ITEM 1. Business
General
The Great Atlantic & Pacific Tea Company, Inc. ("A&P" or the "Company") is engaged in the retail food business. The Company operated 1,014 stores averaging 34,200 square feet per store as of February 24, 1996. In addition, the Company began franchising its Canadian Food Basics stores in fiscal 1995. As of February 24, 1996, the Company had 7 Food Basics Franchisee stores in Canada averaging 25,400 square feet per store. On the basis of reported sales for fiscal 1995, the Company believes that it is one of the ten largest retail food chains in the United States and that it had the largest market share in metropolitan New York and Detroit and in the Province of Ontario, the Company's largest single markets in the United States and Canada.
Operating under the trade names A&P, Super Fresh, Sav-A-Center, Farmer Jack, Kohl's, Food Emporium, Waldbaum's, Food Mart, Food Bazaar, Miracle Food Mart, Ultra Mart, Futurestore, Dominion, Food Basics and Compass Foods, the Company sells 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. National, regional and local brands are sold as well as private label merchandise and generic (non- branded) products. In support of its retail operations, the Company also operates two coffee roasting plants, two bakeries, one delicatessen food kitchen, and an ice cream plant. The products processed in these facilities are sold under the Company's own brand names which include America's Choice, Master Choice, Health Pride, Eight O'Clock, Bokar, Royale, Savings Plus, Jane Parker and Wesley's Quaker Maid. All products produced by A&P's food processing operations are sold in Company stores. A&P also sells its coffee and ice cream products to unaffiliated retail outlets outside of its marketing areas.
Building upon a broad base of A&P supermarkets, the Company has expanded and diversified within the retail food business through the acquisition of other supermarket chains and the development of several alternative store types. The Company now operates its stores with merchandise, pricing and identities tailored to appeal to different segments of the market, including buyers seeking gourmet and ethnic foods, unusual produce, a wide variety of premium quality private label goods and health and beauty aids along with the array of traditional grocery products.
Modernization of Facilities
The Company is engaged in a continuing program of modernizing its corporate operations and retail stores. During fiscal 1995, the Company expended approximately $236 million for capital projects. The Company's plans for fiscal 1996 anticipate capital expenditures of approximately $310 million which include the opening of 39 new supermarkets and 1 new liquor store, the remodeling or expansion of 94 stores and converting the format of 40 Canadian stores. As usual, the Company is currently developing plans for additional stores to be opened in the following fiscal year.
Sources of Supply
The Company obtains the merchandise sold in its stores from a variety of suppliers located primarily in the United States and Canada. The Company has long-standing and satisfactory relationships with its suppliers.
The Company maintains processing facilities which produce coffee, dairy and deli products and certain baked goods. The ingredients for coffee products are purchased principally from Brazilian and Central American sources. Other ingredients are obtained from domestic suppliers.
Employees
As of the close of fiscal 1995, the Company had approximately 89,000 employees, of which 70% were employed on a part-time basis. Approximately 88% of the Company's employees are covered by union contracts.
Competition
The supermarket business is highly competitive throughout the marketing areas served by the 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. The Company competes for sales and store locations with a number of national and regional chains as well as with many independent and cooperative stores and markets.
Foreign Operations
The information required is contained in the 1995 Annual Report to Shareholders on pages 24 and 28 and is herein incorporated by reference.
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ITEM 2.
ITEM 2. Properties
At February 24, 1996, the Company operated 1,014 retail stores. Approximately 7% of the Company's stores are owned, while the remainder are leased. These stores are geographically located as follows:
New England States: Connecticut............. 56 Massachusetts........... 22 New Hampshire........... 1 Vermont................. 2 ----- Total................. 81
Middle Atlantic States: District of Columbia.... 1 Delaware................ 8 Maryland................ 50 New Jersey.............. 111 New York................ 186 Pennsylvania............ 44 ----- Total................. 400
Mid-Western States: Michigan................ 97 Wisconsin............... 51 ----- Total................. 148
Southern States: Alabama................. 4 Georgia................. 45 Kentucky................ 2 Louisiana............... 26 Mississippi............. 7 North Carolina.......... 23 South Carolina.......... 8 Virginia................ 51 West Virginia........... 6 ----- Total................. 172
Total United States... 801
Ontario, Canada........... 213 ----- Total Stores.......... 1,014 =====
The total area of all retail stores is approximately 34.7 million square feet averaging 34,200 square feet per store. The stores built by the Company over the past several years and those planned for fiscal 1996, generally range in size from 50,000 to 65,000 square feet, of which approximately 65% to 70% is utilized as selling area.
The Company operates two coffee roasting plants, two bakeries, one delicatessen food kitchen, and an ice cream plant in the United States and Canada. In addition, the Company maintains warehouses which service its store network.
