Pathmark Stores (NASDAQ:PTMK)
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Pathmark Stores, Inc. (NASDAQ: PTMK) today reported unaudited results
for its 14-week fourth quarter and audited results for its 53-week
fiscal year ended February 3, 2007.
Fourth Quarter of Fiscal 2006 Results
Sales in the 14-week fourth quarter of fiscal 2006 were $1,078.5
million, compared to $993.3 million in the prior year’s
13-week fourth quarter. Sales in the fourth quarter of fiscal 2006,
excluding the extra week, increased by 0.6% as compared to the prior year’s
fourth quarter. Same-store sales for the quarter, excluding the extra
week, increased by 1.2%. The Company reported net earnings of $1.7
million, or $0.03 per diluted share, in the 14-week fourth quarter of
fiscal 2006, compared to a net loss of $14.6 million, or $0.28 per
diluted share, in the prior year’s 13-week
fourth quarter. The earnings improvement was primarily due to an
increase in Adjusted EBITDA. Adjusted EBITDA was $50.0 million in the
14-week fourth quarter of fiscal 2006 compared to $25.9 million in the
prior year’s 13-week fourth quarter. Excluding
the estimated EBITDA benefit of $5.6 million from the 14th
week in fiscal 2006, the increase in Adjusted EBITDA of $18.5 million in
the fourth quarter of fiscal 2006 compared to the fourth quarter of
fiscal 2005 was due to an improvement in gross profit of $12.0 million
generated primarily from our merchandising initiatives as well as lower
inventory shrink, and lower SG&A expenses of $6.5 million. Lower SG&A
expenses resulted primarily from our labor and expense control
initiatives. Adjusted EBITDA is reconciled to net earnings (loss) in
Table C.
Fiscal 2006 Results
Sales for 53-week fiscal 2006 were $4.06 billion, compared to $3.98
billion in 52-week fiscal 2005. Sales for fiscal 2006, excluding the
extra week, were flat as compared to fiscal 2005. Same-store sales for
fiscal 2006, excluding the extra week, increased by 0.4%. The Company
reported a net loss of $18.3 million, or $0.35 per diluted share, in
53-week fiscal 2006, compared to a net loss of $40.1 million, or $0.92
per diluted share, in 52-week fiscal 2005. The reduction in the net loss
was primarily due to an increase in Adjusted EBITDA. Adjusted EBITDA was
$138.6 million in 53-week fiscal 2006 compared to $111.2 million in
52-week fiscal 2005. Excluding the estimated EBITDA benefit of $5.6
million from the 53rd week in fiscal 2006, the
increase in Adjusted EBITDA of $21.8 million in fiscal 2006 compared to
fiscal 2005 was due to an improvement in gross profit of $29.6 million
generated primarily from our merchandising initiatives as well as lower
inventory shrink, partially offset by higher SG&A expenses of $7.8
million. Higher SG&A expenses resulted primarily from higher utility
expenses, higher self-insured workers’
compensation and general liability claims, and higher rent and real
estate taxes, partially offset by gift card income. Adjusted EBITDA is
reconciled to net earnings (loss) in Table C.
Capital Expenditures
Capital expenditures were $71.8 million during fiscal 2006 and are
expected to be approximately $80 million during fiscal 2007. The Company
completed 14 store renovations during fiscal 2006 and plans to complete
13 store renovations during fiscal 2007.
Pathmark Stores, Inc. is a leading regional supermarket chain currently
operating 141 supermarkets primarily in the New York –
New Jersey and Philadelphia metropolitan areas.
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. 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 The Great Atlantic & Pacific Tea Company, Inc. (“A&P”)
announced on March 5, 2007, Pathmark and A&P intend to file with the SEC
relevant materials, including a joint proxy statement/prospectus.
INVESTORS ARE URGED TO READ THESE MATERIALS WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PATHMARK, A&P AND
THE MERGER. The final joint proxy statement/prospectus will be mailed to
the stockholders of A&P and Pathmark. The joint proxy
statement/prospectus and other relevant materials (when they become
available), 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 (732) 499-3000, at 200 Milik Street, Carteret, NJ 07008, or by
accessing Pathmark’s Investor Relations
website; or (ii) contacting A&P’s
Investor Relations at (201) 571-4537, 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 when they become
available 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 2006 Annual
Meeting of Stockholders which was filed with the SEC on May 8, 2006.
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 2006 Annual Meeting of
Stockholders which was filed with the SEC on May 25, 2006. 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 joint proxy statement/prospectus
regarding the merger when it becomes available.
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.
Table A
Pathmark Stores, Inc.
