Pathmark Announces First Quarter Fiscal 2007 Results

  
    
  
  
    
      Pathmark Stores, Inc. (NASDAQ: PTMK), a leading regional supermarket 
      chain currently operating 141 supermarkets primarily in the New York – 
      New Jersey and Philadelphia metro areas, today reported unaudited 
      results for its first quarter ended May 5, 2007.
    
    
      First Quarter of Fiscal 2007 Results
    
    
      Sales in the first quarter of fiscal 2007 were $999.0 million, an 
      increase of 0.1% from $998.5 million in the prior year’s 
      first quarter. Same-store sales for the quarter decreased by 0.3%. The 
      Company reported a net loss of $8.5 million, or $0.16 per diluted share, 
      in the first quarter of fiscal 2007, compared to $5.4 million, or $0.10 
      per diluted share, in the prior year’s first 
      quarter. The increase in the net loss of $3.1 million was primarily due 
      to pre-tax expenses of $5.2 million related to the proposed merger with 
      The Great Atlantic & Pacific Company (“A&P”) 
      and a pre-tax charge of $4.2 million resulting from a voluntary 
      retirement incentive program for certain store associates covered by 
      collective bargaining agreements, partially offset by higher Adjusted 
      EBITDA. Adjusted EBITDA in the first quarter of fiscal 2007 was $40.4 
      million, an increase of $8.6 million from $31.8 million in the prior year’s 
      first quarter. The increase in Adjusted EBITDA was due to the Company’s 
      merchandising and expense control initiatives, as well as the favorable 
      resolution of a vendor dispute resulting in the reversal of a $3.2 
      million charge accrued in the fourth quarter of fiscal 2006. Adjusted 
      EBITDA is reconciled to the net loss and defined in Table C in this 
      release.
    
    
      Capital Expenditures
    
    
      Capital expenditures were $14.7 million during the first quarter of 
      fiscal 2007 compared to $12.1 million during the prior year’s 
      first quarter and are expected to be approximately $80 million during 
      fiscal 2007. The Company plans to complete 13 store renovations during 
      fiscal 2007.
    
    
      Forward Looking Statements
    
    
      Except for historical information contained herein, the matters 
      discussed in this release are “forward-looking 
      statements” within the meaning of the Private 
      Securities Litigation Reform Act of 1995. Such statements relate to, 
      among other things, operating costs, stock-based compensation expense, 
      earnings estimates, Adjusted EBITDA, sales, same-store sales and capital 
      expenditures and are indicated by words or phrases such as “anticipates”, 
      “believes”, “expects”, 
      “forecasts”, “guidance”, 
      “intends”, “may”, 
      “ongoing”, “plans”, 
      “projects”, “will” 
      and similar words and phrases. By their nature, such forward-looking 
      statements are subject to risks, uncertainties and other factors, which 
      are, in many instances, beyond our control, that could cause actual 
      results to differ materially from future results expressed or implied by 
      such forward-looking statements. These statements are based on management’s 
      assumptions and beliefs in the light of information currently available 
      to it and assume no significant changes in general economic trends, 
      consumer confidence or other risk factors that may affect the 
      forward-looking statements. The Company expressly disclaims any current 
      intention to update the information contained herein. Factors that may 
      affect results include changes in business and economic conditions 
      generally and in the Company’s operating 
      areas, the competitive environment in which the Company operates, 
      results of our merchandising, operating and cost reduction initiatives, 
      medical and pension costs and other risks detailed from time to time in 
      the Company’s reports and filings available 
      from the Securities and Exchange Commission (the “SEC”). 
      You should not place undue reliance on forward-looking statements, which 
      speak only as of the date they are made.
    
