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 25, 2007

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 officers)	(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 25, 2007, The Pantry, Inc. (the “Company”) issued a press release announcing results for the first fiscal quarter of the fiscal year ended September 27, 2007. 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’s Chairman and Chief Executive Officer stated the Company’s belief that diluted earnings per share for fiscal 2007 will be between $2.75 and $2.90. This annual guidance assumes, among other things, an increase in comparable store merchandise sales of approximately 3.5%, merchandise margin in a range of 37.0% to 37.5%, an increase in comparable store gasoline gallons of approximately 3%, a gasoline margin of approximately 12.5 cents per gallon and positive accretion from acquisitions completed or announced so far in fiscal 2007 equal to approximately $0.18 per share. Additionally, the Company believes EBITDA for fiscal 2007 will be in a range between $261.2 million and $267.0 million.

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 operating performance and historical ability to service debt because we believe investors find this information useful as a reflection of the resources available for strategic opportunities including, among others, to invest in the business, make strategic acquisition decisions, and to service debt. Management uses EBITDA as an operating measure because it allows us to review the performance of our business directly resulting from our retail operations. Additionally, EBITDA is used by management for budgeting and field operations compensation targets. EBITDA as defined by us may not be comparable to similarly titled measures reported by other companies because such other companies may not calculate EBITDA in the same manner as we do.

Any measure that excludes interest expense or loss on extinguishment of debt, depreciation and amortization or income taxes, has material limitations because we have borrowed money in order to finance our operations and our acquisitions, we use capital assets in our business and the payment of income taxes is a necessary element of our operations.

The Pantry, Inc.

Reconciliation of Non-GAAP Guidance

(In thousands)

	Fiscal Year 2007 Guidance Range
EBITDA	$	261,200		$	267,000
Interest expense and loss on debt extinguishment		(64,300	)		(64,300	)
Depreciation and amortization expense		(91,600	)		(91,600	)
Provision for income taxes		(41,700	)		(44,000	)
Net income	$	63,600		$	67,100

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 25, 2007

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 hereunto duly authorized.

THE PANTRY, INC.
By:	/s/ Daniel J. Kelly
	Daniel J. Kelly Vice President, Chief Financial Officer and Secretary

Date: January 25, 2007

EXHIBIT INDEX

Exhibit No.	Description of Document
99.1	Press Release dated January 25, 2007

EX-99.1

EXHIBIT 99.1

For Immediate Release	Contact: Dan Kelly
January 25, 2007	(919) 774-6700

THE PANTRY ANNOUNCES FIRST QUARTER FINANCIAL RESULTS

Adjusts Fiscal 2007 EPS Guidance to $2.75 to $2.90

Sanford, North Carolina, January 25, 2007 - 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 28, 2006.

Total revenues for the first quarter of fiscal 2007 were approximately $1.4 billion, a 5.0% increase from last year’s first quarter. Net income was $125,000, or $0.01 per share on a diluted basis, compared with $33.0 million, or $1.45 per share, a year ago.

Merchandise revenues for the quarter rose 10.3% from a year ago, and were up 1.9% on a comparable store basis. The merchandise gross margin was 37.6%, a 10 basis point improvement from last year’s first quarter. Total merchandise gross profits for the quarter were $131.3 million, a 10.6% increase from a year ago.

Total gallons sold in the quarter increased 14.0% from a year ago, and were up 2.0% on a comparable store gasoline gallons basis. Gasoline revenues rose 3.3%, despite a 9.4% decline in the average retail price per gallon, to $2.21. The gross margin per gallon was 8.6 cents, compared with 21.2 cents a year ago. Gasoline gross profit for the quarter totaled $40.2 million, compared with $86.6 million in last year’s first quarter.

Chairman and Chief Executive Officer Peter J. Sodini said, “As we expected, our first quarter results were significantly affected by unusually low gasoline margins relative to our historical seasonal trends, especially compared with very strong gas margins a year ago. In addition, we faced difficult comparisons in both merchandise and gasoline sales with the post-Hurricane Katrina period a year ago in the Gulf Coast region. We are pleased to report that gasoline margins and comparable store revenue trends improved at the end of the first quarter, and the improvement has carried over so far in our second quarter.”

Mr. Sodini continued, “More importantly, the strategic highlight of the quarter was the exceptional results achieved in our acquisition program, as measured by both the number and the quality of transactions negotiated.”

The Company has now acquired or agreed to acquire 133 convenience stores in Fiscal 2007, more than the 113 acquired during the full 2006 fiscal year. During the first quarter, the Company acquired or agreed to acquire 67 convenience stores. The largest transactions included 24 Sun Stop stores in Florida, Georgia and Alabama; and 16 Angler’s Mini-Mart stores in the Charleston, South Carolina market. In addition, shortly after the end of the quarter, the Company announced a definitive agreement to acquire 66 Petro Express^TM stores in North Carolina and South Carolina.

