UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 25, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________ to____________
Commission file number 1-4141
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Maryland 13-1890974
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(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)
Registrant's telephone number, including area code: 201-573-9700
---------------------------------
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock - $1 par value New York Stock Exchange
7.75% Notes, due April 15, 2007 New York Stock Exchange
9.125% Senior Notes, due December 15, 2011 New York Stock Exchange
9.375% Notes, due August 1, 2039 New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
---------------------------------
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined by Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 of Section 15(d) of the Act. Yes [ ] No [X]
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 [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer X Accelerated filer Non-accelerated filer
--------- ---------- ---------
Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of the close of business on September 9, 2005, the
registrant's most recently completed second fiscal quarter, was $1,122,677,684.
The number of shares of common stock outstanding as of the close of
business on May 4, 2006 was 41,283,759.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part I, Items 1 and 3, and Part II, Items
5, 6, 7, 7A, 8, 9A and 15 are incorporated by reference from the Registrant's
Fiscal 2005 Annual Report to Stockholders. The information required by Part III,
Items 10, 11, 12, 13, and 14 are incorporated by reference from the Registrant's
Proxy Statement.
1
PART I
ITEM 1 - BUSINESS
GENERAL
The Great Atlantic & Pacific Tea Company, Inc. ("A&P", "we", "our",
"us" or "our Company") is engaged in the retail food business. We operated 405
stores averaging approximately 40,700 square feet per store as of February 25,
2006.
Operating under the trade names A&P(R), Super Fresh(R),
Sav-A-Center(R), Farmer Jack(R), Waldbaum's(TM), Super Foodmart, Food Basics(R),
and The Food Emporium(R), we sell groceries, meats, fresh produce and other
items commonly offered in supermarkets. In addition, many stores have bakery,
delicatessen, pharmacy, floral, fresh fish and cheese departments and on-site
banking. National, regional and local brands are sold as well as private label
merchandise. In support of our retail operations, we sell other private label
products in our stores under other brand names of our Company which include
without limitation, America's Choice(R), Master Choice(R), Health Pride(R), and
Savings Plus.
Building upon a broad base of A&P supermarkets, our Company has
historically expanded and diversified within the retail food business through
the acquisition of other supermarket chains and the development of several
alternative store types. We now operate our stores with merchandise, pricing and
identities tailored to appeal to different segments of the market, including
buyers seeking gourmet and ethnic foods, a wide variety of premium quality
private label goods and health and beauty aids along with the array of
traditional grocery products.
The Company's Securities and Exchange Commission ("SEC") filings are
promptly posted to its website at www.aptea.com after they are filed with the
SEC and can be accessed free of charge through a link on the "Investors" page.
MODERNIZATION OF FACILITIES
During fiscal 2005, we expended approximately $191 million for capital
projects, which included 3 new supermarkets and 41 major remodels or
enlargements. Our Company has planned capital expenditures of approximately $175
to $200 million in fiscal 2006. These expenditures relate primarily to opening 2
to 5 new supermarkets, converting 5 to 10 stores to new formats, and enlarging
or remodeling 40 - 60 supermarkets. In addition, we plan to continue with at
least similar levels of capital expenditures in fiscal 2007 and several years
thereafter.
SOURCES OF SUPPLY
Our Company currently acquires a significant amount of our saleable
inventory from one supplier, C&S Wholesale Grocers, Inc. Although there are a
limited number of distributors that can supply our stores, we believe that other
suppliers could provide similar product on comparable terms.
2
EMPLOYEES
As of February 25, 2006, we had approximately 38,000 employees, of
which 66% were employed on a part-time basis. Approximately 87% of our employees
are covered by union contracts.
COMPETITION
The supermarket business is highly competitive throughout the marketing
areas served by our Company and is generally characterized by low profit margins
on sales with earnings primarily dependent upon rapid inventory turnover,
effective cost controls and the ability to achieve high sales volume. We compete
for sales and store locations with a number of national and regional chains, as
well as with many independent and cooperative stores and markets.
SEGMENT INFORMATION
The segment information required is contained under the caption "Note
15 - Operating Segments" in the Fiscal 2005 Annual Report to Stockholders and is
herein incorporated by reference.
FOREIGN OPERATIONS
The information required is contained under the captions "Management's
Discussion and Analysis", "Note 1 - Summary of Significant Accounting Policies",
"Note 2 - Divestiture of our Businesses in Canada and the Midwestern United
States", "Note 6 - Valuation of Goodwill and Long-Lived Assets", "Note 8 - Asset
Disposition Initiatives", "Note 9 - Indebtedness', "Note 12 - Income Taxes",
"Note 13 - Retirement Plans and Benefits", "Note 15 - Operating Segments", "Note
16 - Related Party Transactions", and "Note 17 - Hedge of Net Investment in
Foreign Operations" in the Fiscal 2005 Annual Report to Stockholders and is
herein incorporated by reference.
