UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2005

Commission File Number: 33-72574

THE PANTRY, INC.

(Exact name of registrant as specified in its charter)

Delaware	56-1574463
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1801 Douglas Drive

Sanford, North Carolina

27330-1410

(Address of principal executive offices)

Registrant’s telephone number, including area code: (919) 774-6700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

COMMON STOCK, $0.01 PAR VALUE	21,895,136 SHARES
(Class)	(Outstanding at August 2, 2005)

THE PANTRY, INC.

FORM 10-Q

JUNE 30, 2005

TABLE OF CONTENTS

Explanatory Note

Prior to the issuance of our unaudited condensed consolidated financial statements for the quarter ended June 30, 2005, we determined that certain sale-leaseback transactions must be accounted for as financing transactions rather than sale-leaseback transactions. Subsequent to the issuance of this report we intend to restate by amendment to our audited financial statements included in our Annual Report filed on Form 10-K for the fiscal year ended September 30, 2004, and our unaudited interim financial statements included in our Quarterly Reports filed on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005. The financial statements included herein reflect the restatements of our consolidated balance sheet at September 30, 2004 and our condensed consolidated statements of operations and condensed consolidated statement of cash flows for the period ended June 24, 2004. The primary effects of the restatement are discussed in Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements-Note 2-Restatement of Previously Issued Financial Statements.

	Page
Part I—Financial Information
Item 1.    Financial Statements
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.    Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.    Controls and Procedures	46
Part II—Other Information
Item 1.    Legal Proceedings	48
Item 6.    Exhibits	48

2

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

THE PANTRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

	June 30, 2005		September 30, 2004
			(As restated, see Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	105,478	$	108,048
Receivables, net		47,241		43,664
Inventories		112,405		95,228
Prepaid expenses and other current assets (Note 8)		15,604		13,446
Property held for sale		5,806		5,939
Deferred income taxes		7,446		7,507
Total current assets		293,980		273,832
Property and equipment, net (Notes 2 and 7)		592,929		582,242
Other assets:
Goodwill (Notes 3 and 4)		386,749		341,652
Other noncurrent assets (Notes 4, 5, 8, and 10)		37,108		35,155
Total other assets		423,857		376,807
Total assets	$	1,310,766	$	1,232,881
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt (Note 6)	$	16,018	$	16,029
Current maturities of lease finance obligations (Notes 2 and 7)		2,902		2,774
Accounts payable		122,900		121,151
Accrued interest (Note 6)		7,465		2,742
Accrued compensation and related taxes		15,435		14,369
Income and other accrued taxes		23,308		18,849
Accrued insurance		21,037		17,228
Other accrued liabilities		15,298		19,393
Total current liabilities		224,363		212,535
Other liabilities:
Long-term debt (Note 6)		539,000		551,010
Lease finance obligations (Notes 2 and 7)		190,307		190,440
Deferred income taxes		66,666		60,932
Deferred revenue		32,776		35,051
Other noncurrent liabilities (Notes 5 and 8)		44,772		33,986
Total other liabilities		873,521		871,419
Commitments and contingencies (Notes 5 and 6)
Shareholders’ equity (Notes 2, 8, 9, 11, and 12):
Common stock, $.01 par value, 50,000,000 shares authorized; 21,895,136 and 20,271,757 issued and outstanding at June 30, 2005 and September 30, 2004, respectively		219		204
Additional paid-in capital		164,006		132,879
Accumulated other comprehensive income, net		640		206
Retained earnings		48,017		15,638
Total shareholders’ equity		212,882		148,927
Total liabilities and shareholders’ equity	$	1,310,766	$	1,232,881

See Notes to Condensed Consolidated Financial Statements

3

THE PANTRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	June 30, 2005			June 24, 2004			June 30, 2005			June 24, 2004
				(As restated, see Note 2)						(As restated, see Note 2)
	(13 weeks)			(13 weeks)			(39 weeks)			(39 weeks)
Revenues:
Merchandise	$	324,041		$	302,879		$	895,397		$	843,101
Gasoline		842,415			625,448			2,158,362			1,616,020
Total revenues		1,166,456			928,327			3,053,759			2,459,121
Cost of sales:
Merchandise		205,467			193,624			566,999			535,186
Gasoline		793,968			580,993			2,025,908			1,496,888
Total cost of sales		999,435			774,617			2,592,907			2,032,074
Gross profit		167,021			153,710			460,852			427,047
Operating expenses:
Operating, general and administrative expenses (Note 2)		110,669			104,491			321,525			306,028
Depreciation and amortization (Note 2)		15,933			14,769			46,936			44,602
Total operating expenses		126,602			119,260			368,461			350,630
Income from operations		40,419			34,450			92,391			76,417
Other income (expense):
Loss on extinguishment of debt (Note 10)		—			—			—			(23,087	)
Interest expense (Notes 2 and 10)		(13,983	)		(13,466	)		(41,404	)		(49,021	)
Miscellaneous		683			482			1,788			849
Total other expense		(13,300	)		(12,984	)		(39,616	)		(71,259	)
Income before income taxes		27,119			21,466			52,775			5,158
Income tax expense		(10,518	)		(8,264	)		(20,396	)		(1,987	)
Net income	$	16,601		$	13,202		$	32,379		$	3,171
Earnings per share (Note 11):
Basic:	$	0.77		$	0.66		$	1.56		$	0.16
Diluted:	$	0.75		$	0.64		$	1.50		$	0.15

See Notes to Condensed Consolidated Financial Statements

4

THE PANTRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Nine Months Ended
	June 30, 2005			June 24, 2004
				(As restated, see Note 2)
	(39 weeks)			(39 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	32,379		$	3,171
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,936			44,602
Provision for deferred income taxes		8,226			1,987
Loss on extinguishment of debt		—			23,087
Fair market value change in non-qualifying derivatives		(411	)		(1,741	)
Amortization of deferred loan costs		880			1,978
Amortization of long-term debt discount		—			534
Other		1,052			822
Changes in operating assets and liabilities (net of effects of acquisitions):
Receivables		(7,943	)		(5,998	)
Inventories		(11,569	)		(1,869	)
Prepaid expenses		(478	)		(1,588	)
Other noncurrent assets		(533	)		432
Accounts payable		1,749			15,973
Other current liabilities and accrued expenses		12,908			(8,960	)
Other noncurrent liabilities		(2,043	)		(7,541	)
Net cash provided by operating activities		81,153			64,889
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property held for sale		(742	)		(1,084	)
Additions to property and equipment		(46,524	)		(26,092	)
Proceeds from sale of land, building and equipment		7,949			5,475
Acquisitions of related businesses, net of cash acquired		(60,010	)		(185,528	)
Net cash used in investing activities		(99,327	)		(207,229	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments under lease finance obligations		(2,056	)		(2,026	)
Principal repayments of long-term debt, including redemption premiums		(12,021	)		(589,403	)
Proceeds from issuance of long-term borrowings		—			675,000
Proceeds from issuance of lease finance obligations		2,051			97,107
Proceeds from issuance of common stock		23,750			—
Proceeds from exercise of stock options		3,880			3,324
Repayments of shareholder loans		—			150
Other financing costs		—			(11,349	)
Net cash provided by financing activities		15,604			172,803
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(2,570	)		30,463
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		108,048			72,901
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	105,478		$	103,364
Cash paid during the period:
Interest	$	36,215		$	52,283
Income Taxes	$	7,899		$	276
Non-cash transactions:
Accrued purchases of property and equipment	$	3,000		$	2,296

See Notes to Condensed Consolidated Financial Statements

5

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements include the accounts of The Pantry, Inc. and its wholly owned subsidiaries (references to “the Company,” “Pantry,” “The Pantry,” “we,” “us,” and “our” mean The Pantry, Inc. and its subsidiaries). All inter-company transactions and balances have been eliminated in consolidation. Transactions and balances of each of these wholly owned subsidiaries are immaterial to the condensed consolidated financial statements.

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim condensed consolidated financial statements have been prepared from the accounting records of The Pantry, Inc. and its subsidiaries and all amounts at June 30, 2005 and for the three and nine months ended June 30, 2005 and June 24, 2004 are unaudited. The condensed consolidated balance sheet at September 30, 2004 has been derived from the audited balance sheet as of such date, restated to give effect to the adjustment of certain of our sale-leaseback transactions. The condensed consolidated balance sheet at September 30, 2004 contained herein is unaudited. Pursuant to Regulation S-X, certain information and note disclosures normally included in annual financial statements have been condensed or omitted. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, and which are of a normal, recurring nature.

The interim financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2004, which will be filed with the Securities and Exchange Commission.

Our results of operations for the three and nine months ended June 30, 2005 and June 24, 2004 are not necessarily indicative of results to be expected for the full fiscal year. The convenience store industry in our marketing areas generally experiences higher levels of revenues and profit margins during the summer months than during the winter months. As a result, we have historically achieved higher revenues and earnings in our third and fourth quarters.

Accounting Period

We operate on a 52-53 week fiscal year ending on the last Thursday in September. Our 2005 fiscal year ends on September 29, 2005 and is a 52 week year. Fiscal 2004 was a 53 week year.

The Pantry

As of June 30, 2005, we operated 1,386 convenience stores located in Florida (449), North Carolina (312), South Carolina (236), Georgia (127), Tennessee (103), Mississippi (53), Kentucky (33), Virginia (30), Alabama (24), Indiana (11), and Louisiana (8). Our stores offer a broad selection of merchandise, gasoline and ancillary products and services designed to appeal to the convenience needs of our customers, including gasoline, car care products and services, tobacco products, beer, soft drinks, self-service fast food and beverages, publications, dairy products, groceries, health and beauty aids, money orders and other ancillary services. In all states, except North Carolina and Mississippi, we also sell lottery products. Self-service gasoline is sold at 1,362 locations, 865 of which sell gasoline under major oil company brand names including Amoco^®, BP^®, Chevron^®, Citgo^®, Mobil^®, and Texaco^®.

6

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 (“SFAS No. 151”). This statement clarifies that inventory costs that are “abnormal” are required to be charged to expense as incurred as opposed to being capitalized into inventory as a product cost. Examples of “abnormal” costs include costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage). SFAS No. 151 will be effective for our 2006 fiscal year beginning September 30, 2005. Based on our initial evaluation, the adoption of SFAS No. 151 is not expected to have a material effect on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”). This statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements. This standard will be effective for our 2006 fiscal year beginning September 30, 2005. We currently plan to adopt this standard using the modified version of prospective application and, beginning in the first fiscal quarter of 2006, will recognize compensation costs for the portion of outstanding awards for which the requisite service has not yet been rendered. While we cannot precisely determine the impact on net earnings as a result of the adoption of SFAS No. 123R, estimated compensation expense related to prior periods can be found below under “—Stock-Based Compensation”. The ultimate amount of increased compensation expense will be dependent on the number of option shares granted during the year, their timing and vesting period, and the method used to calculate the fair value of the awards, among other factors.

FASB Interpretation 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143 (“FIN 47”), was issued by the FASB in March 2005. FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 is not expected to have a material effect on our financial position, results of operations or cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial position, results of operations or cash flows upon adoption.

7

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Stock-Based Compensation

As permitted by SFAS No. 123R and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123, we continue to account for stock options under the intrinsic value method recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in the condensed consolidated statements of operations, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation:

	Three Months Ended						Nine Months Ended
	June 30, 2005			June 24, 2004			June 30, 2005			June 24, 2004
				(As restated)						(As restated)
Net income (amounts in thousands):
As reported	$	16,601		$	13,202		$	32,379		$	3,171
Deduct—Total stock-based compensation expense determined under fair value method for all awards, net of tax		(279	)		(103	)		(722	)		(267	)
Pro forma	$	16,322		$	13,099		$	31,657		$	2,904
Basic earnings per share:
As reported	$	0.77		$	0.66		$	1.56		$	0.16
Pro forma	$	0.76		$	0.66		$	1.52		$	0.15
Diluted earnings per share:
As reported	$	0.75		$	0.64		$	1.50		$	0.15
Pro forma	$	0.73		$	0.63		$	1.46		$	0.14

The above pro forma disclosures are not necessarily representative of pro forma effects on reported net income for the full year or future years.

NOTE 2—RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On July 28, 2005, we announced our intention to restate the consolidated financial statements included in our Annual Report filed on Form 10-K for the fiscal year ended September 30, 2004, and our unaudited interim financial statements included in our Quarterly Reports filed on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005, to correct the accounting for certain sale-leaseback transactions entered into by the company. The restatement is the result of our determination that such transactions should have been accounted for as financing transactions rather than sale-leaseback transactions. We had previously accounted for the leases included in these transactions primarily as operating leases. The restatement recharacterizes the transactions as financing transactions, with the assets and related financing obligation carried on our balance sheet.

