**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

** **

**FORM 10-Q**

** **

**x**Quarterly Report Filed Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

** **

**For the Quarterly PeriodEnded March 29, 2006**

** **

**Commission FileNumber  333-62775**

** **

**BERTUCCI’S CORPORATION**

(Exact name of registrant as 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) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to the filing requirements for the past 90 days.

Yes   o  No   x

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer” and “large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

 
| Large accelerated  filer     o | Accelerated  filer     o | Non-accelerated  filer     x |
|---------------------------------------------------------|---------------------------------------------------|-------------------------------------------------------|

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act.

Yes x    No o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   o   No   x

3,015,982shares of the registrant’s Common Stock were outstanding on May 12, 2006.

 

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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 March 29, 2006 (Unaudited) and  December 28, 2005 (Unaudited)                    |   |   |   |
|          |   |                                                                                                                                         |   |   |   |
| 2)            |   | Condensed  Consolidated Statements of Operations for the 13 Weeks Ended March 29,  2006 (Unaudited) and March 30, 2005 (Unaudited) |   |   |   |
|          |   |                                                                                                                                         |   |   |   |
| 3)            |   | Condensed  Consolidated Statements of Cash Flow for the 13 Weeks Ended March 29,  2006 (Unaudited) and March 30, 2005 (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      |   |                                                                                                                                         |   |   |   |
|          |   |                                                                                                                                         |   |   |   |

 

2

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**PART I: FINANCIAL INFORMATION**

**Item 1. FINANCIALSTATEMENTS**

 

**BERTUCCI’SCORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS**(Inthousands, except share data)(Unaudited)

 
| ** **                                                                                                             | ** ** | **March 29, 2006** | ** ** | **December 28, 2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ASSETS                                                                                                                 |       |                         |       |                            |       |
| Current Assets:                                                                                                        |       |                         |       |                            |       |
| Cash and cash  equivalents                                                                                             |       | $                            | 17,740     |                            | $          | 21,382 |   |
| Restricted cash                                                                                                        |       | 2,175                        |       | 2,187                           |       |
| Accounts  receivable                                                                                                   |       | 637                          |       | 771                             |       |
| Inventories                                                                                                            |       | 1,455                        |       | 1,534                           |       |
| Prepaid expenses  and other current assets                                                                             |       | 1,446                        |       | 897                             |       |
| Total current  assets                                                                                                  |       | 23,453                       |       | 26,771                          |       |
| Property and Equipment,  at cost:                                                                                      |       |                         |       |                            |       |
| Land                                                                                                                   |       | 259                          |       | 259                             |       |
| Buildings                                                                                                              |       | 697                          |       | 697                             |       |
| Capital leases -  land and buildings                                                                                   |       | 5,764                        |       | 5,764                           |       |
| Leasehold  improvements                                                                                                |       | 68,770                       |       | 68,433                          |       |
| Furniture and  equipment                                                                                               |       | 47,504                       |       | 46,787                          |       |
|                                                                                                                   |       | 122,994                      |       | 121,940                         |       |
| Less - accumulated  depreciation and amortization                                                                      |       | (70,347                      | )          | (67,509                         | )          |
| Net property and  equipment                                                                                            |       | 52,647                       |       | 54,431                          |       |
| Goodwill                                                                                                               |       | 26,127                       |       | 26,127                          |       |
| Deferred finance costs,  net                                                                                           |       | 1,991                        |       | 2,165                           |       |
| Liquor licenses, net                                                                                                   |       | 2,344                        |       | 2,358                           |       |
| Other assets                                                                                                           |       | 802                          |       | 693                             |       |
| TOTAL ASSETS                                                                                                           |       | $                            | 107,364    |                            | $          | 112,545 |   |
|                                                                                                                   |       |                         |       |                            |       |
| LIABILITIES AND  STOCKHOLDERS’ DEFICIT                                                                            |       |                         |       |                            |       |
| Current Liabilities:                                                                                                   |       |                         |       |                            |       |
| Promissory notes  - current portion                                                                                    |       | $                            | 43         |                            | $          | 42 |   |
| Capital lease  obligations - current portion                                                                           |       | 112                          |       | 107                             |       |
| Accounts payable                                                                                                       |       | 7,423                        |       | 8,603                           |       |
| Accrued expenses                                                                                                       |       | 14,642                       |       | 19,129                          |       |
| Total current  liabilities                                                                                             |       | 22,220                       |       | 27,881                          |       |
| Promissory notes, net  of current portion                                                                              |       | 717                          |       | 738                             |       |
| Capital lease  obligations, net of current portion                                                                     |       | 5,962                        |       | 5,982                           |       |
| Senior Notes                                                                                                           |       | 85,310                       |       | 85,310                          |       |
| Deferred gain on sale  leaseback transaction                                                                           |       | 1,865                        |       | 1,892                           |       |
| Other long-term  liabilities                                                                                           |       | 7,878                        |       | 8,045                           |       |
| Total  liabilities                                                                                                     |       | 123,952                      |       | 129,848                         |       |
| Commitments and  Contingencies                                                                                         |       |                         |       |                            |       |
| Stockholders’ Deficit:                                                                                            |       |                         |       |                            |       |
| Common stock,  $.01 par value Authorized - 8,000,000 shares  Issued - 3,764,995 shares; Outstanding - 3,012,982 shares |       | 38                           |       | 38                              |       |
| Less treasury  shares - 752,013 at cost                                                                                |       | (8,480                       | )          | (8,480                          | )          |
| Additional  paid-in capital                                                                                            |       | 29,669                       |       | 29,617                          |       |
| Accumulated  deficit                                                                                                   |       | (37,815                      | )          | (38,478                         | )          |
| Total  stockholders’ deficit                                                                                      |       | (16,588                      | )          | (17,303                         | )          |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                      |       | $                            | 107,364    |                            | $          | 112,545 |   |

