Pathmark Announces Third Quarter Fiscal 2006 Results

  
    
  
  
    
      Pathmark Stores, Inc. (Nasdaq: PTMK) today reported unaudited results 
      for its third quarter ended October 28, 2006.
    
    
      Sales for the third quarter of fiscal 2006 were $978.1 million, a 
      decrease of 0.3% from $980.5 million in the prior year’s 
      third quarter. Same-store sales were flat in the quarter. The Company 
      reported a net loss of $5.8 million, or $0.11 per diluted share, in the 
      third quarter of fiscal 2006, compared to a net loss of $18.3 million, 
      or $0.36 per diluted share, in the prior year’s 
      third quarter. The reduction in the net loss was primarily due to an 
      increase in Adjusted EBITDA. Adjusted EBITDA was $30.3 million in the 
      third quarter of fiscal 2006 compared to $19.0 million in the prior year’s 
      third quarter. The increase in Adjusted EBITDA of $11.3 million was 
      primarily due to higher gross profit of $14.1 million with improvement 
      in virtually all departments, partially offset by higher costs of $2.8 
      million primarily for self-insured workers’ 
      compensation and general liability claims. Adjusted EBITDA is reconciled 
      to the net loss in Table C.
    
    
      John Standley, Chief Executive Officer, said, “I 
      am pleased with the progress we made this quarter. Gross margins 
      improved from the prior year in large part because of the merchandising 
      initiatives that we have been working on for the past year as well as 
      lower shrink expense. Additionally, our expense reduction initiatives 
      and the outstanding work of our store teams allowed us to better control 
      expenses.”
    
    
      Capital expenditures during the first nine months of fiscal 2006 were 
      $59.8 million. Capital expenditures for fiscal 2006 are expected to be 
      approximately $70 million. The Company completed 13 store renovations 
      during the first nine months of fiscal 2006 and expects to complete one 
      store renovation during the fourth quarter.
    
    
      Pathmark will conduct a conference call at 2:00 p.m. Eastern Standard 
      Time (EST) today. The call may be accessed via a simultaneous webcast by 
      visiting www.calleci.com. A replay 
      of the call will be available for 14 days after the completion of the 
      call at 1-877-519-4471, Pass Code 8074897. This press release and other 
      financial and statistical information to be presented on the conference 
      call will be accessible on the web by going to www.pathmark.com, 
      ‘Investor Relations’, 
      then clicking on ‘Press Releases’.
    
    
      Pathmark Stores, Inc. is a leading regional supermarket chain currently 
      operating 141 supermarkets primarily in the New York – 
      New Jersey and Philadelphia metropolitan areas.
    
    
      Except for historical information contained herein, the matters 
      discussed in this release and the accompanying discussions on the 
      earnings conference call 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.
    
    
      
        
          
            Table A
          
          
            Pathmark Stores, Inc.
          
          
            Operating Results (Unaudited)
          
          
            (in millions, except per share data)
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Consolidated Statements of Operations
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          13 Weeks Ended
        
        
        
        
          39 Weeks Ended
        
      
      
        
        
        
        
        
           
        
        
          
            October 28,2006
          
        
        
        
        
           
        
        
          
            October 29,2005
          
        
        
        
        
           
        
        
          
            October 28, 2006
          
        
        
        
        
           
        
        
          
            October 29, 2005
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $
        
        
          978.1 
        
        
        
        
          $
        
        
          980.5 
        
        
        
        
          $
        
        
          2,979.5 
        
        
        
        
          $
        
        
          2,983.7 
        
      
      
        
          Cost of goods sold
        
        
        
        
           
        
        
          (690.8)
        
        
        
        
           
        
        
          (707.3)
        
        
        
        
           
        
        
          (2,117.8)
        
        
        
        
           
        
        
          (2,139.6)
        
      
      
        
          Gross profit
        
        
        
        
        
        
          287.3 
        
        
        
        
        