ITEM 1A - RISK FACTORS
Set forth below is a summary of the material risks to an investment in
our securities.
o Actions of competitors could adversely affect our sales and future profits.
The grocery retailing industry continues to experience fierce competition
from other food retailers, super-centers, mass merchandisers, warehouse
clubs, drug stores, dollar stores and restaurants. Our continued success is
dependent upon our ability to effectively compete in this industry and to
reduce operating expenses, including managing health care and pension costs
contained in our collective bargaining agreements. The competitive
practices and pricing in the food industry generally and particularly in
our principal markets may cause us to reduce our prices in order to gain or
maintain share of sales, thus reducing margins.
o Changes in the general business and economic conditions in our operating
regions, including the rate of inflation, population growth, the rising
prices of oil and gas, the nature and extent of continued consolidation in
the food industry and employment and job growth in the markets in which we
operate, may affect our ability to hire and train qualified employees to
operate our stores. This would negatively affect earnings and sales growth.
General economic changes may also affect the shopping habits and buying
patterns of our customers, which could affect sales and earnings. We have
assumed economic and competitive situations will not worsen in fiscal 2006
and 2007. However, we cannot fully foresee the effects of changes in
economic conditions, inflation, population growth, the rising prices of oil
and gas, customer shopping habits and the consolidation of the food
industry on our business.
3
o Our capital expenditures could differ from our estimate if we are
unsuccessful in acquiring suitable sites for new stores, or if development
and remodel costs vary from those budgeted.
o Our ability to achieve our profit goals will be affected by (i.) our
success in executing category management and purchasing programs that we
have underway, which are designed to improve our gross margins and reduce
product costs while making our product selection more attractive to
consumers, (ii.) our ability to achieve productivity improvements and
shrink reduction in our stores, (iii.) our success in generating
efficiencies in our supporting activities, and (iv.) our ability to
eliminate or maintain a minimum level of supply and/or quality control
problems with our vendors.
o The vast majority of our employees are members of labor unions. While we
believe that our relationships with union leaderships and our employees are
satisfactory, we operate under collective bargaining agreements which
periodically must be renegotiated. In the coming year, we have several
contracts expiring and under negotiation. In each of these negotiations
rising health care and pension costs will be an important issue, as will
the nature and structure of work rules. We are hopeful, but cannot be
certain, that we can reach satisfactory agreements without work stoppages
in these markets. However, the actual terms of the renegotiated collective
bargaining agreements, our future relationships with our employees and/or a
prolonged work stoppage affecting a substantial number of stores could have
a material effect on our results.
o The amount of contributions made to our pension and multi-employer plans
will be affected by the performance of investments made by the plans and
the extent to which trustees of the plans reduce the costs of future
service benefits.
o Our Company currently acquires a significant amount of our saleable
inventory from one supplier, C&S Wholesale Grocers, Inc. Although there are
a limited number of distributors that can supply our stores, we believe
that other suppliers could provide similar product on comparable terms.
However, a change in suppliers could cause a delay in distribution and a
possible loss of sales, which would affect operating results adversely.
o We have estimated our exposure to claims, administrative proceedings and
litigation and believe we have made adequate provisions for them, where
appropriate. Unexpected outcomes in both the costs and effects of these
matters could result in an adverse effect on our earnings.
Other factors and assumptions not identified above could also cause actual
results to differ materially from those set forth in the forward-looking
information. Accordingly, actual events and results may vary significantly from
those included in or contemplated or implied by forward-looking statements made
by us or our representatives.
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.
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ITEM 2 - PROPERTIES
At February 25, 2006, we owned 37 properties consisting of the
following:
Stores, Not Including Stores in Owned Shopping Centers
Land and building owned 10
Building owned and land leased 16
----
Total stores 26
Shopping Centers
Land and building owned 1
Building owned and land leased 1
----
Total shopping centers 2
Warehouses
Land and building owned 1
Administrative and Other Properties
Land and building owned 3
Building owned and land leased 1
Undeveloped land 4
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Total other properties 8
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Total Properties 37
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At February 25, 2006, we operated 405 retail stores. These stores are
geographically located as follows:
COMPANY STORES:
New England States:
Connecticut 26
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Total 26
Middle Atlantic States:
District of Columbia 1
Delaware 9
Maryland 30
New Jersey 93
New York 131
Pennsylvania 25
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Total 289
Midwestern States:
Michigan 67
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Total 67
Southern States:
Louisiana 21
Mississippi 2
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Total 23
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Total Stores 405
====
5
The total area of all of our operated retail stores is 16.5 million
square feet averaging approximately 40,700 square feet per store. Excluding
liquor and The Food Emporium(R) stores, which are generally smaller in size, the
average store size is approximately 44,200 square feet. The 3 new stores opened
in fiscal 2005 consisted of 3 supermarkets and range in size from 33,600 to
50,900 square feet, with an average size of approximately 44,000 square feet.
