SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
For the Year Ended December 31, 2005
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SAVINGS PLAN
(Full title of the Plan)
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
2 PARAGON DRIVE, MONTVALE, NEW JERSEY 07645
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(Name of issuer of the securities held
pursuant to the Plan and the address
of its principal executive office)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
Date: June 29, 2006 By /s/Melissa E. Sungela
---------------------------------------
Melissa E. Sungela
Vice President and Corporate Controller
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SAVINGS PLAN
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Financial Statements as of December 31, 2005 and 2004
and for the Year Ended December 31, 2005
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Prepared for filing as part of the Annual
Return/Report of Employee Benefit Plan
(Form 5500)
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SAVINGS PLAN
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TABLE OF CONTENTS
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Page
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.... 2
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004 .............................. 3
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2005..................... 4
NOTES TO FINANCIAL STATEMENTS.............................. 5
SUPPLEMENTAL SCHEDULES
SCHEDULE H, LINE 4a - SCHEDULE OF DELINQUENT
PARTICIPANT CONTRIBUTIONS .............................. 12
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS
(HELD AT END OF YEAR) ................................... 13
Note: Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
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Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
The Great Atlantic & Pacific Tea Company, Inc. Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The Great Atlantic & Pacific Tea Company, Inc. Savings Plan (the "Plan") at
December 31, 2005 and 2004, and the changes in net assets available for benefits
for the year ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4a -
Schedule of Delinquent Participant Contributions and Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
New York, New York
June 29, 2006
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
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Assets:
Investments - at fair value (Note 3) $286,792,238 $295,022,927
Receivables:
Participant Contributions 272,859 46,481
Employer Contributions 80,101 19,122
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Total receivables 352,960 65,603
Total Assets 287,145,198 295,088,530
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Net assets available for benefits $287,145,198 $295,088,530
============ ============
The accompanying notes are an
integral part of these
financial statements.
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2005
2005
-----------------
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments (Note 3) $ 5,668,511
Interest income 4,615,950
Dividend income 2,735,972
Other income 2,139,748
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15,160,181
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Contributions:
Participants 14,402,603
Employer 4,340,640
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18,743,243
Total additions 33,903,424
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Deductions:
Deductions from net assets attributed to:
Benefits paid to participants 41,825,858
Administrative expenses 20,898
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Total deductions 41,846,756
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Net decrease in net assets available for benefits (7,943,332)
Net assets available for benefits:
Beginning of year 295,088,530
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End of year $287,145,198
============
The accompanying notes are an
integral part of these
financial statements.
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SAVINGS PLAN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2005
1. PLAN DESCRIPTION
The following description of The Great Atlantic & Pacific Tea Company,
Inc. ("Company") Savings Plan ("Savings Plan") provides only general
information. Participants should refer to the Savings Plan summary plan
description for a more complete description of the Savings Plan's
provisions.
General
The Savings Plan is a voluntary defined contribution plan of the Company.
The Savings Plan covers employees of the Company who are not covered by a
collective bargaining agreement (CBA), as well as employees covered by a
CBA where the CBA specifically provides for such coverage.
Participants are permitted to change their contribution rates once per
month. In addition, they may change their investment options with regard
to future contributions and reallocate existing investment balances on any
business day.
Prior to May 4, 2004, the Savings Plan covered eligible employees of the
Company who completed at least one year of service (1,000 hours in a
12-month period) if age 21 or older or the earlier of five years of
service if under age 21, if under age 21 at time of employment. Effective
May 4, 2004 the Plan was amended to (a) allow employees to contribute to
the Plan on the first of the month following their date of hire if age 21
or older or the earlier of five years of service or age 21, if under age
21 at the time of employment, and (b) state that each participant shall be
100% vested in the event of termination or partial termination of the Plan
(if Participant is affected by partial termination) or upon retirement,
disability or death.
Contributions
Eligible employees have the option to contribute from 1% to 20% of their
base compensation to the Savings Plan. This can be any combination of pre
and post tax percentages, as long as the total of the percentages does not
exceed 20% of base compensation. Additionally, the Internal Revenue
Service limits the maximum amount a participant may contribute, which was
$14,000 for fiscal 2005. The Company matches 50% of an employee's
contributions up to 6% of their compensation.