Operating Results (Unaudited)
(in millions, except per share data)
Consolidated Statements of Operations
14 WeeksEndedFebruary 3,2007
13 WeeksEndedJanuary 28,2006
53 WeeksEndedFebruary 3,2007
52 WeeksEndedJanuary 28,2006
Sales
$
1,078.5
$
993.3
$
4,058.0
$
3,977.0
Cost of goods sold
(757.4)
(706.7)
(2,875.2)
(2,846.3)
Gross profit
321.1
286.6
1,182.8
1,130.7
Selling, general and administrative expenses
(276.4)
(271.0)
(1,056.8)
(1,040.9)
Depreciation and amortization
(23.5)
(23.8)
(92.6)
(90.8)
Operating earnings (loss)
21.2
(8.2)
33.4
(1.0)
Interest expense, net
(16.4)
(15.2)
(62.3)
(64.7)
Earnings (loss) before income taxes
4.8
(23.4)
(28.9)
(65.7)
Income tax benefit (provision)
(3.1)
8.8
10.6
25.6
Net earnings (loss)
$
1.7
$
(14.6)
$
(18.3)
$
(40.1)
Weighted average number of shares outstanding –
basic
52.2
51.7
52.1
43.5
Weighted average number of shares outstanding –
diluted
55.0
51.7
52.1
43.5
Net earnings (loss) per share – basic and
diluted
$
0.03
$
(0.28)
$
(0.35)
$
(0.92)
Supplemental Operating Results Data
14 WeeksEndedFebruary 3,2007
13 WeeksEndedJanuary 28,2006
53 WeeksEnded
February 3,2007
52 WeeksEndedJanuary 28,2006
Adjusted EBITDA (see Note 2)
$
50.0
$
25.9
$
138.6
$
111.2
Capital expenditures
$
12.0
$
20.7
$
71.8
$
64.5
Gross profit (% of sales)
29.8%
28.9%
29.1%
28.4%
Selling, general and administrative expenses (% of sales)
25.6%
27.3%
26.0%
26.1%
Adjusted EBITDA (% of sales)
4.6%
2.6%
3.4%
2.8%
Net earnings (loss) (% of sales)
0.2%
(1.5)%
(0.5)%
(1.0)%
See notes to financial statements.
Table B
Pathmark Stores, Inc.
Consolidated Balance Sheets
(in millions)
February 3,2007
January 28,2006
ASSETS
Current assets
Cash and cash equivalents
$
28.1
$
73.4
Marketable securities
--
4.0
Accounts receivable, net
20.6
21.1
Merchandise inventories
180.3
180.6
Due from suppliers
69.8
69.6
Other current assets
33.5
23.9
Total current assets
332.3
372.6
Property and equipment, net
535.7
552.3
Goodwill
144.7
144.7
Other noncurrent assets
119.7
185.0
Total assets
$
1,132.4
$
1,254.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
78.2
$
100.2
Current maturities of debt
25.1
2.1
Current portion of capital lease obligations
11.4
11.1
Accrued expenses and other current liabilities
136.9
167.1
Total current liabilities
251.6
280.5
Long-term debt
423.1
423.8
Long-term capital lease obligations
158.4
168.5
Other noncurrent liabilities
170.9
210.5
Total liabilities
1,004.0
1,083.3
Stockholders’ equity
128.4
171.3
Total liabilities and stockholders’ equity
$
1,132.4
$
1,254.6
Capitalization
February 3,2007
January 28,2006
Debt
$
448.2
$
425.9
Capital lease obligations
169.8
179.6
Total debt and capital lease obligations
618.0
605.5
Stockholders’ equity
128.4
171.3
Total capitalization
$
746.4
$
776.8
See notes to financial statements.
Table C
Pathmark Stores, Inc.
Reconciliation of GAAP Net Earnings (Loss) to Adjusted EBITDA
(Unaudited)
(in millions)
14 WeeksEnded
February 3,2007
13 WeeksEndedJanuary 28,2006
53 WeeksEndedFebruary 3,2007
52 WeeksEndedJanuary 28,2006
Net earnings (loss)
$
1.7
$
(14.6)
$
(18.3)
$
(40.1)
Adjustments:
Interest expense, net
16.4
15.2
62.3
64.7
Income tax provision (benefit)
3.1
(8.8)
(10.6)
(25.6)
Depreciation and amortization
23.5
23.8
92.6
90.8
Non-cash stock-based compensation expense
2.7
0.6
9.7
1.2
Merger–related expenses (see Note 1)
2.6
--
2.9
--
Corporate and store non-union headcount reduction program charge
--
8.4
--
8.4
Merchandising and store initiative charge
--
0.5
--
4.7
Store labor buyout charge
--
--
--
3.6
Separation agreement charge
--
1.0
--
2.6
Strategic alternative expense
--
--
--
1.1
Gain on sale of property and equipment
--
(0.2)
--
(0.2)
Adjusted EBITDA (see Note 2)
$
50.0
$
25.9
$
138.6
$
111.2
See notes to financial statements.
Notes to Financial Statements
1. The Company and A&P announced on March 5, 2007 that they had signed a
definitive merger agreement in which A&P will acquire Pathmark Stores,
Inc. for $1.3 billion in cash, stock and debt assumption or retirement.
A&P noted that this transaction is expected to be completed during the
second half of their fiscal year, subject to completion of customary
closing conditions.
2. The definition of Adjusted EBITDA was revised in the third quarter of
fiscal 2006 to include LIFO expense as a reduction of Adjusted EBITDA.
Prior year amounts have been revised to be consistent with the fiscal
2006 definition.
Adjusted EBITDA represents net earnings (loss), excluding interest
expense, the impact of taxes, depreciation and amortization, merger–related
expenses, non-cash stock-based compensation expense, corporate and store
non-union headcount reduction program charge, merchandising and store
initiative charge, store labor buyout charge, separation agreement
charge, strategic alternative expense and gain on sale of property and
equipment. We believe that our investors find Adjusted EBITDA to be a
useful analytical tool for measuring our performance and for comparing
that performance with the performance of other companies in our 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. Our measurement of Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies.