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The Pantry Inc. (PTRY)
F3Q09 Earnings Call
August 4, 2009 10:00 am ET
Berry Epley – Vice President and Corporate Controller
Pete Sodini – Chairman and Chief Executive Officer
Frank Paci –Chief Financial Officer and Secretary
Tom Murnane -- Lead Director
John Heinbockel – Goldman Sachs
Bryan Hunt – Wells Fargo Securities
Ben Brownlow – Morgan Keegan
Mark Miller – William Blair
Ivy Jack – Barclays Capital
Simeon Gutman – Canaccord Adams
Anthony Lebiedzinski – Sidoti & Company
[Megan O'Hare] - BMO Capital Markets
Mike Smith – Kansas City Capital
Previous Statements by PTRY
» The Pantry, Inc. F2Q09 (Qtr End 03/26/09) Earnings Call Transcript
» Pantry Inc. F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
» The Pantry, Inc. F4Q08 (Qtr End 09/25/08) Earnings Call Transcript
As you know, earlier today we announced financial results for the third quarter of our 2009 fiscal year. If anyone does not have a copy of the release and would like one faxed or emailed to them, please contact Beverly Gainey in our office at 919-774-6700 extension 5217 and she will see that you get what you need.
Before we begin today, I would like to point out that certain comments made during this call may be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995. Generally speaking, comments regarding the company are management's beliefs, expectations, targets, goals, plans, outlook or predictions of the future are forward-looking statements.
These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by these forward-looking statements. These risks and uncertainties are detailed in The Pantry's filings with the SEC and in our earnings release issued this morning. We refer you to the SEC's Web site or our site at thepantry.com for these and other documents.
We also will discuss certain non-GAAP financial measures today that we believe are helpful to a full understanding of our financial condition. Certain of these non-GAAP financial measures were also included in the press release we issued this morning. We therefore refer you to our press release posted on our Web site, which includes a presentation and reconciliation of each non-GAAP financial measure most directly comparable financial measuring put in the press release and an explanation of why we believe these measures provide useful information to our investors and how they are used by management.
With us today are The Pantry's Chairman and CEO Pete Sodini, Frank Paci our CFO, and Tom Murnane our Lead Director. I will now turn the call over to Pete.
As you all know, we reported a net income for the third quarter of $43,000 or approximately breakeven on a per share basis compared to $10.7 million or $0.48 per share a year ago. Our results were impacted by weak retail gas margin, adverse economic conditions, and increased tobacco excise taxes.
On the gasoline side, our results are not surprising in light of our exceptionally strong performance earlier this year. You may remember that we reported an all-time record gasoline gross margin in the first quarter due to unprecedented declines in oil and gasoline prices.
We fully expected that sometime during the year there would be naturally some bounce-back and we would see oil prices retrace at least a portion of their huge decline earlier. And that's exactly what happened in the third quarter as oil moved from a low of approximately $46 a barrel to as high as $73 per barrel before easing slightly at the end of the quarter.
As you all know, when oil and gasoline prices are rising, our margins tend to get squeezed and we wound up with a $0.093 per gallon margin for the third quarter. Putting this in perspective, we still have a $0.153 per gallon margin for the first nine months of fiscal 2009.
In addition, market conditions were much more favorable for the first few weeks of the fourth quarter before tightening recently. So overall, even with a soft third quarter, we still expected the year with the gasoline margins at well above our long-term average.
Our gas gallon comps improved slightly during the quarter. Retail gallons sold in comparable stores were down 0.5% in the third quarter, much better than 6.4% decline in the second quarter. And our performance again was significantly impacted by diesel. Comparable diesel sales were down 15.1%.
Excluding diesel, our comp gallons sold were up 1.4%, much stronger than our 4.4% decline in the second quarter. We saw some improvement in the year-on-year weighted average miles driven in our market from a negative 2.6% in the second quarter to only a negative point three-tenths of a percent in the April/May period. However, our markets are continuing to trail the national average. Comps for our merchandise sales were up two-tenths of a percent for the quarter and were clearly dampened by the overall recessionary economy, particularly in the southeast.
As we've noted on previous calls, unemployment is significantly higher in our markets on average than in the U.S. as a whole. The weighted average unemployment rate in the U.S. in the states where we operated increased to 10.4% in the third fiscal quarter, up from 9.6% in the previous quarter and 5.9% in the third quarter a year ago.
Our merchandise results were also significantly affected by the increase in fed cigarette taxes under the SCHIP legislation that took effect April 1. This increase in taxes adversely impacted our cigarette unit volume and we believe this is having a spillover effect on the volume in other merchandise categories.