<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 25, 1999
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-72574 56-1574463
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification Number)
1801 Douglas Drive, P.O. 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 the retail operations sold to The
Pantry of Taylor Oil Company ("Taylor Oil") as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998, and the notes
thereto, were previously filed, within the meaning of Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended, in The Pantry's
Registration Statement on Form S-1, filed with the Securities and Exchange
Commission on March 11, 1999, as amended on June 4, 1999 (the "Registration
Statement").
(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 of Taylor Oil and the
acquisition on January 28, 1999 of Miller Enterprises, Inc. ("Miller
Enterprises") and certain other real estate assets of certain affiliates of
Miller Enterprises are described in the accompanying notes. The unaudited pro
forma consolidated financial data also give effect to (i) the estimated net
proceeds from the proposed offering of common stock as contemplated in the
Registration Statement; (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 December 24, 1998
3) Notes to Unaudited Pro Forma Balance Sheet Data
4) Unaudited Pro Forma Statement of Operations Data for the
Quarter Ended December 24, 1998
5) Unaudited Pro Forma Statement of Operations Data for the
Year Ended September 24, 1998
6) Notes to Unaudited Pro Forma Statement of Operations Data
-2-
<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, Inc. ("The Pantry") for the periods indicated. The
adjustments are described in the accompanying notes.
On January 28, 1999, The Pantry acquired 100% of the outstanding capital
stock of Miller Enterprises, Inc. ("Miller Enterprises"), and certain other real
estate assets of Miller Brothers and Circle Investments, Ltd., affiliates of
Miller Enterprises (collectively referred to as "Miller Enterprises and
Affiliates"). Miller Enterprises is a leading operator of convenience stores
operating one hundred twenty-one (121) stores under the name "Handy Way" and
located primarily in central Florida. The purchase price was $82,000,000 in cash
plus certain working capital and other adjustments. The Company intends to
continue to operate the assets of Miller Enterprises and Affiliates as they have
historically been operated. The source of funds for the acquisition was the 1999
Credit Facility (as defined below) and cash on hand.
On February 25, 1999, The Pantry acquired 60 convenience stores and
related assets from Taylor Oil Company ("Taylor Oil"). The real property on
which the stores are located has been leased or subleased from Taylor Oil or
affiliated parties. Of the 60 leases, 51 are for terms of 15 years with four
five-year renewal options. The remaining nine subleases are for terms ranging
from three to 18 years, exclusive of renewal options. The acquired convenience
stores are located in North Carolina and Virginia. The purchase price was
approximately $22,850,000 in cash plus certain adjustments. The Company intends
to continue to operate the assets of Taylor Oil as they have historically been
operated. The source of funds for the acquisition was The Pantry's 1999 Credit
Facility and cash on hand.
On March 11, 1999, The Pantry filed a Registration Statement on Form S-1,
as amended on June 4, 1999 (the "Registration Statement"), relating to the
offering of 6,250,000 shares of common stock at an assumed offering price of
$16.00 per share. The unaudited pro forma financial data reflect estimated net
proceeds from the proposed offering of $92.0 million and the application of such
proceeds to (1) repay outstanding indebtedness under our Amended Credit Facility
of $19.0 million and (2) redeem preferred stock of $17.5 million and pay accrued
dividends of $5.1 million.
The unaudited pro forma financial data also give effect to the following:
Other Fiscal 1999 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
- ----------------- --------------------------- --------------- --------------------------------- --------
<S> <C> <C> <C> <C>
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>
The approximate cost of the Other 1999 acquisitions and the sources of
funding are as follows:
<TABLE>
<CAPTION>
Company Acquisition Cost Funding Sources
- ---------------------- ------------------ ---------------------------------
(in thousands)
<S> <C> <C>
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>
3
<PAGE>
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
Fiscal 1998 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
- ----------------- ---------------------------- ---------- ----------------------------------- ------
<S> <C> <C> <C> <C>
July 15, 1998 Stallings Oil Company, Inc. Zip Mart Central North Carolina, Virginia 42
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)
- --------
(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:
Company Acquisition Cost Funding Sources
----------------------- ---------------- -------------------------------------------------------
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, 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
Pro Forma Adjustments:
The unaudited pro forma balance sheet gives also effect to the offering of
our common stock and the repayment of $19.0 million of our long-term debt. The
unaudited pro forma balance sheet also gives effect to the Miller Enterprises
and Affiliates and Taylor Oil acquisitions and the fiscal 1999 financing
transactions. The fiscal 1998 acquisitions, the Dash-N and Express Stop
acquisitions and the 1998 financing transactions are reflected in our historical
unaudited balance sheet data as of December 24, 1998.
