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SANFORD, NC-The Pantry convenience store chain endured some ups and downs as a result of gasoline prices that slammed its bottom line during the first fiscal quarter of 2007, but the 1,524-store chain remained on track in its acquisition and expansion program, the company reported Thursday. Commenting on the quarterly results in a conference call with financial analysts, the Pantry’s Chairman and Chief Executive Officer Peter Sodini said, “The strategic highlight of the quarter was the exceptional results achieved in our acquisition program.”

Sodini said the company saw positive developments in the quarter despite a plunge in net income to a penny per share, from $1.45 per share in the comparable quarter the year before, which the company attributed to an unusually steep drop in profits on gasoline sales. The Pantry’s profit on gasoline sales plunged to $40 million from $86 million.

Although disappointed by the bottom-line results for the quarter, Sodini said that the the company made positive strides in its long-term expansion strategy, through which it has now acquired or agreed to acquire 133 convenience stores in fiscal 2007. The largest transactions either closed or planned include 24 Sun Stop stores in Florida, Georgia and Alabama; and 16 Angler’s Mini-Mart stores in the Charleston, SC market.

In addition, shortly after the end of the quarter that company officials were discussing Thursday, the company announced a definitive agreement to acquire 66 Petro Express stores in North Carolina and South Carolina. Based on these results and the expected consummation of future deals, Sodini said, the company met or exceeded its goals for the quarter both in terms of the number and the quality of the locations that the company acquired or plans to acquire.

The Pantry is especially pleased with the proposed Petro Express transaction, according to Sodini, who said that the Petro Express locations were unusually attractive because the company “has built a leadership position in the Charlotte metropolitan area,” which the Pantry considers one of the most lucrative markets in the Southeast.

The convenience store chain’s quarterly results “were significantly affected by unusually low gasoline margins relative to our historical seasonal trends,” Sodini commented, adding that the results looked especially low when compared with very strong gas margins a year ago. In addition, the company faced stiff comparisons in both merchandise and gasoline sales when stacked up against the post-Hurricane Katrina period a year ago.

Even so, Sodini said, gasoline margins and comparable store revenue trends improved at the end of the first quarter, and the improvement has carried into the second quarter. For the quarter, the company reported net income of $125,000, compared with $33 million and $1.45 per share a year ago. Sales increased by 5% to $1.4 billion, with merchandise revenues for the quarter rising 10.3% from a year ago to push comparable store sales up 1.9%.

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