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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2005

Commission File Number: 33-72574

THE PANTRY, INC.

(Exact name of registrant as specified in its charter)

1801 Douglas Drive

Sanford, North Carolina

27330-1410

(Address of principal executive offices)

Registrant’s telephone number, including area code: (919) 774-6700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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THE PANTRY, INC.

FORM 10-Q

MARCH 31, 2005

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PART I-FINANCIAL INFORMATION.

Item 1. Financial Statements.

THE PANTRY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

See Notes to Consolidated Financial Statements

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THE PANTRY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share data)

See Notes to Consolidated Financial Statements

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THE PANTRY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

See Notes to Consolidated Financial Statements

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION

Unaudited Consolidated Financial Statements

The accompanying consolidated financial statements include the accounts of The Pantry, Inc. and its wholly owned subsidiaries (references to “the Company,” “Pantry,” “The Pantry,” “we,” “us,” and “our” mean The Pantry, Inc. and its subsidiaries). All inter-company transactions and balances have been eliminated in consolidation. Transactions and balances of each of these wholly owned subsidiaries are immaterial to the consolidated financial statements.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim consolidated financial statements have been prepared from the accounting records of The Pantry, Inc. and its subsidiaries and all amounts at March 31, 2005 and for the three and six months ended March 31, 2005 and March 25, 2004 are unaudited. Pursuant to Regulation S-X, certain information and note disclosures normally included in annual financial statements have been condensed or omitted. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, and which are of a normal, recurring nature.

The interim financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004.

Our results of operations for the three and six months ended March 31, 2005 and March 25, 2004 are not necessarily indicative of results to be expected for the full fiscal year. The convenience store industry in our marketing areas generally experiences higher levels of revenues and profit margins during the summer months than during the winter months. As a result, we have historically achieved higher revenues and earnings in our third and fourth quarters.

Accounting Period

We operate on a 52-53 week fiscal year ending on the last Thursday in September. Our 2005 fiscal year ends on September 29, 2005 and is a 52 week year. Fiscal 2004 was a 53 week year.

The Pantry

As of March 31, 2005, we operated 1,345 convenience stores located in Florida (453), North Carolina (319), South Carolina (235), Tennessee (103), Georgia (98), Mississippi (51), Kentucky (37), Virginia (30), Indiana (11), and Louisiana (8). Our stores offer a broad selection of merchandise, gasoline and ancillary products and services designed to appeal to the convenience needs of our customers, including gasoline, car care products and services, tobacco products, beer, soft drinks, self-service fast food and beverages, publications, dairy products, groceries, health and beauty aids, money orders and other ancillary services. In all states, except North Carolina and Mississippi, we also sell lottery products. Self-service gasoline is sold at 1,319 locations, 869 of which sell gasoline under major oil company brand names including Amoco^®, BP^®, Chevron^®, Citgo^®, Mobil^®, and Texaco^®.

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 (“SFAS No. 151”). This statement clarifies that inventory costs that are “abnormal” are required to be charged to expense as incurred as opposed to being capitalized into inventory as a product cost. Examples of “abnormal” costs include costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage). SFAS No. 151 is effective for our 2006 fiscal year beginning September 30, 2005. Based on our initial evaluation, the adoption of SFAS No. 151 is not expected to have a significant impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2005) (“SFAS No. 123R”), Share-Based Payment. This statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements. This standard is effective for our 2006 fiscal year beginning September 30, 2005. We currently plan to adopt this standard using the modified version of prospective application and, beginning in the first fiscal quarter of 2006, will recognize compensation costs for the portion of outstanding awards for which the requisite service has not yet been rendered. While we cannot precisely determine the impact on net earnings as a result of the adoption of SFAS No. 123R, estimated compensation expense related to prior periods can be found below under “—Stock-Based Compensation”. The ultimate amount of increased compensation expense will be dependent on the number of option shares granted during the year, their timing and vesting period, and the method used to calculate the fair value of the awards, among other factors.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

Stock-Based Compensation

As permitted by SFAS No. 123R and SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, we continue to account for stock options under the intrinsic value method recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in the consolidated statements of operations, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation:

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The above pro forma disclosures are not necessarily representative of pro forma effects on reported net income for the full year or future years.

