Attached files
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| 8-K - THE PANTRY, INC. SECOND QUARTER EARNINGS - PANTRY INC | form8ker.htm |
Exhibit 99.1
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For Immediate Release
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Contact: Mark Bierley
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May 10, 2011
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(919) 774-6700
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THE PANTRY ANNOUNCES SECOND QUARTER FISCAL 2011
FINANCIAL RESULTS
Cary, North Carolina, May 10, 2011 - The Pantry, Inc. (NASDAQ: PTRY), the leading independently-operated convenience store chain in the southeastern U.S., today announced financial results for its fiscal second quarter and six months ended March 31, 2011.
Second Quarter Summary:
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·
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Net loss was $0.3 million or $0.01 per diluted share. This compares to a net loss of $166.1 million or $7.44 per diluted share in last year’s second quarter. Excluding the impact of impairment charges, net income for the second quarter of fiscal 2011 was $0.2 million or $0.01 per share, compared to a net loss of $0.13 per share in the prior year period (see reconciliation below).
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·
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Adjusted EBITDA grew 6% to $50.5 million, compared to $47.5 million a year ago
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·
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Comparable store merchandise revenue increased 2.0%
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·
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Merchandise gross margin improved to 34.3% from 33.8% in last year’s second quarter and from 33.5% in the first quarter of fiscal 2011
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·
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Fuel gross profit was $61.8 million, compared to $65.4 million a year ago
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President and Chief Executive Officer Terrance M. Marks said, “I am pleased that we have now delivered four consecutive quarters of non-cigarette merchandise sales increases. Our improving execution contributed to expanded gross margins, higher productivity, and ultimately Adjusted EBITDA growth, despite persistently rising fuel prices. Of equal importance, we continued to make progress against our core strategic initiatives of foodservice expansion and productivity growth.”
Comparable store merchandise sales in the second quarter increased 2.0% and 1.8% excluding cigarettes. Total merchandise gross profit for the quarter was $145.0 million, an increase of 5% from the second quarter a year ago.
Retail fuel gallons declined 4% overall in the second quarter and 6.9% on a comparable store basis. Fuel revenues in the second quarter increased 16.2% to $1.5 billion primarily as a result of the 21% increase in the average retail price per gallon to $3.24 from $2.69 in the second quarter of the prior year. Fuel gross profit for the second quarter increased 22% from the first quarter of fiscal 2011 and decreased 5.4% compared to the same period a year ago.
Total store operating and general and administrative expenses in the second quarter were $156.2 million, which was $0.2 million higher than the same period a year ago. This increase is the result of investments in category management, infrastructure, and advertising to support our strategic initiatives, partially offset by expense efficiencies at the store level.
The Company believes its liquidity position is sufficient to continue to execute its core strategic initiatives given the $107 million in cash on hand and approximately $116 million in available capacity under its revolving credit facilities as of March 31, 2011.
Fiscal 2011 Outlook
The Company updated the following guidance ranges for its expected performance (excluding potential acquisitions) in fiscal 2011, which is a 52-week fiscal year:
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Year Ending September 29, 2011
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Low
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High
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Merchandise sales (billions)
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$1.79
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$1.82
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Merchandise gross margin
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34.0%
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34.5%
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Retail fuel gross profit (millions)
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$240
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$260
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Retail fuel gallons (billions)
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1.90
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1.97
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Retail fuel margin per gallon
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$0.122
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$0.137
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Total OSG&A (millions)
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$633
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$640
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Depreciation & amortization (millions)
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$117
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$122
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Interest expense (millions)
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$85
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$88
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Capital expenditures, net (millions)
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$95
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$105
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Conference Call
Interested parties are invited to listen to the second quarter earnings conference call scheduled for Tuesday, May 10, 2011 at 8:30 a.m. Eastern Time. The call will be broadcast live over the Internet and will be accessible through either the Investors section of the Company's website at www.thepantry.com or www.companyboardroom.com. An online archive will be available immediately following the call and will be accessible for 30 days.