    
      Additional Information and Where to 
      Find It
    
    
      In connection with the proposed acquisition (the “Merger”) 
      of Pathmark by A&P, Pathmark and A&P filed with the SEC relevant 
      materials, including a joint proxy statement/prospectus. INVESTORS ARE 
      URGED TO READ THESE MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION 
      ABOUT PATHMARK, A&P AND THE MERGER. The joint proxy statement/prospectus 
      and other relevant materials, and any other documents filed by Pathmark 
      or A&P with the SEC, may be obtained free of charge at the SEC’s 
      web site at www.sec.gov. In addition, 
      investors may obtain free copies of the documents filed with the SEC by 
      (i) contacting Pathmark’s Investor Relations 
      at [phone], at 200 Milik Street, Carteret, NJ 07008, or by 
      accessing Pathmark’s Investor Relations 
      website; or (ii) contacting A&P’s 
      Investor Relations at [phone], at Box 418, 2 Paragon Drive, 
      Montvale, NJ 07645, or by accessing A&P’s 
      Investor Relations website. Investors are urged to read the joint proxy 
      statement/prospectus and other related materials before making any 
      voting or investment decisions with respect to the Merger.
    
    
      Pathmark, A&P and their respective executive officers and directors may 
      be deemed to be participating in the solicitation of proxies in 
      connection with the Merger. Information about the executive officers and 
      directors of Pathmark and the number of shares of Pathmark’s 
      common stock beneficially owned by such persons is set forth in the 
      proxy statement for Pathmark’s 2007 Annual 
      Meeting of Stockholders which was filed with the SEC on May 11, 2007. 
      Information about the executive officers and directors of A&P and the 
      number of shares of A&P’s common stock 
      beneficially owned by such persons is set forth in the proxy statement 
      for A&P’s 2007 Annual Meeting of 
      Stockholders which was filed with the SEC on May 25, 2007. Investors may 
      obtain additional information regarding the direct and indirect 
      interests of Pathmark, A&P and their respective executive officers and 
      directors in the Merger by reading the preliminary joint proxy 
      statement/prospectus regarding the Merger, which was filed with the SEC 
      on May 24, 2007.
    
    
      This communication shall not constitute an offer to sell or the 
      solicitation of an offer to sell or the solicitation of an offer to buy 
      any securities, nor shall there be any sale of securities in any 
      jurisdiction in which such offer, solicitation or sale would be unlawful 
      prior to registration or qualification under the securities laws of any 
      such jurisdiction.
    
    
      (Tables attached)
    
    
      
        
          
            Table A
          
          
            Pathmark Stores, Inc.
          
          
            Operating Results (Unaudited)
          
          
            (in millions, except per share data)
          
          
             
          
          
            Consolidated Statements of Operations
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
          13 Weeks Ended
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            May 5,2007
          
        
        
        
        
          
            April 29,2006
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
          $
        
        
          999.0 
        
        
        
        
          $
        
        
          998.5 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cost of goods sold
        
        
           
        
        
          (702.7)
        
        
        
        
           
        
        
          (709.0)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Gross profit
        
        
        
        
          296.3 
        
        
        
        
        
        
          289.5 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
          (267.3)
        
        
        
        
        
        
          (259.8)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Depreciation and amortization
        
        
           
        
        
          (23.5)
        
        
        
        
           
        
        
          (23.0)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Operating earnings
        
        
        
        
          5.5 
        
        
        
        
        
        
          6.7 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Interest expense
        
        
           
        
        
          (15.9)
        
        
        
        
           
        
        
          (15.5)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Loss before income taxes
        
        
        
        
          (10.4)
        
        
        
        
        
        
          (8.8)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax benefit
        
        
           
        
        
          1.9 
        
        
        
        
           
        
        
          3.4 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss
        
        
          $
        
        
          (8.5)
        
        
        
        
          $
        
        
          (5.4)
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          
            Weighted average number of shares outstanding – 
            basic and diluted
          
        
        
           
        
        
          
            52.3 
          
        
        
        
        
           
        
        
          
            52.0 
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss per share – basic and diluted
        
        
          $
        
        
          (0.16)
        
        
        
        
          $
        
        
          (0.10)
        
      
    
    
    
    
      
        
          
            Supplemental Operating Results Data
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
          13 Weeks Ended
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            May 5,2007
          
        
        
        
        
          
            April 29,2006
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Adjusted EBITDA (see Note 3)
        
