**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM 10-Q**

**x**                              QuarterlyReport Pursuant to Section 13 or 15(d) of the Securities and ExchangeAct of 1934

**For the Quarterly PeriodEnded April 4, 2007**

** **

**Commission FileNumber  333-62775**

**BERTUCCI’S CORPORATION**

(Exact name of registrantas specified in its charter)

| **Delaware**                                      |   | **06-1311266**          |
|---------------------------------------------------|--------|-------------------------|
| (State or other  jurisdiction of                  |   | (I.R.S. Employer        |
| incorporation or  organization)                   |   | Identification  Number) |
| ** **                                        |   | ** **              |
| **155  Otis Street, Northborough, Massachusetts** |   | **01532-2414**          |
| (Address of  principal executive offices)         |   | (Zip Code)              |

 

Registrant’s telephonenumber, including area code:**(508) 351-2500**

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to the filing requirements for thepast 90 days. 

Yes   x     No   o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer” and “largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by checkmark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Exchange Act. 

Yes  x    No  o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). 

Yes  o    No  x

3,008,317 shares of the registrant’s Common Stock wereoutstanding on May 18, 2007.

 

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**BERTUCCI’SCORPORATIONFORM 10-QTABLE OF CONTENTS**
| PART I:  |   | FINANCIAL  INFORMATION                                                                                                           |   |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------|--------|
|          |   |                                                                                                                             |   |
| Item 1.  |   | Financial  Statements:                                                                                                           |   |
|          |   |                                                                                                                             |   |
| 1)            |   | Condensed Consolidated Balance Sheets as of April 4,  2007 (Unaudited) and January 3, 2007 (Unaudited)                           |   |
|          |   |                                                                                                                             |   |
| 2)            |   | Condensed Consolidated Statements of Operations for  the 13 Weeks Ended April 4, 2007 (Unaudited) and March 29, 2006 (Unaudited) |   |
|          |   |                                                                                                                             |   |
| 3)            |   | Condensed Consolidated Statements of Cash Flow for the  13 Weeks Ended April 4, 2007 (Unaudited) and March 29, 2006 (Unaudited)  |   |
|          |   |                                                                                                                             |   |
| 4)            |   | Notes to Condensed Consolidated Financial Statements  (Unaudited)                                                                |   |
|          |   |                                                                                                                             |   |
| Item 2.       |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                      |   |
|          |   |                                                                                                                             |   |
| Item 3.       |   | Quantitative and Qualitative Disclosure About Market  Risk                                                                       |   |
|          |   |                                                                                                                             |   |
| Item 4.       |   | Controls and Procedures                                                                                                          |   |
|          |   |                                                                                                                             |   |
| PART II: |   | OTHER  INFORMATION                                                                                                               |   |
|          |   |                                                                                                                             |   |
| Item  1.      |   | Legal  Proceedings                                                                                                               |   |
| Item 1A. |   | Risk  Factors                                                                                                                    |   |
| Item 2.       |   | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                     |   |
| Item 3.       |   | Defaults Upon Senior Securities                                                                                                  |   |
| Item 4.       |   | Submission of Matters to a Vote of Security Holders                                                                              |   |
| Item  5.      |   | Other  Information                                                                                                               |   |
| Item 6.       |   | Exhibits                                                                                                                         |   |
|          |   |                                                                                                                             |   |
| SIGNATURES    |   |                                                                                                                             |   |
|          |   |                                                                                                                             |   |
| EXHIBITS      |   |                                                                                                                             |   |

 

 

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PART I: FINANCIAL INFORMATION

**Item 1.FINANCIAL STATEMENTS**

**BERTUCCI’S CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS**

**(In thousands, except share data)(Unaudited)**
| ** **                                                 | ** ** | **April 4, 2007** | ** ** | **January 3, 2007** | ** ** |
|------------------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ASSETS                                                     |       |                        |       |                          |       |
| Current Assets:                                            |       |                        |       |                          |       |
| Cash and cash  equivalents                                 |       | $                           | 19,934     |                          | $          | 28,446 |   |
| Restricted cash                                            |       | 2,151                       |       | 2,185                         |       |
| Accounts  receivable                                       |       | 1,184                       |       | 1,143                         |       |
| Inventories                                                |       | 1,723                       |       | 1,698                         |       |
| Prepaid expenses  and other current assets                 |       | 3,116                       |       | 2,618                         |       |
| Total current  assets                                      |       | 28,108                      |       | 36,090                        |       |
|                                                       |       |                        |       |                          |       |
| Property and Equipment,  at cost:                          |       |                        |       |                          |       |
| Land                                                       |       | 259                         |       | 259                           |       |
| Buildings                                                  |       | 697                         |       | 697                           |       |
| Capital leases -  land and buildings                       |       | 5,764                       |       | 5,764                         |       |
| Leasehold  improvements                                    |       | 79,378                      |       | 77,554                        |       |
| Furniture and  equipment                                   |       | 54,169                      |       | 52,000                        |       |
|                                                       |       | 140,267                     |       | 136,274                       |       |
| Less -  accumulated depreciation and amortization          |       | (82,364                     | )          | (79,033                       | )          |
|                                                       |       | 57,903                      |       | 57,241                        |       |
| Construction  work in process                              |       | 224                         |       | 999                           |       |
| Net property and  equipment                                |       | 58,127                      |       | 58,240                        |       |
|                                                       |       |                        |       |                          |       |
| Goodwill                                                   |       | 26,127                      |       | 26,127                        |       |
| Deferred finance costs,  net                               |       | 1,295                       |       | 1,469                         |       |
| Liquor licenses, net                                       |       | 2,287                       |       | 2,301                         |       |
| Other assets                                               |       | 1,195                       |       | 970                           |       |
| TOTAL ASSETS                                               |       | $                           | 117,139    |                          | $          | 125,197 |   |
|                                                       |       |                        |       |                          |       |
| LIABILITIES AND  STOCKHOLDERS’ DEFICIT                |       |                        |       |                          |       |
|                                                       |       |                        |       |                          |       |
| Current Liabilities:                                       |       |                        |       |                          |       |
| Promissory notes  - current portion                        |       | $                           | 46         |                          | $          | 43 |   |
| Capital lease  obligations - current portion               |       | 137                         |       | 126                           |       |
| Accounts payable                                           |       | 10,923                      |       | 12,033                        |       |
| Accrued expenses                                           |       | 15,583                      |       | 22,078                        |       |
| Total current  liabilities                                 |       | 26,689                      |       | 34,280                        |       |
|                                                       |       |                        |       |                          |       |
| Promissory notes, net  of current portion                  |       | 4,333                       |       | 4,356                         |       |
| Capital lease  obligations, net of current portion         |       | 5,834                       |       | 5,871                         |       |
| Senior Notes                                               |       | 85,310                      |       | 85,310                        |       |
| Deferred gain on sale  leaseback transaction               |       | 1,755                       |       | 1,782                         |       |
| Other long-term  liabilities                               |       | 8,194                       |       | 8,399                         |       |
| Total  liabilities                                         |       | 132,115                     |       | 139,998                       |       |
| Commitments and  Contingencies                             |       |                        |       |                          |       |
| Stockholders’ Deficit:                                |       |                        |       |                          |       |
| Common stock,  $.01 par value                              |       |                        |       |                          |       |
| Authorized -  8,000,000 shares                             |       |                        |       |                          |       |
| Issued -  3,767,995 shares; Outstanding - 3,008,317 shares |       | 38                          |       | 38                            |       |
| Less treasury  shares - 759,678 at cost                    |       | (8,603                      | )          | (8,603                        | )          |
| Additional  paid-in capital                                |       | 29,805                      |       | 29,781                        |       |
| Accumulated  deficit                                       |       | (36,216                     | )          | (36,017                       | )          |
| Total  stockholders’ deficit                          |       | (14,976                     | )          | (14,801                       | )          |
| TOTAL LIABILITIES AND  STOCKHOLDERS’ DEFICIT          |       | $                           | 117,139    |                          | $          | 125,197 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