The unaudited pro forma statement of operations for the three months ended
December 24, 1998 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 three month period.
The periods for which the fiscal 1999 acquisitions have been included in the pro
forma statement of operations are as follows:
. Taylor Oil--the three-month period from October 1, 1998 through
December 31, 1998
. Miller Enterprises--the three-month period from October 1, 1998
through December 30, 1998
. 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
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:
. Taylor Oil--the twelve-month period from January 1, 1998 through
December 31, 1998
. 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 and Express Stop acquisitions, we did
not acquire certain operations of these entities, relating primarily to a
truckstop owned, operated and retained by Stallings Oil, and equity in earnings
of certain affiliates of Express Stop, Inc.
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.
The unaudited pro forma financial data and accompanying notes should be
read in conjunction with the financial statements and accompanying notes thereto
and the other financial information included or incorporated by reference in
this Form 8-K/A. The financial statements of the following immaterial acquired
entities were not audited or reviewed by independent pubic accountants. The
information relating to these immaterial acquired entities is generally based on
internal financial statements prepared by the entity:
. Wooten Oil
. United Fuels
. A.G. Lee Oil
4
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
December 24, 1998
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------
Miller
Enterprises
and Miller Bros.
The Pantry Peninsular and Circle
Petroleum Investments, Ltd. Taylor Oil 1999
December 24, December 30, December 30, December 31, Financing
1998 1998 1998 1998 Adjustments
------------ ------------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 15,069 $ 10,649 $ -- $ 70 $95,711 (a)
Receivables, net....... 13,393 5,508 -- 702 --
Inventories............ 53,546 5,862 -- 2,707 --
Prepaid expenses....... 1,338 1,363 -- 61 --
Property held for
sale.................. 2,971 -- -- -- --
Deferred income taxes.. 3,521 491 -- -- --
-------- -------- -------- -------- --------
Total current
assets............... 89,838 23,873 -- 3,540 95,711
-------- -------- -------- -------- --------
Property and equipment,
net.................... 328,037 30,809 48,668 5,398 --
Other assets:
Goodwill, net.......... 119,534 -- -- -- --
Deferred lease cost,
net................... 258 -- -- -- --
Deferred financing
cost, net............. 14,025 -- -- -- 3,210 (a)
(3,406)(b)
Environmental
receivables, net...... 12,783 -- -- -- --
Other.................. 4,085 3,435 -- -- --
-------- -------- -------- -------- --------
Total other assets.... 150,685 3,435 -- -- (196)
-------- -------- -------- -------- --------
Total assets........ $568,560 $58,117 $48,668 $ 8,938 $95,515
======== ======== ======== ======== ========
<CAPTION>
Taylor Oil and
Miller Enterprises
and Affiliates IPO Total
Adjustments Subtotal Adjustments Pro Forma
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $(95,000)(c) $22,649 $50,397(g) $ 73,046
(3,850)(d)
Receivables, net....... -- 19,603 -- 19,603
Inventories............ -- 62,115 -- 62,115
Prepaid expenses....... -- 2,762 -- 2,762
Property held for
sale.................. -- 2,971 -- 2,971
Deferred income taxes.. -- 4,012 -- 4,012
---------- -------- ------- --------
Total current
assets............... (98,850) 114,112 50,397 164,509
--------- -------- ------- --------
Property and equipment,
net.................... -- 412,912 -- 412,912
Other assets:
Goodwill, net.......... 33,317 (e) 152,851 -- 152,851
Deferred lease cost,
net................... -- 258 -- 258
Deferred financing
cost, net............. -- 13,829 -- 13,829
Environmental
receivables, net...... -- 12,783 -- 12,783
Other.................. (2,918)(d) 4,602 -- 4,602
-------- -------- ------- --------
Total other assets.... 30,399 184,323 -- 184,323
-------- -------- ------- --------
Total assets........ $(68,451) $711,347 $50,397 $761,744
======== ======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
5
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
December 24, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------------
Miller
Enterprises Miller Bros.
