EXHIBIT 99.1

 

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

 

	Debtors : The Great Atlantic & Pacific Tea Company, Inc. et al. (1)
	Case Number: Jointly Administered 10-24549 (RDD)

 

Monthly Operating Report for the Period:

November 6, 2011 to December 3, 2011

 

Debtors’ Address:

2 Paragon Drive

Montvale, NJ 07645

 

Net Loss: $62.0 million

 

Debtors’ Attorneys:

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

Telephone: (212) 446-4800

Facsimile: (212) 446-4900

James H.M. Sprayregen, P.C.

Paul M. Basta

Ray C. Schrock

 

and

 

Kirkland & Ellis LLP

300 North LaSalle

Chicago, IL 60654

Telephone: (312) 862-2000

Facsimile: (312) 862-2200

James J. Mazza, Jr.

 

 

Report Preparer:

 

The undersigned, having reviewed the attached report and being familiar with the Debtors’ financial affairs, verifies under the penalty of perjury that the information contained therein is complete, accurate and truthful to the best of my knowledge. (2)

 

 

Date: January 20, 2012	/s/ Frederic F. Brace
	Frederic F. Brace
	Chief Administrative Officer,
	Chief Restructuring Officer and
	Chief Financial Officer

 

(1)          See Schedule 1 for a listing of Debtor by case number

(2)          All amounts herein are unaudited and subject to revision.  The Debtors reserve all rights to revise this report.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

1

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al. (1)

(DEBTORS-IN-POSSESSION)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

TABLE OF CONTENTS

 

	PAGE
Unaudited Financial Statements as of and for the four weeks ended December 3, 2011
Consolidated Statement of Operations	3
Consolidated Balance Sheet	4
Consolidated Statement of Cash Flows	5
Notes to Monthly Operating Report	7
Schedules:
Schedule 1: Schedule of Disbursements	14
Schedule 2: Debtor Questionnaire	15
Schedule 3: Consolidating Statements of Operations for the four weeks ended December 3, 2011	16
Schedule 4: Consolidating Balance Sheets as of December 3, 2011	17

 

 

(1)          See Schedule 1 for a listing of Debtor by case number.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

2

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al. (1)

(DEBTORS-IN-POSSESSION)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited – in thousands)

 

 

		Four Weeks Ended
		December 3, 2011
Sales		$	535,612
Cost of merchandise sold		(388,688		)
Gross margin		146,924
Store operating, general and administrative expense		(171,025		)
Long-lived asset impairment		(25,138		)
Loss from continuing operations before nonoperating income, interest expense and reorganization items		(49,239		)
Nonoperating income		61
Interest expense		(11,207		)
Reorganization items		(2,873		)
Loss from continuing operations before income taxes		(63,258		)
Benefit from income taxes		1,252
Loss from continuing operations		(62,006		)
Loss from discontinued operations, net of income tax benefit of $243		(38		)
Net loss		$	(62,044	)

 

(1) See Schedule 1 for a listing of Debtor by case number.

 

 

See accompanying notes to consolidated financial statements.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

3

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al. (1)

(DEBTORS-IN-POSSESSION)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

CONSOLIDATED BALANCE SHEET

(Unaudited – in thousands)

 

		As of
		December 3, 2011
ASSETS
Current assets:
Cash and cash equivalents		$	196,806
Restricted cash		5,015
Accounts receivable, net of allowance for doubtful accounts of $6,107 at December 3, 2011		159,151
Inventories, net		417,568
Prepaid expenses and other current assets		45,945
Total current assets		824,485
Non-current assets:
Property:
Property owned, net		939,978
Property leased under capital leases, net		55,276
Property, net		995,254
Goodwill		110,412
Intangible assets, net		116,038
Other assets		91,299
Total assets		$	2,137,488
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities:
Debtor-in-possession credit agreement		$	350,000
Current portion of obligations under capital leases		5,379
Current portion of real estate liabilities		447
Accounts payable		143,892
Book overdrafts		35,399
Accrued salaries, wages and benefits		90,757
Accrued taxes		33,129
Other accrued liabilities		63,865
Total current liabilities		722,868
Non-current liabilities:
Long-term obligations under capital leases		52,710
Long-term real estate liabilities		224,118
Deferred real estate income		19,019
Other non-current liabilities		88,760
Total liabilities not subject to compromise		1,107,475
Liabilities subject to compromise		2,393,417
Total liabilities		3,500,892
Series A redeemable preferred stock – no par value, $1,000 redemption value; authorized – 700,000 shares; issued – 179,020 shares at December 3, 2011		148,310
Stockholders’ deficit:
Common stock – $1 par value; authorized – 260,000,000 shares; issued and outstanding – 53,852,470 shares at December 3, 2011		53,852
Additional paid-in capital		509,041
Accumulated other comprehensive loss		(75,822		)
Accumulated deficit		(1,998,785		)
Total stockholders’ deficit		(1,511,714		)
Total liabilities and stockholders’ deficit		$	2,137,488

 

(1) See Schedule 1 for a listing of Debtor by case number.

