The Pantry Reports Net Loss for Fiscal 2010

CARY, N.C. -- The Pantry Inc., an independently operated convenience store chain in the southeastern U.S., announced financial results for its fourth quarter and fiscal year ended Sept. 30, 2010. The quarter and year included 14 and 53 weeks respectively, one more week than the comparable periods in fiscal 2009.

For the full fiscal year, the company reported a net loss of $165.6 million, compared to net income of $54.1 million in fiscal 2009. Excluding the goodwill impairment and other charges, net income for fiscal year 2010 was $27.4 million.

For the fourth quarter, net income was $8.5 million, including charges of approximately $3 million after-tax. This compares to $12.5 million in last year’s fourth quarter. Excluding the charges, fourth quarter fiscal 2010 net income was $11.3 million.

President and CEO Terrance M. Marks said in a statement: "We are pleased with the continued strength and quality of our merchandise business for the quarter, as evidenced by sequential improvement in both gross margin and non-cigarette comps. Importantly, we continued making solid progress on our core strategic initiatives, particularly Program Fresh. Our Raleigh stores were completed on schedule in the fourth quarter and have performed ahead of expectations. The store conversion process is progressing well, and we now expect to finish the calendar year slightly ahead of our original remodel plan of 100 stores."

Merchandise revenue for the fourth quarter increased 12 percent overall and 5.7 percent on a comparable store basis from last year’s fourth quarter. Total merchandise gross profit for the quarter was $172.5 million, an increase of 13.1 percent from the fourth quarter a year ago.

For the full year, merchandise revenue totaled approximately $1.80 billion, up 8.4 percent overall and 5.6 percent on a comparable store basis. Total merchandise gross profit for fiscal 2010 was $607.5 million, up 3.5 percent from a year ago.

Retail fuel gallons sold in the fourth quarter decreased 0.8 percent overall and 7.2 percent on a comparable store basis from last year’s fourth quarter. Retail fuel revenues in the fourth quarter increased 6.1 percent to $1.4 billion primarily as a result of the 7 percent increase in the average retail price per gallon to $2.63 from $2.45.

Fuel gross profit for the fourth quarter decreased 19 percent compared to the same period a year ago, primarily due to a decrease in retail fuel margin per gallon to $0.112 compared to $0.137.

For the full year, retail fuel gallons sold were approximately 2.05 billion, down 1.5 percent overall and 4.9 percent on a comparable store basis from fiscal year 2009.

Total store operating and general and administrative expenses for the fourth quarter were $168.2 million, an increase of $10 million from the fourth quarter last year. The company said this increase was driven entirely by the extra week in fiscal 2010.

For the full year, store operating and general and administration expenses were $634.6 million, an increase of $17.5 million or 2.8 percent from fiscal year 2009.

The Pantry said it remains comfortable with its liquidity position, with $201 million in cash on hand and approximately $106 million in available capacity under its revolving credit facilities as of Sept. 30.

The retailer offered the following outlook (excluding potential acquisitions) for fiscal 2011, which is a 52-week fiscal year that will end on Sept. 29, 2011:

-- Merchandise sales ($ billions): $1.80 low; $1.87 high

-- Merchandise gross margin: 34.0 percent low; 35.0 percent high

-- Retail fuel gross profit ($ millions): $251 low; $280 high

-- Retail fuel gallons (billions): 2.00 low; 2.09 high

-- Retail fuel margin per gallon: $0.12 low; $0.14 high

-- Total OSG&A ($ millions): $650 low; $660 high

-- Depreciation & amortization ($ millions): $119 low; $126 high

-- Interest expense ($ millions): $81 low; $85 high

Headquartered in Cary, N.C., The Pantry is one of the largest independently operated c-store chains in the country. The retailer currently operates 1,672 stores in 13 states under select banners including Kangaroo Express, its primary operating banner.

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