NOTE 2—GOODWILL AND OTHER INTANGIBLES

We account for goodwill and other intangibles under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, and as a result, our goodwill asset is reviewed at least annually for impairment. Other intangible assets which have finite useful lives will continue to be amortized over their useful lives. We determined that we operate in one reporting unit based on our current reporting structure and have thus assigned goodwill at the enterprise level.

The changes in the balance of goodwill for the six months ended March 31, 2005 consisted of the following (in thousands):

The goodwill acquired during the year relates primarily to a single store acquisition.

Other intangible assets consist of noncompete agreements and a trademark. For each of the dates presented, noncompete agreements consisted of the following (in thousands):

Amortization expense related to noncompete agreements was $89 thousand and $97 thousand for the three months ended March 31, 2005 and March 25, 2004, respectively, and $182 thousand and $238 thousand for the six months ended March 31, 2005 and March 25, 2004, respectively. The weighted average amortization period of all noncompete agreements is 31.4 years. Estimated amortization expense for each of the five fiscal years following September 30, 2004 and thereafter is: $169 thousand for the remainder of fiscal 2005; $305 thousand in fiscal 2006; $206 thousand in fiscal 2007; $197 thousand in fiscal 2008; $197 thousand in fiscal 2009 and $4.9 million thereafter. Other intangible assets are classified in other noncurrent assets in the accompanying consolidated balance sheets.

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 3—ENVIRONMENTAL LIABILITIES AND OTHER CONTINGENCIES

As of March 31, 2005, we were contingently liable for outstanding letters of credit in the amount of approximately $29.7 million primarily related to several self-insurance programs, vendor contract terms and regulatory requirements. The letters of credit are not to be drawn against unless we default on the timely payment of related liabilities.

We are party to various legal actions arising in the ordinary course of our business. We believe these other actions are routine and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, we believe that the ultimate resolution of these matters will not have a material adverse impact on our business, financial condition or prospects.

Environmental Liabilities and Contingencies

We are subject to various federal, state and local environmental laws. We make financial expenditures in order to comply with regulations governing underground storage tanks adopted by federal, state and local regulatory agencies. In particular, at the federal level, the Resource Conservation and Recovery Act of 1976, as amended, requires the United States Environmental Protection Agency, or EPA, to establish a comprehensive regulatory program for the detection, prevention and cleanup of leaking underground storage tanks.

Federal and state regulations require us to provide and maintain evidence that we are taking financial responsibility for corrective action and compensating third parties in the event of a release from our underground storage tank systems. In order to comply with these requirements, as of March 31, 2005, we maintain letters of credit in the aggregate amount of approximately $1.3 million in favor of state environmental agencies in North Carolina, South Carolina, Virginia, Georgia, Indiana, Tennessee, Kentucky and Louisiana.

We also rely upon the reimbursement provisions of applicable state trust funds. In Florida, we meet our financial responsibility requirements by state trust fund coverage for releases occurring through December 31, 1998 and meet such requirements for releases thereafter through private commercial liability insurance. In Georgia, we meet our financial responsibility requirements by state trust fund coverage for releases occurring through December 29, 1999 and meet such requirements for releases thereafter through private commercial liability insurance and a letter of credit. The trust funds generally require us to pay deductibles ranging from $10 thousand to $150 thousand per occurrence depending on the upgrade status of our underground storage tank system, the date the release is discovered and/or reported and the type of cost for which reimbursement is sought.