 

See accompanying notes to consolidated financial statements.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

4

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al. (1)

(DEBTORS-IN-POSSESSION)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited – in thousands)

 

		Four Weeks Ended
		December 3, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(62,044	)
Adjustments to reconcile net loss to net cash used in operating activities (see next page)		46,375
Changes in assets and liabilities:
Increase in receivables		(9,567		)
Increase in inventories		(1,364		)
Increase in prepaid expenses and other current assets		(2,983		)
Increase in other assets		(9,743		)
Increase in accounts payable		6,570
Decrease in accrued salaries, wages and benefits, and taxes		(3,256		)
Increase in other accruals		3,891
Increase in other non-current liabilities		1,309
Payments for reorganization items		(1,897		)
Other operating activities, net		15
Net cash used in operating activities		(32,694		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property		(7,180		)
Proceeds from disposal of property		405
Increase in restricted cash		(505		)
Net cash used in investing activities		(7,280		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(14		)
Principal payments on long-term real estate liabilities		(62		)
Principal payments on capital leases		(823		)
Proceeds from long-term real estate liabilities		2,035
Payments of financing fees for debtor-in-possession financing		(207		)
Increase in book overdrafts		1,783
Net cash provided by financing activities		2,712
Net decrease in cash and cash equivalents		(37,262		)
Cash and cash equivalents at beginning of period		234,068
Cash and cash equivalents at end of period		$	196,806

 

(1) See Schedule 1 for a listing of Debtor by case number.

 

 

See accompanying notes to consolidated financial statements.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

5

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:

 

		Four Weeks Ended
		December 3, 2011
Depreciation and amortization		$	13,297
Long-lived asset impairment		25,138
Impairment of long-lived assets in the normal course of business		3,667
Stock compensation expense		931
Nonoperating income		(61		)
Non-cash occupancy charges for stores closed in the normal course of business		220
Recognition of deferred real estate income		(275		)
Loss on write-down of property		378
Reorganization items relating to continuing operations		2,873
Financing fees		207
Total adjustments to net loss		$	46,375

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

6

 

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

1.              Background

 

General

The Great Atlantic & Pacific Tea Company, Inc. (“we,” “our,” “us” or “our Company”) is engaged in the retail food business.  Our Company operates stores under the following trade names: A&P®, SuperFresh®, Waldbaum’s®, Super Foodmart®, Food Basics®, The Food Emporium®, Best Cellars®, Best Cellars at A&P®, Pathmark® and Pathmark Sav-A-Center®.

 

Chapter 11 Reorganization Cases

On December 12, 2010, our Company and all of our U.S. subsidiaries (the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Filing”) under chapter 11 of title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York in White Plains (the “Bankruptcy Court”), which are being jointly administered under case number 10-24549.   Management’s decision to initiate the Bankruptcy Filing was in response to, among other things, our Company’s deteriorating liquidity and management’s conclusion that the challenges of successfully implementing additional financing initiatives and of obtaining necessary cost concessions from our Company’s business and labor partners, was negatively impacting our Company’s ability to implement our previously announced turnaround strategy.  Our Company’s non-U.S. subsidiaries, which are immaterial on a consolidated basis and have no retail operations, were not part of the Bankruptcy Filing.

 

We are currently operating as debtors-in-possession pursuant to the Bankruptcy Filing and continuation of our Company as a going-concern is contingent upon, among other things, the Debtors’ ability (i) to comply with the terms and conditions of the DIP Credit Agreement described in Note 3 to this Monthly Operating Report; (ii) to develop a plan of reorganization and obtain confirmation of that plan under the Bankruptcy Code; (iii) to reduce debt and other liabilities through the bankruptcy process; (iv) to return to profitability, including by realizing necessary near-term cost concessions from our business and labor partners; (v) to generate sufficient cash flow from operations; and (vi) to obtain financing sources to meet our future obligations.  The uncertainty regarding these matters raises substantial doubt about our ability to continue as a going concern.

 

Amended and Restated Securities and Purchase Agreements

The summary of the provisions of the Amended and Restated Securities and Purchase Agreements (“Amended and Restated SPAs”) can be found in our Form 10-Q as of and for the period ended December 3, 2011.

 

Plan of Reorganization

The summary of the provisions of the Plan of Reorganization can be found in our Form 10-Q as of and the period ended December 3, 2011.

 

2.              Basis of Presentation

 

Debtors-in-Possession Financial Statements

The unaudited consolidated financial statements and supplemental information contained herein represent the consolidated financial information for the Debtors as of and for the four weeks ended December 3, 2011. Non-Debtor subsidiaries are deemed to be immaterial on a consolidated basis and related income statement and balance sheet activity has been reported separately on Schedule 3 and Schedule 4 under the column “Foreign Non-Debtor”.

