The Pantry, Inc.William Blair and Company Growth Stock Conference
June 19, 2008
1
Safe Harbor Statement
Some of the statements in this presentation constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than those of historical facts included herein, including those related to the company’s financial outlook, goals, business
strategy, projected plans and objectives of management for future operations and liquidity, are forward-looking statements. These forward-looking
statements are based on the company’s plans and expectations and involve a number of risks and uncertainties that could cause actual results to vary
materially from the results and events anticipated or implied by such forward-looking statements. Please refer to the company’s Annual Report on Form
10-K and its other filings with the SEC for a discussion of significant risk factors applicable to the company. In addition, the forward-looking
statements included in this presentation are based on the company’s estimates and plans as of the date of this presentation. 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.
2
Our Business
Leading independently operated convenience store chain in the Southeast and 3rd largest in the U.S.
Over 1,650 stores located across 11 states
Primarily branded Kangaroo Express
Last twelve months as of March 27, 2008 sales of $8.1 billion and LTM EBITDA of $221.4 million
Stores offer a broad selection of merchandise, motor fuel and food service offerings designed to meet convenience needs of consumers
3
Leading market positions in attractive Southeastern markets
Significant scale advantages vs. primary competitors
Benefiting from consumer trends toward convenience formats
Leveraging infrastructure to drive profitability
Sector growth and consolidation potential
Key Investment Highlights
Strong Cash Flow Generation to Reinvest in Our Business,Strong Cash Flow Generation to Reinvest in Our Business,DeDe--lever and Drive Earnings Growthlever and Drive Earnings Growth
4
U.S. CU.S. C--Store Sales and Growth Store Sales and Growth (1)(1)
_____________________(1) Source: NACS 2007 NACS State of the Industry Report and Retail Forward, Inc.(2) Source: Retail Forward, Inc. CAGR for 5-year period from 2001-2006.
Large and rapidly growing sector
Defensive growth characteristics
Increasing consumer demand for smaller-box, fill-in convenience shopping
Relative to hypermarkets, large supermarkets, etc.
Increasing amount of food consumed away from home and on the run
Highly fragmented market with ample consolidation opportunities
Attractive Industry Fundamentals
$79 $89 $93 $100 $134 $165 $171 $181 $221$75 $77 $81 $86$364$330$263
$109$112$104$100
$116$132
$160$145
$727
$524$475
$395$337
$290$283$269$234
$186$174$166$154
0
100
200
300
400
500
600
$700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2011E
($ in Billions)
Gasoline In Store
Projected
CAGR = 6.8%
2.9%
(1.3%)
6.0%6.0%6.0%7.4%
CovenienceStores
Drug Stores Restaurants Total Retail GroceryStores
DiscountDepartment
Stores
Total Historical CAGR = 11.8%
In-Store Historical CAGR = 7.1%
55--Year InYear In--Store Sales CAGR vs. Other Sectors Store Sales CAGR vs. Other Sectors (1)(2)(1)(2)
5
PA0021GM_1.WOR
IndianaIndianaIndianaIndianaIndianaIndianaIndianaIndianaIndiana
North CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth CarolinaNorth Carolina
VirginiaVirginiaVirginiaVirginiaVirginiaVirginiaVirginiaVirginiaVirginiaKentuckyKentuckyKentuckyKentuckyKentuckyKentuckyKentuckyKentuckyKentucky
