CARY, N.C., Dec. 2, 2009 (GLOBE NEWSWIRE) -- The Pantry, Inc. (Nasdaq:PTRY), the leading independently operated convenience store chain in the southeastern U.S., today announced financial results for its fiscal fourth quarter and year ended September 24, 2009.
Fourth Quarter Highlights:
* Net income was $13.3 million, or $0.60 per share on a diluted basis, compared with $22.9 million, or $1.03 per share in the prior year. * EBITDA was $70.6 million, compared with $87.4 million a year ago. * Retail fuel margin per gallon was 14.0 cents, compared with 19.2 cents a year ago.
Fiscal Year 2009 Highlights:
* Net income was $59.1 million, or $2.65 per share, an 86.0% increase from $31.8 million, or $1.43 per share, in fiscal 2008. * EBITDA was $280.2 million, up 13.3% from $247.2 million in fiscal 2008. * Retail fuel margin per gallon was 15.0 cents, compared with 12.4 cents a year ago. * Net cash provided by operating activities was $169.4 million, up 7.6% from $157.5 million in fiscal 2008.
Executive Vice President and Chief Financial Officer Frank G. Paci said, "Our fourth quarter results were strong but below a year ago, primarily due to an abnormally favorable gasoline market in the fourth quarter of last year. While we faced significant headwinds from a soft economic environment and increased tobacco taxes, an above-average gas margin and continued tight expense controls enabled us to report sharply higher earnings for the year."
Merchandise revenues for the fourth quarter increased 3.8% overall and 1.6% on a comparable store basis from last year's fourth quarter. The merchandise gross margin was 34.0%, compared with 34.7% a year ago, primarily reflecting increased taxes on cigarettes and other tobacco products. Total merchandise gross profit for the quarter was $152.5 million, up 1.9% from the corresponding period a year ago.
For the full year, merchandise revenues totaled approximately $1.66 billion, up 1.4% overall and unchanged on a comparable store basis. The merchandise gross margin for the year was 35.4%, compared with 36.4% in fiscal 2008. Total merchandise gross profit for fiscal 2009 was $587.1 million, down 1.4% from the prior year.
Retail gasoline gallons sold in the fourth quarter were up 4.6% overall and 1.4% on a comparable store basis. Retail gasoline revenues for the fourth quarter were down 33.3%, reflecting a 36.3% drop in the average retail price per gallon, from $3.85 to $2.45. Total gasoline gross profit for the quarter was $78.0 million, down 23.8% from a year ago.
For the full year, retail gasoline gallons sold were approximately 2.08 billion, down 1.2% overall and down 3.3% in comparable stores. Gasoline gross profit for fiscal 2009 totaled $313.7 million, up 19.3% from the prior year.
Total store operating and general and administrative (G&A) expenses for the quarter were $160.0 million, down 3.0% from a year ago. For the full year, store operating and G&A expenses totaled $620.9 million, up 1.4% from fiscal 2008.
The Company believes its liquidity position remains excellent, with $169.9 million in cash on hand and approximately $142.0 million in available capacity under its revolving credit facilities as of September 24, 2009.
President and Chief Executive Officer Terrance M. Marks commented, "Reflecting on 2009 performance and looking ahead to 2010, it is clear that economic conditions have created a more value-conscious consumer mindset. Despite the challenging environment we are confident that our convenient locations combined with a more intense and disciplined focus on meeting our customers' needs will enable us to generate profitable growth and superior financial returns over the long term. We are focused on three significant performance improvement opportunities. We will invest in our information systems to build the business intelligence capability required to maximize productivity across the enterprise. Second, we will improve the appeal of our stores by offering a more extensive array of on-the-go meal solutions, and third we will evaluate growth opportunities with a more disciplined focus on shareholder value creation over the longer term."
Fiscal 2010 Outlook
The Company announced the following initial guidance ranges for its expected performance (excluding potential acquisitions) in fiscal 2010, which is a 53-week fiscal year:
Year Ending
Sept. 30, 2010
------------------
Low High
------- -------
Merchandise Sales ($B) $ 1.76 $ 1.82
Retail Fuel Gallons (B) 2.17 2.22
Merchandise Gross Margin 33.0% 34.5%
Retail Fuel Margin per Gallon $ 0.11 $ 0.13
Total OSG&A ($M) $ 645 $ 655
Depreciation & Amortization ($M) $ 108 $ 112
Interest Expense ($M)(1) $ 80 $ 82
(1) excludes non-cash interest expense associated with the change in
accounting on convertible notes of approximately $5 million.