 

Our Company was required to apply the FASB’s provisions of Reorganizations effective on December 12, 2010, which is applicable to companies in chapter 11, which generally does not change the manner in which financial statements are prepared.  However, it does require that the financial statements for periods subsequent to the Bankruptcy Filing distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

 

The unaudited consolidated financial statements have been derived from the books and records of our Company. Certain financial information, however, has not been subject to procedures that would typically be applied to financial information presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and upon the application of such procedures (such as tests for asset impairment), we believe that the financial information will be subject to changes, and these

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

7

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

changes could be material. The financial information furnished in this report includes primarily normal recurring adjustments as well as all of the adjustments that would typically be made so that the quarterly financial statements are in accordance with U.S. GAAP. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. Therefore, this report should be read in conjunction with our Company’s audited consolidated financial statements on Form 10-K as of and for the period ended February 26, 2011 and for the interim periods on Form 10-Q as of and for the periods ended June 18, 2011, September 10, 2011 and December 3, 2011, respectively.

 

The results of operations contained herein are not necessarily indicative of the results which may be expected for any other period or for the full year and may not necessarily reflect the combined results of operations, financial position and cash flows of our Company in the future.

 

Intercompany Transactions

Intercompany transactions between Debtor entities, as well as between Debtor and Non-Debtor subsidiaries, include, but are not limited to, intercompany cash sweep arrangements, intercompany financing arrangements, intercompany wages and intercompany inventory procurement.  The intercompany financing agreements include two loans from two of the Non-Debtor foreign subsidiaries to Shopwell, Inc., a Debtor of our Company; a 3.562% loan due on May 27, 2013 with an outstanding balance of principal and interest of approximately $94.0 million from A&P Bermuda Limited and a 2.85% loan due on January 15, 2014 with an outstanding balance of principal and interest of approximately $0.1 million from APTEA Hungry Liquidity Management Limited Liability Company. Both loans were transferred from Shopwell, Inc. to The Great A&P Tea Company during June 2010 prior to the Bankruptcy Filing.

 

All payments between the Debtor and Non-Debtor entities have been stayed at this time and we did not record contractual interest expense subsequent to the Bankruptcy filing. The intercompany balances due to / from entities, as shown on individual entities’ balance sheets included in the accompanying Consolidating Balance Sheets, represent the accumulation of activity over time.  These balances between Debtor entities have not been eliminated in the accompanying Consolidating Balance Sheets. Certain intercompany transactions have been eliminated in the accompanying Consolidated Statement of Operations.  Intercompany balances between the Debtor and Non-Debtor entities have been shown net in the consolidated financial statements.

 

Interest Expense

We recorded all contractual interest on secured debt for the four weeks ended December 3, 2011. We recorded interest accretion expense for capital leases and real estate liabilities, self-insurance reserves and GHI obligations.  Although we have recorded interest accretion expense, we have not made a final determination as to the value of any underlying assets or the rejection/assumption of any of the obligations that we have not assumed.  Once a determination is made, the accretion of the interest expense may change. We did not record contractual interest expense of $2.9 million for unsecured debt which is subject to compromise for the four weeks ended December 3, 2011.  Debt discounts and deferred financing fees for all debt which is subject to compromise were reclassified into the carrying value of the respective indebtedness upon the Bankruptcy Filing and the balances were then adjusted to the face value of the debt.  As a result of this reclassification, we ceased amortization of deferred financing fees and discounts effective as of the Bankruptcy Filing date. Such amounts may need to be adjusted in future periods.

 

Taxes and Insurance

We received approval to pay pre-petition employee withholding obligations in addition to employment and wage related taxes, sales and use taxes, and certain other taxes due in the normal course of business through certain court orders. As such, we have paid the applicable taxes when due except for amounts that are in dispute.

 

All post-petition tax obligations to the proper taxing authorities are current.  Deferred tax liabilities of $15.2 million are included within “Other accrued liabilities” in the Consolidated Balance Sheet.  Pre-petition amounts for leases not yet assumed owed for our pro-rata portion of certain taxes for which we reimburse third parties have not been paid.

 

Additionally, all insurance premiums are current and all insurance policies are in force as of December 3, 2011.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

8

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

Other non-current liabilities

Other non-current liabilities are comprised of $50.4 million for self-insurance reserves, $34.9 million for step rent liabilities, $1.5 million for closed locations reserves, $0.8 million for unfavorable lease liability, $0.4 million for deferred income and $0.8 million for other items that were incurred subsequent to the Bankruptcy Filing.  These amounts are not subject to compromise under the Bankruptcy Filing.

