Net cash provided by operating activities [image-nocss] was $83.5 million, compared with $41 million in the third quarter of fiscal 2009.
"We are pleased with our results for the third quarter," said president and CEO Terrance M. Marks. "As expected, we saw broad-based improvement in our merchandise business with robust comparable sales growth and continued improvement in gross margin. On the fuel side, we continued to experience soft demand in line with our expectations and benefited from an above-average fuel margin."
He added, "Our core strategic initiatives are on track. In June, we began to implement our Fresh Initiative in Raleigh, N.C., stores and are encouraged by the customer response."
Merchandise revenues for the third quarter increased 8.8% overall and 7.7% on a comparable-store basis from the same period a year ago. "This was the highest quarterly comp increase in recent history," Marks said during the company's earnings conference call. Total merchandise gross profit for the quarter was $160.5 million, an increase of 6.2% from the third quarter a year ago. Merchandise gross margin increased 40 basis points sequentially, with all major categories showing improved margins.
"We began to see improving in-store trends in late March, which accelerated into April as we cycled over the impact of the large increase in the tobacco federal excise tax," Marks said.
Total fuel gross profit for the quarter was $80.5 million compared to $50 million for the comparable quarter last year. Retail fuel gallons sold in the third quarter decreased 3.7% overall and 5.6% on a comparable-store basis. Retail fuel margin per gallon was $0.156 in the quarter compared to $0.093 in the comparable period last year. For the nine months ended June 24, 2010, retail fuel margin per gallon was $0.135 compared to $0.153 in the same period a year ago.
During the third fiscal quarter, the company did not experience an adverse impact on fuel gross profit from its approximately 490 BP-branded facilities. "During the initial weeks following the initial Gulf [of Mexico] oil well disaster, we saw no impact on the business," said Marks. "However, as the crisis continued into May, we began to experience weaker fuel volumes in our BP sites compared to our other branded stores. In total, we believe this negatively impacted our gallon comps in the quarter by 40 basis points."
He added, "Weakness at BP sites continued in early July; however, the most recent trend suggests improvement. We believe that any adverse effect to fuel gross profit in the fiscal fourth quarter will be offset special allowances currently offered by BP."
Total store operating and general and administrative expenses for the quarter were $156.9 million, up $4.4 million versus a year ago. The increase was primarily driven by expenditures to improve store conditions and higher insurance costs.
Depreciation and amortization expense was $29.9 million, an increase of $3.4 million from the prior year. This increase includes $2.4 million in accelerated depreciation on the assets related to the Chevron withdrawal from some of the company's marketing territories and the replacement of certain assets to meet credit card compliance requirements.
Headquartered in Cary, N.C., The Pantry Inc. is a leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated c-store chains in the country. As of Aug. 2, 2010, the company operated 1,641 stores in 11 states under select banners, including Kangaroo Express, its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services.
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