Exhibit 99.1
| For Immediate Release | Contact: Dan Kelly | |
| November 16, 2006 | (919) 774-6700 |
THE PANTRY ANNOUNCES RECORD FOURTH QUARTER
AND FISCAL 2006 FINANCIAL RESULTS
Establishes Fiscal 2007 EPS Guidance of $2.80 to $3.00
Sanford, North Carolina, November 16, 2006 - The Pantry, Inc. (NASDAQ: PTRY), the leading independently operated convenience store chain in the southeastern U.S., today announced financial results for its fourth fiscal quarter and year ended September 28, 2006.
Total revenues for the fourth quarter of fiscal 2006 were $1.7 billion, a 22.5% increase from last year’s fourth quarter. Net income for the quarter was $26.7 million, or $1.16 per share on a diluted basis, a 5.2% increase from $25.4 million, or $1.12 per share, a year ago. Results for the fiscal 2005 period included charges totaling approximately $0.22 per share related to store closings, impairment charges and uninsured losses associated with Hurricane Katrina.
For the full fiscal year, revenues were $6.0 billion, up 34.6% from fiscal 2005. Net income for the year was $89.2 million, or $3.86 per share, a 54.3% increase from $57.8 million, or $2.64 per share, in fiscal 2005.
Chairman and Chief Executive Officer Peter J. Sodini said, “We are pleased with our record earnings for the quarter and the year, which were achieved on top of very strong results for both periods last year. We clearly benefited from favorable conditions in the gasoline market during the first and fourth quarters of fiscal 2006. More importantly from a longer-term perspective, we continued executing successfully our regional acquisition strategy and our ongoing initiatives to strengthen our merchandise operations. For the second year in a row, comparable store merchandise sales increased approximately 5%, and total merchandise gross profits for fiscal 2006 were up 15%.”
Merchandise revenues for the fourth quarter increased 12.1% from a year ago, and were up 3.0% on a comparable store basis. The merchandise gross margin was 37.0%, an 80 basis point improvement from 36.2% in last year’s fourth quarter. Total merchandise gross profits for the quarter were $138.5 million, a 14.6% increase from a year ago. For the full fiscal year, comparable store merchandise revenues increased 4.9%, while total merchandise gross profit rose 15.3% on an 80 basis-point improvement in the gross margin to 37.4%.
Total gallons sold in the fourth quarter were up 13.6% from a year ago, and were up 0.3% on a comparable store gasoline gallons basis. Gasoline revenues rose 25.9%, in part due to a 10.4% increase in the average retail price per gallon, to $2.75. The gross margin per gallon was 17.3 cents, compared with 19.4 cents a year ago. Gasoline gross profit for the quarter totaled $82.5 million, a 1.3% increase from last year’s fourth quarter. For the full fiscal year, comparable store gasoline gallons rose 3.1% and the gasoline margin per gallon for the year was 15.8 cents, compared with 14.3 cents in fiscal 2005.
During fiscal 2006, the Company acquired 113 convenience stores through three major acquisitions and 10 smaller transactions, an increase from the 96 stores acquired in fiscal 2005. The larger acquisitions included 39 Interstate Food Stop stores in Mississippi and Louisiana; 38 Shop-A-Snak stores in Alabama; and 19 stores operating under the TruBuy and On-The-Run® banners in North Carolina. In addition, the Company developed and opened five new large-format stores in fiscal 2006, and expects to accelerate the number of new store openings to approximately 20 in fiscal 2007.
Mr. Sodini said, “The pipeline of potential acquisitions for fiscal 2007 appears very promising, and we would expect to acquire at least as many stores this year as in fiscal 2006. Partly in anticipation of this continued growth, we made some investments during fiscal 2006 to strengthen our management team and overall infrastructure, which pushed expenses above our targeted levels.”
Mr. Sodini concluded, “Assuming gasoline margins more in line with historic norms and continued solid momentum in our merchandise operations, which generally contribute two-thirds or more of our total gross profit, we believe our earnings per share for fiscal 2007 will be between $2.80 and $3.00. This guidance range incorporates the likelihood of a relatively low gasoline gross margin in the first fiscal quarter, reflecting current market conditions. The guidance does not include any potential accretion from future or pending acquisitions. Given the inherent volatility in the gasoline business, our primary focus is on sustaining the growth in our merchandise business and steadily expanding the store base to leverage our strong regional market position and increase our earnings potential over the long term.”