 

3.              DIP Credit Agreement and Amended and Restated SPAs

 

In connection with the Bankruptcy Filing, on December 13, 2010, the Bankruptcy Court entered its interim financing order, among other things, permitting us to enter into a Superpriority Debtor-in-Possession Credit Agreement as amended and restated in its entirety by that certain Amended and Restated Superpriority Debtor-in-Possession Credit Agreement dated as of December 21, 2010, further amended and restated in its entirety by that certain Second Amended and Restated Superpriority Debtor-in-Possession Credit Agreement dated as of January 10, 2011, further amended and restated in its entirety by that certain Third Amended and Restated Superpriority Debtor-in-Possession Credit Agreement dated as of January 13, 2011, further amended by that certain First Amendment to the Third Amended and Restated Superpriority Debtor-in-Possession Credit Agreement dated as of July 8, 2011, further amended by that certain Second Amendment to the Third Amended and Restated Superpriority Debtor-in-Possession Credit Agreement dated as of September 21, 2011 (the “Second Amendment to the DIP Credit Agreement”), as may be further amended, amended and restated, supplemented or otherwise modified from time to time (the “DIP Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent (in such capacity, the “Agent”), the lenders from time to time party thereto (collectively, the “DIP Lenders”) and our Company and certain subsidiaries as borrowers thereunder.  On December 14, 2010, we satisfied all of the conditions to the effectiveness of the DIP Credit Agreement and to the initial closing thereunder and consummated the transactions contemplated thereunder including the refinancing in full of our Company’s and its applicable subsidiaries’ obligations under the pre-existing first lien credit facility. The Bankruptcy Court entered a final order approving the DIP Credit Agreement on January 11, 2011.  Pursuant to the terms of the DIP Credit Agreement:

 

·                  the DIP Lenders agreed to lend up to $800.0 million in the form of a $350.0 million term loan and a $450.0 million revolving credit facility with a $250.0 million sublimit for letters of credit, in each case subject to the terms and conditions therein;

 

·                  our Company’s and the Subsidiary Borrower’s obligations under the DIP Credit Agreement and the other specified loan documents are guaranteed by our Company’s certain other subsidiaries that are Debtors (“Subsidiary Guarantors” and, together with our Company and the Subsidiary Borrowers, the “Loan Parties”); and

 

·                  the Loan Parties’ obligations under the DIP Credit Agreement and such other specified loan documents are secured by a security interest in, and lien upon, substantially all of the Loan Parties’ existing and after-acquired personal and real property, having the priority and subject to the terms therein and in the order(s) entered into by the Bankruptcy Court, as applicable.

 

Our Company will have the option to have interest on the revolving loans under the revolving credit facility provided under the DIP Credit Agreement accrue at an alternate base rate plus 200 basis points or at adjusted LIBOR plus 300 basis points. Our Company will have the option to have interest on the term loan provided under the DIP Credit Agreement accrue at an alternate base rate plus 600 basis points or at adjusted LIBOR (with a floor of 175 basis points) plus 700 basis points. The DIP Credit Agreement limits, among other things, our Company’s and the other Loan Parties’ ability to (i) incur indebtedness, (ii) incur or create liens, (iii) dispose of assets, (iv) prepay certain indebtedness and make other restricted payments, (v) enter into sale and leaseback transactions and (vi) modify the terms of certain indebtedness and certain material contracts. Notably, however, the DIP Credit Agreement permits our Company to use the proceeds generated from the sale of the Southern Stores in the operation of our business rather than requiring us to use those proceeds to reduce the Loan Parties’ outstanding indebtedness under the DIP Credit Agreement.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

9

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

The DIP Credit Agreement also contains certain financial covenants. The Second Amendment to the DIP Credit Agreement amended the covenants regarding minimum excess availability and minimum cumulative EBITDA. The Second Amendment to the DIP Credit Agreement changed the measurement intervals for minimum excess availability requirements and reduced the minimum cumulative EBITDA requirements to have them measured beginning with respect to the period ending December 31, 2011 rather than prior to such time as required by the DIP Credit Agreement, provided that if the Company has filed a Plan of Reorganization reasonably satisfactory to the DIP Lenders prior to December 31, 2011, the measurement period for the minimum cumulative EBITDA covenant will be measured beginning on February 25, 2012. The financial covenants, as amended by the Second Amendment to the DIP Credit Agreement, include a minimum excess availability covenant of $100.0 million (or $75.0 million at any time after the delivery of the financial statements to the DIP Lenders for the period ended December 31, 2011 but prior to the delivery of financial statements to the DIP Lenders for the period ended February 25, 2012, or $50.0 million at any time thereafter), minimum liquidity covenant of $100.0 million and minimum cumulative EBITDA covenant as defined in the DIP Credit Agreement.  Minimum cumulative EBITDA measured beginning on September 11, 2011 to and including the applicable date set forth in table below is as follows (in millions):

 

Date		Minimum Cumulative EBITDA
December 31, 2011		10.0
January 28, 2012		25.0
February 25, 2012		40.0
March 24, 2012		55.0
April 21, 2012		70.0
May 19, 2012		85.0
June 16, 2012		100.0

 

The Administrative Agent for the DIP Lenders has confirmed that it is reasonably satisfied with our Company’s Plan of Reorganization and, as such, the minimum EBITDA covenants for the respective periods ended December 31, 2011 and January 28, 2012 have been waived. If the treatment of the DIP Lenders’ claims under the Plan of Reorganization is subsequently modified, the minimum cumulative EBITDA covenants for the respective periods ended December 31, 2011 and January 28, 2012 may revert. There is no guarantee that we will continue to receive such waiver for future periods from our DIP Lenders if we continue not to be in compliance with the required covenant.