8

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

A summary of the effects of the restatement on the condensed consolidated balance sheet as of September 30, 2004 is as follows (amounts in thousands):

	As of September 30, 2004
	As Previously Reported		Adjustment			As Restated
Condensed Consolidated Balance Sheet (Unaudited):
Property and equipment, net	$	411,501	$	170,741		$	582,242
Total assets		1,062,140		170,741			1,232,881
Deferred income taxes		63,257		(2,325	)		60,932
Current maturities of lease finance obligations		1,197		1,577			2,774
Lease finance obligations		14,582		175,858			190,440
Other noncurrent liabilities		35,096		(1,110	)		33,986
Total other liabilities		147,986		172,423			320,409
Accumulated earnings		18,897		(3,259	)		15,638
Total shareholders’ equity		152,186		(3,259	)		148,927
Total liabilities and shareholders’ equity		1,062,140		170,741			1,232,881

Below are our condensed consolidated statement of operations and consolidated statement of cash flows stating both previously reported and restated amounts for the periods ended June 24, 2004 (amounts in thousands):

	Three Months Ended June 24, 2004									Nine Months Ended June 24, 2004
	As Previously Reported			Adjustment			As Restated			As Previously Reported			Adjustment			As Restated
Condensed Consolidated Statement of Operations (Unaudited):
Operating, general, and administrative expenses	$	109,252		$	(4,761	)	$	104,491		$	319,822		$	(13,794	)	$	306,028
Depreciation and amortization		13,578			1,191			14,769			41,186			3,416			44,602
Total operating expenses		122,830			(3,570	)		119,260			361,008			(10,378	)		350,630
Income from operations		30,880			3,570			34,450			66,039			10,378			76,417
Interest expense		(9,128	)		(4,338	)		(13,466	)		(36,435	)		(12,586	)		(49,021	)
Total other expense		(8,646	)		(4,338	)		(12,984	)		(58,673	)		(12,586	)		(71,259	)
Income before income taxes		22,234			(768	)		21,466			7,366			(2,208	)		5,158
Income tax expense		(8,560	)		296			(8,264	)		(2,837	)		850			(1,987	)
Net income		13,674			(472	)		13,202			4,529			(1,358	)		3,171

	Nine Months Ended June 24, 2004
	As Previously Reported			Adjustment			As Restated
Condensed Consolidated Statement of Cash Flows (Unaudited):
Net cash provided by operating activities	$	63,871		$	1,018		$	64,889
Net cash used in investing activities		(110,120	)		(97,109	)		(207,229	)
Net cash provided by financing activities		76,712			96,091			172,803
Net increase in cash and cash equivalents		30,463			—			30,463

9

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 3—ACQUISITION OF RELATED BUSINESS

On April 21, 2005, we completed the acquisition of D&D Oil Company, Inc., or D&D Oil, which operates 53 convenience stores operating under the Cowboys^® banner. The purchase price was funded from available cash and approximately $23.8 million in proceeds from the partial settlement of a forward equity sale agreement we executed in October 2004, see Note 12—Forward Sale of Equity. We are leasing all of the stores under operating leases, primarily from the seller. Additionally, during fiscal 2005 we have acquired six stores in four separate transactions.

On June 16, 2005, we signed a definitive agreement to acquire 23 convenience stores in Virginia from Angus I. Hines, Inc., which have been operating under the Sentry Food Mart Banner. We anticipate this transaction closing during the fourth quarter of fiscal 2005.

The following are the purchase price allocations for the 59 stores acquired since the beginning of the fiscal year. These allocations are preliminary estimates based on available information and certain assumptions management believes to be reasonable. These values are subject to change until certain third party valuations have been finalized and changes in these values could have a material impact on the purchase price allocation. Until this purchase price allocation is finalized, there may be material adjustments to the fair values of the assets and liabilities disclosed in this preliminary opening balance sheet. The allocations are based on the fair values on the date of the acquisitions (amounts in thousands):

Assets Acquired:
Inventories	$	5,608
Prepaid expenses and other current assets		58
Property and equipment		16,406
Other noncurrent assets		2,350
Total assets		24,422
Liabilities Assumed:
Other accrued liabilities		130
Deferred income taxes		774
Deferred revenue		881
Other liabilities		7,724
Total liabilities		9,509
Net tangible assets acquired, net of cash		14,913
Goodwill, including direct acquisition costs		45,097
Total consideration paid, including direct acquisition costs, net of cash acquired	$	60,010

The following unaudited pro forma information presents a summary of our condensed consolidated results of operations and the acquired assets as if the transactions occurred at the beginning of the fiscal year for each of the periods presented (amounts in thousands, except per share data):

	Nine Months Ended
	June 30, 2005		June 24, 2004
Total revenues	$	3,221,734	$	2,691,702
Net income		33,491		4,712
Earnings per share:
Basic	$	1.55	$	0.23
Diluted	$	1.51	$	0.22

10

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The unaudited pro forma information set forth above is presented for informational purposes only. In management’s opinion, the unaudited pro forma information set forth above is not necessarily indicative of actual results that would have occurred had the acquisitions been consummated at the beginning of fiscal 2004 or fiscal 2005, or of future operations of the Company.

NOTE 4—GOODWILL AND OTHER INTANGIBLES

We account for goodwill and other intangibles under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, and as a result, our goodwill asset is reviewed at least annually for impairment. Other intangible assets which have finite useful lives will continue to be amortized over their useful lives. We have determined that we operate in one reporting unit based on our current reporting structure and have thus assigned goodwill at the enterprise level.

The changes in the balance of goodwill for the nine months ended June 30, 2005 consisted of the following (amounts in thousands):

Beginning balance (September 30, 2004)	$	341,652
Goodwill acquired during the year		45,097
Ending balance (June 30, 2005)	$	386,749

The goodwill acquired during the year relates primarily to the acquisition of D&D Oil and the additional six stores acquired in four separate transactions.

Other intangible assets consist of noncompete agreements and a trademark. For each of the dates presented, noncompete agreements consisted of the following (amounts in thousands):

	June 30, 2005			September 30, 2004
Gross carrying value	$	10,208		$	7,959
Less—accumulated amortization		(1,971	)		(1,766	)
Noncompete agreements, net	$	8,237		$	6,193

Amortization expense related to noncompete agreements was $124 thousand and $97 thousand for the three months ended June 30, 2005 and June 24, 2004, respectively, and $305 thousand and $335 thousand for the nine months ended June 30, 2005 and June 24, 2004, respectively. The weighted average amortization period of all noncompete agreements is 27.3 years. Estimated amortization expense for each of the five fiscal years following September 30, 2004 and thereafter is: $145 thousand for the remainder of fiscal 2005; $555 thousand in fiscal 2006; $456 thousand in fiscal 2007; $404 thousand in fiscal 2008; $331 thousand in fiscal 2009 and a total of $6.3 million thereafter. Other intangible assets are classified in other noncurrent assets in the accompanying condensed consolidated balance sheets.

NOTE 5—ENVIRONMENTAL LIABILITIES AND OTHER CONTINGENCIES

As of June 30, 2005, we were contingently liable for outstanding letters of credit in the amount of approximately $41.7 million primarily related to several self-insured programs, vendor contract terms and regulatory requirements. The letters of credit are not to be drawn against unless we default on the timely payment of the related liabilities.

11

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

We are party to various legal actions arising in the ordinary course of business. We believe these other actions are routine and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, we believe that the ultimate resolution of these matters will not have a material adverse impact on our business, financial condition, or prospects.

Environmental Liabilities and Contingencies

We are subject to various federal, state and local environmental laws. We make financial expenditures in order to comply with regulations governing underground storage tanks adopted by federal, state and local regulatory agencies. In particular, at the federal level, the Resource Conservation and Recovery Act of 1976, as amended, requires the EPA to establish a comprehensive regulatory program for the detection, prevention and cleanup of leaking underground storage tanks.

Federal and state regulations require us to provide and maintain evidence that we are taking financial responsibility for corrective action and compensating third parties in the event of a release from our underground storage tank systems. In order to comply with these requirements, as of June 30, 2005, we maintain letters of credit in the aggregate amount of approximately $1.3 million in favor of state environmental agencies in North Carolina, South Carolina, Virginia, Georgia, Indiana, Tennessee, Kentucky and Louisiana.

We also rely upon the reimbursement provisions of applicable state trust funds. In Florida, we meet our financial responsibility requirements by state trust fund coverage through December 31, 1998 and meet such requirements thereafter through private commercial liability insurance. In Georgia, we meet our financial responsibility requirements by a combination of state trust fund coverage, private commercial liability insurance, and a letter of credit. The trust funds generally require us to pay deductibles ranging from $0 to $150 thousand per occurrence depending on the upgrade status of our underground storage tank system, the date the release is discovered and/or reported and the type of cost for which reimbursement is sought.

Environmental reserves of $15.3 million and $14.1 million as of June 30, 2005 and September 30, 2004, respectively, represent our estimates for future expenditures for remediation, tank removal and litigation associated with 266 and 251 known contaminated sites, respectively, as a result of releases (e.g., overfills, spills and underground storage tank releases) and are based on current regulations, historical results and certain other factors. We estimate that approximately $14.0 million of our environmental obligation will be funded by state trust funds and third party insurance; as a result we may spend up to $1.3 million for remediation, tank removal and litigation. Also, as of June 30, 2005 and September 30, 2004 there were an additional 484 and 503 sites, respectively, that are known to be contaminated sites that are being remediated by third parties and therefore the costs to remediate such sites are not included in our environmental reserve. Remediation costs for known sites are expected to be incurred over the next one to ten years. Environmental reserves have been established with remediation costs based on internal and external estimates for each site. Future remediation for which the timing of payments can be reasonably estimated is discounted using an appropriate rate to determine the reserve.

We anticipate that we will be reimbursed for expenditures from state trust funds and private insurance. As of June 30, 2005, anticipated reimbursements of $16.1 million are recorded as long-term environmental receivables and $895 thousand are recorded as current receivables related to all sites. In Florida, remediation of such contamination reported before January 1, 1999 will be performed by the state (or state approved independent contractors) and substantially all of the remediation costs, less any applicable deductibles, will be paid by the state trust fund. We will perform remediation in other states through independent contractor firms engaged by us. For certain sites, the trust fund does not cover a deductible or has a co-pay which may be less than the cost of

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(Unaudited)

such remediation. Although we are not aware of releases or contamination at other locations where we currently operate or have operated stores, any such releases or contamination could require substantial remediation expenditures, some or all of which may not be eligible for reimbursement from state trust funds.

Several of the locations identified as contaminated are being remediated by third parties who have indemnified us as to responsibility for clean up matters. Additionally, we are awaiting closure notices on several other locations which will release The Pantry from responsibility related to known contamination at those sites. These sites continue to be included in our environmental reserve until a final closure notice is received.

NOTE 6—LONG-TERM DEBT

Long-term debt consisted of the following (amounts in thousands):

	June 30, 2005			September 30, 2004
Senior subordinated notes payable; due February 19, 2014; interest payable semi-annually at 7.75%	$	250,000		$	250,000
Senior credit facility; interest payable monthly at LIBOR plus 2.25%; principal due in quarterly installments through March 12, 2011		305,000			317,000
Other notes payable; various interest rates and maturity dates		18			39
Total long-term debt		555,018			567,039
Less—current maturities		(16,018	)		(16,029	)
Long-term debt, net of current maturities	$	539,000		$	551,010

Our senior credit facility consists of a term loan with an outstanding balance of $305.0 million and a $70.0 million revolving credit facility, which bear interest at a rate of LIBOR plus 2.25%. Our senior credit facility is secured by substantially all of our assets, other than our leased real property and is guaranteed by our subsidiaries. As of June 30, 2005, there were no outstanding borrowings under the revolving credit facility and we had approximately $41.7 million of standby letters of credit issued under the facility. As a result, we had approximately $28.3 million in available borrowing capacity. Furthermore, the revolving credit facility limits our total outstanding letters of credit to $50.0 million. The LIBOR associated with our senior credit facility resets periodically, and as of June 30, 2005, the effective LIBOR rate was 3.33%.

The remaining annual maturities of our long-term debt as of June 30, 2005 are as follows (amounts in thousands):

Year Ended September:
2005	$	8
2006		16,010
2007		16,000
2008		16,000
2009		16,000
Thereafter		491,000
Total long-term debt	$	555,018

As of June 30, 2005, we were not in compliance with all covenants and restrictions relating to all outstanding borrowings. As a result of the restatement described in Note 2—Restatement of Previously Issued

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(Unaudited)

Financial Statements, we recorded a lease finance obligation in excess of the amount allowed under our covenants. On August 5, 2005, we amended the loan agreement under our senior credit facility to, among other things, eliminate the restriction on capital lease and other lease financing obligations and increase our leverage ratio requirement by 50 basis points. In addition, we received a waiver of the default caused by a breach of the indebtedness and related covenants. The waiver and amendment brought us back into compliance with our covenants and restrictions under our senior credit facility.

Substantially all of our net assets are restricted as to payment of dividends and other distributions.

NOTE 7—LEASE FINANCE OBLIGATIONS (INCLUDING CAPITAL LEASES)

We lease certain facilities under capital leases and through sale-leaseback arrangements accounted for using the financing method. The net book values of assets under capital leases and sale-leasebacks accounted for under the financing method at June 30, 2005 and September 30, 2004 are summarized as follows (amounts in thousands):

	June 30, 2005			September 30, 2004
				(As restated)
Land	$	80,241		$	80,241
Buildings		119,858			118,542
Equipment		5,004			5,004
Accumulated Depreciation		(25,388	)		(20,722	)
	$	179,715		$	183,065

Following are the minimum lease payments net of sublease income that will have to be made in each of the years indicated based on non-cancelable leases in effect as of June 30, 2005 (amounts in thousands):

Fiscal year	Lease Finance Obligations		Operating Leases
2005	$	5,687	$	12,993
2006		22,588		50,904
2007		22,603		48,359
2008		22,429		46,184
2009		22,363		42,931
Later years		278,764		248,667
Total minimum lease payments	$	374,434	$	450,038
Amount representing interest (8% to 20%)		181,225
Present value of minimum lease payments		193,209
Less—current maturities		2,902
	$	190,307

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into interest rate swap agreements to modify the interest rate characteristics of our outstanding long-term debt and have designated each qualifying instrument as a cash flow hedge. We formally document our hedge relationships, including identifying the hedge instruments and hedged items, as well as our risk management objectives and strategies for entering into the hedge transaction. At hedge inception, and at least quarterly thereafter, we assess whether derivatives used to hedge transactions are highly effective in offsetting changes in the cash flow of the hedged item. We measure effectiveness by the ability of the interest rate swaps to offset cash flows associated with changes in the variable LIBOR rate associated with our term loan facilities using the hypothetical derivative method. To the extent the instruments are considered to be effective, changes in fair value are recorded as a component of other comprehensive income (loss). To the extent there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately recognized in earnings (interest expense). When it is determined that a derivative ceases to be a highly effective hedge, we discontinue hedge accounting, and subsequent changes in fair value of the hedge instrument are recognized in earnings. Interest income (expense) for the mark-to-market adjustment of those instruments that do not qualify for hedge accounting was $(9) thousand and $577 thousand for the third quarter of fiscal 2005 and fiscal 2004, respectively, and $411 thousand and $1.7 million for the nine months ended June 30, 2005 and June 24, 2004, respectively.

