UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 25, 2004
Commission File Number 33-72574
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 56-1574463 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
1801 Douglas Drive
Sanford, North Carolina
27330-1410
(Address of principal executive offices)
Registrant’s telephone number, including area code: (919) 774-6700
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| COMMON STOCK, $0.01 PAR VALUE | 19,964,048 SHARES | |
| (Class) | (Outstanding at May 3, 2004) |
FORM 10-Q
MARCH 25, 2004
TABLE OF CONTENTS
| Page | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
42 | |
| 43 | ||
| 44 | ||
2
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
| March 25, 2004 |
September 25, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents. |
$ | 50,991 | $ | 72,901 | ||||
| Receivables, net (Note 2). |
35,828 | 30,423 | ||||||
| Inventories (Note 2) |
94,321 | 84,156 | ||||||
| Prepaid expenses (Note 2) |
8,015 | 6,326 | ||||||
| Property held for sale (Note 2) |
6,864 | 2,013 | ||||||
| Deferred income taxes |
4,334 | 4,334 | ||||||
| Total current assets |
200,353 | 200,153 | ||||||
| Property and equipment, net (Note 2) |
412,458 | 400,609 | ||||||
| Other assets: |
||||||||
| Goodwill (Note 2) |
337,998 | 278,629 | ||||||
| Deferred financing costs, net (Note 4) |
7,736 | 10,757 | ||||||
| Environmental receivables (Note 3) |
15,784 | 15,109 | ||||||
| Other (Note 2) |
12,671 | 8,908 | ||||||
| Total other assets |
374,189 | 313,403 | ||||||
| Total assets |
$ | 987,000 | $ | 914,165 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current maturities of long-term debt (Note 4) |
$ | 12,039 | $ | 27,558 | ||||
| Current maturities of capital lease obligations |
1,375 | 1,375 | ||||||
| Accounts payable (Note 2) |
91,194 | 78,885 | ||||||
| Accrued interest (Note 4) |
3,118 | 11,924 | ||||||
| Accrued compensation and related taxes |
12,520 | 12,840 | ||||||
| Other accrued taxes |
11,386 | 16,510 | ||||||
| Accrued insurance |
14,367 | 12,293 | ||||||
| Other accrued liabilities (Note 2) |
11,905 | 21,314 | ||||||
| Total current liabilities |
157,904 | 182,699 | ||||||
| Long-term debt (Note 4) |
583,025 | 470,011 | ||||||
| Other liabilities: |
||||||||
| Environmental reserves (Note 3) |
14,226 | 13,823 | ||||||
| Deferred income taxes |
44,291 | 50,015 | ||||||
| Deferred revenue |
33,486 | 37,251 | ||||||
| Capital lease obligations |
15,106 | 15,779 | ||||||
| Other noncurrent liabilities |
19,820 | 15,922 | ||||||
| Total other liabilities |
126,929 | 132,790 | ||||||
| Commitments and contingencies (Notes 3 and 4) |
||||||||
| Shareholders’ equity (Notes 6 and 9): |
||||||||
| Common stock, $.01 par value, 50,000,000 shares authorized; 19,824,215 and 18,107,597 issued and outstanding at March 25, 2004 and September 25, 2003, respectively |
200 | 182 | ||||||
| Additional paid-in capital |
128,740 | 128,002 | ||||||
| Shareholder loans |
(64 | ) | (173 | ) | ||||
| Accumulated other comprehensive deficit, net |
(1,934 | ) | (690 | ) | ||||
| Accumulated earnings (deficit) |
(7,800 | ) | 1,344 | |||||
| Total shareholders’ equity |
119,142 | 128,665 | ||||||
| Total liabilities and shareholders’ equity |
$ | 987,000 | $ | 914,165 | ||||
See Notes to Consolidated Financial Statements
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| March 25, 2004 |
March 27, 2003 |
March 25, 2004 |
March 27, 2003 |
|||||||||||||
| (13 weeks) | (13 weeks) | (26 weeks) | (26 weeks) | |||||||||||||
| Revenues: |
||||||||||||||||
| Merchandise sales |
$ | 269,795 | $ | 234,900 | $ | 539,820 | $ | 477,240 | ||||||||
| Gasoline sales |
516,280 | 431,719 | 990,571 | 833,652 | ||||||||||||
| Commissions |
8,312 | 6,825 | 15,331 | 13,529 | ||||||||||||
| Total revenues |
794,387 | 673,444 | 1,545,722 | 1,324,421 | ||||||||||||
| Cost of sales: |
||||||||||||||||
| Merchandise |
178,621 | 157,405 | 356,491 | 319,972 | ||||||||||||
| Gasoline |
482,539 | 402,910 | 915,894 | 765,329 | ||||||||||||
| Total cost of sales |
661,160 | 560,315 | 1,272,385 | 1,085,301 | ||||||||||||
| Gross profit |
133,227 | 113,129 | 273,337 | 239,120 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Operating, general and administrative expenses |
105,443 | 92,323 | 210,570 | 185,464 | ||||||||||||
| Depreciation and amortization |
13,533 | 13,098 | 27,608 | 25,605 | ||||||||||||
| Total operating expenses |
118,976 | 105,421 | 238,178 | 211,069 | ||||||||||||
| Income from operations |
14,251 | 7,708 | 35,159 | 28,051 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Loss on extinguishment of debt (Notes 4 and 8) |
(23,087 | ) | — | (23,087 | ) | — | ||||||||||
| Interest expense (Note 8) |
(14,166 | ) | (12,042 | ) | (27,307 | ) | (24,815 | ) | ||||||||
| Miscellaneous |
105 | 507 | 367 | 941 | ||||||||||||
| Total other expense |
(37,148 | ) | (11,535 | ) | (50,027 | ) | (23,874 | ) | ||||||||
| Income (loss) before income taxes |
(22,897 | ) | (3,827 | ) | (14,868 | ) | 4,177 | |||||||||
| Income tax benefit (expense) |
8,815 | 1,474 | 5,724 | (1,610 | ) | |||||||||||
| Net income (loss) before cumulative effect adjustment |
(14,082 | ) | (2,353 | ) | (9,144 | ) | 2,567 | |||||||||
| Cumulative effect adjustment, net of tax (Note 7) |
— | — | — | (3,482 | ) | |||||||||||
| Net loss |
$ | (14,082 | ) | $ | (2,353 | ) | $ | (9,144 | ) | $ | (915 | ) | ||||
| Net income (loss) per share (Note 10): |
||||||||||||||||
| Basic and diluted: |
||||||||||||||||
| Net income (loss) before cumulative effect adjustment |
$ | (0.71 | ) | $ | (0.13 | ) | $ | (0.48 | ) | $ | 0.14 | |||||
| Cumulative effect adjustment |
— | — | — | (0.19 | ) | |||||||||||
| Net loss |
$ | (0.71 | ) | $ | (0.13 | ) | $ | (0.48 | ) | $ | (0.05 | ) | ||||
See Notes to Consolidated Financial Statements
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| Six Months Ended |
||||||||
| March 25, 2004 |
March 27, 2003 |
|||||||
| (26 weeks) | (26 weeks) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (9,144 | ) | $ | (915 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
27,608 | 25,605 | ||||||
| Provision (benefit) for deferred income taxes |
(5,724 | ) | 1,610 | |||||
| Loss on extinguishment of debt |
23,087 | — | ||||||
| (Gain) loss on sale of property and equipment |
||||||||