The Pantry Announces Q3 Results

Cary, N.C.-based The Pantry Inc. has announced financial results for its third fiscal quarter ended June 24, 2010.

The Pantry reported net income for the quarter of $18.0 million or $0.80 per diluted share, compared to a net loss of $749,000 or $0.03 per share in last year’s third quarter.

The results for the third quarter of fiscal 2010 include non-cash charges of $2.7 million after-tax and a $481,000 after-tax net loss on the extinguishment of debt. When adjusted for these charges, net income for the third quarter of fiscal 2010 was $21.2 million or $0.94 per diluted share. Net cash provided by operating activities was $83.5 million, compared with $41.0 million in the third quarter of fiscal 2009.

“We are pleased with our results for the third quarter. As expected, we saw broad based improvement in our merchandise business with robust comparable sales growth and continued improvement in gross margin. On the fuel side, we continued to experience soft demand in line with our expectations and benefited from an above-average fuel margin,” said President and CEO Terrance Marks. He added, “Importantly, our core strategic initiatives are on track. In June, we began to implement our Fresh Initiative in Raleigh, N.C., stores and are encouraged by the customer response.”

Merchandise revenues for the third quarter increased 8.8% overall and 7.7% on a comparable store basis from the same period a year ago. Total merchandise gross profit for the quarter was $160.5 million, an increase of 6.2% from the third quarter a year ago. Merchandise gross margin increased 40 basis points sequentially, with all major categories showing improved margins.

Total fuel gross profit for the quarter was $80.5 million compared to $50.0 million for the comparable quarter last year. Retail fuel gallons sold in the third quarter decreased 3.7% overall and 5.6% on a comparable store basis. Retail fuel margin per gallon was $0.156 in the quarter compared to $0.093 in the comparable period last year. For the nine months ended June 24, 2010, retail fuel margin per gallon was $0.135 compared to $0.153 in the same period a year ago. During the third fiscal quarter, the company did not experience an adverse impact on fuel gross profit from its BP branded facilities.

Total store operating and general and administrative expenses for the quarter were $156.9 million, up $4.4 million versus a year ago. The increase was primarily driven by expenditures to improve store conditions and higher insurance costs.

Depreciation and amortization expense was $29.9 million, an increase of $3.4 million from the prior year. This increase includes $2.4 million in accelerated depreciation on the assets related to the Chevron withdrawal from some of the company’s marketing territories and the replacement of certain assets to meet credit card compliance requirements.

In the third quarter of fiscal 2010, the company recorded an impairment charge of $1.7 million after-tax or $0.07 per diluted share, to increase the goodwill impairment charge that was recorded in the second quarter of fiscal 2010.

During the quarter, the company repurchased $16.1 million in principal amount of its convertible notes for $14.9 million, which resulted in a loss of $786,000 or $0.02 per diluted share, including the write-off of the unamortized debt discount and deferred loan costs of $2.0 million.

Source: The Pantry Inc.



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