The stores built over the past several years and those planned for fiscal 2006
and thereafter, generally range in size from 40,000 to 60,000 square feet. The
selling area of new stores is approximately 75% of the total square footage.
As of the end of fiscal 2005, we operated 2 warehouses to service our
store network located in Michigan. Our store network is also serviced by C&S
Wholesale Grocers, Inc.
ITEM 3 - LEGAL PROCEEDINGS
The information required is contained under the caption "Note 18 -
Commitments and Contingencies" in the Fiscal 2005 Annual Report to Stockholders
and is herein incorporated by reference.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of fiscal 2005.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required is contained under the captions "Summary of
Quarterly Results", "Five Year Summary of Selected Financial Data", and
"Stockholder Information" in the Fiscal 2005 Annual Report to Stockholders and
is herein incorporated by reference.
Although our Company declared and paid a special one-time dividend to
our shareholders of record on April 17, 2006 equal to $7.25 per share in April
2006, which is subsequent to our fiscal year end of February 25, 2006, our
Company's policy is to not pay dividends. As such, we have not made dividend
payments in the previous three years and do not intend to pay dividends in the
normal course of business in fiscal 2006. However, our Company is permitted,
under the terms of our Revolver, to pay cash dividends on common shares.
6
Securities authorized for issuance under equity compensation plans are
summarized below:
As of February 25, 2006
---------------------------------------------------------
Weighted Average
Number of Exercise Price Number of
Securities of Outstanding Securities
to be Issued Options and Available to
Upon Exercises Rights Grant
----------------- ------------------ ------------------
Plan Category
-------------
1994 Stock Option Plan for officers and key employees 424,585 $ 19.96 - *
1998 Long Term Incentive and Share Award Plan 1,082,666 18.98 4,662,611**
1994 Stock Option Plan for Board of Directors 27,134 18.53 65,567
----------------- --------------- ------------------
TOTAL OPTIONS OUTSTANDING AS OF FEBRUARY 25, 2006 1,534,385 $ 19.24 4,728,178
================= =============== ==================
* On March 17, 2004, the plan expired.
** At our Annual Meeting of Stockholders on July 14, 2005, the Board of
Directors voted to increase the number of shares that may be issued
under the 1998 Long Term Incentive and Share Award Plan by 3,000,000
shares.
ITEM 6 - SELECTED FINANCIAL DATA
The information required is contained under the caption "Five Year
Summary of Selected Financial Data" in the Fiscal 2005 Annual Report to
Stockholders and is herein incorporated by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required is contained under the caption "Management's
Discussion and Analysis" in the Fiscal 2005 Annual Report to Stockholders and is
herein incorporated by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required is contained in the section "Market Risk"
under the caption "Management's Discussion and Analysis" in the Fiscal 2005
Annual Report to Stockholders and is herein incorporated by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements: The financial statements required to be filed
herein are described in Part IV, Item 15 of this report. Except for
the sections included herein by reference, our Fiscal 2005 Annual
Report to Stockholders is not deemed to be filed as part of this
report.
(b) Supplementary Data: The information required is contained under the
caption "Summary of Quarterly Results" in the Fiscal 2005 Annual
Report to Stockholders and is herein incorporated by reference.
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ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on
accounting and financial disclosure during the fiscal year ended February 25,
2006.
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established and maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our
Company's Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to our Company's management,
including our President and Chief Executive Officer and Senior Vice President,
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
We carried out an evaluation, under the supervision and with the
participation of our Company's management, including our Company's President and
Chief Executive Officer along with our Company's Senior Vice President, Chief
Financial Officer, of the effectiveness of the design and operation of our
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(b). Based upon the foregoing, as of February 25, 2006, our Company's
President and Chief Executive Officer along with our Company's Senior Vice
President, Chief Financial Officer, concluded that our Company's disclosure
controls and procedures were effective as of February 25, 2006.
The Company's management does not expect that its disclosure controls
and procedures or its internal control over financial reporting will prevent all
errors and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and breakdowns
can occur because of simple errors or mistakes. Additionally, controls can be
circumvented by the individual acts of some person or by collusion of two or
more people. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected. Accordingly, the Company's disclosure controls and procedures
are designed to provide reasonable, not absolute, assurance that the objectives
of our disclosure control system are met and, as set forth above, the Company's
management has concluded, based on their evaluation as of the end of the period,
that our disclosure controls and procedures were sufficiently effective to
provide reasonable assurance that the objectives of our disclosure control
system were met.