The fair values of our interest rate swaps are obtained from dealer quotes. These values represent the estimated amount we would receive or pay to terminate the agreement taking into consideration the difference between the contract rate of interest and rates currently quoted for agreements of similar terms and maturities. At June 30, 2005, other noncurrent liabilities include derivative liabilities of $591 thousand and prepaid expenses and other current assets include derivative assets of $1.6 million. At September 30, 2004, other noncurrent liabilities included derivative liabilities of approximately $700 thousand and other noncurrent assets included derivative assets of approximately $600 thousand. Cash flow hedges which were effective on June 30, 2005 represent interest rate swaps with a notional amount of $202.0 million, a weighted average pay rate of 2.72% and have various settlement dates, the latest of which is April 2006. Additionally, we are party to cash flow hedges which will become effective April 2006 with a notional amount of $130.0 million, a weighted average pay rate of 4.24%, and have various settlement dates, the latest of which is April 2009.

NOTE 9—COMPREHENSIVE INCOME

The components of comprehensive income, net of related income taxes, for the periods presented are as follows (amounts in thousands):

	Three Months Ended					Nine Months Ended
	June 30, 2005			June 24, 2004		June 30, 2005		June 24, 2004
				(As restated)				(As restated)
Net income	$	16,601		$	13,202	$	32,379	$	3,171
Other comprehensive income:
Net unrealized (losses) gains on qualifying cash flow hedges (net of deferred income taxes of $(946), $1,557, $273 and $778, respectively)		(1,494	)		2,486		434		1,243
Comprehensive income	$	15,107		$	15,688	$	32,813	$	4,414

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The components of unrealized gains on qualifying cash flow hedges, net of related income taxes, for the periods presented are as follows (amounts in thousands):

	Three Months Ended						Nine Months Ended
	June 30, 2005			June 24, 2004			June 30, 2005			June 24, 2004
Unrealized (losses) gains on qualifying cash flow hedges	$	(1,580	)	$	2,992		$	626		$	2,154
Less: Reclassification adjustment for income (expenses) included in net income		86			(506	)		(192	)		(911	)
Net unrealized (losses) gains on qualifying cash flow hedges	$	(1,494	)	$	2,486		$	434		$	1,243

Accumulated other comprehensive income, net of related income taxes, is composed of unrealized gains on qualifying cash flow hedges of $640 thousand and $206 thousand as of June 30, 2005 and September 30, 2004, respectively.

NOTE 10—INTEREST EXPENSE AND LOSS ON EXTINGUISHMENT OF DEBT

The components of interest expense are as follows (amounts in thousands):

	Three Months Ended						Nine Months Ended
	June 30, 2005			June 24, 2004			June 30, 2005			June 24, 2004
				(As restated)						(As restated)
Interest on long-term debt	$	8,909		$	8,066		$	25,809		$	31,661
Interest on lease finance obligations		4,922			4,892			14,772			14,244
Interest rate swap settlements		(140	)		823			313			2,864
Fair market value change in non-qualifying derivatives		9			(577	)		(411	)		(1,741	)
Amortization of deferred financing costs		279			249			880			1,978
Miscellaneous		4			13			41			15
Subtotal: Interest expense	$	13,983		$	13,466		$	41,404		$	49,021
Loss on extinguishment of debt		—			—			—			23,087
Total interest expense and loss on extinguishment of debt	$	13,983		$	13,466		$	41,404		$	72,108

The loss on extinguishment of debt relates to the redemption of our $200 million 10.25% senior subordinated notes and the refinancing of our senior credit facility. The loss includes the write-off of deferred financing costs of $11.8 million, the call premium on the senior subordinated notes of $6.8 million, the call premium on the second lien term loan of $1.0 million, and the write-off of the unamortized original issue discount on the senior credit facility of $3.5 million.

NOTE 11—EARNINGS PER SHARE

We compute earnings per share data in accordance with the requirements of SFAS No. 128, Earnings per Share. Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding warrants and stock options using the “treasury stock” method.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	June 30, 2005		June 24, 2004		June 30, 2005		June 24, 2004
			(As restated)				(As restated)
Net income	$	16,601	$	13,202	$	32,379	$	3,171
Earnings per share—basic:
Weighted average shares outstanding		21,598		19,985		20,769		19,397
Earnings per share—basic	$	0.77	$	0.66	$	1.56	$	0.16
Earnings per share—diluted:
Weighted average shares outstanding		21,598		19,985		20,769		19,397
Dilutive impact of options and warrants outstanding		666		724		884		1,203
Weighted average shares and potential dilutive shares outstanding		22,264		20,709		21,653		20,600
Earnings per share—diluted	$	0.75	$	0.64	$	1.50	$	0.15

There were no options or warrants to purchase shares of common stock that were not included in the computation of diluted earnings per share for the three and nine months ended June 30, 2005. Options to purchase shares of common stock that were not included in the computation of diluted earnings per share, because their inclusion would have been antidilutive, were 25 thousand for the three and nine months ended June 24, 2004.

NOTE 12—FORWARD SALE OF EQUITY

During October 2004, we completed a secondary stock offering in which Freeman Spogli & Co., or Freeman Spogli, sold 3,850,000 shares of our stock at a public offering price of $22.96 per share. In connection with this secondary stock offering, we sold 1,500,000 shares of our common stock under a forward sale agreement with Merrill Lynch International, an affiliate of Merrill Lynch & Co., as forward purchaser, under which, at our request, Merrill Lynch International borrowed 1,500,000 shares of our common stock from stock lenders and sold such borrowed shares at a net price of $21.8694 per share to certain underwriters pursuant to a purchase agreement.

We may elect to settle the forward sale by means of a physical stock, cash or net stock settlement. The forward sale will settle in twelve months, or earlier at our option. At any time during that period (up to a maximum of four settlement dates in total), we have the option to settle the forward sale in whole or in part. We may physically settle the forward sale by delivering all or a portion of the shares to Merrill Lynch International for cash proceeds approximately equal to the product of the applicable number of shares and our share price as of the date of the forward sale, plus an imputed interest rate of the Federal Funds Rate minus 1.0%. The actual proceeds to be received by us will vary depending upon the settlement date, the portion of the shares designated by us for settlement on that settlement date and the method of settlement.

On April 20, 2005, we partially settled the forward sale agreement by issuing and delivering 1,078,697 shares of our common stock, par value $.01 per share. In connection with the partial settlement, we received $23.8 million in proceeds. The remaining 421,303 shares subject to the forward sale agreement may be issued

17

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

and delivered by us in settlement of the forward sale agreement by means of physical stock, cash, or net settlement and must be settled no later than twelve months following the effective date of the forward sale agreement. If we elect to physically settle the remaining shares we expect to receive aggregate proceeds of approximately $9.2 million. The forward sale agreement provides that the initial forward sale price will be subject to increase based on a floating interest factor equal to the Federal Funds Rate, less a spread of 1.0%. However, because the spread may be greater than the Federal Funds Rate for at least part of the term of the forward sale agreement, the actual forward sale price received at settlement may be less than the initial forward sale price. In no event are we required to deliver more than the remaining 421,303 shares under the forward sale agreement.

If we elect cash or net stock settlement, Merrill Lynch International or one of its affiliates will purchase shares of our common stock in secondary market transactions over a period of time for delivery to Merrill Lynch International’s stock lenders in order to unwind its hedge. In connection with a cash or net stock settlement election by us, if the price paid by Merrill Lynch International or its affiliates in secondary market transactions to unwind its hedge exceeds the price that Merrill Lynch International would have been obligated to pay us had we instead elected a physical stock settlement under the forward sale agreement with respect to such shares, then we would pay Merrill Lynch International an amount in cash equal to such difference in the case of a cash settlement or would deliver a number of shares of our common stock having a market value equal to such difference in the case of a net stock settlement. On the other hand, if Merrill Lynch International or one of its affiliates is able to unwind its hedge by purchasing shares in secondary market transactions for an amount less than the price that Merrill Lynch International would have been obligated to pay us in connection with a physical stock settlement, Merrill Lynch International would pay us such difference in cash in the case of a cash settlement or in shares of our common stock having a market value equal to such difference in the case of a net stock settlement.

Prior to settlement, Merrill Lynch International will utilize the aggregate net proceeds from the sale of the borrowed shares as cash collateral for the borrowing of shares described above.

Under limited circumstances related to a default or certain other extraordinary or otherwise unanticipated events, Merrill Lynch International also will have the ability to require us to settle the forward sale prior to the maturity date.

NOTE 13—SUBSEQUENT EVENTS

On August 2, 2005, we signed a definitive agreement to acquire 13 convenience stores in Alabama from Chatham Oil Company, which have been operating under the Speedmart Food Stores banner.

On August 5, 2005, we entered into an amendment to the loan agreement under our senior credit facility that, among other things:

• eliminates any dollar limitation on additional indebtedness and capital lease obligations so long as borrowings are incurred to finance acquisitions, certain capital expenditures and related fees and expenses;

• increases by 50 basis-points the loan agreement’s existing leverage ratio requirements that are based on debt/EBITDA (as such terms are defined in the loan agreement); and

• increases the limitation on net capital expenditures from 30 percent to 35 percent of EBITDA (as such term is defined in the loan agreement).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In connection with the amendment, we also received from our lenders a waiver of certain defaults in the loan agreement caused by the restatement of our previously issued financial statements discussed herein.

NOTE 14—GUARANTOR SUBSIDIARIES

We have two wholly owned subsidiaries, R. & H. Maxxon, Inc., and Kangaroo, Inc. (the “Guarantor Subsidiaries”) that are guarantors of our senior credit facility and our senior subordinated notes. The guarantees are joint and several and full and unconditional. The Guarantor Subsidiaries and D&D Oil comprise all direct and indirect subsidiaries of the Company. We expect that D&D Oil will be made a Guarantor Subsidiary by mid-September. Combined financial information for the Guarantor Subsidiaries is as follows:

19

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Balance Sheets

June 30, 2005

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries			Eliminations			Total
ASSETS
Current assets:
ash and cash equivalents	$	105,478		$	—		$	—		$	105,478
Receivables, net		47,241			—			—			47,241
Inventories		112,405			—			—			112,405
Prepaid expenses and other current assets		15,602			2			—			15,604
Property held for sale		5,806			—			—			5,806
Deferred income taxes		7,446			—			—			7,446
Total current assets		293,978			2			—			293,980
Investments in subsidiaries		40,723			—			(40,723	)		—
Property and equipment, net		592,929			—			—			592,929
Other assets:
Goodwill		386,749			—			—			386,749
Intercompany notes receivable		(23,477	)		43,872			(20,395	)		—
Other		37,051			57			—			37,108
Total other assets		400,323			43,929			(20,395	)		423,857
Total assets	$	1,327,953		$	43,931		$	(61,118	)	$	1,310,766
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	16,018		$	—		$	—		$	16,018
Current maturities of lease finance obligations		2,902			—			—			2,902
Accounts payable		122,900			—			—			122,900
Accrued interest		7,465			—			—			7,465
Accrued compensation and related taxes		15,435			—			—			15,435
Income and other accrued taxes		23,308			—			—			23,308
Accrued insurance		21,037			—			—			21,037
Other accrued liabilities		15,363			—			(65	)		15,298
Total current liabilities		224,428			—			(65	)		224,363
Other liabilities:
Long-term debt		539,000			—			—			539,000
Deferred income taxes		66,666			—			—			66,666
Deferred revenue		32,776			—			—			32,776
Lease finance obligations		190,307			—			—			190,307
Intercompany notes payable		17,124			3,208			(20,332	)		—
Other noncurrent liabilities		44,770			2			—			44,772
Total other liabilities		890,643			3,210			(20,332	)		873,521
Shareholders’ equity:
Common stock		219			523			(523	)		219
Additional paid-in-capital		164,006			40,551			(40,551	)		164,006
Accumulated other comprehensive income, net		640			—			—			640
Retained earnings		48,017			(353	)		353			48,017
Total shareholders’ equity		212,882			40,721			(40,721	)		212,882
Total liabilities and shareholders’ equity	$	1,327,953		$	43,931		$	(61,118	)	$	1,310,766