 

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

3

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**BERTUCCI’SCORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**(Inthousands, except share and per share data)(Unaudited)

 
| ** **                                                          | ** ** | **Thirteen weeks ended** | ** ** |
|---------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                          | ** ** | **March 29, 2006**       | ** ** | **March 30, 2005** | ** ** |
| Net sales                                                           |       | $                                  | 52,684     |   | $ | 49,952 |   |
| Cost of sales and  expenses:                                        |       |                               |       |   |   |
| Cost of sales                                                       |       | 11,942                             |       | 11,860 |   |
| Operating  expenses                                                 |       | 31,305                             |       | 30,454 |   |
| General and  administrative expenses                                |       | 3,553                              |       | 3,499 |   |
| Depreciation,  amortization, deferred rent and pre-opening expenses |       | 2,721                              |       | 3,142 |   |
| Total cost of  sales and expenses                                   |       | 49,521                             |       | 48,955 |   |
| Income from  operations                                             |       | 3,163                              |       | 997 |   |
| Interest expense, net                                               |       | (2,500                             | )          | (2,650 | ) |
| Income (loss) before  income taxes                                  |       | 663                                |       | (1,653 | ) |
| Income taxes                                                        |       | —                             |       | — |   |
| Net income (loss)                                                   |       | $                                  | 663        |   | $ | (1,653 | ) |
|                                                                |       |                               |       |   |   |
| Basic net income (loss)  per share                                  |       | $                                  | 0.22       |   | $ | (0.57 | ) |
| Diluted net income  (loss) per share                                |       | $                                  | 0.22       |   | $ | (0.57 | ) |
| Weighted average shares  outstanding:                               |       |                               |       |   |   |
| Basic                                                               |       | 3,012,982                          |       | 2,925,520 |   |
| Diluted                                                             |       | 3,034,435                          |       | 2,925,520 |   |

 

