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The Great Atlantic & Pacific Tea Company, inc. Has Completed Its Review Of Lease Accounting
MONTVALE, NJ - May 6, 2005 - The Great Atlantic & Pacific Tea Company, Inc. ("A&P" or the "Company") (NYSE: GAP) today announced that in connection with its preparation of its consolidated financial statements for the year ended February 26, 2005, it completed a review of its historical lease accounting to determine whether its accounting for leases was in accordance with generally accepted accounting principles ("GAAP").
Based upon this review, as well as discussions with the Company's independent auditors and its Audit Committee, the Company determined that its accounting for leases was not in conformity with GAAP. On May 5, 2005, management and the Audit Committee concluded that the Company should restate its previously issued consolidated financial statements for fiscal years 2002 and 2003. As a result of the Company's determination to restate its consolidated financial statements, the financial statements included in the Company's Annual Report on Form 10-K for its fiscal year ended February 28, 2004, as well as its interim unaudited financial statements for the first three quarters of fiscal year 2004, should no longer be relied upon. The Company's Annual Report on Form 10-K for its fiscal year ended February 26, 2005, expected to be filed on or before May 10, 2005, will reflect the restated information for the periods presented therein.
The net cumulative impact of this correction, which was recorded in the fourth quarter of fiscal 2004, was an increase to net loss of $0.8 million ($0.3 million pre-tax). Although the effect of this change did not have a material effect on net loss, it did result in an increase in interest expense with a corresponding reduction in rent expense and a related increase in EBITDA. Fourth quarter interest expense for fiscal 2004 and fiscal 2003 includes $6 million and $5 million, respectively, relating to this change. For the full year, interest expense related to this change includes $25 million and $21 million for fiscal years 2004 and 2003, respectively.
In connection with the Company's restatement of previously issued financial statements, the Company has determined a material weakness existed due to ineffective controls over the selection and application of its lease accounting policies. During the fourth quarter of fiscal year 2004 and prior to February 26, 2005 the Company implemented controls to ensure that all leases are reviewed and accounted for in accordance with GAAP. Accordingly, the Company evaluated its internal controls over the selection and application of lease accounting policies as of February 26, 2005 and has concluded that the material weakness had been remediated as of year-end.
Founded in 1859, A&P, one of the nation's first supermarket chains, is today among North America's largest. The Company operates 647 stores in 10 states, the District of Columbia and Ontario, Canada under the following trade names: A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, Dominion, The Barn Markets, Food Basics and Ultra Food & Drug.
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This release contains forward-looking statements about the future performance of the Company, which are based on Management's assumptions and beliefs in light of the information currently available to it. The Company assumes no obligation to update the information contained herein. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements including, but not limited to: competitive practices and pricing in the food industry generally and particularly in the Company's principal markets; the Company's relationships with its employees and the terms of future collective bargaining agreements; the costs and other effects of legal and administrative cases and proceedings; the nature and extent of continued consolidation in the food industry; changes in the financial markets which may affect the Company's cost of capital and the ability of the Company to access capital; supply or quality control problems with the Company's vendors; and changes in economic conditions which affect the buying patterns of the Company's customers.
Investor Contact:
William J. Moss
Vice President, Treasurer
(201) 571-4019
Media Contact:
Richard P. De Santa
Vice President, Corporate Affairs
(201) 571-4495
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