Use of Non-GAAP Measures
Adjusted EBITDA
Adjusted EBITDA is defined by the Company as net income (loss) before interest expense, net, gain/loss on extinguishment of debt, income taxes, impairment charges and depreciation and amortization. Adjusted EBITDA is not a measure of operating performance or liquidity under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. The Company is no longer adjusting EBITDA for payments made for lease finance obligations in order to provide a measure that management believes is more comparable to similarly titled measures used by other companies. The Company has included information concerning Adjusted EBITDA because it believes investors find this information useful as a reflection of the resources available for strategic opportunities including, among others, to invest in the Company’s business, make strategic acquisitions and to service debt. Management also uses Adjusted EBITDA to review the performance of the Company's business directly resulting from its retail operations and for budgeting and field operations compensation targets. Adjusted EBITDA does not include impairment of long-lived assets and other charges. The Company excluded the effect of impairment losses because it believes that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.
Net Income/(Loss) and Net Income/(Loss) Per Share Excluding Certain Items
In addition to net income/(loss) and net income/(loss) per share presented in accordance with GAAP, the Company has also presented net income/(loss) and net income/(loss) per share for the three and six months ended March 31, 2011 and March 25, 2010 excluding the after-tax impact of non-cash charges related to impairment. Management believes that investors find this information useful as a reflection of the Company’s underlying operating performance and that this information facilitates comparisons between the Company and other companies in its industry. Management uses these measures as part of its preparation of operating plans, budgets and forecasts and in its assessment of the Company’s historical performance.
Additional Information Regarding Non-GAAP Measures
Any measure that excludes interest expense, gain/loss on extinguishment of debt, depreciation and amortization, or impairment charges has material limitations because the Company uses debt and lease financing in order to finance its operations and acquisitions, uses capital and intangible assets in its business and must pay income taxes as a necessary element of its operations. Due to these limitations, the Company uses non-GAAP measures in addition to and in conjunction with results and cash flows presented in accordance with GAAP. The Company strongly encourages investors to review its consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Because non-GAAP financial measures are not standardized, the measures referenced above, each as defined by the Company, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare the Company's use of these measures with non-GAAP financial measures having the same or similar names used by other companies.
About The Pantry
Headquartered in Cary, North Carolina, The Pantry, Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country. As of May 9, 2011, the Company operated 1,659 stores in thirteen states under select banners, including Kangaroo Express®, its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services designed to appeal to the convenience needs of its customers.
Safe Harbor Statement
Statements made by the Company in this press release relating to future plans, events, or financial performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company's current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements. Any number of factors could affect actual results and events, including, without limitation: the ability of the Company to take advantage of expected synergies in connection with acquisitions; the actual operating results of stores acquired; the Company's ability to enhance its operating performance through its in-store initiatives; the ability of the Company to identify, acquire and integrate acquisitions into its operations; fluctuations in domestic and global petroleum and fuel markets; realizing expected benefits from the Company's fuel supply agreements; changes in the competitive landscape of the convenience store industry, including fuel stations and other non-traditional retailers located in the Company's markets; the effect of national and regional economic conditions on the convenience store industry and the Company's markets; the global financial crisis and uncertainty in global economic conditions; wholesale cost increases of, and tax increases on, tobacco products; the effect of regional weather conditions and climate change on customer traffic and spending; legal, technological, political and scientific developments regarding climate change; financial difficulties of suppliers, including the Company's principal suppliers of fuel and merchandise, and their ability to continue to supply its stores; the Company's financial leverage and debt covenants; environmental risks associated with selling petroleum products; and governmental laws and regulations, including those relating to the environment. These and other risk factors are discussed in the Company's Annual Report on Form 10-K and in its other filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release are based on the Company's estimates and plans as of May 10, 2011. While the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.
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The Pantry, Inc.
