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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 26, 1997
Commission File Number 33-72574
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1574463
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1801 DOUGLAS DRIVE, SANFORD, NORTH CAROLINA
(Address of principal executive offices)
27330
(Zip Code)
(919) 774-6700
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value 114,029 shares
(Class) (Outstanding at July 31, 1997)
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THE PANTRY, INC.
Form 10-Q/A
June 26, 1997
Table of Contents
Part I - Financial Information
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Item 1. Financial Statements
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Consolidated Balance Sheets...................................................................2
Consolidated Statements of Operations.........................................................4
Consolidated Statements of Cash Flows.........................................................5
Notes to Consolidated Financial Statements....................................................7
</TABLE>
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PART I - Financial Information.
Item 1. Financial Statements.
The registrant's Form 10-Q filed with the Securities and Exchange Commission
on July 31, 1997 is hereby amended by a reclassification of $1.136 million from
"Deferred financing cost, net" to "Deferred income taxes" in the Company's
Consolidated Balance Sheets, and the registrant's Consolidated Balance Sheet
dated as of June 26, 1997 is restated in its entirety as follows:
THE PANTRY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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<CAPTION>
September 26, June 26,
1996 1997
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,338 $ 6,134
Receivables 2,860 2,961
Inventories 13,223 15,637
Prepaid expenses 775 960
Income taxes receivable 63 --
Property held for sale 2,816 8,168
Deferred income taxes 879 --
Total current assets 25,954 33,860
Property and equipment, net 65,455 72,085
Other assets:
Goodwill, net 16,852 20,565
Deferred lease cost, net 359 325
Deferred financing cost, net 5,940 4,941
Environmental receivables, net 5,162 5,162
Deferred income taxes 790 2,641
Other 368 329
Total other assets 29,471 33,963
$120,880 $139,908
</TABLE>
See Notes to Consolidated Financial Statements.
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THE PANTRY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 26, June 26,
1996 1997
(Audited) (Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 16 $ 32
Current maturities of capital lease obligations 285 285
Line of credit -- 5,645
Accounts payable:
Trade 15,666 16,640
Money orders 2,788 3,154
Accrued interest 4,416 1,489
Accrued compensation and related taxes 2,338 3,228
Other accrued taxes 2,135 1,455
Accrued insurance 3,629 4,251
Other accrued liabilities 1,194 1,256
Total current liabilities 32,467 37,435
Long-term debt 100,148 100,314
Other non-current liabilities:
Environmental reserve 6,232 6,494
Capital lease obligations 982 755
Employment obligations 2,039 1,590
Accrued dividends on preferred stock 2,654 6,414
Other 3,905 4,584
Total other non-current liabilities 15,812 19,837
Shareholders' deficit:
Preferred stock, $.01 par value, 150,000 shares authorized; 25,999 issued and
outstanding at September 26, 1996 and
43,499 issued and outstanding at March 27, 1997 -- --
Common stock, $.01 par value, 300,000 shares authorized;
114,029 issued and outstanding 1 1
Additional paid in capital (10,557) 5,383
Accumulated deficit (16,991) (23,062)
Total shareholders' deficit (27,547) (17,678)
$ 120,880 $ 139,908
</TABLE>
See Notes to Consolidated Financial Statements.
3
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 27, June 26, June 27, June 26,
1996 1997 1996 1997
(13 weeks) (13 weeks) (39 weeks) (39 weeks)
<S> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 50,351 $ 52,562 $ 135,611 $ 144,679
Gasoline sales 52,301 57,132 139,975 158,970
Commissions 998 1,338 3,019 3,624
Total revenues 103,650 111,032 278,605 307,273
Cost of sales:
Merchandise 34,196 34,552 91,007 95,384
Gasoline 45,617 51,166 121,886 143,084
Total cost of sales 79,813 85,718 212,893 238,468
Gross profit 23,837 25,314 65,712 68,805
Operating expenses:
Store expenses 14,002 14,959 42,893 43,644
General and administrative expenses 5,363 4,237 14,615 12,715
Depreciation and amortization 2,333 2,310 6,874 6,808
Total operating expenses 21,698 21,506 64,382 63,167
Income from operations 2,139 3,808 1,330 5,638
Other income (expense):
Interest (2,604) (3,284) (8,906) (9,763)
Miscellaneous (347) 517 (138) 1,236
Total other expense (2,951) (2,767) (9,044) (8,527)
Income (loss) before income taxes (812) 1,041 (7,714) (2,889)
Income tax benefit (expense) (286) (208) 1,392 578
Net income (loss) $ (1,098) $ 833 $ (6,322) $ (2,311)
</TABLE>
See Notes to Consolidated Financial Statements.
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 27, June 26,
1996 1997
(39 weeks) (39 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(6,322) $(2,311)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 6,874 6,808
(Gain) loss on sale of property and equipment 268 (467)
Reserves for environmental issues 73 72
Reserves for closed stores 285 59
Write-off of property held for sale 125 --
Amortization of deferred revenues (1,011) (949)
(Increase) decrease in:
Receivables (249) (64)
Inventories (848) (1,019)
Prepaid expenses 4 (184)
Income taxes receivable (392) (644)
Other assets 262 26
Increase (decrease) in:
Accounts payable - trade 3,756 974
Accounts payable - money orders 778 366
Accrued interest (3,451) (2,927)
Accrued compensation and related taxes 393 890
Income taxes payable (657) --
Other accrued taxes 4 (681)
Accrued insurance 342 623
Employment obligations (71) (449)
Other accrued liabilities (246) 63
Other liabilities 1,831 1,739
Net cash provided by (used in) operating activities 1,748 1,925
</TABLE>
See Notes to Consolidated Financial Statements.