Conference Call
Interested parties are invited to listen to the fourth quarter earnings conference call scheduled for Thursday, November 16, 2006 at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet and is accessible at www.thepantry.com orwww.companyboardroom.com. An online archive will be available immediately following the call and will be accessible until November 29, 2006.
Use of Non-GAAP Measure
EBITDA is defined by us as net income before interest expense and loss on extinguishment of debt, income taxes, depreciation and amortization. EBITDA is not a measure of operating performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net income, cash flows from operating activities and other income or cash flow statement data. We have included information concerning EBITDA as one measure of our operating performance because we believe investors find this information useful as a reflection of the resources available for strategic opportunities including, among others, to invest in the business, make strategic acquisitions and to service debt. EBITDA as defined by us may not be comparable to similarly titled measures reported by other companies because such other companies may not calculate EBITDA in the same manner as we do.
Any measure that excludes interest expense or loss on extinguishment of debt, depreciation and amortization or income taxes, has material limitations because we have borrowed money in order to finance our operations and our acquisitions of new stores, we use capital assets in our business and the payment of income taxes is a necessary element of our operations.
About The Pantry
Headquartered in Sanford, 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, with revenues for fiscal 2006 of approximately $6.0 billion. As of September 28, 2006, the Company operated 1,493 stores in eleven states under select banners, including Kangaroo Express(SM), 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 integrate acquisitions into its operations; fluctuations in domestic and global petroleum and gasoline markets; realizing expected benefits from our 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 markets we serve; the effect of regional weather conditions on customer traffic; financial difficulties of suppliers, including our principal suppliers of gas and merchandise, and their ability to continue to supply our stores; environmental risks associated with selling petroleum products; governmental regulations, including those regulating the environment; and acts of war or terrorist activity. 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 November 16, 2006. 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 | Year Ended | |||||||||||||||
September 28, 2006 | September 29, 2005 | September 28, 2006 | September 29, 2005 | |||||||||||||
| (13 weeks) | (13 weeks) | (52 weeks) | (52 weeks) | |||||||||||||
Revenues: | ||||||||||||||||
Merchandise | $ | 373,926 | $ | 333,494 | $ | 1,385,659 | $ | 1,228,891 | ||||||||
Gasoline | 1,311,595 | 1,041,986 | 4,576,043 | 3,200,348 | ||||||||||||
Total revenues | 1,685,521 | 1,375,480 | 5,961,702 | 4,429,239 | ||||||||||||
Costs and operating expenses: | ||||||||||||||||
Merchandise costs of goods | 235,410 | 212,640 | 867,717 | 779,639 | ||||||||||||
Gasoline cost of goods | 1,229,100 | 960,544 | 4,294,839 | 2,986,453 | ||||||||||||
Operating, general and administrative | 142,713 | 128,809 | 521,076 | 450,263 | ||||||||||||
Depreciation and amortization | 21,185 | 17,409 | 76,025 | 64,341 | ||||||||||||
Total costs and operating expenses | 1,628,408 | 1,319,402 | 5,759,657 | 4,280,696 | ||||||||||||
Income from operations | 57,113 | 56,078 | 202,045 | 148,543 | ||||||||||||