8
Incorporation by reference of Management's Annual Report on Internal Control
over Financial Reporting
Management of The Great Atlantic and Pacific Tea Company, Inc. has
prepared an annual report on internal control over financial reporting.
Management's report, together with the attestation report of the independent
registered public accounting firm, is included in our Company's Fiscal 2005
Annual Report to Stockholders and is herein incorporated by reference in this
Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
Other than discussed below, there has been no change during our
Company's fiscal quarter ended February 25, 2006 in our Company's internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our Company's internal control over financial
reporting.
In the fourth quarter of fiscal 2005, our Company completed the sale of
our U.S. distribution operations and the majority of our warehouse facilities
and related assets to C&S Wholesale Grocers, Inc. In connection with the sale of
these operations, our Company no longer maintains internal controls over
financial reporting relating to these warehouse physical inventories and related
reconciliations. We have evaluated and identified our key controls associated
with the revised process and these key controls have been implemented and
tested.
ITEM 9B - OTHER INFORMATION
None
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PART III
ITEMS 10 AND 11 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND
EXECUTIVE COMPENSATION
The executive officers of our Company are as follows:
Name Age Current Position
---- --- ----------------
Christian W.E. Haub 41 Executive Chairman
Eric Claus 49 President and Chief Executive Officer
John E. Metzger 51 Executive Vice President
Brenda M. Galgano 37 Senior Vice President and Chief Financial Officer
Jennifer MacLeod 45 Senior Vice President, Marketing and Communications
Allan Richards 42 Senior Vice President, Human Resources, Labor
Relations, Legal Services & Secretary
Stephen Slade 55 Senior Vice President, Merchandising
Paul Wiseman 45 Senior Vice President, Store Operations
William Moss 58 Vice President and Treasurer
Melissa Sungela 40 Vice President and Corporate Controller
The executive officers of our Company are chosen annually and serve
under the direction of the Chief Executive Officer ("CEO") with the consent of
the Board of Directors.
Mr. Haub was appointed Executive Chairman in August 2005. He was
elected a director in December 1991, and is Chair of the Executive Committee.
Mr. Haub previously served as Chairman of the Board and Chief Executive Officer;
and as Chief Operating Officer of our Company from December 1993, becoming
Co-Chief Executive Officer in April 1997, sole CEO in May 1998 and Chairman of
the Board in May 2001. Mr. Haub also served as President of the Company from
December 1993 through February 2002, and from November 2002 through November
2004. Mr. Haub, son of Helga Haub, is a partner and Co-Chief Executive Officer
of Tengelmann Warenhandelsgesellschaft KG, a partnership organized under the
laws of the Federal Republic of Germany ("Tengelmann"). Mr. Haub is on the Board
of Directors of Metro, Inc., the Food Marketing Institute and on the Board of
Trustees of St. Joseph's University in Philadelphia, Pennsylvania.
Mr. Claus was appointed President & Chief Executive Officer in August
2005. Mr. Claus previously served as President & Chief Executive Officer,
Canadian Company from November 2002 to August 2005. Prior to joining our
Company, Mr. Claus served as Chief Executive Officer of Co-Op Atlantic, between
February 1997 and November 2002.
Mr. Metzger was appointed Executive Vice President in September 2005.
Mr. Metzger previously served as Senior Vice President, Chief Information
Officer from February 2002 to September 2005, with the exception of
mid-September, 2004 through mid-November, 2004, when he served as the Company's
Executive Vice President, Fresh Stores. Prior to that, he was Senior Vice
President and Business Process Initiative Business Leader from May 2001 to
February 2002, and Vice President, Supply & Logistics from October 1999 to May
2001. Prior to joining our Company, Mr. Metzger was Senior Vice President of CS
Integrated LLC from January 1998 to October 1999 and before that, Vice
President, Distribution & Procurement for General Mills Restaurants, Inc. from
October 1993 to November 1997. Mr. Metzger is a director of the Institute for
Standards & Collaboration Commerce, Inc.
10
Ms. Galgano, CPA, was appointed Senior Vice President and Chief
Financial Officer in November 2005. Ms. Galgano served as Senior Vice President
and Corporate Controller, from November 2004 to November 2005; Vice President,
Corporate Controller from February 2002 to November 2004, Assistant Corporate
Controller of our Company from July 2000 to February 2002 and Director of
Corporate Accounting from October 1999 to July 2000. Prior to joining our
Company, Ms. Galgano was with PricewaterhouseCoopers as Senior Manager,
Assurance and Business Advisory Services.
Ms. MacLeod was appointed Senior Vice President, Marketing and
Communications in November 2005. Prior to joining our Company, Ms. MacLeod
served as Vice President of Marketing and Public Relations from 1998 to November
2005 for Co-op Atlantic, an operator based in New Brunswick, Canada.