        
          273.2 
        
        
        
        
        
        
          861.7 
        
        
        
        
        
        
          844.1 
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
        
        
          (259.5)
        
        
        
        
        
        
          (264.1)
        
        
        
        
        
        
          (780.4)
        
        
        
        
        
        
          (769.9)
        
      
      
        
          Depreciation and amortization
        
        
        
        
           
        
        
          (23.0)
        
        
        
        
           
        
        
          (22.5)
        
        
        
        
           
        
        
          (69.1)
        
        
        
        
           
        
        
          (67.0)
        
      
      
        
          Operating earnings (loss)
        
        
        
        
        
        
          4.8 
        
        
        
        
        
        
          (13.4)
        
        
        
        
        
        
          12.2 
        
        
        
        
        
        
          7.2 
        
      
      
        
          Interest expense, net (see Note 1)
        
        
        
        
           
        
        
          (15.0)
        
        
        
        
           
        
        
          (15.0)
        
        
        
        
           
        
        
          (45.9)
        
        
        
        
           
        
        
          (49.5)
        
      
      
        
          Loss before income taxes
        
        
        
        
        
        
          (10.2)
        
        
        
        
        
        
          (28.4)
        
        
        
        
        
        
          (33.7)
        
        
        
        
        
        
          (42.3)
        
      
      
        
          Income tax benefit (see Note 2)
        
        
        
        
           
        
        
          4.4 
        
        
        
        
           
        
        
          10.1 
        
        
        
        
           
        
        
          13.7 
        
        
        
        
           
        
        
          16.8 
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (5.8)
        
        
        
        
          $
        
        
          (18.3)
        
        
        
        
          $
        
        
          (20.0)
        
        
        
        
          $
        
        
          (25.5)
        
      
      
        
          
            Weighted average number of shares outstanding – 
            basic and diluted
          
        
        
        
        
           
        
        
          
            52.1 
          
        
        
        
        
           
        
        
          
            50.7 
          
        
        
        
        
           
        
        
          
            52.1 
          
        
        
        
        
           
        
        
          
            40.8 
          
        
      
      
        
          Net loss per share – basic and diluted
        
        
        
        
          $
        
        
          (0.11)
        
        
        
        
          $
        
        
          (0.36)
        
        
        
        
          $
        
        
          (0.38)
        
        
        
        
          $
        
        
          (0.62)
        
      
    
    
      
        
          
            Supplemental Operating Results Data
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          13 Weeks Ended
        
        
        
        
          39 Weeks Ended
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
           
        
        
          
            October 28,2006
          
        
        
        
        
           
        
        
          
            October 29,2005
          
        
        
        
        
           
        
        
          
            October 28,2006
          
        
        
        
        
           
        
        
          
            October 29,2005
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Adjusted EBITDA (see Note 3)
        
        
        
        
          $
        
        
          30.3 
        
        
        
        
          $
        
        
          19.0 
        
        
        
        
          $
        
        
          88.3 
        
        
        
        
          $
        
        
          85.3 
        
      
      
        
          Capital expenditures
        
        
        
        
          $
        
        
          25.1 
        
        
        
        
          $
        
        
          28.3 
        
        
        
        
          $
        
        
          59.8 
        
        
        
        
          $
        
        
          43.8 
        
      
      
        
          Gross profit (% of sales)
        
        
        
        
           
        
        
          29.4%
        
        
        
        
           
        
        
          27.9%
        
        
        
        
           
        
        
          28.9%
        
        
        
        
           
        
        
          28.3%
        
      
      
        
          Selling, general and administrative expenses (% of sales)
        
        
        
        
           
        
        
          26.5%
        
        
        
        
           
        
        
          26.9%
        
        
        
        
           
        
        
          26.2%
        
        
        
        
           
        
        
          25.8%
        
      
      
        
          Adjusted EBITDA (% of sales)
        
        
        
        
           
        
        
          3.1%
        
        
        
        
           
        
        
          1.9%
        
        
        
        
           
        
        
          3.0%
        
        
        
        
           
        
        
          2.9%
        
      
      
        
          Net loss (% of sales)
        
        
        
        
           
        
        
          (0.6)%
        
        
        
        
           
        
        
          (1.9)%
        
        
        
        
           
        
        
          (0.7)%
        
        
        
        
           
        
        
          (0.8)%
        
      
    
    
      
        
          
            Table B
          
          
            Pathmark Stores, Inc.
          