 

Meeting our EBITDA covenant requires increasing levels of performance throughout the years, including the successful implementation of our business improvement initiatives. As part of these initiatives, we entered into a definitive supply agreement with C&S to provide Services and on December 5, 2011, subsequent to our balance sheet date, we negotiated with union locals to obtain consensual modifications to collective bargaining agreements necessary for our successful reorganization. When establishing the EBITDA covenants, we anticipated entering these agreements earlier in the fiscal year. Due to the timing of the recently negotiated agreements, these savings did not start to be realized until the fourth quarter of 2011 but were included in EBITDA covenant requirement outlined above. As a result, as of December 3, 2011, we are currently expecting EBITDA to be below the minimum cumulative EBITDA covenant level above for December 31, 2011 although, as noted above, that covenant has been waived. A financial covenant violation could result in termination of the DIP Credit Agreement and/or termination of our access to funding thereunder. If either (or both) of those were to occur, our Company could be without sufficient cash availability to meet our operating needs or satisfy our obligations as they fall due, in which instance we may be unable to successfully reorganize.

 

The DIP Credit Agreement matures upon the earliest to occur of (a) June 14, 2012, (b) the acceleration of the loans and the termination of the commitment thereunder, and (c) the substantial consummation (as defined in Section 1101(2) of the Bankruptcy Code, which for purposes hereof shall be no later than the effective date thereof) of a plan of reorganization that is confirmed pursuant to an order entered by the Bankruptcy Court.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

10

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

Amended and Restated SPAs

The summary of the provisions of the Amended and Restated SPAs can be found in our Form 10-Q as of and for the period ended December 3, 2011.

 

4.              Reorganization Items

 

Reorganization items represent amounts incurred as a direct result of the Bankruptcy Filing and was comprised of the following:

 

		Four Weeks Ended
		December 3, 2011
		(in thousands)
Professional fees		$	(3,210	)
US Trustee fees		166
Write-off of balance sheet items related to rejected lease		171
Total reorganization items – continuing operations		$	(2,873	)

 

Professional fees of approximately $3.2 million were accrued and $1.9 million were paid for the four weeks ended December 3, 2011.

 

5.              Liabilities Subject to Compromise

 

As a result of the Bankruptcy Filing, the payment of pre-petition indebtedness is subject to compromise or other treatment under a Plan of Reorganization. Generally, actions to enforce or otherwise effect payment of pre-Bankruptcy Filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtor authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of our Company’s businesses and assets. Among other things, the Bankruptcy Court authorized us to pay certain pre-petition claims relating to employee wages and benefits, customers, vendors, and suppliers.

 

We have been paying and intend to continue to pay undisputed post-petition claims in the normal course of business. In addition, we may reject pre-petition executory contracts and unexpired leases with respect to our operations, with the approval of the Bankruptcy Court. Any damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as “Liabilities subject to compromise” in our Consolidated Balance Sheets. We previously notified all known claimants subject to the bar date of their need to file a proof of claim with the Bankruptcy Court. A bar date is the date by which claims against our Company must be filed if the claimants disagree with the amounts included in our schedule of assets and liabilities filed with the Bankruptcy Court and wish to receive any distribution in the Bankruptcy Filing. The bar date of June 17, 2011 set by the Bankruptcy Court has passed. Thus far, claimants filed over nine thousand claims against our Company, asserting approximately $28.0 billion worth of liabilities.  Our Company and our retained professionals are continuing to review and analyze the proofs of claim submitted by claimants and will investigate any material differences between these claims and liability amounts estimated by our Company. If necessary, in the event of a claims dispute, the Bankruptcy Court will make a final determination whether such claims should be allowed and, if so, the appropriate amount of such allowed claims. The ultimate amount of such liabilities is not determinable at this time.