Participants direct the investment of their contributions into the plan,
as discussed in Note 3, which includes various investment options offered
by the Savings Plan. Employee contributions may not be allocated to the
Employer Stock Fund.
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Vesting
Participants are always 100% vested in their contributions and become
fully vested in the Company's matching contributions after five years, in
accordance with the following schedule:
Years of Service Vesting Percentage
----------------------------- ------------------
Less than 2 years 0%
2 years but less than 3 years 25%
3 years but less than 4 years 50%
4 years but less than 5 years 75%
5 years or more 100%
Payment of Benefits
Participants may receive the value of the vested portion of their account
balance when they leave the Company for any reason other than death, in
which case a beneficiary would receive the benefit. Participants may
generally withdraw unmatched after-tax contributions once during any 12
month period but may withdraw unmatched before-tax contributions only in
the case of "financial hardship" as defined in the Plan.
Forfeited Accounts
At December 31, 2005, and December 31, 2004, forfeited nonvested accounts
totaled $122,856 and $79,620, respectively. These accounts will be used to
decrease future employer contributions. During the year ended December 31,
2005, employer contributions were reduced by $222,330 from forfeited
nonvested accounts.
Participant Accounts
Each participant's account is credited with the participant's contribution
and (a) the matching Company contribution and (b) allocations of Plan
earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account.
Participant Loans
Participants may borrow from their account balance a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50 percent of their vested
account balance. The loans are collateralized by the balance in the
participant's account and bear a fixed interest rate for the duration of
the loan equal to Prime plus 1% as published in the Wall Street Journal on
the last day of the preceding quarter. Principal and interest is
paid ratably through payroll deductions.
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During the years ended December 31, 2005, and December 31, 2004, the
interest rates on participant loans ranged from 5.00% to 10.50%, and
5.75% to 10.50%, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Savings Plan are as
follows:
Basis of Accounting -
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America on the accrual basis of accounting.
Use of Estimates -
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of net assets available for benefits and changes therein. Actual
results could differ from those estimates.
Investment Valuation and Income Recognition -
The Plan's investments are presented at fair value. Shares of Company
Stock are valued at quoted market prices. Shares of mutual funds are
valued at the net asset value of shares held by the Plan at year end.
Units of common/collective trusts are valued at the net asset value of
shares held by the Plan at year end and wrapper contracts are valued as
the difference between the fair market value of the underlying investment
and the contract value.
Purchases and sales of securities are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date. Interest income is
recorded as earned.
Expenses -
All administrative expenses are being paid by the Plan.
Payment of Benefits -
Benefit payments to participants are recorded upon distribution.
Risks and Uncertainties -
The Plan provides for various investment options. The Plan's mutual
funds invest in various securities including U.S.
government securities, corporate debt instruments and corporate
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stocks. Investment securities, in general, are exposed to various risks,
such as interest rate, credit and overall market volatility. Due to the
level of risk associated with certain investment securities, it is
reasonably possible that changes in the values of investment securities
will occur in the near term and that such changes could materially affect
the amounts reported in the statements of net assets available for Plan
benefits.
Reclassifications -
Certain reclassifications have been made to prior year amounts to conform
to current year presentation.
3. INVESTMENTS
The following table represents a breakdown of how the fair value of
investments is determined:
December 31, 2005 December 31, 2004
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Quoted Market Value $ 901,268 $ 356,965
Net Asset Value 282,014,657 291,970,983
Contract Value 3,876,313 2,694,979
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Total investments at fair value $ 286,792,238 $ 295,022,927
=================== ================
The following table presents investments that represent 5 percent or more
of the Plan's net assets at December 31, 2005 and 2004.
December 31, 2005 December 31, 2004
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Wells Fargo Galliard Fixed Income Fund A $ 18,170,953 $ 18,149,959
Wells Fargo Galliard Fixed Income Fund F 34,635,359 -
Wells Fargo Synthetic Stable Value Fund 29,732,573 34,187,444
Dryden Stock Index Fund I 58,539,696 63,852,389
PIMCO Total Return A 21,412,903 22,507,879
Amer Funds EuroPacific Growth A 15,839,903 12,646,747*
MFS Massachusetts Investors Growth Stock A 18,385,244 17,906,095
Alliance Bern Growth & Income 20,414,884 20,060,517
American Balanced Fund 22,844,846 24,719,855
*In 2004, this investment represented less than 5% of the Plan's net asset
value but was disclosed for comparative purposes.
