GREAT ATLANTIC & PACIFIC TEA CO INC

CIK:0000043300|SEC Filings

Discontinued Operations

9 Months Ended

Dec. 03, 2011

17. Discontinued Operations

We have had multiple transactions throughout the years which met the criteria for discontinued operations. These events are described based on the year the transaction was initiated.

Summarized below is a reconciliation of the liabilities related to restructuring obligations resulting from these activities:


				For the 40 weeks Ended December 3, 2011
		Balance at		Interest							Balance at
		2/26/2011		Accretion⁽¹⁾	Adjustments⁽²⁾Utilization⁽³⁾						12/3/2011
2007 Events
Occupancy	$	49,317	$	80	$	(6,857	) $	-		$	42,540
Pension withdrawal		57,581		2,674		-		-			60,255
2007 events total		106,898		2,754		(6,857	)	-			102,795

2005 Event
Occupancy		21,390		-		-		-			21,390

2003 Events
Occupancy		8,451		12		(1,641	)	(39	)		6,783
Total	$	136,739	$	2,766	$	(8,498	) $	(39	)	$	130,968

(1) The additions to occupancy and severance represent the interest accretion on future occupancy costs and future obligations for early withdrawal from multi-employer union pension plans which were recorded at present value at the time of the original charge. Interest accretion is recorded as a component of "Loss from operations of discontinued businesses" in our Consolidated Statements of Operations.

(2) At each balance sheet date, we assess the adequacy of the balance of the remaining liability to determine if any adjustments are required as a result of changes in circumstances and/or estimates. These adjustments are recorded as a component of "Loss from operations of discontinued businesses" in our Consolidated Statements of Operations.

For the 40 weeks Ended December 3, 2011

During the 40 weeks ended December 3, 2011, we recorded adjustments for the 2007 and 2003 events to reduce occupancy liabilities by $6.9 million and $1.6 million, respectively, due to an estimated allowable claim amount for property leases that were rejected in Bankruptcy Court during the fiscal year.

(3) Occupancy utilization represents payments made during those periods for rent, common area maintenance and real estate taxes. Pension withdrawal utilization represents payments made to the union pension fund during the period.

Summarized below are the payments made to date from the time of the original charge and expected future payments related to these events:


		2007 Events		2005 Event		2003 Events		Total
Total severance payments made to date	$	37,089	$	2,650	$	22,528	$	62,267
Expected future pension withdrawal payments		60,255		-		-		60,255
Total severance and pension withdrawal payments
expected to be incurred		97,344		2,650		22,528		122,522
Total occupancy payments made to date		92,140		60,866		34,123		187,129
Expected future occupancy payments,
excluding interest accretion		42,540		21,390		6,783		70,713
Total occupancy payments expected to be incurred,
excluding interest accretion	$	134,680	$	82,256	$	40,906	$	257,842

Total severance and occupancy payments made to date	$	129,229	$	63,516	$	56,651	$	249,396
Expected future pension withdrawal and occupancy payments
expected to be incurred, excluding interest accretion		102,795		21,390		6,783		130,968

Total severance, pension withdrawal and occupancy payments
expected to be incurred, excluding interest accretion	$	232,024	$	84,906	$	63,434	$	380,364

Payments to date were primarily for occupancy related costs such as rent, common area maintenance, real estate taxes, lease termination costs, severance, and benefits. The remaining obligation relates to expected future payments under long term leases and expected future payments for early withdrawal from multi-employer union pension plans. The expected completion dates for the 2007, 2005 and 2003 events are 2028, 2012 and 2012, respectively.

Summarized below are the amounts included in our balance sheet captions in our Company's Consolidated Balance Sheets related to these events:


				December 3, 2011
		2007 Events		2005 Event	2003 Events			Total
Other accruals	$	-	$	-	$	-	$	-
Other non-current liabilities	$	-	$	-	$	-	$	-
Liabilities subject to compromise	$	102,795	$	21,390	$	6,783	$	130,968

				February 26, 2011
		2007 Events		2005 Event	2003 Events			Total
Other accruals	$	-	$	-	$	-	$	-
Other non-current liabilities	$	-	$	-	$	-	$	-
Liabilities subject to compromise	$	106,898	$	21,390	$	8,451	$	136,739

We evaluated the closed locations reserves balances as of December 3, 2011 based on current information and have concluded that they are adequate to cover future costs. We will continue to monitor the status of the vacant and subsidized properties, severance and benefits, and pension withdrawal liabilities, and adjustments to the closed locations reserves balances may be recorded in the future, if necessary.

Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 03, 2011	Dec. 04, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (379,450)	$ (473,548)
Adjustments to reconcile net loss to net cash used in operating activities (see next page)	230,817	318,952
Other changes in assets and liabilities:
Decrease in receivables	56,236	17,803
Decrease in inventories	17,862	10,467
Increase in prepaid expenses and other current assets	(17,028)	(12,968)
(Increase) decrease in other assets	(32,346)	2,567
Decrease in accounts payable	(27,123)	(29,201)
Decrease in accrued salaries, wages and benefits, and taxes	(13,259)	(28,977)
Increase in other accruals	88,748	40,817
Decrease in other non-current liabilities	(67,780)	(25,156)
Other operating activities, net	282	(1,020)
Payments for reorganization items	(35,744)
Net cash used in operating activities	(178,785)	(180,264)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property	(33,076)	(62,854)
Proceeds from disposal of property	9,723	16,111
Proceeds from flood insurance	6,500	6,410
Proceeds from sale of assets held for sale	38,302	22,075
(Increase) decrease in restricted cash	(3,284)	303
Proceeds from sale of pharmacy assets	4,785
Net cash provided by (used in) investing activities	22,950	(17,955)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		800
Principal payments on long-term debt	(142)	(201)
Proceeds under revolving lines of credit		619,500
Principal payments on revolving lines of credit		(636,384)
Principal payments on long-term real estate liabilities	(802)	(980)
Proceeds from sale-leaseback transaction		89,830
Proceeds from long-term real estate liabilities	2,035
Principal payments on capital leases	(8,213)	(9,140)
Increase (decrease) in book overdrafts	11,677	(9,543)
Payments of financing fees for debtor-in-possession financing	(4,521)
Payments of financing fees for revolving line of credit		(2,995)
Deferred financing fees		(2,211)
Dividends paid on preferred stock		(10,500)
Proceeds from exercises of stock options		28
Net cash provided by financing activities	34	38,204
Net decrease in cash and cash equivalents	(155,801)	(160,015)
Cash and cash equivalents at beginning of year	352,607	252,426
Cash and cash equivalents at end of period	196,806	92,411
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization	141,944	171,841
Goodwill, trademark and long-lived asset impairment	104,680	77,684
Impairment of long-lived assets in the normal course of business	5,132	1,144
Nonoperating income	(152)	(10,241)
Non-cash interest expense	10,104	27,658
Stock compensation expense	2,440	1,246
Pension withdrawal costs	13,923
Employee benefit related costs	1,561	13,728
Asset disposition initiatives relating to discontinued operations		(117)
Non-cash occupancy charges for locations closed in the normal course of business	1,800	7,024
Adjustment to occupancy reserves	92,775	52,357
Losses relating to Hurricane Irene	1,000
Gain from surrender of Company Owned Life Insurance Policies	(917)
Gain on disposal of owned property and write-down of property, net	(65)	(4,031)
Gain on disposal of discontinued operations		(79)
Gain on sale of pharmacy assets	(4,785)
Gain on sale of assets held for sale	(29,120)	(12,770)
Recognition of deferred real estate income	(2,599)	(3,434)
C&S contract effect	9,930
Benefit from deferred income taxes	(1,719)	(3,058)
Reorganization items, net relating to continuing operations	(84,516)
Reorganization items, net relating to discontinued operations	(34,209)
Financing fees	3,610
Total adjustments to net loss	$ 230,817	$ 318,952

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 03, 2011	Feb. 26, 2011
ASSETS
Cash and cash equivalents	$ 196,806	$ 352,607
Restricted cash	5,015	1,731
Accounts receivable, net of allowance for doubtful accounts of $6,107 and $5,554 at December 3, 2011 and February 26, 2011, respectively	159,151	209,966
Inventories, net	417,568	452,289
Prepaid expenses and other current assets	45,945	36,329
Total current assets	824,485	1,052,922
Non-current assets:
Property owned, net	939,978	1,163,853
Property under capital leases, net	55,276	63,346
Property, net	995,254	1,227,199
Goodwill	110,412	110,412
Intangible assets, net	116,038	124,288
Other assets	90,948	141,357
Total assets	2,137,137	2,656,178
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current portion of long-term debt	350,000
Current portion of obligations under capital leases	5,379
Current portion of real estate liabilities	447
Accounts payable	143,892	119,245
Book overdrafts	35,399	23,722
Accrued salaries, wages and benefits	90,757	109,428
Accrued taxes	33,129	26,175
Other accruals	63,514	65,048
Total current liabilities	722,517	343,618
Non-current liabilities:
Long-term debt		350,000
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	74,162
Total liabilities not subject to compromise	1,107,124	767,780
Liabilities subject to compromise	2,393,417	2,874,734
Total liabilities	3,500,541	3,642,514
Series A redeemable preferred stock - no par value, $1,000 redemption value; authorized - 700,000 shares; issued - 179,020 shares at December 3, 2011 and February 26, 2011, respectively	148,310	143,299
Commitments and contingencies (Refer to Note 22)
Stockholders' deficit:
Common stock - $1 par value; authorized - 260,000,000 shares; issued and outstanding - 53,852,470 shares at December 3, 2011 and February 26, 2011, respectively	53,852	53,852
Additional paid-in capital	509,041	511,157
Accumulated other comprehensive loss	(75,822)	(75,309)
Accumulated deficit	(1,998,785)	(1,619,335)
Total stockholders' deficit	(1,511,714)	(1,129,635)
Total liabilities and stockholders' deficit	$ 2,137,137	$ 2,656,178