 

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts.  The amounts currently classified as “Liabilities subject to compromise” may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events.  We expect that certain amounts currently classified as “Liabilities subject to compromise” may in fact be paid in the normal course of business as they come due.  Any resulting changes in classification will be reflected in subsequent monthly operating reports.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

11

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

Liabilities subject to compromise consist of the following (in thousands):

 

		As of December 3, 2011
Accounts payable		$	168,678
Accrued salaries, wages, and benefits		10,958
Self-insurance reserves		379,401
Damages claim for rejected leases		186,632
Pension withdrawal liabilities		115,211
GHI contractual liability for employee benefits		101,327
Accrued occupancy related costs for open stores		21,708
Deferred income		33,496
Deferred real estate income		13,870
Accrued audit, legal and other		6,840
Accrued interest		56,669
Other postretirement and postemployment benefits		41,958
Other accruals		1,855
Pension plan benefits		132,217
Step rent liabilities		13,314
Other noncurrent liabilities		9,791
5.125% Convertible Senior Notes, due June 15, 2011		165,000
Related Party Promissory Note, due August 18, 2011		10,000
9.125% Senior Notes, due December 15, 2011		12,840
6.750% Convertible Senior Notes, due December 15, 2012		255,000
11.375% Senior Secured Notes, due August 1, 2015		260,000
9.375% Notes, due August 1, 2039		200,000
Other debt		2,369
Obligations under capital leases		44,254
Real estate liabilities		150,029
Total liabilities subject to compromise		$	2,393,417

 

Liabilities subject to compromise include liabilities related to pre-petition purchases and interest payments, some of which were scheduled for payment in the December 2011 period.  As a result, the December 2011 cash flows from operations were favorably affected by the stay of payment related to the liabilities.

 

Non-Debtor Financing Agreements

Intercompany financing agreements with foreign non-Debtor subsidiaries of $94.1 million are not reflected in the above liabilities subject to compromise table as these amounts were eliminated on a consolidated basis.

 

6.              Post-petition Accounts Payable and Accrued Expenses

 

To the best of our knowledge, all undisputed post-petition accounts payable and accrued expenses have been paid, or are being paid under agreed-upon payment terms.

 

7.              Subsequent Events

 

Modified Collective Bargaining Agreements

Subsequent to our balance sheet date, on December 5, 2011, our Company obtained approval from the Bankruptcy Court to enter modifications to certain Collective Bargaining Agreements (the “Modified CBAs”) with the United Food and Commercial Workers, International and 13 Local UFCW Affiliates in support of our Company’s restructuring initiatives. The Modified CBAs will be in effect for a period of five years beginning on January 1, 2012.

 

The Modified CBA enables our Company to materially reduce the cost associated with our unionized workforce and ensure labor cost stability. It will also permit our Company to survive in the competitive grocery business while still permitting our Company to retain and attract high-quality associates. Our Company expects it will realize a minimum aggregate labor savings of an agreed upon amount

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

12

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

NOTES TO MONTHLY OPERATING REPORT (UNAUDITED)

 

(excluding employee buy-out savings) over the term of the Modified CBAs.

 

Assumed Leases

On December 22, 2011, our Company assumed an additional 140 real estate leases, including leases for sub-leased locations. Any resulting changes in the classification of related liability balances will be reflected in our subsequent monthly operating reports.

 

Store Closures

In January 2012, our Company filed a motion with the Bankruptcy Court seeking approval to close 14 stores in four states as our Company prepares to emerge from chapter 11.  These store closures are expected to be completed in our Company’s first quarter of fiscal 2012. In connection with our review of the long-lived assets, we recorded an impairment charge relating to these stores. This impairment charge amounted to $6.8 million during the 12 weeks ended December 3, 2011, of which $4.1 million and $2.7 million related to our Fresh and Pathmark reporting segments, respectively. An occupancy charge for these stores will be recorded when the stores close.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

13

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

SCHEDULE 1: SCHEDULE OF DISBURSEMENTS

 