During 2005, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
in value by $5,668,511 as follows:
Net appreciation in fair value of investments:
Common stock $ 678,381
Mutual funds 4,990,130
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Net appreciation $ 5,668,511
===========
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4. Synthetic Guaranteed Investment Contracts (GIC)
The Plan has three investments in Synthetic GIC's. These are investments
that simulate the performance of a traditional GIC through the use of
financial instruments (referred to as wrapper contracts). For these
investments, the Company invested in common / collective trusts which
consist of government securities, private and public backed
mortgaged-backed and other asset-backed securities. The benefit responsive
"wrapper" contracts consist of liquidity agreements.
Reconciled
Number of Contract Value of
Plan Year 2005 Units Held Cost Investment
---------------------------------------------------------- ---------------- -------------------- --------------------
AIG Financial Products,5.52%
due 7/31/09
Fixed Income Fund A 1,118,622 $ 13,037,756 $ 18,170,953
Contract value liquidity agreement (169,671)
--------------------
Total Contract Value $ 18,001,282
Crediting rate: 5.52%
Yield Rates: 5.44%
Union Bank Switzerland,5.33%
due 7/31/10
Galliard Fixed Income Fund E 722,801 $ 10,077,167 $ 11,295,510
Contract value liquidity agreement 10,099
--------------------
Total Contract Value $ 11,305,609
Crediting rate: 5.33%
Yield Rates: 5.25%
Bank of America, 5.07%
due 3/31/08
Galliard Fixed Income Fund F 1,690,661 $ 16,263,531 $ 17,317,680
Contract value liquidity agreement 77,275
--------------------
Total Contract Value $ 17,394,955
Crediting rate: 5.07%
Yield Rates: 4.97%
Monumental Life, 5.07%
due 3/31/08
Galliard Fixed Income Fund F 1,690,661 $ 16,263,530 $ 17,317,679
Contract value liquidity agreement 77,274
--------------------
Total Contract Value $ 17,394,953
Crediting rate: 5.07%
Yield Rates: 4.97%
--------------------
Total $ 64,096,799
====================
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Reconciled
Number of Contract Value of
Plan Year 2004 Units Held Cost Investment
---------------------------------------------------------- ---------------- -------------------- --------------------
AIG Financial Products,5.32%
due 8/31/08
Fixed Income Fund A 1,145,541 $ 13,322,022 $ 18,149,959
Contract value liquidity agreement (654,964)
--------------------
Total Contract Value $ 17,494,995
Crediting rate: 5.32%
Yield Rates: 5.32%
Union Bank Switzerland,5.20%
due 5/31/09
Galliard Fixed Income Fund E 489,431 $ 6,654,142 $ 7,394,316
Contract value liquidity agreement (179,447)
--------------------
Total Contract Value $ 7,214,869
Crediting rate: 5.20%
Yield Rates: 5.20%
--------------------
Total $ 24,709,864
====================
5. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of a common collective trust and
mutual funds managed by Prudential Trust Company. Prudential Trust Company
is the trustee as defined by the Plan and, therefore, these transactions
qualify as party-in-interest transactions. The Plan has investments in A&P
Stock that were made in prior years. Employees may no longer select this
investment option.
Certain administrative functions are performed by the officers and
employees of the Company (who may be participants in the Plan) at no cost
to the Plan. These transactions are not deemed prohibited transactions
because they are covered by the statutory administrative exemption from
the Internal Revenue Code's and ERISA's rules on prohibited transactions.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company reserves
the right to terminate the Plan subject to the provisions of ERISA. If the
Plan is terminated, each participant would receive the value of his or her
interest in the trust funds attributable to both participant and employer
contributions for all years of participation.