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

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**BERTUCCI’SCORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW**(Inthousands)(Unaudited)
| ** **                                                                            | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                            | ** ** | **March 29, 2006**       | ** ** | **March 30, 2005** | ** ** |
| Cash flows from  operating activities                                                 |       |                               |       |   |   |
| Net income  (loss)                                                                    |       | $                                  | 663        |   | $ | (1,653 | ) |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities: |       |                               |       |   |   |
| Depreciation,  amortization and deferred rent                                         |       | 2,894                              |       | 3,109 |   |
| Stock  compensation expense                                                           |       | 52                                 |       | 144 |   |
| Changes in  operating assets and liabilities                                          |       |                               |       |   |   |
| Inventories                                                                           |       | 79                                 |       | (26 | ) |
| Prepaid  expenses, receivables and other                                              |       | (415                               | )          | 339 |   |
| Other accrued  expenses                                                               |       | (4,549                             | )          | (2,681 | ) |
| Accounts payable                                                                      |       | (1,180                             | )          | (1,093 | ) |
| Other operating  assets and liabilities                                               |       | (109                               | )          | (4 | ) |
| Total  adjustments                                                                    |       | (3,228                             | )          | (212 | ) |
| Net cash used in  operating activities                                                |       | (2,565                             | )          | (1,865 | ) |
| Cash flows from  investing activities                                                 |       |                               |       |   |   |
| Additions to  property and equipment                                                  |       | (1,054                             | )          | (764 | ) |
| Decrease in  restricted cash                                                          |       | 12                                 |       | 225 |   |
| Net cash used in  investing activities                                                |       | (1,042                             | )          | (539 | ) |
| Cash flows from  financing activities                                                 |       |                               |       |   |   |
| Payment on  promissory note                                                           |       | (20                                | )          | (19 | ) |
| Principal  payments under capital lease obligations                                   |       | (15                                | )          | (20 | ) |
| Net cash used in  financing activities                                                |       | (35                                | )          | (39 | ) |
| Net decrease in cash  and cash equivalents                                            |       | (3,642                             | )          | (2,443 | ) |
| Cash and cash  equivalents, beginning of year                                         |       | 21,382                             |       | 12,291 |   |
| Cash and cash  equivalents, end of period                                             |       | $                                  | 17,740     |   | $ | 9,848 |   |
|                                                                                  |       |                               |       |   |   |
| Supplemental Disclosure  of Cash Flow Information:                                    |       |                               |       |   |   |
| Cash paid for  interest                                                               |       | $                                  | 4,818      |   | $ | 4,822 |   |
| Cash paid for income  taxes                                                           |       | $                                  | —     |   | $ | 16 |   |

 

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

5

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**BERTUCCI’SCORPORATIONNotes To Condensed Consolidated Financial Statements**March 29,2006(Unaudited)

*1. Basisof 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 for reporting on Form 10-Q.Accordingly, certain information and footnote disclosures required for completefinancial statements are not included herein. It is suggested the UnauditedFinancial Statements be read in conjunction with the consolidated financialstatements and notes included in the Company’s Annual Report on Form 10-Kfor the year ended December 28, 2005, which was filed with the Securitiesand Exchange Commission (the “SEC”) on March 28, 2006 (the “2005 AnnualReport”). The operating results for the thirteen weeks ended March 29,2006 may not be indicative of the results expected for any succeeding interim periodor for the entire year ending January 3, 2007.

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from those estimates.

*2. LiquorLicenses*

Transferable liquor licenses purchased are accountedfor at the lower of cost or fair market value and are not amortized. Annualrenewal fees are expensed as incurred. The carrying value of transferableliquor licenses was $2.0 million at each of March 29, 2006 and December 28,2005. Non-transferable liquor licenses are amortized on a straight-linebasis over the contractual life of the license. Amortization expense forthe thirteen weeks ended March 29, 2006 was $14,000 and is expected to be$56,000 per year through fiscal 2010.

*3. RestaurantClosing Reserves*

Restaurant closing reserves were established as partof the acquisition of Bertucci’s, Inc. in July 1998. These reserveswere related to estimated future lease commitments and exit costs to close 18Bertucci’s locations. In 2001, the Company accrued an additional $4.2 millionrelated to selected locations (all of which had been closed), consisting ofestimated lease commitments and certain exit costs. It was originally expectedthe Company would be able to exit these locations, sublease the locations orotherwise be released from the related leases. However, due to marketconditions, the Company has been unable to sublease, exit, or otherwise bereleased from certain of these leases.

Theclosed restaurant reserve was calculated net of sublease income at tenlocations partially or fully subleased as of March 29, 2006. The Companyremains primarily liable for the remaining lease obligations should thesublessee default. Total sublease income excluded from the reserve isapproximately $5.7 million for subleases expiring at various dates through2017.

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Activity within thereserve was as follows (in thousands):

|                                                 | ** ** | **Thirteen weeks ended** | ** ** |
|-------------------------------------------------|------------|------------------------------------|------------|
| ** **                                      | ** ** | **March 29, 2006**       | ** ** | **March 30, 2005** | ** ** |
| Balance,  beginning of the year                 |       | $                                  | 372        |   | $ | 659 |   |
| Payments charged  against reserve               |       | (20                                | )          | (157 | ) |
| Balance, end of  period                         |       | $                                  | 352        |   | $ | 502 |   |
| Current portion  (included in accrued expenses) |       | $                                  | 266        |   | $ | 324 |   |
| Noncurrent  portion                             |       | 86                                 |       | 178 |   |
|                                            |       | $                                  | 352        |   | $ | 502 |   |

 

*4. NetIncome (Loss) per Share*

Basic net income (loss) per share is computed bydividing net income (loss) by the weighted average number of common sharesoutstanding for the reporting period. Diluted net income (loss) per sharereflects the potential dilution that could occur if options to issue commonstock were exercised or converted into common stock. Net dilutive shares addedto the weighted average number of common shares outstanding for the reportingperiod for this calculation (21,453 shares) were determined using the treasurystock method for in-the-money stock options as of March 29, 2006. For theperiods ended March 29, 2006 and March 30, 2005, options representing874,037 and 531,429 shares of common stock, respectively, were excluded fromthe calculation of diluted net income (loss) per share because of theiranti-dilutive effect.

