<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 1999
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-72574 56-1574463
(State or other (Commission File No.) (IRS Employer
jurisdiction Identification Number)
of incorporation)
1801 Douglas Drive, PO Box 1410, Sanford, North Carolina 27330
(Address of principal executive offices)
(919) 774-6700
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 7 is hereby replaced as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Audited financial statements of R&H Maxxon, Inc. ("Maxxon") as of June
30, 1999, 1998 and 1997, and for each of the three years in the period ended
June 30, 1999:
(1) Report of Independent Certified Public Accountants
(2) Balance Sheets
(3) Statements of Income
(4) Statements of Changes in Stockholders' Equity
(5) Statements of Cash Flows
(6) Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated financial data provided below have
been derived by the application of pro forma adjustments to the historical
financial statements of The Pantry for the periods indicated. The adjustments,
which include adjustments reflecting the acquisition on July 22, 1999 of Maxxon
are described in the accompanying notes. The unaudited pro forma consolidated
financial data also give effect to: (i) the initial public offering of
6,250,000 shares of The Pantry's common stock on June 8, 1999; (ii) other
acquisitions by the Company in fiscal 1998 and fiscal 1999; and (iii) certain
financing transactions in fiscal 1998 and fiscal 1999 (each as described more
fully in Items (1), (3) and (6) below). The following unaudited pro forma
consolidated financial data are provided below:
(1) Introduction to Unaudited Pro Forma Financial Data
(2) Unaudited Pro Forma Balance Sheet Data as of June 24, 1999
(3) Notes to Unaudited Pro Forma Balance Sheet Data
(4) Unaudited Pro Forma Statement of Operations Data for the Nine-Month
Period Ended June 24, 1999
(5) Unaudited Pro Forma Statement of Operations Data for the Year Ended
September 24, 1998
(6) Notes to Unaudited Pro Forma Statements of Operations Data
2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
R & H Maxxon, Inc.
Aiken, South Carolina
We have audited the accompanying balance sheets of R & H Maxxon, Inc. as
of June 30, 1999, 1998 and 1997 and the related statements of income, changes
in stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of R & H Maxxon, Inc.
as of June 30, 1999, 1998 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ ELLIOTT, DAVIS & COMPANY, LLP
Aiken, South Carolina
September 29, 1999
3
<PAGE>
R & H MAXXON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash...................................... $ 1,813,672 $ 933,832 $ --
Accounts receivable....................... 1,853,632 1,512,262 4,059,869
Inventory................................. 3,059,024 2,522,761 2,476,892
Prepaid expenses.......................... 59,271 49,855 421,431
Deferred tax asset........................ 18,766 1,726 2,962
Current portion of notes receivable....... 64,629 140,195 15,177
----------- ----------- -----------
Total current assets.................... 6,868,994 5,160,631 6,976,331
----------- ----------- -----------
Property and equipment--net................. 30,833,944 30,952,176 25,623,827
----------- ----------- -----------
Other assets
Cash surrender value life insurance....... 1,093,032 847,752 623,903
Intangible assets--net.................... 64,177 82,249 63,429
Notes receivable.......................... 461,668 152,841 165,779
Deposits.................................. 6,165 34,555 32,305
----------- ----------- -----------
1,625,042 1,117,397 885,416
----------- ----------- -----------
$39,327,980 $37,230,204 $33,485,574
=========== =========== ===========
</TABLE>
(Continued)
4
<PAGE>
R & H MAXXON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable........................... $ 3,727,400 $ 3,445,505 $ 3,287,563
Accrued liabilities........................ 1,231,907 871,982 749,093
Income taxes payable....................... 6,922 117,183 5,186
Sales and fuel taxes payable............... 1,244,067 1,227,683 1,194,584
Deferred revenue........................... 44,167 -- --
Notes payable.............................. 15,615,896 -- 250,000
Current portion of long-term debt.......... -- 63,547 1,692,030
----------- ----------- -----------
Total current liabilities................ 21,870,359 5,725,900 7,178,456
----------- ----------- -----------
Long-term liabilities
Deferred tax liability..................... 1,677,789 1,516,766 1,295,852
Notes payable--net of current portion...... -- 17,231,000 14,455,227
----------- ----------- -----------
1,677,789 18,747,766 15,751,079
----------- ----------- -----------
Stockholders' equity
Common stock, par value $10; 10,000 shares
authorized; 2,210 shares issued and
outstanding............................... 22,100 22,100 22,100
Additional paid-in capital................. 282,969 282,969 282,969
Retained earnings.......................... 15,474,763 12,451,469 10,250,970
----------- ----------- -----------
15,779,832 12,756,538 10,556,039
----------- ----------- -----------
$39,327,980 $37,230,204 $33,485,574
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
R & H MAXXON, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended June 30,
--------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Merchandise sales..................... $ 34,597,625 $ 26,788,484 $ 23,497,130
Gasoline sales........................ 80,496,693 81,802,142 95,854,789
Other................................. 3,197,875 2,633,284 2,271,086
------------ ------------ ------------
Total revenue....................... 118,292,193 111,223,910 121,623,005
------------ ------------ ------------
Cost of sales
Merchandise........................... 23,891,883 18,379,430 16,099,505
Gasoline.............................. 70,726,580 73,284,483 87,701,543
Other................................. 52,085 24,723 39,409
------------ ------------ ------------
Total cost of sales................. 94,670,548 91,688,636 103,840,457
------------ ------------ ------------
Gross profit............................ 23,621,645 19,535,274 17,782,548
------------ ------------ ------------
Operating expenses
Salaries--other....................... 7,113,318 5,885,373 5,480,805
Salaries--officers.................... 861,057 808,717 804,225
Depreciation and amortization......... 3,194,617 2,433,976 2,419,477
Utilities and telephone............... 1,313,060 1,174,786 1,115,768
Taxes--payroll and property........... 1,128,623 947,126 1,121,232
Interest expense...................... 1,065,571 1,137,473 871,816
Repairs and maintenance............... 1,048,381 949,003 964,534
Contract services..................... 611,517 545,610 435,340
Operating supplies.................... 463,133 413,987 488,354
Rent expense.......................... 431,571 389,990 463,416
Insurance............................. 409,280 448,213 394,243
Advertising........................... 398,462 264,410 487,922
Retirement plan....................... 169,527 94,687 101,053
Vehicle expense....................... 125,771 106,916 80,924
Other operating expenses.............. 941,803 753,411 778,411
------------ ------------ ------------
19,275,691 16,353,678 16,007,520
------------ ------------ ------------
Operating income........................ 4,345,954 3,181,596 1,775,028
------------ ------------ ------------
Other income
Gain on disposition of assets......... 299,339 165,056 71,710
Rents from operating leases........... 119,296 164,351 246,786
Interest income....................... 43,915 41,374 49,383
------------ ------------ ------------
462,550 370,781 367,879
------------ ------------ ------------
Income before income taxes.......... 4,808,504 3,552,377 2,142,907
------------ ------------ ------------
Provision for income taxes
Current taxes......................... 1,641,227 1,129,728 838,987
Deferred taxes........................ 143,983 222,150 (17,253)
------------ ------------ ------------
1,785,210 1,351,878 821,734
------------ ------------ ------------
Net income.............................. $ 3,023,294 $ 2,200,499 $ 1,321,173
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
6
<PAGE>
R & H MAXXON, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional Retained
Stock Paid-in Capital Earnings Total
------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 30, 1996......... $22,100 $282,969 $ 8,929,797 $ 9,234,866
Net income..................... -- -- 1,321,173 1,321,173
------- -------- ----------- -----------
Balance, June 30, 1997......... 22,100 282,969 10,250,970 10,556,039
Net income..................... -- -- 2,200,499 2,200,499
------- -------- ----------- -----------
Balance, June 30, 1998......... 22,100 282,969 12,451,469 12,756,538
Net income..................... -- -- 3,023,294 3,023,294
------- -------- ----------- -----------
Balance, June 30, 1999......... $22,100 $282,969 $15,474,763 $15,779,832
======= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
R & H MAXXON, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended June 30,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities...................
Net income............................. $ 3,023,294 $ 2,200,499 $ 1,321,173
Adjustments to reconcile net income to
net cash provided by operating
activities............................
Deferred income taxes................ 143,983 222,150 (17,253)
Depreciation and amortization........ 3,194,617 2,433,976 2,419,477
Gain on disposition of assets........ (299,339) (165,056) (71,710)
Changes in deferred and accrued
amounts:
Accounts receivable................ (341,370) 2,547,607 (2,587,701)
Inventory.......................... (536,263) (45,869) (224,285)
Prepaid expenses................... (9,416) 371,576 (142,866)
Cash surrender value of life
insurance......................... (245,280) (223,849) (165,319)
Other deposits..................... 1,335 1,305 3,045
Accounts payable................... 166,726 171,431 (486,955)
Accrued expenses................... 359,925 122,889 40,712
Income taxes payable............... (110,261) 111,997 (2,578)
Sales and fuel taxes payable....... 131,553 19,610 45,835
Deferred revenue................... 44,167 -- --
----------- ----------- -----------
Net cash provided by operating
activities...................... 5,523,671 7,768,266 131,575
----------- ----------- -----------
Investing activities...................