and and
Peninsular Circle
The Pantry Petroleum Investments Ltd. Taylor Oil 1999
December 24, December 30, December 31, December 31, Financing
1998 1998 1999 1998 Adjustments
------------ ----------- ---------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Liabilities and
Shareholders' Equity
Current liabilities:
Current maturities of
long-term debt......... $ 39 $ 1,531 $ -- $ -- $ --
Current maturities of
capital lease
obligations............ 1,240 -- -- -- --
Revolving credit........ 2,000 -- -- -- 5,000 (a)
Accounts payable........ 55,320 12,543 -- -- --
Accrued expenses........ 49,359 8,085 -- -- (630)(a)
(454)(a)
-------- -------- -------- -------- --------
Total current
liabilities........... 107,958 22,159 -- -- 3,916
-------- -------- -------- -------- --------
Senior subordinated
notes.................. 200,000 -- -- -- --
Senior notes payable ... 48,995 -- -- -- (48,995)(a)
Credit facility......... 94,000 -- -- -- (94,000)(a)
Amended credit
facility............... -- -- -- -- 240,000 (a)
Other long-term debt.... 265 9,762 -- -- --
-------- -------- --------- -------- --------
Total long-term debt... 343,260 9,762 -- -- 97,005
-------- -------- --------- -------- --------
Other non-current
liabilities:
Environmental reserve... 17,291 -- -- -- --
Capital lease
obligations............ 11,806 -- -- -- --
Employment obligations.. 842 -- -- -- --
Accrued dividends on
preferred stock........ 5,103 -- -- -- --
Deferred income taxes... 19,927 1,567 2,218 -- (2,162)(f)
Other non-current
liabilities............ 21,628 3,859 -- -- --
-------- -------- -------- -------- --------
Total other non-current
liabilities........... 76,597 5,426 2,218 -- (2,162)
-------- -------- -------- -------- --------
Shareholders' equity:
Preferred stock......... -- -- -- -- --
Common stock............ 2 6,163 -- -- --
Additional paid-in
capital................ 69,925 1,020 -- -- --
Shareholder loan........ (937) (4,784) -- -- --
Retained earnings....... (28,245) 18,371 46,450 8,938 (2,000)(a)
(3,406)(b)
2,162 (f)
-------- -------- --------- -------- --------
Total shareholders'
equity................ 40,745 20,770 46,450 8,938 (3,244)
-------- -------- -------- -------- --------
Total liabilities and
shareholders' equity.. $568,560 $58,117 $48,668 $ 8,938 $ 95,515
======== ======== ======== ======== ========
<CAPTION>
Taylor Oil and
Miller
Enterprises
and
Affiliates IPO Total
Adjustments Subtotal Adjustments Pro Forma
------------- -------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Liabilities and
Shareholders' Equity
Current liabilities:
Current maturities of
long-term debt......... $(1,531)(d) $ 39 $ -- $ 39
Current maturities of
capital lease
obligations............ -- 1,240 -- 1,240
Revolving credit........ -- 7,000 -- 7,000
Accounts payable........ -- 67,863 -- 67,863
Accrued expenses........ -- 56,360 -- 56,360
------- --------- -------- ---------
Total current
liabilities........... (1,531) 132,502 -- 132,502
------- -------- -------- --------
Senior subordinated
notes.................. -- 200,000 -- 200,000
Senior notes payable ... -- -- -- --
Credit facility......... -- -- -- --
Amended credit
facility............... 19,000 (c) 259,000 (19,000)(g) 240,000
Other long-term debt.... (9,762)(d) 265 -- 265
------- -------- -------- --------
Total long-term debt... 9,238 459,265 (19,000) 440,265
------- -------- -------- --------
Other non-current
liabilities:
Environmental reserve... -- 17,291 -- 17,291
Capital lease
obligations............ -- 11,806 -- 11,806
Employment obligations.. -- 842 -- 842
Accrued dividends on
preferred stock........ -- 5,103 (5,103)(g) --
Deferred income taxes... -- 21,550 -- 21,550
Other non-current
liabilities............ -- 25,487 -- 25,487
------- -------- -------- --------
Total other non-current