TennesseeTennesseeTennesseeTennesseeTennesseeTennesseeTennesseeTennesseeTennessee
MississippiMississippiMississippiMississippiMississippiMississippiMississippiMississippiMississippi
LouisianaLouisianaLouisianaLouisianaLouisianaLouisianaLouisianaLouisianaLouisiana
FloridaFloridaFloridaFloridaFloridaFloridaFloridaFloridaFlorida
AlabamaAlabamaAlabamaAlabamaAlabamaAlabamaAlabamaAlabamaAlabama
GeorgiaGeorgiaGeorgiaGeorgiaGeorgiaGeorgiaGeorgiaGeorgiaGeorgia
SouthSouthSouthSouthSouthSouthSouthSouthSouthCarolinaCarolinaCarolinaCarolinaCarolinaCarolinaCarolinaCarolinaCarolina
IndianapolisIndianapolisIndianapolisIndianapolisIndianapolisIndianapolisIndianapolisIndianapolisIndianapolis
RaleighRaleighRaleighRaleighRaleighRaleighRaleighRaleighRaleigh
FrankfortFrankfortFrankfortFrankfortFrankfortFrankfortFrankfortFrankfortFrankfort
JacksonJacksonJacksonJacksonJacksonJacksonJacksonJacksonJackson
TallahasseeTallahasseeTallahasseeTallahasseeTallahasseeTallahasseeTallahasseeTallahasseeTallahassee
Baton RougeBaton RougeBaton RougeBaton RougeBaton RougeBaton RougeBaton RougeBaton RougeBaton Rouge
RichmondRichmondRichmondRichmondRichmondRichmondRichmondRichmondRichmond
MontgomeryMontgomeryMontgomeryMontgomeryMontgomeryMontgomeryMontgomeryMontgomeryMontgomery
AtlantaAtlantaAtlantaAtlantaAtlantaAtlantaAtlantaAtlantaAtlanta
ColumbiaColumbiaColumbiaColumbiaColumbiaColumbiaColumbiaColumbiaColumbia
DurhamDurhamDurhamDurhamDurhamDurhamDurhamDurhamDurham
ChesapeakeChesapeakeChesapeakeChesapeakeChesapeakeChesapeakeChesapeakeChesapeakeChesapeake
PaducahPaducahPaducahPaducahPaducahPaducahPaducahPaducahPaducah
ClintonClintonClintonClintonClintonClintonClintonClintonClintonVicksburgVicksburgVicksburgVicksburgVicksburgVicksburgVicksburgVicksburgVicksburg
MeridianMeridianMeridianMeridianMeridianMeridianMeridianMeridianMeridian
TampaTampaTampaTampaTampaTampaTampaTampaTampa
OrlandoOrlandoOrlandoOrlandoOrlandoOrlandoOrlandoOrlandoOrlando
GulfportGulfportGulfportGulfportGulfportGulfportGulfportGulfportGulfport
NorfolkNorfolkNorfolkNorfolkNorfolkNorfolkNorfolkNorfolkNorfolk
HamptonHamptonHamptonHamptonHamptonHamptonHamptonHamptonHampton
ArlingtonArlingtonArlingtonArlingtonArlingtonArlingtonArlingtonArlingtonArlington
WilmingtonWilmingtonWilmingtonWilmingtonWilmingtonWilmingtonWilmingtonWilmingtonWilmington
St. PetersburgSt. PetersburgSt. PetersburgSt. PetersburgSt. PetersburgSt. PetersburgSt. PetersburgSt. PetersburgSt. Petersburg
Daytona BeachDaytona BeachDaytona BeachDaytona BeachDaytona BeachDaytona BeachDaytona BeachDaytona BeachDaytona Beach
JacksonvilleJacksonvilleJacksonvilleJacksonvilleJacksonvilleJacksonvilleJacksonvilleJacksonvilleJacksonville
NashvilleNashvilleNashvilleNashvilleNashvilleNashvilleNashvilleNashvilleNashville
Boca RatonBoca RatonBoca RatonBoca RatonBoca RatonBoca RatonBoca RatonBoca RatonBoca Raton
MiamiMiamiMiamiMiamiMiamiMiamiMiamiMiamiMiami
Bowling GreenBowling GreenBowling GreenBowling GreenBowling GreenBowling GreenBowling GreenBowling GreenBowling Green
CovingtonCovingtonCovingtonCovingtonCovingtonCovingtonCovingtonCovingtonCovington
1,659 Stores Located in Eleven Southeastern States
Leading Convenience Store Retailer Concentrated in the Southeastern United States
NY0010DP_1.WOR
Pantry Store Locations
_____________________Note: Map as of fiscal year ended September 27, 2007.
6
Key Markets Possess Highly Attractive Growth Characteristics
_____________________Note: Pantry’s store counts as of quarter ended March 27, 2008.Source: U.S. Census Bureau and 2007 NACS State of the Industry Report.