Purchase of property and equipment and
intangibles........................... (3,727,810) (8,792,538) (4,559,007)
Proceeds from sale of property and
equipment............................. 314,717 577,007 541,278
Proceeds from incentive plans with
dealers............................... 520,044 582,987 602,236
Additions to notes receivable.......... (239,134) (137,000) --
Payments received on notes receivable.. 167,003 37,820 22,113
Proceeds from sale of investment....... -- -- 62,206
----------- ----------- -----------
Net cash used in investing
activities...................... (2,965,180) (7,731,724) (3,331,174)
----------- ----------- -----------
Financing activities...................
Net cash advanced (repaid) on line-of-
credit................................ (3,405,651) 374,290 202,190
Principal borrowings (payments) on
long-term debt........................ 1,727,000 (1,500,000) (1,575,969)
Proceeds from borrowings............... -- 2,273,000 3,720,000
Principal payments on notes payable to
stockholder........................... -- (250,000) --
Proceeds from notes payable to
stockholder........................... -- -- 250,000
----------- ----------- -----------
Net cash (used in) provided by
financing activities............ (1,678,651) 897,290 2,596,221
----------- ----------- -----------
Net increase (decrease) in cash.. 879,840 933,832 (603,378)
Cash, beginning of year................ 933,832 -- 603,378
----------- ----------- -----------
Cash, end of year...................... $ 1,813,672 $ 933,832 $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
R&H Maxxon, Inc. (the Company), a South Carolina corporation, is
primarily a retailer of petroleum and convenience store products in South
Carolina and Georgia. The Company also sells petroleum products to wholesale
customers and state and local governmental units within South Carolina.
The Company grants credit to wholesale customers, substantially all of
whom operate within South Carolina and eastern Georgia, and to state and local
governmental units within South Carolina. Collateral is generally not required
of customers to whom credit is granted, except for certain significant
customers.
On April 29, 1999, the stockholders of the Company entered into an
agreement to sell the outstanding common stock of the Company to The Pantry,
Inc., a publicly owned company based in Sanford, North Carolina. The sale
closed on July 22, 1999.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventory
Inventory of gasoline is stated at the lower of cost (on a weighted
averaged basis) or market. Inventory of all other merchandise is valued by the
retail method on a weighted average basis at the lower of cost or market.
Depreciation
Property and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred, and renewals and betterments are capitalized.
Gains or losses on disposals are credited or charged to operations.
The Company depreciates its fixed assets over their estimated useful
lives. For financial reporting and income tax purposes, accelerated methods are
used for equipment and vehicles. Buildings are depreciated using the straight-
line method for financial reporting purposes and accelerated methods for income
tax purposes.
Estimated useful lives of the depreciable property and equipment are as
follows:
<TABLE>
<CAPTION>
Estimated
Useful
Life
----------
<S> <C>
Buildings and land improvements................................. 5-20 years
Equipment....................................................... 5-15 years
Vehicles........................................................ 5 years
</TABLE>
9
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Amortization
Intangible assets (consisting of costs incurred to obtain financing,
contractual commitments to supply petroleum products to independent retailers,
and franchise fees) are amortized on a straight-line basis over the terms of
the related loans and contracts.
Income taxes
Income taxes are accounted for by the asset/liability approach for
financial reporting purposes. Deferred taxes represent the expected future tax
consequences when the reported amounts of assets and liabilities are recovered
or paid. They arise from differences between the financial reporting and tax
bases of assets and liabilities and are adjusted for changes in tax laws and
tax rates when those changes are enacted. Valuation allowances are established
when necessary to reduce deferred tax assets to amounts expected to be
realized. The provision for income taxes represents the total of income taxes
paid or payable for the current year, plus the change in deferred taxes during
the year.
Reclassifications
Certain amounts in 1998 and 1997 have been reclassified to conform to the
1999 presentation. The reclassifications had no effect on net income.
NOTE 3--ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
For the years ended June 30,
--------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Trade receivables....................... $ 930,545 $ 786,217 $1,505,139
Gas taxes refundable.................... 201,905 186,348 1,862,544
Vendor rebates and other miscellaneous
receivables............................ 721,182 539,697 692,186
---------- ---------- ----------
$1,853,632 $1,512,262 $4,059,869
========== ========== ==========
</TABLE>
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Land and improvements........... $ 15,823,895 $ 12,011,287 $ 9,484,623
Buildings and improvements...... 13,749,643 14,599,427 13,998,970
Equipment....................... 14,954,927 13,709,084 12,443,727
Vehicles........................ 168,827 190,055 188,355
------------ ------------ ------------
44,697,292 40,509,853 36,115,675
Less accumulated depreciation... (13,863,348) (12,343,116) (10,658,004)
------------ ------------ ------------
30,833,944 28,166,737 25,457,671
Construction in progress........ -- 2,785,439 166,156
------------ ------------ ------------
$ 30,833,944 $ 30,952,176 $ 25,623,827
============ ============ ============
</TABLE>
10
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--NOTES RECEIVABLE
During the year ended June 30, 1996, the Company sold one of its
locations and received a note from the purchaser for a portion of the sales
price. The initial investment by this purchaser of the property was not
sufficient to qualify the sale for full profit recognition at the date of sale.
Prior to the year ended June 30, 1999, the profit on the sale was being
recognized by the installment method. During the year ended June 30, 1999, the
total investment by the purchaser allowed the Company to recognize the
remaining profit from the sale.
Details of the transaction are as follows:
<TABLE>
<S> <C>
Sales value..................................................... $ 390,000
Cost and expense of sale........................................ (198,806)
---------
Total gross profit.............................................. $ 191,194
=========
</TABLE>
<TABLE>
<CAPTION>
For the years ended June
30,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Profit recognized in current year.............. $161,130 $ 12,900 $ 10,840
======== ======== ========
Unrecognized profit at year-end................ $ -- $161,130 $174,030
======== ======== ========
</TABLE>
The current year profit recognized has been included in the Statement of
Income as a part of "Gain on disposition of assets."
During the years ended June 30, 1999 and 1998, the Company sold
additional locations and received notes related to these sales. These sales
were accounted for using the full accrual method. The notes from the above
sales are secured by mortgages on the properties.
The note receivable from the 1996 sale is dated June 27, 1996 and is
payable in even monthly payments over ten years at 9% interest. The note
receivable from the 1998 sale was dated May 15, 1998 and was payable over
twelve months at 9% interest. The note receivable from the 1999 sale is dated
December 23, 1998 and is payable in even monthly payments over six years at
8.25% interest. Details of the Company's notes receivable were as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------
1999 1998 1997
----------------- ------------------- -------------------
Current Long-Term Current Long-Term Current Long-Term
------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1996 Sale:
Note receivable....... $31,568 $268,274 $ 28,825 $ 299,841 $ 26,347 $ 328,639
Less unrecognized
profit............... -- -- (14,130) (147,000) (11,170) (162,860)
------- -------- -------- --------- -------- ---------
Net receivable........ 31,568 268,274 14,695 152,841 15,177 165,779
1998 Sale:
Note receivable....... -- -- 125,500 -- -- --
1999 Sale:
Note receivable....... 31,772 184,850 -- -- -- --
Other note receivable... 1,289 8,544 -- -- -- --
------- -------- -------- --------- -------- ---------
Notes receivable, net... $64,629 $461,668 $140,195 $ 152,841 $ 15,177 $ 165,779
======= ======== ======== ========= ======== =========
</TABLE>
11
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 6--INTANGIBLE ASSETS
The estimated useful lives of intangible assets are as follows:
<TABLE>
<CAPTION>
Estimated
Useful
Life
---------
<S> <C>
Loan costs....................................................... 3 years
Petroleum supply contracts....................................... 2-9 years
Franchise fees................................................... 5 years
</TABLE>
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
Loan costs................................. $ 5,000 $ 160,651 $ 160,651
Petroleum supply contracts................. 91,231 91,231 91,231
Franchise fees............................. 57,000 57,000 22,000
-------- --------- ---------
153,231 308,882 273,882
Less accumulated amortization.............. (89,054) (226,633) (210,453)
-------- --------- ---------
$ 64,177 $ 82,249 $ 63,429
======== ========= =========
</TABLE>
NOTE 7--NOTES PAYABLE
The Company's notes payable as of June 30, 1999 are classified as current
liabilities because of the pending sale of the Company's outstanding common
stock. Amounts outstanding as of June 30, 1999, bearing interest at LIBOR plus
85 basis points (5.79% at June 30, 1999), were:
<TABLE>
<S> <C>
Step down revolver--Accrued interest was payable semi-
annually. Annual reductions of the revolver in the amount
$1,439,000 were due annually on June 30. The loan was secured
by real estate, equipment, inventory, accounts receivable,
intangible assets, and assignment of leases, rents, profits,
and officers' life insurance................................. $12,615,896
Cumulative line of credit--Allowed for borrowings of up to
$17,000,000, based upon an advance rate of 80% of the cost of
construction or acquisition of stores. Payments of accrued
interest only were due semi-annually for a period of twenty-
four months, after which the outstanding balance converted to
a term loan with semi-annual interest payments and annual
principal payments based on a thirteen year amortization
period. The line was secured by real estate, equipment,
inventory, accounts receivable, intangible assets, and
assignment of leases, rents, profits and officers' life
insurance.................................................... 3,000,000
-----------
Total notes payable, June 30, 1999........................... $15,615,896
===========
</TABLE>
The Company committed to its commercial bank to meet various financial
ratios and comply with other non-financial covenants. At June 30, 1999, the
Company was in compliance with all loan related financial covenant ratios,
however it was in violation of certain loan covenants regarding change of
control. The Company's notes payable were extinguished in connection with the
sale of its outstanding common stock.