          
            Consolidated Balance Sheets
          
          
            (in millions)
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          
            (Unaudited)
          
          
            October 28,2006
          
        
        
        
        
          
            January 28,2006
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          ASSETS
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Current assets
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          40.7 
        
        
        
        
          $
        
        
          73.4 
        
      
      
        
          Marketable securities
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          4.0 
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          22.7 
        
        
        
        
        
        
          21.1 
        
      
      
        
          Merchandise inventories
        
        
        
        
        
        
          204.4 
        
        
        
        
        
        
          180.6 
        
      
      
        
          Due from suppliers
        
        
        
        
        
        
          70.4 
        
        
        
        
        
        
          69.6 
        
      
      
        
          Other current assets
        
        
        
        
           
        
        
          25.4 
        
        
        
        
           
        
        
          23.9 
        
      
      
        
          Total current assets
        
        
        
        
        
        
          363.6 
        
        
        
        
        
        
          372.6 
        
      
      
        
          Property and equipment, net
        
        
        
        
        
        
          547.3 
        
        
        
        
        
        
          552.3 
        
      
      
        
          Goodwill
        
        
        
        
        
        
          144.7 
        
        
        
        
        
        
          144.7 
        
      
      
        
          Other noncurrent assets
        
        
        
        
           
        
        
          182.5 
        
        
        
        
           
        
        
          185.0 
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          1,238.1 
        
        
        
        
          $
        
        
          1,254.6 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS’ EQUITY
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Current liabilities
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable
        
        
        
        
          $
        
        
          117.0 
        
        
        
        
          $
        
        
          100.2 
        
      
      
        
          Current maturities of debt
        
        
        
        
        
        
          23.3 
        
        
        
        
        
        
          2.1 
        
      
      
        
          
            Current portion of capital leaseobligations
          
        
        
        
        
        
        
          10.4 
        
        
        
        
        
        
          11.1 
        
      
      
        
          
            Accrued expenses and other currentliabilities
          
        
        
        
        
           
        
        
          160.4 
        
        
        
        
           
        
        
          167.1 
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          311.1 
        
        
        
        
        
        
          280.5 
        
      
      
        
          Long-term debt
        
        
        
        
        
        
          423.3 
        
        
        
        
        
        
          423.8 
        
      
      
        
          Long-term capital lease obligations
        
        
        
        
        
        
          161.6 
        
        
        
        
        
        
          168.5 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Other noncurrent liabilities
        
        
        
        
           
        
        
          183.4 
        
        
        
        
           
        
        
          210.5 
        
      
      
        
          Total liabilities
        
        
        
        
        
        
          1,079.4 
        
        
        
        
        
        
          1,083.3 
        
      
      
        
          Stockholders’ equity
        
        
        
        
           
        
        
          158.7 
        
        
        
        
           
        
        
          171.3 
        
      
      
        
          Total liabilities and stockholders’ equity
        
        
        
        
          $
        
        
          1,238.1 
        
        
        
        
          $
        
        
          1,254.6 
        
      
    
    
      
        
          
            Capitalization
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          
            October 28,2006
          
        
        
        
        
          
            January 28,2006
          
        
      
      
        
        
        
        
        
        
        
          
             
          
        
        
        
        
        
        
        
      
      
        
          Debt
        
        
        
        
          $
        
        
          446.6 
        
        
        
        
          $
        
        
          425.9 
        
      
      