20

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Balance Sheets

September 30, 2004

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries			Eliminations			Total
	(As restated)			(As restated)			(As restated)			(As restated)
ASSETS
Current assets:
Cash and cash equivalents	$	108,048		$	—		$	—		$	108,048
Receivables, net		43,664			—			—			43,664
Inventories		95,228			—			—			95,228
Prepaid expenses and other current assets		13,444			2			—			13,446
Property held for sale		5,939			—			—			5,939
Deferred income taxes		7,507			—			—			7,507
Total current assets		273,830			2			—			273,832
Investments in subsidiaries		40,723			—			(40,723	)		—
Property and equipment, net		582,242			—			—			582,242
Other assets:
Goodwill		341,652			—			—			341,652
Intercompany notes receivable		(23,477	)		43,872			(20,395	)		—
Other		35,098			57			—			35,155
Total other assets		353,273			43,929			(20,395	)		376,807
Total assets	$	1,250,068		$	43,931		$	(61,118	)	$	1,232,881
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	16,029		$	—		$	—		$	16,029
Current maturities of lease finance obligations		2,774			—			—			2,774
Accounts payable		121,151			—			—			121,151
Accrued interest		2,742			—			—			2,742
Accrued compensation and related taxes		14,369			—			—			14,369
Other accrued taxes		18,849			—			—			18,849
Accrued insurance		17,228			—			—			17,228
Other accrued liabilities		19,458			—			(65	)		19,393
Total current liabilities		212,600			—			(65	)		212,535
Other liabilities:
Long-term debt		551,010			—			—			551,010
Deferred income taxes		60,932			—			—			60,932
Deferred revenue		35,051			—			—			35,051
Lease finance obligations		190,440			—			—			190,440
Intercompany notes payable		17,124			3,208			(20,332	)		—
Other noncurrent liabilities		33,984			2			—			33,986
Total other liabilities		888,541			3,210			(20,332	)		871,419
Shareholders’ equity:
Common stock		204			523			(523	)		204
Additional paid-in-capital		132,879			40,551			(40,551	)		132,879
Accumulated other comprehensive income, net		206			—			—			206
Retained earnings		15,638			(353	)		353			15,638
Total shareholders’ equity		148,927			40,721			(40,721	)		148,927
Total liabilities and shareholders’ equity	$	1,250,068		$	43,931		$	(61,118	)	$	1,232,881

21

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Operations

Three Months Ended June 30, 2005

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Total		Total
Revenues:
Merchandise	$	324,041		$	—	$	—	$	324,041
Gasoline		842,415			—		—		842,415
Total revenues		1,166,456			—		—		1,166,456
Cost of sales:
Merchandise		205,467			—		—		205,467
Gasoline		793,968			—		—		793,968
Total cost of sales		999,435			—		—		999,435
Gross profit		167,021			—		—		167,021
Operating expenses:
Operating, general and administrative expenses		110,669			—		—		110,669
Depreciation and amortization		15,933			—		—		15,933
Total operating expenses.		126,602			—		—		126,602
Income from operations		40,419			—		—		40,419
Other income (expense):
Interest expense		(13,983	)		—		—		(13,983	)
Miscellaneous		683			—		—		683
Total other expense		(13,300	)		—		—		(13,300	)
Income before income taxes		27,119			—		—		27,119
Income tax expense		(10,518	)		—		—		(10,518	)
Net Income	$	16,601		$	—	$	—	$	16,601

22

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Operations

Three Months Ended June 24, 2004

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Eliminations		Total
	(As restated)			(As restated)		(As restated)		(As restated)
Revenues:
Merchandise	$	302,879		$		$		$	302,879
Gasoline		625,448			—		—		625,448
Total revenues		928,327			—		—		928,327
Cost of sales:
Merchandise		193,624			—		—		193,624
Gasoline		580,993			—		—		580,993
Total cost of sales		774,617			—		—		774,617
Gross profit		153,710			—		—		153,710
Operating expenses:
Operating, general and administrative expenses		104,491			—		—		104,491
Depreciation and amortization		14,769			—		—		14,769
Total operating expenses		119,260			—		—		119,260
Income from operations		34,450			—		—		34,450
Other income (expense):
Interest expense		(13,466	)		—		—		(13,466	)
Miscellaneous		482			—		—		482
Total other expense		(12,984	)		—		—		(12,984	)
Income before income taxes		21,466			—		—		21,466
Income tax expense		(8,264	)		—		—		(8,264	)
Net Income	$	13,202		$		$		$	13,202

23

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Operations

Nine Months Ended June 30, 2005

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Eliminations		Total
Revenues:
Merchandise	$	895,397		$	—	$	—	$	895,397
Gasoline		2,158,362			—		—		2,158,362
Total revenues		3,053,759			—		—		3,053,759
Cost of sales:
Merchandise		566,999			—		—		566,999
Gasoline		2,025,908			—		—		2,025,908
Total cost of sales		2,592,907			—		—		2,592,907
Gross profit		460,852			—		—		460,852
Operating expenses:
Operating, general and administrative expenses		321,525			—		—		321,525
Depreciation and amortization		46,936			—		—		46,936
Total operating expenses		368,461			—		—		368,461
Income from operations		92,391			—		—		92,391
Other income (expense):
Interest expense		(41,404	)		—		—		(41,404	)
Miscellaneous		1,788			—		—		1,788
Total other expense		(39,616	)		—		—		(39,616	)
Income before income taxes		52,775			—		—		52,775
Income tax expense		(20,396	)		—		—		(20,396	)
Net Income	$	32,379		$	—	$	—	$	32,379

24

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Operations

Nine Months Ended June 24, 2004

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Eliminations		Total
	(As restated)			(As restated)		(As restated)		(As restated)
Revenues:
Merchandise	$	843,101		$	—	$	—	$	843,101
Gasoline		1,616,020			—		—		1,616,020
Total revenues		2,459,121			—		—		2,459,121
Cost of sales:
Merchandise		535,186			—		—		535,186
Gasoline		1,496,888			—		—		1,496,888
Total cost of sales		2,032,074			—		—		2,032,074
Gross profit		427,047			—		—		427,047
Operating expenses:
Operating, general and administrative expenses		306,028			—		—		306,028
Depreciation and amortization		44,602			—		—		44,602
Total operating expenses		350,630			—		—		350,630
Income from operations		76,417			—		—		76,417
Other income (expense):
Loss on extinguishment of debt		(23,087	)		—		—		(23,087	)
Interest expense		(49,021	)		—		—		(49,021	)
Miscellaneous		849			—		—		849
Total other expense		(71,259	)		—		—		(71,259	)
Income before income taxes		5,158			—		—		5,158
Income tax expense		(1,987	)		—		—		(1,987	)
Net Income	$	3,171		$	—	$	—	$	3,171

25

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Cash Flows

Nine Months Ended June 30, 2005

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Eliminations		Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	32,379		$	—	$	—	$	32,379
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,936			—		—		46,936
Provision for deferred income taxes		8,226			—		—		8,226
Fair market value change in non-qualifying derivatives		(411	)		—		—		(411	)
Amortization of deferred loan costs		880			—		—		880
Other		1,052			—		—		1,052
Changes in operating assets and liabilities (net of effects of acquisitions):
Receivables		(7,943	)		—		—		(7,943	)
Inventories		(11,569	)		—		—		(11,569	)
Prepaid expenses		(478	)		—		—		(478	)
Other noncurrent assets		(533	)		—		—		(533	)
Accounts payable		1,749			—		—		1,749
Other current liabilities and accrued expenses		12,908			—		—		12,908
Other noncurrent liabilities		(2,043	)		—		—		(2,043	)
Net cash provided by operating activities		81,153			—		—		81,153
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property held for sale		(742	)		—		—		(742	)
Additions to property and equipment		(46,524	)		—		—		(46,524	)
Proceeds from sale of land, building and equipment		7,949			—		—		7,949
Acquisitions of related businesses, net of cash acquired		(60,010	)		—		—		(60,010	)
Net cash used in investing activities		(99,327	)		—		—		(99,327	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments under lease finance obligations		(2,056	)		—		—		(2,056	)
Principal repayments of long-term debt, including redemption premiums		(12,021	)		—		—		(12,021	)
Proceeds from issuance of lease finance obligations		2,051			—		—		2,051
Proceeds from issuance of common stock		23,750			—		—		23,750
Proceeds from exercise of stock options		3,880			—		—		3,880
Net cash provided by financing activities		15,604			—		—		15,604
NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,570	)		—		—		(2,570	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		108,048			—		—		108,048
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	105,478		$	—	$	—	$	105,478

26

THE PANTRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Statement of Cash Flows

Nine Months Ended June 24, 2004

(Dollars in thousands)

	The Pantry (Issuer)			Guarantor Subsidiaries		Eliminations		Total
	(As restated)			(As restated)		(As restated)		(As restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,171		$	—	$	—	$	3,171
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		44,602			—		—		44,602
Provision for deferred income taxes		1,987			—		—		1,987
Loss on extinguishment of debt		23,087			—		—		23,087
Fair market value change in non-qualifying derivatives		(1,741	)		—		—		(1,741	)
Amortization of deferred loan costs		1,978			—		—		1,978
Amortization of long-term debt discount		534			—		—		534
Other		822			—		—		822
Changes in operating assets and liabilities (net of effects of acquisitions):
Receivables		(5,998	)		—		—		(5,998	)
Inventories		(1,869	)		—		—		(1,869	)
Prepaid expenses		(1,588	)		—		—		(1,588	)
Other noncurrent assets		432			—		—		432
Accounts payable		15,973			—		—		15,973
Other current liabilities and accrued expenses		(8,960	)		—		—		(8,960	)
Other noncurrent liabilities		(7,541	)		—		—		(7,541	)
Net cash provided by operating activities		64,889			—		—		64,889
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property held for sale		(1,084	)		—		—		(1,084	)
Additions to property and equipment		(26,092	)		—		—		(26,092	)
Proceeds from sale of land, building and equipment		5,475			—		—		5,475
Acquisitions of related businesses, net of cash acquired		(185,528	)		—		—		(185,528	)
Net cash used in investing activities		(207,229	)		—		—		(207,229	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments under lease finance obligations		(2,026	)		—		—		(2,026	)
Principal repayments of long-term debt, including redemption premiums		(589,403	)		—		—		(589,403	)
Proceeds from issuance of long-term borrowings		675,000			—		—		675,000
Proceeds from issuance of lease finance obligations		97,107			—		—		97,107
Proceeds from exercise of stock options		3,324			—		—		3,324
Repayment of shareholder loans		150			—		—		150
Other financing costs		(11,349	)		—		—		(11,349	)
Net cash provided by financing activities		172,803			—		—		172,803
NET INCREASE IN CASH AND CASH EQUIVALENTS		30,463			—		—		30,463
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		72,901			—		—		72,901
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	103,364		$	—	$	—	$	103,364

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

On July 28, 2005, we announced our intention to restate the consolidated financial statements included in our Annual Report filed on Form 10-K for the fiscal year ended September 30, 2004 (fiscal 2000 – 2004), and our unaudited interim financial statements included in our Quarterly Reports on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005, to correct the accounting for certain sale-leaseback transactions entered into by the company. The restatement is the result of our determination that such transactions should have been accounted for as financing transactions rather than sale-leaseback transactions. We had previously accounted for the leases included in these transactions primarily as operating leases. The restatement recharacterizes the transactions as financing transactions, with the assets and related financing obligation carried on our balance sheet. The primary effects of the restatement are discussed in Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 2—Restatement of Previously Issued Financial Statements. The following discussion and analysis gives effect to the restatement.

The following discussion and analysis of our financial condition and results of operations is provided to increase the understanding of, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes appearing elsewhere in this report.

This report, including without limitation, statements under our discussion and analysis of financial condition and results of operations, contains statements that we believe are “forward-looking statements” under the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to enjoy protection of the safe harbor for forward-looking statements provided by that Act. These forward-looking statements generally can be identified by use of phrases such as “believe”, “plan”, “expect”, “anticipate”, “intend”, “forecast” or other similar words or phrases. Descriptions of our objectives, goals, targets, plans, strategies, anticipated capital expenditures, costs and burdens of environmental remediation, anticipated gasoline suppliers and percentages of our requirements to be supplied by particular companies, anticipated store banners and percentages of our stores that we believe will operate under particular banners, expected cost savings and benefits and anticipated synergies from acquisitions, anticipated costs of re-branding our stores, anticipated sharing of costs of conversion with our gasoline suppliers, expectations regarding re-modeling, re-branding, re-imaging or otherwise converting our stores are also forward-looking statements and anticipated impact of the restatement of our previously issued financial statements. These forward-looking statements are based on our current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements, including:

• Competitive pressures from convenience stores, gasoline stations and other non-traditional retailers located in our markets;

• Changes in economic conditions generally and in the markets we serve;

• Unfavorable weather conditions;

• Political conditions in crude oil producing regions, including South America and the Middle East;

• Volatility in crude oil and wholesale petroleum costs;

• Wholesale cost increases of tobacco products;

• Consumer behavior, travel and tourism trends;

• Changes in state and federal environmental and other regulations;

• Dependence on one principal supplier for merchandise and two principal suppliers for gasoline;

• Financial leverage and debt covenants;

• Changes in the credit ratings assigned to our debt securities, credit facilities and trade credit;

• Inability to identify, acquire and integrate new stores;

• Dependence on senior management;

28

• Our ability to finance future transactions in light of the restatement of our previously issued financial statements described herein;

• Whether the preliminary financial impact of the restatement will be different than expected when finalized and reported;

• Whether we will be able to file amended periodic reports for the year ended September 30, 2004, and the quarterly periods ended December 30, 2004 and March 31, 2005 to reflect the restatement within the cure period provided under our senior subordinated notes;

• Acts of war and terrorism; and

• Other unforeseen factors.