The net book value of real estate pledged as collateral for all mortgage loans amounted to approximately $49 million as of February 24, 1996.
ITEM 3.
ITEM 3. Legal Proceedings
The information required is contained in the 1995 Annual Report to Shareholders on page 28 and is herein incorporated by reference.
ITEM 4.
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 1995.
PART II
ITEM 5.
ITEM 5. Market for the Registrant's Common Stock and Related Security Holder Matters
The information required is contained in the 1995 Annual Report to Shareholders on pages 29, 30 and 31 and is herein incorporated by reference.
ITEM 6.
ITEM 6. Selected Financial Data
The information required is contained on page 31 of the 1995 Annual Report to Shareholders and is herein incorporated by reference.
ITEM 7.
ITEM 7. Management's Discussion and Analysis
The information required is contained in the 1995 Annual Report to Shareholders on pages 15 through 18 and is herein incorporated by reference.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data
(a) Financial Statements: The financial statements required to be filed hereunder are described in Part IV, Item 14 of this report. Except for the pages included herein by reference, the Company's 1995 Annual Report to Shareholders is not deemed to be filed as part of this report.
(b) Selected Quarterly Financial Data: The information required is contained on page 29 of the 1995 Annual Report to Shareholders and is herein incorporated by reference.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.
PART III
ITEMS 10 and 11. Directors and Executive Officers of the Registrant and Executive Compensation
Executive Officers of the Company
Name Age Current Position
James Wood.......... 66 Chairman of the Board and Chief Executive Officer Fred Corrado........ 56 Vice Chairman of the Board and Chief Financial Officer Christian W.E. Haub. 31 President and Chief Operating Officer Peter J. O'Gorman... 57 Executive Vice President - International Store and Product Development Gerald L. Good...... 53 Executive Vice President - Marketing and Merchandising J. Wayne Harris..... 57 Executive Vice President - Canadian Operations George Graham....... 46 Senior Vice President - Chief Merchandising Officer John D. Moffatt..... 48 Chairman and Chief Executive Officer - The Great Atlantic & Pacific Company of Canada, Limited Ivan K. Szathmary... 59 Senior Vice President - Chief Services Officer Robert G. Ulrich.... 61 Senior Vice President - General Counsel
Corporate officers of the Company are elected annually and serve at the pleasure of the Board of Directors; each of the executive officers, with the exception of Mr. Moffatt, is a corporate officer.
Mr. Wood was elected Chairman of the Board and Chief Executive Officer on April 29, 1980. From December 1988 to December 1993 and at other prior times he also served as President. He is Chairman of the Executive Committee and is an ex officio member of the Finance and Retirement Benefits Committees of the Board.
Mr. Corrado was elected as Vice Chairman of the Board on October 6, 1992. He has also served as Chief Financial Officer since joining the Company in January 1987. Mr. Corrado also served as Treasurer of the Company in 1987 and from April 18, 1989 through December 5, 1995. Mr. Corrado has been a member of the Board of Directors of the Company since December 4, 1990, and is currently the Vice Chairman of the Executive Committee and a member of the Finance and Retirement Benefits Committees.
Mr. Haub was elected President and Chief Operating Officer of the Company on December 7, 1993. Prior to assuming his present position he served as Corporate Vice President, Development and Strategic Planning, since joining the Company in 1991. Prior thereto and during the past five years, Mr. Haub was a partner in the investment banking firm, Global Reach, which he had joined from the investment banking firm of Dillon Read & Co., Inc. in New York City. Mr. Haub has been a member of the Board of Directors of the Company since December 3, 1991 and is a member of the Finance Committee.
Mr. O'Gorman was elected Executive Vice President - International Store and Product Development on June 26, 1995. During the past five years he was Executive Vice President - Development and Strategic Planning, and Executive Vice President - Development.
Mr. Good was elected Executive Vice President - Marketing and Merchandising on October 3, 1994. During the past five years and prior to assuming his present position he served as Senior Vice President and Chairman, The Great Atlantic & Pacific Company of Canada, Limited, Senior Vice President - Field Administration, and as Vice President - Chief Administrative Officer.
Mr. Harris was elected Executive Vice President - Canadian Operations on December 12, 1995. Prior thereto, he had been successively Executive Vice President, Chairman Waldbaum's, Inc. and Chief Operating Officer - U.S. Operations. In 1993 Mr. Harris was Senior Vice President - Northeast Operations, and prior thereto Vice President - Operations Greater New York Metropolitan area. During the past five years and prior to joining the Company in September 1992, he was Group President, Cincinnati/Dayton marketing area of the Kroger Company.
Mr. Graham was elected Senior Vice President - Chief Merchandising Officer in March 1990. Prior to assuming his present position he was President, Metro Group of the Company.