        
          $
        
        
          40.4 
        
        
        
        
          $
        
        
          31.8 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Capital expenditures
        
        
          $
        
        
          14.7 
        
        
        
        
          $
        
        
          12.1 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Gross profit (% of sales)
        
        
           
        
        
          29.7%
        
        
        
        
           
        
        
          29.0%
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Selling, general and administrative expenses (% of sales)
        
        
           
        
        
          26.8%
        
        
        
        
           
        
        
          26.0%
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Adjusted EBITDA (% of sales)
        
        
           
        
        
          4.0%
        
        
        
        
           
        
        
          3.2%
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss (% of sales)
        
        
           
        
        
          (0.8)%
        
        
        
        
           
        
        
          (0.5)%
        
      
    
    
      See notes to financial statements.
    
    
      
        
          
            Table B
          
          
            Pathmark Stores, Inc.
          
          
            Consolidated Balance Sheets
          
          
            (in millions)
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            (unaudited)
          
        
        
        
        
        
      
      
        
        
        
          
            May 5,2007
          
        
        
        
        
          
            February 3,2007
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          ASSETS
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current assets
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash
        
        
          $
        
        
          31.8 
        
        
        
        
          $
        
        
          28.1 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Accounts receivable, net
        
        
        
        
          21.3 
        
        
        
        
        
        
          20.6 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Merchandise inventories
        
        
        
        
          193.0 
        
        
        
        
        
        
          180.3 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Due from suppliers
        
        
        
        
          58.6 
        
        
        
        
        
        
          69.8 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other current assets
        
        
           
        
        
          34.0 
        
        
        
        
           
        
        
          33.5 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total current assets
        
        
        
        
          338.7 
        
        
        
        
        
        
          332.3 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Property and equipment, net
        
        
        
        
          526.2 
        
        
        
        
        
        
          535.7 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Goodwill
        
        
        
        
          144.7 
        
        
        
        
        
        
          144.7 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other noncurrent assets
        
        
           
        
        
          119.2 
        
        
        
        
           
        
        
          119.7 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total assets
        
        
          $
        
        
          1,128.8 
        
        
        
        
          $
        
        
          1,132.4 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS’ EQUITY
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current liabilities
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Accounts payable
        
        
          $
        
        
          82.6 
        
        
        
        
          $
        
        
          78.2 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current maturities of debt
        
        
        
        
          23.3 
        
        
        
        
        
        
          25.1 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current portion of capital lease obligations
        
        
        
        
          10.9 
        
        
        
        
        
        
          11.4 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Accrued expenses and other current liabilities
        
        
           
        
        
          146.0 
        
        
        
        
           
        
        
          136.9 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total current liabilities
        
        
        
        
          262.8 
        
        
        
        
        
        
          251.6 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Long-term debt
        
        
        
        
          422.9 
        
        
        
        
        
        
          423.1 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Long-term capital lease obligations
        
        
        
        
          156.6 
        
        
        
        
        
        
          158.4 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other noncurrent liabilities
        
        
           
        
        
          168.5 
        
        
        
        
           
        
        
          170.9 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total liabilities
        
        
        
        
          1,010.8 
        
        
        
        
        
        
          1,004.0 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders’ equity
        
        
           
        
        
          118.0 
        
        
        
        
           
        
        
          128.4 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total liabilities and stockholders’ equity
        
        
          $
        
        
          1,128.8 
        
        
        
        
          $
        
        
          1,132.4 
        
      
    
    
    
    
      
        
          
            Capitalization
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            May 5,2007
          
        
        
        
        
          
            February 3,2007
          
        
      
      
        
        
        
        
        
          
             
          
        
        
        
        
        
        
        
      
      
        
          Debt
        
        
          $
        
        
          446.2 
        
        
        
        
          $
        
        
          448.2 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Capital lease obligations
        
        
           
        
        
          167.5 
        
        
        
        
           
        
        
          169.8 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total debt and capital lease obligations
        
        
        
        
          613.7 
        
        
        
        
        
        
          618.0 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders’ equity
        
        
           
        
        
          118.0 
        
        
        
        
           
        
        
          128.4 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total capitalization
        
        
          $
        
        
          731.7 
        
        
        
        
          $
        
        
          746.4 
        
      
    
    
      See notes to financial statements.
    
