Conformed Copy
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 6, 1997 Commission File Number 1-4141
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
----------------------------------------------
(Exact name of registrant as specified in 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
------------
- ----------------------------------------------------------------------------
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 XXX NO
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 6, 1997
----- --------------------------------
Common stock - $1 par value 38,248,966 shares
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF CONSOLIDATED OPERATIONS & RETAINED EARNINGS
(Dollars in thousands, except share amounts)
(Unaudited)
12 Weeks Ended 28 Weeks Ended
September 6, September 7, September 6 September 7,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Sales $ 2,335,695 $2,329,987 $ 5,440,286 $5,422,541
Cost of merchandise sold (1,662,228) (1,667,632) (3,882,603) (3,863,406)
---------- ---------- ---------- ----------
Gross margin 673,467 662,355 1,557,683 1,559,135
Store operating, general and
administrative expense (634,827) (627,802) (1,466,037) (1,471,839)
---------- ---------- ---------- ----------
Income from operations 38,640 34,553 91,646 87,296
Interest expense, net (16,888) (15,476) (39,041) (36,247)
---------- ---------- ---------- ----------
Income before income taxes 21,752 19,077 52,605 51,049
Provision for income taxes (5,545) (5,083) (13,611) (15,176)
---------- ---------- ---------- ----------
Income before extraordinary
item 16,207 13,994 38,994 35,873
Extraordinary loss on early
extinguishment of debt
(net of income tax benefit
of $394) (544) - (544) -
---------- ---------- ---------- ----------
Net Income 15,663 13,994 38,450 35,873
Retained earnings at
beginning of period 466,730 402,348 447,768 382,380
Cash dividends (3,825) (1,911) (7,650) (3,822)
---------- ---------- ---------- ----------
Retained earnings at
end of period $ 478,568 $ 414,431 $ 478,568 $ 414,431
========== ========== ========== ==========
Earnings per share:
Income before extra-
ordinary item $ .42 $ .37 $ 1.02 $ .94
Extraordinary loss on early
extinguishment of debt (.01) .00 (.01) .00
---------- ---------- ---------- ----------
Net Income $ .41 $ .37 $ 1.01 $ .94
========== ========== ========== ==========
Cash dividends $ .10 $ .05 $ .20 $ .10
========== ========== ========== ==========
Weighted average number of
common and common
equivalent shares
outstanding 38,254,867 38,252,259 38,253,308 38,281,559
========== ========== ========== ==========
See Notes to Quarterly Report on Page 5.
- 1 -
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in thousands)
September 6, 1997 February 22, 1997
------------------ ------------------
(Unaudited)
ASSETS
- ------
Current assets:
Cash and short-term investments $ 162,789 $ 98,830
Accounts receivable 229,496 213,888
Inventories 898,892 881,288
Prepaid expenses and other assets 50,828 37,373
---------- ----------
Total current assets 1,342,005 1,231,379
---------- ----------
Property:
Property owned 1,497,179 1,486,504
Property leased 98,636 103,474
---------- ---------
Property-net 1,595,815 1,589,978
Other assets 175,394 181,315
---------- ----------
Total Assets $3,113,214 $3,002,672
========== ==========
See Notes to Quarterly Report on Page 5.
-2-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in thousands)
Sept. 6, 1997 Feb. 22, 1997
-------------- -------------
(Unaudited)
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Current liabilities:
Current portion of long-term debt $ 11,103 $ 18,290
Current portion of obligations under
capital leases 12,736 12,708
Accounts payable 486,184 468,808
Book overdrafts 173,951 182,305
Accrued salaries, wages and benefits 144,980 146,737
Accrued taxes 62,866 52,269
Other accruals 126,237 134,888
---------- ----------
Total current liabilities 1,018,057 1,016,005
---------- ----------
Long-term debt 780,750 701,609
---------- ----------
Obligations under capital leases 131,768 137,886
---------- ----------
Deferred income taxes 112,502 113,188
---------- ----------
Other non-current liabilities 149,901 143,912
---------- ----------
Commitments & contingencies
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 and
outstanding
38,248,966 and 38,247,716,
respectively 38,249 38,247
Capital surplus 453,783 453,751
Cumulative translation adjustment (50,364) (49,694)
Retained earnings 478,568 447,768
---------- ----------
Total shareholders' equity 920,236 890,072
---------- ----------
Total liabilities and shareholders'
equity $3,113,214 $3,002,672
========== ==========
See Notes to Quarterly Report on Page 5.
