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8-K - 8-K - PANTRY INCptry-20130205x8k.htm

 

 

 

 

 

 

 

 

 

Contact: Berry Epley

February 5, 2013

(919) 774-6700

 

THE PANTRY ANNOUNCES FIRST QUARTER FISCAL 2013 RESULTS

 

Cary, North Carolina, February 5, 2013 - The Pantry, Inc. (NASDAQ: PTRY), a leading independently operated convenience store chain in the southeastern U.S., today announced financial results for its fiscal first quarter ended December 27, 2012. 

 

First Quarter Summary:

 

·

Net loss was $3.1 million or $0.14 per share.  This compares to a net loss of $2.9 million or $0.13 per share in last year’s first quarter. Excluding the impact of impairment charges, net loss for the first quarter of fiscal 2013 improved to $1.7 million or $0.08 per share, compared to net loss per share of $0.11 in the prior year (see reconciliation below).

 

·

Adjusted EBITDA increased $5.1 million to $48.9 million, compared to $43.8 million a year ago.    

 

·

Fuel gross profit was $49.2 million, compared to $55.9 million a year ago; retail fuel margin per gallon was $0.114 compared to $0.122 a year ago; comparable store fuel gallons sold decreased 4.8%.

 

·

Comparable store merchandise revenue increased 2.2%; excluding cigarettes, comparable store merchandise revenue increased 4.6%.

 

·

Merchandise gross margin was 34.3%, compared to 33.2% a year ago.

 

·

Store operating and general and administrative expenses were $147.2 million, compared to $154.4 million a year ago.

 

·

Net cash provided by operating activities was $17.0 million, an increase of $10.3 million over the prior year quarter.

 

·

Long-term debt was reduced by $60.8 million in the first quarter of Fiscal 2013 and has now been reduced by $200.4 million since December 2011.  The Company believes its liquidity position will allow it to continue to execute its core strategic initiatives given the $24.4 million in cash on hand and $129.9 million in available capacity under its revolving credit facilities as of December 27, 2012.

 

President and Chief Executive Officer Dennis G. Hatchell said, “We improved adjusted EBITDA to $49 million in the first fiscal quarter of 2013, which is an increase of 12% from the same quarter a year ago.  This improvement over the prior year quarter is a reflection of our teams continued focus on improving merchandise sales and margins and controlling expenses.  This was achieved despite lower fuel volume and margins compared to the same period a year ago.” 

 


 

 

 

 

 

 

Mr. Hatchell continued by saying, “We are also excited to have Clyde Preslar joining our team as Senior Vice President and Chief Financial Officer.  Clyde’s fifteen years of experience as a public company CFO and his work in the consumer goods space make him a great fit for the Pantry and we are convinced that he will make significant contributions to the Pantry realizing its strategic initiatives.”

 

Fiscal 2013 Outlook

 

The Company announced the following guidance ranges for its expected performance in fiscal 2013, which is a 52-week fiscal year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 FY12

 

 

Q2 FY13 Guidance

 

 

FY12

 

 

FY13 Guidance

 

Actual

 

 

Low

 

High

 

 

Actual

 

 

Low

 

High

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise sales ($B)(1)

$0.435

 

 

$0.426

 

$0.436

 

 

$1.81

 

 

$1.83

 

$1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise gross margin

33.4%

 

 

34.0%

 

34.5%

 

 

33.7%

 

 

33.8%

 

34.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail fuel gallons (B)(1)

0.448

 

 

0.415

 

0.425

 

 

1.81

 

 

1.68

 

1.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail fuel margin per gallon

$0.096

 

 

$0.080

 

$0.100

 

 

$0.115

 

 

$0.105

 

$0.125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Store operating and general and administrative
   expenses ($M)

$150

 

 

$148

 

$152

 

 

$610

 

 

$607

 

$619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation & amortization ($M)

$29

 

 

$29

 

$30

 

 

$120

 

 

$115

 

$120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense ($M) (2)

$20

 

 

$22

 

$23

 

 

$84

 

 

$89

 

$92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures, net ($M)

$14

 

 

$17

 

$20

 

 

$55

 

 

$80

 

$95

 

(1)

Fiscal 2013 guidance assumes closure of 35-40 stores

(2)

Excludes loss on extinguishment of debt

 

Conference Call

 

Interested parties are invited to listen to the first quarter earnings conference call scheduled for Tuesday, February 5, 2013 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 generally accepted accounting principles 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 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 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 its remaining assets. Adjusted EBITDA does not include gain/loss on extinguishment of debt because it represents financing activities and is not indicative of the ongoing performance of the Company’s remaining stores.