Core Markets Projected to Experience Rapid Growth Throughout NexCore Markets Projected to Experience Rapid Growth Throughout Next Several Years; t Several Years; High Degree of Fragmentation Provides Continued Consolidation OpHigh Degree of Fragmentation Provides Continued Consolidation Opportunitiesportunities
21.1%
15.0%
9.5% 9.0% 9.1%
0.0
5.0
10.0
15.0
20.0
25.0%
Florida NorthCarolina
SouthCarolina
Tennessee U.S.
54%9%
31%6%
58%
21%
14% 7%
52%21%
17% 10%
60%20%
17%3%
Pantry
1 StoreOperators
2-50 StoreOperators
>50 StoreOperators
Pantry
1 StoreOperators
2-50 StoreOperators
>50 StoreOperators
Pantry
1 StoreOperators
2-50 StoreOperators
>50 StoreOperators
Pantry
1 StoreOperators
2-50 StoreOperators
>50 StoreOperators
FloridaFlorida(7,356 stores)(7,356 stores)
North CarolinaNorth Carolina(5,447 stores)(5,447 stores)
South CarolinaSouth Carolina(2,872 stores)(2,872 stores)
TennesseeTennessee(3,697 stores)(3,697 stores)
Population Growth CAGRs (2005-2015)
Pantry Stores: 457 387 281 104 1,659
Market Fragmentation
7
$1,642$1,576
$1,386$1,229
$1,170
$1,010
0
500
1,000
1,500
$2,000
2003 2004 2005 2006 2007 LTM
Merchandise RevenueMerchandise Revenue
2,1432,033
1,758
1,4971,372
1,161
0
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 LTM
(Gallons in mm)($ in mm)
CAGR ’03 – ’07 = 11.8%
CAGR ’03 – ’07 = 15.0%
Fiscal Year Fiscal Year_____________________Note: Fiscal year ends in September. Last twelve months as of March 27, 2008.
$8,089
$6,911
$5,962
$4,429
$3,493
$2,750
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
$9,000
2003 2004 2005 2006 2007 LTM
($ in mm)
Retail Gas Gallons SoldRetail Gas Gallons Sold Total RevenueTotal Revenue
Fiscal Year
Strong Track Record of Top Line Growth…
CAGR ’03 – ’07 = 25.9%
8
$607
$366$425 $449 $518
$586
$165$214
$281$225
$145
$233
0
100
200
300
400
500
600
700
800
$900
2003 2004 2005 2006 2007 LTM
Merchandise Gasoline
Reported EBITDAReported EBITDAGross ProfitGross Profit
$221
$136
$173
$214
$279
$214
0
50
100
150
200
250
$300
2003 2004 2005 2006 2007 LTM
$511
$591
$663
$779$811
$840
Fiscal Year Fiscal Year
_____________________Note: Fiscal year ends in September. Last twelve months as of March 27, 2008.
($ in mm) ($ in mm)’03-’07CAGR
11.6%
12.5%
…And Substantial EBITDA Generation
9
$792
$857
$898
$954
$999 $1,000
700
750
800
850
900
950
$1,000
2003 2004 2005 2006 2007 LTM
Average Merchandise Sales per Store($ in Thousands)
Improved Store Portfolio and Stronger Consumer Offering Improved Store Portfolio and Stronger Consumer Offering Driving Increased Average Merchandise Sales per StoreDriving Increased Average Merchandise Sales per Store
_____________________Note: Fiscal year ends in September. Last twelve months for the quarter ending March 27, 2008.
Fiscal Year
Stores 1,258 1,361 1,400 1,493 1,644 1,659
Strong Growth in Merchandise Sales Per Store
CAGR ’03-’07: 6.0%
10
36.2% 36.3% 36.6%37.4% 37.2% 37.0%
20.0
25.0
30.0
35.0
40.0%
2003 2004 2005 2006 2007 LTM
Merchandise Gross Margin
Fiscal Year
Superior Merchandise offering leads to above average margins Superior Merchandise offering leads to above average margins
Industry
Avg.(1):
29.3%
_____________________Note: Fiscal year ends in September. Last twelve months for the quarter ending March 27, 2008.(1) Industry average for 2006 based on the 2007 NACS State of the Industry Report.