-3-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
28 Weeks Ended
Sept. 6, 1997 Sept. 7, 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $38,450 $ 35,873
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 125,402 122,798
Deferred income tax provision 3,914 2,556
(Gain) loss on disposal of owned property (1,259) 519
(Increase) decrease in receivables (10,172) 4,973
Increase in inventories (19,219) (5,376)
Increase in prepaid expenses and other
current assets (18,118) (8,938)
Increase in other assets (749) (23,472)
Increase in accounts payable 18,312 24,762
Decrease in accrued salaries,
wages and benefits (1,410) (1,649)
Increase (decrease) in accrued taxes 10,629 (6,202)
Increase (decrease) in other accruals
and other liabilities 362 (10,739)
Other operating activities, net (166) 536
--------- ---------
Net cash provided by operating activities 145,976 135,641
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property (139,931) (150,367)
Proceeds from disposal of property 8,996 7,541
--------- ---------
Net cash used in investing activities (130,935) (142,826)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term debt (101,516) 56,187
Proceeds under revolving lines
of credit and long-term borrowings 305,769 25,497
Payments on revolving lines of
credit and long-term borrowings (130,565) (51,092)
Increase (decrease) in book overdrafts (7,790) 5,590
Principal payments on capital leases (6,719) (7,005)
Deferred financing fees (2,519) -
Cash dividends (7,650) (3,822)
Proceeds from stock options exercised 34 -
--------- ---------
Net cash provided by financing activities 49,044 25,355
--------- ---------
Effect of exchange rate changes on
cash and short-term investments (126) 57
--------- ---------
NET INCREASE IN CASH AND
SHORT-TERM INVESTMENTS 63,959 18,227
Cash and Short-Term Investments
at Beginning of Period 98,830 99,772
--------- ---------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 162,789 $ 117,999
========= =========
See Notes to Quarterly Report on Page 5.
-4-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
NOTES TO QUARTERLY REPORT
-------------------------
1) BASIS OF PRESENTATION
The consolidated financial statements for the 28 weeks ended September 6,
1997 and September 7, 1996 are unaudited, and in the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only
of normal recurring items. Interim results are not necessarily
indicative of results for a full year.
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries.
This Form 10-Q should be read in conjunction with the Company's
consolidated financial statements and notes incorporated by reference in
the 1996 Annual Report on Form 10-K.
Certain reclassifications have been made to the prior periods' financial
statements in order to conform to the current period presentation.
2) INCOME TAXES
The income tax provisions recorded for the 28 week period ended in fiscal
years 1997 and 1996 reflect the Company's estimated expected annual tax
rates applied to their respective domestic and foreign financial results.
For the 28 week period ended in fiscal years 1997 and 1996, the income
tax provisions mainly reflect the taxes on U.S. income, as the Canadian
income tax expense is principally offset by the reversal of its valuation
allowance. During the 28 week period ended in fiscal years 1997 and 1996,
the Canadian operations generated pretax earnings and reversed a portion
of the valuation allowance to the extent of such pretax earnings.
Although Canada generated pretax earnings, the Company was unable to
conclude that the Canadian deferred tax assets are more likely than not
to be realized. Accordingly, at September 6, 1997 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 its
Canadian deferred tax assets.
3) OTHER ASSETS
Other assets include notes receivable and equipment leases relating to
the Food Basics franchising business amounting to approximately $38.3
million and $40.2 million at September 6, 1997 and February 22, 1997,
respectively.
-5-
4) EXTRAORDINARY ITEM
During the second quarter of fiscal 1997, the Company retired at a
premium, mortgages amounting to $20 million with an effective interest
rate of 9.44%.
5) DEBT
On April 15, 1997, the Company issued $300 million 7.75% 10 year Notes
due April 15, 2007. The Company used the net proceeds to reduce bank
borrowings under the U.S. and Canadian revolving credit facilities,
prepay other indebtedness and for general corporate purposes.
On June 12, 1997, the Company offered to exchange its 7.75% 10 year Notes
due April 15, 2007, which were registered under the Securities Act, for
outstanding 7.75% 10 year Notes due April 15, 2007, which had not been so
registered. The exchange offer expired on July 10, 1997 with all
outstanding unregistered 10 year Notes being exchanged for registered 10
year Notes.
On June 10, 1997, the Company executed an unsecured five year $465
million U.S. credit agreement and a five year C$50 million Canadian
credit agreement (the "1997 Credit Agreement") with a syndicate of banks,
enabling it to borrow funds on a revolving basis sufficient to refinance
short-term borrowings. This 1997 Credit Agreement replaced a previous
five year $400 million U.S. revolving credit agreement and a C$100
million revolving credit agreement dated December 12, 1995. The 1997
Credit Agreement resulted in the Company obtaining lower cost of
borrowing, reduced facility fees, and extended the maturity to June 2002.