Mr. Richards was appointed Senior Vice President, Human Resources,
Labor Relations & Legal Services in September 2005 and in October 2005 was
additionally appointed the Company's Secretary. Prior to that Mr. Richards
served as Senior Vice President, Labor Relations & Human Resources from July
2004 to September 2005 and as Senior Vice President, Labor Relations from March
2004 to July 2004. Prior to joining our Company Mr. Richards served as a
consultant with MGS Consulting, Inc. from July 2003 to July 2004; and prior to
that as Director of Labor Relations and Employment Law for Fleming Companies,
Inc. from June 2000 to July 2003.
Mr. Slade was appointed Senior Vice President, Merchandising in
September 2005. Prior to that Mr. Slade served as Executive Vice President,
Operations from November 2004 to September 2005; and as Banner President from
February 2004 to November 2005. Prior to joining our Company, Mr. Slade served
from 1999 to 2004 as a Managing Director of K-Mart, a nationwide retailer.
Mr. Wiseman was appointed Senior Vice President, Store Operations in
September 2005. Prior to that Mr. Wiseman was Senior Vice President, Discount
Operations, A&P Canada from 2004 to September 2005 and prior to that served as
District Manager/Vice President Retail Operations from 1999 to 2004 for Co-op
Atlantic, an operator based in New Brunswick, Canada.
Mr. Moss was appointed Vice President and Treasurer in February 2002.
Prior to that Mr. Moss was Vice President, Treasury Services and Risk Management
from 1992 to February 2002.
Ms. Sungela, CPA, was appointed Vice President and Corporate Controller
in November 2005. Ms. Sungela served as Vice President and Assistant Corporate
Controller from June 2004 to November 2005. Prior to joining our Company, Ms.
Sungela was North American Controller for Amersham Biosciences, a part of GE
Healthcare, from April 2002 to June 2004. Previously, she served as Director of
Accounting Policy for Honeywell, from June 1998 to January 2002.
The information required regarding our directors, executive
compensation and our beneficial ownership reporting compliance is contained
under the captions "Election of Directors", "Executive Compensation" and
"Section 16(a) Beneficial Ownership Reporting Compliance", respectively, in the
Proxy Statement for our 2006 Annual Meeting of Stockholders, to be filed on or
about May 24, 2006 ("Proxy Statement"), and is herein incorporated by reference.
11
Audit Committee Financial Expert
The Board has determined that each member of the Audit Committee is
independent in accordance with the NYSE listing rules, the Company's Standards
of Independence and Rule 10A-3 of the Exchange Act. In addition, the Board has
determined that each member of the Audit Committee qualifies as an "audit
committee financial expert," as defined by the SEC.
Code of Business Conduct and Ethics
Our Company has adopted a Code of Business Conduct and Ethics
applicable to all employees. This Code is applicable to Senior Financial
Executives including the chief executive officer, chief financial officer and
chief accounting officer of our Company. A&P's Code of Business Conduct and
Ethics is available on the Company's Web site at www.aptea.com under "Corporate
Governance." Our Company intends to post on its web site any amendments to, or
waivers from, its Code of Business Conduct and Ethics applicable to Senior
Financial Executives.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP OF MORE THAN 5% OF THE COMPANY'S COMMON STOCK
The information required is contained in our Proxy Statement under the
heading "Security Ownership of Certain Beneficial Owners and Management", and is
herein incorporated by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required is contained in our Proxy Statement under the
heading "Certain Relationships and Transactions", and is herein incorporated by
reference.
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required is contained in our Proxy Statement under the
heading "Independent Registered Public Accounting Firm", and is herein
incorporated by reference.
12
PART IV
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) DOCUMENTS FILED AS PART OF THIS REPORT.
1) Financial Statements: The financial statements required by Item 8 are
included in the Fiscal 2005 Annual Report to Stockholders. The
following required items are herein incorporated by reference:
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity and
Comprehensive (Loss) Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2) Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are not required or do
not apply, or the required information is included elsewhere in the
Consolidated Financial Statements or Notes thereto.
