The Pantry's fiscal Q2 net loss down to about US$300,000, from US$166.1M a year ago, as total revenues rose to US$1.89B, from US$1.68B in prior-year period, and comparable-store merchandise revenue grew 2%
Graziela Medina Shepnick
CARY, North Carolina
,
May 10, 2011
(press release)
–
The Pantry, Inc. (NASDAQ:PTRY - News), 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:
* 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).
* Adjusted EBITDA grew 6% to $50.5 million, compared to $47.5 million a year ago
* Comparable store merchandise revenue increased 2.0%
* 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
* Fuel gross profit was $61.8 million, compared to $65.4 million a year ago
President and Chief Executive Officer Terrance M. Marks said, “I am pleased that we have now delivered four consecutive quarters of non-cigarette comparable store 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:
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.
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)
Quarter Ended
Six Months Ended
2011
2010
2011
2010
(13 weeks)
(13 weeks)
(26 weeks)
(26 weeks)
Revenues:
Merchandise
$422,494
$409,267
$842,359
$826,839
Fuel
1,473,216
1,268,175
2,857,157
2,587,001
Total revenues
1,895,710
1,677,442
3,699,516
3,413,840
Costs and operating expenses:
Merchandise cost of goods sold
277,531
271,044
556,847
552,328
Gasoline cost of goods sold
1,411,385
1,202,790
2,744,577
2,464,628
Store operating
127,200
129,774
259,084
260,623
General and administrative (1)
29,047
26,306
56,397
47,902
Goodwill impairment
---
227,414
---
227,414
Other impairment charges
797
1,681
797
34,318
Depreciation and amortization
29,356
30,614
58,187
59,583
Total costs and operating expenses
1,875,316
1,889,623
3,675,889
3,646,796
Income (loss) from operations
20,394
(212,181)
23,627
(232,956)
Interest expense, net
Interest on lease finance obligations
10,740
10,714
21,217
21,311
Interest expense – all other, net (1)
11,061
11,609
22,321
23,275
Total interest expense, net
21,801
22,323
43,538
44,586
Loss before income taxes
(1,407)
(234,504)
(19,911)
(277,542)
Income tax benefit
1,138
68,422
7,445
85,391
Net loss
$(269)
$(166,082)
$(12,466)
$(192,151)
Loss per share:
Net loss per diluted shares
$(0.01)
$(7.44)
$(0.56)
$(8.62)
Shares outstanding
22,455
22,324
22,429
22,301
Selected financial data:
Adjusted EBITDA
$50,547
$47,528
$82,611
$88,359
Payments made for lease finance obligations
$12,534
$12,328
$24,710
$24,503
Merchandise gross profit
$144,963
$138,223
$285,512
$274,511
Merchandise margin
34.3%
33.8%
33.9%
33.2%
Retail fuel data:
Gallons
448,578
467,442
935,720
985,586
Margin per gallon (2)
$0.137
$0.139
$0.120
$0.124
Retail price per gallon
$3.24
$2.69
$3.02
$2.60
Total fuel gross profit
$61,831
$65,385
$112,580
$122,373
Comparable store data:
Merchandise sales %
2.0%
3.6%
1.7%
4.4%
Fuel gallons %
-6.9%
-7.5%
-6.0%
-3.3%
Number of stores:
End of period
1,660
1,649
1,660
1,649
Weighted-average store count
1,663
1,655
1,654
1,661
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