The Company currently intends to borrow up to $200 million against the
1997 Credit Agreement in order to repay at maturity $200 million in bonds
due on January 15, 1998.
6) NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings Per Share" ("SFAS 128"). SFAS 128 replaces the presentation of
primary earnings per share ("EPS") with a presentation of basic EPS. The
Company will adopt SFAS 128 during the fourth quarter of fiscal 1997 and
believes that the computation of basic EPS will not result in a
difference from primary EPS as currently computed.
-6-
In addition, in June 1997 the FASB issued SFAS No. 130 "Reporting
Comprehensive Income" ("SFAS 130") and SFAS No. 131 "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS
130 relates to the change in the equity of a business during a reporting
period from transactions of the business. The Company currently intends
to adopt this new accounting standard effective in the first quarter of
fiscal 1998. The only item that the Company currently records which
would be a component of comprehensive income relates to foreign currency
translation adjustments. SFAS 131 supersedes SFAS No. 14 "Financial
Reporting for Segments of a Business Enterprise". SFAS 131 provides for
the disclosure of financial information disaggregated by the way
management organizes the segments of the enterprise for making operating
decisions. The Company will adopt the provisions of this new disclosure
in fiscal 1998.
-7-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
12 WEEKS ENDED SEPTEMBER 6, 1997
--------------------------------
OPERATING RESULTS
Sales for the second quarter ended September 6, 1997 of $2.3 billion
increased $6 million or 0.2% from the prior year second quarter.
Contributing to this increase is the opening of 20 stores in new market
areas since the second quarter of fiscal 1996 which added
approximately $73 million or 3.1% to sales in the second quarter of fiscal
1997. In addition, wholesale sales to the Food Basics franchised stores
increased $31 million or 77% to $73 million for the 12 week period ended
September 6, 1997, which increased total Company sales by 1.4%. These
increases were partially offset by store closures and same store sales
declines. The closure of 71 stores, excluding replacement stores, since the
beginning of the second quarter of fiscal 1996, of which 11 have been sold
in the Carolina market, reduced comparative sales by approximately $49
million or 2.1% in the second quarter of fiscal 1997. In addition, same
store sales ("same store sales" referred to herein includes replacement
stores) decreased 2.3% or $50 million from the same period last year.
Average weekly sales per supermarket were approximately $200,100 versus
$196,400 for the corresponding period of the prior year for a 1.9% increase.
Same store sales for U.S. operations declined 2.5% from the prior year and
Canadian operations same store sales decreased 1.7% from the prior year.
Gross margin as a percent of sales increased .40% to 28.83% in the second
quarter of fiscal 1997 from 28.43% for the second quarter of fiscal 1996,
resulting primarily from an increase in the retail supermarket margin in the
U.S., partially offset by the higher volume of the lower margin wholesale
sales to the Food Basics franchised stores. The wholesale sales to the
franchised stores represented 3.1% of total Company sales in the second
quarter of 1997 as opposed to only 1.8% of total Company sales in the prior
year second quarter. Excluding the effect of the wholesale sales to the
franchised stores, the gross margin percentage increased .74% from the prior
year to 29.62%. The gross margin dollar increase of $11 million is
primarily the result of an increase in gross margin rates of $9 million and
an increase in sales volume which had an impact of increasing margin by $3
million, partially offset by a lower Canadian exchange rate which decreased
margin by $1 million. The U.S. gross margin increased $16 million
principally as a result of an increase in gross margin rates of $20 million
partially offset by a decrease in sales volume which had an impact of
decreasing margin by $4 million. The Canadian operations gross margin
decreased $5 million which was primarily the result of the increased
wholesale sales which have a lower margin than retail sales.
-8-
Store operating, general, and administrative expense as a percent of sales
increased .24% to 27.18% from 26.94% for the corresponding period in the
prior year resulting primarily from increased store labor costs and
occupancy costs in the U.S. The increase was partially offset by the Food
Basics franchise business which maintained relatively flat expenses while
sales increased $31 million.
-9-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Net interest expense increased $1.4 million from the previous year,
primarily due to an increase in average debt of approximately $78 million.
The increase in interest expense was partially offset by an increase in
interest income of $1.1 million from the prior year second quarter. This
increase was the result of higher interest income on the equipment leases
relating to the Food Basics franchise business and higher interest income on
short-term investments.