3) Exhibits:
The following are filed as Exhibits to this Report:
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Stock Purchase Agreement, dated as of July 19, 2005, by and among the Company, A&P
Luxembourg S.a.r.l., Metro Inc. and 4296711 Canada Inc. (incorporated herein by
reference to Exhibit 2.1 to Form 8-K filed on July 22, 2005)
3.1 Articles of Incorporation of The Great Atlantic & Pacific Tea Company, Inc., as
amended through July 1987 (incorporated herein by reference to Exhibit 3(a) to
Form 10-K filed on May 27, 1988)
3.2 By-Laws of The Great Atlantic & Pacific Tea Company, Inc., as amended and restated
through October 6, 2005 (incorporated herein by reference to Exhibit 3.1 to Form
8-K filed on October 11, 2005)
4.1 Indenture, dated as of January 1, 1991 between the Company and JPMorgan Chase Bank
(formerly The Chase Manhattan Bank as successor by merger to Manufacturers Hanover
Trust Company), as trustee (the "Indenture") (incorporated herein by reference to
Exhibit 4.1 to Form 8-K)
13
4.2 First Supplemental Indenture, dated as of December 4, 2001, to the Indenture,
dated as of January 1, 1991 between our Company and JPMorgan Chase Bank, relating
to the 7.70% Senior Notes due 2004 (incorporated herein by reference to Exhibit
4.1 to Form 8-K filed on December 4, 2001)
4.3 Second Supplemental Indenture, dated as of December 20, 2001, to the Indenture
between our Company and JPMorgan Chase Bank, relating to the 9 1/8% Senior Notes
due 2011 (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed on
December 20, 2001)
4.4 Successor Bond Trustee (incorporated herein by reference to Exhibit 4.4 to Form
10-K filed on May 9, 2003)
4.5 Third Supplemental Indenture, dated as of August 23, 2005, to the Indenture
between the Company and Wilmington Trust Company (as successor to JPMorgan Chase
Bank) (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed on August
23, 2005)
4.6 Fourth Supplemental Indenture, dated as of August 23, 2005, to the Indenture
between the Company and Wilmington Trust Company (as successor to JPMorgan Chase
Bank). (incorporated herein by reference to Exhibit 4.2 to Form 8-K filed on
August 23, 2005)
4.7 Credit Agreement dated as of November 15, 2005 between the Company and Bank of
America, N.A. as Administrative Agent and Collateral Agent, JPMorgan Chase Bank,
N.A. as Syndication Agent, Wachovia Bank, National Association as Documentation
Agent and Banc of America Securities LLC as Lead Arranger (incorporated herein by
reference to Exhibit 4.1 to Form 8-K filed on November 18, 2005 and Item 8.01 to
Form 8-K filed April 10, 2006)
10.1* Executive Employment Agreement, made and entered into as of the 15th day of
August, 2005, by and between the Company and Mr. Eric Claus (incorporated herein
by reference to Exhibit 10.1 to Form 8-K filed on September 9, 2005) and a technical
amendment as filed herein
10.2 Employment Agreement, made and entered into as of the 1st day of November, 2000,
by and between the Company and William P. Costantini (incorporated herein by
reference to Exhibit 10 to Form 10-Q filed on January 16, 2001) ("Costantini
Agreement")
10.3 Amendment to Costantini Agreement dated April 30, 2002 (incorporated herein by
reference to Exhibit 10.7 to Form 10-K filed on July 5, 2002)
10.4 Confidential Separation and Release Agreement by and between William P. Costantini
and The Great Atlantic & Pacific Tea Company, Inc. dated November 4, 2004
(incorporated herein by reference to Exhibit 10.4 to Form 10-Q filed on January 7,
2005)
14
10.5 Employment Agreement, made and entered into as of the 16th day of June, 2003, by
and between our Company and Brenda Galgano (incorporated herein by reference to
Exhibit 10.9 to Form 10-Q filed on October 17, 2003)
10.6 Employment Agreement, made and entered into as of the 24th day of February, 2002,
by and between our Company and Mitchell P. Goldstein (incorporated herein by
reference to Exhibit 10.8 to Form 10-K filed on July 5, 2002)
10.7 Letter Agreement dated September 6, 2005, between Mitchell P. Goldstein and our
Company (incorporated herein by reference to Exhibit 10.2 to Form 8-K filed on
September 9, 2005)
10.8 Employment Agreement, made and entered into as of the 2nd day of October, 2002, by
and between our Company and Peter Jueptner (incorporated herein by reference to
Exhibit 10.26 to Form 10-Q filed on October 22, 2002) ("Jueptner Agreement")
10.9 Amendment to Jueptner Agreement dated November 10, 2004 (incorporated herein by
reference to Exhibit 10.8 to Form 10-K filed on May 10, 2005)
10.10 Offer Letter dated the 18th day of September 2002, by and between our Company and
Peter Jueptner (incorporated herein by reference to Exhibit 10.10 to Form 10-Q
filed on January 10, 2003)
