---




SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





|x |  | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended June 30, 2002 or





| ̈ |  | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|- |  | ----------------------------------------------------------------------------------------




For the transition period
from  
to





Commission file number 33-14051





Prandium, Inc.


(Exact name of registrant as specified in its charter)





Delaware

33-0197361(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)





2701 Alton Parkway, Irvine, California 92606


(Address of principal executive offices) (Zip Code)





Registrants telephone number, including area code: (949) 863-8500





Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.





Yes  x    No  ̈





Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.





Yes  x    No  ̈





As of August 9, 2002 the registrant had issued and outstanding 5,000,000 shares of common stock, $.01 par value per share.








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1




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PART I.    FINANCIAL INFORMATION





Item 1.    Financial Statements





PRANDIUM, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS


($ in thousands)





June 30, 2002


December 30, 2001(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
26,058


$
27,982Restricted cash


10,661



12,992Receivables, net


1,822



1,894Inventories


1,679



1,887Other current assets


5,019



5,139Property held for sale


14,786



15,844Total current assets


60,025



65,738Property and equipment, net


91,472



96,926Other assets, net


10,430



11,218$
161,927


$
173,882LIABILITIES AND STOCKHOLDERS DEFICITLiabilities not subject to compromiseCurrent liabilities:Current portion of long-term debt, including capitalized lease obligations

$
620


$
234,271Accounts payable


6,492



6,178Current portion of self-insurance reserves


1,862



2,012Other accrued liabilities


35,614



81,117Income taxes payable


3,373



3,379Total current liabilities


47,961



326,957Self-insurance reserves


5,840



5,964Other long-term liabilities


2,511



2,648Long-term debt, including capitalized lease obligations, less current portion


902



967Liabilities subject to compromise under reorganization proceedings


282,996



Total liabilities


340,210



336,536Commitments and contingenciesStockholders deficit:Common stockauthorized 300,000,000 shares, par value $.01 per share, 180,380,513 shares issued and outstanding on
June 30, 2002 and on December 30, 2001


1,804



1,804Additional paid-in capital


222,353



222,353Accumulated deficit


(402,440
)


(386,811
)Total stockholders deficit


(178,283
)


(162,654
)$
161,927


$
173,882





See accompanying notes to condensed consolidated financial statements




2




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PRANDIUM, INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


($ in thousands, except per share amounts)


(Unaudited)





For the Quarters EndedJune 30, 2002


July 1, 2001Sales

$
67,494


$
74,528Product costs


16,584



19,846Payroll and related costs


23,660



26,509Occupancy and other operating expenses


18,856



22,402Depreciation and amortization


3,062



3,900General and administrative expenses


4,094



5,842Opening costs






57Loss on disposition of properties, net


513



369Provision for divestitures and write-down of long-lived assets


550



Restructuring costs


1,391



2,057Total costs and expenses


68,710



80,982Operating loss


(1,216
)


(6,454
)Interest expense, net (contractual interest of $7,373 for 2002)


3,056



7,066Loss before reorganization items and income tax provision


(4,272
)


(13,520
)Reorganization items


492



Loss before income tax provision


(4,764
)


(13,520
)Income tax provision


93



107Net loss

$
(4,857
)

$
(13,627
)Net loss per sharebasic and diluted

$
(0.03
)

$
(0.08
)Weighted average shares outstandingbasic and diluted


180,380,513



180,380,513








See accompanying notes to condensed
consolidated financial statements




3




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PRANDIUM, INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


($ in thousands, except per share amounts)


(Unaudited)





For the Six Months EndedJune 30, 2002


July 1,2001Sales

$
135,389


$
150,510Product costs


33,850



40,307Payroll and related costs


48,148



54,116Occupancy and other operating expenses


37,778



44,790Depreciation and amortization


6,085



8,077General and administrative expenses


8,765



11,715Opening costs


1



107Loss on disposition of properties, net


654



771Provision for divestitures and write-down of long-lived assets


2,757



189Restructuring costs


1,772



2,553Total costs and expenses


139,810



162,625Operating loss


(4,421
)


(12,115
)Interest expense, net (contractual interest of $14,846 for 2002)


10,529



13,712Loss before reorganization items and income tax provision


(14,950
)


(25,827
)Reorganization items


492



Loss before income tax provision


(15,442
)


(25,827
)Income tax provision


187



213Net loss

$
(15,629
)

$
(26,040
)Net loss per share - basic and diluted

$
(0.09
)

$
(0.14
)Weighted average shares outstanding - basic and diluted


180,380,513



180,380,513





See accompanying notes to condensed consolidated financial statements




4




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PRANDIUM, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


($ in thousands)


(Unaudited)





For the Six Months EndedJune 30, 2002


July 1,2001Cash flows from operating activities:Cash received from customers, franchisees and licensees

$
135,961


$
151,197Cash paid to suppliers and employees


(134,614
)


(154,701
)Interest received (paid), net


(153
)


406Opening costs


(1
)


(107
)Restructuring costs


(707
)


(1,223
)Income taxes paid


(193
)


(396
)Net cash provided by (used in) operating activities before reorganization items


293



(4,824
)Reorganization items


(276
)


Net cash provided by (used in) operating activities


17



(4,824
)Cash flows from investing activities:Proceeds from disposal of property and equipment


70



139Proceeds from payments on notes receivable






348Capital expenditures


(1,064
)