Other income (expense): | ||||||||||||||||
Loss on extinguishment of debt | — | — | (1,832 | ) | — | |||||||||||
Interest expense | (15,505 | ) | (14,659 | ) | (59,602 | ) | (56,130 | ) | ||||||||
Interest income | 1,206 | 607 | 4,941 | 1,816 | ||||||||||||
Miscellaneous | 190 | 402 | 800 | 977 | ||||||||||||
Total other expense | (14,109 | ) | (13,650 | ) | (55,693 | ) | (53,337 | ) | ||||||||
Income before income taxes | 43,004 | 42,428 | 146,352 | 95,206 | ||||||||||||
Income tax expense | (16,264 | ) | (17,000 | ) | (57,154 | ) | (37,396 | ) | ||||||||
Net income | $ | 26,740 | $ | 25,428 | $ | 89,198 | $ | 57,810 | ||||||||
Earnings per share: | ||||||||||||||||
Net income per diluted share | $ | 1.16 | $ | 1.12 | $ | 3.86 | $ | 2.64 | ||||||||
Diluted shares outstanding | 23,015 | 22,613 | 23,085 | 21,930 | ||||||||||||
Selected financial data: | ||||||||||||||||
EBITDA | $ | 79,694 | $ | 74,496 | $ | 283,811 | $ | 215,677 | ||||||||
Merchandise gross profit | $ | 138,516 | $ | 120,854 | $ | 517,942 | $ | 449,252 | ||||||||
Merchandise margin | 37.0 | % | 36.2 | % | 37.4 | % | 36.6 | % | ||||||||
Gasoline gallons | 476,079 | 419,215 | 1,774,926 | 1,501,031 | ||||||||||||
Gasoline gross profit | $ | 82,495 | $ | 81,442 | $ | 281,204 | $ | 213,895 | ||||||||
Gasoline margin per gallon (1) | $ | 0.1733 | $ | 0.1943 | $ | 0.1584 | $ | 0.1425 | ||||||||
Gasoline retail per gallon | $ | 2.75 | $ | 2.49 | $ | 2.58 | $ | 2.13 | ||||||||
Comparable store data: | ||||||||||||||||
Merchandise sales % | 3.0 | % | 4.7 | % | 4.9 | % | 5.3 | % | ||||||||
Gasoline gallons % | 0.3 | % | 3.1 | % | 3.1 | % | 4.7 | % | ||||||||
Number of stores: | ||||||||||||||||
End of period | 1,493 | 1,400 | 1,493 | 1,400 | ||||||||||||
Weighted-average store count | 1,500 | 1,396 | 1,452 | 1,369 | ||||||||||||
Notes:
| (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)
September 28, 2006 | September 29, 2005 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 120,394 | $ | 111,472 | ||
Receivables, net | 68,064 | 61,597 | ||||
Inventories | 140,135 | 125,348 | ||||
Other current assets | 27,131 | 24,868 | ||||
Total current assets | 355,724 | 323,285 | ||||
Property and equipment, net | 745,721 | 630,291 | ||||
Goodwill, net | 440,681 | 394,903 | ||||
Other | 45,781 | 39,687 | ||||
Total assets | $ | 1,587,907 | $ | 1,388,166 | ||
Liabilities and shareholders’ equity | ||||||
Current maturities of long-term debt | $ | 2,088 | $ | 16,045 | ||
Current maturities of lease finance obligations | 3,511 | 2,872 | ||||
Accounts payable | 139,939 | 131,618 | ||||
Other accrued liabilities | 109,742 | 102,998 | ||||
Total current liabilities | 255,280 | 253,533 | ||||
Long-term debt | 602,215 | 539,328 | ||||
Lease finance obligations | 240,564 | 200,214 | ||||
Deferred income taxes | 72,435 | 64,848 | ||||
Deferred vendor rebates | 23,876 | 27,385 | ||||
Other | 56,530 | 50,925 | ||||
Total shareholders’ equity | 337,007 | 251,933 | ||||
Total liabilities and shareholders’ equity | $ | 1,587,907 | $ | 1,388,166 | ||
The Pantry, Inc.
Reconciliation of Non-GAAP Financial Measures
(In thousands)
| Quarter Ended | Year Ended | |||||||||||||||
September 28, 2006 | September 29, 2005 | September 28, 2006 | September 29, 2005 | |||||||||||||
EBITDA | $ | 79,694 | $ | 74,496 | $ | 283,811 | $ | 215,677 | ||||||||
Interest expense and loss on extinguishment of debt | (15,505 | ) | (14,659 | ) | (61,434 | ) | (56,130 | ) | ||||||||
Depreciation and amortization | (21,185 | ) | (17,409 | ) | (76,025 | ) | (64,341 | ) | ||||||||
Provision for income taxes | (16,264 | ) | (17,000 | ) | (57,154 | ) | (37,396 | ) | ||||||||
Net income | $ | 26,740 | $ | 25,428 | $ | 89,198 | $ | 57,810 | ||||||||