    
      
        
          
            Table C
          
          
            Pathmark Stores, Inc.
          
          
            Reconciliation of GAAP Net Loss to Adjusted EBITDA (Unaudited)
          
          
            (in millions)
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
          13 Weeks Ended
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          
            May 5,2007
          
        
        
        
        
          
            April 29,2006
          
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss
        
        
          $
        
        
          (8.5)
        
        
        
        
          $
        
        
          (5.4)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Adjustments:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Interest expense
        
        
        
        
          15.9 
        
        
        
        
        
        
          15.5 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Income tax benefit
          
        
        
        
        
          (1.9)
        
        
        
        
        
        
          (3.4)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Depreciation and amortization
        
        
        
        
          23.5 
        
        
        
        
        
        
          23.0 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Merger–related expenses (see Note 1)
        
        
        
        
          5.2 
        
        
        
        
        
        
          
            -- 
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Store labor buyout charge (see Note 2)
        
        
        
        
          4.2 
        
        
        
        
        
        
          -- 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-cash stock-based compensation expense
        
        
        
        
          2.6 
        
        
        
        
        
        
          2.1 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Gain on sale of real estate
        
        
           
        
        
          (0.6)
        
        
        
        
           
        
        
          -- 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Adjusted EBITDA (see Note 3)
        
        
          $
        
        
          40.4 
        
        
        
        
          
            $
          
        
        
          
            31.8 
          
        
      
    
    
      See notes to financial statements.
    
    
      Notes to Financial Statements
    
    
      1. As previously disclosed, on March 4, 2007, the Company entered into a 
      definitive agreement and plan of merger with A&P and its subsidiary, 
      pursuant to which A&P will acquire Pathmark through the merger of its 
      subsidiary with and into Pathmark. In the first quarter of fiscal 2007, 
      the Company incurred merger-related expenses of $5.2 million, comprised 
      of $2.9 million for legal fees, $1.5 million for other professional 
      services and $0.8 million for stay-on bonuses.
    
    
      2. During the first quarter of fiscal 2007, the Company offered a 
      voluntary retirement incentive program to certain of its store 
      associates covered by collective bargaining agreements (the "Store Labor 
      Buyout"), in which 152 store associates accepted the Store Labor Buyout 
      and agreed to retire effective no later than May 5, 2007. The Company 
      recorded a pre-tax charge of $4.2 million in the first quarter of fiscal 
      2007 for early retirement and benefits-related expenses related to the 
      Store Labor Buyout. Cash payments of $3.4 million were made as of May 5, 
      2007, with the balance to be paid over the next 18 months. The Company 
      expects the Store Labor Buyout to produce approximately $5.0 million in 
      annualized payroll and payroll-related pre-tax savings.
    
    
      3. The definition of Adjusted EBITDA was revised in the third quarter of 
      fiscal 2006 to include LIFO expense as a reduction of Adjusted EBITDA. 
      Adjusted EBITDA for the first quarter of fiscal 2006 was revised to be 
      consistent with the revised definition.
    
    
      Adjusted EBITDA represents the net loss, excluding interest expense, the 
      impact of taxes, depreciation and amortization, merger–related 
      expenses, store labor buyout charges, non-cash stock-based compensation 
      expense and a gain on sale of real estate. The Company believes that its 
      investors find Adjusted EBITDA to be a useful analytical tool for 
      measuring its performance and for comparing that performance with the 
      performance of other companies in the industry having different capital 
      structures. Adjusted EBITDA is a non-GAAP measure and should not be 
      considered in isolation from, and is not intended to represent an 
      alternative measure of, operating results or of cash flows from 
      operating activities, as determined in accordance with GAAP. The Company’s 
      measurement of Adjusted EBITDA may not be comparable to similarly titled 
      measures reported by other companies.