The Pantry, Inc.
Wachovia Consumer Growth Conference
          October 14, 2008
Safe Harbor Statement

      Some of the statements in this presentation constitute “forward-looking
 statements” within t...
Leading Convenience Store Retailer Concentrated in
the Southeastern United States

1,653 Stores Located in Eleven Southeas...
Key Investment Highlights

  Leading market positions in attractive Southeastern markets

  Significant scale advantages v...
Key Markets Possess Highly Attractive Growth
Characteristics

              Core Markets Projected to Experience Rapid Gro...
Recent Inflation and Volatility in Oil and Gas Prices
                                                                    ...
Annual CPG Tends to Remain Relatively Stable

                                     Annual Net CPG Margins Typically Range ...
Strong Track Record of Top Line Growth…

            Merchandise Revenue                                                 R...
…And Substantial EBITDA Generation

                               Gross Profit                                           ...
Strong Growth in Merchandise Sales Per Store

                                  Improved Store Portfolio and Stronger Cons...
Consistently Strong Merchandise Margins

                             Superior Merchandise Offering Leads to Above Average...
Proprietary Merchandise and Food Service Concepts
Drive Revenue and Margins

             Celeste               Candy Lane...
QSR Food Service Offering Differentiates Our
Stores and Drives Traffic and Margins

             We Currently Operate 239 ...
Gasoline Strategy Maximizes Fuel Gross Profit Dollars

                            We Balance Average Gallons Sold Per Sto...
Gasoline CPG Can Be Volatile on a Quarterly Basis

                  Recent Margins Impacted by Higher Credit Card Fees an...
Current Operating Initiatives Intended to Address Challenging
Environment and Improving Strategic Flexibility

        Cha...
Focus on Reducing Operating Expenses

Initiative Maximizes Operating Expense Leverage and Better Positions Us for Profitab...
Meaningful Liquidity / Financial Flexibility

    Meaningful liquidity
              $162 million in cash-on-hand
        ...
Key Investment Highlights

  Leading market positions in attractive Southeastern markets

  Significant scale advantages v...
Reconciliation of Non-GAAP Measures

                                  Adjusted EBITDA/EBITDA Reconciled to Net Income


 ...
Reconciliation of Non-GAAP Measures

                                  Adjusted EBITDA/EBITDA Reconciled to Cash Flows


 ...
The Pantry, Inc.
Wachovia Consumer Growth Conference
          October 14, 2008


                21
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pantry Wachovia_Consumer_Growth_Conference