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Unaudited Condensed Consolidated Statements of Operations and Selected Financial Data
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(In thousands, except per share and per gallon amounts, margin data and store count)
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Quarter Ended
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Six Months Ended
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March 31, 2011
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March 25, 2010
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March 31, 2011
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March 25, 2010
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(13 weeks)
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(13 weeks)
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(26 weeks)
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(26 weeks)
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Revenues:
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Merchandise
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$422,494
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$409,267
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$842,359
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$826,839
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Fuel
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1,473,216
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1,268,175
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2,857,157
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2,587,001
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Total revenues
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1,895,710
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1,677,442
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3,699,516
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3,413,840
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Costs and operating expenses:
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Merchandise cost of goods sold
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277,531
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271,044
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556,847
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552,328
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Gasoline cost of goods sold
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1,411,385
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1,202,790
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2,744,577
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2,464,628
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Store operating
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127,200
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129,774
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259,084
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260,623
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General and administrative (1)
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29,047
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26,306
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56,397
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47,902
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Goodwill impairment
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---
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227,414
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---
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227,414
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Other impairment charges
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797
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1,681
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797
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34,318
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Depreciation and amortization
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29,356
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30,614
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58,187
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59,583
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Total costs and operating expenses
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1,875,316
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1,889,623
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3,675,889
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3,646,796
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Income (loss) from operations
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20,394
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(212,181)
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23,627
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(232,956)
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Interest expense, net
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Interest on lease finance obligations
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10,740
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10,714
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21,217
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21,311
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Interest expense – all other, net (1)
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11,061
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11,609
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22,321
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23,275
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Total interest expense, net
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21,801
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22,323
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43,538
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44,586
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Loss before income taxes
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(1,407)
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(234,504)
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(19,911)
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(277,542)
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Income tax benefit
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1,138
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68,422
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7,445
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85,391
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Net loss
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$(269)
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$(166,082)
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$(12,466)
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$(192,151)
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Loss per share:
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Net loss per diluted shares
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$(0.01)
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$(7.44)
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$(0.56)
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$(8.62)
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Shares outstanding
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22,455
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22,324
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22,429
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22,301
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Selected financial data:
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Adjusted EBITDA
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$50,547
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$47,528
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$82,611
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$88,359
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Payments made for lease finance obligations
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$12,534
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$12,328
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$24,710
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$24,503
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Merchandise gross profit
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$144,963
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$138,223
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$285,512
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$274,511
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Merchandise margin
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34.3%
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33.8%
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33.9%
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33.2%
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Retail fuel data:
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Gallons
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448,578
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467,442
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935,720
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985,586
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Margin per gallon (2)
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$0.137
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$0.139
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$0.120
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$0.124
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Retail price per gallon
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$3.24
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$2.69
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$3.02
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$2.60
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Total fuel gross profit
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$61,831
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$65,385
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$112,580
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$122,373
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Comparable store data:
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Merchandise sales %
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2.0%
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3.6%
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1.7%
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4.4%
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Fuel gallons %
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-6.9%
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-7.5%
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-6.0%
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-3.3%
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Number of stores:
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End of period
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1,660
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1,649
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1,660
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1,649
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Weighted-average store count
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1,663
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1,655
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1,654
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1,661
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(1)
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Fees associated with our senior credit facility previously included in general and administrative expenses are now included in interest expense, net for all periods presented.
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(2)
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Fuel margin per gallon represents fuel revenue less cost of product and expenses associated with credit card processing
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fees and repairs and maintenance on fuel equipment. Fuel margin per gallon as presented may not be comparable to
similarly titled measures reported by other companies.
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The Pantry, Inc.
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Unaudited Condensed Consolidated Balance Sheets
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(In thousands)
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March 31, 2011
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September 30, 2010
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ASSETS
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Cash and cash equivalents
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$
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106,641
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$
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200,637
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Receivables, net
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113,294
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92,118
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Inventories
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171,871
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130,949
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Other current assets
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36,241
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33,316
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Total current assets
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428,047
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457,020
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Property and equipment, net
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1,013,461
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1,005,152
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Goodwill
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431,763
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403,193
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Other noncurrent assets
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32,785
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31,085
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Total assets
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$
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1,906,056
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$
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1,896,450
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current maturities of long-term debt
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$
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4,281
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$
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6,321
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Current maturities of lease finance obligations
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|
7,338
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7,024
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Accounts payable
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159,172
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144,358
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Other accrued liabilities
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94,278
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114,031
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Total current liabilities
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265,069
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271,734
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Long-term debt
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751,416
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753,020
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Lease finance obligations
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448,702
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450,312
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Deferred income taxes
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62,579
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38,388
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Deferred vendor rebates
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14,742
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10,212
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Other noncurrent liabilities
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64,740
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64,675
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||||
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Total shareholders’ equity
|
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298,808
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308,109
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Total liabilities and shareholders’ equity
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$
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1,906,056
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$
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1,896,450
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The Pantry, Inc.