Mr. Moffatt was elected Chairman and Chief Executive Officer of The Great Atlantic & Pacific Company of Canada, Limited effective upon his hire on September 1, 1994. Prior thereto and during the past five years he was president of Cott Corporation's Control Brands Division in Ontario, and from January 1989 to November 1992 he was President, Eastern Division, First National Supermarkets in Windsor Locks, Connecticut.
Dr. Szathmary was elected Senior Vice President and Chief Services Officer in July 1986.
Mr. Ulrich was elected Senior Vice President and General Counsel of the Company in April 1981.
The Company has filed with the Commission since the close of its fiscal year ended February 24, 1996 a definitive proxy statement pursuant to Regulation 14A, involving the election of directors. Accordingly, the information required in Items 10 and 11, except as provided above, appears on pages 1 through 14 and is incorporated by reference from the proxy statement.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required is contained in the Company's 1995 definitive proxy statement on pages 1 and 5 and is herein incorporated by reference.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions
The information required is contained in the Company's 1995 definitive proxy statement on pages 1 and 7 and is herein incorporated by reference.
PART IV
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report
1) Financial Statements: The financial statements required by Item 8 are included in the fiscal 1995 Annual Report to Shareholders. The following required items, appearing on pages 19 through 30 of the 1995 Annual Report to Shareholders, are herein incorporated by reference:
Statements of Consolidated Operations Statements of Consolidated Shareholders' Equity Consolidated Balance Sheets Statements of Consolidated Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report
2) Financial Statement Schedules are omitted because they are not required or do not apply, or the information is included elsewhere in the financial statements or notes thereto.
3) Exhibits:
Exhibit Incorporation by reference Numbers Description (If applicable)
2) Not Applicable 3) Articles of Incorporation and By-Laws a) Articles of Incorporation Exhibit 3)a) to Form 10-K as amended through for fiscal year ended July 1987 February 27, 1988 b) By-Laws as amended through Exhibit 3)b) to Form 10-K March 1989 for fiscal year ended February 25, 1989
4) Instruments defining the Exhibit A to Form 10-Q rights of security holders, for the quarter ended including indentures August 27, 1977; and Registration Statement No. 33-14624 on Form S-3 filed May 29, 1987
9) Not Applicable
10) Material Contracts a) Management Compensation Exhibit 10)b) to Form 10-K Agreements for the fiscal years ended February 25, 1989, February 24, 1990, and Exhibit 10)a) for the fiscal years ended February 26, 1994, and February 25, 1995
b) Supplemental Executive Exhibit 10)b) to Form 10-K Retirement Plan, amended for the fiscal year ended and restated February 27, 1993
c) 1975 Stock Option Plan, Exhibit 10) to Form 10-K for as amended the fiscal year ended February 23, 1985
d) 1984 Stock Option Plan, Exhibit 10)e) to Form 10-K as amended for the fiscal year ended February 23, 1991
e) 1994 Stock Option Plan Exhibit 10)e) to Form 10-K for the fiscal year ended February 25, 1995
f) 1994 Stock Option Plan Exhibit 10)f) to Form 10-K for Non-Employee Directors for the fiscal year ended February 25, 1995
g) Competitive Advance and Exhibit 10) to Form 10-Q Revolving Credit Facilities for the quarter ended Agreement dated as of December 2, 1995, filed on December 12, 1995. Form SE.
Exhibit Incorporation by reference Numbers Description (If applicable)
11) Not Applicable
12) Not Applicable
13) 1995 Annual Report to Shareholders
18) Not Applicable
21) Subsidiaries of Registrant
22) Not Applicable
23) Independent Auditors' Consent
24) Not Applicable
27) Financial Data Schedule
28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the fiscal year ended February 24, 1996.
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 14, 1996 By: /s/ Fred Corrado
Fred Corrado Vice Chairman of the Board and 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/ James Wood Chairman of the Board, James Wood Chief Executive Officer and Director
/s/ Fred Corrado Vice Chairman of the Board, Fred Corrado Chief Financial Officer and Director
/s/ Rosemarie Baumeister Director Rosemarie Baumeister
/s/ Christopher F. Edley Director Christopher F. Edley
/s/ Christian W.E. Haub Director Christian W.E. Haub
/s/ Helga Haub Director Helga Haub
/s/ Barbara Barnes Hauptfuhrer Director Barbara Barnes Hauptfuhrer
/s/ Paul C. Nagel, Jr. Director Paul C. Nagel, Jr
/s/ Eckart C. Siess Director Eckart C. Siess
/s/ Fritz Teelen Director Fritz Teelen
/s/ Henry W. Van Baalen Director Henry W. Van Baalen
/s/ R.L. "Sam" Wetzel Director R.L. "Sam" Wetzel
The above-named persons signed this report on behalf of the registrant on May 14, 1996.
/s/ Kenneth A. Uhl Vice President, Controller May, 14, 1996 Kenneth A. Uhl Date