Case Number:		Debtor Name:		Disbursements for the four weeks ended December 3, 2011:
087-10-24548		APW SUPERMARKETS, INC.		$	33,398,099.86
087-10-24549		THE GREAT ATLANTIC & PACIFIC		102,843,573.23
087-10-24550		2008 BROADWAY, INC.		—
087-10-24551		AAL REALTY CORPORATION		—
087-10-24552		ADBRETT CORPORATION		—
087-10-24553		AMSTERDAM TRUCKING CORPORATION		—
087-10-24554		APW SUPERMARKET CORPORATION		—
087-10-24555		BERGEN STREET PATHMARK, INC.		—
087-10-24556		BEST CELLARS DC, INC.		—
087-10-24557		BEST CELLARS, INC.		214,596.64
087-10-24558		BEST CELLARS LICENSING, CORP.		—
087-10-24559		BEST CELLARS MASSACHUSETTS, INC.		144.20
087-10-24560		BEST CELLARS VA, INC.		64.27
087-10-24561		BEV, LTD		24,874.34
087-10-24562		BORMAN’S INC.		158,202.20
087-10-24563		BRIDGE STUART, INC.		—
087-10-24564		CLAY-PARK REALTY, CORP.		—
087-10-24565		COMPASS FOODS, INC.		—
087-10-24566		EAST BRUNSWICK STUART, LLC		—
087-10-24567		FARMER JACKS OF OHIO, INC.		—
087-10-24568		FOOD BASICS, INC.		7,247,651.93
087-10-24569		GRAMATAN FOODTOWN CORP.		—
087-10-24570		GRAPE FINDS AT DUPONT, INC.		—
087-10-24571		GRAPE FINDS LICENSING, CORP.		—
087-10-24572		GREENLAWN LAND DVLPMNT, CORP.		—
087-10-24573		HOPELAWN PROPERTY I, INC.		2,352.53
087-10-24574		KOHL’S FOOD STORES, INC.		—
087-10-24575		KWIK SAVE, INC.		—
087-10-24576		LANCASTER PIKE STUART, LLC		—
087-10-24577		LBRO REALTY, INC.		—
087-10-24578		MAC DADE BOULEVARD STUART, LLC		—
087-10-24579		MCLEAN AVENUE PLAZA, CORP.		—
087-10-24580		MILIK SERVICE COMPANY, LLC		—
087-10-24581		MONTVALE HOLDINGS, INC.		—
087-10-24582		N. JERSEY PROPERTIES, INC. VI		—
087-10-24583		ONPOINT, INC.		—
087-10-24584		PATHMARK STORE, INC.		103,460,077.26
087-10-24585		PLAINBRIDGE, LLC		325,648,761.17
087-10-24586		SEG STORES, INC.		5,515.91
087-10-24587		SHOPWELL, INC.		14,027,438.55
087-10-24588		SHOPWELL, INC.		—
087-10-24589		SPRING LANE PRODUCE CORP.		—
087-10-24590		SUPER FRESH FOOD MARKETS, INC.		13,530,606.14
087-10-24591		SUPER FRESH/SAV A CENTER, INC.		20,457.73
087-10-24592		SUPER MARKET SERVICES, CORP.		—
087-10-24593		SUPER PLUS FOOD WAREHOUSE, INC.		—
087-10-24594		SUPERMARKETS OIL COMPANY, INC.		—
087-10-24595		THE FOOD EMPORIUM, INC.		—
087-10-24596		THE OLD WINE EMPORIUM		273,788.68
087-10-24597		THE S. DAKOTA GREAT ATLANTIC		—
087-10-24598		TRADEWELL FOODS OF CONN., INC.		526,883.54
087-10-24599		UPPER DARBY STUART, LLC		—
087-10-24600		WALDBAUM, INC.		2,086,022.51
087-10-24601		LO-LO DISCOUNT STORES, INC.		—
		GRAND TOTALS:		$	603,469,110.69

 

Certain Debtor entities make disbursements on behalf of the other Debtor entities.  Every effort has been made to accurately represent the disbursements made on behalf of each affiliated debtor.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

14

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al. (1)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

SCHEDULE 2: DEBTOR QUESTIONNAIRE

 

	Must be completed each month. If the answer to any of the questions is “Yes”, provide a detailed explanation of each item. Attach additional sheets if necessary.		Yes	No
1.	Have any assets been sold or transferred outside the normal course of business this reporting period?			ü
2.	Have any funds been disbursed from any account other than a debtor-in-possession account this reporting period?		ü(a)
3.	Is the Debtor delinquent in the timely filing of any post-petition tax returns?			ü
4.	Are worker compensation, general liability or other necessary insurance coverage expired or cancelled, or has the Debtor received notice of expiration or cancellation of such policies?			ü
5.	Is the Debtor delinquent in paying any insurance premium payment?			ü
6.	Have any payments been made on pre-petition liabilities this reporting period?		ü(b)
7.	Are any post-petition receivables (accounts, notes, or loans) due from related parties?			ü
8.	Are any post-petition payroll taxes past due?			ü
9.	Are any post-petition State or Federal income taxes past due?			ü
10.	Are any post-petition real estate taxes past due?		ü(c)
11.	Are any other post-petition taxes past due?			ü
12.	Have any pre-petition taxes been paid during this reporting period?		ü(d)
13.	Are any amounts owed to post-petition creditors delinquent?			ü
14.	Are any wage payments past due?		ü(e)
15.	Have any post-petition loans been received by the Debtor from any party?			ü
16.	Is the Debtor delinquent in paying any U.S. Trustee fees?			ü
17.	Is the Debtor delinquent with any court ordered payments to attorneys or other professionals?			ü
18.	Have the owners or shareholder received any compensation outside of the normal course of business?			ü

 

Explanations to “Yes” answers:
(a)	Funds have been disbursed from Rule 501(c)3 non-profit organizations, affiliates of our Company, in the normal course of operations.
(b)	Payments made on certain pre-petition liabilities were made pursuant to various court orders.
(c)	Certain post-petition taxes related to closed locations were not paid during the bankruptcy while lease assumption and rejection decisions were completed.
(d)	Due to the assumption of real estate leases during the previous periods, landlords were reimbursed during the four weeks ended December 3, 2011 for pre-petition real estate taxes paid on our behalf as cure amounts
(e)	Certain severance payments have not been made and have been classified as part of “Liabilities subject to compromise”; however, wage payments for existing employees are current.