(2,994
)Lease termination payments


(1,512
)


(611
)Other divestment expenditures


(987
)


(1,023
)Cash required for the El Torito Sale


(128
)


(1,085
)Decrease (increase) in restricted cash, net


2,260



(9,568
)Other


126



(1,125
)Net cash used in investing activities


(1,235
)


(15,919
)Cash flows from financing activities:Payment of debt issuance costs


(175
)


Reductions of long-term debt, including capitalized lease obligations


(531
)


(634
)Net cash used in financing activities


(706
)


(634
)Net decrease in cash and cash equivalents


(1,924
)


(21,377
)Cash and cash equivalents at beginning of period


27,982



53,505Cash and cash equivalents at end of period

$
26,058


$
32,128Reconciliation of net loss to net cash provided by (used in) operating activities:Net loss

$
(15,629
)

$
(26,040
)Adjustments to reconcile net loss to net cash provided by (used in) operatingactivities:Depreciation and amortization


6,085



8,077Amortization of debt issuance costs and deferred gain


6



183Loss on disposition of properties


654



771Provision for divestitures and write-down of long-lived assets


2,757



189(Increase) decrease in receivables, inventories and other current assets


493



(202
)Increase in accounts payable, self-insurance reserves, otheraccrued liabilities and income taxes
payable


5,651



12,198Net cash provided by (used in) operating activities

$
17


$
(4,824
)





See accompanying notes to condensed consolidated financial statements




5




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PRANDIUM, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.Company.  Prandium, Inc. (Prandium and together with its subsidiaries, the Company), was
incorporated in Delaware in 1986. The Company, through its subsidiaries, is primarily engaged in the operation of restaurants in the full-service and fast-casual segments. At June 30, 2002, the Company operated 176 restaurants in 21 states,
approximately 66% of which are located in California, Ohio, Pennsylvania, Indiana and Michigan, and franchised and licensed 8 restaurants outside the United States.





2.    Financial Statements.  The Condensed Consolidated Financial Statements in this Form 10-Q have been prepared in accordance
with Securities and Exchange Commission Regulation S-X. Reference is made to the Notes to the Consolidated Financial Statements for the Fiscal Year Ended December 30, 2001 included in the Companys Annual Report on Form 10-K for the fiscal year
ended December 30, 2001 (the Form 10-K) for information with respect to the Companys significant accounting and financial reporting policies, as well as other pertinent information. The Company believes that all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the quarter and six months ended June 30, 2002 are not necessarily
indicative of those for the full year.





3.    Basis of Presentation and
Recapitalization Plan.  The Companys condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course
of business. As a result of the consummation of the Plan (as defined below), the Company has applied the provisions of the American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code (SOP 90-7), in the June 30, 2002 condensed consolidated financial statements. The Prandium Notes and the Old FRI-MRD Notes (both as defined below) were in default at June 30, 2002. In
accordance with SOP 90-7, those liabilities and obligations whose disposition was dependent upon the consummation of the Plan have been segregated and classified as Liabilities subject to compromise under reorganization proceedings in
the condensed consolidated balance sheet at June 30, 2002. As a result of the consummation of the Plan on July 2, 2002 (as discussed below), it is expected that the Company will apply the fresh start reporting provisions of SOP 90-7
commencing with the quarter ending September 29, 2002.





Financial Restructuring and Reorganization





On May 6, 2002, following receipt of sufficient votes from their debtholders approving a pre-packaged Chapter 11 plan of reorganization
(the Plan), Prandium and its subsidiary, FRI-MRD Corporation (FRI-MRD), each filed cases (together, the Reorganization Case) seeking confirmation of the Plan in the United States Bankruptcy Court for the Central
District of California, Santa Ana division (the Bankruptcy Court). The Reorganization Case was entitled In re Prandium, Inc. and FRI-MRD Corporation, Case No. SA-02-13529 (RA) (Jointly Administered). The Bankruptcy Court subsequently
confirmed the Plan on June 20, 2002. The effective date of the Plan (the Closing) was July 2, 2002 when all material conditions to the Plan, including the signing of a new secured credit facility (the New Credit Facility)
with Foothill Capital Corporation (Foothill), were completed.




6




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Under the Plan, the FRI-MRD 14% Senior Secured Discount Notes (the 14%
FRI-MRD Notes) were exchanged at a discount for cash, and the FRI-MRD 15% Senior Discount Notes (the 15% FRI-MRD Notes and together with the 14% FRI-MRD Notes, the Old FRI-MRD Notes) were exchanged at a discount for a
combination of cash and new FRI-MRD 12% Senior Secured Notes (the New Notes) having substantially similar terms as the 15% FRI-MRD Notes except that the New Notes (i) mature on January 31, 2005, (ii) have an interest rate of 12%, (iii)
include capital expenditure restrictions on the 14 location Hamburger Hamlet restaurant chain (the Hamburger Hamlet Chain), (iv) require that free cash flow generated by the Hamburger Hamlet Chain prior to a sale of the restaurants, and
the proceeds of any sale of the Hamburger Hamlet Chain, be applied to prepay the New Notes and (v) contain additional limitations on indebtedness and capital expenditures. In addition, while no cash interest payments are required on the New Notes,
prepayments are encouraged by an extra reduction in principal of up to 33.33% of the prepaid amount, depending on how quickly the prepayment is made.