  1. 1. The Pantry, Inc. Wachovia Consumer Growth Conference October 14, 2008
  2. 2. Safe Harbor Statement Some of the statements in this presentation constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than those of historical facts included herein, including those related to the company’s financial outlook, goals, business strategy, projected plans and objectives of management for future operations and liquidity, are forward-looking statements. These forward-looking statements are based on the company’s plans and expectations and involve a number of risks and uncertainties that could cause actual results to vary materially from the results and events anticipated or implied by such forward- looking statements. Please refer to the company’s Annual Report on Form 10-K and its other filings with the SEC for a discussion of significant risk factors applicable to the company. In addition, the forward-looking statements included in this presentation are based on the company’s estimates and plans as of the date of this presentation. While the company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. 1
  3. 3. Leading Convenience Store Retailer Concentrated in the Southeastern United States 1,653 Stores Located in Eleven Southeastern States as of September 25, 2008 Indiana Indiana Arlington Arlington Indianapolis Indianapolis Covington Covington Hampton Hampton Richmond Richmond Frankfort Norfolk Norfolk Frankfort Virginia Virginia Chesapeake Chesapeake Kentucky Kentucky PA0021GM_1.WOR Bowling Green Bowling Green Durham Durham Paducah Paducah Raleigh Raleigh North Carolina North Carolina Nashville Nashville Tennessee Tennessee Columbia Columbia Wilmington Wilmington South South NY0010DP_1.WOR Carolina Carolina Atlanta Atlanta Mississippi Mississippi Georgia Georgia Clinton Clinton Montgomery Montgomery Vicksburg Vicksburg Meridian Meridian Alabama Alabama Jackson Jackson Jacksonville Jacksonville Louisiana Louisiana Tallahassee Tallahassee Daytona Beach Daytona Beach Gulfport Gulfport Baton Rouge Baton Rouge Orlando Orlando St. Petersburg St. Petersburg Tampa Tampa Pantry Store Locations Florida Florida Boca Raton Boca Raton Miami Miami _____________________ Note: Map as of fiscal year ended September 27, 2007. 2
  4. 4. Key Investment Highlights Leading market positions in attractive Southeastern markets Significant scale advantages vs. primary competitors Benefiting from consumer trends toward convenience formats Leveraging infrastructure to drive profitability and future growth Attractive sector growth and consolidation potential Strong Cash Flow Generation to Reinvest in Our Business, De-lever and Drive Earnings Growth 3
  5. 5. Key Markets Possess Highly Attractive Growth Characteristics Core Markets Projected to Experience Rapid Growth Throughout Next Several Years; High Degree of Fragmentation Provides Continued Consolidation Opportunities Population Growth CAGRs (2005-2015) (1) Market Fragmentation (1) 25.0% Florida North Carolina 21.1% (7,356 stores) (5,447 stores) Pantry 20.0 Pantry >50 Store Operators >50 Store 6% 14% 7% 1 Store Operators 1 Store Operators Operators 31% 15.0% 2-50 Store 21% Operators 15.0 54% 58% 9% 2-50 Store Operators 9.5% 9.1% 9.0% 10.0 South Carolina Tennessee (2,872 stores) (3,697 stores) 5.0 Pantry Pantry >50 Store >50 Store Operators Operators 17% 10% 3% 1 Store 1 Store 17% Operators 0.0 Operators Florida North South Tennessee U.S. 21% 2-50 Store 20% Carolina Carolina 2-50 Store 52% 60% Operators Operators (2) Pantry Stores: 455 388 282 104 1,660 _____________________ (1) Source: U.S. Census Bureau and 2007 NACS State of the Industry Report. (2) Note: Pantry’s store counts as of quarter ended June 26, 2008. 4
  6. 6. Recent Inflation and Volatility in Oil and Gas Prices $146.65 $150.00 $5.00 % Δ 3 Months Since Prior to Peak Peak $124.47 Oil +33% (46%) $118.33 125.00 Gas +23% (15%) Avg. Retail Price per Gasoline Gallon 4.00 Avg. Crude Oil Price per Barrel $97.59 100.00 $90.61 $75.13 $78.66 $70.89 $60.74 $60.13 $70.95 75.00 3.00 $65.44 $63.34 $63.82 $58.74 $53.58 $50.03 50.00 2.00 25.00 1.00 0.00 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 7/11/08 Q4 Current (Peak) FY2005 FY2006 FY2008 FY2007 Avg. Crude Oil Price per Barrel Avg. Retail Price per Gasoline Gallon Note: Fiscal year ends in September. As of October 10, 2008. Source: FactSet. Data represent average futures contract price per barrel of light sweet crude and national average retail price per gasoline gallon. 5