*5. IncomeTaxes*

The Company recognizes deferred tax assets andliabilities for the expected future tax consequences of events that have beenincluded in the financial statements or tax returns. Additionally, the Companyis required to consider both negative and positive evidence in determining if avaluation allowance is required on a quarterly basis. Management previouslyrecorded a full valuation allowance for its deferred tax assets. For the periodended March 29, 2006, the Company recorded a tax provision ofapproximately $18,000 which was offset by the release of a like amount from itsvaluation allowance.

The Company continues to maintain a valuationallowance for its deferred tax assets as the Company has experienced a historyof losses. Management continues to evaluate the need for a valuation allowanceon an on-going basis.

*6. Stock-BasedCompensation*

EffectiveDecember 29, 2005, the Company adopted the provisions of Statement ofFinancial Accounting Standards (“SFAS”)  No. 123R,*Share Based Payment* (“SFAS No. 123R”),using a modified prospective application, and as such prior periods have notbeen restated. Under this method, compensation expense is recorded on astraight-line basis for all unvested options over the related vesting periodbeginning in the period of adoption. As a result of the adoption of SFAS No. 123R,the Company now recognizes stock-based compensation costs rateably over therequisite service period. In March 2005, the SEC issued Staff AccountingBulletin No. 107 (“SAB 107”) regarding the Staff’s interpretation of SFAS No. 123R.This interpretation provides the Staff’s views regarding interactions betweenSFAS No. 123R and certain SEC rules and regulations and providesinterpretations of the valuation of share-based payments for public companies.The interpretive guidance is intended to assist companies in applying theprovisions of SFAS No. 123R and investors and users of the financialstatements in analyzing the information provided. The Company follows theguidance prescribed in SAB No. 107 in connection with the adoption of SFASNo. 123R. The impact of the adoption of SFAS No. 123R and SAB No. 107resulted in a compensation charge for the thirteen weeks ended March 29,2006 of $52,000. This charge is included in General and Administrative expensesin the Condensed Consolidated Statement of Operations for the period indicated.

TheCompany currently grants stock options under its Amended and Restated 1997Equity Incentive Plan (“Equity Incentive Plan”), which provides for theissuance of nonqualified stock options and allows us to provide equityincentives to our key employees and directors. On September 27, 2005, theCompany’s Board of Directors approved the amendment and restatement of theEquity Incentive Plan which increased the number of shares of Common 

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Stockavailable for issuance under the Equity Incentive Plan from 750,000 to1,100,000. The Board of Directors administers the Equity Incentive Plan andmay modify or amend it in any respect.

Stockoptions are: (1) issued at the fair value 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) typicallyexpire 90 days following the tenth anniversary of the date of the grant. Inaddition, such options generally provide that unvested options vest immediatelyand in full upon a transaction that constitutes a “change of control” of theCompany.

Thegrant date fair value is calculated using the Black-Scholes option valuationmodel. The fair value of options granted during the first quarter of fiscal2006 and the first quarter of fiscal 2005 were calculated using the followingestimated weighted average assumptions:

|                                         | ** ** | **Thirteen weeks ended** | ** ** |
|-----------------------------------------|------------|------------------------------------|------------|
| ** **                              | ** ** | **March 29, 2006**       | ** ** | **March 30, 2005** | ** ** |
| Options granted                         |       | 29,000                             |       | 142,750 |   |
| Weighted-average  exercise price        |       | $                                  | 17.51      |   | $ | 17.51 |   |
| Weighted-average  grant date fair value |       | $                                  | 3.08       |   | — |   |
| Assumptions:                            |       |                               |       |   |   |
| Risk free  interest rate                |       | 4.40                               | %          | 3.89 | % |
| Expected life  (in years)               |       | 5                                  |       | 5 |   |
| Expected  volatility                    |       | 20                                 | %          | 0 | % |
| Expected dividend yield                 |       | 0                                  | %          | 0 | % |
|                                         |            |                                    |            |  |  |  |  |

 

**Expected volatility** — The Company is responsible for estimating volatility and has used0.0% volatility historically to estimate the grant-date fair value of stockoptions as 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.

