The Pantry, Inc. Issues a Technical Accounting Adjustment to Third Quarter and Year-End Financial Results; Net Income and Pro Forma Earnings Per Share Remain Unchanged

Business Wire, Dec 29, 1999

Business Editors

SANFORD, N.C.--(BUSINESS WIRE)--Dec. 29, 1999

The Pantry, Inc. (Nasdaq: PTRY) today announced a technical accounting adjustment to third quarter financial results and the fiscal year 1999 press release dated November 18, 1999 to reflect a one-time, non-cash accounting charge related to the Company's redemption of preferred stock on June 9, 1999. This accounting adjustment does not affect previously reported net income, pro forma diluted earnings per share, or EBITDA for either the Company's third quarter or fiscal year results. Earnings per share on a pro forma basis remain at $0.27 and $0.72 for the third quarter ended June 24, 1999 and the year ended September 30, 1999, respectively. Additionally, the adjustment does not affect any amounts reported for the Company's fourth quarter 1999 results of operations.

In accordance with Emerging Issues Task Force Topic No. D-42, The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock, at the time of the redemption The Pantry was required to recognize a one-time, non-cash accounting adjustment to net income applicable to common shareholders in the amount of $1,500,000 associated with original issue costs incurred in connection with the sale of preferred stock in December 1996. Therefore, net income applicable to common shareholders for the three months ended June 24, 1999 and the twelve months ended September 30, 1999 are as follows:

         Adjusted Net Income Applicable to Common Shareholders
                 (In thousands, except per share data)

                       Three Months Ended      Twelve Months Ended
                         June 24, 1999         September 30, 1999
                       As                         As
                   Previously       As         Previously       As
                    Reported     Adjusted       Reported     Adjusted

Net income            $5,210       $5,210        $10,416      $10,416
  Preferred
   dividends            (624)        (624)        (2,070)      (2,070)
  Redemption of
   preferred stock
   in excess of
   carrying amount(1)   (613)      (2,113)          (613)      (2,113)
                         ---        -----            ---        -----
Net income
 applicable to
 common
 shareholders         $3,973       $2,473         $7,733       $6,233
                      ======       ======         ======       ======

Earnings per Share
 Applicable to Common
 Shareholders:
  Basic(2):
    Income before
     extraordinary
     item              $0.31        $0.19          $0.82        $0.71
    Net income         $0.31        $0.19          $0.56        $0.45
  Diluted:
    Income before
     extraordinary
     item              $0.28        $0.18          $0.75        $0.65
    Net income         $0.28        $0.18          $0.51        $0.41


Earnings per Share
 on a Pro Forma
 Basis(3):
    Income before
     extraordinary
     item              $0.27        $0.27          $0.72        $0.72
    Net income         $0.27        $0.27          $0.54        $0.54

(1)  In accordance with EITF D-42, The Pantry has renamed the non-cash
     item from "Premium on redemption of preferred stock" to
     "Redemption of preferred stock in excess of carrying amount" and
     has adjusted the amount to include $1.5 million in original issue
     costs incurred in connection with the sale of preferred stock in
     December 1996.

(2)  The difference in the third quarter adjustment of $0.12 and
     fiscal year adjustment of $0.11 is due to rounding.

(3)  Earnings per share on a pro forma basis is not impacted by this
     technical accounting adjustment. Earnings per share on a pro
     forma basis adjusts earnings applicable to common shareholders to
     exclude preferred dividends and the redemption of preferred stock
     in excess of carrying amount with proceeds from the Initial
     Public Offering divided by pro forma weighted-average shares
     outstanding.