Also under the Plan, Prandiums 93/4% Senior Notes (the
93/4% Prandium Notes) were cancelled in exchange for all 5,000,000 shares of the new common stock of
Prandium, and stock options to purchase an additional 444,445 shares at an exercise price of $1.90 per share were granted to certain members of management. Prandiums 107/8% Senior Subordinated Discount Notes (the 107/8% Prandium Notes and together with the 93/4% Prandium Notes, the Prandium
Notes) were cancelled without receiving any consideration. The old common stock of Prandium was also cancelled without receiving any consideration.





In accordance with the Plan, at the Closing, the Company, among other things, entered into a note agreement (the New Note Agreement) governing the New Notes,
revised Prandiums charter and bylaws and the charter of FRI-MRD, entered into the New Credit Facility with Foothill to replace the old secured credit facility (the Old Credit Facility) with Foothill and designated four members of
Prandiums five-member board of directors. The Plan also provides that the investment representative of certain of the holders of the New Notes (the Representative) has the initial right to designate one individual to the currently
vacant position on the board of directors of Prandium. The Representatives right to nominate one individual for election to the board of directors continues until the New Notes are paid in full pursuant to the Plan and a nominating agreement
entered into with Prandium and certain of Prandiums common stockholders. As of August 9, 2002, the Representative had not yet designated a director.





The Plan did not involve any of Prandiums or FRI-MRDs operating subsidiaries. The claims of employees, general unsecured creditors (other than noteholders) and secured creditors, other than
holders of the 14% FRI-MRD Notes, were not impaired under the Plan.





4.Sale of
Hamburger Hamlet Restaurants.  On May 10, 2002, the Company entered into an agreement (the Hamlet Agreement) to sell the Hamburger Hamlet Chain. On August 9, 2002, the Hamlet Agreement was terminated in accordance with
its terms. The purchaser under the Hamlet Agreement has denied the effectiveness of the Companys termination notice. Since a sale of the Hamburger Hamlet Chain is contemplated by the Companys capital restructuring strategy, the Company
will continue to explore and develop opportunities to sell the Hamburger Hamlet Chain. As called for in the New Note Agreement which was entered into in accordance with the Reorganization Case, the proceeds of a sale will be used to prepay the New
Notes in accordance with the terms of the New Note Agreement. Prior to a sale of the Hamburger Hamlet Chain, the New Note Agreement requires that the excess cash flow generated by the Hamburger Hamlet Chain be used to prepay the New Notes. There can
be no assurance that a sale will be successfully completed. A prior agreement to sell the Hamburger Hamlet Chain to a different party was entered into




7




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on October 23, 2001 and terminated on February 6, 2002 in accordance with its terms.





The assets and liabilities of the Hamburger Hamlet Chain have been written down to their estimated net realizable value of $14,786,000 and classified as property held for
sale in the accompanying condensed consolidated balance sheet. This amount reflects an additional write-down of $1,058,000 recorded in the quarter ended March 31, 2002 to recognize the terms of the Hamlet Agreement. During the second quarter of
2002, the Company recorded an additional provision for divestitures of $467,000 related to the sale of the Hamburger Hamlet Chain.





The Hamburger Hamlet Chain generated sales of $15,713,000 and $16,588,000 for the six months ended June 30, 2002 and July 1, 2001, respectively, and related operating income of $1,590,000 and $1,951,000 for the same periods,
respectively. Such operating income includes charges for allocated general and administrative expenses of $345,000 and $386,000 for the six months ended June 30, 2002 and July 1, 2001, respectively.





5.Strategic Divestment Programs.  During the fiscal years 1999, 2000 and 2001, the Company
designated three, ten and four non-strategic Koo Koo Roo restaurants for divestment (the KKR Strategic Divestment Program), respectively. In conjunction with the KKR Strategic Divestment Program, for such periods, the Company recorded
provisions for divestitures of $904,000, $4,510,000 and $814,000, respectively. On a cumulative basis, these provisions consisted of (i) $3,429,000 for the write-down to net realizable value of the property and equipment associated with such
restaurants and (ii) $2,799,000 for costs associated with lease terminations, subsidized leases, brokerage fees and other divestment costs. During 2001, the Company also recorded a provision for severance costs of $189,000 associated with certain
restaurant managers in connection with the restaurants to be divested. During 2000, two of the restaurants designated in 1999 were subleased and a third restaurants lease was terminated. Of the ten restaurants designated in 2000, nine were
divested or closed during 2001, and one was closed during the first quarter of 2002. Of the four restaurants designated in 2001, one was divested in the fourth quarter of 2001, and three were divested or closed during the first quarter of 2002. For
the years ended December 30, 2001, December 31, 2000 and December 26, 1999, the Company paid (i) $138,000, $0 and $0, respectively, for severance costs associated with certain restaurant and regional managers who were terminated in connection with
the restaurants divested and (ii) $947,000, $135,000 and $0, respectively, for net costs associated with lease terminations, subsidized subleases, brokerage fees and other divestment costs. During the first six months of 2002, the Company paid
$46,000 for severance costs and $211,000 for lease terminations. During the first six months of 2002, restaurants still in operation under the KKR Strategic Divestment Program had sales of $352,000 and restaurant- level operating losses of $232,000.