Prior to December 29, 2005, in accordance withSFAS No. 123, *Accounting forStock-Based Compensation*(whichhas been replaced by SFAS No. 123R and supersedes AccountingPrinciples Board Opinion No. 25 (“APB Opinion No. 25”)), the Companyaccounted for stock-based compensation under the intrinsic value method with disclosureof the effects of fair value accounting on net income and earnings per share ona pro forma basis. The Company’s stock-based compensation plan is describedmore fully in Note 9 of Notes to Consolidated Financial Statements in the 2005Annual Report. The Company had accounted for this plan under the recognitionand measurement principles of APB Opinion No. 25**andrelated interpretations. In 2005, stock based employee compensation expenseresulted from the granting of shares of the Company’s common stock to keyemployees and independent directors. All shares and options granted had anexercise price equal to, or in excess of, the fair value of the underlyingcommon stock on the date of grant. The following table illustrates the effecton net loss and loss per share for the thirteen weeks ended March 30, 2005if the Company had applied the fair value recognition provisions of SFAS No. 123(in thousands, except per share data):

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| ** **                                                                                                      | ** ** | **Thirteen Weeks Ended  March 30, 2005 ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | ** **                                                         | ** ** |
| Net loss, as  reported                                                                                          |       | $                                                                  | (1,653     | ) |
|                                                                                                            |       |                                                               |       |
| Add: Stock-based  employee compensation expense included in reported net loss                                   |       | 144                                                                |       |
|                                                                                                            |       |                                                               |       |
| Adjust: Net  stock-based employee compensation expense determined under fair value based  method for all awards |       | (191                                                               | )          |
| Pro forma net  loss                                                                                             |       | $                                                                  | (1,700     | ) |
|                                                                                                            |       |                                                               |       |
| Basic and  diluted loss per share:                                                                              |       |                                                               |       |
| As reported                                                                                                     |       | $                                                                  | (0.57      | ) |
| Pro forma                                                                                                       |       | $                                                                  | (0.58      | ) |

 

A summary of the activityunder the Company’s stock option plans as of March 29, 2006 and changesduring the thirteen-week period then ended, is presented below:

 
| ** **                                                   | ** ** | **Options  Outstanding** | ** ** | **Weighted-Average  Remaining  Contractual Life in Years** | ** ** | **Weighted  Average  Exercise Price** | ** ** | **Aggregate  Intrinsic Value** | ** ** |
|--------------------------------------------------------------|------------|--------------------------|------------|---------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------|------------|
| Options  outstanding at December 28, 2005               |       | 970,929                  |       |                                                                      |       | $                                          | 16.77      |                                |       |   |
| Granted                                                      |       | 29,000                   |       |                                                                      |       | $                                          | 17.51      |                                |       |   |
| Cancelled                                                    |       | (27,856                  | )          |                                                                      |       | $                                          | 16.91      |                                |       |   |
| Exercised                                                    |       | —                   |       |                                                                      |       | —                                     |       |                                |       |
| Options  outstanding at March 29, 2006                  |       | 972,073                  |       | 7.6                                                                       |       | $                                          | 16.81      |                                | $          | 390,169 |   |
|                                                         |       |                     |       |                                                                      |       |                                       |       |                                |       |
| Options fully  vested and exercisable at March 29, 2006 |       | 266,198                  |       | 3.2                                                                       |       | $                                          | 14.96      |                                | $          | 390,169 |   |

 

As of March 29, 2006there was $188,000 of unrecognized compensation cost related to unvested stockoptions. That cost is expected to be recognized over a weighted average periodof 2.0 years.

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**Item2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

**Forward-LookingStatements**

All statements other thanstatements of historical facts included in this Quarterly Report on Form 10-Q,including, without limitation, statements set forth in this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”regarding Bertucci’s future financial position, business strategy, budgets,projected costs, plans, and objectives of management for future operations, areforward-looking statements. These statements involve known and unknown risks,uncertainties and other factors which may cause our or the foodserviceindustry’s actual results, performance or achievements to be materiallydifferent from any expected results, performance or achievements. Forward-lookingstatements include, 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 service our debt and other obligations;*

·        *Our ability to meet ongoing financial covenants contained in our debtinstruments; 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 December 28, 2005 which was filed with the SEC on March 28,2006 (the “2005 Annual Report”), as well as those discussed elsewhere herein.