 

(1) See Schedule 1 for a listing of Debtor by case number.

 

 

Case No. 10-24549 (RDD) Jointly Administered

 

15

 

THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. et al.

(DEBTORS-IN-POSSESSION)

MONTHLY OPERATING REPORT FOR DECEMBER 2011 (PERIOD 10)

SCHEDULE 3: CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE FOUR WEEKS ENDED DECEMBER 3, 2011

(Unaudited - in thousands)

 

		APW Supermarket			Bev LTD			Borman’s Inc			Shopwell			Super Fresh/Sav			Super Fresh			The Great A&P			The Old Wine
														-A-Center			Food Markets			Tea Co			Emporium
		10-24548			10-24561			10-24562			10-24587			10-24591			10-24590			10-245549			10-24596
Sales	$	86,410		$	10		$	-		$	20,804		$	-		$	38,785		$	140,499		$	262
Cost of merchandise sold		(62,267	)		(9	)		-			(12,013	)		-			(27,296	)		(98,521	)		(208	)
Gross margin		24,143			1			-			8,791			-			11,489			41,978			54
Store operating, general and administrative expense		(29,264	)		(275	)		(2	)		(7,764	)		-			(13,511	)		(50,375	)		(56	)
Long-lived asset impairment		-			-			-			-			-			-			-			-
(Loss) income from continuing operations before nonoperating income, interest expense and reorganization items, net		(5,121	)		(274	)		(2	)		1,027			-			(2,022	)		(8,397	)		(2	)
Nonoperating income		-			-			-			-			-			-			61			-
Interest expense		(357	)		-			-			-			-			(157	)		(8,187	)		-
Reorganization items		109			-			-			-			-			24			(3,026	)		-
(Loss) income from continuing operations before benefit from income taxes		(5,369	)		(274	)		(2	)		1,027			-			(2,155	)		(19,549	)		(2	)
Benefit from income taxes		-			-			-			-			-			-			1,252			-
(Loss) income from continuing operations		(5,369	)		(274	)		(2	)		1,027			-			(2,155	)		(18,297	)		(2	)
(Loss) income from operations of discontinued businesses		-			-			(19	)		-			(19	)		-			-			-
(Loss) Income from discontinued operations		-			-			(19	)		-			(19	)		-			-			-
Net (loss) income	$	(5,369	)	$	(274	)	$	(21	)	$	1,027		$	(19	)	$	(2,155	)	$	(18,297	)	$	(2	)

 

Case No. 10-245949 (RDD) Jointly Administered

 

16

 

	Tradewell Foods			Waldbaums Inc			US Food Basics			Pathmark Inc			Plainbridge			E Brusnswick			Best Cellars			SEG			Best Cellars			Grape Finds at			Foreign			Total
																									Mass Inc			Dupont, Inc			Non-Debtor
	10-24598			10-24600			10-24568			10-24584			10-24585			10-24566			10-24557			10-24586			10-24559			10-24570
$	1,313		$	2,851		$	17,821		$	226,652		$	-		$	-		$	205		$	-		$	-		$	-		$	-		$	535,612
	(892	)		(1,935	)		(14,876	)		(170,546	)		-			-			(125	)		-			-			-			-			(388,688	)
	421			916			2,945			56,106			-			-			80			-			-			-			-			146,924
	(407	)		(1,187	)		(3,234	)		(64,405	)		(449	)		(12	)		(79	)		11			(1	)		(1	)		(14	)		(171,025	)
	-			-			-			(25,138	)		-			-			-			-			-			-			-			(25,138	)
	14			(271	)		(289	)		(33,437	)		(449	)		(12	)		1			11			(1	)		(1	)		(14	)		(49,239	)
	-			-			-			-			-			-			-			-			-			-			-			61
	-			(499	)		(118	)		(1,889	)		-			-			-			-			-			-			-			(11,207	)
	-			-			-			20			-			-			-			-			-			-			-			(2,873	)
	14			(770	)		(407	)		(35,306	)		(449	)		(12	)		1			11			(1	)		(1	)		(14	)		(63,258	)
	-			-			-			-			-			-			-			-			-			-			-			1,252
	14			(770	)		(407	)		(35,306	)		(449	)		(12	)		1			11			(1	)		(1	)		(14	)		(62,006	)
	-			-			-			-			-			-			-			-			-			-			-			(38	)
	-			-			-			-			-			-			-			-			-			-			-			(38	)
$	14		$	(770	)	$	(407	)	$	(35,306	)	$	(449	)	$	(12	)	$	1		$	11		$	(1	)	$	(1	)	$	(14	)	$	(62,044	)

 

Case No. 10-245949 (RDD) Jointly Administered

 

16