In the fourth quarter of 1998, 48 non-strategic Chi-Chis restaurants were designated for divestment (the
CC Strategic Divestment Program). In conjunction with the CC Strategic Divestment Program, the Company recorded a provision for divestitures of $22,884,000, including divestment reserves of $12,256,000. During the fourth quarter of 1999,
the Company determined that it would not be able to satisfactorily negotiate lease terminations or subleases for 20 operating restaurants of the 48 Chi-Chis restaurants designated for divestment. As a result, these 20 restaurants were removed
from the CC Strategic Divestment Program, and $1,048,000 previously recorded in conjunction with the provision for divestitures was reversed during the fourth quarter




8




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of 1999. After this reversal, the eight restaurants remaining in the CC Strategic Divestment Program were divested during 2000. In the fourth
quarter of 2001, sixteen additional Chi-Chis restaurants were designated for divestment. The Company recorded a provision for divestitures of $2,736,000. This provision consisted of (i) $2,386,000 for the write-down to net realizable value of
the property and equipment associated with such restaurants and (ii) $350,000 for costs associated with lease terminations, subsidized leases, brokerage fees and other divestment costs. In December 2001, the Company recorded an additional provision
for divestitures of $2,029,000 for costs associated with lease terminations, subsidized leases, brokerage fees and other divestment costs. For the years ended December 30, 2001, December 31, 2000 and December 26, 1999, the Company paid (i) $33,000,
$225,000 and $287,000, respectively, for severance costs associated with certain restaurant and regional managers who were terminated in connection with the restaurants divested and (ii) $1,681,000, $2,124,000 and $1,913,000, respectively, for net
costs associated with lease terminations, subsidized subleases, brokerage fees and other divestment costs. During the first quarter of 2002, the Company recorded an additional provision of $695,000. The provision consisted of (i) $250,000 for the
write-off of a liquor license and (ii) $445,000 for lease terminations and other divestment costs. During the second quarter of 2002, the Company recorded a provision of $82,000 for lease terminations, other divestment costs and the write-down of
property and equipment to net realizable value. During the first six months of 2002, the Company paid $100,000 for severance costs and $1,079,000 for lease terminations. During the first six months of 2002, restaurants still in operation under the
CC Strategic Divestment Program had sales of $6,603,000 and restaurant-level operating losses of $1,018,000.





In
the second quarter of 2001, the Company announced an organizational restructuring that resulted in the elimination of approximately 40 positions in the Companys support center. The Company recorded a provision of $1,607,000 for severance and
outplacement services and the amount was included in restructuring costs on the 2001 consolidated statements of operations. For the year ended December 30, 2001, a total of $1,521,000 was paid for severance and outplacement services. During the
first six months of 2002, the Company paid $17,000 for outplacement services.





6.Segment Information.  The Company operates exclusively in the food-service industry. Substantially all revenues result from the sale of menu products at restaurants operated by the
Company. The Companys reportable segments are based on restaurant operating divisions. The Koo Koo Roo Division includes the operations of Koo Koo Roo and Hamburger Hamlet restaurants. Operating income (loss) includes the operating results
before interest. The corporate component of sales, depreciation and amortization and operating income (loss) represents operating results of certain other restaurants, as well as corporate general and administrative expenses. Corporate assets
include corporate cash, restricted cash, investments, receivables, asset portions of financing instruments and certain other restaurants.







9




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For the Quarters Ended


For the Six Months EndedJune 30, 2002


July 1, 2001


June 30, 2002


July 1, 2001(Unaudited)($ in thousands)SalesChi-Chis Division

$
49,288


$
52,602


$
98,503


$
106,059Koo Koo Roo Division


17,489



20,642



35,371



41,868Corporate


717



1,284



1,515



2,583Total Sales

$
67,494


$
74,528


$
135,389


$
150,510Depreciation and AmortizationChi-Chis Division

$
2,203


$
2,638



4,377


$
5,412Koo Koo Roo Division


598



949



1,202



2,003Corporate


261



313



506



662Total Depreciation and Amortization

$
3,062


$
3,900


$
6,085


$
8,077Operating Income (Loss)Chi-Chis Division

$
374


$
(2,280
)

$
(586
)

$
(4,817
)Koo Koo Roo Division


118



(730
)


(1,219
)


(1,763
)Corporate


(1,708
)


(3,444
)


(2,616
)


(5,535
)Total Operating Loss

$
(1,216
)

$
(6,454
)

$
(4,421
)

$
(12,115
)Interest Expense, netChi-Chis Division

$
161


$
100


$
344


$
206Koo Koo Roo Division


59



47



120



89Corporate


2,836



6,919



10,065



13,417Total Interest Expense, net

$
3,056


$
7,066


$
10,529


$
13,712Capital ExpendituresChi-Chis Division

$
531


$
624


$
883


$
1,202Koo Koo Roo Division


108



621



122



1,588Corporate


20



36



59



204Total Capital Expenditures

$
659


$
1,281


$
1,064


$
2,994June 30, 2002


December 30, 2001(Unaudited)($ in thousands)Total AssetsChi-Chis Division









$
87,460


$
90,784Koo Koo Roo Division










30,628



43,028Corporate










43,839



40,070Total Assets









$
161,927


$
173,882







10




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7.    Subsequent Event.   The State
of Delaware sent the Company a notice dated July 29, 2002 that it intends to select the Company for audit of the Companys compliance with Delawares escheat (unclaimed property) laws in the near future unless the Company voluntarily files
annual abandoned property reports for the years 1990 through 2000 prior to the beginning of October 2002. If the Company does not file the reports for the ten year period, Delaware has told the Company that it intends to audit a twenty year period,
pursuant to current Delaware law and that the Company will be liable for interest and penalties on any amount of unreported property found during the audit. Escheat laws cover a wide scope of situations and property types and have certain statutes
of limitations. At this time the Company has not determined whether or not it will file any annual abandoned property reports. In addition, the Company is unable to estimate any liability that may result from filing the annual abandoned property
reports or from the potential audit.





