Pathmark Stores (NASDAQ:PTMK)
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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 (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 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.