For a discussion of these and other risks and uncertainties, please refer to “Risk Factors” below. The list of factors that could affect future performance and the accuracy of forward-looking statements is illustrative but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The forward-looking statements included in this report are based on, and include, our estimates as of August 9, 2005. We anticipate that subsequent events and market developments will cause our estimates to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if new information becomes available in the future.

Executive Overview

We are the leading independently operated convenience store chain in the southeastern United States and the third largest independently operated convenience store chain in the country based on store count with 1,386 stores in eleven states as of June 30, 2005. Our stores offer a broad selection of merchandise, gasoline and ancillary products and services designed to appeal to the convenience needs of our customers. Our strategy is to continue to improve upon our position as the leading independently operated convenience store chain in the southeastern United States by generating profitable growth through merchandising initiatives, sophisticated management of our gasoline business, upgrading our stores, leveraging our geographic economies of scale, benefiting from the favorable demographics of our markets and continuing to selectively pursue acquisitions.

We had favorable results for our third quarter of fiscal 2005 with net income of $16.6 million compared to a net income of $13.2 million in the third quarter of fiscal 2004. During the quarter, our comparable store merchandise revenue increased 4.1% and comparable store gasoline gallons increased 5.6%. We achieved these results despite a volatile wholesale gasoline environment in which wholesale crude costs peaked at approximately $60 per barrel in June 2005 from a low of approximately $47 per barrel in May 2005. We continue to remain focused on several key initiatives, including the following:

Acquisition strategy—We believe there are significant acquisition opportunities to strengthen our position in existing markets and expand into other markets. We believe our advantageous supply agreements and operating expertise make acquisitions an attractive way to grow our business. On April 21, 2005, we completed the acquisition of D&D Oil, which operated 53 convenience stores under the Cowboys^® banner in Alabama (23), Georgia (29) and Mississippi (1). We believe that the Cowboys^® locations complement our existing store base and provide an entrance into the state of Alabama. Additionally, we have announced acquisitions of 23 stores in Virginia and 13 stores in Alabama, which are expected to close in the fourth quarter of fiscal 2005. We plan to continue to selectively review acquisition opportunities to build on our market position. Since 1996, we have successfully completed more than 40 acquisitions, growing our store base from 379 to almost 1,400 stores.

Re-imaging and re-branding initiative—During the third quarter of fiscal 2005, we completed the gasoline brand conversion or image upgrades at an additional 126 stores, bringing the total as of June 30, 2005 to 992 locations. Almost all of these stores have also been converted to Kangaroo Express^SM branding for their merchandise operations. We believe this combined initiative allows us to leverage the cost of a complete facelift to most of our facilities, provides us with increased brand identity, and helps us in our efforts to optimize our gasoline gallon growth and gross profit dollars.

29

Merchandise programs—During the third quarter of fiscal 2005, we continued to enhance our merchandise mix to maximize sales and profitability and upgraded our food service offerings across our store base. Our quick service restaurant revenue increased approximately 14% in the third quarter of fiscal 2005 compared to the third quarter of fiscal 2004 and we opened our first Quizno’s Sub^® location in March 2005 with additional Quiznos Sub^® and other formats of quick service restaurant openings planned over the remainder of fiscal 2005. Historically, quick service restaurant revenues have averaged approximately 4% of our merchandise revenue.

Market and Industry Trends

During the third quarter of fiscal 2005, we experienced a volatile wholesale gasoline cost environment as domestic crude oil prices rose from a low of approximately $47 per barrel in May 2005 to a high of approximately $60 per barrel in June 2005. We attempt to pass along wholesale gasoline cost changes to our customers through retail price changes; however, we are not always able to do so, and the timing of the related increase in retail prices is affected by competitive conditions. As a result, we tend to experience lower gasoline margins in periods of rising wholesale costs and higher margins in periods of decreasing wholesale costs. Since 1995, our gasoline margin per gallon has remained relatively stable and averaged more than 12 cents per gallon on an annual basis.

Increases in wholesale cigarette costs during 2005, as well as national and local campaigns to discourage smoking in the United States, have had an adverse effect on unit demand for cigarettes domestically. We have attempted to pass along cigarette cost increases to our customers and have not generally experienced deterioration in cigarette gross margin or in average cartons sold per store week.

Results of Operations

The following table presents, for the periods indicated, selected items in the condensed consolidated statements of income as a percentage of our total revenue:

	Three Months Ended				Nine Months Ended
	June 30, 2005		June 24, 2004		June 30, 2005		June 24, 2004
			(As restated)				(As restated)
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%
Gasoline revenue	72.2	%	67.4	%	70.7	%	65.7	%
Merchandise revenue	27.8	%	32.6	%	29.3	%	34.3	%
Cost of sales	85.7	%	83.4	%	84.9	%	82.6	%
Gross profit	14.3	%	16.6	%	15.1	%	17.4	%
Gasoline gross profit	4.1	%	4.8	%	4.3	%	4.9	%
Merchandise gross profit	10.2	%	11.8	%	10.8	%	12.5	%
Operating, general and administrative expenses	9.5	%	11.3	%	10.5	%	12.5	%
Depreciation and amortization	1.4	%	1.6	%	1.6	%	1.8	%
Income from operations	3.4	%	3.7	%	3.0	%	3.1	%
Loss on extinguishment of debt	—		—		—		(0.9	)%
Interest and miscellaneous expense	(1.1	)%	(1.4	)%	(1.3	)%	(2.0	)%
Income before income taxes	2.3	%	2.3	%	1.7	%	0.2	%
Income tax expense	(0.9	)%	(0.9	)%	(0.6	)%	(0.1	)%
Net income	1.4	%	1.4	%	1.1	%	0.1	%

30

The table below provides a summary of our selected financial data for our three and nine months ended June 30, 2005 and June 24, 2004.

	Three Months Ended						Nine Months Ended
	June 30, 2005			June 24, 2004			June 30, 2005			June 24, 2004
Merchandise margin		36.6	%		36.1	%		36.7	%		36.5	%
Gasoline gallons (millions)		395.0			342.8			1,081.8			990.2
Gasoline margin per gallon	$	0.1226		$	0.1297		$	0.1224		$	0.1203
Gasoline retail per gallon	$	2.13		$	1.82		$	2.00		$	1.63
Comparable store data:
Merchandise sales %		4.1	%		3.9	%		5.5	%		3.3	%
Gasoline gallons %		5.6	%		0.2	%		5.5	%		1.6	%
Number of stores:
End of period		1,386			1,367			1,386			1,367
Weighted-average store count		1,377			1,371			1,360			1,370

Three Months Ended June 30, 2005 Compared to the Three Months Ended June 24, 2004

Merchandise Revenue.    Merchandise revenue for the third quarter of fiscal 2005 was $324.0 million compared to $302.9 million during the third quarter of fiscal 2004, an increase of $21.2 million, or 7.0%. The increase is primarily attributable to a 4.1%, or $12.2 million, increase in comparable store merchandise revenue compared to the third quarter of fiscal 2004 and a $12.0 million increase in revenue from stores acquired in the third quarter of fiscal 2005. These increases were partially offset by lost revenue from closed stores of approximately $5.0 million.

Gasoline Revenue and Gallons.    Gasoline revenue for the third quarter of fiscal 2005 was $842.4 million compared to $625.4 million during the third quarter of fiscal 2004, an increase of $217.0 million, or 34.7%. The increase in gasoline revenue is primarily attributable to an increase in comparable store gallons sold of 18.9 million, or 5.6%, the 31 cent per gallon increase in the average gasoline retail price per gallon, and 34.4 million gallons sold from stores acquired in the third quarter of fiscal 2005. The increase in the average gasoline retail price per gallon is a result of our passing along to customers the increases in wholesale fuel costs experienced in the third quarter of fiscal 2005. These increases were partially offset by lost revenue from closed stores of approximately $6.4 million.

In the third quarter of fiscal 2005, gasoline gallons sold were 395.0 million compared to 342.8 million during the third quarter of fiscal 2004, an increase of 52.2 million gallons, or 15.2%. The increase is primarily attributable to the comparable store and acquisition related gasoline gallon increase discussed above, partially offset by lost gallon volume from closed stores of approximately 3.5 million gallons. We believe that the comparable store volume increases were driven by our re-branding and re-imaging initiatives as well as general economic strength in Florida and throughout the Southeast.

Merchandise Gross Profit and Margin.    Merchandise gross profit was $118.6 million for the third quarter of fiscal 2005 compared to $109.3 million for the third quarter of fiscal 2004, an increase of $9.3 million, or 8.5%. This increase is primarily attributable to the increased merchandise revenue discussed above as well as a 50 basis point increase in our merchandise margin. We believe that the increase in merchandise margin is primarily attributable to our improvements in merchandise mix as a result of increased private label and food service offerings as well as continued leveraging of our purchasing volumes.

Gasoline Gross Profit and Per Gallon Margin.    Gasoline gross profit was $48.4 million for the third quarter of fiscal 2005 compared to $44.5 million for the third quarter of fiscal 2004, an increase of $4.0 million, or 9.0%. The increase is primarily attributable to the gasoline gallon volume increase discussed above. These

31

increases were partially offset by a decline in our gross profit per gallon to 12.3 cents for the third quarter of fiscal 2005 from 13.0 cents in the third quarter of fiscal 2004. During the third quarter of fiscal 2005, our gasoline gross profit per gallon was impacted by increasing wholesale gasoline costs and the timing of related gasoline retail price increases. We present gasoline gross profit per gallon inclusive of credit card processing fees and repairs and maintenance on gasoline equipment. These fees and costs totaled 3.5 cents per gallon and 3.2 cents per gallon for the three months ended June 30, 2005 and June 24, 2004, respectively. The increase in these fees was primarily due to higher credit card fees as a result of a 17% increase in retail gasoline prices.

Operating, General and Administrative Expenses.    Operating, general and administrative expenses for the third quarter of fiscal 2005 totaled $110.7 million compared to $104.5 million for the third quarter of fiscal 2004, an increase of $6.2 million, or 5.9%. This increase is primarily due to comparable store increases in labor and other variable expenses. As a percentage of total revenue, operating, general and administrative expenses were 9.5% in the third quarter of fiscal 2005, and adjusted for the impact of gasoline inflation were 10.1% in the third quarter of fiscal 2004.

Income from Operations.    Income from operations totaled $40.4 million for the third quarter of fiscal 2005 compared to $34.5 million for the third quarter of fiscal 2004, an increase of $5.9 million, or 17.3%. The increase is primarily attributable to the increases in gasoline and merchandise gross profit discussed above, partially offset by the increase in operating, general and administrative expenses.

EBITDA.    EBITDA is defined by us as net income before interest expense, loss on extinguishment of debt, income taxes, depreciation and amortization. EBITDA for the third quarter of fiscal 2005 totaled $57.0 million compared to EBITDA of $49.7 million during the third quarter of fiscal 2004, an increase of $7.3 million, or 14.8%. The increase is attributable to the increase in income from operations discussed above.

EBITDA is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net income, cash flows from operating activities and other income or cash flow statement data. We have included information concerning EBITDA as one measure of our cash flow and historical ability to service debt and because we believe investors find this information useful because it reflects the resources available for strategic opportunities including, among others, to invest in the business, make strategic acquisitions and to service debt. EBITDA as defined by us may not be comparable to similarly titled measures reported by other companies.

The following table contains a reconciliation of EBITDA to net cash provided by operating activities and cash flows from investing and financing activities (amounts in thousands):

	Three Months Ended
	June 30, 2005			June 24, 2004
				(As restated)
EBITDA	$	57,035		$	49,701
Interest expense		(13,983	)		(13,466	)
Adjustments to reconcile net income to net cash provided by operating activities (other than depreciation and amortization and provision for deferred income taxes)		784			(709	)
Changes in operating assets and liabilities, net:
Assets		(14,080	)		(3,614	)
Liabilities		23,747			24,912
Net cash provided by operating activities	$	53,503		$	56,824
Net cash used in investing activities	$	(74,138	)	$	(6,763	)
Net cash provided by financing activities	$	21,336		$	2,312

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Interest Expense.    Interest expense is primarily comprised of interest on borrowings under our senior credit facility, senior subordinated notes, and lease finance obligations. Interest expense for the third quarter of fiscal 2005 was $14.0 million compared to $13.5 million for the third quarter of fiscal 2004.

Net Income.    Net income for the third quarter of fiscal 2005 was $16.6 million compared to net income of $13.2 million for the third quarter of fiscal 2004. The increase is primarily attributable to increased income from operations discussed above.

Nine Months Ended June 30, 2005 Compared to the Nine Months Ended June 24, 2004

Merchandise Revenue.    Merchandise revenue for the first nine months of fiscal 2005 was $895.4 million compared to $843.1 million for the first nine months of fiscal 2004, an increase of $52.3 million, or 6.2%. The increase is primarily attributable to a 5.5%, or $40.8 million, increase in comparable store merchandise revenue compared to the first nine months of fiscal 2004, $8.2 million in increased merchandise revenue from stores acquired in the Golden Gallon^® acquisition (in the first quarter of fiscal 2004), and $12.0 million in merchandise revenue from stores acquired in the third quarter of fiscal 2005. These increases were partially offset by lost revenue from closed stores of approximately $12.6 million.