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Reconciliation of Non-GAAP Financial Measures
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(In thousands)
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|||||||
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Quarter Ended
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Six Months Ended
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March 31, 2011
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March 25, 2010
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March 31, 2011
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March 25, 2010
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Adjusted EBITDA
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$50,547
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$47,528
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$82,611
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$88,359
|
|||
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Impairment charges
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(797)
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(229,095)
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(797)
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(261,732)
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|||
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Interest expense, net
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(21,801)
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(22,323)
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(43,538)
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(44,586)
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|||
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Depreciation and amortization
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(29,356)
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(30,614)
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(58,187)
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(59,583)
|
|||
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Income tax benefit
|
1,138
|
68,422
|
7,445
|
85,391
|
|||
|
Net loss
|
$(269)
|
$(166,082)
|
$(12,466)
|
$(192,151)
|
|||
|
Adjusted EBITDA
|
$50,547
|
$47,528
|
$82,611
|
$88,359
|
|||
|
Interest expense, net
|
(21,801)
|
(22,323)
|
|
(43,538)
|
(44,586)
|
||
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Income tax benefit
|
1,138
|
68,422
|
|
7,445
|
85,391
|
||
|
Stock-based compensation expense
|
979
|
864
|
|
1,686
|
1,737
|
||
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Changes in operating assets and liabilities
|
(23,636)
|
(13,118)
|
|
(54,094)
|
(24,038)
|
||
|
Provision (benefit) for deferred income taxes
|
(668)
|
(62,553)
|
12,214
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(69,186)
|
|||
|
Other
|
2,142
|
2,741
|
|
4,176
|
5,414
|
||
|
Net cash provided by operating activities
|
$8,701
|
$21,561
|
|
$10,500
|
$43,091
|
||
|
Additions to property and equipment, net
|
$(26,080)
|
$(20,016)
|
$(47,332)
|
$(29,096)
|
|||
|
Acquisitions of businesses, net
|
--
|
(20)
|
(47,564)
|
(10)
|
|||
|
Net cash used in investing activities
|
$(26,080)
|
$(20,036)
|
|
$(94,896)
|
$(29,106)
|
||
|
Net cash used in financing activities
|
$(8,233)
|
$(2,538)
|
|
$(9,600)
|
$(5,361)
|
||
|
Net increase (decrease) in cash
|
$(25,612)($(
|
$(1,013)
|
$(93,996)$
|
$8,624
|
|||
|
|
|||||||
|
Quarter Ended
|
Quarter Ended
|
|||||||||||
|
March 31, 2011
|
March 25, 2010
|
|||||||||||
|
Pre Tax
|
After Tax
|
EPS
|
Pre Tax
|
After Tax
|
EPS
|
|||||||
|
Loss, as reported
|
$(1,407)
|
$(269)
|
$(0.01)
|
$(234,504)
|
$(166,082)
|
$(7.44)
|
||||||
|
Impairment charges
|
797
|
487
|
0.02
|
229,095
|
163,166
|
7.31
|
||||||
|
Income/(loss), as adjusted
|
$(610)
|
$218
|
$0.01
|
$(5,409)
|
$(2,916)
|
$(0.13)
|
||||||
|
Six Months Ended
|
Six Months Ended
|
|||||||||||
|
March 31, 2011
|
March 25, 2010
|
|||||||||||
|
Pre Tax
|
After Tax
|
EPS
|
Pre Tax
|
After Tax
|
EPS
|
|||||||
|
Loss, as reported
|
$(19,911)
|
$(12,466)
|
$(0.56)
|
$(277,542)
|
$(192,151)
|
$(8.62)
|
||||||
|
Impairment charges
|
797
|
487
|
0.02
|
261,732
|
183,120
|
8.21
|
||||||
|
Loss, as adjusted
|
$(19,114)
|
$(11,979)
|
$(0.53)
|
$(15,810)
|
$(9,031)
|
$(0.40)
|
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