Income before income taxes for the second quarter ended September 6, 1997
was $21.8 million compared to $19.1 million for the comparable period in the
prior year for an increase of approximately $2.7 million or 14%. The
increase is mainly the result of higher gross margin of $11.1 million,
partially offset by higher store operating, general and administrative
expenses of $7 million and higher net interest expense of $1.4 million.
The income tax provisions recorded in the second quarter of fiscal years
1997 and 1996 reflect the Company's estimated expected annual tax rates
applied to their respective domestic and foreign financial results. The
effective tax rate for the second quarter of fiscal 1997 was 25.5% versus an
effective tax rate of 26.6% for the second quarter of fiscal 1996. The
decrease in the effective tax rate is the result of the higher earnings
provided by the Canadian operations. The second quarter 1997 and 1996 income
tax provisions mainly reflect the taxes on U.S. income, as the Canadian
income tax expense is principally offset by the reversal of its deferred tax
asset valuation allowance. During the second quarter of fiscal 1997 and
1996 the Canadian operations generated pretax earnings and reversed a
portion of the valuation allowance to the extent of such pretax earnings.
Although Canada generated pretax earnings, the Company was unable to
conclude that the Canadian deferred tax assets are more likely than not to
be realized. Accordingly, at September 6, 1997, 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 its Canadian deferred tax
assets.
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS
28 WEEKS ENDED SEPTEMBER 6, 1997
--------------------------------
OPERATING RESULTS
Sales for the 28 weeks ended September 6, 1997 of $5.4 billion increased $18
million or 0.3% from the prior year. Contributing to this increase is
the opening of 27 stores in new market areas since the second quarter of
fiscal 1996 which added approximately $146 million or 2.7% to sales in the 28
week period of fiscal 1997. In addition, wholesale sales to the Food Basics
franchised stores increased $97 million or 128% to $172 million for the 28
week period ended September 6, 1997, which increased total Company sales by
1.8%. These increases were partially offset by store closures and same
store sales declines. The closure of 99 stores, excluding replacement
stores, since the beginning of fiscal 1996, of which 11 have been sold in
the Carolina market, reduced comparative sales by approximately $125 million
or 2.3% in the 28 week period of fiscal 1997. In addition, same store sales
decreased 1.9% or $100 million from the same period last year.
Average weekly sales per supermarket were approximately $198,300 versus
$194,000 for the corresponding period of the prior year for a 2.2% increase.
Same store sales for U.S. operations declined 2.1% from the prior year and
Canadian operations same store sales decreased 1.4% from the prior year.
Gross margin as a percent of sales decreased .12% to 28.63% from 28.75% for
the prior year resulting primarily from the higher volume of the
lower margin wholesale sales to the Food Basics franchised stores, partially
offset by an increase in the retail supermarket margin in the U.S. The
wholesale sales to the franchised stores represented 3.2% of total Company
sales for the first two quarters of fiscal 1997 as opposed to only 1.4% of
total Company sales in the prior year. Excluding the effect of the
wholesale sales to the franchised stores, the gross margin percentage
increased .35% from the prior year to 29.47%. The gross margin dollar
decrease of $2 million is primarily the result of the increased wholesale
sales which have a lower margin than the retail sales. The lower margin
wholesale sales resulted in a decrease in gross margin rates of $7 million
which was partially offset by the wholesale sales volume increase which
impacted margins by $8 million. A lower Canadian exchange rate resulted in
decreasing margin by $3 million. The Canadian operations gross margin
decreased $15 million which was primarily the result of the wholesale sales
increase from the prior year. The U.S. gross margin increased $13 million
principally as a result of an increase in gross margin rates of $23 million
partially offset by a decrease in sales volume which had an impact of
decreasing margin by $10 million.
Store operating, general and administrative expense as a percent of sales
decreased .19% to 26.95% from 27.14% for the prior year resulting primarily
from the Food Basics franchise business which maintained relatively flat
expenses while sales increased $97 million. This decrease was partially
offset by an increase in store labor and occupancy costs in the U.S.
-11-
Net interest expense increased $2.8 million from the previous year,
primarily due to an increase in average debt of approximately $79 million.
The increase in interest expense was partially offset by an increase in
interest income of $2.6 million from the corresponding period of the prior
year. This increase was the result of higher interest income on the
equipment leases relating to the Food Basics franchise business and higher
interest income on short-term investments.
Income before income taxes for the 28 week period ended September 6, 1997
was $52.6 million compared to $51.0 million for the comparable period of the
prior year for an increase of approximately $1.6 million or 3.0%. The
increase is mainly the result of lower store operating, general and
administrative expenses of $5.8 million, partially offset by lower gross
margin of $1.4 million and higher net interest expense of $2.8 million.