New Accounting Pronouncement
In May 2008, the FASB issued new accounting guidance, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. This accounting standard impacted the Company's senior convertible notes and will require the Company to recognize additional non-cash interest expense based on the market rate for similar debt instruments without the conversion feature. The Company will adopt this accounting standard in the first quarter of 2010, and accordingly, the prior periods' financial statements will be adjusted. The adoption of this standard will increase non-cash interest expense by approximately $5 million in fiscal 2010.
Conference Call
Interested parties are invited to listen to the fourth quarter earnings conference call scheduled for Wednesday, December 2, 2009 at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet and will be accessible 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
EBITDA and Adjusted EBITDA
EBITDA is defined by the Company as net income before interest expense, net, gain/loss on extinguishment of debt, income taxes and depreciation and amortization. Adjusted EBITDA includes the lease payments the Company makes under its lease finance obligations as a reduction to EBITDA. EBITDA and Adjusted EBITDA are not measures of operating performance or liquidity under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as substitutes for net income, cash flows from operating activities or other income or cash flow statement data. The Company has included information concerning EBITDA and 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 EBITDA and 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.
In accordance with GAAP, certain of the Company's leases, including all of its sale-leaseback arrangements, are accounted for as lease finance obligations. As a result, payments made under these lease arrangements are accounted for as interest expense and a reduction of the principal amounts outstanding under the Company's lease finance obligations. By including in Adjusted EBITDA the amounts the Company pays under its lease finance obligations, the Company is able to present such payments as operating costs instead of financing costs. The Company believes that this presentation helps investors better understand its operating performance relative to other companies that do not account for their leases as lease finance obligations.
Any measure that excludes interest expense, gain/loss on extinguishment of debt, depreciation and amortization or income taxes has material limitations because the Company uses debt and lease financing in order to finance its operations and its acquisitions, it uses capital and intangible assets in its business and the payment of income taxes is a necessary element of its operations. Due to these limitations, the Company uses EBITDA and Adjusted EBITDA only 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, EBITDA and Adjusted EBITDA, 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 EBITDA and Adjusted EBITDA 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 December 2, 2009, the Company operated 1,663 stores in eleven states under select banners, including Kangaroo Express(r), its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as gasoline 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 ability of the Company to identify, acquire and integrate acquisitions into its operations; fluctuations in domestic and global petroleum and gasoline markets; realizing expected benefits from the Company's fuel supply agreements; changes in the competitive landscape of the convenience store industry, including gasoline 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 current 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 on customer traffic; financial difficulties of suppliers, including the Company's principal suppliers of gasoline 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 December 2, 2009. 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 Consolidated Statements of Operations
and Selected Financial Data
(In thousands, except per share and
per gallon amounts, margin data and store count)
Quarter Ended Twelve Months Ended
---------------------- ----------------------
Sept 24, Sept 25, Sept 24, Sept 25,
2009 2008 2009 2008
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (52 weeks) (52 weeks)
Revenues:
Merchandise $ 448,269 $ 431,861 $1,658,926 $1,636,711
Gasoline 1,367,684 2,082,242 4,731,205 7,358,915
---------- ---------- ---------- ----------
Total revenues 1,815,953 2,514,103 6,390,131 8,995,626
Costs and operating
expenses:
Merchandise cost
of goods sold 295,740 282,201 1,071,842 1,041,574
Gasoline cost of
goods sold 1,289,654 1,979,896 4,417,547 7,095,951
