UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 18, 2005 (August 15, 2005)
THE GREAT ATLANTIC & PACIFIC
TEA COMPANY, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-4141 13-1890974
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
or organization)
Two Paragon Drive, Montvale, New Jersey 07645
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 573-9700
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communication pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c).
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2.01. Completion of Disposition of Assets.
As previously announced, on July 19, 2005, The Great Atlantic &
Pacific Tea Company, Inc. (the "Company") entered into a Stock Purchase
Agreement (the "Agreement") with A&P Luxembourg S.a r.l., a wholly owned
subsidiary of the Company ("Seller"), Metro Inc. ("Metro") and 4296711 Canada
Inc., a wholly owned subsidiary of Metro ("Purchaser"), to sell all of the
outstanding capital stock of The Great Atlantic and Pacific Tea Company,
Limited, a wholly owned subsidiary of Seller ("A&P Canada") to Purchaser.
On August 15, 2005, Seller completed the sale to Purchaser of all
the outstanding capital stock of A&P Canada for C$1.2 billion (US$1.0 billion)
and 18,076,645 Class A Subordinate Voting Shares of Metro, subject to a
post-closing working capital adjustment as provided in the Agreement (the
"Disposition").
Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial information shown
below is based on audited and unaudited historical financial statements of the
Company. The unaudited pro forma financial information presented reflects the
estimated pro forma effect of the Disposition.
Two unaudited pro forma condensed consolidated financial statements are
included herein, as follows:
o An unaudited condensed consolidated pro forma statement of operations
for the 52-week period ended February 26, 2005 and the 16-week period
ended June 18, 2005, giving effect to the Disposition as if it had
occurred on February 28, 2004.
o An unaudited condensed consolidated pro forma balance sheet as of June
18, 2005, giving effect to the Disposition as if it occurred on June 18,
2005.
The unaudited condensed consolidated pro forma financial statements include
assumptions and adjustments related to the Disposition. These pro forma
adjustments have been made to illustrate the anticipated financial effect of
the Disposition. The adjustments are based upon available information and
assumptions that the Company believes are reasonable as of the date of this
filing. However, actual adjustments may differ from the information presented.
Decisions regarding the use of sale proceeds have not been finalized.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes, which should be read in conjunction with the unaudited pro
forma condensed consolidated financial statements.
The unaudited condensed consolidated pro forma financial information presented
herein is for informational purposes only. It is not intended to represent or
be indicative of the consolidated results of operations or financial position
that would have been reported had the Disposition been completed as of the
dates presented. The information is not representative of future results of
operations or financial position.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
Pro Forma
52 weeks ended Pro Forma Excluding
February 26, 2005 Adjustments (A) Canada
Sales........................................... $ 10,854,911 $ (3,537,320) B $ 7,317,591
Cost of merchandise sold........................ (7,813,771) 2,674,140 (5,139,631)
------------------- ------------------ ----------------
Gross Margin.................................... 3,041,140 (863,180) 2,177,960
Store operating, general and administrative
expense......................................... (3,114,062) 806,859 (2,307,203)
------------------- ------------------ ----------------
Loss/income from operations..................... (72,922) (56,321) (129,243)
Net Interest expense............................ (111,331) 16,076 (95,255)
Minority interest in earnings of
consolidated franchisees..................... 772 (772) -
------------------- ------------------ ----------------
Loss/income from continuing operations before
income taxes................................. (183,481) (41,017) (224,498)
Provision for/benefit from income taxes......... (528) (3,972) (4,500)
------------------- ------------------ ----------------
Loss from continuing operations................. $ (184,009) $ (44,989) $ (228,998)
=================== ================== ================
Net loss per share - basic and diluted -
continuing operations........................ $ (4.77) $ (5.94)
Weighted average common shares outstanding...... 38,558,598 38,558,598
Pro Forma
16 Weeks Ended Pro Forma Excluding
June 18, 2005 Adjustments (A) Canada
Sales........................................... $ 3,383,633 $ (1,153,715) B $ 2,229,918
Cost of merchandise sold........................ (2,445,675) 869,461 (1,576,214)
------------------- ------------------ ----------------
Gross Margin.................................... 937,958 (284,254) 653,704
Store operating, general and administrative
expense......................................... (976,687) 244,557 (732,130)
------------------- ------------------ ----------------
Loss/income from operations..................... (38,729) (39,697) (78,426)
Net Interest expense............................ (34,937) 5,390 D (29,547)
Minority interest in earnings of consolidated
franchisees.................................. (1,536) 1,536 -
------------------- ------------------ ----------------
Loss/income from continuing operations before
income taxes................................. (75,202) (32,771) (107,973)
Provision for income taxes...................... (13,865) 12,481 (1,384)
------------------- ------------------ ----------------
Loss from continuing operations................. $ (89,067) $ (20,290) $ (109,357)
=================== ================== ================
Net loss per share - basic and diluted -
continuing operations........................ $ (2.27) $ (2.79)
Weighted average common shares outstanding...... 39,201,114 39,201,114
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