Item 2.   Managements Discussion and Analysis of Financial Condition and
Results of Operations





Certain information and statements included in this Managements Discussion and
Analysis of Financial Condition and Results of Operations, including, without limitation, statements containing the words believes, anticipates, expects, intends, plans,
estimates and words of similar import, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks and uncertainties that could cause
actual results of the Company or the restaurant industry to differ materially from expected results expressed or implied by such forward-looking statements. Although it is not possible to itemize all of the factors and specific events that could
affect the outlook of a restaurant company operating in a competitive environment, factors that could significantly impact expected results include:





| |  |  | the ability of the Company to sell the Hamburger Hamlet Chain on acceptable terms;
| | - |  | ----------------------------------------------------------------------------------




| |  |  | the continuing development of successful marketing strategies for each of the Companys concepts;
| | - |  | -------------------------------------------------------------------------------------------------




| |  |  | the effect of national and regional economic conditions;
| | - |  | --------------------------------------------------------




| |  |  | the availability of adequate working capital;
| | - |  | ---------------------------------------------




| |  |  | the ability of the Company to generate sufficient operating cash flow or cash flow from other sources to meet its obligations on a timely basis and to comply
with the terms of its new financing agreements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | competitive products and pricing;
| | - |  | ---------------------------------




| |  |  | changes in legislation;
| | - |  | -----------------------




| |  |  | demographic changes;
| | - |  | --------------------




| |  |  | the ability to attract and retain qualified personnel;
| | - |  | ------------------------------------------------------




| |  |  | changes in business strategy or development or divestment plans;
| | - |  | ----------------------------------------------------------------




| |  |  | business disruptions;
| | - |  | ---------------------




| |  |  | changes in consumer preferences, tastes and eating habits;
| | - |  | ----------------------------------------------------------




| |  |  | increases in food and labor costs; and
| | - |  | --------------------------------------




| |  |  | increases in utility costs and the impact of potential utility interruptions.
| | - |  | -----------------------------------------------------------------------------



11




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The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future events or developments.





The following
should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations presented in the Form 10-K.





Critical Accounting Policies





The Companys financial
condition and results of operations are necessarily impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following accounting policies are particularly important to the financial condition
or results of operations of the Company, and require estimates or other judgments of matters inherently uncertain. Changes in the estimates or other judgments included within these accounting policies could result in a significant change to the
information presented in the condensed consolidated financial statements.





1.Impairment of
Long-Lived Assets.    The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying amounts may not be recoverable. Assets subject to this review, and for which impairments
have been recorded in 2002 or prior years, include property, plant and equipment and costs in excess of net assets of business acquired.





In determining asset impairments, management must make significant judgments and estimates to calculate the fair value of an asset. Fair value is developed through consideration of several valuation methods including
comparison of similar recent sales transactions and discounted cash flow. Discounted cash flow is calculated by estimating future cash flow streams, applying appropriate discount rates to determine the present values of the cash flow streams, and
then assessing the probability of the various cash flow scenarios. The impairment is then recorded based on the excess of the carrying value of the asset over fair value.





Changes in assumptions and estimates included within the impairment reviews could result in significantly different results than those discussed below in Results of
Operations and recorded in the condensed consolidated financial statements.





2.Insurance
Reserves.    Insurance liabilities and reserves are accounted for based on actuarial estimates of the amount of loss inherent in that periods claims, including losses for claims that have not yet been reported.
These estimates rely on actuarial calculations of ultimate loss experience for similar historical events and an estimate of incurred but not reported claims. The Companys insurance reserves totaled $7,702,000 at June 30, 2002. Management
continually evaluates the potential for changes in loss estimates, both positive and negative, and uses the results of these evaluations to adjust recorded provisions and reserves.





3.Divestment Reserves.    The Company makes decisions to close restaurants based on their cash flows and anticipated future
profitability. Losses on disposition of properties are recognized when a commitment to divest a restaurant property is made by the Company and include estimated carrying costs through the expected disposal date. These divestment charges represent a
liability for the net present value of any remaining lease obligations, including executory costs, after the expected closure dates, net of estimated sublease income, if any. These estimates of future




12




---

costs often require significant judgments and estimates by management and could be materially affected by factors such as the Companys
ability to secure subleases and the Companys success at negotiating early termination agreements with lessors. While management believes the current estimates of future liabilities are adequate, it is possible that future events could require
the Company to make significant adjustments for revisions to these estimates.





As used herein, comparable
restaurants means restaurants operated by the Company for at least eighteen months and that continued in operation through the end of the second quarter of 2002.





Liquidity and Capital Resources





A.  Liquidity





Cash needs are being funded by available cash balances and cash
provided by operating activities and can be supplemented by borrowings under the New Credit Facility (currently limited to $1.0 million of cash borrowings). As described below, the Company filed a Reorganization Case to confirm the Plan with the
Bankruptcy Court. The Plan was confirmed by the Bankruptcy Court on June 20, 2002 and consummated on July 2, 2002. The Companys continuing viability will be dependent upon its ability to generate sufficient operating cash flow or cash flow
from other sources to meet its obligations on a timely basis and to comply with the terms of its new financing agreements or to be able to renegotiate such obligations and terms.