1

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**BERTUCCI’S CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except share and per share data)(Unaudited)**
| ** **                                                          | ** ** | **Thirteen weeks ended** | ** ** |
|---------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                          | ** ** | **April 4, 2007**        | ** ** | **March 29, 2006** | ** ** |
| Net sales                                                           |       | $                                  | 60,189     |   | $ | 52,684 |   |
|                                                                |       |                               |       |   |   |
| Cost of sales and  expenses:                                        |       |                               |       |   |   |
| Cost of sales                                                       |       | 13,902                             |       | 11,942 |   |
| Operating  expenses                                                 |       | 36,701                             |       | 31,305 |   |
| General and  administrative expenses                                |       | 3,700                              |       | 3,553 |   |
| Depreciation,  amortization, deferred rent and pre-opening expenses |       | 3,426                              |       | 2,721 |   |
| Closed  restaurant charge                                           |       | 127                                |       | — |   |
| Asset impairment  charge                                            |       | 55                                 |       | — |   |
| Total cost of  sales and expenses                                   |       | 57,911                             |       | 49,521 |   |
| Income from  operations                                             |       | 2,278                              |       | 3,163 |   |
|                                                                |       |                               |       |   |   |
| Interest expense, net                                               |       | (2,477                             | )          | (2,500 | ) |
| (Loss) income before  income tax provision                          |       | (199                               | )          | 663 |   |
|                                                                |       |                               |       |   |   |
| Income tax provision                                                |       | —                             |       | — |   |
| Net (loss)  income                                                  |       | $                                  | (199       | ) | $ | 663 |   |
|                                                                |       |                               |       |   |   |
| Basic net (loss) income  per share                                  |       | $                                  | (0.07      | ) | $ | 0.22 |   |
|                                                                |       |                               |       |   |   |
| Diluted net (loss)  income per share                                |       | $                                  | (0.07      | ) | $ | 0.22 |   |
|                                                                |       |                               |       |   |   |
| Weighted average shares  outstanding:                               |       |                               |       |   |   |
| Basic                                                               |       | 3,008,317                          |       | 3,012,982 |   |
| Diluted                                                             |       | 3,008,317                          |       | 3,034,435 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

2

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**BERTUCCI’S CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW**

**(In thousands)(Unaudited)**
| ** **                                                                            | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                            | ** ** | **April 4, 2007**        | ** ** | **March 29, 2006** | ** ** |
|                                                                                  |       |                               |       |   |   |
| Cash flows from  operating activities                                                 |       |                               |       |   |   |
| Net (loss) income                                                                     |       | $                                  | (199       | ) | $ | 663 |   |
| Adjustments to  reconcile net (loss) income to net cash used in operating activities: |       |                               |       |   |   |
| Depreciation,  amortization and deferred rent                                         |       | 3,374                              |       | 2,894 |   |
| Closed restaurant  charge                                                             |       | 127                                |       | — |   |
| Asset impairment charge                                                               |       | 55                                 |       | — |   |
| Stock compensation  expense                                                           |       | 24                                 |       | 52 |   |
| Changes in operating  assets and liabilities                                          |       |                               |       |   |   |
| Inventories                                                                           |       | (25                                | )          | 79 |   |
| Prepaid expenses,  receivables and other                                              |       | (539                               | )          | (415 | ) |
| Other accrued expenses                                                                |       | (6,709                             | )          | (4,549 | ) |
| Accounts payable                                                                      |       | (1,110                             | )          | (1,180 | ) |
| Other operating assets  and liabilities                                               |       | (225                               | )          | (109 | ) |
| Total adjustments                                                                     |       | (5,028                             | )          | (3,228 | ) |
| Net cash used in  operating activities                                                |       | (5,227                             | )          | (2,565 | ) |
|                                                                                  |       |                               |       |   |   |
| Cash flows from  investing activities                                                 |       |                               |       |   |   |
| Additions to property  and equipment                                                  |       | (3,273                             | )          | (1,054 | ) |
| Decrease in restricted  cash                                                          |       | 34                                 |       | 12 |   |
| Net cash used in investing  activities                                                |       | (3,239                             | )          | (1,042 | ) |
|                                                                                  |       |                               |       |   |   |
| Cash flows from  financing activities                                                 |       |                               |       |   |   |
| Payment on promissory  note                                                           |       | (20                                | )          | (20 | ) |
| Principal payments  under capital lease obligations                                   |       | (26                                | )          | (15 | ) |
| Net cash used in  financing activities                                                |       | (46                                | )          | (35 | ) |
|                                                                                  |       |                               |       |   |   |
| Net decrease in cash  and cash equivalents                                            |       | (8,512                             | )          | (3,642 | ) |
| Cash and cash  equivalents, beginning of year                                         |       | 28,446                             |       | 21,382 |   |
| Cash and cash  equivalents, end of period                                             |       | $                                  | 19,934     |   | $ | 17,740 |   |
|                                                                                  |       |                               |       |   |   |
| Supplemental Disclosure  of Cash Flow Information:                                    |       |                               |       |   |   |
| Cash paid for interest                                                                |       | $                                  | 4,817      |   | $ | 4,818 |   |
| Cash paid for income  taxes                                                           |       | $                                  | 409        |   | $ | — |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

3

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**BERTUCCI’S CORPORATIONNotes To Condensed Consolidated Financial Statements**

**April 4, 2007(Unaudited)**

*1.Basis of Presentation*

The unaudited condensed consolidated financialstatements (the “Unaudited Financial Statements”) presented herein have beenprepared by Bertucci’s Corporation and include all of its subsidiaries(collectively, the “Company”) after elimination of inter-company accounts andtransactions, without audit, and, in the opinion of management, reflect alladjustments (consisting of normal recurring adjustments) necessary for a fairstatement of the interim periods presented. The accompanying unaudited interimcondensed consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of Americafor interim financial information and pursuant to the rules andregulations of the Securities and Exchange Commission (the “SEC”) for reportingon Form 10-Q. Accordingly, certain information and footnotedisclosures required for complete financial statements are not included herein.It is suggested the Unaudited Financial Statements be read in conjunction withthe consolidated financial statements and notes included in the Company’sAnnual Report on Form 10-K for the year ended January 3, 2007, whichwas filed with the SEC on April 3, 2007 (the “2006 Annual Report”). Theoperating results for the thirteen weeks ended April 4, 2007 may not beindicative of the results expected for any succeeding interim period or for theentire year ending January 2, 2008.