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
June 27, June 26,
1996 1997
(39 weeks) (39 weeks)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property held for sale (3,362) (6,737)
Additions to property and equipment (5,447) (9,003)
Cash paid for businesses acquired -- (9,526)
Proceeds from sale of property held for sale 1,385 1,274
Proceeds from sale of property and equipment 1,421 1,406
Net cash provided by (used in) investing activities (6,003) (22,586)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations (270) (227)
Principal payments on long-term debt (16) (18)
Proceeds from issuance of long-term debt -- 200
Proceeds from line of credit, net 2,585 5,645
Net proceeds (payments) related to equity issue (285) 15,941
Other financing costs (3,030) (84)
Net cash provided by (used in) financing activities (1,016) 21,457
Net increase (decrease) in cash (5,271) 796
CASH AT BEGINNING OF PERIOD 10,999 5,338
CASH AT END OF PERIOD $ 5,728 $ 6,134
See Notes to Consolidated Financial Statements.
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THE PANTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. The interim consolidated financial statements have
been prepared from the accounting records of The Pantry, Inc. and its
subsidiaries (the Company) and all amounts at June 26, 1997 and for the
comparative three and nine month periods are unaudited. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The information furnished
reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented, and which are of a normal, recurring nature. It is suggested
that these interim financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended September 26,
1996 and the Company's quarterly reports on Form 10-Q for the quarterly
periods ended December 26, 1996 and March 27, 1997.
2. The results of operations for the three and nine month periods ended June
26, 1997 are not necessarily indicative of results to be expected for the
full fiscal year. The convenience store industry in the Company's
marketing areas experiences higher levels of revenues and profit margins
during the summer months than during the winter months. Historically, the
Company has achieved higher revenues and earnings in its third and fourth
quarters.
3. Inventories are stated at the lower of last-in, first-out (LIFO) cost or
market. Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 26, June 26,
1996 1997
(Audited) (Unaudited)
<S> <C> <C>
Inventories at FIFO cost:
Merchandise $ 13,841 $ 16,180
Gasoline 4,013 4,691
17,854 20,871
Less adjustment to LIFO cost:
Merchandise (4,012) (4,352)
Gasoline (619) (882)
Inventories at LIFO cost $ 13,223 $ 15,637
</TABLE>
4. Environmental reserves of $6.2 million and $6.5 million as of September
26, 1996 and June 26, 1997 represent estimates for future expenditures
for remediation, tank removal and litigation associated with all known
contaminated sites as a result of releases (e.g., overfills, spills and
underground storage tank releases) and are based on current regulations,
historical results and certain other factors. The Company anticipates
that it will be reimbursed for a portion of these expenditures from state
insurance funds and private insurance. These anticipated reimbursements
of $5.2 million are recorded as long-term environmental receivables.
5. On December 30, 1996, the Company issued 17,500 shares of Series B
Preferred Stock, $0.01 par value, for $17.5 million (see Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Liquidity and Capital Resources; Preferred and Common Stock). The Company
used the net proceeds of $16 million to fund acquisitions, existing store
remodels and new store development. This transaction increases the total
number of shares of Preferred Stock issued and outstanding to 43,499
consisting of 25,999 outstanding shares of Series A Preferred Stock and
17,500 outstanding shares of Series B Preferred Stock.
Under the terms of the Series A Preferred Stock, holders of the
outstanding shares are entitled to receive cumulative dividends in an
amount equal to sixty dollars ($60) per share per semi-annual calendar
period plus an amount determined by applying a 12% annual rate compounded
semi-annually to any accrued but unpaid dividend amount from the last day
of the semi-annual calendar period when such dividend accrues to the
actual
6
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date of payment of such dividend. In accordance with these terms,
the Company has accrued $5,258,271 of Series A Preferred Stock dividends
as of June 26, 1997.
Under the terms of the Series B Preferred Stock, holders of the
outstanding shares are entitled to receive cumulative dividends in an
amount equal to thirty-two dollars and fifty cents ($32.50) per share per
quarterly calendar period plus an amount determined by applying a 13%
annual rate compounded quarterly to any accrued but unpaid dividend
amount from the last day of the quarterly calendar period when such
dividend accrues to the actual date of payment of such dividend. In
accordance with these terms, the Company has accrued $1,155,984 of
Series B Preferred Stock dividends as of June 26, 1997.
6. In four separate and unrelated transactions, the Company acquired
thirty-two (32) convenience stores in existing markets in North and South
Carolina. The Company acquired the operating rights, leases, certain
equipment, inventory and certain real estate. The real estate purchased
is classified as property held for resale in the Company's financial
statements and sale and leaseback transactions are expected within the
next twelve months. The Company paid $14.7 million for the assets with
values attributed as follows (in thousands):
Property held for resale $ 5,150
Plant, property and equipment 3,974
Inventory 1,395
Value of tangible assets purchased 10,519
Cash paid in excess of value - goodwill 4,157
Cash paid for businesses acquired $ 14,676
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PANTRY, INC.
Date: August 7, 1997 By: \s\ William T. Flyg
William T. Flyg
Senior Vice President Finance and Secretary
(Authorized Officer and Principal Financial Officer)
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