  7. 7. Annual CPG Tends to Remain Relatively Stable Annual Net CPG Margins Typically Range from 10¢ – 13¢ 20.0¢ 17.0 15.9¢ 14.3¢ 13.4¢ 14.0 13.2¢ 12.5¢ 12.5¢ 12.8¢ 12.3¢ 12.0¢ 10.9¢ 10.4¢ 11.0 8.0 5.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year _____________________ Note: Fiscal year ends in September. Shaded area represents average historical CPG range. CPG is net of credit card fees and repairs and maintenance 6
  8. 8. Strong Track Record of Top Line Growth… Merchandise Revenue Retail Gas Gallons Sold Total Revenue ($ in mm) (Gallons in mm) ($ in mm) $9,000 2,500 $2,000 % $8,502 5.9 2 7= 5.0% % 11.8 =1 0 –’ ’07 = 2,129 ’07 3– ’03 8,000 3– R ’0 $1,640 R ’0 2,033 CAG GR CAG $1,576 CA $6,911 2,000 7,000 1,758 1,500 $1,386 $5,962 $1,229 6,000 1,497 $1,170 1,500 1,372 5,000 $4,429 $1,010 1,161 1,000 $3,493 4,000 1,000 $2,750 3,000 500 2,000 500 1,000 0 0 0 2003 2004 2005 2006 2007 LTM 2003 2004 2005 2006 2007 LTM 2003 2004 2005 2006 2007 LTM Fiscal Year Fiscal Year Fiscal Year _____________________ Note: Fiscal year ends in September. Last twelve months as of June 26, 2008. 7
  9. 9. …And Substantial EBITDA Generation Gross Profit Reported EBITDA ($ in mm) ($ in mm) ’03-’07 $900 $300 CAGR $279 $826 $811 $779 800 250 11.6% $663 $218 $220 700 $225 $214 $214 $281 $591 600 200 $173 $511 $214 $165 500 $136 150 $145 400 $606 12.5% 300 100 $586 $518 $425 $449 200 $366 50 100 0 0 2003 2004 2005 2006 2007 LTM 2003 2004 2005 2006 2007 LTM Fiscal Year Fiscal Year Merchandise Gasoline _____________________ Note: Fiscal year ends in September. Last twelve months as of June 26, 2008. 8
  10. 10. Strong Growth in Merchandise Sales Per Store Improved Store Portfolio and Stronger Consumer Offering Have Driven Increased Average Merchandise Sales per Store Average Merchandise Sales per Store ($ in Thousands) % 7: 6.0 ’03-’0 CAGR $999 $996 $1,000 $954 950 $898 900 $857 850 $792 800 750 700 2003 2004 2005 2006 2007 LTM Fiscal Year Stores 1,258 1,361 1,400 1,493 1,644 1,660 _____________________ Note: Fiscal year ends in September. Last twelve months for the quarter ending June 26, 2008. 9
  11. 11. Consistently Strong Merchandise Margins Superior Merchandise Offering Leads to Above Average Margins Merchandise Gross Margin Proprietary branded offerings 40.0% 37.4% 37.2% 37.0% 36.6% 36.3% 36.2% Private label products in high velocity 35.0 categories Industry Avg.(1): 30.6% 30.0 Selective expansion of nationally branded quick service restaurants (QSRs) 25.0 Leveraging scale with merchandise vendors 20.0 2003 2004 2005 2006 2007 LTM Fiscal Year Merch. Comps 2.1% 3.4% 5.3% 4.9% 2.3% N/A _____________________ Note: Fiscal year ends in September. Last twelve months for the quarter ending June 26, 2008. (1) Industry average for 2007 based on the 2008 NACS State of the Industry Report. 10
  12. 12. Proprietary Merchandise and Food Service Concepts Drive Revenue and Margins Celeste Candy Lane Bean Street Coffee Grilling Depot 11
  13. 13. QSR Food Service Offering Differentiates Our Stores and Drives Traffic and Margins We Currently Operate 239 Nationally Branded and Proprietary Quick Service Restaurants 12
  14. 14. Gasoline Strategy Maximizes Fuel Gross Profit Dollars We Balance Average Gallons Sold Per Store and Gasoline Margins to Maximize Overall Gross Profit Dollars Retail Gasoline Gross Profit $ Average Gallons Sold per Store (Gallons in Thousands) ($ in mm) % % 11. 6 8 .3 ’07 = ’07 = – – 1,400 R ’03 $300 R ’03 $281 CAG CAG 1,309 1,306 1,300 250 1,242 $225 $220 $214 1,200 200 1,118 $165 1,100 $145 1,026 150 1,000 941 100 900 50 800 700 0 2003 2004 2005 2006 2007 LTM 2003 2004 2005 2006 2007 LTM Fiscal Year Fiscal Year CPG (1) Comps 0.7% 2.0% 4.7% 3.1% 1.0% N/A 12.5¢ 12.0¢ 14.3¢ 15.9¢ 10.9¢ 10.7¢ _____________________ Note: Fiscal year ends in September. Last twelve months for the quarter ending June 26, 2008. (1) Net of credit card fees and repairs and maintenance. Last twelve months excludes per gallon loss on hedging operations in Q2 and Q3 of 1.6¢ and 0.3¢, respectively. 13
  15. 15. Gasoline CPG Can Be Volatile on a Quarterly Basis Recent Margins Impacted by Higher Credit Card Fees and Fuel Maintenance Expenses, As Well As Losses on Fuel Hedging Activities in Q2 and Q3 2008 Our Quarterly Retail Gasoline CPG (Net of Credit Card Fees and Repairs and Maintenance) 22.5¢ 21.2¢ 19.4¢ 20.0 17.3¢ 17.5 14.6¢ 15.0 14.0¢ 12.8¢ 12.3¢ 12.5 11.4¢ 11.1¢ 11.0¢ 10.6¢ 10.6¢ 10.5¢ 9.9¢ 0.3¢ 10.0 1.6¢ 10.7¢ 8.6¢ 9.0¢ 7.5 5.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (1) FY2005 FY2006 FY2007 FY2008 Hedging Loss (1) Net CPG _____________________ Note: Fiscal year ends September. (1) Q2 and Q3 include per gallon loss on hedging operations of 1.6¢ and 0.3¢, respectively. 14