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to makeestimates and assumptions affecting the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

*2.Restaurant Closing Reserves*

Restaurant closingreserves were established as part of the acquisition of Bertucci’s, Inc.in July 1998. These reserves were related to estimated future leasecommitments and exit costs to close 18 Bertucci’s locations.  It wasoriginally expected the Company would be able to exit these locations, subleasethe locations or otherwise be released from the related leases.However, due to market conditions, the Company has been unable tosublease, exit, or otherwise be released from certain of these leases.

In the first quarter offiscal 2007, the Company closed three restaurants not meeting sales and profitexpectations.  Net Sales from these locations totaled $3.5 million infiscal 2006. One location was closed in conjunction with a lease terminationagreement while the other two locations have continuing lease obligationstotaling $2.4 million through 2013. The Company anticipates being able tosublease the properties or negotiate lease termination agreements, butestimates it will incur rental costs net of sublease income, as well as legal,brokerage and other fees of approximately $646,000.  These amounts wereoffset by the deferred rent liability previously recorded for the threelocations of $519,000 and a fee received in conjunction with the leasetermination agreement.  The resulting charge of $127,000 was recorded inthe first quarter of 2007.

Theclosed restaurant reserve was calculated net of sublease income at elevenlocations partially or fully subleased as of April 4, 2007. The Company remainsprimarily liable for the remaining lease obligations should the sublesseedefault. Total sublease income excluded from the reserve is approximately $6.9million for subleases expiring at various dates through 2017.

4

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Activity withinthe reserve was as follows (in thousands):
| ** **                                              | ** ** | **Thirteen weeks ended** | ** ** |
|---------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                              | ** ** | **April 4, 2007**        | ** ** | **March 29, 2006** | ** ** |
|                                                    |       |                               |       |   |   |
| Balance,  beginning of the year                         |       | $                                  | 286        |   | $ | 372 |   |
| Amounts added to  reserve                               |       | 646                                |       | — |   |
| Payments charged  and receipts credited against reserve |       | (27                                | )          | (20 | ) |
| Balance, end of  period                                 |       | $                                  | 905        |   | $ | 352 |   |
| Current portion (included in accrued expenses)          |       | $                                  | 646        |   | $ | 266 |   |
| Noncurrent  portion                                     |       | 259                                |       | 86 |   |
|                                                    |       | $                                  | 905        |   | $ | 352 |   |

 

*3. Net(Loss) Income per Share*

Basic net (loss) income per share is computed bydividing net (loss) income by the weighted average number of common sharesoutstanding for the reporting period. Diluted net (loss) income per sharereflects the potential dilution that could occur if options to issue commonstock were exercised or converted into common stock. Dilutive shares added tothe weighted average number of common shares outstanding for the thirteen weeksended March 29, 2006 for this calculation were 21,453. Dilutive shares weredetermined using the treasury stock method for in-the-money stock options as ofthe dates presented. For the thirteen weeks ended April 4, 2007 and March 29,2006, options representing 969,323 and 874,037 shares of common stock,respectively, were excluded from the calculation of diluted net (loss) incomeper share because of their anti-dilutive effect.

*4.Income Taxes*

The Company recognizes deferred tax assets andliabilities for the expected future tax consequences of events included in thefinancial statements or tax returns. Additionally, the Company is required toconsider both negative and positive evidence in determining if a valuationallowance is required on a quarterly basis. Management previously recorded afull valuation allowance for its deferred tax assets.

The Company did not record a tax benefit for thefuture benefits created in the thirteen weeks ended April 4, 2007 as theCompany continues to maintain a valuation allowance for its deferred tax assetsdue to its history of losses. Management continues to evaluate the need for avaluation allowance on an on-going basis.

In July 2006, theFinancial Accounting Standards Board (“FASB”) issued FASB Interpretation No.48, “*Accounting for Uncertainty in Income Taxes*”(“FIN 48”), an interpretation of Statement of Financial Accounting Standards (“SFAS”)No. 109, “*Accounting for Income Taxes*”. FIN 48clarifies the accounting for uncertainty in tax positions and requires theimpact of tax positions be recorded in the financial statements if it is morelikely than not such position will be sustained on audit, based on thetechnical merits of the position. The provisions of FIN 48 are effective forfiscal years beginning after December 15, 2006. The adoption of FIN 48 did nothave a material effect on the Company’s consolidated financial position orresults of operations.

TheCompany files numerous consolidated and separate income tax returns in theUnited States Federal jurisdiction and in many state jurisdictions. With fewexceptions, the Company is no longer subject to US Federal and state and localincome tax examinations for years before 2003.

*5. Stock-Based Compensation*

The Company grants stock options under its Amended andRestated 1997 Equity Incentive Plan (“Equity Incentive Plan”), which providesfor the issuance of nonqualified stock options and allows the Company toprovide equity incentives to its key employees and directors. In September 2005the Company’s Board of Directors approved an amendment to the Equity IncentivePlan which increased the number of shares of Common Stock available forissuance under the Equity Incentive Plan from 750,000 to 1,100,000. The Boardof Directors administers the Equity Incentive Plan and may modify or amendit in any respect.

5

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Stock options are: (1) issued at or above thefair value of the underlying stock on the date of the grant; (2) areexercisable either (a) cumulatively at the rate of 25% on or aftereach of the second, third, fourth and fifth anniversaries of the date of grantor (b) only upon the fifth anniversary of the date of grant; and(c) typically expire 90 days following the tenth anniversary of the dateof the grant. In addition, such options generally provide unvested options vestimmediately and in full upon a transaction constituting a “change of control”of the Company.