Environmental reserves of $15.1 million and $14.1 million as of as of March 31, 2005 and September 30, 2004, respectively, represent our estimates for future expenditures for remediation, tank removal and litigation associated with 260 and 251 known contaminated sites, respectively, as a result of releases (e.g., overfills, spills and underground storage tank releases) and are based on current regulations, historical results and certain other factors. We estimate that approximately $14.0 million of our environmental obligation will be funded by state trust funds and third party insurance; as a result we may spend up to $1.1 million for remediation, tank removal and litigation. Also, as of March 31, 2005 and September 30, 2004 there were an additional 490 and 503 sites, respectively, that are known to be contaminated sites that are being remediated by third parties and therefore the costs to remediate such sites are not included in our environmental reserve. Remediation costs for known sites are expected to be incurred over the next one to ten years. Environmental reserves have been established with remediation costs based on internal and external estimates for each site. Future remediation for which the timing of payments can be reasonably estimated are discounted using an appropriate rate to determine the reserve.

We anticipate that we will be reimbursed for expenditures from state trust funds and private insurance. As of March 31, 2005, anticipated reimbursements of $16.1 million are recorded as long-term environmental receivables and $1.3 million are recorded as current receivables related to all sites. In Florida, remediation of such contamination reported before January 1, 1999 will be performed by the state (or state-approved independent contractors) and substantially all of the remediation costs, less any applicable deductibles, will be paid by the state trust fund. We will perform remediation in other states through independent contractor firms engaged by us. For certain sites, the trust fund does not cover a deductible or has a co-pay which may be less than the cost of such remediation. Although we are not aware of releases or contamination at other locations where we currently operate or have operated stores, any such releases or contamination could require substantial remediation expenditures, some or all of which may not be eligible for reimbursement from state trust funds.

Several of the locations identified as contaminated are being remediated by third parties who have indemnified us as to responsibility for clean up matters. Additionally, we are awaiting closure notices on several other locations which will release us from responsibility related to known contamination at those sites. These sites continue to be included in our environmental reserve until a final closure notice is received.

NOTE 4—LONG-TERM DEBT

Long-term debt consisted of the following (amounts in thousands):

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our senior credit facility consists of a term loan with an outstanding balance of $309.0 million and a $70.0 million revolving credit facility, which bear interest at a rate of LIBOR plus 2.25%. Our senior credit facility is secured by substantially all of our assets, other than our leased real property and is guaranteed by our subsidiaries. As of March 31, 2005, there were no outstanding borrowings under the revolving credit facility and we had approximately $29.7 million of standby letters of credit issued under the facility. As a result, we had approximately $40.3 million in available borrowing capacity. Furthermore, the revolving credit facility limits our total outstanding letters of credit to $50.0 million. The LIBOR associated with our senior credit facility resets periodically, and as of March 31, 2005, the effective LIBOR rate was 2.85%.

The remaining annual maturities of our long-term debt as of March 31, 2005 are as follows (amounts in thousands):

As of March 31, 2005, we were in compliance with all covenants and restrictions relating to all outstanding borrowings and substantially all of our net assets are restricted as to payment of dividends and other distributions.

NOTE 5—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into interest rate swap agreements to modify the interest rate characteristics of our outstanding long-term debt and have designated each qualifying instrument as a cash flow hedge. We formally document our hedge relationships, including identifying the hedge instruments and hedged items, as well as our risk management objectives and strategies for entering into the hedge transaction. At hedge inception, and at least quarterly thereafter, we assess whether derivatives used to hedge transactions are highly effective in offsetting changes in the cash flow of the hedged item. We measure effectiveness by the ability of the interest rate swaps to offset cash flows associated with changes in the variable LIBOR rate associated with our term loan facilities using the hypothetical derivative method. To the extent the instruments are considered to be effective, changes in fair value are recorded as a component of other comprehensive income (loss). To the extent there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately recognized in earnings (interest expense). When it is determined that a derivative ceases to be a highly effective hedge, we discontinue hedge accounting, and subsequent changes in fair value of the hedge instrument are recognized in earnings. Interest income (expense) for the mark-to-market adjustment of those instruments that do not quality for hedge accounting was $(63) thousand and $409 thousand for the three months ended March 31, 2005 and March 25, 2004, respectively, and $423 thousand and $1.2 million for the six months ended March 31, 2005 and March 25, 2004, respectively.