Proprietary branded offerings
Private label products in high velocity categories
Selective expansion of nationally branded quick service restaurants (QSRs)
Leveraging scale with merchandise vendors
Merch. Comps 2.1% 3.4% 5.3% 4.9% 2.3% N/A
Consistently Strong Merchandise MarginsConsistently Strong Merchandise Margins
11
CelesteCeleste
Bean Street CoffeeBean Street Coffee
Proprietary Merchandise and Food Service Concepts Drive Revenue and Margins
Candy LaneCandy Lane
Grilling Depot & Chill ZoneGrilling Depot & Chill Zone
12
We Currently Operate 234 Nationally Branded and We Currently Operate 234 Nationally Branded and Proprietary Quick Service RestaurantsProprietary Quick Service Restaurants
QSR Food Service Offering Differentiates Our Stores and Drives Traffic and Margins
13
$165
$214$225
$145
$239
$281
0
50
100
150
200
250
$300
2003 2004 2005 2006 2007 LTM
941
1,026
1,118
1,242
1,306 1,323
700
800
900
1,000
1,100
1,200
1,300
1,400
2003 2004 2005 2006 2007 LTM
We Balance Average Gallons Sold per Store and Gasoline Margins We Balance Average Gallons Sold per Store and Gasoline Margins to Maximize Overall Gross Profit Dollarsto Maximize Overall Gross Profit Dollars
Average Gallons Sold per Store
Gasoline Strategy Maximizes Fuel Gross Profit Dollars
Gasoline Gross Profit $
Fiscal Year Fiscal Year
_____________________Note: Fiscal year ends in September. Last twelve months for the quarter ending March 27, 2008.(1) Net of credit card fees and repairs and maintenance. Last twelve months excludes 1.6¢ hedging loss in Q2 ’08.
(Gallons in Thousands) ($ in mm)
Comps 0.7% 2.0% 4.7% 3.1% 1.0% N/A
CPG (1) 12.5¢ 12.0¢ 14.3¢ 15.9¢ 10.9¢ 11.1¢
CAGR ’03 – ’07 = 8.3%
CAGR ’03 – ’07 = 11.6%
14
$58.74
$90.61$97.59
$138.54
$75.13
$60.13
$63.34 $63.82 $65.44$60.74$70.89$70.95
$119.75
$53.58$50.03
0.00
25.00
50.00
75.00
100.00
125.00
$150.00
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3TD Current
Avg
. Cru
de O
il P
rice
per B
arre
l
1.00
2.00
3.00
4.00
$5.00
Avg. R
etail Price per G
asoline Gallon
Note: Fiscal year ends in September. As of June 6, 2008.Source: FactSet. Average futures price per barrel of light sweet crude and national average retail price per gasoline gallon.
FY2005 FY2006 FY2007 FY2008
+25% in last 3 mos.
Avg. Crude Oil Price per Barrel Avg. Retail Price per Gasoline Gallon
Unprecedented Inflation in Recent Oil and Gas Prices
15
9.0¢
10.5¢
12.8¢
11.4¢
8.6¢
14.0¢14.6¢
9.9¢
12.3¢
19.4¢
21.2¢
11.1¢10.6¢
17.3¢
1.6¢
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5¢
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
10.6¢
Recent Margins Impacted by Higher Credit Card Fees and Repairs aRecent Margins Impacted by Higher Credit Card Fees and Repairs and Maintenance Expense, nd Maintenance Expense, and a 1.6and a 1.6¢¢ Loss on Fuel Hedging Activity in Q2Loss on Fuel Hedging Activity in Q2
Our Quarterly Retail Gasoline CPG (Net of Credit Card Fees and Repairs and Maintenance)