Thegrant date fair value is calculated using the Black-Scholes option valuationmodel. The fair value of options granted during the thirteen weeks ended April4, 2007 and March 29, 2006, were calculated using the following estimatedweighted average assumptions:
| ** **                              | ** ** | **Thirteen weeks ended** | ** ** |
|-----------------------------------------|------------|------------------------------------|------------|
| ** **                              | ** ** | **April 4, 2007**        | ** ** | **March 29, 2006** | ** ** |
| Options granted                         |       | 1,000                              |       | 29,000 |   |
| Weighted-average  exercise price        |       | $                                  | 23.84      |   | $ | 17.51 |   |
| Weighted-average  grant date fair value |       | $                                  | 4.16       |   | $ | 3.08 |   |
| Assumptions:                            |       |                               |       |   |   |
| Risk free  interest rate                |       | 4.65                               | %          | 4.40 | % |
| Expected life  (in years)               |       | 5                                  |       | 5 |   |
| Expected  volatility                    |       | 20                                 | %          | 20 | % |
| Expected dividend yield                 |       | 0                                  | %          | 0 | % |

 

**Expected volatility** — The Company is responsible for estimating volatility and has used 0%volatility historically to estimate the grant-date fair value of stock optionsas its common stock is not publicly traded. Effective December 29, 2005,management considered the guidance in SFAS No. 123R and now estimatesexpected volatility at 20%.

**Expected life**— The Company uses the full vesting period to estimate the expected lifeassumption for the Black-Scholes grant-date valuation. The Company believesthis is currently the best estimate of the expected life of a new option.

**Risk-free interest rate** — The market yield on U.S. Treasury securities at a 5-yearconstant maturity, quoted on investment basis, is used as the risk-freeinterest rate.

**Expected dividend yield** — The Company has notpaid any dividends in the last five years and currently intends to retain anyearnings to finance future growth and, therefore, does not anticipate payingany cash dividends on its common stock in the foreseeable future.

A summary of the activityunder the Company’s Equity Incentive Plan as of April 4, 2007 and changesduring the thirteen week period then ended, is presented below:
| ** **                                     | ** ** | **Options** | ** ** | **Weighted-Average  Remaining  Contractual Life in  Years** | ** ** | **Weighted  Average  Exercise Price** | ** ** | **Aggregate  Intrinsic Value  (thousands)** | ** ** |
|------------------------------------------------|------------|-------------|------------|-----------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------------|------------|
| Outstanding at  January 3, 2007                |       | 969,323     |       |                                                                  |       | $                                          | 16.82      |                                             |       |   |
| Granted                                        |       | 1,000       |       |                                                                  |       | $                                          | 23.84      |                                             |       |   |
| Cancelled                                      |       | (1,000      | )          |                                                                  |       | $                                          | 17.51      |                                             |       |   |
| Outstanding at  April 4, 2007                  |       | 969,323     |       | 6.8                                                                   |       | $                                          | 16.83      |                                             | $          | 6,838 |   |
|                                           |       |        |       |                                                                  |       |                                       |       |                                             |       |
| Fully vested and  exercisable at April 4, 2007 |       | 297,948     |       | 3.1                                                                   |       | $                                          | 15.24      |                                             | $          | 2,692 |   |

 

As of April 4, 2007 therewas $385,000 of unrecognized compensation cost related to unvested stockoptions which is expected to be recognized over a weighted average period of2.1 years.

6

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6.  *Asset Impairment Charge*

The Company’s long-livedassets consist primarily of goodwill, other intangible assets, and leaseholdimprovements related to its restaurant operations. SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets*,requires management to test the recoverability of long-lived assets (excludinggoodwill) by comparing estimated undiscounted future operating cash flowsexpected to be generated from these assets to the carrying amounts of theassets whenever events or changes in circumstances indicate the carrying valuemay not be recoverable.  If cash flows are not sufficient to recover thecarrying amount of the assets, impairment has occurred and the assets arewritten down to fair value.  Significant estimates and assumptionsregarding future sales, cost trends, productivity and market maturity arerequired to be made by management in order to test for impairment under thisstandard.

Duringthe first quarter of 2007, the Company assessed all restaurants for recoverabilityand determined an impairment existedat two previously impaired restaurant locations due to $55,000 of maintenancecapital expended at these locations. The Company recorded an impairment chargein that amount to reflect the write down of the affected assets to fair value.

7.  *Recent Accounting Pronouncements*

In September 2006, theFASB issued SFAS No. 157, “*Fair Value Measurements*”(“SFAS No. 157”), which addresses how companies should measure fair value whenthey are required to use a fair value measure for recognition or disclosurepurposes under generally accepted accounting principles. The provisions of SFASNo. 157 are effective for fiscal years beginning after November 15, 2007. TheCompany has not yet adopted this pronouncement and is currently evaluating theexpected impact the adoption of SFAS No. 157 will have on its consolidatedfinancial position and results of operations.

InFebruary 2007, the FASB issued SFAS No. 159, “*The FairValue Option for Financial Assets and Liabilities*” (“SFAS No. 159”).SFAS No. 159 permits entities to choose to measure many financial instrumentsand certain other items at fair value. If the fair value option is elected,unrealized gains and losses will be recognized in earnings at each subsequentreporting date. SFAS No. 159 is effective for fiscal years beginning afterNovember 15, 2007. The Company has not yet adopted this pronouncement and iscurrently evaluating the impact the adoption of SFAS No. 159 may have on itsconsolidated financial position and results of operations.

8. *Utility Purchase Commitments*

The Company has executedcontracts to provide electricity to thirty-nine restaurants at a fixed rate perkilowatt through 2009. In addition, the Company executed contracts to providenatural gas to eighty-two restaurants at a fixed price per therm through May2007. The Company believes certain of these contracts qualify for the “normalpurchases” exception as defined by SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities*.Therefore, the applicable contracts are not required to be marked to marketthrough the Condensed Consolidated Statement of Operations. Certain contractsdo not qualify for the “normal purchase” exception, and are not consideredhedges.  These contracts have been recorded on the balance sheet at fairvalue with adjustments to fair value being recognized in earnings when theyoccur. The Company has recorded an unrealized loss of $20,000 on the balancesheet as of April 4, 2007. The remaining purchase commitments below representan estimate of the minimum usage per year multiplied by the contracted rates(dollars in thousands):

| Year   | ** ** | ** ** | ** ** |
|--------|------------|------------|------------|
|   |       |       |       |
| 2007   |       | $          | 1,101      |   |
| 2008   |       | 1,468      |       |
| 2009   |       | 1,345      |       |
|   |       | $          | 3,914      |   |

 

7

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9.  *Acquisition*

In September, 2006, the Company executed a StockPurchase Agreement with BUCA, Inc. (“BUCA”) and BUCA Restaurants 3, Inc. (“BUCA3”) the entity which owns and operates Vinny T’s of Boston restaurants (the “VinnyT’s Acquisition”). BUCA 3 has since been renamed Vinny T’s RestaurantCorp. (“Vinny T’s Corp.”). As a result of the Vinny T’s Acquisition, Vinny T’sCorp. is now a wholly-owned subsidiary of the Company and continues to own andoperate 11 Vinny T’s of Boston restaurants in four states. The Company believesthe acquisition of the 11 restaurants will increase revenues and incomefrom operations while providing an acceptable return on the investment. TheCompany paid BUCA an aggregate purchaseprice of $6.6 million, of which $3.0 million was paid in cash and $3.6 millionwas paid through the issuance of a Promissory Note (the “Promissory Note”). ThePromissory Note contains no covenants and bears interest at the rate of 9% perannum. Interest is payable on September 25, 2007 and July 15, 2008.