The fair values of our interest rate swaps are obtained from dealer quotes. These values represent the estimated amount we would receive or pay to terminate the agreement taking into consideration the difference between the contract rate of interest and rates currently quoted for agreements of similar terms and maturities. At March 31, 2005, other noncurrent assets include derivative assets of $3.5 million. At September 30, 2004 other noncurrent liabilities included derivative liabilities of approximately $700 thousand and other noncurrent assets included derivative assets of approximately $600 thousand. Cash flow hedges which were effective on March 31, 2005 represent interest rate swaps with a notional amount of $202.0 million, a weighted average pay rate of 2.72% and have various settlement dates, the latest of which is April 2006. Additionally, we are party to cash flow hedges which will become effective April 2006 with a notional amount of $130.0 million, a weighted average pay rate of 4.24%, and have various settlement dates, the latest of which is April 2009.

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 6—COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related income taxes, for the periods presented are as follows (amounts in thousands):

The components of unrealized gains (losses) on qualifying cash flow hedges, net of related income taxes, for the periods presented are as follows (amounts in thousands):

Accumulated other comprehensive income, net of related income taxes, is composed of unrealized gains on qualifying cash flow hedges of $2.1 million and $206 thousand as of March 31, 2005 and September 30, 2004, respectively.

NOTE 7—INTEREST EXPENSE AND LOSS ON EXTINGUISHMENT OF DEBT

The components of interest expense are as follows (amounts in thousands):

The loss on debt extinguishment relates to the redemption of our $200 million 10.25% senior subordinated notes and the

refinancing of the senior credit facility. The loss includes the write-off of deferred financing costs of $11.8 million, the call premium on the senior subordinated notes of $6.8 million, the call premium on the second lien term loan of $1.0 million, and the write-off of the unamortized original issue discount on the senior credit facility of $3.5 million.

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 8—EARNINGS PER SHARE

We compute earnings per share data in accordance with the requirements of SFAS No. 128, Earnings Per Share. Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding warrants and stock options using the “treasury stock” method.

The following table reflects the calculation of basic and diluted earnings per share (dollars in thousands, except per share data):

There were no options or warrants to purchase shares of common stock that were not included in the computation of diluted earnings per share for the three months ended March 31, 2005. Options to purchase shares of common stock that were not included in the computation of diluted earnings per share, because their inclusion would have been antidilutive, were 30 thousand for the six months ended March 31, 2005 and 1.4 million for the three months and six months ended March 25, 2004, respectively.

NOTE 9 – FORWARD SALE OF EQUITY

During October 2004, we completed a secondary stock offering in which Freeman Spogli & Co., or Freeman Spogli, sold 3,850,000 shares of our stock at a public offering price of $22.96 per share. In connection with this secondary stock offering, we sold 1,500,000 shares of our common stock under a forward sale agreement with Merrill Lynch International, an affiliate of Merrill Lynch & Co., as forward purchaser, under which, at our request, Merrill Lynch International borrowed 1,500,000 shares of our common stock from stock lenders and sold such borrowed shares at a net price of $21.8694 per share to certain underwriters pursuant to a purchase agreement.

We may elect to settle the forward sale by means of a physical stock, cash or net stock settlement. The forward sale will settle in twelve months, or earlier at our option. At any time during that period (up to a maximum of four settlement dates in total), we have the option to settle the forward sale in whole or in part. We may physically settle the forward sale by delivering all or a portion of the shares to Merrill Lynch International for cash proceeds approximately equal to the product of the applicable number of shares and our share price as of the date of the forward sale, plus an imputed interest rate of the Federal Funds Rate minus 1.0%. The actual proceeds to be received by us will vary depending upon the settlement date, the portion of the shares designated by us for settlement on that settlement date and the method of settlement.

If we elect to physically settle all of the 1,500,000 shares subject to the forward sale with stock, based on an initial forward price of $21.8694, which is the public offering price less the underwriting discount, we will receive aggregate proceeds of approximately $32.8 million. The forward sale agreement provides that the initial forward sale price will be subject to increase based on a floating interest factor equal to the Federal Funds Rate, less a spread of 1.0%. However, because the spread may be greater than the Federal Funds Rate for at least part of the term of the forward sale agreement, the actual forward sale price received at settlement may be less than the initial forward sale price. In no event are we required to deliver more than 1,500,000 shares under the forward sale agreement.