10.11 Employment Agreement, made and entered into as of the 14th day of May, 2001, by
and between our Company and John E. Metzger, as amended February 14, 2002
(incorporated herein by reference to Exhibit 10.13 to Form 10-K filed on July 5,
2002) ("Metzger Agreement")
10.12 Amendment to John E. Metzger Agreement dated October 25, 2004 (incorporated
herein by reference to Exhibit 10.12 to Form 10-K filed on May 10, 2005)
10.13* Employment Agreement, made and entered into as of the 25th day of January, 2006,
by and between our Company and Jennifer MacLeod, as filed herein
10.14 Employment Agreement, made and entered into as of the 1st day of March 2005, by
and between our Company and William J. Moss (incorporated herein by reference to
Exhibit 10.13 to Form 10-K filed on May 10, 2005)
10.15 Employment Agreement, made and entered into as of the 28th day of October, 2002,
by and between our Company and Brian Piwek, and Offer Letter dated the 23rd day of
October, 2002 (incorporated herein by reference to Exhibit 10.14 to Form 10-Q
filed on January 10, 2003) ("Piwek Agreement")
15
10.16 Amendment to Brian Piwek Agreement dated February 4, 2005 (incorporated herein by
reference to Exhibit 10.15 to Form 10-K filed on May 10, 2005)
10.17 Employment Agreement, made and entered into as of the 4th of January 2006, by and
between our Company and Melissa E. Sungela, (incorporated herein by reference to
Exhibit 10.17 to Form 10-Q filed on January 6, 2006)
10.18 Employment Agreement, made and entered into as of the 12th of September 2005, by
and between our Company and Paul Wiseman (incorporated herein by reference to
Exhibit 10.17 to Form 10-Q filed on October 18, 2005)
10.19 Employment Agreement, made and entered into as of the 2nd of December 2004, by and
between our Company and Allan Richards (incorporated herein by reference to
Exhibit 10.18 to Form 10-Q filed on October 18, 2005)
10.20 Employment Agreement, made and entered into as of the 2nd of December 2004, by and
between our Company and Stephen Slade (incorporated herein by reference to Exhibit
10.19 to Form 10-Q filed on October 18, 2005)
10.21 Supplemental Executive Retirement Plan effective as of September 1, 1997
(incorporated herein by reference to Exhibit 10.B to Form 10-K filed on May 27,
1998)
10.22 Supplemental Retirement and Benefit Restoration Plan effective as of January 1,
2001 (incorporated herein by reference to Exhibit 10(j) to Form 10-K filed on May
23, 2001)
10.23 1994 Stock Option Plan (incorporated herein by reference to Exhibit 10(e) to Form
10-K filed on May 24, 1995)
10.24 1998 Long Term Incentive and Share Award Plan (incorporated herein by reference to
Exhibit 10(k) to Form 10-K filed on May 19, 1999 and to Appendix B to the Proxy
Statement dated May 27, 2005)
10.25 Form of Stock Option Grant (incorporated herein by reference to Exhibit 10.20 to
Form 10-K filed on May 10, 2005)
10.26 Description of 2005 Turnaround Incentive Compensation Program (incorporated herein
by reference to Exhibit 10.21 to Form 10-K filed on May 10, 2005)
10.27 Form of Restricted Share Unit Award Agreement (incorporated herein by reference to
Exhibit 10.22 to Form 10-K filed on May 10, 2005)
16
10.28 1994 Stock Option Plan for Non-Employee Directors (incorporated herein by
reference to Exhibit 10(f) to Form 10-K filed on May 24, 1995)
10.29 2004 Non-Employee Director Compensation effective as of July 14, 2004
(incorporated herein by reference to Exhibit 10.15 to Form 10-Q filed on July 29,
2004)
10.30* Description of Management Incentive Plan (incorporated herein by reference to
Exhibit 10.26 to Form 10-K filed on May 10, 2005) and as filed herein
10.31 Asset Purchase Agreement, dated as of June 27, 2005, by and between the Company,
Ocean Logistics LLC and C&S Wholesale Grocers, Inc. (incorporated herein by
reference to Exhibit 10.38 to Form 10-Q filed on October 18, 2005)
10.32 Supply Agreement, dated as of June 27, 2005, by and between the Company and C&S
Wholesale Grocers, Inc. (incorporated herein by reference to Exhibit 10.39 to Form
10-Q filed on October 18, 2005)
10.33 Information Technology Transition Services Agreement by and between The Great
Atlantic and Pacific Tea Company, Limited ("A&P Canada") and Metro, Inc. entered
into on August 15, 2005 (incorporated herein by reference to Exhibit 10.40 to Form
10-Q filed on October 18, 2005)
10.34 Investor Agreement by and between A&P Luxembourg S.a.r.l., a wholly owned
subsidiary of the Company, and Metro, Inc. entered into on August 15, 2005
(incorporated herein by reference to Exhibit 10.41 to Form 10-Q filed on October
18, 2005)
10.35 Letter of Credit Agreement, dated as of October 14, 2005 between the Company and
Bank of America, N.A., as Issuing Bank, (incorporated herein by reference to