(Dollars in thousands, except per share amounts)
Pro Forma
Pro Forma Excluding
June 18, 2005 Adjustments (A) Canada
Cash and cash equivalents....................... $ 171,431 $ 980,960 C $ 1,152,391
Net Accounts Receivable......................... 93,949 93,949
Inventories..................................... 534,891 534,891
Prepaid expenses and other current assets....... 47,586 6,552 C 54,138
Assets held for sale............................ 866,122 (866,122)C -
------------------ ----------------- ----------------
Total current assets............................ 1,713,979 121,390 1,835,369
Property - net.................................. 1,003,477 1,003,477
Investment in Metro............................. - 494,802 C 494,802
Other Assets.................................... 55,537 - 55,537
------------------ ----------------- ----------------
Total assets.................................... $ 2,772,993 $ 616,192 $ 3,389,185
================== ================= ================
Current portion of long-term obligations........ $ 4,936 D $ 4,936
Accounts Payable................................ 313,178 313,178
Book overdrafts................................. 78,400 78,400
Accrued salaries, wages and benefits............ 117,773 117,773
Other accruals.................................. 212,617 15,700 C 228,317
Liabilities held for sale....................... 503,174 (503,174)C -
------------------ ----------------- ----------------
Total current liabilities....................... 1,230,078 (487,474) 742,604
Long-term debt.................................. 618,879 D 618,879
Long-term obligations under capital leases...... 34,543 34,543
Long-term real estate liabilities............... 276,614 276,614
Other non-current liabilities................... 458,305 170,552 C 628,857
------------------ ----------------- ----------------
Total liabilities............................... 2,618,419 (316,922) 2,301,497
Common stock.................................... 40,020 40,020
Additional paid-in capital...................... 477,315 477,315
Accumulated other comprehensive loss............ (7,328) 928 C (6,400)
Accumulated (deficit) earnings.................. (355,433) 932,186 C 576,753
------------------ ----------------- ----------------
Total stockholders' equity...................... 154,574 933,114 1,087,688
------------------ ----------------- ----------------
Total liabilities and stockholders' equity...... $ 2,772,993 $ 616,192 $ 3,389,185
================== ================= ================
NOTES:
A) A&P is evaluating the appropriate accounting method for its investment in
Metro's common stock and will apply either the equity method or cost method.
Therefore, the pro forma financial statements do not reflect the impact of
either method. Set forth below is information relating to the estimated impact
of both the accounting methods for the periods presented in the pro forma
financial statements.
If A&P concludes that it has significant influence in relation to Metro, A&P
would use the equity method to account for its investment in Metro and would
record its proportionate share of Metro's income or loss. A&P's proportionate
share of Metro's earnings (excluding the impact of Metro's acquisition of A&P's
Canadian operations) would have increased income from continuing operations of
$20.5 million for FY 2004 and $5.8 million for the 16 weeks ended June 18,
2005. A&P's investment in Metro would have increased by the amount of its
proportionate share of income and decreased by the amount of any dividends
received.
If A&P concludes the cost method is appropriate, A&P would record dividends
received from Metro as income. Based upon the dividends paid by Metro on its
outstanding Class A Subordinate Voting Shares during the periods presented in
the pro forma financial statements, the amount of dividends which would have
been received from Metro and reported as income would have been approximately
$4.6 million for the fiscal year ended February 26, 2005 and $1.2 million for
the 16 weeks ended June 18, 2005.
B) The pro forma financial statements exclude the impact of a two year service
agreement with Metro to provide IT services for $20 million Canadian on an
annual basis. Metro has the option to renew this agreement for a third year.
C) Represents the gain on the sale of A&P Canada for approximately US $1
billion in cash and 18,076,645 shares of common stock of Metro, excluding the
impact of certain foreign currency hedges of $36,593. The gain has not been
adjusted to reflect either the cost or equity method of accounting. If the cost
method is used to account for the investment there would be no adjustment to
the estimated gain. However, if the equity method is used to account for the
investment then the gain would be decreased by approximately $179,641, with a
corresponding decrease in the investment.
Cash proceeds in Canadian dollars C$ 1,200,000
Exchange rate as of 8/13/05 0.8358
----------------------
Cash proceeds US$ 1,002,960
Less: estimated closing costs (22,000)
----------------------
Net cash proceeds 980,960
Investment in Metro 494,802
----------------------
Net proceeds 1,475,762
Assets held for sale as of 6/18/05 (866,122)
Liabilities held for sale as of 6/18/05 503,174
----------------------
Net gain before tax impact 1,112,814
Deferred tax asset attributable to the
disposition 6,552
Current tax payable attributable to the
disposition (15,700)
Other non-current tax liabilities
attributable to the disposition (170,552)
----------------------
Net gain on sale after tax 933,114
Less: CTA as of 6/18/05 928
----------------------
Net adjustment to accumulated earnings US$ 932,186
======================
E) The above pro forma financial statements do not give effect to the tender
offers made by A&P on August 10, 2005 for any and all of its outstanding 7 3/4%
Notes due 2007 (the "7 3/4% Notes") and 9 1/8% Senior Notes due 2011 (the "9
1/8% Notes"), which are expected to expire on August 23, 2005, unless extended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
THE GREAT ATLANTIC & PACIFIC TEA
COMPANY, INC.
By: /s/ Mitchell P. Goldstein
------------------------------
Name: Mitchell P. Goldstein
Title: Executive Vice President,
Chief Financial Officer
and Secretary
Dated: August 18, 2005