12
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
On June 29, 1998, the Company entered into an agreement with a commercial
bank to restructure and expand its existing loan agreements, which were due
December 31, 1998 under the previous agreement. Amounts outstanding under the
new agreement, bearing interest at LIBOR plus 85 basis points (6.51% at June
30, 1998), were to mature on December 31, 2001. As of June 30, 1998, the
following amounts were outstanding under the new agreement:
<TABLE>
<S> <C>
Step down revolver--This note refinanced the Company's
existing term loan payable and lines of credit. Accrued
interest was payable semi-annually. Annual reductions of
the revolver in the amount $1,439,000 were due beginning
June 30, 1999. The note was secured by real estate,
equipment, inventory, accounts receivable, intangible
assets, and assignment of leases, rents, profits, and
officers' life insurance................................... $16,021,547
Cumulative line of credit--Allowed for borrowings of up to
$17,000,000, based upon an advance rate of 80% of the cost
of construction or acquisition of stores. Payments of
accrued interest only were due semi-annually for a period
of twenty-four months, after which the outstanding balance
converted to a term loan with semi-annual interest payments
and annual principal payments based on a thirteen year
amortization period. The line was secured by real estate,
equipment, inventory, accounts receivable, intangible
assets, and assignment of leases, rents, profits and
officers' life insurance................................... 1,273,000
-----------
Total...................................................... 17,294,547
Less current portion....................................... (63,547)
Total long-term debt, June 30, 1998........................ $17,231,000
===========
</TABLE>
The Company's long-term debt at June 30, 1997 consisted of amounts
payable to a commercial bank, bearing interest at rates based on the Prime rate
or LIBOR, adjusted by a designated financial performance ratio achieved by the
Company (7.22% at June 30, 1997). The amounts payable as of June 30, 1997, all
of which had due dates of December 31, 1998, were as follows:
<TABLE>
<S> <C>
Term loan payable in quarterly installments of $366,195 plus
accrued interest. Secured by real estate, equipment,
assignment of leases, rents and profits..................... $12,170,110
Cumulative line of credit, allowing borrowings of up to
$10,200,000, based upon an advance rate of 75% of the cost
of construction or acquisition of stores. Quarterly payments
of $56,812 plus accrued interest were based on a twelve year
amortization period as of June 30, 1997. Secured by real
estate, equipment, inventory and intangible assets.......... 2,727,000
Revolving line of credit, allowing borrowings of up to
$3,000,000. Payments of accrued interest were due quarterly.
Secured by real estate, equipment, inventory and intangible
assets...................................................... 1,250,147
-----------
Total....................................................... 16,147,257
Less current portion........................................ (1,692,030)
-----------
Total long-term debt, June 30, 1997......................... $14,455,227
===========
</TABLE>
13
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 8--RELATED PARTY DEBT AND LEASE
The stockholders of the Company also own a separate corporation, which
owns and leases to the Company one convenience store location. The related
corporation has borrowed funds from the same bank as the Company. Under the
terms of the security agreements securing the debt of the Company and the
related corporation's borrowings, a default under one agreement will be
considered a default under both agreements. All assets of the Company are also
pledged as security for the debt of the related corporation. The debt of the
related corporation carries the same interest rate as that of the Company. The
balance due on the related corporation loan at June 30, 1999, 1998 and 1997 was
$241,964, $261,951, and $276,745, respectively, and was payable at the rate of
$2,900 per month including principal and interest. The balance of the loan is
due on December 31, 2001.
As of June 30, 1999, the Company pays rent of $3,000 per month to the
related party. Total rental expense incurred during each of the years ended
June 30, 1999, 1998 and 1997 was $36,000.
Upon the sale of the Company's outstanding common stock to The Pantry,
Inc. on July 22, 1999, this related party relationship ceased to exist.
NOTE 9--LEASE COMMITMENTS
As of June 30, 1999, the Company had leases on eleven active convenience
store locations, carrying terms from five to fifteen years, with renewal
options, varying in monthly payments from $1,170 to $6,340. Future minimum
payments under the above leases are as follows:
<TABLE>
<CAPTION>
Twelve months ending June 30, Amount
----------------------------- ----------
<S> <C>
2000........................................................... $ 377,149
2001........................................................... 362,024
2002........................................................... 264,994
2003........................................................... 211,942
2004........................................................... 190,680
Thereafter..................................................... 497,450
----------
$1,904,239
==========
</TABLE>
NOTE 10--CONTINGENCIES
The Company entered into agreements to operate certain stores as
particular branded petroleum retailers. The following is a summary of the
outstanding contingencies under these agreements:
Under the terms of various agreements, the Company is partially
reimbursed for the cost of certain equipment upgrades and/or the
altering of the appearance of the stores to match the branded petroleum
distributors' marketing program requirements. If the Company ceases to
operate a participating store, the Company will be liable to refund part
of the reimbursement. As of June 30, 1999, 1998 and 1997, the Company
would be liable to refund $1,977,759, $1,763,853 and $1,316,788,
respectively, if it discontinued all participation in the branded
14
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
distributors' marketing programs. As of June 30, 1999, 1998 and 1997,
the Company was in full compliance with the requirements of the
agreements and does not anticipate any liabilities to accrue to the
Company as a result of these programs.
Under the terms of another agreement, the Company committed to operate
certain stores as particular branded locations, for a period of at least
ten years, beginning on December 8, 1993, and to purchase a defined
minimum quantity in gallons of gasoline as specified in the agreement.
Should the Company fail to meet its obligations as required by the
agreement, the Company will be liable for the payment of certain
specified amounts which reduce ratably with the passage of time and the
purchase of gasoline under the agreement. As of June 30, 1999, 1998 and
1997, the remaining amount that the Company could be liable for under
this agreement should it discontinue the operation of the stores as
branded stores, or fail to meet its purchase commitments, was
$3,117,793, $4,073,496 and 4,627,056, respectively. As of June 30, 1999,
1998 and 1997 the Company was in full compliance with the requirements
of the agreement and does not anticipate any liabilities to accrue to
the Company as a result of this agreement.
NOTE 11--RETIREMENT PLAN
The Company maintained a defined contribution Employee Wealth
Accumulation Plan (the Plan), containing a profit-sharing feature and a 401(k)
feature, for its full-time employees. Employees were considered full-time if
they worked at least 1,000 hours per year. Employees at least 21 years of age
who had completed one year of full-time service with the Company were eligible
to participate in the Plan. Once eligible, employees became participants on the
first day of the next fiscal quarter.
Annually, the Company elected whether to fund the profit-sharing feature
and the amount to contribute. Funding could not exceed 15% of the wages of
eligible employees. The Company funded the profit-sharing feature during the
year ended June 30, 1999. The Company did not fund the profit-sharing feature
during the years ended June 30, 1998 and 1997.
Participants in the 401(k) feature could defer up to 10% of their
earnings. The Company was required to match 50% of employee contributions up to
6% of the employee's wages (thereby) yielding a maximum match of 3%).
Additional discretionary matching was permitted under the 401(k) feature.
The Plan was terminated effective June 30, 1999. The Company recognized
costs under the Plan totaling $169,527, $94,687 and $80,924 for the years ended
June 30, 1999, 1998 and 1997, respectively.
NOTE 12--INCOME TAXES
The Company recognizes deferred taxes for the expected future tax effects
of temporary differences between the tax bases of assets and liabilities and
their respective bases for financial reporting purposes. Accordingly, the
Company has recorded deferred tax assets and liabilities for differences in
book and tax basis relating to inventory, property and equipment, and deferred
revenue. At June 30, 1999, 1998 and 1997 and for the years then ended, the
Company had no valuation allowance for its deferred tax assets. The Company's
deferred income taxes consisted of the following components:
<TABLE>
<CAPTION>
For the years ended June 30,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets--current...... $ 18,766 $ 1,726 $ 2,962
Deferred tax liability--
noncurrent....................... (1,677,789) (1,516,766) (1,295,852)
----------- ----------- -----------
Net deferred tax liabilities.... $(1,659,023) $(1,515,040) $(1,292,890)
=========== =========== ===========
</TABLE>
15
<PAGE>
R & H MAXXON, INC.
NOTES TO FINANCIAL STATEMENTS--(Concluded)
The Company's reported provision for income taxes differs from the amount
computed by applying statutory rates to income before income taxes, as follows:
<TABLE>
<CAPTION>
For the years ended June 30,
--------------------------------
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Provision for income taxes:
At statutory rates..................... $1,634,891 $1,207,808 $728,588
State income taxes..................... 220,559 156,144 90,351
Other, net............................. (70,240) (12,074) 2,795
---------- ---------- --------
As presented........................... $1,785,210 $1,351,878 $821,734
========== ========== ========
</TABLE>
NOTE 13--FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses approximated fair value as of June 30,
1999, 1998 and 1997 because of the relatively short maturities of these
instruments.