If we elect cash or net stock settlement, Merrill Lynch International or one of its affiliates will purchase shares of our common

stock in secondary market transactions over a period of time for delivery to Merrill Lynch International’s stock lenders in order to unwind its hedge. In connection with a cash or net stock settlement election by us, if the price paid by Merrill Lynch International or its affiliates in secondary market transactions to unwind its hedge exceeds the price that Merrill Lynch International would have been obligated to pay us had we instead elected a physical stock settlement under the forward sale agreement with respect to such shares, then we would pay Merrill Lynch International an amount in cash equal to such difference in the case of a cash settlement or would deliver a number of shares of our common stock having a market value equal to such difference in the case of a net stock settlement. On the other hand, if Merrill Lynch International or one of its affiliates is able to unwind its hedge by purchasing shares in secondary market transactions for an amount less than the price that Merrill Lynch International would have been obligated to pay us in connection with a physical stock settlement, Merrill Lynch International would pay us such difference in cash in the case of a cash settlement or in shares of our common stock having a market value equal to such difference in the case of a net stock settlement.

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to settlement, Merrill Lynch International will utilize the aggregate net proceeds from the sale of the borrowed shares as cash collateral for the borrowing of shares described above. We have not received any proceeds from the sale of the borrowed shares and will not do so until settlement of all or a portion of the forward sale.

Under limited circumstances related to our default or certain other extraordinary or otherwise unanticipated events, Merrill Lynch International also will have the ability to require us to settle the forward sale prior to the maturity date.

On April 20, 2005, we partially settled the forward sale agreement by issuing and delivering 1,078,697 shares of our common stock, par value $.01 per share. In connection with the partial settlement, we received $23.8 million in proceeds. The remaining 421,303 shares subject to the forward sale agreement may be issued and delivered by us in settlement of the forward sale agreement by means of physical stock, cash, or net settlement and must be settled no later than twelve months following the effective date of the forward sale agreement. If we elect to physically settle the remaining shares we expect to receive aggregate proceeds of approximately $9.2 million.

NOTE 10—SUBSEQUENT EVENTS

On April 22, 2005, we completed the acquisition of 53 convenience stores operating under the Cowboys^® banner in Alabama (23), Georgia (29) and Mississippi (1) from D&D Oil Company, Inc., or D&D Oil. The purchase price was funded from available cash and approximately $23.8 million in proceeds from the partial settlement of a forward equity sale agreement we executed in October 2004, as described above. We will be leasing all of the stores under operating leases primarily from the seller. In connection with the acquisition, we entered into an amendment to the Distribution Services Agreement dated October 10, 1999 by and between The Pantry, Inc., Lil’ Champ Food Stores, Inc. and McLane Company, Inc. (the “Agreement”). The amendment extends the term of the Agreement until April 21, 2010. In addition, the amendment requires McLane to pay us certain additional fees relating to the stores currently covered by the Agreement, as well as additional fees relating to the stores acquired by us in connection with the acquisition of D&D Oil, and modifies certain provisions of the Agreement relating to service charges and rebate amounts.

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THE PANTRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 11 – GUARANTOR SUBSIDIARIES

We have two wholly owned subsidiaries, R. & H. Maxxon, Inc. and Kangaroo, Inc., collectively referred to as the Guarantor Subsidiaries, which are guarantors of our senior credit facility and our subordinated notes. The guarantees are joint and several in addition to full and unconditional. The Guarantor Subsidiaries do not conduct any operations and do not have significant assets. The Guarantor Subsidiaries comprise all of our direct and indirect subsidiaries. Combined financial information for the Guarantor Subsidiaries is as follows:

THE PANTRY, INC. AND SUBSIDIARIES

Supplemental Combining Balance Sheets

March 31, 2005

(Dollars in thousands)