Gasoline Revenue and Gallons.    Gasoline revenue for the first nine months of fiscal 2005 was $2.2 billion compared to $1.6 billion during the first nine months of fiscal 2004, an increase of $542.3 million, or 33.6%. The increase in gasoline revenue is primarily attributable to the 37 cent per gallon increase in the average gasoline retail price per gallon, an increase in comparable store gallons of 46.6 million, or 5.5%, 34.4 million gallons from stores acquired in the third quarter of fiscal 2005, and an increase in gasoline gallons of 16.9 million from stores acquired in the Golden Gallon^® acquisition (in the first quarter of fiscal 2004). The increase in the average gasoline retail price per gallon is a result of our passing along to customers the increases in wholesale fuel costs experienced in fiscal 2005. These increases were partially offset by lost revenue from closed stores of approximately $16.2 million.

For the first nine months of fiscal 2005, gasoline gallons sold were 1.1 billion compared to 990.2 million during the first nine months of fiscal 2004, an increase of 91.6 million gallons, or 9.3%. The increase is primarily attributable to the volume increases described above, partially offset by lost gallon volume from closed stores of approximately 10.7 million gallons.

Merchandise Gross Profit and Margin.    Merchandise gross profit was $328.4 million for the first nine months of fiscal 2005 compared to $307.9 million for the first nine months of fiscal 2004, an increase of $20.5 million, or 6.7%. This increase is primarily attributable to the increased merchandise revenue discussed above. Merchandise margin increased to 36.7% for the first nine months of fiscal 2005 from the 36.5% reported for the first nine months of fiscal 2004.

Gasoline Gross Profit and Per Gallon Margin.    Gasoline gross profit was $132.5 million for the first nine months of fiscal 2005 compared to $119.1 million for the first nine months of fiscal 2004, an increase of $13.3 million, or 11.2%. The increase is primarily attributable to the gasoline gallon increase discussed above as well as an increase in our gasoline gross profit per gallon to 12.2 cents for the first nine months of fiscal 2005 compared to 12.0 cents for the first nine months of fiscal 2004. We present gasoline gross profit per gallon inclusive of credit card processing fees and repairs and maintenance on gasoline equipment. These fees and costs totaled 3.4 cents per gallon and 2.8 cents per gallon for the nine months ended June 30, 2005 and June 24, 2004, respectively. The increase in these fees was primarily due to higher credit card fees as a result of a 23% increase in retail gasoline prices.

Operating, General and Administrative Expenses.    Operating, general and administrative expenses for the first nine months of fiscal 2005 totaled $321.5 million compared to $306.0 million for the first nine months of fiscal 2004, an increase of $15.5 million, or 5.1%. This increase is primarily due to comparable store increases in

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labor and other variable expenses. As a percentage of total revenue, operating, general and administrative expenses were 10.5% in the first nine months of fiscal 2005, and adjusted for the impact of gasoline inflation were 10.8% in the comparable period in fiscal 2004.

Income from Operations.    Income from operations totaled $92.4 million for the first nine months of fiscal 2005 compared to $76.4 million for the first nine months of fiscal 2004, an increase of $16.0 million, or 20.9%. The increase is primarily attributable to the increases in gasoline and merchandise gross profit discussed above, partially offset by the increase in operating, general and administrative expenses.

EBITDA.    EBITDA for the first nine months of fiscal 2005 totaled $141.1 million compared to EBITDA of $121.9 million for the first nine months of fiscal 2004, an increase of $19.2 million, or 15.8%. The increase is attributable to the increase in income from operations discussed above.

The following table contains a reconciliation of EBITDA to net cash provided by operating activities and cash flows from investing and financing activities (amounts in thousands):

	Nine Months Ended
	June 30, 2005			June 24, 2004
				(As restated)
EBITDA	$	141,115		$	121,868
Interest expense and loss on extinguishment of debt		(41,404	)		(72,108	)
Adjustments to reconcile net income to net cash provided by operating activities (other than depreciation and amortization, provision for deferred income taxes and loss on extinguishment of debt)		1,521			24,680
Changes in operating assets and liabilities, net:
Assets		(20,523	)		(9,023	)
Liabilities		444			(528	)
Net cash provided by operating activities	$	81,153		$	64,889
Net cash used in investing activities	$	(99,327	)	$	(207,229	)
Net cash provided by financing activities	$	15,604		$	172,803

Loss on Extinguishment of Debt.    As a result of the retirement of our 10.25% subordinated notes and the refinancing of our senior credit facility during fiscal 2004, we incurred $23.1 million in debt extinguishment costs that have been included as a component of interest expense. These charges include the write-off of approximately $11.8 million in unamortized deferred financing costs, the write-off of approximately $3.5 million of unamortized original issue discount and call premiums of approximately $7.8 million.

Interest Expense.    Interest expense is primarily comprised of interest on borrowings under our senior credit facility and senior subordinated notes and the loss on extinguishment of debt referred to above. Interest expense, excluding the loss on extinguishment of debt, for the first nine months of fiscal 2005 was $41.4 million compared to $49.0 million for the first nine months of fiscal 2004. The decrease of $7.6 million is primarily the result of the benefits of our refinancing which was completed in March 2004, which reduced our effective borrowing rate by approximately 250 basis points. Additionally, on September 30, 2004, we reduced the effective LIBOR spread on our senior credit facility by an additional 50 basis points. Included in interest expense in the first nine months of fiscal 2004 was approximately $1.7 million in duplicative interest on our senior subordinated notes during the 30-day call period.

Net Income.    Net Income for the first nine months of fiscal 2005 was $32.4 million compared to a net income of $3.2 million for the first nine months of fiscal 2004. The increase is attributable to the items discussed above.

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Liquidity and Capital Resources

Cash Flows from Operations.    Due to the nature of our business, substantially all sales are for cash, and cash provided by operations is our primary source of liquidity. We rely primarily upon cash provided by operating activities, supplemented as necessary from time to time by borrowings under our revolving credit facility, lease financing, and asset dispositions to finance our operations, pay interest and principal payments and fund capital expenditures. Cash provided by operating activities increased to $81.2 million for the first nine months of fiscal 2005 compared to $64.9 million for the first nine months of fiscal 2004. The increase in cash flow from operations is primarily attributable to the $16.0 million increase in income from operations and a $16.1 million decline in cash paid for interest. The decline in cash paid for interest is primarily a result of the reduction of our effective borrowing rate subsequent to our debt refinancings in February and March 2004 and a change in the timing of the semiannual interest payment on our senior subordinated notes, also a result of the refinancing. These increases were offset by a $7.6 million increase in cash paid for income taxes and other changes in working capital. We had $105.5 million of cash and cash equivalents on hand at June 30, 2005.

Capital Expenditures.    Gross capital expenditures (excluding all acquisitions) for the first nine months of fiscal 2005 were $47.3 million. Our capital expenditures are primarily expenditures for store re-imaging and improvements, store equipment, new store development, information systems and expenditures to comply with regulatory statutes, including those related to environmental matters. We finance substantially all capital expenditures and new store development through cash flow from operations, proceeds from lease financing and asset dispositions and vendor reimbursements.

In the first nine months of fiscal 2005, we received approximately $12.5 million in proceeds, including asset dispositions ($7.9 million), vendor reimbursements ($2.5 million), and lease financing transactions ($2.1 million). As a result, our net capital expenditures, excluding all acquisitions, for the first nine months of fiscal 2005 were $34.8 million. We anticipate that net capital expenditures for fiscal 2005 will be approximately $55.0 million.

Cash Flows from Financing Activities.    For the first nine months of fiscal 2005, net cash provided by financing activities was $15.6 million and related primarily to proceeds from the issuance of common stock, partially offset by scheduled principal payments on our senior credit facility. At June 30, 2005, our long-term debt consisted primarily of $305.0 million in loans under our senior credit facility and $250.0 million on our 7.75% senior subordinated notes.

Senior Credit Facility.    On March 12, 2004, we entered into an Amended and Restated Credit Agreement, which consists of a $345.0 million term loan that matures in March, 2011 and a $70.0 million revolving credit facility, which expires in March, 2010. As of June 30, 2005, our outstanding term loan balance was $305.0 million.

Our $70.0 million revolving credit facility is available to fund working capital, finance general corporate purposes and support the issuance of standby letters of credit. Borrowings under the revolving credit facility are limited by our outstanding letters of credit of approximately $41.7 million. Furthermore, the revolving credit facility limits our total outstanding letters of credit to $50.0 million. As of June 30, 2005, we had no borrowings outstanding under the revolving credit facility, we had approximately $28.3 million in available borrowing capacity and $41.7 million of standby letters of credit were issued under the facility.

On August 5, 2005, we entered into an amendment to the loan agreement under our senior credit facility that, among other things:

• eliminates any dollar limitation on additional indebtedness and capital lease obligations so long as borrowings are incurred to finance acquisitions, certain capital expenditures and related fees and expenses;

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• increases by 50 basis-points the loan agreement’s existing leverage ratio requirements that are based on debt/EBITDA (as such terms are defined in the loan agreement); and

• increases the limitation on net capital expenditures from 30 percent to 35 percent of EBITDA (as such term is defined in the loan agreement).

In connection with the amendment, we also received from our lenders a waiver of certain defaults in the loan agreement caused by the restatement of our previously issued financial statements discussed herein.

Senior Subordinated Notes.    On February 19, 2004, we completed the sale of $250.0 million of 7.75% senior subordinated notes due February 19, 2014. Interest on the senior subordinated notes is due on February 15 and August 15 of each year.

Shareholders’ Equity.    As of June 30, 2005, our shareholders’ equity totaled $212.9 million. The $64.0 million increase from September 30, 2004 is primarily attributable to the net income for the period of $32.4 million and a $23.8 million increase in additional paid in capital as a result of the partial settlement of our forward equity contract. The remaining increase is primarily the result of option exercises, including related income tax benefits.

Long Term Liquidity.    We believe that anticipated cash flows from operations and funds available from our existing revolving credit facility, together with cash on hand and vendor reimbursements, will provide sufficient funds to finance our operations and fund our contractual commitments at least for the next 12 months. As a normal part of our business, depending on market conditions, we from time to time consider opportunities to refinance our existing indebtedness, and although we may refinance all or part of our existing indebtedness in the future, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased expenses, additional acquisitions or other events may cause us to need to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Additional equity financing could be dilutive to the holders of our common stock; and additional debt financing, if available, could impose greater cash payment obligations and more covenants and operating restrictions.

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 (“SFAS No. 151”). This statement clarifies that inventory costs that are “abnormal” are required to be charged to expense as incurred as opposed to being capitalized into inventory as a product cost. Examples of “abnormal” costs include costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage). SFAS No. 151 will be effective for our 2006 fiscal year beginning September 30, 2005. Based on our initial evaluation, the adoption of SFAS No. 151 is not expected to have a material effect on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”). This statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements. This standard will be effective for our 2006 fiscal year beginning September 30, 2005. We currently plan to adopt this standard using the modified version of prospective application and, beginning in the first fiscal quarter of 2006, will recognize compensation costs for the portion of outstanding awards for which the requisite service has not yet been rendered. While we cannot precisely determine the impact on net earnings as a result of the adoption of SFAS No. 123R, estimated compensation expense related to prior periods can be found below under “—Stock-Based Compensation”. The ultimate amount of increased compensation expense will be dependent on the number of option shares granted during the year, their timing and vesting period, and the method used to calculate the fair value of the awards, among other factors.

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FASB Interpretation 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143 (“FIN 47”), was issued by the FASB in March 2005. FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 is not expected to have a material effect on our financial position, results of operations or cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial position, results of operations or cash flows upon adoption.

Risk Factors

You should carefully consider the risks described below before making a decision to invest in our securities. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, could negatively impact our results of operations or financial condition in the future. If any of such risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Related to Our Industry

The convenience store industry is highly competitive and impacted by new entrants.

The industry and geographic areas in which we operate are highly competitive and marked by ease of entry and constant change in the number and type of retailers offering the products and services found in our stores. We compete with other convenience store chains, gasoline stations, supermarkets, drugstores, discount stores, club stores and mass merchants. In recent years, several non-traditional retailers, such as supermarkets, club stores and mass merchants, have impacted the convenience store industry by entering the gasoline retail business. These non-traditional gasoline retailers have obtained a significant share of the motor fuels market and their market share is expected to grow. In some of our markets, our competitors have been in existence longer and have greater financial, marketing and other resources than we do. As a result, our competitors may be able to respond better to changes in the economy and new opportunities within the industry. To remain competitive, we must constantly analyze consumer preferences and competitor’s offerings and prices to ensure we offer a selection of convenience products and services consumers demand at competitive prices. We must also maintain and upgrade our customer service levels, facilities and locations to remain competitive and drive customer traffic to our stores. Major competitive factors include, among others, location, ease of access, gasoline brands, pricing, product and service selections, customer service, store appearance, cleanliness and safety.

Volatility of wholesale petroleum costs could impact our operating results.

Over the past three fiscal years, our gasoline revenue accounted for approximately 63.4% of total revenues and our gasoline gross profit accounted for approximately 27.4% of total gross profit. Crude oil and domestic wholesale petroleum markets are marked by significant volatility. General political conditions, acts of war or terrorism, and instability in oil producing regions, particularly in the Middle East and South America, could significantly impact crude oil supplies and wholesale petroleum costs. In addition, the supply of gasoline and our wholesale purchase costs could be adversely impacted in the event of shortage, which could result from, among other things, lack of capacity at United States oil refineries or the fact that our gasoline contracts do not guarantee an uninterrupted, unlimited supply of gasoline. Significant increases and volatility in wholesale petroleum costs could result in significant increases in the retail price of petroleum products and in lower gasoline gross margin per gallon. Increases in the retail price of petroleum products could impact consumer demand for gasoline. This

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volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our operating results and financial condition. These factors could materially impact our gasoline gallon volume, gasoline gross profit and overall customer traffic, which in turn would impact our merchandise sales.