FY2005
HedgingLoss
FY2006 FY2007 FY2008
_____________________Note: Fiscal year ends September. (1) Includes 1.6¢ per gallon loss on hedging operations.
Gasoline CPG Can Be Volatile on a Quarterly Basis…
(1)
(1)Net CPG Hedging Loss
16
12.0¢
10.4¢
12.5¢13.2¢
12.3¢13.4¢
12.8¢ 12.5¢
14.3¢
15.9¢
10.9¢
5.0
8.0
11.0
14.0
17.0
20.0¢
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Annual Net CPG Typically Ranges from 11Annual Net CPG Typically Ranges from 11¢¢ -- 1313¢¢
Fiscal Year
_____________________Note: Fiscal year ends in September. Shaded area represents average historical CPG range. CPG is net of credit card fees and repairs and maintenance
…But Annual CPG Tends to Remain Relatively Stable
17
Supply / demand dynamics driving oil and gas prices to all-time highs
Higher gasoline prices impacting consumers’ disposable income and demand for gasoline and convenience merchandise
Lower disposable income also leading to decreased recreational travel
East Coast resort areas especially impacted
Florida market hard hit by the downturn in the housing market, softer construction activity
Recent Macroeconomic Factors Negatively Impacting Our Sector
Extremely Challenging Operating Environment IndustryExtremely Challenging Operating Environment Industry--WideWide
18
What are We Doing to Manage This Challenging Environment?
Promotional activity to drive traffic
Reducing store level and overhead costs
Accelerating ethanol roll-out
Discontinuing fuel hedging strategy
Collectively, These Actions Should Better Leverage Our OperatingCollectively, These Actions Should Better Leverage Our Operating Model and Model and Help Stabilize Results Given the Challenging EnvironmentHelp Stabilize Results Given the Challenging Environment
Bolstering liquidity by accessing delayed draw on term loan
Temporarily suspending acquisition activity until calendar year-end
Reducing non-essential capex
Temporarily suspending share repurchases
19
Reorganized field management structure to streamline operationsImproved overall quality / efficiency of staffing
Improved store-level controllable expensesReduced bad check expense
Lowered cash over and short by moving to prepaid on gasoline
Tangible financial results achieved, more expected throughout yearAchieved flat average per store expenses in Q2 despite higher utility costs
Reduced corporate overhead spend despite an additional 104 stores
Lowered FY ’08 OG&A guidance by $13mm - $18mm in January, current run-rate tracking at low-end of $615mm - $630mm range
Focus on Reducing Operating Expenses
Initiative Maximizes Operating Expense Leverage and Better PositInitiative Maximizes Operating Expense Leverage and Better Positions Us for ions Us for Profitable Growth as Market Conditions ImproveProfitable Growth as Market Conditions Improve
20
Introduced ethanol-blended products in 2007
Lower-cost alternative versus 100% gasoline
Ethanol blending tax credit received
Environmental benefits
Currently, approximately 59% of our locations offer ethanol products
Reduced chain-wide cost per gallon by $0.01 in most recent quarter
By the end of fiscal 2008, ~66% of locations will offer ethanol
Chain-wide costs per gallon benefit of approximately $0.02
Ultimate effect on margin will be determined by competitive forces
Update on Ethanol Roll-out
21
Lease Finance Obligations Cause Valuation and Leverage Confusion
Adjusting EBITDA by Treating SaleAdjusting EBITDA by Treating Sale--Leasebacks as Operating Leases and Subtracting SaleLeasebacks as Operating Leases and Subtracting Sale--Leaseback Rent Allows for Better Comparison to Other RetailersLeaseback Rent Allows for Better Comparison to Other Retailers
Balance sheet Data as of 3/27/08 (1)
_____________________(1) Reflects $100 million of delayed term loan, with proceeds used to paydown revolver and increase cash.