liabilities........... -- 82,079 (5,103) 76,976
------- -------- -------- --------
Shareholders' equity:
Preferred stock......... -- -- -- --
Common stock............ (6,163) 2 62 64
Additional paid-in
capital................ (1,020) 69,925 91,938 (g) 144,363
(17,500)(g)
Shareholder loan........ 4,784 (937) -- (937)
Retained earnings....... (73,759) (31,489) -- (31,489)
-------- -------- -------- --------
Total shareholders'
equity................ (76,158)(e) 37,501 74,500 112,001
-------- -------- -------- --------
Total liabilities and
shareholders' equity.. $(68,451) $711,347 $ 50,397 $761,744
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(dollars in thousands)
(a) Sources and Uses
<TABLE>
<S> <C>
Sources:
Revolving credit ................................................. $ 5,000
Amended credit facility........................................... 240,000
--------
Total sources.................................................... $245,000
========
Uses:
Redemption of senior notes........................................ $ 48,995
Refinance credit facility......................................... 94,000
Accrued interest--senior notes.................................... 630
Accrued interest--credit facility................................. 454
Redemption premium................................................ 2,000
Deferred financing cost........................................... 3,210
--------
Total uses...................................................... $149,289
========
Increase in cash and cash equivalents............................. $ 95,711
========
</TABLE>
(b) Write-off of $3,406 of unamortized deferred financing costs related to our
bank credit facility and our senior notes, which have been redeemed.
(c) Reflects payment of acquisition costs of Miller Enterprises and Affiliates
funded by cash of $95,000 and borrowings under our bank credit facility of
$19,000 to fund the acquisition (see note a).
(d) Reflects the elimination of certain assets and liabilities we did not
acquire in connection with the Miller Enterprises and Affiliates
acquisitions:
Miller
Enterprises
and
Affiliates
-----------
Cash...................................... $ --
Receivables............................... --
Prepaid expenses.......................... --
Property and equipment.................... --
Other assets.............................. (2,918)
Current maturities of long-term debt...... 1,531
Accounts payable.......................... --
Other accrued liabilities................. --
Other long-term debt...................... 9,762
-----------
Total................................... $ 8,375
===========
Additionally, we used approximately $3,850 of cash on hand to partially
fund the Taylor Oil acquisition.
(e) Goodwill related to the Taylor Oil and Miller Enterprises and Affiliates
acquisitions has been determined as follows:
Miller
Enterprises
and Taylor
Affiliates Oil Total
----------- -------- ---------
Aggregate purchase price................. $ 95,000 $ 22,850 $ 117,850
Less shareholders' equity................ (67,220) (8,938) (76,158)
Elimination of certain net assets not
acquired by The Pantry (see note d)..... (8,375) -- (8,375)
-------- -------- ---------
Total.................................. $ 19,405 $ 13,912 $ 33,317
======== ======== =========
(f) Reflects a $2,162 tax benefit related to the premium paid in connection
with the redemption of our senior notes and the write-off of unamortized
deferred financing costs (see notes a and b).
(g) Reflects estimated net proceeds from the proposed offering of $92,000 and
the application of such proceeds to (1) repay outstanding indebtedness under
our Amended Credit Facility of $19,000 and (2) redeem preferred stock of
$17,500 and pay accrued dividends of $5,103.