        
          Capital lease obligations
        
        
        
        
           
        
        
          172.0 
        
        
        
        
           
        
        
          179.6 
        
      
      
        
          Total debt and capital lease obligations
        
        
        
        
        
        
          618.6 
        
        
        
        
        
        
          605.5 
        
      
      
        
          Stockholders’ equity
        
        
        
        
           
        
        
          158.7 
        
        
        
        
           
        
        
          171.3 
        
      
      
        
          Total capitalization
        
        
        
        
          $
        
        
          777.3 
        
        
        
        
          $
        
        
          776.8 
        
      
    
    
      
        
          
            Table C
          
          
            Pathmark Stores, Inc.
          
          
            Reconciliation of the GAAP Net Loss to Adjusted EBITDA 
            (Unaudited)
          
          
            (in millions)
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          13 Weeks Ended
        
        
        
        
          39 Weeks Ended
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
           
        
        
          
            October 28,2006
          
        
        
        
        
           
        
        
          
            October 29,2005
          
        
        
        
        
           
        
        
          
            October 28,2006
          
        
        
        
        
           
        
        
          
            October 29,2005
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (5.8)
        
        
        
        
          $
        
        
          (18.3)
        
        
        
        
          $
        
        
          (20.0)
        
        
        
        
          $
        
        
          (25.5)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Adjustments:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Interest expense, net (see Note 1)
        
        
        
        
        
        
          15.0 
        
        
        
        
        
        
          15.0 
        
        
        
        
        
        
          45.9 
        
        
        
        
        
        
          49.5 
        
      
      
        
          Income tax benefit (see Note 2)
        
        
        
        
        
        
          (4.4)
        
        
        
        
        
        
          (10.1)
        
        
        
        
        
        
          (13.7)
        
        
        
        
        
        
          (16.8)
        
      
      
        
          Depreciation and amortization
        
        
        
        
        
        
          23.0 
        
        
        
        
        
        
          22.5 
        
        
        
        
        
        
          69.1 
        
        
        
        
        
        
          67.0 
        
      
      
        
          Non-cash stock-based compensation expense
        
        
        
        
        
        
          2.5 
        
        
        
        
        
        
          0.5 
        
        
        
        
        
        
          7.0 
        
        
        
        
        
        
          0.6 
        
      
      
        
          Merchandising and store initiative charge
        
        
        
        
        
        
          
            -- 
          
        
        
        
        
        
        
          4.2 
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          4.2 
        
      
      
        
          Store labor buyout charge
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          3.6 
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          3.6 
        
      
      
        
          Separation agreement charge
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          1.6 
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          1.6 
        
      
      
        
          Strategic alternative expense
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          -- 
        
        
        
        
        
        
          1.1 
        
      
      
        
        
        
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
      
      
        
          Adjusted EBITDA (see Note 3)
        
        
        
        
          $
        
        
          30.3 
        
        
        
        
          $
        
        
          19.0 
        
        
        
        
          $
        
        
          88.3 
        
        
        
        
          $
        
        
          85.3 
        
      
    
    
      Notes to Financial Statements
    
    
      1. Interest expense for the 39 weeks ended October 29, 2005 included a 
      $2.8 million early extinguishment of debt charge related to the 
      defeasance of a mortgage liability.
    
    
      2. The tax benefit and effective tax rate for the 13 weeks and the 39 
      weeks ended October 29, 2005 were negatively impacted by a $2.0 million 
      third quarter charge to increase our valuation allowance related to 
      certain state net operating loss carryforwards.
    
    
      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. 
      Prior year amounts have been revised to be consistent with the fiscal 
      2006 definition.
    
    
      Adjusted EBITDA represents net loss, excluding interest expense, the 
      impact of taxes, depreciation and amortization, non-cash stock-based 
      compensation expense, merchandising and store initiative charge, store 
      labor buyout charge, separation agreement charge and strategic 
      alternative expense. 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.