The carrying amount of the note receivable approximated fair value as of
June 30, 1999, 1998 and 1997 since the interest rate on the note receivable was
considered to be a market rate of interest for instruments of this type.
The carrying value of the credit lines and the note payable to the bank
approximated fair value as of June 30, 1999, 1998 and 1997 because the interest
rates on these instruments change with market interest rates.
NOTE 14--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
June 30,
--------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Interest.................................. $ 853,434 $1,132,270 $1,073,405
========== ========== ==========
Income taxes.............................. $1,746,787 $ 780,682 $1,007,390
========== ========== ==========
</TABLE>
NOTE 15--SUBSEQUENT EVENT
Subsequent to June 30, 1999, in connection with the sale of the Company's
outstanding common stock to The Pantry, Inc., the Company entered into a sale-
leaseback transaction with Realty Income Corporation (RIC), an unrelated third
party, whereby land and buildings from 33 store locations were sold to and
leased back from RIC in 33 separate leases. The leases, which have initial
terms of twenty years plus renewal options, were recorded as operating leases
as of July 21, 1999. The deferred revenue associated with this transaction will
be recognized over the terms of the leases in proportion to the related rent
expense. Details of the sale-leaseback transaction follow:
<TABLE>
<S> <C>
Sales price of locations at fair value........................ $29,950,000
Expenses of sale.............................................. (174,194)
-----------
Proceeds from the transaction................................. 29,775,806
Net book value of land and buildings sold..................... (11,919,454)
-----------
Deferred revenue.............................................. $17,856,352
===========
</TABLE>
16
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial data have been
derived by the application of pro forma adjustments to the historical
financial statements of The Pantry for the periods indicated. The adjustments
are described in the accompanying notes. The unaudited pro forma financial
data give effect to our acquisition of Maxxon and our other 1998 and 1999
acquisitions and financing transactions as follows:
The Initial Public Offering of our Common Stock:
The net proceeds from the sale of 6,250,000 shares of our common stock
on June 8, 1999, were approximately $74.6 million. We used the net proceeds to
repay indebtedness of $19.0 million under our bank credit facility and redeem
our outstanding preferred stock and accumulated dividends of $23.3 million,
with the remainder available for acquisitions during the nine months following
the offering.
Fiscal 1998 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
---------------- ------------------------------ ---------- ----------------------- ------
<C> <C> <C> <S> <C>
July 15, 1998 Stallings Oil Company, Inc. Zip Mart Central North Carolina, 42
Virginia
July 2, 1998 Quick Stop Food Mart, Inc. Quick Stop Southeast North
Carolina, Coastal South
Carolina 75
May 2, 1998 United Fuels Corporation, Inc. Sprint Gainesville, Florida 10
March 19, 1998 Wooten Oil Company, Inc. Kwik Mart Eastern North Carolina 23
October 23, 1997 Lil' Champ Food Stores, Inc. Lil' Champ Northeast Florida 440(a)
</TABLE>
- --------
(a) Net of the disposition of 48 convenience stores located throughout eastern
Georgia.
The approximate cost of the 1998 acquisitions and the sources of funding
are as follows:
<TABLE>
<CAPTION>
Company Acquisition Cost Funding Sources
------------------- ---------------- --------------------------------------
(in thousands)
<C> <C> <S>
Stallings Oil $29,300 Proceeds of $25.0 million from our
1998 bank credit facility and cash on
hand
Quick Stop 56,000 Proceeds of $25.0 million from the
sale of 43,478 shares of our common
stock to existing shareholders, $25.0
million from our 1998 bank credit
facility and cash on hand
United Fuels 18,300 Proceeds of $19.0 million from our
1998 bank credit facility
Wooten Oil 9,000 Proceeds of $9.0 million from our 1998
bank credit facility
Lil' Champ 136,400 Proceeds from the issuance of $200.0
million of senior subordinated notes
</TABLE>
Fiscal 1998 Financing Transactions:
. October 23, 1997--we issued $200.0 million of senior subordinated
notes at an interest rate of 10.25%
. October 23, 1997--we repurchased $51.0 million of senior notes with
an interest rate of 12.5% and paid related costs including a 10%
repurchase premium, consent fee, accrued interest and other expenses.
This issuance of new debt and retirement of existing debt,
17
<PAGE>
which results in an annual reduction in interest costs of
approximately $1.148 million, was an integral part of our plan to
acquire Lil' Champ.
. March 19, 1998 through July 15, 1998--we borrowed $78.0 million under
our bank credit facility
Fiscal 1999 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
----------------- -------------------------- ----------------- ------------------------ ------
<C> <C> <C> <S> <C>
July 22, 1999 R&H Maxxon, Inc. Depot Food Stores South Carolina, Georgia 53
February 25, 1999 Taylor Oil Company ETNA North Carolina, Virginia 60
January 28, 1999 Miller Enterprises, Inc. Handy Way North-central Florida 121
and affiliates (a)
November 5, 1998 Express Stop, Inc. Express Stop Southeast North
Carolina, Eastern South
Carolina 22
October 22, 1998 A.G. Lee Oil Company, Inc. Dash-N East-central North
Carolina 10
</TABLE>
- --------
(a) Including real estate assets of Miller Brothers and Circle Investments,
Ltd. consisting of land and buildings leased to and used in the
convenience store operations of Miller Enterprises, Inc.
The approximate cost of the 1999 acquisitions and the sources of funding
are as follows:
<TABLE>
<CAPTION>
Company Acquisition Cost Funding Sources
--------------------------------- ---------------- -------------------------
(in thousands)
<C> <C> <S>
Maxxon $35,809 Proceeds of $12.0 million
from our 1999 bank credit
facility and cash on hand
Taylor Oil 22,850 Proceeds of $19.0 million
from our 1999 bank credit
facility and cash on hand
Miller Enterprises and affiliates 95,100 Proceeds of $95.0 million
from our 1999 bank credit
facility and cash on hand
Express Stop 21,800 Proceeds of $16.0 million
from our 1998 bank credit
facility and cash on hand
A.G. Lee Oil 3,750 Cash on hand
</TABLE>
Fiscal 1999 Financing Transactions:
. January 28, 1999--we entered into a new bank credit facility and used
the proceeds of $245.0 million plus cash on hand to:
. repay $94.0 million of existing debt under our 1998 bank credit
facility
. redeem $49.0 million of outstanding senior notes and pay $2.0
million of related premium costs
. finance $95.0 million of the Miller Enterprises and affiliates
acquisition price and
. pay related fees and accrued and unpaid interest
. The 1999 bank credit facility repaid and replaced the 1998 bank
credit facility and is comprised of $80.0 million Tranche A and
$160.0 million Tranche B term loans, a $45.0 million revolving credit
facility and a $50.0 million acquisition facility
18
<PAGE>
. February 25, 1999--we borrowed $19.0 million on our 1999 revolving
credit facility and used the proceeds plus cash on hand to finance
the purchase price of the Taylor Oil acquisition
Pro Forma Adjustments:
Unaudited Pro Forma Balance Sheet as of June 24, 1999
The unaudited pro forma balance sheet gives effect to our acquisition of
Maxxon on July 22, 1999. The remaining fiscal 1998 and 1999 transactions are
reflected in our historical unaudited balance sheet as of June 24, 1999.
Unaudited Pro Forma Statement of Operations for the Nine Months Ended June 24,
1999
The unaudited pro forma statement of operations for the nine months ended
June 24, 1999 gives effect to the fiscal 1999 acquisitions and the fiscal 1999
financing transactions as if such events occurred at the beginning of fiscal
1998. The fiscal 1998 acquisitions and fiscal 1998 financing transactions are
included in our historical results of operations for the nine-month period. The
periods for which the fiscal 1999 acquisitions have been included in the pro
forma statement of operations are as follows:
. Maxxon--the nine-month period from October 1, 1998 through June 30,
1999
. Taylor Oil--the five-month period from October 1, 1998 through
February 24, 1999
. Miller Enterprises--the four-month period from October 1, 1998
through January 27, 1999
. Express Stop--the one-month period from October 1, 1998 through
October 31, 1998
. A.G. Lee Oil--the one-month period from October 1, 1998 through
October 22, 1998
Unaudited Pro Forma Statement of Operations for the Year Ended September 24,
1998
The unaudited pro forma statement of operations for the year ended
September 24, 1998 gives effect to the 1998 acquisitions and disposition, the
1998 financing transactions, the fiscal 1999 acquisitions and the 1999
financing transactions as if such events occurred at the beginning of fiscal
1998. The periods for which the fiscal 1998 and 1999 acquisitions have been
included in the pro forma statement of operations are as follows:
1998 Acquisitions and Disposition:
. Stallings Oil--the nine-month period from October 1, 1997 through
June 30, 1998
. Quick Stop--the nine-month period from October 1, 1997 through June
30, 1998
. United Fuels--the six-month period from October 1, 1997 through March
31, 1998
. Wooten Oil--the five-month period from October 1, 1997 through
February 28, 1998
. Lil' Champ--the one-month period from September 28, 1997 through
October 23, 1997
. Lil' Champ disposition--the disposition of 48 convenience stores
located throughout eastern Georgia for the eleven-month period from
October 25, 1997 through August 31, 1998
1999 Acquisitions:
. Maxxon--the twelve-month period from July 1, 1997 to June 30, 1998
. Taylor Oil--the twelve-month period from January 1, 1998 through
December 31, 1998
19
<PAGE>
. Miller Enterprises--the twelve-month period from October 1, 1997
through September 30, 1998
. Express Stop--the twelve-month period from October 1, 1997 through
September 30, 1998
. A.G. Lee Oil--the twelve-month period from October 1, 1997 through
September 30, 1998
In connection with the Stallings Oil, Express Stop and Maxxon
acquisitions, we did not acquire all operations of these entities. The
operations not acquired primarily related to a truckstop owned, operated and
retained by Stallings Oil, equity in earnings of affiliates of Express Stop and
a wholesale petroleum business owned, operated, and retained by Maxxon.