7
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Quarter Ended December 24, 1998
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------
Three Months
Quarter Ended Three Months
Ended December 30, Ended Other Acquisition
December 24, 1998 December 31, Fiscal and
1998 Miller 1998 1999 Financing IPO Total
The Pantry Enterprises Taylor Oil Acquisitions(a) Adjustments Subtotal Adjustments Pro Forma
------------ -------------- ------------ --------------- ------------ -------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales...... $139,390 $27,818 $ 6,732 $2,313 $ -- $176,253 $ -- $176,253
Gasoline sales......... 171,789 35,003 21,414 3,442 -- 231,648 -- 231,648
Commissions............ 4,428 510 61 249 -- 5,248 -- 5,248
-------- ------- ------- ------ ------- -------- ------ --------
Total revenue......... 315,607 63,331 28,207 6,004 -- 413,149 -- 413,149
-------- ------- ------- ------- ------- -------- ------ --------
Cost of Sales:
Merchandise............ 94,453 17,013 4,331 1,693 -- 117,490 -- 117,490
Gasoline............... 148,774 30,611 18,727 3,141 -- 201,253 -- 201,253
-------- ------- ------- ------ ------- -------- ------ --------
Total cost of sales... 243,227 47,624 23,058 4,834 -- 318,743 -- 318,743
-------- ------- ------- ------ ------- -------- ------ --------
Gross profit............ 72,380 15,707 5,149 1,170 -- 94,406 -- 94,406
-------- ------- ------- ------ ------- -------- ------ --------
Store operating
expenses............... 43,729 11,007 2,881 682 (1,106)(b) 57,802 -- 57,802
609 (c)
General and
administrative
expenses............... 9,968 2,666 600 113 -- 13,347 -- 13,347
Impairment of long-lived
assets................. -- -- 55 -- -- 55 -- 55
Depreciation and
amortization........... 8,190 946 497 70 424 (d) 10,435 -- 10,435
370 (e)
(62)(f)
-------- ------- ------- ------ ------- -------- ------ --------
Total operating
expense............... 61,887 14,619 4,033 865 235 81,639 -- 81,639
-------- ------- ------- ------ ------- -------- ------ --------
Income from operations.. 10,493 1,088 1,116 305 (235) 12,767 -- 12,767
-------- ------- ------- ------ ------- -------- ------ --------
Other Income (Expense):
Interest............... (8,912) (91) -- (5) (1,989)(g) (10,997) 392 (k) (10,605)
Miscellaneous.......... (184) 2 -- 23 (13)(h) (172) -- (172)(l)
-------- ------- ------- ------ ------- -------- ------ --------
Total other expense... (9,096) (89) -- 18 (2,002) (11,169) 392 (10,777)
-------- ------- ------- ------ ------- -------- ------ --------
Income (loss) before
income taxes........... 1,397 999 1,116 323 (2,237) 1,598 392 1,990
Income tax expense
(benefit).............. 332 385 -- -- (78)(i) 639 157 (i) 796
-------- ------- ------- ------- ------- -------- ------ --------
Net income (loss) before
extraordinary item..... $ 1,065 $ 614 $1,116 $ 323 $(2,159)(j) $ 959 $ 235 $ 1,194
======== ======= ======= ======= ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
8
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Year Ended September 24, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------------------------------------------
Latest Twelve
Year Ended 1998 Months Ended Year Ended Other
September 24, Acquisitions September 30, December 31, Fiscal Acquisition and
1998 and 1998 1998 1999 Financing
The Pantry Disposition(m) Miller Enterprises Taylor Oil Acquisitions(n) Adjustments
------------- --------------- ------------------ ------------ --------------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales...... $460,798 $ 75,593 $100,338 $ 25,587 $ 30,302 $ (402)(h)
Gasoline sales......... 509,958 181,814 139,734 84,592 44,693 (15,823)(h)
Commissions............ 14,128 3,633 1,988 267 2,962 (467)(h)
-------- -------- -------- -------- -------- --------
Total revenues...... 984,884 261,040 242,060 110,446 77,957 (16,692)
-------- -------- -------- -------- -------- --------
Cost of Sales:
Merchandise............ 303,968 54,219 63,387 17,022 22,688 (207)(h)
Gasoline............... 447,565 161,074 124,258 74,422 40,213 (13,004)(h)
-------- -------- -------- -------- -------- --------