  16. 16. Current Operating Initiatives Intended to Address Challenging Environment and Improving Strategic Flexibility Challenge Key Initiatives / Action Taken Increasing vendor-supported promotional activity Consumer Focusing promotions on high-velocity, high-return categories Headwinds Accelerated ethanol roll-out Margin / Profitability Fuel price strategy maximizing total gross profit dollars Pressure Meaningfully reducing store level and corporate overhead Bolstered liquidity by accessing delayed draw on term loan Substantially reduced non-essential capex Financial Flexibility Temporarily suspended share repurchases Return to Growth Focus Collectively, We Believe These Actions Have Better Positioned Us to Leverage Our Operating Model and Drive Top-line and Earnings Growth when the Market Environment Improves 15
  17. 17. Focus on Reducing Operating Expenses Initiative Maximizes Operating Expense Leverage and Better Positions Us for Profitable Growth as Market Conditions Improve Reorganized field management structure to streamline operations Improved overall quality / efficiency of staffing Improved store-level controllable expenses Reduced bad check expense Lowered cash over and short by moving to prepaid on gasoline Tangible financial results achieved, more expected throughout the year Reduced store operating expenses in Q3 by $6.4 million or 4.8% Reduced corporate overhead spend in Q3 by $4.8 million or 17.6% despite adding 16 stores 16
  18. 18. Meaningful Liquidity / Financial Flexibility Meaningful liquidity $162 million in cash-on-hand $225 million revolver – $0 drawn, over $142 million available after LOCs Long-term debt profile; earliest maturity is the convertible debt in November 2012 Covenant-light bank facility – financial flexibility (1) 6.5x Adj. Net Debt / EBITDAR Leverage – Currently 5.8x 2.25x Interest Coverage – Currently 2.53x _____________________ Note: Balance Sheet data as of June 26, 2008. (1) Per credit facility covenant calculations (8x rent methodology). 17
  19. 19. Key Investment Highlights Leading market positions in attractive Southeastern markets Significant scale advantages vs. primary competitors Benefiting from consumer trends toward convenience formats Leveraging infrastructure to drive profitability and future growth Attractive sector growth and consolidation potential Strong Cash Flow Generation to Reinvest in Our Business, De-lever and Drive Earnings Growth 18
  20. 20. Reconciliation of Non-GAAP Measures Adjusted EBITDA/EBITDA Reconciled to Net Income LTM Jun-08 2007 2006 2005 2004 2003 ($ in mm) Adjusted EBITDA $173 $178 $254 $189 $150 $127 Payments made for lease finance obligations 46 36 25 24 23 13 Cumulative effect adjustment - - - - - (3) Reported EBITDA $218 $214 $279 $214 $173 $136 Interest expense, net and loss on extinguishment of debt (88) (74) (56) (54) (87) (60) Depreciation and amortization (108) (96) (76) (64) (61) (56) Provision for income taxes (17) (57) (37) (9) (9) (8) Net income $15 $27 $89 $58 $16 $11 _____________________ Note: Fiscal year ends in September. Last twelve months as of June 26, 2008. 19
  21. 21. Reconciliation of Non-GAAP Measures Adjusted EBITDA/EBITDA Reconciled to Cash Flows LTM Jun-08 2007 2006 2005 2004 2003 ($ in mm) Adjusted EBITDA $173 $178 $254 $189 $150 $127 Payments made for lease finance obligations 46 36 25 24 23 13 Cumulative effect adjustment - - - - - (3) Reported EBITDA $218 $214 $279 $214 $173 $136 Interest expense, net and loss on extinguishment of debt (88) (74) (56) (54) (87) (60) Provision for income taxes (8) (17) (57) (37) (9) (9) Non-cash stock based compensation 3 4 3 - - - Changes in operating assets and liabilities 8 8 (13) (7) - (20) Non-cash loss on extinguishment of debt - 2 2 - 23 3 4 (3) 19 17 19 Other 6 Net cash provided by operating activities $140 $141 $154 $134 $117 $69 Net cash used in investing activities ($150) ($529) ($219) ($166) ($227) ($24) Net cash provided by (used in) financing activities $94 $339 $74 $36 $145 ($14) _____________________ Note: Fiscal year ends in September. Last twelve months as of June 26, 2008. 20
  22. 22. The Pantry, Inc. Wachovia Consumer Growth Conference October 14, 2008 21

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