The Pantry, Inc. : The Pantry Announces Second Quarter Fiscal 2012 Financial Results
05/08/2012| 07:05am US/Eastern
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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 29, 2012.
Second Quarter Summary:
Net loss was $9.7 million or $0.43 per share.
This compares to a net loss of $0.3 million or $0.01 per share in last
year's second quarter. Excluding the impact of impairment charges and
loss on extinguishment of debt, the net loss for the second quarter of
fiscal 2012 was $6.7 million or $0.30 per share compared to earnings
per share of $0.01 in the prior year (see reconciliation below).
Adjusted EBITDA was $38.9 million, compared to $50.5
million a year ago.
Comparable store merchandise revenue increased 4.8%.
Merchandise gross margin was 33.4%, compared to 34.3% a
year ago.
Fuel gross profit was $43.3 million, compared to $61.8
million a year ago.
Comparable store gallons improved 1.1%.
Retail fuel margin per gallon declined to $0.096 from $0.137 a
year ago.
Long-term debt was reduced by $48.5 million of principal
in the second quarter of fiscal 2012 and $94.0 million of
principal, or down 12% in the first six months of fiscal 2012.
President and Chief Executive Officer Dennis G. Hatchell said, "We were
pleased with our positive comparable store merchandise sales and fuel
gallon trends within the quarter. Fuel gross profit was negatively
impacted by consistently rising wholesale fuel costs, which was
partially offset by our ongoing expense management efforts. In addition,
we continue to reduce our indebtedness and have repaid $94 million of
long term debt this fiscal year."
Comparable store merchandise sales in the second quarter increased 4.8%
in total and 7.9% excluding cigarettes. Total merchandise gross profit
for the quarter was $145.4 million, an increase of $0.4 million from the
second quarter a year ago.
Fuel gross profit decreased 30.0% in the second quarter of fiscal 2012
compared to the same period a year ago due to a reduction in retail fuel
margin per gallon to $0.096 from $0.137 a year ago. From the end of
December 2011 through March 2012, the average retail fuel price per
gallon increased by approximately 20%, rising to $3.82 per gallon as a
result of wholesale cost increases. Retail fuel gallons sold in the
second quarter of fiscal 2012 were flat overall and increased 1.1% on a
comparable store basis as compared to last year's second quarter.
Total store operating and general and administrative expenses for the
second quarter were $149.8 million, a decrease of $6.4 million from the
second quarter last year. This decrease was due to lower general and
administrative expenses primarily as a result of a $2.9 million
reduction in personnel costs and a $3.2 million favorable variance from
various property transactions.
The Company had $113.2 million in cash on hand and $123.6 million in
available capacity under its revolving credit facilities as of March 29,
2012.
Fiscal 2012 Outlook
The Company announced the following updated guidance ranges for its
expected performance (excluding potential acquisitions) in fiscal 2012:
Q3 FY11
Q3 FY12 Guidance
FY11
FY12 Guidance
Actual
Low
High
Actual
Low
High
Merchandise sales ($B)
$0.47
$0.475
$0.485
$1.78
$1.81
$1.83
Merchandise gross margin
34.0%
33.0%
33.8%
33.9%
33.1%
33.6%
Retail fuel gallons (B)
0.48
0.45
0.46
1.89
1.80
1.83
Retail fuel margin per gallon
$0.166
$0.125
$0.145
$0.135
$0.115
$0.124
Store operating expenses ($M)
$130
$130
$134
$524
$518
$526
General & administrative expenses ($M)
$25
$23
$24
$104
$94
$96
Depreciation & amortization ($M)
$30
$29
$30
$117
$115
$117
Interest expense ($M) *
$22
$20
$21
$88
$82
$83
Capital expenditures, net ($M)
$18
$15
$18
$93
$75
$85
*Excludes loss on extinguishment of debt
Conference Call
Interested parties are invited to listen to the second quarter earnings
conference call scheduled for Tuesday, May 8, 2012 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/(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 29, 2012 and March 31, 2011 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 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 7, 2012, the Company operated
1,607 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," "outlook," "guidance," "believes,"
"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, 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 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; 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 stores acquired; 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. 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 8, 2012. 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
Six Months Ended
March 29, 2012
March 31, 2011
March 29, 2012
March 31, 2011
(13 weeks)
(13 weeks)
(26 weeks)
(26 weeks)
Revenues:
Merchandise
$434,902
$422,494
$863,258
$842,359
Fuel
1,627,260
1,473,216
3,161,880
2,857,157
Total revenues
2,062,162
1,895,710
4,025,138
3,699,516
Costs and operating expenses:
Merchandise cost of goods sold
289,511
277,531
575,658
556,847
Fuel cost of goods sold
1,583,961
1,411,385
3,062,671
2,744,577
Store operating
127,301
127,200
256,170
259,084
General and administrative
22,530
29,047
48,024
56,397
Asset impairment
2,388
797
2,910
797
Depreciation and amortization
29,275
29,356
56,641
58,187
Total costs and operating expenses
2,054,966
1,875,316
4,002,074
3,675,889
Income from operations
7,196
20,394
23,064
23,627
Other expenses:
Loss on extinguishment of debt
2,457
-
2,539
-
Interest on lease finance obligations
11,197
10,946
22,288
21,632
Interest expense - all other, net
9,005
10,855
19,262
21,906
Total other expenses
22,659
21,801
44,089
43,538
Loss before income taxes
(15,463)
(1,407)
(21,025)
(19,911)
Income tax benefit
5,805
1,138
8,438
7,445
Net loss
$(9,658)
$(269)
$(12,587)
$(12,466)
Loss per share:
Net loss per diluted share
$(0.43)
$(0.01)
$(0.56)
$(0.56)
Shares outstanding
22,561
22,455
22,538
22,429
Selected financial data:
Adjusted EBITDA
$38,859
$50,547
$82,615
$82,611
Payments made for lease finance obligations
$12,802
$12,534
$25,500
$24,710
Merchandise gross profit
$145,391
$144,963
$287,600
$285,512
Merchandise margin
33.4%
34.3%
33.3%
33.9%
Retail fuel data:
Gallons
447,538
448,578
902,780
935,720
Margin per gallon (1)
$0.096
$0.137
$0.109
$0.120
Retail price per gallon
$3.57
$3.24
$3.45
$3.02
Total fuel gross profit (1)
$43,299
$61,831
$99,209
$112,580
Comparable store data:
Merchandise sales %
4.8%
2.0%
3.3%
1.7%
Fuel gallons %
1.1%
-6.9%
-3.2%
-6.0%
Number of stores:
End of period
1,611
1,660
1,611
1,660
Weighted-average store count
1,618
1,663
1,626
1,654
(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.
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