Total cost of
sales.............. 751,533 215,293 187,645 91,444 62,901 (13,211)
-------- -------- -------- -------- -------- --------
Gross profit............ 233,351 45,747 54,415 19,002 15,056 (3,481)
-------- -------- -------- -------- -------- --------
Store operating
expenses............... 140,089 27,164 40,173 11,110 8,713 (4,424)(b)
2,725 (c)
(3,015)(h)
General and
administrative
expenses............... 32,761 7,506 8,703 1,927 1,541 (356)(h)
(42)(p)
Restructuring charges... 1,016 -- -- -- -- --
Impairment of long-lived
assets................. -- -- -- 219 -- --
Depreciation and
amortization........... 27,642 5,189 3,214 1,987 903 3,180 (d)
(324)(e)
(451)(f)
(169)(h)
-------- -------- -------- -------- -------- --------
Total operating
expense................ 201,508 39,859 52,090 15,243 11,157 (2,876)
-------- -------- -------- -------- -------- --------
Income from operations.. 31,843 5,888 2,325 3,759 3,899 (605)
-------- -------- -------- -------- -------- --------
Other Income (Expense):
Interest............... (28,946) (1,687) (305) -- (125) (12,483)(g)
Miscellaneous.......... 1,776 137 356 -- 271 (193)(h)
-------- -------- -------- -------- -------- --------
Total other
expense............ (27,170) (1,550) 51 -- 146 (12,676)
-------- -------- -------- -------- -------- --------
Income (loss) before
income taxes........... 4,673 4,338 2,376 3,759 4,045 (13,281)
Income tax expense...... -- 364 915 -- -- 1,085 (i)
-------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary item..... $ 4,673 $ 3,974 $ 1,461 $ 3,759 $ 4,045 $(14,366)(j)
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
IPO Total
Subtotal Adjustments Pro Forma
-------- ----------- ---------
(dollars in thousands except per share data)
<S> <C> <C> <C>
Revenues:
Merchandise sales...... $ 692,216 $ -- $ 692,216
Gasoline sales......... 944,968 -- 944,968
Commissions............ 22,511 -- 22,511
---------- ------ ----------
Total revenues...... 1,659,695 -- 1,659,695
---------- ------ ----------
Cost of Sales:
Merchandise............ 461,077 -- 461,077
Gasoline............... 834,528 -- 834,528
---------- ------ ----------
Total cost of
sales.............. 1,295,605 -- 1,295,605
---------- ------ ----------
Gross profit............ 364,090 -- 364,090
---------- ------ ----------
Store operating
expenses............... 222,535 -- 222,535
General and
administrative
expenses............... 52,040 -- 52,040
Restructuring charges... 1,016 -- 1,016
Impairment of long-lived
assets................. 219 -- 219
Depreciation and
amortization........... 41,171 -- 41,171
---------- ------ ----------
Total operating
expense................ 316,981 -- 316,981
---------- ------ ----------
Income from operations.. 47,109 -- 47,109
---------- ------ ----------
Other Income (Expense):
Interest............... (43,546) 1,568 (k) (41,978)
Miscellaneous.......... 2,347 -- 2,347 (1)
---------- ------ ----------
Total other
expense............ (41,199) 1,568 (39,631)
---------- ------ ----------
Income (loss) before
income taxes........... 5,910 1,568 7,478
Income tax expense...... 2,364 627 (i) 2,991
---------- ------ ----------
Net income (loss) before
extraordinary item..... $ 3,546 $ 941 $ 4,487
========== ====== ==========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
9
<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 three months ended December 24, 1998 consist of the
historical financial statements of the following entities:
<TABLE>
<CAPTION>
One-month
period
October 1,
1998
through
October 31,
1998
----------- Total Other
Express Other 1999 Fiscal 1999
Stop Acquisitions Acquisitions
----------- ------------ ------------
<S> <C> <C> <C>
Revenue:
Merchandise sales.............. $1,698 $ 615 $2,313
Gasoline sales................. 2,407 1,035 3,442
Commissions.................... 191 58 249
------ ------ ------
Total revenue................ 4,296 1,708 6,004
------ ------ ------
Cost of Sales:
Merchandise.................... 1,232 461 1,693
Gasoline....................... 2,184 957 3,141
------ ------ ------
Total cost of sales.......... 3,416 1,418 4,834