The Vinny T’s Acquisitionwas accounted for by the Company under the purchase method of accounting inaccordance with SFAS No. 141, *Business Combinations*.Accordingly, the results of the Vinny T’s of Bostonoperations have been included in the Company’s consolidatedstatements of operations from September 28, 2006.

The cash paid at closingwas funded by available cash on hand. The purchase price has been allocatedbased on the Company’s estimate of the fair value of the assets acquired andliabilities assumed at the date of acquisition in the table below. Included inthe purchase price are direct acquisition costs of $645,000. The preliminarypurchase price allocation for assets acquired and liabilities assumed is subjectto adjustment upon finalization of the valuation of property and equipment bythe Company (dollars in thousands).

| Assets acquired:           |   |   |   |
|----------------------------|--------|--------|--------|
| Receivables                |   | $      | 283    |   |
| Inventory                  |   | 278    |   |
| Prepaid Expenses           |   | 144    |   |
| Property                   |   | 9,186  |   |
| Other noncurrent  assets   |   | 65     |   |
|                       |   |   |   |
| Less liabilities  assumed: |   |   |   |
| Accounts payable           |   | (995   | )      |
| Accrued expenses           |   | (1,657 | )      |
| Net purchase  price        |   | $      | 7,304  |   |

 

The Company has alsoacquired approximately $5.8 million of future income tax benefits statutorilyavailable to the Company through the Vinny T’s Acquisition. Because of thehistory of tax losses of the Company and BUCA 3, the Company concluded avaluation allowance for the amount of the net future tax benefits wasappropriate.

The following unauditedpro forma financial information presents the results of operations for thethirteen weeks ended March 29, 2006, as though the Vinny T’s Acquisitionoccurred at the beginning of the period presented. The pro forma financialinformation is not intended to be indicative of the operating results thatactually would have occurred if the Vinny T’s Acquisition had beenconsummated at the beginning of the period presented, nor is theinformation intended to be indicative of future operating results. The proforma financial information reflects adjustments for (1) additional general andadministrative expenses for direct field supervision; (2) additionaldepreciation to more closely reflect allocated values of the Vinny T’sAcquisition; and (3) additional interest expense on the Promissory Note(dollars in thousands, except per share amounts).

|                                           | ** ** | **2006** | ** ** |
|-------------------------------------------|------------|----------|------------|
| Net sales                                 |       | $        | 60,215     |   |
| Net loss                                  |       | $        | (430       | ) |
| Basic and diluted loss  per share

  |       | $        | (.14       | ) |

 

8

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** **

**Item2.**                          MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS

**Forward-LookingStatements**

All statements other than statements of historicalfacts included in this Quarterly Report on Form 10-Q, including,without limitation, statements set forth under “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” regarding Bertucci’sfuture financial position, business strategy, budgets, projected costs, plans,and objectives of management for future operations, are forward-lookingstatements. These statements involve known and unknown risks, uncertainties andother factors which may cause our or the foodservice industry’s actualresults, performance or achievements to be materially different from anyexpected results, performance or achievements. Forward-looking statementsinclude, but are not limited to, statements regarding:

·        *Our highly competitive business environment;*

·        *Exposure to food prices;*

·        *Risks associated with the foodservice industry such as changes inconsumer tastes and adverse publicity resulting from food quality, illness,injury or other health concerns;*

·        *Our ability to retain and attract new employees;*

·        *Government regulations;*

·        *Our high geographic concentration in the Northeast and Mid-Atlanticstates;*

·        *The attendant weather patterns in locations in which we operate;*

·        *The number of expected restaurant openings, including the appropriateconditions needed to meet new opening targets;*

·       *Our ability to integrate acquired businesses into theCompany;*

·        *Our ability to service our debt and other obligations; and*

·        *Matters relating to litigation.*

Forward-lookingstatements generally can be identified by the use of forward-lookingterminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate”or “believe” or the negative thereof or variations thereon or similarterminology. These statements are only predictions and involve known andunknown risks, uncertainties, and other factors that may cause actualresults, levels of activity, performance, or achievements to be materiallydifferent from any expected results, levels of activity, performance, orachievements expressed or implied by such forward-looking statements. Althoughwe believe the expectations reflected in such forward-looking statements willprove to be correct, we can give no assurance such expectations will prove tobe correct. You are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date hereof. Weundertake no obligation to publicly release any revisions to theseforward-looking statements to reflect events or circumstances after the datehereof or to reflect the occurrence of unanticipated events. Factors causing orcontributing to such differences include those discussed in the risk factorsset forth in Item 1A of our Annual Report on Form 10-K for the yearended January 3, 2007 which was filed with the SEC on April 3, 2007 (the “2006Annual Report”), as well as those discussed elsewhere herein.

Unless the contextindicates otherwise, references herein to “we”, “us”, “our,” “Bertucci’s,” “VinnyT’s of Boston” or the “Company” refer to Bertucci’s Corporation, itspredecessors and its consolidated subsidiaries.

The following discussion should be read in conjunctionwith our condensed consolidated financial statements, and the notes theretoincluded herein, as well as our 2006 Annual Report.

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** **

**General**

We own and operate two chains of full-service casualdining, Italian-style restaurants under the names (1) Bertucci’s Brick OvenPizzeria® and Bertucci’s Brick Oven Ristorante® and (2) Vinny T’s ofBoston®. As of April 4, 2007, we operated 90 Bertucci’s restaurants and 11Vinny T’s of Boston restaurants located primarily in the northeastern UnitedStates.

In July 1998, we completed our acquisition ofBertucci’s Restaurant Corp.’s parent entity, Bertucci’s, Inc., for apurchase price, net of cash received, of approximately $89.4 million (the “Bertucci’sAcquisition”). We financed the Bertucci’s Acquisition primarily through the issuanceof $100 million of 103⁄4% senior notes due 2008 (the “Senior Notes”). The SeniorNotes are still outstanding as to $85.3 million in principal.

