SANFORD, N.C. -- The Securities & Exchange Commission (SEC) has requested more information from The Pantry Inc. about its earnings restatement in late July, reported the Charlotte News & Observer.
The company said it is cooperating with the SEC's informal inquiry, which involves an accounting change related to how the company records some of its store leases. Company officials met with SEC representatives in October, said Peter Sodini, president and CEO.
I don't know where they go from here or who else they talk to, he [image-nocss] told the newspaper. It's an inquiry, not an investigation, so it could run the range of them saying we're finished with it officially or we could never hear about it again.
Sodini said the earnings were restated because the company's accountants decided sale-leaseback transactions were not correctly recorded. He explained that in some acquisitions, The Pantry did not want to act as a landlord, and so it sold the properties to real estate investment trusts, which then leased the properties back to The Pantry. But the underground tanks and pipes remained the property of The Pantry; therefore, the company needed to restate its earnings to reflect about $177 million in additional debt to account for the assets of those tanks and pipes, said the report.
The company disclosed the SEC inquiry in a regulatory filing about its plans to offer, subject to market and other conditions, approximately $130 million of seven-year senior subordinated convertible notes through an offering to qualified U.S. institutional buyers.
The Pantry said it expects to grant the initial purchasers a 30-day option to purchase up to an additional $20 million of notes to cover overallotments.
The company intends to use the majority of the net proceeds from the offering to pay down existing senior debt and for general corporate purposes, including acquisitions. It also intends to use a portion of the net proceeds for the net cost of a convertible bond hedge and separate warrant transaction entered into in connection with the notes.
Headquartered in Sanford, N.C., The Pantry Inc. is a leading independently operated convenience store chain in the southeastern United States, with net sales for fiscal 2005 of approximately $4.4 billion. As of September 29, 2005, it operated 1,400 stores in 11 states under flags including The Pantry, Kangaroo Express, Cowboys and Golden Gallon.
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