Unless the contextindicates otherwise, references herein to “we”, “us”, “our,” “Bertucci’s” orthe “Company” refer to Bertucci’s Corporation, its predecessors and itsconsolidated subsidiaries.

The following discussion should be read in conjunctionwith our condensed consolidated financial statements, and the notes theretoincluded herein, as well as our 2005 Annual Report.

**General**

We own and operate a chain of full-service casualdining, Italian-style restaurants under the names Bertucci’s Brick OvenPizzeria® and Bertucci’s Brick Oven Ristorante®. As of March 29,2006, we operated 92 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 “Acquisition”).We financed the Acquisition primarily through the issuance of $100 million of10 3⁄4 % senior notes due 2008 (the “Senior Notes”). The Senior Notes are stilloutstanding as to $85.3 million in principal.

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**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 OFOPERATIONS DATA**(Percentageof Net Sales)

 

|                                                                      | ** ** | **Thirteen weeks ended** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                           | ** ** | **March 29, 2006**       | ** ** | **March 30, 2005** | ** ** |
| Net sales                                                            |       | 100.0                              | %          | 100.0 | % |
| Cost of sales  and expenses:                                         |       |                               |       |   |   |
| Cost of sales                                                        |       | 22.7                               | %          | 23.7 | % |
| Operating expenses                                                   |       | 59.4                               | %          | 61.0 | % |
| General and administrative expenses                                  |       | 6.7                                | %          | 7.0 | % |
| Depreciation, amortization, deferred rent, and  pre-opening expenses |       | 5.2                                | %          | 6.3 | % |
| Total cost of sales and expenses                                     |       | 94.0                               | %          | 98.0 | % |
| Income from  operations                                              |       | 6.0                                | %          | 2.0 | % |
| Interest  expense, net                                               |       | (4.7                               | )%         | (5.3 | )% |
| Income (loss)  before income taxes                                   |       | 1.3                                | %          | (3.3 | )% |
| Income taxes                                                         |       | —                             |       | — |   |
| Net income  (loss)                                                   |       | 1.3                                | %          | (3.3 | )% |
|                                                                 |       |                               |       |   |   |
| **Restaurant  Operating Data:**                                      | ** ** | ** **                         | ** ** | ** ** | ** ** |
| Increase  (decrease) in comparable restaurant sales (a)              |       | 5.2                                | %          | (1.6 | )% |
| Number of  restaurants:                                              |       |                               |       |   |   |
| Restaurants open, beginning of period                                |       | 92                                 |       | 91 |   |
| Restaurants opened                                                   |       | —                             |       | 1 |   |
| Total  restaurants open, end of period                               |       | 92                                 |       | 92 |   |

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

**ThirteenWeeks Ended March 29, 2006 Compared to Thirteen Weeks Ended March 30,2005**

*NetSales*. Total net sales increased by $2.7 million, or 5.4%, to$52.7 million during the first quarter of 2006 from $50.0 million during thefirst quarter of 2005. The increase was primarily due to a 5.2% increase in the91 comparable restaurants’ sales plus five incremental restaurant weeks fromone restaurant opened since January 2005. Comparable dine-in guest countsincreased 1.1% for the first quarter of 2006 as compared to the first quarterof 2005. Comparable dine-in sales increased 5.2% and comparable carry-outand delivery sales increased 5.3% for the quarter as compared to the firstquarter of 2005. We believe comparable restaurant sales increases have been aresult of increased guest visits combined with a shift in menu mix to dinnerentrees versus pizza, and an approximate 1.7% menu price increase in January 2006.For the 91 comparable restaurants, average weekly sales were approximately$44,100 for the first quarter of 2006 compared to approximately $41,900 perweek for the first quarter of 2005.

*Cost ofSales.* Cost of sales was essentially flat at $11.9million during the first quarter of 2006 compared to the first quarter of 2005.Expressed as a percentage of net sales, overall cost of sales decreased to22.7% during the first quarter of 2006 from 23.7% during the first quarter of2005. The percentage decrease can be attributed to decreases in certainingredient costs, the benefit from the menu price increase, and better foodcost controls; all partially offset by a menu mix shift away from pizzas todinner entrees.