In September, 2006, we executed a Stock PurchaseAgreement with BUCA, Inc. and BUCA Restaurants 3, Inc. (“BUCA 3”), the entitywhich owns and operates Vinny T’s of Boston restaurants (the “Vinny T’sAcquisition”). BUCA 3 has since been renamed Vinny T’s Restaurant Corp.(“Vinny T’s Corp.”). As a result of the Vinny T’s Acquisition, Vinny T’s Corp.is now a wholly-owned subsidiary of ours and continues to own and operate 11Vinny T’s of Boston restaurants in four states. We believe the acquisition ofthe 11 restaurants will increase revenues and income from operations whileproviding an acceptable return on our investment. We paid BUCA an aggregate purchase price of $6.6 million, of which$3.0 million was paid in cash and $3.6 million was paid through the issuance ofa Promissory Note (the “Promissory Note”). The Promissory Note containsno covenants and bears interest at the rate of 9% per annum. Interest is payableon September 25, 2007 and July 15, 2008.

**Resultsof Operations**

The following table sets forth the percentagerelationship to net sales, unless otherwise indicated, of certain itemsincluded in our condensed consolidated statements of operations, as well ascertain operating data, for the periods indicated:

**STATEMENTS OF OPERATIONS DATA**(Percentage of Net Sales)

 
| ** **                                                           | ** ** | **Thirteen weeks ended** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                           | ** ** | **April 4,  2007**            | ** ** | **March 29,  2006** | ** ** |
| Net sales                                                            |       | 100.0                              | %          | 100.0 | % |
| Cost of sales  and expenses:                                         |       |                               |       |   |   |
| Cost of sales                                                        |       | 23.1                               | %          | 22.7 | % |
| Operating expenses                                                   |       | 61.1                               | %          | 59.4 | % |
| General and administrative expenses                                  |       | 6.1                                | %          | 6.7 | % |
| Depreciation, amortization, deferred rent, and  pre-opening expenses |       | 5.7                                | %          | 5.2 | % |
| Closed restaurant charge                                             |       | 0.2                                | %          | 0.0 | % |
| Asset impairment charge                                              |       | 0.1                                | %          | 0.0 | % |
| Total cost of sales and expenses                                     |       | 96.3                               | %          | 94.0 | % |
| Income from operations                                               |       | 3.7                                | %          | 6.0 | % |
| Interest  expense, net                                               |       | (4.1                               | %)         | (4.7 | %) |
| (Loss) income  before income tax provision                           |       | (0.4                               | %)         | 1.3 | % |
| Income tax  provision                                                |       | 0.0                                | %          | 0.0 | % |
| Net (loss)  income                                                   |       | (0.4                               | %)         | 1.3 | % |
| **Restaurant Operating Data:**                                       | ** ** | ** **                         | ** ** | ** ** | ** ** |
| Increase in  comparable restaurant sales (a)                         |       | 1.8                                | %          | 5.2 | % |
| Number of  restaurants:                                              |       |                               |       |   |   |
| Restaurants open, beginning of period                                |       | 103                                |       | 92 |   |
| Restaurant opened                                                    |       | 1                                  |       | — |   |
| Restaurants closed                                                   |       | (3                                 | )          | — |   |
| Total  restaurants open, end of period                               |       | 101                                |       | 92 |   |

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(a)             Wedefine comparable restaurant sales as net sales from restaurants open and ownedfor at least one full fiscal year at the beginning of the fiscal year.

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**ThirteenWeeks Ended April 4, 2007 Compared to Thirteen Weeks Ended March 29, 2006**

*NetSales*. Total net sales increased by $7.5 million, or 14.2% to$60.2 million during the first quarter of 2007 from $52.7 million during thefirst quarter of 2006. The increase was primarily due to $6.4 million in salesgenerated by the 11 Vinny T’s of Boston restaurants acquired in the Vinny T’sAcquisition, a 1.8% increase in the 89 comparable Bertucci’s restaurants($922,000), seven incremental restaurant weeks from one restaurant opened inFebruary 2007 ($574,000), partially offset by 11 less restaurant weeks due tothree restaurant closings in the first quarter of 2007 ($352,000). The Bertucci’scomparable dine-in guest counts decreased 1.6% for the first quarter of 2007 ascompared to the first quarter of 2006. Bertucci’s comparable dine-in salesincreased 2.0% and comparable carry-out and delivery sales increased 1.1% forthe quarter as compared to the first quarter of 2006. We believe the Bertucci’scomparable restaurant sales increases have been a result of increased guestspending as a result of a shift in menu mix to dinner entrees versus pizza, andan approximate 1.4% menu price increase in January 2007. For the 89comparable Bertucci’s restaurants, average weekly sales were approximately$45,500 for the first quarter of 2007 compared to approximately $44,700 perweek for the first quarter of 2006. Average weekly sales for the Vinny T’s ofBoston restaurants were approximately $44,500 for the first quarter of 2007.

*Cost of Sales.* Cost of salesincreased by $2.0 million or 16.4% to $13.9 million during the first quarter of2007 from $11.9 million during the first quarter of 2006. Expressed as apercentage of net sales, overall cost of sales increased to 23.1% during thefirst quarter of 2007 from 22.7% during the first quarter of 2006. The percentageincease can be attributed to the addition of the Vinny T’s restaurants and amenu mix shift away from pizzas to dinner entrees, partially offset by thebenefit from a Bertucci’s menu price increase, and better food cost controls. Costof sales in Vinny T’s of Boston restaurants was 26.3% of sales for the firstquarter of fiscal 2007 as compared to 22.6% for the Bertucci’s restaurants.

*OperatingExpenses.*Operating expenses increased by approximately $5.4million or 17.3%, to $36.7 million during the first quarter of 2007 from $31.3million during the first quarter of 2006. Expressed as a percentage of netsales, operating expenses increased to 61.1% in the first quarter of 2007 from59.4% during the first quarter of 2006. The dollar increase can be attributedto (a) the Vinny T’s Acqusition ($4.7 million; the current run rate foroperating expenses at the Vinny T’s of Boston restaurants is 73.2%.),(b) increased payroll and related benefits ($480,000), and (c) increasedadvertising ($279,000).

*Generaland Administrative Expenses.*General and administrativeexpenses increased approximately $100,000 to $3.7 million during the firstquarter of 2007 compared to $3.6 million in the first quarter of 2006.Expressed as a percentage of net sales, general and administrative expensesdecreased to 6.1% in the first quarter of 2007 from 6.7% in the first quarterof 2006, reflecting the leveraging of the increased sales due to the Vinny T’sAcquisition.

