USA: Penn Traffic posts 35% increase in adjusted earnings/diluted share in Q4
US retailers The Penn Traffic Company has announced that adjusted net income was US$7.1m, US$0.35/diluted share, in the Q4 of fiscal 2002 (the 13-week period ended 2 February 2002) compared to US$5.3m, US$0.26/share in the prior year.
The company explained that net income was adjusted to exclude amortisation of excess reorganisation value in the Q4 of both years; and an unusual item, startup costs and operating losses associated with the commencement of operation of the its New England stores and the estimated effect of the additional week in the Q4 of Fiscal 2001 (the 14-week period ended 3 February 2001).
In accordance with the implementation of a new accounting standard, Penn Traffic does not expect to record amortisation of excess reorganisation value, a noncash charge, after fiscal 2002. Excluding the adjustments described above, the company reported a net loss of US$20.2m, US$1/share, compared to a net loss of US$21.3m, US$1.06/share, in the prior year.
Total revenues for the Q4 were US$615m, a 0.3% increase from the prior year. The prior year revenues have been adjusted to exclude the effect of the additional week. Same store sales for the Q4 increased 0.9% from the comparable prior year period.
EBITDA for the Q4 was US$30.6m, up 3.9% on the prior year's adjusted US$29.5m level. EBITDA in the prior year's Q4 has been adjusted to exclude New England store startup costs and operating losses and the effect of the additional week. Excluding these adjustments, EBITDA for the 14-week Q4 of the prior year was US$32.1m.
"The continued implementation of our long-term business strategies drove our improved financial performance in both the fourth quarter and the fiscal year," said Joseph V. Fisher, Penn Traffic's president and CEO.
"A softening economy and a greater than normal amount of promotional activity made the Q4 a challenging one for us," said Fisher. "We were able to achieve solid results, however, primarily because of improvements in the planning and execution of holiday merchandising programmes, an increase in private label sales and the benefits of our cost reduction programmes."
Fisher cited the company-wide rollout of Penn Traffic's Wild Card loyalty card programme as another factor in the company's improved fourth quarter performance. "Our loyalty card has enabled us to implement more effective and efficient promotions for our customers," said Fisher. "We have more than two million customers carrying the Wild Card, accounting for more than 70% of all retail sales." The Q4 was the first full quarter in which the Wild Card was available in all Penn Traffic supermarkets.
In the Q4, Penn Traffic continued the strong capital investment programme it began in 1999 by completing the remodels of three stores in Columbus, Ohio, and two each in Syracuse and Jamestown, New York. The company recently completed another major remodel of a supermarket in a suburb of Buffalo, New York.
"During the past two and a half years, Penn Traffic has invested about US$135m to improve our infrastructure and enhance our store base," said Martin A. Fox, executive VP and CFO. "As part of this programme, we have remodeled, enlarged or replaced 80 supermarkets representing 43% of our square footage." Fox reported that total capital investment in Fiscal 2002 was about US$48m.
Adjusted EBITDA for Fiscal 2002 was US$106m, up 10.8% on the US$95.7m reported in the prior year. EBITDA has been adjusted to exclude loyalty card startup costs in both years; and New England lease income, New England store startup costs and operating losses and the effect of the additional week in fiscal 2001 (the 53-week period ended 3 February 2001). Excluding these adjustments, EBITDA in Fiscal 2002 was US$103.6m compared to US$101.9m in the prior 53-week year.
Adjusted net income for fiscal 2002 was US$15m, US$0.74/diluted share, compared to US$7.2m, US$0.36/diluted share in the prior year. Excluding adjustments, the company reported a net loss of US$95.7m, US$4.77/share, compared to a net loss of US$99.9m, US$4.97/share, in the prior year.
Revenues for fiscal 2002 were US$2.404bn, a 1.8% increase over the prior year, when adjusted to exclude the effect of the additional week in the prior year. Same store sales for fiscal 2002 increased 0.8% over the prior year.
"Our associates and management team deserve the credit for the significant progress we made during the year," said Fisher. "Their tireless efforts to implement our business plan are making Penn Traffic a much stronger supermarket operator, dedicated to satisfying the shopping needs of our diverse customer base."
Fisher said that Penn Traffic would continue to implement the four major components of its long-term business plan:
*Pursue a strong capital investment programme
*Improve store operations
*Reduce and contain costs
"We believe the current fiscal year will test our company again," said Fisher. "We expect to continue to face a challenging competitive environment this year. In addition, like the entire industry, we anticipate that employee benefit costs, in particular health care and pension costs, will increase in Fiscal 2003 more than they have in many years."
"We approach these challenges with many strengths, including a modern store base, a strong position in virtually all our markets and a dedicated team of management and associates," said Fisher. "We believe that by relentlessly pursuing our business plan we will continue to achieve positive same store sales and income growth in this fiscal year."
Some of the major initiatives Penn Traffic will implement in fiscal 2003 include:
*Expanded use of the loyalty card in merchandising
*Cost reduction programs
*New point-of-sale (POS) system
*Strong capital programme
"As a result of the significant investment we have made over the past two and a half years, we can now shift the focus of our capital investment away from upgrading existing facilities and toward growing our business through the construction of new and replacement stores," said Fox. "We plan to complete 20 major store projects in Fiscal 2003, including the construction of six new stores (two incremental and four replacements), expanding an existing store and remodeling 13 stores."
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