*OperatingExpenses.*Operating expenses increased by approximately$800,000 or 2.6%, to $31.3 million during the first quarter of 2006 from $30.5million during the first quarter of 2005. Expressed as a percentage of netsales, operating expenses decreased to 59.4% in the first quarter of 2006 from61.0% during the first quarter of 2005. The dollar increase can be attributedto (a) increased payroll and related benefits ($500,000) and generalrestaurant operating expenses ($150,000) due to the increased sales volume, (b) higherutility costs ($450,000) because of increased gas and electric rates, and (c) increasedoccupancy costs ($230,000) due to scheduled rent increases; all partiallyoffset by lower advertising expenditures ($480,000) and other miscellaneousexpenses ($50,000).

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*Generaland Administrative Expenses.*General and administrativeexpenses increased approximately $100,000 to $3.6 million during the firstquarter of 2006 compared to $3.5 million in the first quarter of 2005. Whilenearly flat, fluctuations occurred in the areas of decreased management trainingsalaries and benefits ($120,000) as well as corporate salaries and relatedbenefits ($100,000), offset by increased corporate bonus plan accruals($145,000) and professional fees ($75,000). Expressed as a percentage of netsales, general and administrative expenses decreased to 6.7% in the firstquarter of 2006 from 7.0% in the first quarter of 2005.

*Depreciation,Amortization, Deferred Rent and Pre-opening Expenses*. Depreciation,amortization, deferred rent and pre-opening expenses decreased by approximately$400,000 to $2.7 million during the first quarter of 2006 from $3.1 millionduring the first quarter of 2005. The decrease can be attributed to: (a) lowerpreopening expense ($200,000) because of one less opening in 2006, (b) depreciation($100,000) because prior impairment charges have reduced the cost basis ofcertain assets and the associated depreciation expense and equipment acquiredin the Acquisition have become fully depreciated, and (c) decreaseddeferred rent ($100,000) as many leases with step rent provisions now requirecash payments in excess of the calculated pro-rata rent expense. Expressed as apercentage of net sales, depreciation, amortization, deferred rent andpre-opening expenses decreased to 5.2% in the first quarter of 2006 from 6.3%during the first quarter of 2005.

*InterestExpense, net.* Net interest expense decreased byapproximately $200,000 to $2.5 million during the first quarter of 2006 from$2.7 million during the first quarter of 2005. Increased overnight investmentfunds and higher interest rates available thereon have resulted in increasedinterest income thereby reducing net interest expense.

*IncomeTaxes*. We have an historical trend of recurring pre-taxlosses. We previously recorded a full valuation allowance for our net deferredtax asset and have also provided a full valuation allowance relating to the taxbenefits generated since 2003 (primarily from operating losses). For the periodended March 29, 2006, we recorded a tax provision of approximately $18,000which was offset by the release of a like amount from our valuation allowance.

**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 $2.6million for the first quarter of 2006, approximately $700,000 more than the$1.9 million used during the first quarter of 2005. As of March 29, 2006,we had cash and cash equivalents of $17.7 million.

Our capital additions were $1.1 million during thefirst quarter of 2006 as compared to $0.8 million for the comparable prior yearperiod. The capital expenditures were primarily comprised of remodeling andmaintenance capital. We anticipate capital expenditures for the remainder of2006 will be approximately $5.1 million.

As of March 29, 2006, we had $92.1 million inconsolidated indebtedness which consisted of $85.3 million pursuant to theSenior Notes, $6.0 million of capital lease obligations, and $0.8 million ofpromissory notes. The Senior Notes contain no financial covenants and we are incompliance with all non-financial covenants as of May 12, 2006. The SeniorNotes bear interest at the rate of 10 3⁄4% per annum, payable semi-annually on January 15and 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, plus a 1.79% premium through July 15, 2006. After July 15,2006, the Senior Notes may be redeemed at face value. Additionally, undercertain circumstances, including a change of control or following certain assetsales, the holders of the Senior Notes may require us to repurchase the SeniorNotes, at a redemption price of 101% of face value.

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 ofcredit facility (expiring in December 2006) as collateral with third partyadministrators for self insurance reserves. Letters of credit totaling $2.2million were outstanding on March 29, 2006, collateralized by $2.2 millionof cash restricted from general use.

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We believe the cash flow generated from our operationsand cash on hand should be sufficient to fund our debt service requirements,lease obligations, expected capital expenditures and other operating expensesthrough 2006. Beyond 2006 and up to the 2008 maturity of our Senior Notes, weexpect to be able to service our debt, but the lack of short term borrowingavailability may impede growth. We are evaluating various refinancingalternatives for our Senior Notes upon their maturity in 2008.