The unaudited pro forma financial data are provided for informational
purposes only and do not represent our results of operations or financial
position had the transactions occurred on such dates, nor are they indicative
of our results of operations or financial position as of any future date or
period.
20
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
June 24, 1999
<TABLE>
<CAPTION>
Maxxon Acquisition
The Pantry June and
June 24, 30, Financing Total
1999 1999 Adjustments Pro Forma
---------- ------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 61,211 $ 1,814 $ 12,000 (a) $ 39,216
(35,809)(b)
Receivables, net...... 18,682 1,854 -- 20,536
Inventories........... 65,822 3,059 -- 68,881
Income taxes
receivable........... -- -- -- --
Prepaid expenses...... 3,086 124 -- 3,210
Property held for
sale................. 114 -- -- 114
Deferred income
taxes................ 5,776 18 -- 5,794
-------- ------- -------- --------
Total current
assets............. 154,691 6,869 (23,809) 137,751
-------- ------- -------- --------
Property and equipment,
net.................... 396,404 30,834 (11,919)(c)(d) 413,175
(2,144)(d)
Other assets:
Goodwill, net......... 169,033(a) -- 26,401 (b) 195,434
Deferred lease cost,
net.................. 235 -- -- 235
Deferred financing
cost, net............ 13,122 -- -- 13,122
Environmental
receivables, net..... 13,750 -- -- 13,750
Other................. 8,565 1,625 (1,093)(d) 9,097
-------- ------- -------- --------
Total other assets.. 204,705 1,625 25,308 231,638
-------- ------- -------- --------
Total assets...... $755,800 $39,328 $(12,564) $782,564
======== ======= ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
21
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
June 24, 1999
<TABLE>
<CAPTION>
Maxxon Acquisition
The Pantry June and
June 24, 30, Financing Total
1999 1999 Adjustments Pro Forma
---------- ------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Liabilities and Shareholders'
Equity
Current liabilities:
Current maturities of long-term
debt........................... $ 5,431 $15,616 $(15,616)(d) $ 5,431
Current maturities of capital
lease obligations.............. 1,240 -- -- 1,240
Accounts payable................ 80,713 3,727 -- 84,440
Income tax payable.............. 924 7 6,832 (b)(c) 7,763
Accrued expenses................ 64,704 2,520 -- 67,224
-------- ------- -------- --------
Total current liabilities...... 153,012 21,870 (8,784) 166,098
-------- ------- -------- --------
Senior subordinated notes....... 200,000 -- -- 200,000
1999 bank credit facility....... 223,294 -- 12,000 (a) 235,294
Other long-term debt............ 1,976 -- -- 1,976
-------- ------- -------- --------
Total long-term debt........... 425,270 -- 12,000 437,270
-------- ------- -------- --------
Other non-current liabilities:
Environmental reserve........... 18,024 -- -- 18,024
Capital lease obligations....... 11,190 -- -- 11,190
Employment obligations.......... 657 -- -- 657
Deferred income taxes........... 23,419 1,678 -- 25,097
Other non-current liabilities... 27,533 -- -- 27,533
-------- ------- -------- --------
Total other non-current
liabilities................... 80,823 1,678 -- 82,501
-------- ------- -------- --------
Shareholders' equity:
Common stock, par value $.01 per
share; 50,000,000 shares
authorized, 18,111,478 shares
issued and outstanding......... 181 22 (22)(b) 181
Additional paid-in capital...... 126,328 283 (283)(b) 126,328
Shareholder loans............... (937) -- -- (937)
Retained deficit................ (28,877) 15,475 (15,475)(b) (28,877)
-------- ------- -------- --------
Total shareholders' equity..... 96,695 15,780 (15,780) 96,695
-------- ------- -------- --------
Total liabilities and
shareholders' equity.......... $755,800 $39,328 $(12,564) $782,564
======== ======= ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(dollars in thousands except per share amounts)
(a) Reflects borrowings of $12.0 million under our 1999 bank credit facility at
a rate of 8.18% to partially fund the Maxxon acquisition.
(b) Goodwill related to the Maxxon acquisition has been determined as follows:
<TABLE>
<S> <C>
Aggregate purchase price (less net cash acquired from sale-
leaseback transaction of $14,160)................................. $ 35,809
Less shareholders' equity.......................................... (15,780)
Taxes payable on gain from sale-leaseback transaction (see note
c)................................................................ 6,832
Elimination of certain net assets not acquired by The Pantry (see
note d)........................................................... (460)
--------
Total............................................................ $ 26,401
========
</TABLE>
The 1998 and 1999 acquisitions have been accounted for using the purchase
method of accounting. Purchase price allocations for the Lil' Champ
acquisition, the Wooten Oil acquisition, the Stallings Oil acquisition, the
Quick Stop acquisition and the United Fuels acquisition have been finalized.
Purchase price allocations for all other 1998 and 1999 acquisitions have not
been finalized and are based on available information, internal estimates
and assumptions we believe are reasonable.
For each acquisition, the purchase price will be allocated to the tangible
and intangible assets acquired and liabilities assumed based upon their
respective fair values at the time the acquisitions were consummated,
pending completion of appraisals of property and equipment acquired. The
excess of the purchase price over the historical basis of the net assets
acquired has been allocated to the net assets acquired based on preliminary
estimates. The actual allocation of the purchase cost, however, and the
resulting effect on income from operations may differ significantly from the
pro forma amounts included herein pending the completion of appraisals and
other purchase price adjustments.
The purchase price of the Maxxon acquisition is subject to working capital
and debt adjustments pending the completion of a closing balance sheet audit
of Maxxon as of July 21, 1999.
The purchase price of the Miller Enterprises and affiliates acquisition is
subject to working capital and capital expenditure adjustments pending the
completion of a closing balance sheet audit of Miller Enterprises as of
January 27, 1999.
(c) Prior to the sale of its stock to The Pantry, Maxxon entered into a sale-
leaseback transaction with an unrelated third party in which it sold land
and buildings with a carrying value of $11,919 for net proceeds of $29,776.
The gain on the sale of property of $17,857 was recorded by Maxxon as
deferred revenue, to be amortized over the twenty-year term of the leases.
For tax purposes, the tax gain is recognized in the current period.
Accordingly, upon completion of the sale-leaseback transaction, Maxxon
recorded current income tax expense and payable of $6,832. The leases were
determined to be operating leases. Upon completion of the Maxxon
acquisition, The Pantry assumed all lease obligations and tax liabilities
related to the sale-leaseback transaction.