Wholesale cost increases of tobacco products could impact our operating results.

Sales of tobacco products have averaged approximately 10.7% of our total revenue over the past three fiscal years and our tobacco gross profit accounted for approximately 16.3% of total gross profit for the same period. Significant increases in wholesale cigarette costs and tax increases on tobacco products, as well as national and local campaigns to discourage smoking in the United States, may have an adverse effect on unit demand for cigarettes domestically. In general, we attempt to pass price increases on to our customers. However, due to competitive pressures in our markets, we may not be able to do so. These factors could materially impact our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit and overall customer traffic.

Changes in consumer behavior, travel and tourism could impact our business.

In the convenience store industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for automobile and truck traffic and trends in travel, tourism and weather. Changes in economic conditions generally or in the Southeast specifically could adversely impact consumer spending patterns and travel and tourism in our markets. Approximately 40% of our stores are located in coastal, resort or tourist destinations. Historically, travel and consumer behavior in such markets is more severely impacted by weak economic conditions. If visitors to resort or tourist locations decline due to economic conditions, changes in consumer preferences, changes in discretionary consumer spending or otherwise, our sales could decline.

Risks Related to Our Business

Unfavorable weather conditions or other trends or developments in the Southeast could adversely affect our business.

Substantially all of our stores are located in the southeast region of the United States. Although the Southeast is generally known for its mild weather, the region is susceptible to severe storms including hurricanes, thunderstorms, extended periods of rain, ice storms and heavy snow, all of which we experienced in fiscal 2004. Inclement weather conditions as well as severe storms in the Southeast could damage our facilities or could have a significant impact on consumer behavior, travel and convenience store traffic patterns as well as our ability to operate our locations. In addition, we typically generate higher revenues and gross margins during warmer weather months in the Southeast, which fall within our third and fourth fiscal quarters. If weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected. We would also be impacted by regional occurrences in the Southeast such as energy shortages or increases in energy prices, fires or other natural disasters.

Inability to identify, acquire and integrate new stores could adversely affect our ability to grow our business.

An important part of our historical growth strategy has been to acquire other convenience stores that complement our existing stores or broaden our geographic presence, such as our acquisition of 138 convenience stores operating under the Golden Gallon^® banner on October 16, 2003. From April 1997 through June 2005, we acquired 1,363 convenience stores in 22 major and numerous smaller transactions. We expect to continue to selectively review acquisition opportunities as an element of our growth strategy. Acquisitions involve risks that could cause our actual growth or operating results to differ adversely compared to our expectations or the expectations of securities analysts. For example:

• We may not be able to identify suitable acquisition candidates or acquire additional convenience stores on favorable terms. We compete with others to acquire convenience stores. We believe that this competition may increase and could result in decreased availability or increased prices for suitable acquisition candidates. It may be difficult to anticipate the timing and availability of acquisition candidates.

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• During the acquisition process we may fail or be unable to discover some of the liabilities of companies or businesses which we acquire. These liabilities may result from a prior owner’s noncompliance with applicable federal, state or local laws.

• We may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions.

• We may fail to successfully integrate or manage acquired convenience stores.

• Acquired convenience stores may not perform as we expect or we may not be able to obtain the cost savings and financial improvements we anticipate.

• We face the risk that our existing systems, financial controls, information systems, management resources and human resources will need to grow to support significant growth.

Our substantial indebtedness and lease finance obligations could adversely affect our financial health.

We have a significant amount of indebtedness. As of June 30, 2005, we had consolidated debt, including lease finance obligations, of approximately $748.2 million. As of June 30, 2005 our availability under our senior credit facility for borrowing or issuing additional letters of credit was approximately $28.3 million, with availability to issue letters of credit up to $50.0 million. We are vulnerable to increases in interest rates because the debt under our senior credit facility is at a variable interest rate. Although in the past we have on occasion entered into certain hedging instruments in an effort to manage our interest rate risk, we cannot assure you that we will continue to do so, on favorable terms or at all, in the future.

Our substantial indebtedness could have important consequences to you. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to our debt and our leases;

• increase our vulnerability to general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our debt and lease obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage compared to our competitors that have less indebtedness or better access to capital by, for example, limiting our ability to enter into new markets or renovate our stores; and

• limit our ability to borrow additional funds in the future.

If we are unable to meet our debt and lease obligations, we could be forced to restructure or refinance our obligations, seek additional equity financing or sell assets, which we may not be able to do on satisfactory terms or at all. As a result, we could default on those obligations. In addition, the indenture governing our senior subordinated notes and our senior credit facility, which includes a term loan and a revolving credit facility, contain financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness, which would adversely affect our financial health and could prevent us from fulfilling our obligations.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional debt. This could further increase the risks associated with our substantial leverage.

We and our subsidiaries are still able to incur additional indebtedness. The terms of the indenture that governs our senior subordinated notes permit us to incur additional indebtedness under certain circumstances. In

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addition, our senior credit facility, as amended, permits us to potentially borrow up to an additional $75.0 million for permitted acquisitions (assuming certain financial conditions are met at the time) beyond the $70.0 million we can borrow under our revolving credit facility. If we and our subsidiaries incur additional indebtedness, the related risks that we and they now face could intensify.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on our indebtedness and to refinance our indebtedness and fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, funds available from our revolving credit facility, and funds available under the forward sale agreement (see Item 1.—Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 12—Forward Sale of Equity), will be adequate to meet our future liquidity needs for at least the next 12 months. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our revolving credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

If we do not comply with the covenants in our senior credit facility and the indenture governing our senior subordinated notes or otherwise default under them, we may not have the funds necessary to pay all of our indebtedness that could become due.

Our senior credit facility and our indenture governing our senior subordinated notes require us to comply with certain covenants. In particular, our senior credit facility prohibits us from incurring any additional indebtedness except in specified circumstances or materially amending the terms of any agreement relating to existing indebtedness without lender approval. In addition, our senior credit facility limits our ability to make capital expenditures. Further, our senior credit facility restricts our ability to acquire and dispose of assets, engage in mergers or reorganizations, pay dividends, or make investments. Other restrictive covenants require that we meet fixed charge coverage and leverage tests, and also maximum capital expenditure limits as defined in the senior credit facility agreement. A violation of any of these covenants could cause an event of default under the senior credit facility. If we default under that facility because of a covenant breach or otherwise, all outstanding amounts could become immediately due and payable. We cannot assure you that we would have sufficient funds to repay all the outstanding amounts, and any acceleration of amounts due under our senior credit facility or our indenture governing our senior subordinated notes likely would have a material adverse effect on us.

On July 28, 2005, we announced our intention to restate our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 (fiscal 2000 – 2004), and our unaudited interim period results included in our Quarterly Reports on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005, to correct the recording of certain sale-leaseback transactions entered into by our company. The restatement is the result of our determination, in consultation with our independent registered public accountants, that such transactions must be accounted for as financing transactions rather than sale-leaseback transactions. The restatement recharacterizes the transactions as financing transactions, with the assets and related financing obligation carried on our balance sheet. As a result, approximately $178 million in additional debt has been recorded as of June 30, 2005, with a proportionate increase in assets. While we have remained in compliance with all of the financial ratio covenants of the loan agreement under our senior credit facility, the increase in debt put our company in default because of provisions that limit our ability to incur additional indebtedness. On August 5, 2005, we obtained a waiver of default and amendment to our loan agreement, the effect of which has been to bring our company into compliance with the loan agreement after giving effect to the restatement of financial statements.

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We are subject to state and federal environmental and other regulations.

Our business is subject to extensive governmental laws and regulations including, but not limited to, environmental regulations, employment laws and regulations, regulations governing the sale of alcohol and tobacco, minimum wage requirements, working condition requirements, public accessibility requirements, citizenship requirements and other laws and regulations. A violation or change of these laws could have a material adverse effect on our business, financial condition and results of operations.

Under various federal, state and local laws, ordinances and regulations, we may, as the owner or operator of our locations, be liable for the costs of removal or remediation of contamination at these or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination. The failure to properly remediate such contamination may subject us to liability to third parties and may adversely affect our ability to sell or rent such property or to borrow money using such property as collateral. Additionally, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at sites where they are located, whether or not such site is owned or operated by such person. Although we do not typically arrange for the treatment or disposal of hazardous substances, we may be deemed to have arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may be liable for removal or remediation costs, as well as other related costs, including governmental fines, and injuries to persons, property and natural resources.

Compliance with existing and future environmental laws regulating underground storage tanks may require significant capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. We pay tank registration fees and other taxes to state trust funds established in our operating areas and maintain private insurance coverage in Florida and Georgia in support of future remediation obligations.

These state trust funds or other responsible third parties including insurers are expected to pay or reimburse us for remediation expenses less a deductible. To the extent third parties do not pay for remediation as we anticipate, we will be obligated to make these payments, which could materially adversely affect our financial condition and results of operations. Reimbursements from state trust funds will be dependent on the maintenance and continued solvency of the various funds.

In the future, we may incur substantial expenditures for remediation of contamination that has not been discovered at existing locations or locations that we may acquire. We cannot assure you that we have identified all environmental liabilities at all of our current and former locations; that material environmental conditions not known to us do not exist; that future laws, ordinances or regulations will not impose material environmental liability on us; or that a material environmental condition does not otherwise exist as to any one or more of our locations. In addition, failure to comply with any environmental laws, ordinances or regulations or an increase in regulations could adversely affect our operating results and financial condition.

State laws regulate the sale of alcohol and tobacco products. A violation or change of these laws could adversely affect our business, financial condition and results of operations because state and local regulatory agencies have the power to approve, revoke, suspend or deny applications for, and renewals of, permits and licenses relating to the sale of these products or to seek other remedies. In addition, certain states regulate relationships, including overlapping ownership, among alcohol manufacturers, wholesalers and retailers and may deny or revoke licensure if relationships in violation of the state laws exist. While we are not aware of any alcoholic beverage manufacturers or wholesalers having a prohibited relationship with our company, an investment fund related to our former stockholder, Freeman Spogli, acquired an interest in a wine wholesaler during 2004. Although we do not believe this relationship is prohibited by the laws of any state in which we operate, if a regulatory authority were to take a contrary view and revoke our retail alcohol license, it could have a material adverse effect on our business and results of operations. In addition, our ability to expand into certain states, should we desire to do so, may be adversely affected if the laws of any such state prohibit the type of relationship which exists among our former stockholder, the investment fund affiliated with it, the wine wholesaler in which the fund invested, and us.

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Any appreciable increase in the statutory minimum wage rate or income or overtime pay or adoption of mandated healthcare benefits would result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition and results of operations.

From time to time, regulations are proposed which, if adopted, could also have an adverse effect on our business, financial condition or results of operations.

We depend on one principal supplier for the majority of our merchandise.

We purchase over 50% of our general merchandise, including most tobacco products and grocery items, from a single wholesale grocer, McLane Company, Inc., or McLane. We have a contract with McLane until April 2010, but we may not be able to renew the contract upon expiration. A change of suppliers, a disruption in supply or a significant change in our relationship with our principal suppliers could have a material adverse effect on our business, cost of goods, financial condition and results of operations.

We depend on two principal suppliers for the majority of our gasoline.

During February 2003, we signed new gasoline supply agreements with BP^® and Citgo^®. We expect that BP^® and Citgo^® will supply approximately 90% of our future gasoline purchases, after an approximately 27 to 33 month conversion process that began in March 2003. We have contracts with Citgo^® until 2008 and BP^® until 2009, but we may not be able to renew either contract upon expiration. A change of suppliers, a disruption in supply or a significant change in our relationship with our principal suppliers could have a material adverse effect on our business, cost of goods, financial condition and results of operations.

Because we depend on our senior management’s experience and knowledge of our industry, we would be adversely affected if senior management left The Pantry.

We are dependent on the continued efforts of our senior management team, including our President and Chief Executive Officer, Peter J. Sodini. Mr. Sodini’s employment contract terminates in September 2006. If, for any reason, our senior executives do not continue to be active in management, our business, financial condition or results of operations could be adversely affected. We cannot assure you that we will be able to attract and retain additional qualified senior personnel as needed in the future. In addition, we do not maintain key personnel life insurance on our senior executives and other key employees. We also rely on our ability to recruit store managers, regional managers and other store personnel. If we fail to continue to attract these individuals, our operating results may be adversely affected.

Other Risks

Future sales of additional shares into the market may depress the market price of our common stock.

If we or our existing stockholders sell shares of our common stock in the public market, including shares issued upon the exercise of outstanding options or upon settlement of the forward sale agreement, or if the market perceives such sales or issuances could occur, the market price of our common stock could decline. As of August 2, 2005, there are 21,895,136 shares of our common stock outstanding, of these shares, 21,624,512 shares are freely tradable (unless held by one of our affiliates). Pursuant to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, during any three-month period our affiliates can resell up to the greater of (a) 1% of our aggregate outstanding common stock or (b) the average weekly trading volume for the four weeks prior to the sale. Sales by our existing stockholders also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate or to use equity as consideration for future acquisitions.

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In addition, we have filed registration statements with the Securities and Exchange Commission that cover up to 5,100,000 shares issuable pursuant to the exercise of stock options granted and to be granted under our stock option plans. Shares registered on a registration statement may be sold freely at any time after issuance.

Any issuance of shares of our common stock in the future could have a dilutive effect on your investment.