Reported Adjustments Adjusted
Total Debt (ex. Lease Finance Obligations) $848 $848
Cash ($129) ($129)
Net Debt (ex. Lease Finance Obligations) $719 $719
Lease Finance Obligations $463 ($463) –
Total Net Debt $1,182 ($463) $719
Market Cap 6/6/08 $252 $252
Enterprise Value $1,434 ($463) $971
LTM EBITDA as of 3/27/08 $221 ($45) $177
EV / EBITDA Multiple 6.5x 5.5x
Total Net Debt/EBITDA 5.3x 4.1x
22
Meaningful liquidity$129 million in cash-on-hand (pro forma for term loan delayed draw)$250 million revolver – $0 drawn, over $145 million available after LOCs
Long-term debt profile; earliest maturity is the convertible debt in 2012
Covenant-light bank facility – financial flexibility (1)
6.5x Adj. Net Debt / EBITDAR Leverage – Currently 5.7x 2.25x Interest Coverage – Currently 2.68x
_____________________(1) Per credit facility covenant calculations (8x rent methodology).
Meaningful Liquidity / Financial Flexibility
23
Merchandise sales to grow to $1.6 - $1.7 billion
Merchandise gross margin to be about 37%
Retail gasoline gallons sold to be 2.1 - 2.2 billion gallons
Retail gasoline margins targeted at between 10 and 12 cents per gallon
Operating, general and administrative expenses expected to be at the low end of the previously announced range of $615 - $630 million
Capital expenditure plans reduced by $40 million to $90 million
Full Year Impact of 2007 Acquisitions Should Drive Significant RFull Year Impact of 2007 Acquisitions Should Drive Significant Revenue Growth in 2008; evenue Growth in 2008; Continuing Discipline on Expenses Should Lower OG&A and Drive EaContinuing Discipline on Expenses Should Lower OG&A and Drive Earningsrnings
Fiscal 2008 Financial Outlook
24
Leading market positions in attractive Southeastern markets
Significant scale advantages vs. primary competitors
Benefiting from consumer trends toward convenience formats
Leveraging infrastructure to drive profitability
Sector growth and consolidation potential
Key Investment Highlights
Strong Cash Flow Generation to Reinvest in Our Business,Strong Cash Flow Generation to Reinvest in Our Business,DeDe--lever and Drive Earnings Growthlever and Drive Earnings Growth
25
Reconciliation of NonReconciliation of Non--GAAP MeasuresGAAP Measures
Adjusted EBITDA/EBITDA Reconciled to Net Income
_____________________Note: Fiscal year ends in September. Last twelve months as of March 27, 2008.
($ in mm) LTM
Mar-08 2007 2006 2005 2004 2003
Adjusted EBITDA 177$ 178$ 254$ 189$ 150$ 127$
Payments made for lease finance obligations 45 36 25 24 23 13 Cumulative effect adjustment - - - - - (3)
Reported EBITDA 221$ 214$ 279$ 214$ 173$ 136$
Interest expense, net and loss on extinguishment of debt 89 74 56 54 87 60
Depreciation and amortization 106 96 76 64 61 56 Provision for income taxes 10 17 57 37 9 9
Net income 16$ 27$ 89$ 58$ 16$ 11$
26
Adjusted EBITDA/EBITDA Reconciled to Cash Flows
_____________________Note: Fiscal year ends in September. Last twelve months as of March 27, 2008.
($ in mm) TTMMar-08
Reconciliation of NonReconciliation of Non--GAAP MeasuresGAAP Measures
2007 2006 2005 2004 2003Adjusted EBITDA 177$ 178$ 254$ 189$ 150$ 127$
Payments made for lease finance obligations 45 36 25 24 23 13 Cumulative effect adjustment - - - - - (3)
Reported EBITDA 221$ 214$ 279$ 214$ 173$ 136$ Interest expense, net and loss on extinguishment of debt (89) (74) (56) (54) (87) (60) Provision for income taxes (10) (17) (57) (37) (9) (9) Non-cash stock based compensation 4 4 3 - - - Changes in operating assets and liabilities (5) 8 (13) (7) 0 (20) Non-cash loss on extinguishment of debt 2 2 2 - 23 3 Other 2 4 (3) 19 17 19
Net cash provided by operating activities 125$ 141$ 154$ 134$ 117$ 69$
Net cash used in investing activities (472)$ (529)$ (219)$ (166)$ (227)$ (24)$
Net cash provided by financing activities 330$ 339$ 74$ 36$ 145$ (14)$
27
The Pantry, Inc.William Blair and Company Growth Stock Conference
June 19, 2008
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