Statement of Cash Flows.    For the six months ended June 30, 2002, net cash provided by operating activities was $17,000 compared to $4.8
million used in operating activities for the same period in 2001. This change was primarily due to the $4.9 million increase in cash received from customers, franchisees and licensees net of cash paid to suppliers and employers. For the first six
months of 2002, net cash used in investing activities was $1.2 million compared to $15.9 million used in investing activities for the same period in 2001. This change was primarily due to a $1.9 million decrease in capital expenditures and an $11.8
million change in restricted cash activity (net cash collateral increase of $9.6 million in 2001 and net escrow release of $2.3 million in 2002). For the first six months of 2002, net cash used in financing activities was $706,000 compared to
$634,000 used in financing activities for the same period in 2001.





EBITDA.    For the
first six months of 2002, the Company reported EBITDA (defined as earnings (loss) before opening costs, gain (loss) on disposition of properties, provision for divestitures and write-down of long-lived assets, restructuring costs, reorganization
items, interest, taxes, depreciation and amortization) of $6.8 million, compared to $(418,000) in the same period of 2001. The $7.3 million increase was primarily composed of (i) a $4.2 million increase in the EBITDA attributable to the
Chi-Chis restaurants; (ii) a $1.4 million increase in the EBITDA attributable to the Koo Koo Roo restaurants; (iii) a $361,000 decrease in the EBITDA attributable to the Hamburger Hamlet Chain; and (iv) $2.1 million of previously unallocated
general and administrative expenses which have been eliminated.





The Company has included information concerning
EBITDA herein because it understands that such information is used by certain investors as one measure of an issuers historical ability to service debt. EBITDA should not be considered as an alternative to, or more meaningful than, operating
income (loss) as an indicator of operating performance or cash flows from operating




13




---

activities as a measure of liquidity. Furthermore, other companies may compute EBITDA differently, and therefore, EBITDA amounts among companies
may not be comparable.





Working Capital Deficiency.    The Company normally operates
with a working capital deficiency because:





| |  |  | restaurant operations are conducted primarily on a cash (and cash equivalent) basis with a low level of accounts receivable;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------




| |  |  | rapid turnover allows a limited investment in inventories; and
| | - |  | --------------------------------------------------------------




| |  |  | cash from sales is applied to the payment of related accounts payable for food, beverages and supplies which are generally purchased on trade credit terms.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------




The Company had working capital of $12.1 million on June 30, 2002. This amount includes
property held for sale of approximately $14.8 million.





The following represents a list of the Companys
contractual obligations and commitments, giving effect to the consummation of the Plan and the issuance of the New Notes discussed below ($ in thousands):





Payments Due by PeriodRemaining Six Months

Years Ending DecemberTotal

2002

2003

2004

2005

2006

2007

ThereafterLong-term debt, including capitalized lease obligations

$
80,231

$
382

$
429

$
242

$
78,914

$
142

$
122

$
Operating leases


121,819


12,860


23,694


20,188


17,481


12,012


10,261


25,323Total contractual cash obligations

$
202,050

$
13,242

$
24,123

$
20,430

$
96,395

$
12,154

$
10,383

$
25,323





Debt Restructuring.





1.Reorganization Plan.    On May 6, 2002, following receipt of sufficient votes from their debtholders approving the Plan,
Prandium and FRI-MRD each filed a Reorganization Case seeking confirmation of the Plan with the Bankruptcy Court. The Bankruptcy Court subsequently confirmed the Plan on June 20, 2002. The effective date of the Plan was July 2, 2002 when all
material conditions to the Plan, including the signing of the New Credit Facility with Foothill, were completed.





Under the Plan, the 14% FRI-MRD Notes were exchanged at a discount for cash, and the 15% FRI-MRD Notes were exchanged at a discount for a combination of cash and New Notes having substantially similar terms as the 15% FRI-MRD Notes
except that the replacement notes (i) mature on January 31, 2005, (ii) have an interest rate of 12%, (iii) include capital expenditure restrictions on the Hamburger Hamlet Chain, (iv) require that free cash flow generated by the Hamburger Hamlet
Chain prior to a sale of the restaurants, and the proceeds of any Hamburger Hamlet sale, be applied to prepay the New Notes and (v) contain additional limitations on indebtedness and capital expenditures. In addition, while no cash interest payments
will be required on the New Notes,




14




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prepayments are encouraged by an extra reduction in principal of up to 33.33% of the prepaid amount, depending on how quickly the prepayment is
made.





Also under the Plan, the 93/4% Prandium Notes were cancelled in exchange for all 5,000,000 shares of the new common stock of Prandium, and stock options to purchase an additional 444,445 shares at an
exercise price of $1.90 per share were granted to certain members of management. The 107/8% Prandium Notes were
cancelled without receiving any consideration. The old common stock of Prandium was also cancelled without receiving any consideration.