Exhibit 10.42 to Form 10-Q filed on October 18, 2005)
13* Fiscal 2005 Annual Report to Stockholders
14* Code of Business Conduct and Ethics
16 Letter on Change in Certifying Accountant (incorporated herein by reference to
Forms 8-K filed on September 18, 2002 and September 24, 2002, and Form 8-K/A filed
on September 24, 2002)
18 Preferability Letter Issued by PricewaterhouseCoopers LLP (incorporated herein by
reference to Exhibit 18 to Form 10-Q filed on July 29, 2004)
21* Subsidiaries of Registrant
23* Consent of Independent Registered Public Accounting Firm
17
31.1* Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2* Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
* Filed with this 10-K
18
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule
To the Stockholders and Board of Directors
of The Great Atlantic & Pacific Tea Company, Inc.:
Our audits of the consolidated financial statements, of management's
assessment of the effectiveness of internal control over financial reporting
and of the effectiveness of internal control over financial reporting referred
to in our report dated May 9, 2006 appearing in the Fiscal 2005 Annual Report
to Stockholders of The Great Atlantic & Pacific Tea Company, Inc. (which
report, consolidated financial statements and assessment are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
New York, New York
May 9, 2006
19
SCHEDULE II
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED FEBRUARY 28, 2004, FEBRUARY 26, 2005, AND FEBRUARY 25, 2006
(IN THOUSANDS)
Additions Additions
Allowance for Impact of Charged to Charged to
Bad Debts for Beginning Adoption of Costs & Other Foreign Ending
Year Ended Balance FIN 46-R Expenses Accounts Deductions (1) Adjustments (2) Exchange Balance
-------------- ------------- ------------- ------------- ------------- -------------- --------------- -------- -------
Feb. 28, 2004 9,799 (4,200) 5,225 - (4,554) - 46 6,316
Feb. 26, 2005 6,316 - (1,745) - 1,072 - 70 5,713
Feb. 25, 2006 5,713 - 3,913 - (159) (2,461) 36 7,042
Additions Additions
Stock Loss Impact of Charged to Charged to
Reserve for Beginning Adoption of Costs & Other Foreign Ending
Year Ended Balance FIN 46-R Expenses Accounts Deductions Adjustments (2) Exchange Balance
-------------- ------------- ------------- ------------- ------------- ------------ --------------- -------- -------
Feb. 28, 2004 8,081 - (1,147) - (251) - 109 6,792
Feb. 26, 2005 6,792 - 3,016 - - - 81 9,889
Feb. 25, 2006 9,889 - 5,437 - - (1,441) 48 13,933
Deferred Tax Additions Additions
Valuation Impact of Charged to Charged to
Allowance for Beginning Adoption of Costs & Other Foreign Ending
Year Ended Balance FIN 46-R Expenses Accounts Deductions (3) Exchange Balance
-------------- ------------- ------------- ------------- ------------- --------------- ------------- --------------
Feb. 28, 2004 161,495 - 67,682 - - - 229,177
Feb. 26, 2005 229,177 - 89,632 - - - 318,809
Feb. 25, 2006 318,809 - 18,652 - (260,441) - 77,020
(1) Deductions to Allowance for Bad Debts represent write-offs of accounts
receivable balances.
(2) As discussed in Note 2 of our Consolidated Financial Statements for the
year ended February 25, 2006, we sold our Canadian operations on August 13,
2005 and as a result, the Canadian balances are no longer consolidated in
our Consolidated Balance Sheet at February 25, 2006.
(3) Deductions to the Deferred Tax Valuation Allowance represent utilization of
net operating loss carryforwards as a result of the sale of our Canadian
operations.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
(registrant)
Date: May 9, 2006 By: /s/ Brenda M. Galgano
------------------------------------------------
Brenda M. Galgano, Senior Vice President,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and as of the date indicated.
/s/ Christian W.E. Haub Executive Chairman
------------------------------------
Christian W.E. Haub
/s/ John D. Barline Director
------------------------------------
John D. Barline
/s/ Jens-Jurgen Bockel Director
------------------------------------
Jens-Jurgen Bockel
/s/ Bobbie A. Gaunt Director
------------------------------------
Bobbie Gaunt
/s/ Helga Haub Director
------------------------------------
Helga Haub
/s/ Dan P. Kourkoumelis Director
------------------------------------
Dan P. Kourkoumelis
/s/ Edward Lewis Director
------------------------------------
Edward Lewis
/s/ Richard L. Nolan Director
------------------------------------
Richard L. Nolan
/s/ Maureen B. Tart-Bezer Director
------------------------------------
Maureen B. Tart-Bezer
The above-named persons signed this report on behalf of the registrant on May 9,
2006.
/s/ Melissa E. Sungela Vice President, Corporate Controller
------------------------------------
Melissa E. Sungela May 9, 2006
21