23
<PAGE>
(d) Reflects the elimination of certain assets and liabilities we did not
acquire or assume in connection with the Maxxon acquisition:
<TABLE>
<S> <C>
Property and equipment............................................. $ (2,144)
Property and equipment--sale-leaseback assets...................... (11,919)
Other assets....................................................... (1,093)
Current maturities of long-term debt............................... 15,616
--------
Total............................................................ $ 460
========
</TABLE>
24
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Nine Months Ended June 24, 1999
<TABLE>
<CAPTION>
Historical
--------------------------------------------
Nine Months
Ended Nine Months Acquisition
June 24, Ended Fiscal and
1999 June 30, 1999 1999 Financing IPO Total
The Pantry Maxxon Acquisitions(a) Adjustments Subtotal Adjustments Pro Forma
----------- ------------- --------------- ----------- --------- ----------- ----------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales..... $ 503,047 $26,387 $ 49,122 $ -- $ 578,556 $ -- $ 578,556
Gasoline sales........ 611,733 60,831 80,645 (5,890)(c) 747,319 -- 747,319
Commissions........... 17,323 2,501 757 (6)(c) 20,575 -- 20,575
---------- ------- -------- ------- --------- ------ ----------
Total revenue........ 1,132,103 89,719 130,524 (5,896) 1,346,450 -- 1,346,450
---------- ------- -------- ------- --------- ------ ----------
Cost of Sales:
Merchandise........... 338,458 18,357 29,666 -- 386,481 -- 386,481
Gasoline.............. 537,273 53,701 70,450 (5,699)(c) 655,725 -- 655,725
---------- ------- -------- ------- --------- ------ ----------
Total cost of sales.. 875,731 72,058 100,116 (5,699)(c) 1,042,206 -- 1,042,206
---------- ------- -------- ------- --------- ------ ----------
Gross profit........... 256,372 17,661 30,408 (197) 304,244 -- 304,244
---------- ------- -------- ------- --------- ------ ----------
Store operating
expenses............... 152,066 8,864 23,397 (1,507)(d) 185,719 -- 185,719
2,932 (e) --
(33)(c)
General and
administrative
expenses............... 35,450 2,433 2,631 -- 40,514 -- 40,514
Merger integration
costs.................. -- -- 695 -- 695 -- 695
Stock compensation
charge................. -- -- 2,029(b) -- 2,029 -- 2,029
Impairment of long-
lived assets........... -- -- 47 -- 47 -- 47
Depreciation and
amortization........... 28,776 2,500 2,036 1,157 (f) 34,178 -- 34,178
(36)(g) --
(222)(h) --
(33)(c)
---------- ------- -------- ------- --------- ------ ----------
Total operating
expense............... 216,292 13,797 30,835 2,258 263,182 -- 263,182
---------- ------- -------- ------- --------- ------ ----------
Income from
operations............. 40,080 3,864 (427) (2,455) 41,062 -- 41,062
---------- ------- -------- ------- --------- ------ ----------
Other Income (Expense):
Interest.............. (29,580) (741) (131) (2,797)(i) (33,190) 1,176(l) (32,014)
59 (c)
Miscellaneous......... 414 382 25 (187)(c) 634 -- 634
---------- ------- -------- ------- --------- ------ ----------
Total other income
(expense)............ (29,166) (359) (106) (2,925) (32,556) 1,176 (31,380)
---------- ------- -------- ------- --------- ------ ----------
Income (loss) before
income taxes........... 10,914 3,505 (533) (5,380) 8,506 1,176 9,682
Income tax expense
(benefit).............. 4,600 1,264 (508) (1,741)(j) 3,615 500 (j) 4,115
---------- ------- -------- ------- --------- ------ ----------
Net income (loss)
before extraordinary
loss................... $ 6,314 $ 2,241 $ (25) $(3,639)(k) $ 4,891 $ 676 $ 5,567
========== ======= ======== ======= ========= ====== ==========
Earnings (Loss) Per
Share Before
Extraordinary Loss:
Basic................. $ 0.30(k) $ 0.31(k)
========== ==========
Diluted............... $ 0.27(k) $ 0.29(k)
========== ==========
Weighted-Average Number
of Shares Outstanding:
Basic................. 12,225(k) 18,109(k)
========== ==========
Diluted............... 13,388(k) 19,272(k)
========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
25
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Year Ended September 24, 1998
<TABLE>
<CAPTION>
Historical
------------------------------------------------------------------------------------
Year Ended Year Ended 1998
September 24, June 30, Acquisitions Fiscal Acquisition and
1998 1998 and 1999 Financing IPO
The Pantry Maxxon Disposition(m) Acquisitions(n) Adjustments Subtotal Adjustments
------------- ---------- -------------- --------------- --------------- ---------- -----------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise
sales............. $460,798 $ 26,789 $ 75,593 $156,227 $ (402)(c) $ 719,005 $ --
Gasoline sales.... 509,958 81,802 181,814 267,481 (26,162)(c) 1,014,893 --
Commissions....... 14,128 2,633 3,633 5,217 (473)(c) 25,138 --
-------- -------- -------- -------- -------- ---------- ------
Total revenues.. 984,884 111,224 261,040 428,925 (27,037) 1,759,036 --
-------- -------- -------- -------- -------- ---------- ------
Cost of Sales:
Merchandise....... 303,968 18,379 54,219 103,097 (207)(c) 479,456 --
Gasoline.......... 447,565 73,310 161,074 237,327 (23,020)(c) 896,256 --
-------- -------- -------- -------- -------- ---------- ------
Total cost of
sales........... 751,533 91,689 215,293 340,424 (23,227) 1,375,712 --
-------- -------- -------- -------- -------- ---------- ------
Gross profit....... 233,351 19,535 45,747 88,501 (3,810) 383,324 --
-------- -------- -------- -------- -------- ---------- ------
Store operating
expenses........... 140,089 10,077 27,164 60,021 (3,015)(c) 235,370 --
(4,424)(d) --
5,492 (e) --
(34)(c)
General and
administrative
expenses........... 32,761 2,705 7,506 11,909 (356)(c) 54,483 --
(42)(o) --
Merger integration
costs.............. 1,016 -- -- 261 -- 1,277 --
Impairment of long-
lived assets....... -- -- -- 188 -- 188 --
Depreciation and
amortization....... 27,642 2,434 5,189 5,517 (209)(c) 43,757 --
4,040 (f) --
(405)(g) --
(451)(h) --
-------- -------- -------- -------- -------- ---------- ------
Total operating
expense............ 201,508 15,216 39,859 77,896 596 335,075 --
-------- -------- -------- -------- -------- ---------- ------
Income from
operations......... 31,843 4,319 5,888 10,605 (4,406) 48,249 --
-------- -------- -------- -------- -------- ---------- ------
Other Income
(Expense):
Interest.......... (28,946) (1,096) (1,687) (430) (12,476)(i) (44,528) 1,568(l)
107 (c)
Miscellaneous..... 1,776 329 137 627 (401)(c) 2,468 --
-------- -------- -------- -------- -------- ---------- ------
Total other
income (expense)
................ (27,170) (767) (1,550) 197 (12,770) (42,060) 1,568
-------- -------- -------- -------- -------- ---------- ------
Income (loss)
before income
taxes.............. 4,673 3,552 4,338 10,802 (17,176) 6,189 1,568
Income tax expense
(benefit).......... -- 1,352 364 915 -- 2,631 666(j)
-------- -------- -------- -------- -------- ---------- ------
Net income (loss)
before
extraordinary
item............... $ 4,673 $ 2,200 $ 3,974 $ 9,887 $(17,176)(k) $ 3,558 $ 902
======== ======== ======== ======== ======== ========== ======
Earnings Per Share
Before
Extraordinary Loss:
Basic............. $ 0.18(k)
========
Diluted........... $ 0.16(k)
========
Weighted-Average
Number of Shares
Outstanding:
Basic............. 9,732(k)
========
Diluted........... 10,840(k)
========
<CAPTION>
Total
Pro Forma
-------------
<S> <C>
Revenues:
Merchandise
sales............. $ 719,005
Gasoline sales.... 1,014,893
Commissions....... 25,138
-------------
Total revenues.. 1,759,036
-------------
Cost of Sales:
Merchandise....... 479,456
Gasoline.......... 896,256
-------------
Total cost of
sales........... 1,375,712
-------------
Gross profit....... 383,324
-------------
Store operating
expenses........... 235,370
General and
administrative
expenses........... 54,483
Merger integration
costs.............. 1,277
Impairment of long-
lived assets....... 188
Depreciation and
amortization....... 43,757
-------------
Total operating
expense............ 335,075
-------------
Income from
operations......... 48,249
-------------
Other Income
(Expense):
Interest.......... (42,960)
Miscellaneous..... 2,468
-------------
Total other
income (expense)
................ (40,492)
-------------
Income (loss)
before income
taxes.............. 7,757
Income tax expense
(benefit).......... 3,297
-------------
Net income (loss)
before
extraordinary
item............... $ 4,460
=============
Earnings Per Share
Before
Extraordinary Loss:
Basic............. $ 0.30(k)
=============
Diluted........... $ 0.26(k)
=============
Weighted-Average
Number of Shares
Outstanding:
Basic............. 15,982(k)
=============
Diluted........... 17,090(k)
=============
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
(dollars in thousands)
(a) The fiscal 1999 acquisitions included in the unaudited pro forma statement
of operations for the nine months ended June 24, 1999 consist of the
historical financial statements of the following entities:
<TABLE>
<CAPTION>
One-month Four-month
period period Five-month
October 1, October 1, period
1998 1998 October 1,
through through 1998 through
October 31, January 27, February 24,
1998 1999 1999
----------- ----------- ------------ Total
Express Miller Taylor Other 1999 Fiscal 1999
Stop Enterprises Oil Acquisitions Acquisitions
----------- ----------- ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales...... $1,698 $ 36,072 $10,737 $ 615 $49,122
Gasoline sales......... 2,407 45,191 32,012 1,035 80,645
Commissions............ 191 404 104 58 757
------ -------- ------- ------ -------
Total revenue......... 4,296 81,667 42,853 1,708 130,524
------ -------- ------- ------ -------
Cost of Sales:
Merchandise............ 1,232 20,736 7,237 461 29,666
Gasoline............... 2,184 39,608 27,701 957 70,450
------ -------- ------- ------ -------
Total cost of sales... 3,416 60,344 34,938 1,418 100,116
------ -------- ------- ------ -------
Gross profit............ 880 21,323 7,915 290 30,408
------ -------- ------- ------ -------
Store operating
expenses............... 433 17,961 4,754 249 23,397
General and
administrative
expenses............... 105 1,503 1,015 8 2,631
Merger integration
costs.................. -- 695 -- -- 695
Stock compensation
charge................. -- 2,029 -- -- 2,029
Impairment of long-lived
assets................. -- -- 47 -- 47
Depreciation and
amortization........... 61 1,281 685 9 2,036
------ -------- ------- ------ -------
Total operating
expense.............. 599 23,469 6,501 266 30,835
------ -------- ------- ------ -------
Income (loss) from
operations............. 281 (2,146) 1,414 24 (427)
------ -------- ------- ------ -------
Other Income (Expense):
Interest............... (5) (126) -- -- (131)
Miscellaneous.......... 13 2 -- 10 25
------ -------- ------- ------ -------
Total other........... 8 (124) -- 10 (106)
------ -------- ------- ------ -------
Income (loss) before
income taxes........... 289 (2,270) 1,414 34 (533)
Income tax expense
(benefit).............. -- (508) -- -- (508)
------ -------- ------- ------ -------
Net income (loss) before
extraordinary item..... $ 289 $ (1,762) $ 1,414 $ 34 $ (25)
====== ======== ======= ====== =======
</TABLE>
(b) On January 26, 1999, in anticipation of its acquisition by The Pantry,
Miller Enterprises redeemed 18,502 shares of its restricted stock. In
connection with this redemption of stock, Miller Enterprises recognized a
charge to compensation expense of $2,029 for the period October 1, 1998
through January 27, 1999. This non-recurring charge is not reflective of
The Pantry's continuing operations after the Miller acquisition and would
not have been incurred by The Pantry had it owned Miller Enterprises as of
the beginning of fiscal 1998.