Store operating 135,272 137,714 517,949 516,782
General and
administrative 24,764 27,268 102,937 95,253
Depreciation and
amortization 29,083 27,647 109,612 108,326
---------- ---------- ---------- ----------
Total costs and
operating
expenses 1,774,513 2,454,726 6,219,887 8,857,886
Income from
operations 41,440 59,377 170,244 137,740
Other income
(expense):
Gain on
extinguishment
of debt -- -- 7,163 --
Interest expense,
net (20,925) (22,338) (84,229) (87,593)
Miscellaneous 37 414 301 1,164
---------- ---------- ---------- ----------
Total other
expense (20,888) (21,924) (76,765) (86,429)
Income before
income taxes 20,552 37,453 93,479 51,311
Income tax expense (7,260) (14,508) (34,368) (19,528)
---------- ---------- ---------- ----------
Net income $ 13,292 $ 22,945 $ 59,111 $ 31,783
---------- ---------- ---------- ----------
Earnings per share:
Net income per
diluted share $ 0.60 $ 1.03 $ 2.65 $ 1.43
Diluted shares
outstanding 22,306 22,219 22,346 22,236
Selected financial
data:
EBITDA $ 70,560 $ 87,438 $ 280,157 $ 247,230
Adjusted EBITDA $ 58,709 $ 75,522 $ 232,982 $ 201,093
Merchandise gross
profit $ 152,528 $ 149,660 $ 587,084 $ 595,137
Merchandise margin 34.0% 34.7 % 35.4% 36.4%
Retail gasoline data:
Gallons 552,139 527,643 2,078,035 2,103,442
Margin per
gallon(1) $ 0.1404 $ 0.1925 $ 0.1498 $ 0.1238
Retail price per
gallon $ 2.45 $ 3.85 $ 2.24 $ 3.40
Wholesale gasoline
data:
Gallons 5,574 14,664 38,191 67,630
Margin per
gallon(1) $ 0.0938 $ 0.0531 $ 0.0597 $ 0.0371
Total gasoline
gross profit $ 78,030 $ 102,346 $ 313,658 $ 262,964
Comparable store data:
Merchandise sales % 1.6% -2.5% 0.0% -1.7%
Gasoline gallons % 1.4% -6.8% -3.3% -4.4%
Number of stores:
End of period 1,673 1,653 1,673 1,653
Weighted-average
store count 1,678 1,658 1,657 1,651
(1) Gasoline margin per gallon represents gasoline revenue less cost
of product and expenses associated with credit card processing
fees and repairs and maintenance on gasoline equipment. Gasoline
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)
Sept. 24, Sept. 25,
2009 2008
---------- ----------
Assets
Cash and cash equivalents $ 169,880 $ 217,188
Receivables, net 92,494 109,050
Inventories 124,524 132,248
Other current assets 33,101 27,551
---------- ----------
Total current assets 419,999 486,037
---------- ----------
Property and equipment, net 1,028,982 990,916
Goodwill 634,703 627,653
Other noncurrent assets 70,967 64,124
---------- ----------
Total assets $2,154,651 $2,168,730
---------- ----------
Liabilities and
shareholders' equity
Current maturities of
long-term debt $ 4,317 $ 27,385
Current maturities of lease
finance obligations 6,536 5,322
Accounts payable 140,730 171,216
Other accrued liabilities 110,258 121,154
---------- ----------
Total current liabilities 261,841 325,077
---------- ----------
Long-term debt 787,940 819,115
Lease finance obligations 458,509 459,711
Deferred income taxes 102,311 90,708
Deferred vendor rebates 17,392 20,875
Other 70,415 63,385
Total shareholders' equity 456,243 389,859
---------- ----------
Total liabilities and
shareholders' equity $2,154,651 $2,168,730
---------- ----------
The Pantry, Inc.
Reconciliation of Non-GAAP Financial Measures
(In thousands)
Quarter Ended Twelve Months Ended
--------------------- --------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2009 2008 2009 2008
--------- --------- --------- ---------
Adjusted EBITDA $ 58,709 $ 75,522 $ 232,982 $ 201,093
Payments made for
lease finance
obligations 11,851 11,916 47,175 46,137
--------- --------- --------- ---------
EBITDA 70,560 87,438 280,157 247,230
Gain on extinguishment
of debt -- -- 7,163 --
Interest expense, net (20,925) (22,338) (84,229) (87,593)
Depreciation and
amortization (29,083) (27,647) (109,612) (108,326)
Income tax expense (7,260) (14,508) (34,368) (19,528)
--------- --------- --------- ---------
Net income $ 13,292 $ 22,945 $ 59,111 $ 31,783
Adjusted EBITDA $ 58,709 $ 75,522 $ 232,982 $ 201,093
Payments made for
lease finance
obligations 11,851 11,916 47,175 46,137
--------- --------- --------- ---------
EBITDA 70,560 87,438 280,157 247,230
Gain on extinguishment
of debt -- -- 7,163 --
Interest expense, net (20,925) (22,338) (84,229) (87,593)
Income tax expense (7,260) (14,508) (34,368) (19,528)
Stock-based
compensation expense 990 776 6,368 3,321
Changes in operating
assets and
liabilities (28,826) 3,179 (18,050) (6,410)
Other 7,011 11,718 12,395 20,484
--------- --------- --------- ---------
Net cash provided by
operating activities $ 21,550 $ 66,265 $ 169,436 $ 157,504
Net cash used in
investing activities $ (64,523) $ (13,044) $(166,012) $(115,513)
Net cash (used in)
provided by
financing activities $ (2,554) $ 2,102 $ (50,732) $ 103,694