We may sell securities in the public or private equity markets if and when conditions are favorable, even if we do not have an immediate need for capital at that time. We may also, either mandatorily or at our option, issue shares upon settlement of the forward sale agreement. We may elect to settle the forward sale by means of a physical stock, cash or net stock settlement. If we elect to physically settle the forward sale agreement in total, we would be required to issue 1,500,000 shares of our common stock. In no event are we required to deliver more than 1,500,000 shares under the forward sale agreement. On April 20, 2005, we partially settled the forward sale agreement by issuing and delivering 1,078,697 shares of our common stock.

Raising funds by issuing securities dilutes the ownership of our existing stockholders. Additionally, certain types of equity securities that we may issue in the future could have rights, preferences or privileges senior to your rights as a holder of our common stock. We could choose to issue additional shares for a variety of reasons including for investment or acquisitive purposes. Such issuances may have a dilutive impact on your investment.

The market price for our common stock has been and may in the future be volatile, which could cause the value of your investment to decline.

There currently is a public market for our common stock, but there is no assurance that there will always be such a market. Securities markets worldwide experience significant price and volume fluctuations. This market volatility could significantly affect the market price of our common stock without regard to our operating performance. In addition, the price of our common stock could be subject to wide fluctuations in response to the following factors among others:

• A deviation in our results from the expectations of public market analysts and investors;

• Statements by research analysts about our common stock, our company or our industry;

• Changes in market valuations of companies in our industry and market evaluations of our industry generally;

• Additions or departures of key personnel;

• Actions taken by our competitors;

• Sales of common stock by the company, senior officers or other affiliates; or

• Other general economic, political or market conditions, many of which are beyond our control.

The market price of our common stock will also be impacted by our quarterly operating results and quarterly comparable store sales growth, which may be expected to fluctuate from quarter to quarter. Factors that may impact our quarterly results and comparable store sales include, among others, general regional and national economic conditions, competition, unexpected costs and changes in pricing, consumer trends, the number of stores we open and/or close during any given period, costs of compliance with corporate governance and Sarbanes-Oxley requirements, and other factors discussed in “Risk Factors” beginning on page 37 and throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You may not be able to resell your shares of our common stock at or above the price you pay.

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Our charter includes provisions that may have the effect of preventing or hindering a change in control and adversely affecting the market price of our common stock.

Our certificate of incorporation gives our board of directors the authority to issue up to five million shares of preferred stock and to determine the rights and preferences of the preferred stock, without obtaining stockholder approval. The existence of this preferred stock could make it more difficult or discourage an attempt to obtain control of The Pantry by means of a tender offer, merger, proxy contest or otherwise. Furthermore, this preferred stock could be issued with other rights, including economic rights, senior to our common stock, and, therefore, issuance of the preferred stock could have an adverse effect on the market price of our common stock. We have no present plans to issue any shares of our preferred stock.

Other provisions of our certificate of incorporation and bylaws and of Delaware law could make it more difficult for a third party to acquire us or hinder a change in management even if doing so would be beneficial to our stockholders. For example, our certificate of incorporation makes us subject to the anti-takeover provisions of Section 203 of the General Corporation Law of the State of Delaware. In general, Section 203 prohibits publicly-held Delaware corporations to which it applies from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. This provision could discourage others from bidding for our shares and could, as a result, reduce the likelihood of an increase in our stock price that would otherwise occur if a bidder sought to buy our stock.

These governance provisions could affect the market price of our common stock. We may, in the future, adopt other measures that may have the effect of delaying, deferring or preventing an unsolicited takeover, even if such a change in control were at a premium price or favored by a majority of unaffiliated stockholders. These measures may be adopted without any further vote or action by our stockholders.

Our recently announced restatement is not complete and subject to a final review by management, the audit committee and review by our independent registered public accountants

As described above, on July 28, 2005, we announced our intention to restate our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 (fiscal 2000 – 2004), and our unaudited interim period results included in our Quarterly Reports on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005, to correct the accounting for certain sale-leaseback transactions entered into by our company.

Because the restatement is not yet completed, the expected impact of the restatement is preliminary and subject to a final review by management and the audit committee and the audit or review by our independent registered public accountants. There can be no assurance that these final reviews or audit will not result in any significant change to the preliminary impact of the restatement.

Our recently announced restatement could impair our ability to secure future financing

As described above, on July 28, 2005, we announced our intention to restate certain of our audited and unaudited financial statements to correct the accounting for certain sale-leaseback transactions entered into by our company. The fact that we are restating certain of our previously issued financial statements may factor into negotiations with lenders on future financing. As a result of the restatement, we may find it more difficult to secure additional financing in the future, on satisfactory terms or at all.

We may be required to file amendments to our periodic reports within a specified cure period provided under the indenture under our senior subordinated notes in order to avoid acceleration of all amounts due thereunder

The indenture under our senior subordinated notes provides a cure period (60 days from receipt of notice to comply from the trustee or holders of not less than 25% in aggregate principal amount of our outstanding senior subordinated notes) within which time we may be required to file amended financial statements to avoid an event

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of default under the indenture. If we receive notice from the trustee or holders of our senior subordinated notes and do not amend our reports to reflect the restatement within the stated cure period, the trustee or holders of our senior subordinated notes would have the right to accelerate our debt and declare it immediately due and payable, which would adversely affect our financial health and could prevent us from fulfilling our obligations. We expect to file our amended periodic reports within the stated cure period, but given that our restatement is not complete, we cannot assure you that we will be able to do so.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Quantitative Disclosures.    We are subject to interest rate risk on our existing long-term debt and any future financing requirements. Our fixed rate debt consists primarily of outstanding balances on our senior subordinated notes and our variable rate debt relates to borrowings under our senior credit facility. We are exposed to market risks inherent in our financial instruments. These instruments arise from transactions entered into in the normal course of business and, in some cases, relate to our acquisitions of related businesses. We hold derivative instruments primarily to manage our exposure to these risks and all derivative instruments are matched against specific debt obligations. There have been no material changes in the primary risk exposures or management of the risks since the end of fiscal 2004. Our debt and interest rate swap instruments outstanding at June 30, 2005, including applicable interest rates, are discussed above, in “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 8—Derivative Financial Instruments.”

The following table presents the future principal cash flows and weighted average interest rates based on rates in effect at June 30, 2005, on our existing long-term debt instruments. Fair values have been determined based on quoted market prices as of August 8, 2005.

Expected Maturity Date

as of June 30, 2005

(Dollars in thousands)

	Fiscal 2005			Fiscal 2006			Fiscal 2007			Fiscal 2008			Fiscal 2009			Thereafter			Total			Fair Value
Long-term debt	$	8		$	16,010		$	16,000		$	16,000		$	16,000		$	491,000		$	555,018		$	565,149
Weighted average interest rate		6.33	%		6.55	%		6.82	%		6.83	%		6.77	%		7.25	%		6.92	%

In order to reduce our exposure to interest rate fluctuations, we have entered into interest rate swap arrangements in which we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional amount. The interest rate differential is reflected as an adjustment to interest expense over the life of the swaps. Fixed rate swaps are used to reduce our risk of increased interest costs during periods of rising interest rates. At June 30, 2005, the interest rate on approximately 81% of our debt was fixed by either the nature of the obligation or through the interest rate swap arrangements compared to approximately 80% at September 30, 2004. The annualized effect of a one percentage point change in floating interest rates on our interest rate swap agreements and other floating rate debt obligations at June 30, 2005, would be to change interest expense by approximately $1.0 million.

The following table presents the notional principal amount, weighted average pay rate, weighted average receive rate and weighted average years to maturity on our interest rate swap contracts:

Interest Rate Swap Contracts

(Dollars in thousands)

	June 30, 2005			September 30, 2004
Notional principal amount	$	202,000		$	202,000
Weighted average pay rate		2.72	%		2.72	%
Weighted average receive rate		3.39	%		1.84	%
Weighted average years to maturity		0.80			1.55

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We have also entered into swap agreements having a notional amount of $130.0 million which will become effective April 2006. These swap agreements have a weighted average pay rate of 4.24% with various settlement dates, the latest of which is April 2009.

As of June 30, 2005, the fair value of our swap agreements represented a net benefit of $1.0 million.

Qualitative Disclosures.    Our primary exposure relates to:

• interest rate risk on long-term and short-term borrowings;

• our ability to pay or refinance long-term borrowings at maturity at market rates;

• the impact of interest rate movements on our ability to meet interest expense requirements and exceed financial covenants; and

• the impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.

We manage interest rate risk on our outstanding long-term and short-term debt through our use of fixed and variable rate debt. We expect the interest rate swaps mentioned above will reduce our exposure to short-term interest rate fluctuations. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.

Item 4. Controls and Procedures

As required by paragraph (b) of Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective, due to a material weakness which resulted in the restatement of the Company’s previously issued financial statements as discussed below.

As disclosed in the Form 8-K we filed with the SEC on July 28, 2005 (the “Form 8-K”), after extensive consultation with its independent registered public accountants, on July 26, 2005, the Company’s Board of Directors concluded to restate the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended September 30, 2004, and its unaudited interim period results included in its Quarterly Reports on Form 10-Q for the periods ended December 30, 2004 and March 31, 2005 (the “Restatement”) to correct the accounting for certain sale-leaseback transactions entered into by the Company. The restatement is the result of the determination by the Company that such transactions contained elements of continuing involvement that precluded the use of the sale-leaseback accounting method. We completed a review of the lease terms in all of the sale-leaseback transactions previously entered into by the Company to verify that all instances of potential continuing involvement were identified that would preclude the use of sale-leaseback accounting treatment. The restatement recharacterizes the transactions as financing transactions, with the assets and related financing obligations carried on the balance sheet.

In the Public Company Accounting Oversight Board’s Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements, restatement of financial statements in prior filings with the SEC is a strong indicator of the existence of a “material weakness” in the design or operation of internal control over financial reporting. Based on the restatement for sale-leaseback transactions, as of June 30, 2005, management concluded that a material weakness existed in the Company’s internal control over financial reporting. Specifically, the Company determined that it failed to design and implement appropriate controls regarding the application of generally accepted accounting principles and the review process of the implementation of accounting guidance for sale-leaseback transactions.

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Subsequent to such evaluation, management identified and implemented the following enhancements to our internal controls over financial reporting:

• Developed a checklist designed to assist management in the identification of all forms of continuing involvement in future sale-leaseback transactions; and

• Strengthened its training program for its accounting staff to include additional training, education and resource materials to ensure that its accounting personnel understand the accounting regulations and standards for sale-leaseback transactions.

At the time of preparation of this report, all of the changes discussed above have been implemented, which we believe render the design and operation of our disclosure controls and procedures effective for providing reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms.

From time to time, we make changes to our internal control over financial reporting that are intended to enhance their effectiveness and which do not have a material effect on our overall internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate. Except as discussed above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that we believe have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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THE PANTRY, INC.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

As reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004, there is pending (instituted on July 17, 2004) a suit (Constance Barton, Kimberly Clark, Wesley Clark, Tracie Hunt, Eleanor Walters, Karen Meredith, Gilbert Breeden, LaCentia Thompson, and Mathesia Peterson, on behalf of themselves and on behalf of classes of those similarly situated vs. The Pantry, Inc.) seeking class action status and asserting claims on behalf of our North Carolina present and former employees for unpaid wages under North Carolina Wage and Hour laws. The suit also seeks an injunction against any unlawful practices, damages, liquidated damages, costs and attorneys’ fees. We have filed an Answer denying any wrongdoing or liability to plaintiffs in any regard. The suit originally was filed in the Superior Court for Forsyth County, State of North Carolina. On August 17, 2004, the case was removed to the United States District Court for the Middle District of North Carolina and on July 18, 2005, plaintiffs filed an Amended Complaint asserting certain additional claims under the federal Fair Labor Standards Act on behalf of present and former store employees in the southeastern United States and adding one additional named plaintiff, Chester Charneski. We believe our employment policies and procedures comply with applicable law and intend to vigorously defend this litigation. We are presently in the preliminary stages of this matter and cannot at this time predict the outcome or provide a reasonable estimate of the potential liability, if any, that might arise.

We are party to various other legal actions in the ordinary course of our business. We believe these other actions are routine in nature and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, we believe that the ultimate resolution of these matters will not have a material adverse impact on our business, financial condition or prospects.

Item 6. Exhibits

Exhibit Number	Description of Document
10.1	Sixth Amendment to Distribution Service Agreement dated April 21, 2005, by and between The Pantry and McLane Company, Inc. (asterisks located within the exhibit denote information which has been deleted pursuant to a confidential treatment filing with the Securities and Exchange Commission).
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. [This exhibit is being furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by that act, be deemed to be incorporated by reference into any document or filed herewith for purposes of liability under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, as the case may be.]
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. [This exhibit is being furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by that act, be deemed to be incorporated by reference into any document or filed herewith for purposes of liability under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, as the case may be.]

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE PANTRY, INC.
By:	/s/    DANIEL J. KELLY
	Daniel J. Kelly Vice President, Chief Financial Officer and Assistant Secretary (Authorized Officer and Principal Financial Officer)
Date: August 9, 2005

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EXHIBIT INDEX

Exhibit Number	Description of Document
10.1	Sixth Amendment to Distribution Service Agreement dated April 21, 2005, by and between The Pantry and McLane Company, Inc. (asterisks located within the exhibit denote information which has been deleted pursuant to a confidential treatment filing with the Securities and Exchange Commission).
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. [This exhibit is being furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by that act, be deemed to be incorporated by reference into any document or filed herewith for purposes of liability under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, as the case may be.]
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. [This exhibit is being furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by that act, be deemed to be incorporated by reference into any document or filed herewith for purposes of liability under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, as the case may be.]

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