27
<PAGE>
(c) Reflects the elimination of operations not acquired. These operations
relate to a truckstop owned, operated, and retained by Stallings Oil,
equity in earnings of affiliates of Express Stop and a wholesale petroleum
business owned, operated and retained by Maxxon which were not acquired by
The Pantry.
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended June 24, September 24,
1999 1998
------------------- ------------------
Decrease in expenses (decrease in income)
<S> <C> <C> <C>
Fiscal 1998 Acquisitions:
Merchandise sales........... $ -- $ (402)
Gasoline sales.............. -- (15,823)
Commissions................. -- (467)
Merchandise cost of sales... -- 207
Gasoline cost of sales...... -- 13,004
Store operating expenses.... -- 3,015
General and administrative
expenses................... -- 356
Depreciation and
amortization............... -- 169
Fiscal 1999 Acquisitions:
Gasoline sales.............. (5,890) (10,339)
Commissions................. (6) (6)
Gasoline cost of sales...... 5,699 10,016
Store operating expense..... 33 34
Depreciation and
amortization............... 33 40
Interest expense............ 59 107
Miscellaneous income........ (187) (401)
</TABLE>
(d) Historically, Miller Enterprises incurred rental expense related to stores
leased from its affiliates. These stores were acquired by us in connection
with the Miller Enterprises acquisition and all leases with Miller
Enterprises affiliates were terminated. As a result, rental expenses of
$1,507 for the nine months ended June 24, 1999 and $4,424 for the year
ended September 24, 1998 have been eliminated.
(e) Reflects an increase in store rental expense of $2,041 for Maxxon and $891
for Taylor Oil for the nine months ended June 24, 1999 and $288 for Quick
Stop, $2,437 for Taylor Oil, and $2,767 for Maxxon for the year ended
September 24, 1998 in connection with an obligation to lease stores from
the former owners of Quick Stop, Taylor Oil, and Maxxon at current market
values at the dates of acquisition. The rent increases were effective
concurrent with the Quick Stop acquisition, which occurred on July 2,
1998, the Taylor Oil acquisition, which occurred on February 25, 1999, and
the Maxxon acquisition which occurred on July 22, 1999.
(f) The 1998 and 1999 acquisitions have been accounted for using the purchase
method of accounting. Purchase price allocations for the Lil' Champ
acquisition, the Wooten Oil acquisition and the United Fuels acquisition
have been finalized. Purchase price allocations for all other 1998 and
1999 acquisitions have not been finalized and are based on available
information, internal estimates and assumptions we believe are reasonable.
For each acquisition, the purchase price will be allocated to the tangible
and intangible assets acquired and liabilities assumed based upon their
respective fair values at the time the acquisitions were consummated,
pending completion of appraisals of property and equipment acquired. The
excess of the purchase price over the historical basis of the net assets
acquired has been allocated to the net assets acquired based on preliminary
estimates. The actual allocation of
28
<PAGE>
the purchase cost, however, and the resulting effect on income from
operations may differ significantly from the pro forma amounts included
herein pending the completion of appraisals and other purchase price
adjustments.
The purchase price of the Maxxon acquisition is subject to working capital
and debt adjustments pending the completion of a closing balance sheet
audit of Maxxon as of July 21, 1999.
The purchase price of the Miller Enterprises and affiliates acquisition is
subject to working capital and capital expenditure adjustments pending the
completion of a closing balance sheet audit of Miller Enterprises as of
January 27, 1999.
The following table summarizes the additional amortization expense to be
incurred in connection with the various 1998 and 1999 transactions
described above:
<TABLE>
<CAPTION>
Estimated Nine Months Ended Year Ended
Recorded Useful Life June 24, September 24,
Acquisitions Goodwill (in years) 1999 1998
------------ -------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
1998 acquisitions:
Lil' Champ............. $ 42,622 30 $ -- $ 118
Wooten Oil............. 126 30 -- --
United Fuels........... 7,386 30 -- 123
Quick Stop............. 35,928 30 -- 898
Stallings Oil.......... 15,505 30 -- 388
1999 acquisitions:
A.G. Lee Oil........... 355 30 12
Express Stop........... 12,163 30 34 405
Miller Enterprises and
affiliates............ 25,000 30 278 833
Taylor Oil............. 13,300 30 185 443
Maxxon................. 26,401 30 660 880
-------- ------ ------
$178,786 1,157 4,100
========
Less historical recorded
predecessor amounts.... -- 60
------ ------
Adjustment.............. $1,157 $4,040
====== ======
</TABLE>
29
<PAGE>
(g) Reflects additional depreciation expense in connection with the various
1998 and 1999 acquisition and financing transactions as follows:
<TABLE>
<CAPTION>
Recorded
Fair Value of
Property and Estimated Nine Months Ended Year Ended
Equipment Useful Life June 24, September 24,
Acquisitions Acquired (in years) 1999 1998
------------ ------------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
1998 acquisitions:
Lil' Champ............. $155,382 10-35 $ -- $ 985
Wooten Oil............. 7,600 10 -- 317
United Fuels........... 15,400 10 -- 770
Quick Stop............. 15,000 10-35 -- 1,125
Stallings Oil.......... 10,313 10-35 -- 773
Georgia stores
disposition........... -- -- (516)
1999 acquisitions:
A.G. Lee Oil........... 2,500 10 54 250
Express Stop........... 7,095 10 118 711
Miller Enterprises and
affiliates............ 79,335 10-35 1,928 5,958
Taylor Oil............. 4,750 10 198 475
Maxxon................. 16,771 10-35 2,169 1,618
-------- ------ -------
$314,146 4,467 12,466
======== ------ -------
Less historical recorded
amounts................ 4,503 12,871
------ -------
Adjustment.............. $ (36) $ (405)
====== =======
</TABLE>
As noted in note (c), The Pantry did not acquire a truckstop owned,
operated, and retained by Stallings Oil. Included in the historical
financial statements of Stallings Oil for the nine months ended June 30,
1998 is $169 of depreciation expense related to the truckstop, which as been
eliminated.
The Pantry also did not acquire a wholesale petroleum business owned,
operated, and retained by Maxxon. Included in the historical financial
statements of Maxxon for the nine months ended June 30, 1999 and the year
ended June 30, 1999 is $33 and $40 of depreciation expense related to the
wholesale business, which has been eliminated.
(h) Reflects additional amortization of deferred financing costs resulting from
entering into our 1999 bank credit facility and the removal of deferred
financing costs associated with the repayment of our 1998 bank credit
facility and the repurchase of our senior notes as follows:
<TABLE>
<CAPTION>
Straight-
Financing line Six Months
Costs Amortization Ended Year Ended
Incurred Period March 25, September 24,
Transaction (Written-off) (in years) 1999 1998
----------- ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Issuance of $200 million
senior subordinated
notes and 1998 bank
credit facility........ $14,044 7 $ -- $ 167
Repurchase of $51
million of senior
notes.................. (2,006) 7 -- (24)
Entering into 1999 bank
credit facility........ 3,210 6 178 535
Repurchase of $49
million of outstanding
senior notes and
repayment of 1998 bank
credit facility........ (3,972) 7 (400) (1,129)
----- -------
Adjustment.............. $(222) $ (451)
===== =======
</TABLE>
Deferred financing costs relating to the issuance of our $200 million senior
subordinated notes and our 1998 credit facility are amortized using the
straight line method over the terms of the instruments because the
instruments either require interim payments of interest only or require
30
<PAGE>
interim interest payments computed using variable interest rates which are
periodically revised based on current market conditions. For purposes of
the unaudited pro forma financial statements, deferred financing costs
related to the 1999 credit facility are amortized using the straight line
method, which approximates the results that would be computed using the
effective interest method.