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 debt service on our Senior Notes.

There have been nomaterial changes to our contractual obligations and commitments from thosedisclosed in the 2005 Annual Report.

**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 economic conditions.Our business is also subject to seasonal influences of consumer spending,dining out patterns and weather. As is the case with many restaurant companies,we typically experience lower net sales and net income from operations duringthe first and fourth quarters. Because of these fluctuations, the results ofoperations of any quarter are not necessarily indicative of the results thatmay be achieved for a full year or any future quarter.

**CriticalAccounting Policies and Estimates**

The discussion and analysisof our financial condition and results of operations are based upon ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America. Thepreparation 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, and closed restaurants reserve. Estimates are based onhistorical experience and on various other assumptions believed to bereasonable 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 2005 Annual Report and otherfilings with the Securities and Exchange Commission.

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 and closed restaurants reserves. For amore detailed discussion of our critical accounting policies and estimates,please refer to “Management’s Discussion and Analysis of Financial Conditionand Results of Operations - Critical Accounting Policies and Estimates”contained in our 2005 Annual Report. There have been no material changes to ourcritical accounting policies and estimates from those disclosed in our 2005Annual Report.

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**Item3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

We have no exposure tospecific risks related to derivatives or other “hedging” types of financialinstruments. In addition, we do not have operations outside of the UnitedStates of America which would expose us to foreign currency risk and ouroutstanding debt has fixed interest rates.

**Item 4. CONTROLS AND PROCEDURES**

*DisclosureControls and Procedures*. We maintain disclosure controlsand procedures 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 Securities and Exchange Commission(the “SEC”), and such information is accumulated and communicated to management,including our Chief Executive Officer (the “CEO”) and Chief Financial Officer(the “CFO”), as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating our disclosure controls and procedures,we recognized controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, as ours are designed to do, and we necessarily wererequired to apply our judgment in evaluating the cost-benefit relationship ofpossible controls and procedures.

During the firstquarter of fiscal 2006, we performed an evaluation under the supervision andwith the participation of our management, including our CEO and CFO, of theeffectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rule 13a-15(e) under the ExchangeAct). Based on that evaluation, our CEO and CFO concluded our disclosurecontrols and procedures were effective as of March 29, 2006.

*Changes in Internal Control OverFinancial Reporting*. We made changes to our internalcontrol over financial reporting in the first quarter of fiscal 2006 by makingchanges to our depreciation and income tax expense accounting controls asdescribed in Item 9A of our 2005 Annual Report.

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**PART II:OTHER INFORMATION**

**Item 1. LEGALPROCEEDINGS**

We are involved invarious legal proceedings from time to time incidental to the conduct of ourbusiness. In our opinion, any ultimate liability arising out of suchproceedings will not have a material adverse effect on our financial conditionor our results of operations.

**Item 1A. RISKFACTORS**

None

**Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None

**Item 3.  DEFAULTS UPON SENIOR SECURITIES**

None

**Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None

**Item 5. OTHERINFORMATION**

On April 4,2006, we sold 3,000 shares of our common stock to a key employee for$39,000. Concurrent with the sale, we recorded a compensation charge ofapproximately $12,000. As a result, the total consideration for the shares(approximately $51,000) represented our estimate of fair value at the timeof the sale based on a valuation model which assumes the sale of a controllinginterest of the Company. The key employee acknowledged in writing the transferof the shares is subject to the provisions of a Stockholders’ Agreement, whichis summarized in “Security Ownership of Certain Beneficial Owners andManagement - Shareholders Agreement” in the 2005 Annual Report. We believethe issuance of the shares was exempt from registration under theSecurities Act of 1933, as amended (the “Act”), pursuant to the exemptionprovided by Section 4(2) of the Act. No commissions were paid to anyunderwriter in connection with the issuance of these shares.

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**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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(*)    —   Includedwith this report.

**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                          |   | BERTUCCI’S CORPORATION |
|--------------------------|--------|-----------------------------|
|                     |   | (Registrant)                |
|                     |   |                        |   |   |
| Date:  May 12, 2006 |   | By:                         |   | /s/ Stephen V. Clark |
|                     |   |                        |   | Chief Executive Officer and Director |
|                     |   |                        |   |   |
|                     |   |                        |   |   |
| Date:  May 12, 2006 |   | By:                         |   | /s/ David G. Lloyd |
|                     |   |                        |   | President, Chief Financial Officer and Director |

 

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