The Pantry Announces First Quarter Fiscal 2011 Financial Results

The Pantry, Inc. (NASDAQ: PTRY), the leading independently-operated

convenience store chain in the southeastern U.S., today announced

financial results for its fiscal first quarter ended December 30, 2010.

First Quarter Summary:

• Net loss was $12.2 million or $0.54 per diluted share.

  This compares to a net loss of $26.1 million or $1.17 per diluted

  share in last year’s first quarter. Excluding the impact of impairment

  and other charges the net loss for the first quarter of fiscal 2010

  was $5.8 million or $0.26 per share.

• Adjusted EBITDA was $31.3 million, compared to $40.3

  million a year ago

• Comparable store merchandise revenue

  increased 1.3%

• Merchandise gross margin improved to 33.5% from 32.6% in

  last year’s first quarter

• Fuel gross profit was $50.7 million, compared to $57.0

  million a year ago

• Completed the 47-store Presto acquisition, using $47.6

  million in cash.

President and Chief Executive Officer Terrance M. Marks said, “Adjusted

EBITDA was below our expectations for the quarter, driven by soft

merchandise comparable store sales growth and low fuel margins.

Merchandise sales performance was particularly weak in the latter half

of December, which we believe was primarily driven by the severe winter

weather that affected the Southeast. On a positive note, the sales

performance in our Fresh stores continues to exceed expectations. We

completed the Charlotte store conversion process on schedule in December

and are moving quickly to our next markets.”

Comparable store merchandise sales in the first quarter increased 1.3%

and 1.7% excluding cigarettes. Total merchandise gross profit for the

quarter was $140.5 million, an increase of 3.1% from the first quarter a

year ago.

Comparable store retail gallons sold in the first quarter decreased

5.2%. Retail fuel revenues in the first quarter increased 4.8% to $1.4

billion primarily as a result of the 12% increase in the average retail

price per gallon to $2.81 from $2.52. Fuel gross profit for the first

quarter decreased 10.9% compared to the same period a year ago, due to a

decrease in retail fuel margin per gallon to $0.104 compared to $0.109

and the decrease in retail fuel gallons sold.

Total store operating and general and administrative expenses for the

first quarter increased 4.6% to $160.0 million from the first quarter

last year primarily as a result of strategic investments in advertising

and category management capability to support the Program Fresh

initiative and professional costs associated with the Presto acquisition.

The Company remains comfortable with its liquidity position given the

$132 million in cash on hand and approximately $106 million in available

capacity under its revolving credit facilities as of December 30, 2010.

Fiscal 2011 Outlook

The Company updated the following guidance ranges for its expected

performance (excluding potential acquisitions) in fiscal 2011, which is

a 52-week fiscal year:

Conference Call

Interested parties are invited to listen to the first quarter earnings

conference call scheduled for Tuesday, February 8, 2011 at 8:30 a.m.

Eastern Time. The call will be broadcast live over the Internet and will

be accessible through either the Investors section of the Company's

website at www.thepantry.com

or www.companyboardroom.com.

An online archive will be available immediately following the call and

will be accessible for 30 days.

Use of Non-GAAP Measures

Adjusted EBITDA

Adjusted EBITDA is defined by the Company as net income before interest

expense, net, gain/loss on extinguishment of debt, income taxes,

impairment charges and depreciation and amortization. Adjusted EBITDA is

not a measure of operating performance or liquidity under accounting

principles generally accepted in the United States of America (“GAAP”)

and should not be considered as a substitute for net income, cash flows

from operating activities or other income or cash flow statement data.

The Company has included information concerning Adjusted EBITDA because

it believes investors find this information useful as a reflection of

the resources available for strategic opportunities including, among

others, to invest in the Company’s business, make strategic acquisitions

and to service debt. Management also uses Adjusted EBITDA to review the

performance of the Company's business directly resulting from its retail

operations and for budgeting and field operations compensation targets.

Net Income/(Loss) and Net Income/(Loss) Per Share Excluding Certain

Items

In addition to net income/(loss) and net income/(loss) per share

presented in accordance with GAAP, the Company has also presented net

income/(loss) and net income/(loss) per share for the three months ended

December 24, 2009 excluding the after-tax impact of non-cash charges

related to impairment and excess depreciation related to remodeling

activity. Management believes that investors find this information

useful as a reflection of the Company’s underlying operating performance

and that this information facilitates comparisons between the Company

and other companies in its industry. Management uses these measures as

part of its preparation of operating plans, budgets and forecasts and in

its assessment of the Company’s historical performance.

Additional Information Regarding Non-GAAP Measures

Any measure that excludes interest expense, gain/loss on extinguishment

of debt, depreciation and amortization, or impairment charges has

material limitations because the Company uses debt and lease financing

in order to finance its operations and acquisitions, uses capital and

intangible assets in its business, and must pay income taxes as a

necessary element of its operations. Due to these limitations, the

Company uses non-GAAP measures in addition to and in conjunction with

results and cash flows presented in accordance with GAAP. The Company

strongly encourages investors to review its consolidated financial

statements and publicly filed reports in their entirety and not to rely

on any single financial measure.

Because non-GAAP financial measures are not standardized, the measures

referenced above, each as defined by the Company, may not be comparable

to similarly titled measures reported by other companies. It therefore

may not be possible to compare the Company's use of these measures with

non-GAAP financial measures having the same or similar names used by

other companies.

About The Pantry

Headquartered in Cary, 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. As of February 7, 2011, the Company

operated 1,662 stores in thirteen states under select banners, including

Kangaroo Express(R), its primary operating banner. The Pantry's stores

offer a broad selection of merchandise, as well as fuel 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

Company's ability to enhance its operating performance through its

in-store initiatives; the ability of the Company to identify, acquire

and integrate acquisitions into its operations; fluctuations in domestic

and global petroleum and fuel markets; realizing expected benefits from

the Company's fuel supply agreements; changes in the competitive

landscape of the convenience store industry, including fuel 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 Company's markets; the global financial crisis

and uncertainty in global economic conditions; wholesale cost increases

of, and tax increases on, tobacco products; the effect of regional

weather conditions and climate change on customer traffic and spending;

legal, technological, political and scientific developments regarding

climate change; financial difficulties of suppliers, including the

Company's principal suppliers of fuel and merchandise, and their ability

to continue to supply its stores; the Company's financial leverage and

debt covenants; environmental risks associated with selling petroleum

products; and governmental laws and regulations, including those

relating to the environment. 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 February 7, 2011. 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.

Mark Bierley, 919-774-6700