(i) Reflects additional interest expense in connection with the various 1998
and 1999 financing and acquisitions transactions as follows:
<TABLE>
<CAPTION>
Principal Interest Nine Months Ended Year Ended
Borrowed Rate June 24, September 24,
Acquisition/Financing (Retired) (per annum) 1999 1998
--------------------- --------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Issuance of senior
subordinated notes..... $200,000 10.25% $ -- $ 1,708
Redemption of senior
notes in Lil' Champ
acquisition............ (51,000) 12.50 -- (531)
1998 acquisitions....... 78,000 8.25 -- 4,187
1999 acquisitions and
proceeds to redeem
outstanding senior
notes ................. 186,000 8.25 4,916 15,361
Redemption of senior
notes from proceeds of
1999 bank credit
facility............... (49,000) 12.50 (2,042) (6,125)
Borrowings under 1999
bank credit facility to
fund Maxxon
acquisition............ 12,000 8.18 736 982
------- -------
Subtotal............... 3,610 15,582
Less historical recorded
amounts related to
indebtedness not
assumed................ 813 3,106
------- -------
Adjustment.............. $ 2,797 $12,476
======= =======
</TABLE>
In connection with the 1998 and 1999 acquisitions, The Pantry did not
assume debt obligations of the acquired entities totaling approximately
$70,300 and having interest rates ranging from 5.75% to 8.75%.
The interest rates disclosed above are based on the current weighted-
average interest rates for which The Pantry has an obligation. Assuming a
0.125% increase or decrease in the variable rate bank credit facility,
interest expense, net of taxes, would increase or decrease by $90 for the
nine months ended June 24, 1999 and $179 for the year ended September 24,
1998.
(j) Adjusts income tax expense for an assumed tax rate of 42.5% for each of
the periods presented.
(k) For each period presented, net income (loss) excludes an extraordinary
loss of $3,584 related to the redemption of $48,995 of senior notes and
the amendment of our bank credit facility. In addition, net income (loss)
before extraordinary items for the year ended September 24, 1998 excludes
an extraordinary loss of $7,998 incurred related to the costs of the
redemption of $51,000 of senior notes.
Pro forma basic and diluted earnings (loss) per share exclude dividends and
premium on redemption of our preferred stock of $2,683 for the nine months
ended June 24, 1999 and $2,942 for the year ended September 24, 1998, as if
the initial offering of our stock and the redemption of our preferred stock
occurred at the beginning of fiscal 1998.
In addition, basic and diluted weighted average shares outstanding have
been increased by 5,884 shares for the nine months ended June 30, 1999 and
6,250 shares for the year ended September 24, 1998 to arrive at pro forma
weighted average shares outstanding as if the offering of 6,250 shares of
our common stock had occurred at the beginning of fiscal 1998.
(l) Reflects the application of net proceeds of approximately $19,000 to repay
outstanding indebtedness at the weighted-average rate of 8.25%.
31
<PAGE>
(m) The fiscal 1998 acquisitions and disposition included in the unaudited pro
forma statement of operations for the year ended September 24, 1998 consist
of the historical financial statements of the following entities:
<TABLE>
<CAPTION>
One-month Eleven-month
period Nine-month Nine-month period
September 28, period period October 1, 1997
1997 through October 1, 1997 October 1, 1997 through
October 23, through through August 31, 1998
1997 June 30, 1998 June 30, 1998 Lil' Champ Total 1998
------------- --------------- --------------- Other 1998 Disposition Acquisitions/
Lil' Champ Quick Stop Stallings Oil Acquisitions (48 Stores) Disposition
------------- --------------- --------------- ------------ --------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales...... $17,752 $ 45,623 $ 20,029 $ 7,265 $(15,076) $ 75,593
Gasoline sales......... 21,397 69,277 88,452 16,525 (13,837) 181,814
Commissions............ 570 2,278 1,806 379 (1,400) 3,633
------- -------- -------- ------- -------- --------
Total revenue......... 39,719 117,178 110,287 24,169 (30,313) 261,040
------- -------- -------- ------- -------- --------
Cost of Sales:
Merchandise............ 11,421 34,108 14,357 5,018 (10,685) 54,219
Gasoline............... 18,682 62,691 78,289 13,535 (12,123) 161,074
------- -------- -------- ------- -------- --------
Total cost of sales... 30,103 96,799 92,646 18,553 (22,808) 215,293
------- -------- -------- ------- -------- --------
Gross profit............ 9,616 20,379 17,641 5,616 (7,505) 45,747
------- -------- -------- ------- -------- --------
Store operating
expenses............... 5,957 12,029 12,784 2,429 (6,035) 27,164
General and
administrative
expenses............... 1,698 2,771 1,334 1,703 -- 7,506
Depreciation and
amortization........... 952 2,233 2,029 491 (516) 5,189
------- -------- -------- ------- -------- --------
Total operating
expense.............. 8,607 17,033 16,147 4,623 (6,551) 39,859
------- -------- -------- ------- -------- --------
Income from operations.. 1,009 3,346 1,494 993 (954) 5,888
------- -------- -------- ------- -------- --------
Other Income (Expense):
Interest............... (121) (497) (1,055) (14) -- (1,687)
Miscellaneous.......... -- 137 -- -- -- 137
------- -------- -------- ------- -------- --------
Total other expense... (121) (360) (1,055) (14) -- (1,550)
------- -------- -------- ------- -------- --------
Income before income
taxes.................. 888 2,986 439 979 (954) 4,338
Income tax expense
(benefit).............. 364 -- -- -- -- 364
------- -------- -------- ------- -------- --------
Net income before
extraordinary item..... $ 524 $ 2,986 $ 439 $ 979 $ (954) $ 3,974
======= ======== ======== ======= ======== ========
</TABLE>
In connection with the October 23, 1997 acquisition of Lil' Champ and as
contemplated at the consummation date, The Pantry sold all 48 Lil' Champ
store operations and idle property in the state of Georgia. The sale was
completed on September 1, 1998. As required by Statement of Financial
Accounting Standards No. 121, these assets were measured at fair value less
costs to sell during the allocation period following the consummation date
of the acquisition. The Pantry received cash proceeds of $2,500 from the
disposition, which approximated the carrying value of the assets.
Accordingly, no gain or loss was recorded on the disposition.
32
<PAGE>
(n) The fiscal 1999 acquisitions included in the unaudited pro forma statement
of operations for the year ended September 24, 1998 consist of the
historical financial statements of the following entities:
<TABLE>
<CAPTION>
Twelve-month Twelve-month Twelve-month
period period period
October October January
1, 1997 1, 1997 1, 1998
through through through
September September December 31,
30, 1998 30, 1998 1998
------------ ------------ ------------
Total
Miller Other 1999 Fiscal 1999
Express Stop Enterprises Taylor Oil Acquisitions Acquisitions
------------ ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales...... $20,720 $100,338 $ 25,587 $ 9,582 $156,227
Gasoline sales......... 27,736 139,734 83,054 16,957 267,481
Commissions............ 2,209 1,988 267 753 5,217
------- -------- -------- ------- --------
Total revenue......... 50,665 242,060 108,908 27,292 428,925
------- -------- -------- ------- --------
Cost of Sales:
Merchandise............ 15,747 63,387 17,022 6,941 103,097
Gasoline............... 24,765 124,258 72,856 15,448 237,327
------- -------- -------- ------- --------
Total cost of sales... 40,512 187,645 89,878 22,389 340,424
------- -------- -------- ------- --------
Gross profit............ 10,153 54,415 19,030 4,903 88,501
------- -------- -------- ------- --------
Store operating
expenses............... 5,284 40,173 11,135 3,429 60,021
General and
administrative
expenses............... 968 8,442 1,926 573 11,909
Merger integration
costs.................. -- 261 -- -- 261
Impairment of long-lived
assets................. -- -- 188 -- 188
Depreciation and
amortization........... 788 3,214 1,400 115 5,517
------- -------- -------- ------- --------
Total operating
expense.............. 7,040 52,090 14,649 4,117 77,896
------- -------- -------- ------- --------
Income from operations.. 3,113 2,325 4,381 786 10,605
------- -------- -------- ------- --------
Other Income (Expense):
Interest............... (116) (305) -- (9) (430)
Miscellaneous.......... 181 356 -- 90 627
------- -------- -------- ------- --------
Total other .......... 65 51 -- 81 197
------- -------- -------- ------- --------
Income (loss) before
income taxes........... 3,178 2,376 4,381 867 10,802
Income tax expense
(benefit).............. -- 915 -- -- 915
------- -------- -------- ------- --------
Net income (loss) before
extraordinary item..... $ 3,178 $ 1,461 $ 4,381 $ 867 $ 9,887
======= ======== ======== ======= ========
</TABLE>
(o) Historically, Lil' Champ paid Docks U.S.A., Inc., Lil' Champ's parent
company, service agreement fees. The service agreement was terminated
concurrent with the acquisition of Lil' Champ. Consequently, $42 of service
agreement fees have been eliminated for the year ended September 24, 1998.
33
<PAGE>
SIGNATURES
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 hereunto duly authorized.
Date: October 5, 1999
The Pantry, Inc.
/s/ William T. Flyg
By: _________________________________
William T. Flyg
Senior Vice President Finance and
Secretary
34