In accordance with the Plan, at the Closing, the Company, among other things, entered into the New Note Agreement, revised Prandiums charter and bylaws and the charter of FRI-MRD, entered into
the New Credit Facility with Foothill to replace the Old Credit Facility with Foothill, and designated four of Prandiums five-member board of directors. The Plan also provides that the Representative has the initial right to designate one
individual to the currently vacant position on the board of directors of Prandium. The Representatives right to nominate one individual for election to the board of directors continues until the New Notes are paid in full pursuant to the Plan
and a nominating agreement entered into with Prandium and certain of Prandiums common stockholders. As of August 9, 2002, the Representative had not yet designated a director.





The Plan did not involve any of Prandiums or FRI-MRDs operating subsidiaries. The claims of employees, general unsecured creditors (other than noteholders) and
secured creditors, other than holders of the 14% FRI-MRD Notes, were not impaired under the Plan.





2.  Credit Facility.    On January 10, 1997, the Company entered into the Old Credit Facility which provided for a five-year, $35 million credit facility for the ongoing working capital
needs of the Company. As a result of the 1998 merger with Koo Koo Roo, Inc., the Company increased the Old Credit Facility to $55 million. In connection with the sale of the Companys El Torito restaurant division to Acapulco Acquisition Corp.
on June 28, 2000 (the El Torito Sale), (i) the Company used a portion of the cash proceeds from the sale to repay $25.9 million outstanding under the Old Credit Facility and (ii) the Old Credit Facility was amended and restated to adjust
all restrictive covenants to reflect the El Torito Sale and reduce the credit facility to a maximum of $20 million (subject to certain limitations) of letters of credit and revolving cash borrowings.





The Company was not in compliance with certain financial ratios at June 30, 2002, March 31, 2002, December 30, 2001, September 30, 2001,
July l, 2001, April 1, 2001 and December 31, 2000. In addition, the vesting of the holders of the Old FRI-MRD Notes right to accelerate the debt caused an Event of Default to occur under the provisions of the Old Credit Facility.
The Company notified Foothill of all such Events of Default. Beginning on March 29, 2001, Prandium, FRI-MRD, Chi-Chis and certain other subsidiaries of FRI-MRD entered into a series of letter agreements with Foothill, that among other things,
acknowledged that certain specified events of default had occurred and provided for certain forbearance periods during the Companys efforts to consummate the Plan.





On July 2, 2002, the Company entered into the four-year New Credit Facility to provide for the ongoing working capital needs of the Company. The New Credit Facility
replaces the Old Credit Facility and provides for up to $4 million in revolving cash borrowings and up to $15 million in letters of credit (less the outstanding amount of revolving cash balances). There is a $3 million reserve against both the
revolving cash borrowings and letter of credit limits which will be released in $1 million increments at each of the 90, 180, and 270 day anniversaries of the effective date of




15




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the facility. The New Credit Facility is secured by substantially all of the real and personal property of the Company and contains customary
restrictive covenants, including the maintenance of certain financial ratios. Among other things, the covenants restrict the Companys ability to incur debt, pay dividends on or redeem capital stock, make certain types of investments, make
dispositions of assets and engage in mergers and consolidations. In addition, a change in ownership of 30% or more of the Companys common stock, with certain permitted exceptions, in one person or group after the effective date of the
facility, is prohibited.





Approximately $9.4 million of letters of credit were outstanding under the Old Credit
Facility as of June 30, 2002, and approximately $10.0 million of letters of credit were outstanding under the New Credit Facility as of August 9, 2002. Such outstanding letters of credit, in large part, provide security for future amounts payable
under the Companys workers compensation insurance program and under Mr. Kevin S. Relyeas employment agreement. No working capital borrowings were outstanding under the Old Credit Facility as of June 30, 2002 or under the New Credit
Facility as of August 9, 2002.





3.  FRI-MRD and Prandium Notes.    As
described above, prior to the consummation of the Plan, Prandium was in default under the Prandium Notes and FRI-MRD was in default under the Old FRI-MRD Notes. Under the Plan, the 14% FRI-MRD Notes were exchanged at a discount for cash, and the 15%
FRI-MRD Notes were exchanged at a discount for a combination of cash and New Notes. Also under the Plan, the 93/4% Prandium Notes were cancelled in exchange for all 5,000,000 shares of the new common stock of Prandium, and the 107/8% Prandium Notes were cancelled without receiving any consideration.





The
New Notes, among other things, (i) mature on January 31, 2005, (ii) have an interest rate of 12%, (iii) include capital expenditure restrictions on the Hamburger Hamlet Chain, (iv) require that free cash flow generated by the Hamburger Hamlet Chain
prior to a sale of the restaurants, and the proceeds of any sale of the Hamburger Hamlet Chain, be applied to prepay the New Notes and (v) contain additional limitations on indebtedness and capital expenditures. In addition, while no cash interest
payments are required on the New Notes, prepayments are encouraged by an extra reduction in principal of up to 33.33% of the prepaid amount, depending on how quickly the prepayment is made.





4.  Other.    On May 10, 2002, the Company entered into the Hamlet Agreement to sell the Hamburger Hamlet Chain. On August 9,
2002, the Hamlet Agreement was terminated in accordance with its terms. The purchaser under the Hamlet Agreement has denied the effectiveness of the Companys termination notice. Since a sale of the Hamburger Hamlet Chain is contemplated by the
Companys capital restructuring strategy, the Company will continue to explore and develop opportunities to sell the Hamburger Hamlet Chain. As called for in the New Note Agreement which was entered into in accordance with the Reorganization
Case, the proceeds of a sale will be used to prepay the New Notes in accordance with the terms of the New Note Agreement. Prior to a sale of the Hamburger Hamlet Chain, the New Note Agreement requires that the excess cash flow generated by the
Hamburger Hamlet Chain be used to prepay the New Notes. There can be no assurance that a sale will be successfully completed. A prior agreement to sell the Hamburger Hamlet Chain to a different party was entered into on October 23, 2001 and
terminated on February 6, 2002 in accordance with its terms.