------ ------ ------
Gross profit..................... 880 290 1,170
------ ------ ------
Store operating expenses......... 433 249 682
General and administrative
expenses....................... 105 8 113
Depreciation and amortization... 61 9 70
------ ------ ------
Total operating expense...... 599 266 865
------ ------ ------
Income (loss) from operations.... 281 24 305
------ ------ ------
Other Income (Expense):
Interest....................... (5) -- (5)
Miscellaneous.................. 13 10 23
------ ------ ------
Total other.................. 8 10 18
------ ------ ------
Income (loss) before income
taxes.......................... 289 34 323
Income tax expense (benefit)..... -- -- --
------ ------ ------
Net income (loss) before
extraordinary item............. $ 289 $ 34 $ 323
====== ====== ======
</TABLE>
(b) 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 and Affiliates acquisition and all leases with
Miller Enterprises affiliates were terminated. As a result, rental expenses
of $1,106 for the quarter ended December 24, 1998 and $4,424 for the year
ended September 24, 1998 have been eliminated.
10
<PAGE>
(c) Reflects an increase in store rental expense of $609 for Taylor Oil for the
three months ended December 24, 1998 and $288 for Quick Stop and $2,437 for
Taylor Oil for the year ended September 24, 1998 in connection with an
obligation to lease certain stores from the former owners of Quick Stop and
Taylor Oil 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, and the Taylor Oil acquisition, which occurred on
February 25, 1999.
(d) 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 certain 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 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 28, 1999.
In the Express Stop acquisition, $2,500 of the purchase price was subject to
an escrow agreement until March 1999, and was to be forfeited upon the
occurrence of specific events or conditions relating to the operations of
video poker machines in South Carolina. The events or conditions specified
in the purchase agreement did not occur, and the $2,500 million held in
escrow was paid to Express Stop in March 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 Three Months Ended Year Ended
Recorded Useful Life December 24, September 24,
Acquisitions Goodwill (in years) 1998 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....................... 17,689 30 147 590
Miller Enterprises and affiliates.. 19,405 30 161 647
Taylor Oil......................... 13,912 30 116 464
-------- ---- -----
$152,928 424 3,240
========
Less historical recorded predecessor
amounts............................. -- 60
---- -----
Adjustment.......................... $424 $3,180
==== ======
</TABLE>
(e) 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 Three Months Ended Year Ended
Equipment Useful Life December 24, September 24,
Acquisitions Acquired (in years) 1998 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 63 250
Express Stop..................... 2,250 10 118 226
Miller Enterprises and affiliates 79,335 10-35 1,567 6,270
Taylor Oil....................... 5,398 10 135 540
-------- ------ -------
$293,178 1,883 10,740
======== ------ -------
Less historical recorded
predecessor amounts.............. 1,513 11,064
------ -------
Adjustment....................... $ 370 $ (324)
====== =======
</TABLE>
As noted in note (h), 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 has
been eliminated.
11
<PAGE>
(f) 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>
Financing Straight-line Three Months
Costs Amortization Ended Year Ended
Incurred Period December 24, September 24,
Transaction (Written-off) (in years) 1998 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 6 134 535
Repurchase of $49 million of outstanding senior
notes and repayment of 1998 bank credit
facility...................................... (3,972) 7 (196) (1,129)
----- -------
Adjustment...................................... $ (62) $ (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 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.