*Depreciation,Amortization, Deferred Rent and Pre-opening Expenses*.Depreciation, amortization, deferred rent and pre-opening expenses increased byapproximately $700,000 to $3.4 million during the first quarter of 2007 from$2.7 million during the first quarter of 2006. The dollar increase is due tothe Vinny T Acquisition ($400,000) and the addition of one new restaurant inthe first quarter of 2007. Expressed as a percentage of net sales,depreciation, amortization, deferred rent and pre-opening expenses increased to5.7% in the first quarter of 2007 from 5.2% during the first quarter of 2006.

*ClosedRestaurants Charge:* As discussed in Note 2 of Notes toCondensed Consolidated Financial Statements, the Company recorded a charge ofapproximately $127,000 to provide for net lease exit obligations at threerestaurants closed during the quarter.

*Asset Impairment Charge.* Asdiscussed in Note 6 of Notes to Condensed Consolidated Financial Statements, weassessed all restaurants for recoverability as of the end of the first quarterof 2007. As a result of ourevaluation, we determined an impairment of fixed assets existed at tworestaurant locations. We estimated the fair value of these assets based on thenet present value of the expected cash flows from the restaurants anddetermined the carrying amount of the assets exceeded their fair value byapproximately $55,000. We recorded an impairment charge in that amount toreflect the write down of the affected assets to fair value.

*InterestExpense, net.* Net interest expense was essentially flatat $2.5 million during the first quarters of both 2007 and 2006. Increasedovernight investment funds and higher interest rates available thereon haveresulted in increased interest income ($275,000 in the first quarter of 2007versus $198,000 in the first quarter of 2006). This increase in interest incomewas offset by an increase in interest expense due to the Vinny T’s AcquisitionPromissory Note.

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*IncomeTaxes*. We have an historical trend of recurring pre-taxlosses. We previously recorded a full valuation allowance for our net deferredtax assets and have also provided a full valuation allowance relating to thetax benefits generated since 2003 (primarily from operating losses). We did notrecord a tax benefit for the future benefits created in the thirteen weeksended April 4, 2007 as we continue to maintain a valuation allowance for thedeferred tax assets due to our history of losses.

**Liquidityand Capital Resources**

We have historically met our capital expenditures andworking capital needs through a combination of operating cash flow and bankborrowings, the sale of the Senior Notes, the sale of Common Stock, and, infiscal 2003, two sale leaseback transactions. We expect our future capitaland working capital needs will be funded from net cash flows provided byoperating cash flow and cash on hand.

Net cash flows used in operating activities were $5.2million for the first quarter of 2007, approximately $2.6 million more than thefirst quarter of 2006, primarily due to reduced income from operations and networking capital needs in the Vinny T’s of Boston restaurants. As of April 4,2007, we had cash and cash equivalents of $19.9 million.

Our capital expenditures were $3.3 million during thefirst quarter of 2007 as compared to $1.0 million for the comparable prior yearperiod. The capital expenditures were primarily comprised of remodeling andmaintenance capital as well as capital related to the opening of a Bertucci’srestaurant in the first quarter of 2007. We anticipate capital expenditures forthe remainder of 2007 will be approximately $14.7 million, primarily for fournew Bertucci’s restaurants.

As of April 4, 2007, we had $95.9 million inconsolidated indebtedness which consisted of $85.3 million pursuant to theSenior Notes, $6.0 million of capital lease obligations, and $4.6 million ofpromissory notes. The Senior Notes contain no financial covenants and we are incompliance with all non-financial covenants as of May 18, 2007. The SeniorNotes bear interest at the rate of 103⁄4%, payable semi-annually onJanuary 15 and July 15 and are due in full on July 15, 2008.

We may, at our option, redeem any or all of the SeniorNotes at face value. Additionally, under certain circumstances, including achange of control, the holders of the Senior Notes may require us to repurchasethe Senior Notes, at a redemption price of 101% of the unpaid principal amountthereof, plus accrued and unpaid interest. In the event of certain assetdispositions resulting in excess proceeds equal to or greater than $5.0million, the holders of the Senior Notes have the right to compel us topurchase on a pro rata basis Senior Notes up to a maximum principal amountequal to such excess proceeds at a purchase price equal to 100% of the unpaidprincipal amount thereof, plus accrued and unpaid interest.

The Promissory Note issued in connection with theVinny T’s Acquisition is due in full on July 15, 2008 or earlier upon theoccurrence of certain other events, including if we have a change in control(as defined in the Promissory Note), the consummation of an initial publicoffering by us or the redemption, repurchase, refinancing or payment of ourSenior Notes.

We are operating without a line of credit and arefunding all of our capital expenditures, debt reductions and operating needsout of cash flows from operations and cash on hand.

We have established a$4.0 million (maximum) letter of credit (expiring in December 2007) ascollateral with third party administrators for self insurance reserves. As ofApril 4, 2007, this facility was collateralized with $2.2 million of cashrestricted from general use. Letters of Credit totaling $2.2 million wereoutstanding on April 4, 2007.

Our future operatingperformance and ability to service or refinance the Senior Notes will besubject to future economic conditions and to financial, business and otherfactors, many of which are beyond our control. Significant liquidity demandswill arise from our repayment obligation under our Senior Notes when theymature on July 15, 2008.

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We executed additional future contractualobligations or recorded additions to reserves subsequent to January 3, 2007 asfollows:
| ** **                                          | ** ** | **Payments Due by Fiscal Year** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                          | ** ** | **(Dollars in Thousands)**                | ** ** |
| ** **                                          | ** ** | **Total**                                           | ** ** | **2007** | ** ** | **2008-2009** | ** ** | **2010-2011** | ** ** | **After 2011** | ** ** |
| Contractual  Obligations:                           |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating leases                                    |       | $                                                   | 8,153      |   | $ | 115 |   | $ | 2,404 |   | $ | 2,686 |   | $ | 2,948 |   |
| Capital expenditures                                |       | 4,100                                               |       | 4,100 |   | — |   | — |   | — |   |
| Closed restaurants  reserve, net of sublease income |       | 646                                                 |       | 439 |   | 76 |   | 76 |   | 55 |   |
| Total Contractual Obligations                       |       | $                                                   | 12,899     |   | $ | 4,654 |   | $ | 2,480 |   | $ | 2,762 |   | $ | 3,003 |   |

 

**Impactof Inflation**

Inflationary factors such as increases in labor, foodor other operating costs could adversely affect our operations. We do notbelieve inflation has had a material impact on our financial position orresults of operations for the periods discussed above. We believe through theproper leveraging of purchasing size, labor scheduling, and restaurantdevelopment, inflation will not have a material adverse effect on ouroperations during the foreseeable future. There can be no assurance, however,inflation will not materially adversely affect us.

