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Tuesday, May 4, 2010

The Pantry Plans to Sell 80 Sites

Source: Convenience Store News
By Barbara Grondin Francella

CARY, N.C. -- Though merchandise revenues and margin picked up in the last couple months, The Pantry Inc., operator of 1,647 Kangaroo Express and other convenience stores in 11 states, reported a net loss for its second fiscal quarter ended March 25, 2010, of $166.1 million.

The results included non-cash impairment and other non-cash charges of $164.2 million after-tax and a charge of $1.9 million after-tax related to the settlement of a class action lawsuit. When adjusted for these charges, the net loss for the second quarter of fiscal 2010 was $6,000, compared to net income of $3.8 million in last year's second quarter, which included a one-time gain of $2.3 million after-tax, related to a gain on extinguishment of debt. The retailer recorded a $162 million after-tax impairment charge to write-down goodwill according to ASC 350, "Intangibles-Goodwill and Other."

"In view of the unusually cold and wet conditions experienced throughout our markets in the quarter, I am pleased we were able to deliver an earnings result in line with our expectations, excluding the charges," said President and CEO Terrance M. Marks. "I want to emphasize that the goodwill impairment charge does not have any effect on our operations, liquidity or debt covenants and in no way is an indicator of our business outlook and strategy to build long-term shareholder value.

"Our second quarter operating results reflect sequential improvement in merchandise margin and a heightened executional focus on fuel gross profit contribution. As the quarter ended, we saw improved merchandise sales performance and we are encouraged that this trend has continued into the third quarter. In addition, our cash position remains strong at $179 million, and we continue to make progress on our key strategic initiatives."

Total merchandise gross profit for the quarter was $138.2 million, down 4.6 percent from a year ago but up 1.4 percent from the first fiscal quarter. Merchandise revenues for the second quarter increased 5.1 percent overall and 3.6 percent on a comparable-store basis from the corresponding period last year. The merchandise gross margin was 33.8 percent, down from 37.2 percent a year ago, but improved 120 basis points sequentially from 32.6 percent in the first quarter of fiscal 2010, primary from actions to improve grocery margin. Merchandise gross profit a year ago benefited from an unusually high cigarette margin in advance of the federal excise tax increase, the company noted.

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