity 822,785 774,914 994,417 1,034,330 1,253,106
Weighted average shares
outstanding 38,220,000 38,220,000 38,220,000 38,219,000 38,211,000
Number of registered
shareholders 10,010 10,867 11,831 12,309 12,871
Other
Number of employees 89,000 92,000 94,000 90,000 94,600
New store openings 30 22 16 11 18
Number of stores at
year end 1,014 1,108 1,173 1,193 1,238
Total store area
(square feet) 34,669,000 36,441,000 37,908,000 37,741,000 38,742,000
Number of franchised
stores at year end 7 - - - -
Total franchised
stores area
(square feet) 177,936 - - - -
CORPORATE OFFICERS
James Wood
Chairman of the Board
and Chief Executive Officer
Christian W.E. Haub
President and
Chief Operating Officer
Fred Corrado
Vice Chairman of the Board and
Chief Financial Officer
Gerald L. Good
Executive Vice President,
Marketing and Merchandising
J. Wayne Harris
Executive Vice President,
Canadian Operations
Peter J. O'Gorman
Executive Vice President,
International Store and Product
Development
George Graham
Senior Vice President,
Chief Merchandising Officer
Veronica Hackett
Senior Vice President,
Real Estate
Clifford J. Horler
Senior Vice President,
Development
H. Nelson Lewis
Senior Vice President,
Human Resources
Michael J. Rourke
Senior Vice President,
Communications and
Corporate Affairs
Ivan K. Szathmary
Senior Vice President,
Chief Services Officer
Robert G. Ulrich
Senior Vice President,
General Counsel
Peter R. Brooker
Vice President, Planning
and Corporate Secretary
Stephen T. Brown
Vice President, Labor
Relations
Timothy J. Courtney
Vice President, Taxation
Donald B. Dobson
Vice President, Southeast
and Southern Operations
R. Paul Gallant
President, Compass Foods
R. Terrence Galvin
Vice President, Treasurer
Kenneth W. Green
Vice President,
Produce Merchandising
and Procurement
Robert A. Keenan
Vice President,
Chief Internal Auditor
Peter R. Lavoy
Vice President,
Grocery Merchandising
and Procurement
Francis X. Leonard
Vice President,
Real Estate Administration
Mary Ellen Offer
Vice President,
Assistant Corporate Secretary
and Senior Counsel
Brian Pall
Vice President,
Real Estate Development
Richard J. Scola
Vice President,
Assistant General Counsel
J. Paul Stillwell
President, Supermarket
Service Corp.
Craig C. Sturken
Group Vice President,
Michigan Group
Kenneth A. Uhl
Vice President, Controller
William T. Wolverton
Vice President, Warehousing
and Transportation
DIRECTORS
James Wood (c)(d)(e)
Chairman of the Board
and Chief Executive Officer
Rosemarie Baumeister (b)
Executive Vice President,
Tengelmann
Warenhandelsgesellschaft,
Germany
Fred Corrado (c)(d)(e)
Vice Chairman of the Board and
Chief Financial Officer
Christopher F. Edley (a)(b)(c)(e)
President Emeritus and former
President and Chief Executive
Officer of the United Negro
College Fund, Inc.
Christian W.E. Haub (d)
President and
Chief Operating Officer
Helga Haub (c)(d)
Barbara Barnes Hauptfuhrer (a)(c)(d)(e)
Director of various corporations
Paul C. Nagel, Jr. (a)(c)(d)
Director of various corporations
Eckart C. Siess (e)
Former Vice Chairman
of the Board
Fritz Teelen (d)
President, Plus Subsidiary
Tengelmann
Warenhandelsgesellschaft,
Germany
Henry W. Van Baalen (d)
Business Consultant
R.L. "Sam" Wetzel
(a)(b)(d)(e)
President and Chief
Executive Officer of Wetzel
International, Inc.
(a) Member of
Audit Review Committee,
Paul C. Nagel, Jr., Chairman
(b) Member of
Compensation Policy Committee,
Christopher F. Edley,
Chairman
(c) Member of Executive Committee,
James Wood, Chairman
(d) Member of Finance Committee,
R.L. "Sam" Wetzel, Chairman
(e) Member of Retirement
Benefits Committee,
Barbara Barnes Hauptfuhrer,
Chairman
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 LLP
Two Hilton Court
Parsippany, NJ 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 9, 1996 at the Marriott Waterfront Hotel , 80 Compromise St.,
Annapolis, Maryland. 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
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
AND
SUBSIDIARIES
The Stock of all subsidiaries is 100% owned or controlled by the parent
company except as denoted below and in the case of a few subsidiaries where
nominal qualifying shares are held in the names of subsidiary officers and/or
directors in trust. No shares of any subsidiary's stock are subject to
options.
COMPANIES STATE INCORPORATED
A&P Wine and Spirits, Inc. Massachusetts
ANP Properties I Corp. Delaware
ANP Sales Corp. Maryland
APG V, 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
Food Basics, Limited Ontario
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
Limited Foods, Inc. Delaware
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
Tea Development Co., 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
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.:
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 report dated April 25, 1996,
contained in the Company's 1995 Annual Report to Shareholders and
incorporated by reference in this Annual Report on Form 10-K of The Great
Atlantic & Pacific Tea Company, Inc. for the year ended February 24, 1996.
/s/Deloitte & Touche LLP
Parsippany, New Jersey
May 22, 1996
<TABLE> <S> <C>
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GREAT
ATLANTIC & PACIFIC TEA COMPANY, INC. FORM 10-K FOR THE YEAR ENDED FEBRUARY 24,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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