Pantry planning to lower leverage with cash generation, cuts to debt

By Jennifer Lanning Drey

Portland, Ore., June 9 - The Pantry Inc. will continue pursuing a strategy of reducing its leverage through a combination of growing cash and EBITDA while reducing debt, Frank Paci, chief financial officer of Pantry, said during a Tuesday presentation at the William Blair & Co. Growth Stock Conference in Chicago.

"We believe the strong cash flow the business generates will allow us to delever while continuing to drive earnings growth," Paci said.

Pantry slowed its acquisition-heavy strategy in 2008 due to difficult gas margins, and as a result has been improving its liquidity.

Since the beginning of fiscal 2009, Pantry has increased its cash on hand by $26 million and decreased outstanding debt by $53 million through a combination of making excess cash flow payments to reduce bank debt and the buyback of $26 million principal amount of outstanding bonds for $19 million.

Pantry's liquidity at March 25 included $243 million of cash and $145 million available under its revolving credit facility.

The company believes it is now positioned to continue to grow when the economy turns and is considering beginning to ramp up its acquisition strategy again, Paci said.

Pantry's most recent acquisition was an agreement to purchase 39 stores from Herndon Oil Corp. in Mobile, Ala. The company expects the acquisition should be accretive in the first year.

Pantry is a Sanford, N.C.-based convenience store chain.

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