 

Net Income and Net Income Per Share Excluding Certain Items

 

In addition to net income and net income per share presented in accordance with GAAP, the Company has also presented net income and net income per share for the three months ended December 27, 2012 excluding the after-tax impact of non-cash charges related to impairment and loss on extinguishment of debt. 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, impairment charges, or income taxes 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 a 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 February 5, 2013, the Company operated 1,572 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 condition or performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified by the use of words such as “expect,” “plan,” “anticipate,” “intend,” “outlook,” “guidance,” “believes,” “should,” “target,” “goal,” “forecast,” “will,” “may” or words of similar meaning. Forward-looking statements are likely to address matters such as the Company’s anticipated sales, expenses, margins, tax rates, capital expenditures, profits, cash flows, liquidity and debt levels, as well as our pricing strategies and their anticipated impact and our expectations relating to the costs and benefits of our merchandising and store remodel initiatives. 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 Company's ability to enhance its operating performance through its in-store initiatives and its store remodel program; 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; a disruption of our IT systems or a failure to protect sensitive customer, employee or vendor data; the ability of the Company to take advantage of expected synergies in connection with acquisitions; the actual operating results of new or acquired stores; the ability of the Company to divest non-core assets; environmental risks associated with selling petroleum products; and governmental laws and regulations, including those relating to the environment and the impact of mandated health care laws. 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 February 5, 2013. 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.

 


 

 

 

 

 

 

 

 

 

 

 

 

The Pantry, Inc.

Unaudited Condensed Consolidated Statements of Operations and Selected Financial Data

(In thousands, except per share and per gallon amounts, margin data and store count)

 

 

 

 

 

 

 

Three Months Ended

 

December 27, 2012

 

December 29, 2011

 

 

(13 weeks)

 

 

(13 weeks)

Revenues:

 

 

 

 

 

  Merchandise

$

428,848 

 

$

428,356 

  Fuel

 

1,486,359 

 

 

1,534,620 

     Total revenues

 

1,915,207 

 

 

1,962,976 

Costs and operating expenses:

 

 

 

 

 

  Merchandise cost of goods sold

 

281,955 

 

 

286,147 

  Fuel cost of goods sold

 

1,437,191 

 

 

1,478,710 

  Store operating

 

123,276 

 

 

128,869 

  General and administrative

 

23,886 

 

 

25,494 

  Impairment charges

 

2,299 

 

 

522 

  Depreciation and amortization

 

28,586 

 

 

27,366 

     Total costs and operating expenses

 

1,897,193 

 

 

1,947,108 

Income from operations

 

18,014 

 

 

15,868 

Other expenses:

 

 

 

 

 

  Loss on extinguishment of debt

 

 -

 

 

82 

  Interest expense, net

 

23,101 

 

 

21,348 

     Total other expenses

 

23,101 

 

 

21,430 

Loss before income taxes

 

(5,087)

 

 

(5,562)

  Income tax benefit

 

2,030 

 

 

2,633 

     Net loss

$

(3,057)

 

$

(2,929)

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

  Loss per share

$

(0.14)

 

$

(0.13)

  Shares outstanding

 

22,615 

 

 

22,516 

 

 

 

 

 

 

Selected financial data:

 

 

 

 

 

  Adjusted EBITDA

$

48,899 

 

$

43,756 

  Payments made for lease finance obligations

$

12,887 

 

$

12,699 

  Merchandise gross profit

$

146,893 

 

$

142,209 

  Merchandise margin

 

34.3% 

 

 

33.2% 

  Retail fuel data:

 

 

 

 

 

       Gallons

 

427,024 

 

 

455,241 

       Margin per gallon (1)

$

0.114 

 

$

0.122 

       Retail price per gallon

$

3.42 

 

$

3.32 

Total fuel gross profit

$

49,168 

 

$

55,910 

 

 

 

 

 

 

Comparable store data:

 

 

 

 

 

  Merchandise sales %

 

2.2% 

 

 

2.0% 

  Fuel gallons %

 

-4.8%

 

 

-7.4%

 

 

 

 

 

 

Number of stores:

 

 

 

 

 

  End of period

 

1,572 

 

 

1,624 

  Weighted-average store count

 

1,574 

 

 

1,635 

 

(1)

Fuel margin per gallon represents fuel revenue less cost of product and expenses associated with credit card processing 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.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

The Pantry, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

December 27, 2012

 

September 27, 2012

ASSETS

 

 

  

 

 

Cash and cash equivalents

$

24,365 

  

$

89,175 

Receivables, net

 

66,248 

  

 

80,014 

Inventories

 

131,548 

  

 

137,376 

Prepaid expenses and other current assets

 

22,684 

  

 

21,734 

Deferred income taxes

 

18,166 

  

 

17,376 

Total current assets

 

263,011 

  

 

345,675 

 

 

 

 

 

 

Property and equipment, net

 

921,296 

  

 

935,841 

Goodwill and other intangible assets

 

440,918 

  

 

441,070 

Other noncurrent assets

 

77,559 

  

 

76,954 

Total assets

$

1,702,784 

  

$

1,799,540 

 

 

 

  

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

  

 

 

Current maturities of long-term debt

$

2,585 

  

$

62,840 

Current maturities of lease finance obligations

 

10,972 

  

 

10,947 

Accounts payable

 

137,828 

  

 

155,008 

Other accrued liabilities

 

109,443 

  

 

121,760 

Total current liabilities

 

260,828 

  

 

350,555 

 

 

 

  

 

 

Long-term debt

 

500,054 

  

 

500,600 

Lease finance obligations

 

440,180 

  

 

443,020 

Deferred income taxes

 

61,615 

  

 

62,766 

Deferred vendor rebates

 

11,125 

  

 

11,886 

Other noncurrent liabilities

 

106,835 

  

 

106,162 

Total shareholders' equity

 

322,147 

  

 

324,551 

Total liabilities and shareholders' equity

$

1,702,784 

  

$

1,799,540 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

The Pantry, Inc.

Reconciliation of Non-GAAP Financial Measures

(In thousands)

 

 

 

 

 

 

 

Three Months Ended

 

December 27, 2012

 

December 29, 2011

 

 

 

 

 

 

Adjusted EBITDA

$

48,899 

 

$

43,756 

Impairment charges

 

(2,299)

 

 

(522)

Loss on debt extinguishment

 

 -

 

 

(82)

Interest expense, net

 

(23,101)

 

 

(21,348)

Depreciation and amortization

 

(28,586)

 

 

(27,366)

Income tax benefit

 

2,030 

 

 

2,633 

Net loss

$

(3,057)

 

$

(2,929)

 

 

 

 

 

 

Adjusted EBITDA

$

48,899 

 

$

43,756 

Loss on debt extinguishment

 

 -

 

 

(82)

Interest expense, net

 

(23,101)

 

 

(21,348)

Income tax benefit

 

2,030 

 

 

2,633 

Stock-based compensation expense

 

852 

 

 

918 

Changes in operating assets and liabilities

 

(11,008)

 

 

(18,767)

Benefit for deferred income taxes

 

(2,002)

 

 

(3,127)

Other

 

1,349 

 

 

2,708 

Net cash provided by operating activities

$

17,019 

 

$

6,691 

 

 

 

 

 

 

Additions to property and equipment, net

 

(18,370)

 

 

(22,355)

Net cash used in investing activities

$

(18,370)

 

$

(22,355)

 

 

 

 

 

 

Net cash used in financing activities

$

(63,459)

 

$

(47,439)

 

 

 

 

 

 

Net decrease in cash

$

(64,810)

 

$

(63,103)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

December 27, 2012

 

December 29, 2011

 

Pre Tax

 

After Tax

 

EPS

 

Pre Tax

 

After Tax

 

EPS

Loss, as reported

$

(5,087)

 

$

(3,057)

 

$

(0.14)

 

$

(5,562)

 

$

(2,929)

 

$

(0.13)

Impairment charges

 

2,299 

 

 

1,406 

 

 

0.06 

 

 

522 

 

 

319 

 

 

0.01 

Loss on extinguishment of debt

 

 -

 

 

 -

 

 

 -

 

 

82 

 

 

50 

 

 

 -

Loss, as adjusted

$

(2,788)

 

$

(1,651)

 

$

(0.08)

 

$

(4,958)

 

$

(2,560)

 

$

(0.11)