**Seasonality**

Our quarterly results of operations have fluctuatedand are expected to continue to fluctuate depending on a variety of factors,including the timing of new restaurant openings and related pre-opening andother startup expenses, net sales contributed by new restaurants, increases ordecreases in comparable restaurant sales, competition and overall economicconditions. Our business is also subject to seasonal influences of consumerspending, dining out patterns and weather. As is the case with many restaurantcompanies, we typically experience lower net sales and net income fromoperations during the first and fourth quarters. Because of these fluctuations,the results of operations of any quarter are not necessarily indicative of theresults that may be achieved for a full year or any future quarter.

**CriticalAccounting Policies and Estimates**

The discussion andanalysis of our financial condition and results of operations are based uponour consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States of America.The preparation of these financial statements requires us to make estimates andjudgments affecting the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and liabilities. On anon-going basis, estimates are evaluated, including those related to theimpairment of long-lived assets, income tax valuation allowances,self-insurance, closed restaurants reserves, and gift card breakage. Estimatesare based on historical experience and on various other assumptions believed tobe reasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities notreadily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. For a discussion of howthese and other factors may affect our business, see the “Forward-LookingStatements” and other factors included in the 2006 Annual Report and otherfilings with the SEC.

Our critical accountingpolicies affect the more significant judgments and estimates used in thepreparation of our consolidated financial statements. We believe our criticalaccounting policies relate to the impairment of long-lived assets, income taxvaluation allowances, self-insurance, closed restaurants reserves, and giftcards. For a more detailed discussion of our critical accounting policies andestimates, please refer to “Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Critical Accounting Policies andEstimates” contained in our 2006 Annual Report.

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**Item3.**                          QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

In order to limit anypossible exposure to market risk from changes in the price of natural gas usedin the operations of our restaurants, we have contracted for minimum purchasequantities at fixed prices in selected restaurants through May 2007. Based uponsensitivity analysis as of April 4, 2007, a 20% change in the price of naturalgas would cause the fair value of these contracts to increase/decrease by lessthan $5,000. We do not have operations outside of the United States of Americawhich expose us to foreign currency risk and substantially all of ouroutstanding debt has fixed interest rates.

**Item4.**                          CONTROLSAND PROCEDURES

*Disclosure Controls and Procedures*. We maintain disclosure controls andprocedures designed to ensure information required to be disclosed in ourreports under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), is recorded, processed, summarized and reported within the time periodsspecified in the rules and forms of the SEC, and such information isaccumulated and communicated to management, including our Chief ExecutiveOfficer (the “CEO”) and Chief Financial Officer (the “CFO”), as appropriate, toallow timely decisions regarding required disclosure. In designing andevaluating our disclosure controls and procedures, we recognized controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, as ours aredesigned to do, and we necessarily were required to apply our judgment inevaluating the cost-benefit relationship of possible controls and procedures.

During the first quarter of fiscal 2007, we performedan evaluation under the supervision and with the participation of ourmanagement, including our CEO and CFO, of the effectiveness of the design andoperation of our disclosure controls and procedures (as defined inRule 13a-15(e) under the Exchange Act). Based on thatevaluation, our CEO and CFO concluded our disclosure controls and procedures wereeffective as of April 4, 2007.

*Changes in Internal Control over FinancialReporting*.  Therewere no significant changes to our internal control over financial reportingoccurring during our last fiscal quarter materially affecting, or reasonablylikely to materially affect, our internal control over financial reporting.

**PART II:OTHER INFORMATION**

**Item1.   LEGAL PROCEEDINGS**

On or about April11, 2007, a purported class action lawsuit captioned Gerald D. Wells, Jr. v.Bertucci’s Corp., et al., Case No. 2:07-cv-01458, was filed against usin the United States District Court for the Eastern District of Pennsylvania(the “Lawsuit”). The complaint alleges willful violation of the federal Fairand Accurate Credit Transaction Act (“FACTA”) based upon certain of our retailstores’ alleged electronic printing of receipts that were not in compliancewith the applicable information truncation provisions of FACTA. The complaintseeks statutory damages of not less than $100 and not more than $1,000 for eachviolation, as well as unspecified punitive damages, attorneys’ fees andequitable relief preventing us from further engaging in violations of FACTA.The complaint does not allege that any class member has suffered actualdamages. Similar complaints have recently been filed against a number of otherretailers. Notwithstanding the Lawsuit, we believe that we are currentlyin full compliance with FACTA’s information truncation requirements. We intendto vigorously defend against the claims asserted. However, the results of anylitigation are inherently uncertain and we cannot assure that we will be ableto successfully defend against such claims. We are currently unable to assessthe extent of damages and/or other relief, if any, that could be awarded to theplaintiff class if it were to prevail.

**Item1A.   RISK FACTORS**

None

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**Item2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None

**Item3.   DEFAULTS UPON SENIOR SECURITIES**

None

**Item4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None

**Item5.   OTHER INFORMATION**

Under our Pay forPerformance Plan for Executive Officers (the “PFP”), our Named ExecutiveOfficers are eligible to receive annual non-equity incentive cash bonuses. Theamount of these bonuses, if any, are measured by: (1) our financial performancefor the year in question (measured by a target that is closely related toEBITDA (the “EBITDA Target”)); and (2) a matrix of percentages (the “PercentageMatrix”) which determines what percentage of a Named Executive Officer’s basesalary will be awarded as a cash bonus. Our Named Executive Officers (inaddition to other members of management), recommend the yearly EBITDA Target toour Board of Directors which must approve such target. The Chairman of ourBoard of Directors, Benjamin R. Jacobson (the “Chairman”), and theCompensation Committee determine the Percentage Matrix for the applicable year.

On December 12, 2006, ourBoard of Directors, upon the recommendation of management, approved thePFP for fiscal 2007 and the Chairman and the Compensation Committeeestablished the Percentage Matrix for the fiscal 2007 PFP. Under the fiscal2007 PFP, our Named Executive Officers, Stephen V. Clark and David G. Lloyd,are eligible to receive cash awards ranging from 25% to 100% of their basesalaries, depending on achievement of a minimum of 95% of the EBITDA Target toa maximum of 110% of the EBITDA Target. The awards under the fiscal 2007 PFP,if any, will be paid in 2008 once our fiscal 2007 resultsare finalized.

**Item 6.**  **EXHIBITS**

**Exhibits**
| 31.1   |   | Certification of Stephen V. Clark pursuant to Item  601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 (*).    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                            |
| 31.2   |   | Certification of David G. Lloyd pursuant to Item  601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 (*). |

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(*) Included with this report.

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                     |   | BERTUCCI’S CORPORATION |
|---------------------|--------|-----------------------------|
|                |   | (Registrant)                |
| Date: May 18,  2007 |   | By:                         | /s/ Stephen V. Clark |
|                |   |                        | Chief Executive Officer and Director |
| Date: May 18,  2007 |   | By:                         | /s/ David G. Lloyd |
|                |   |                        | President, Chief Financial Officer and Director |

 

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