8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): January 26, 2006

THE PANTRY, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-25813	56-1574463
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

1801 Douglas Drive Sanford, North Carolina	27330-1410
(Address of principal executive officer)	(Zip Code)

(919) 774-6700

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On January 26, 2006, The Pantry, Inc. (the “Company”) issued a press release announcing results for the first fiscal quarter of the fiscal year ended September 28, 2006. The full text of the press release is set forth in Exhibit 99.1 hereto and is incorporated herein by reference.

In the attached release, the Company stated its belief that earnings per share for fiscal 2006 are likely to exceed previous guidance. The Company’s increased annual guidance assumes, among other things, an increase in comparable store merchandise sales of approximately 4.0%, an increase in comparable store gasoline gallons of approximately 3.5% and gasoline margin in the mid to high 13 cents per gallon range for fiscal 2006. Also included in the Company’s increased earnings per share guidance is an assumption that fiscal 2006 earnings per share will be negatively impacted by approximately 15 to 20 cents as a result of, among other things, expensing of stock options for the first time (approximately 9 cents per share), a higher tax rate (approximately 39.8 percent compared with 39.2 percent in fiscal 2005) and additional diluted shares outstanding (primarily as a result of issuance in the second half of fiscal 2005 of 1,500,000 shares in connection with the Company’s recent forward equity sale agreement). Additionally, the Company believes EBITDA for fiscal 2006 will exceed previous guidance and fall in a range between $242.0 million and $246.0 million.

EBITDA is defined by the Company as net income before interest expense, loss on extinguishment of debt, income taxes, depreciation and amortization. EBITDA is not a measure of operating 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. The Company is providing information concerning EBITDA as one measure of its cash flow and historical ability to service debt and because it believes investors find this information useful as 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 the Company may not be comparable to similarly titled measures reported by other companies.

The Pantry, Inc.

Reconciliation of Non-GAAP Guidance

(In thousands)

	Fiscal Year, 2006 Guidance Range
EBITDA	$	242,000		$	246,000
Interest expense and loss on debt extinguishment		(59,200	)		(59,200	)
Depreciation and amortization expense		(71,100	)		(71,100	)
Provision for income taxes		(44,400	)		(46,050	)
Net income	$	67,300		$	69,650

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in Item 2.02 of this report, including the press release appearing in Exhibit 99.1, is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in Item 2.02 of this report shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description of Document
99.1	Press Release dated January 26, 2006

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 Secretary (Authorized Officer and Principal Financial Officer)

Date: January 26, 2006

EXHIBIT INDEX

Exhibit No.	Description of Document
99.1	Press Release dated January 26, 2006

EX-99.1

EXHIBIT 99.1

For Immediate Release	Contact: Dan Kelly
January 26, 2006	(919) 774-6700

THE PANTRY ANNOUNCES RECORD FIRST QUARTER FINANCIAL RESULTS

Sanford, North Carolina, January 26, 2006 - The Pantry, Inc. (NASDAQ: PTRY), the leading independently operated convenience store chain in the southeastern U.S., today announced financial results for its first fiscal quarter ended December 29, 2005.

Total revenues for the quarter were approximately $1.3 billion, a 39.7% increase from last year’s first quarter. Net income was $33.0 million, or $1.45 per share on a diluted basis, more than double net income a year ago of $12.4 million, or $0.59 per share. The results for the first quarter of fiscal 2006 include approximately $0.05 per share in expenses related to the Company’s refinancing of its credit facilities.

“Our first quarter performance was exceptionally strong, reflecting unusually favorable conditions in the gasoline market early in the quarter, and benefits from prior year acquisitions,” said Peter J. Sodini, President and Chief Executive Officer. “In addition, we continued to benefit from solid increases of nearly 5% in both comparable store merchandise sales and gasoline gallons sold. We believe that our ongoing strategic initiatives, including the rollout of additional food service offerings and private label merchandise is helping to drive growth, as are the attractive demographics of our southeastern markets and the appeal of our modern store base, most of which has been remodeled and rebranded under the Kangaroo banner over the last three years.”

Merchandise revenues for the quarter increased 10.3% overall and 5.0% on a comparable store basis. The merchandise gross margin was 37.5%, a 120 basis-point improvement from 36.3% a year ago. Total merchandise gross profits were $118.7 million, a 14.1% increase from last year’s first quarter. Comparable store gasoline gallons rose 4.6%, while total gallons sold increased 20.1%. Total gasoline revenues were up 52.6%, in part due to a 27.1% increase in the average retail price per gallon, to $2.44. The gross margin per gallon was 21.2 cents, compared with 14.6 cents a year ago. Gasoline gross profits for the quarter totaled $86.6 million, a 73.6% increase from last year’s first quarter.

Mr. Sodini continued, “We also made excellent strategic progress across several fronts during the quarter. In October, we announced an extension of our gasoline supply agreement with Citgo, as well as a new agreement with ExxonMobil, enhancing the flexibility and security of our gasoline supplies. We announced agreements for two accretive ‘tuck-in’ acquisitions involving a total of 58 stores in Mississippi, Louisiana and North Carolina. In addition, we strengthened our capital structure through a $150 million convertible notes offering and a refinancing of our credit facilities, which will reduce interest expense and increase our capacity to finance future acquisitions.”

Mr. Sodini concluded, “As we recently announced, we have increased our earnings per share guidance for fiscal 2006 to a range between $2.95 and $3.05, excluding pending or future acquisitions. This increase reflects both the strong first quarter results and our assumption that gasoline margins will be closer to historical levels over the balance of the year, including the normal seasonal weakness in the current quarter.”