“We are particularly pleased with the proposed Petro Express^TM transaction,” Mr. Sodini noted. “Petro Express^TM has built a leadership position in the Charlotte metropolitan area, one of the most fundamentally attractive markets in the Southeast. Featuring large, state-of-the-art facilities, the Petro Express^TM stores generate average revenues substantially above our own average.”

Mr. Sodini concluded, “Including approximately 18 cents of accretion related to the acquisitions we have announced or completed so far this year, we now expect our fiscal 2007 earnings per share to be between $2.75 and $2.90. This guidance range incorporates the assumption that gasoline margins will be more in line with historical trends over the balance of the year. Longer term, we remain focused on consistently growing our merchandise business, optimizing gasoline profits, and strategically expanding the store base to leverage our strong regional market share across the Southeast.”

Conference Call

Interested parties are invited to listen to the first quarter earnings conference call scheduled for Thursday, January 25, 2007 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, 2007.

Use of Non-GAAP Measure

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 operating performance because we believe investors find this information useful as a reflection of 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 because such other companies may not calculate EBITDA in the same manner as we do.

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 revenues for fiscal 2006 of approximately $6.0 billion. As of January 18, 2006, the Company operated 1,524 stores in eleven states under select banners, including Kangaroo Express^SM, its primary operating banner. 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; realizing expected benefits from our fuel supply agreements; 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 25, 2007. 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 28, 2006			December 29, 2005
	(13 weeks)			(13 weeks)
Revenues:
Merchandise	$	349,239		$	316,648
Gasoline		1,031,901			998,675
Total revenues		1,381,140			1,315,323
Costs and operating expenses:
Merchandise costs of goods (exclusive of items shown separately below)		217,923			197,912
Gasoline cost of goods (exclusive of items shown separately below)		991,682			912,090
Operating, general and administrative		136,353			118,328
Depreciation and amortization		20,856			17,237
Total costs and operating expenses		1,366,814			1,245,567
Income from operations		14,326			69,756
Other income (expense):
Loss on extinguishment of debt		—			(1,832	)
Interest expense		(15,486	)		(14,433	)
Interest income		1,357			1,044
Miscellaneous		167			159
Total other expense		(13,962	)		(15,062	)
Income before income taxes		364			54,694
Income tax expense		(239	)		(21,723	)
Net income	$	125		$	32,971
Earnings per share:
Net income per diluted share	$	0.01		$	1.45
Diluted shares outstanding		23,005			22,798
Selected financial data:
EBITDA	$	36,706		$	88,196
Merchandise gross profit	$	131,316		$	118,736
Merchandise margin		37.6	%		37.5	%
Gasoline gallons		466,498			409,093
Gasoline gross profit	$	40,219		$	86,585
Gasoline margin per gallon (1)	$	0.0862		$	0.2117
Gasoline retail per gallon	$	2.21		$	2.44
Comparable store data:
Merchandise sales %		1.9	%		5.0	%
Gasoline gallons %		2.0	%		4.6	%
Number of stores:
End of period		1,506			1,401
Weighted-average store count		1,497			1,399

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 28, 2006		September 28, 2006
Assets
Cash and cash equivalents	$	110,758	$	120,394
Receivables, net		62,586		68,064
Inventories		130,347		140,135
Other current assets		21,793		27,131
Total current assets		325,484		355,724
Property and equipment, net		762,408		745,721
Goodwill, net		446,009		440,681
Other		45,339		45,781
Total assets	$	1,579,240	$	1,587,907
Liabilities and shareholders’ equity
Current maturities of long-term debt	$	2,088	$	2,088
Current maturities of lease finance obligations		3,807		3,511
Accounts payable		128,761		139,939
Other accrued liabilities		100,601		111,992
Total current liabilities		235,257		257,530
Long-term debt		601,693		602,215
Lease finance obligations		253,542		240,564
Deferred income taxes		72,417		72,435
Deferred vendor rebates		23,600		23,876
Other		54,278		54,280
Total shareholders’ equity		338,453		337,007
Total liabilities and shareholders’ equity	$	1,579,240	$	1,587,907

The Pantry, Inc.

Reconciliation of Non-GAAP Financial Measures

(In thousands)

	Quarter Ended
	December 28, 2006			December 29, 2005
EBITDA	$	36,706		$	88,196
Interest expense and loss on extinguishment of debt		(15,486	)		(16,265	)
Depreciation and amortization		(20,856	)		(17,237	)
Provision for income taxes		(239	)		(21,723	)
Net income	$	125		$	32,971

Created by 10KWizard www.10KWizard.comSource: PANTRY INC, 8-K, January 25, 2007