The income tax provisions recorded for the 28 week period of fiscal years
1997 and 1996 reflect the Company's estimated expected annual tax rates
applied to their respective domestic and foreign financial results. The
effective tax rate for the 28 week period ended September 6, 1997 was 25.9%
versus an effective tax rate of 29.7% for the corresponding period of the
prior year. The decrease in the effective tax rate is the result of higher
earnings provided by the Canadian operations. The first and second quarter
1997 and 1996 income tax provisions mainly reflect the taxes on U.S. income,
as the Canadian income tax expense is principally offset by the reversal of
its deferred tax asset valuation allowance. During the first and second
quarters of fiscal 1997 and 1996 the Canadian operations generated pretax
earnings and reversed a portion of the valuation allowance to the extent of
such pretax earnings. Although Canada generated pretax earnings, the
Company was unable to conclude that the Canadian deferred tax assets are
more likely than not to be realized. Accordingly, at September 6, 1997, 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 its Canadian
deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the second quarter with working capital of $324 million
compared to $215 million at the beginning of the fiscal year. The Company
had cash and short-term investments aggregating $163 million at the end of
the second quarter of fiscal 1997 compared to $99 million as of fiscal 1996
year end. Short-term investments were approximately $48 million and $0.1
million at September 6, 1997 and February 22, 1997, respectively, and were
primarily invested in commercial paper.
On April 15, 1997, the Company issued $300 million 7.75% 10 year Notes due
April 15, 2007. The Company used the net proceeds to reduce bank borrowings
under the U.S. and Canadian revolving credit facilities, prepay other
indebtedness and for general corporate purposes.
-12-
On June 12, 1997, the Company offered to exchange its 7.75% 10 year Notes
due April 15, 2007, which were registered under the Securities Act, for
outstanding 7.75% 10 year Notes due April 15, 2007, which had not been so
registered. The exchange offer expired on July 10, 1997 with all
outstanding unregistered 10 year Notes being exchanged for registered 10
year Notes.
On June 10, 1997, the Company executed an unsecured five year $465 million
U.S. credit agreement and a five year C$50 million Canadian credit agreement
(the "1997 Credit Agreement") with a syndicate of banks, enabling it to
borrow funds on a revolving basis sufficient to refinance short-term
borrowings. This 1997 Credit Agreement replaced a previous five year $400
million U.S. revolving credit agreement and a C$100 million revolving credit
agreement dated December 12, 1995. The 1997 Credit Agreement resulted in
the Company obtaining lower cost of borrowing, reduced facility fees, and
extended the maturity to June 2002.
In addition to the 1997 Credit Agreement, the Company also has various
uncommitted lines of credit with numerous banks. As of September 6, 1997,
the Company had no borrowings outstanding on the 1997 Credit Agreement or on
the uncommitted lines of credit. Accordingly, as of September 6, 1997, the
Company had available approximately $503 million on the 1997 Credit
Agreement and $30 million in uncommitted lines of credit. The Company
currently intends to borrow up to $200 million against the 1997 Credit
Agreement in order to repay at maturity $200 million in bonds due on January
15, 1998.
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 covenants as of September 6, 1997.
On March 18, 1997, the Board of Directors increased the Company's quarterly
dividend from $0.05 to $0.10 per share which increased the dividend payment
from $3.8 million for the 28 weeks ended September 7, 1996 to $7.7 million
for the 28 weeks ended September 6, 1997.
During the second quarter of fiscal 1997, the Company retired at a premium,
mortgages amounting to $20 million with an effective interest rate of 9.44%.
For the 28 weeks ended September 6, 1997, capital expenditures totaled $140
million, which included 17 new stores and 28 remodels and enlargements. The
Company expects to have capital expenditures of approximately $160 million
for the remainder of fiscal 1997.
These available cash resources, together with income from operations, are
sufficient for the Company's capital expenditure program, mandatory
scheduled debt repayments and dividend payments for fiscal 1997.
-13-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None - Matters were previously reported on the First
Quarter ended June 14, 1997 Form 10-Q.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
-14-
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SIGNATURES
Pursuant to the requirements 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.
Date: October 15, 1997 By: /s/ Kenneth A. Uhl
---------------------------------------
Kenneth A. Uhl, Vice President and
Controller (Chief Accounting Officer)
-15-
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GREAT
ATLANTIC & PACIFIC TEA COMPANY, INC. 10-Q FOR THE SECOND QUARTER ENDED SEPTEMBER
6, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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</TABLE>