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7. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by
letter dated April 19, 2004 that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (the
"Code"). The Plan has been amended (Refer to Note 1) since receiving the
determination letter. The Plan Administrator believes that the Plan is
currently designed and being operated in compliance with the applicable
requirements of the Internal Revenue Code. Therefore, no provision for
income taxes has been included in the Plan's financial statements.
8. DELINQUENT PARTICIPANT CONTRIBUTIONS
As reported on the supplemental schedule, certain employee contributions
were not remitted to the trust within the time frame specified by the
Department of Labor, therefore constituting nonexempt transactions between
the Plan and the Company for the year ended December 31, 2005. The Company
will remit estimated earnings on the delinquent participant contributions
subsequent to year end.
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SAVINGS PLAN
SCHEDULE H, LINE 4a - SCHEDULE OF DELINQUENTPARTICIPANT CONTRIBUTIONS
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Participant Contributions Total that Constitute Nonexempt
Transferred Late to Plan Prohibited Transactions
--------------------------------- ------------------------------------
January 2005 $ 5,511 $ 5,511
February 2005 4,115 4,115
March 2005 9,352 9,352
April 2005 378 378
May 2005 760 760
June 2005 - -
July 2005 - -
August 2005 - -
September 2005 - -
October 2005 - -
November 2005 - -
December 2005 - -
--------------------------------- ------------------------------------
Total $ 20,116 $ 20,116
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THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. SAVINGS PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
Description of Investment
including maturity date, rate of
Identity of Issue, Borrower, interest, collateral, par or
Lessor, or Similar Party maturity value Cost Current Value
----------------------------------------- ------------------------------------------ --------------- -----------------
Wells Fargo Stable Value Fund A Collective Trust Fund $ 4,213,770 $ 4,502,641
Wells Fargo Synthetic Stable Value Fund Collective Trust Fund 21,539,890 29,732,573
Wells Fargo Galliard Fixed Income Fund A Collective Trust Fund 13,037,756 18,170,953
Wells Fargo Galliard Fixed Income Fund E Collective Trust Fund 10,077,167 11,295,510
Wells Fargo Galliard Fixed Income Fund F Collective Trust Fund 32,527,061 34,635,359
AIG Financial Products Corp Wrapper Contract, - (169,671)
Maturity 7/31/09, Rate of interest 5.52%
Union Bank of Switzerland AG Wrapper Contract, - 10,099
Maturity 7/31/10, Rate of interest 5.33%
Bank of America N A Wrapper Contract, - 77,275
Maturity 3/31/08, Rate of interest 5.07%
Monumental Life Insurance Company Wrapper Contract, - 77,274
Maturity 3/31/08, Rate of interest 5.07%
Dryden Stock Index Fund I (*) Mutual fund 58,713,208 58,539,696
American Balanced Fund Mutual fund 22,253,205 22,844,846
PIMCO Total Return A Mutual fund 21,761,919 21,412,903
MFS Massachusetts Investors Growth Mutual fund
Stock A 17,457,048 18,385,244
Alliance Growth and Income A Mutual fund 18,095,773 20,414,884
Amer Funds Euro Pacific Growth A Mutual fund 12,336,739 15,839,903
John Hancock Small Cap Value A Mutual fund 10,139,092 12,416,453
Lord Abbett Mid Cap Value A Fund Mutual fund 12,208,433 13,823,692
A&P Stock (*) A&P Stock 284,865 901,268
Participant loans Mature from 2006 to 2025, 5.00% - 10.50% - 3,881,336
(*) Party-in-interest
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 333-119045, 333-78805, and 033-54863) of The Great
Atlantic & Pacific Tea Company, Inc. of our report dated June 29, 2006 relating
to the financial statements of The Great Atlantic & Pacific Tea Company, Inc.
Savings Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
New York, New York
June 29, 2006
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Exhibit 99.1
Certification Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of The Great Atlantic & Pacific Tea
Company, Inc. Savings Plan (the "Plan") on Form 11-K for the period ending
December 31, 2005 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Paul Marsico, Vice President of Compensation,
Benefits and HRIS, of The Great Atlantic & Pacific Tea Company, Inc., certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Plan.
June 29, 2006 /s/ Paul Marsico
-----------------------------------
Paul Marsico
Vice President of Compensation, Benefits & HRIS
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