(g) Reflects additional interest expense in connection with the various 1998 and
1999 financing and acquisitions transactions as follows:
<TABLE>
<CAPTION>
Principal Interest Three Months Ended Year Ended
Borrowed Rate December 24, September 24,
Acquisition/Financing (Retired) (per annum) 1998 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 3,616 15,361
Redemption of senior notes from proceeds
of 1999 bank credit facility............. (49,000) 12.50 (1,531) (6,125)
------- -------
Subtotal............................... 2,085 14,600
Less historical recorded amounts related
to indebtedness not assumed.............. 96 2,117
------- -------
Adjustment................................. $ 1,989 $12,483
======= =======
</TABLE>
In connection with the 1998 and 1999 acquisitions, The Pantry did not assume
debt obligations of the acquired entities totaling approximately $54,700
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 $45 for the three months
ended December 24, 1998 and $179 for the year ended September 24, 1998.
(h) Reflects the elimination of operations not acquired. These operations relate
to a truckstop owned, operated and retained by Stallings Oil and equity in
earnings of affiliates of Express Stop which were not acquired by The Pantry.
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 24, September 24,
1998 1998
-------------------- --------------------
Decrease in expenses (decrease in income)
<S> <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:
Miscellaneous income...... (13) (193)
</TABLE>
(i) Adjusts income tax expense for an assumed tax rate of 40% for each of the
periods presented.
(j) For each period presented, net income (loss) excludes an extraordinary loss
of $3,557 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.
(k) Reflects the application of net proceeds of approximately $19,000 to repay
outstanding indebtedness at the weighted-average rate of 8.25%.
(l) Does not reflect estimated interest income of $544 for the three months
ended December 24, 1998 and $2,217 for the year ended September 24, 1998
from investment of the estimated remaining offering proceeds of $50,397
at an assumed interest rate of 4.4%.
(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 and
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
expenses.............. 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.
(n) The other 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
period
October 1,
1997 through
September 30,
1998 Total
------------- Other 1999 Fiscal 1999
Express Stop Acquisitions Acquisitions
------------- ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
Merchandise sales......... $20,720 $ 9,582 $ 30,302
Gasoline sales............ 27,736 16,957 44,693
Commissions............... 2,209 753 2,962
------- -------- --------
Total revenue........... 50,665 27,292 77,957
------- -------- --------
Cost of Sales:
Merchandise............... 15,747 6,941 22,688
Gasoline.................. 24,765 15,448 40,213
------- -------- --------
Total cost of sales..... 40,512 22,389 62,901
------- -------- --------
Gross profit................ 10,153 4,903 15,056
------- -------- --------
Store operating expenses.... 5,284 3,429 8,713
General and administrative
expenses.................. 968 573 1,541
Restructuring charges....... -- -- --
Impairment of long-lived
assets...................... -- -- --
Depreciation and
amortization.............. 788 115 903
------- -------- --------
Total operating
expense............... 7,040 4,117 11,157
------- -------- --------
Income from operations...... 3,113 786 3,899
------- -------- --------
Other Income (Expense):
Interest................ (116) (9) (125)
Miscellaneous........... 181 90 271
------- -------- --------
Total other........... 65 81 146
------- -------- --------
Income (loss) before income
taxes..................... 3,178 867 4,045
Income tax expense
(benefit)................. -- -- --
------- -------- --------
Net income (loss) before
extraordinary item........ $ 3,178 $ 867 $ 4,045
======= ======== ========
</TABLE>
(p) 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.
12
<PAGE>
(c) EXHIBITS.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1* Asset Purchase Agreement between Taylor and the
Company dated as of January 14, 1999
2.2* List of Exhibits and Schedules omitted from the Asset
Purchase Agreement referenced in Exhibit 2.1 hereof
- ------------
* Previously Filed.
-13-
<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: June 4, 1999
THE PANTRY, INC.
By: /s/ William T. Flyg
-----------------------------
William T. Flyg
Senior Vice President Finance
and Secretary
-14-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1* Asset Purchase Agreement between Taylor and the Company dated as of
January 14, 1999
2.2* List of Exhibits and Schedules omitted from the Asset Purchase
Agreement referenced in Exhibit 2.1 hereof
- -----------
* Previously Filed.
-15-