Conference Call

Interested parties are invited to listen to the first quarter earnings conference call scheduled for Thursday, January 26, 2006 at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet and is accessible at www.thepantry.com or www.companyboardroom.com. An online archive will be available immediately following the call and will be accessible until February 1, 2006.

Use of Non-GAAP Measures

EBITDA is defined by us as net income before interest expense, income taxes, depreciation and amortization. EBITDA is not a measure of operating 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 as 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 may not be comparable to similarly titled measures reported by other companies.

About The Pantry

Headquartered in Sanford, North Carolina, The Pantry, Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2005 of approximately $4.4 billion. As of December 29, 2005, the Company operated 1,401 stores in eleven states under select banners including Kangaroo Express(SM), our primary operating banner, Golden Gallon(R), and Cowboys(SM). The Pantry’s stores offer a broad selection of merchandise, as well as gasoline and other ancillary services designed to appeal to the convenience needs of its customers.

Safe Harbor Statement

Statements made by the Company in this press release relating to future plans, events, or financial performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company’s 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. Any number of factors could affect actual results and events, including, without limitation: the ability of the Company to take advantage of expected synergies in connection with acquisitions; the actual operating results of stores acquired; the ability of the Company to integrate acquisitions into its operations; fluctuations in domestic and global petroleum and gasoline markets; changes in the

competitive landscape of the convenience store industry, including gasoline stations and other non-traditional retailers located in the Company’s markets; the effect of national and regional economic conditions on the convenience store industry and the markets we serve; the effect of regional weather conditions on customer traffic; financial difficulties of suppliers, including our principal suppliers of gas and merchandise, and their ability to continue to supply our stores; environmental risks associated with selling petroleum products; governmental regulations, including those regulating the environment; and acts of war or terrorist activity. These and other risk factors are discussed in the Company’s Annual Report on Form 10-K and in its other filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release are based on the Company’s estimates and plans as of January 26, 2006. While the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.

The Pantry, Inc.

Unaudited Consolidated Statements of Operations and Selected Financial Data

(In thousands, except per share and per gallon amounts, margin data and store count)

	Quarter Ended
	December 29, 2005			December 30, 2004
	(13 weeks)			(13 weeks)
Revenues:
Merchandise	$	316,648		$	287,067
Gasoline		998,675			654,476
Total revenues		1,315,323			941,543
Cost of sales:
Merchandise		197,912			182,975
Gasoline		912,090			604,589
Total cost of sales		1,110,002			787,564
Gross profit		205,321			153,979
Operating expenses:
Operating, general and administrative		118,328			105,176
Depreciation and amortization		17,236			15,586
Total operating expenses		135,564			120,762
Income from operations		69,757			33,217
Other income (expense):
Loss on extinguishment of debt		(1,832	)		—
Interest expense		(14,433	)		(13,412	)
Miscellaneous		1,202			422
Total other expense		(15,063	)		(12,990	)
Income before income taxes		54,694			20,227
					3
Income tax expense		(21,723	)		(7,787	)
Net income	$	32,971		$	12,440
Earnings per share:
Net income per diluted share	$	1.45		$	0.59
Diluted shares outstanding		22,798			21,102
Selected financial data:
EBITDA	$	88,195		$	49,225
Merchandise gross profit	$	118,736		$	104,092
Merchandise margin		37.5	%		36.3	%
Gasoline gallons		409,093			340,643
Gasoline gross profit	$	86,585		$	49,887
Gasoline margin per gallon (1)	$	0.2117		$	0.1464
Gasoline retail per gallon	$	2.44		$	1.92
Comparable store data:
Merchandise sales %		5.0	%		5.2	%
Gasoline gallons %		4.6	%		3.4	%
Number of stores:
End of period		1,401			1,353
Weighted-average store count		1,399			1,355

Notes:

(1) Gasoline margin per gallon represents gasoline revenue less cost of product and expenses associated with credit card processing fees and repairs and maintenance on gasoline equipment. Gasoline margin per gallon as presented may not be comparable to similarly titled measures reported by other companies.

The Pantry, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

	December 29, 2005		September 29, 2005
Assets
Cash and cash equivalents	$	189,536	$	111,472
Receivables, net		52,589		61,597
Inventories		115,902		125,348
Other current assets		16,930		24,868
Total current assets		374,957		323,285
Property and equipment, net		640,253		630,291
Goodwill, net		393,694		394,903
Other		44,622		39,687
Total assets	$	1,453,526	$	1,388,166
Liabilities and shareholders’ equity
Current maturities of long-term debt	$	1,573	$	16,045
Current maturities of lease finance obligations		2,944		2,872
Accounts payable		122,527		131,618
Other accrued liabilities		107,545		102,998
Total current liabilities		234,589		253,533
Long-term debt		603,781		539,328
Lease finance obligations		205,047		200,214
Deferred income taxes		64,965		64,848
Deferred revenue		25,338		27,385
Other		51,416		50,925
Total shareholders’ equity		268,390		251,933
Total liabilities and shareholders’ equity	$	1,453,526	$	1,388,166

The Pantry, Inc.

Reconciliation of Non-GAAP Financial Measures

(In thousands)

	Quarter Ended
	December 29, 2005			December 30, 2004
EBITDA	$	88,195		$	49,225
Interest expense and loss on extinguishment of debt		(16,265	)		(13,412	)
Depreciation and amortization		(17,236	)		(15,586	)
Provision for income taxes		(21,723	)		(7,787	)
Net income	$	32,971		$	12,440