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The Pantry, Inc. William Blair and Company Growth Stock Conference June 19, 2008

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Page 1: pantry wb992v4

The Pantry, Inc.William Blair and Company Growth Stock Conference

June 19, 2008

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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.

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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

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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

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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)

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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.

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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

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$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%

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$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

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$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%

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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

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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

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$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%

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$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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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$

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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)$

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The Pantry, Inc.William Blair and Company Growth Stock Conference

June 19, 2008