5.  Unclaimed
Property.The State of Delaware sent the Company a notice dated July 29, 2002 that it intends to select the Company for audit of the Companys compliance with Delawares escheat (unclaimed property) laws in
the near future unless the Company voluntarily files annual abandoned property reports for the years 1990 through 2000 prior to the beginning of October 2002. If the Company does not file the reports for the ten year period, Delaware has told the
Company that it intends to audit a twenty year period, pursuant to current Delaware law and that the Company will be liable for interest and penalties on any amount of unreported property found during the audit. Escheat laws cover a wide scope of
situations and property types and have certain statutes of limitations. At this time the Company has not determined whether or not it will file any annual abandoned property reports. In addition, the Company is unable to estimate any liability that
may result from filing the annual abandoned property reports or from the potential audit.




16




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B.  Capital Expenditures





Net cash used in investing activities was $1.2 million for the first six months of 2002, including $1.1 million used for capital expenditures, as compared to net cash used
in investing activities of $15.9 million for the same period in 2001. The change in net cash used in investing activities for the first six months of 2002 was primarily due to a $1.9 million decrease in capital expenditures and an $11.8 million
change in restricted cash activity.





Capital expenditures of up to approximately $4.3 million have now been
identified for fiscal 2002, primarily related to maintaining existing open and operating restaurants. Actual capital expenditures for fiscal 2002 will be dependent on restrictions under the Companys debt instruments and the availability of the
required funds.





Recent Accounting Pronouncements





In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations (SFAS 141), and Statement
No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies criteria for
intangible assets acquired in a purchase method business combination to meet in order to be recognized and reported apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated
residual values and reviewed for impairment in accordance with Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).





The Company was required to adopt the provisions of SFAS 141 effective July 1, 2001 and the provisions of SFAS 142 effective January 1, 2002. As a result of the anticipated
sale of the Hamburger Hamlet Chain and the classification of the net realizable value of Hamburger Hamlets assets and liabilities as property held for sale, the Company no longer had goodwill or intangible assets to analyze in connection with
the adoption of SFAS 142, accordingly, the adoption of this statement did not have a material impact on the Companys condensed consolidated financial statements. Excess reorganization value, if any, resulting from the Companys
reorganization would fall under the scope of SFAS 142. The Company is currently unable to determine the impact on the consolidated financial statements of any such excess reorganization value.





The FASB issued Statement No. 143, Accounting for Asset Retirement Obligations (SFAS 143), in September 2001. SFAS 143 is effective for fiscal
years beginning after June 15, 2002 and addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Management does not believe that the
adoption of this standard will have any impact on the Companys financial position, results of operations or liquidity.





The FASB issued SFAS 144 in October 2001. SFAS 144 is effective for fiscal years beginning after December 15, 2001, addresses financial accounting and reporting for the impairment or disposal of long-lived assets and effectively
supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The Company was




17




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required to adopt the provisions of SFAS 144 effective January 1, 2002. The adoption of this standard did not have a material impact on the
Companys condensed consolidated financial statements.





In April 2002, the FASB issued Statement No. 145,
Rescission of the FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS 145). SFAS 145 eliminates the requirements to classify gains and losses from the extinguishment of
indebtedness as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction, and makes other non-substantive technical corrections to existing pronouncements. SFAS 145 is effective for fiscal years
beginning after May 15, 2002, with earlier adoption encouraged. Management believes the only impact of adopting SFAS 145 will be the classification of gains related to extinguishment of indebtedness in the Reorganization Case as non-extraordinary
items.





In July 2002, the FASB issued Statement No.146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS 146). SFAS 146 requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by SFAS 146 include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operations, plant closing or other exit or disposal activities. SFAS 146 is effective prospectively for
exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. As the provisions of SFAS 146 are required to be applied prospectively after the adoption date, management cannot determine the potential effects that
adoption of SFAS 146 will have on the Companys consolidated financial statements.





Results of Operations





The Companys total sales of $67,494,000 for the second quarter of 2002 decreased by $7,034,000 or 9.4%
as compared to the same period in 2001. For the first six months of 2002, total Company sales of $135,389,000 decreased by $15,121,000 or 10.0% as compared to the same period in 2001. These decreases were the result of (i) sales decreases
attributable to the 28 restaurants sold or closed during the period beginning January 1, 2001 and ending June 30, 2002 and (ii) declines in comparable restaurant sales for Chi-Chis, Koo Koo Roo and Hamburger Hamlet for both the second quarter
and first six months of 2002, partially offset by an increase in new restaurant sales for Koo Koo Roo for the first six months of 2002. The breakdown of the sales decreases for the second quarter and first six months of 2002 is shown in the
following table.




18




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Change in Second Quarter 2002 Sales


Change in First
Six Months 2002 Sales($ in thousands)Decrease in Sales from Restaurants Sold or Closed

$
(3,921
)

$
(7,639
)Decrease in Sales of Comparable Restaurants


(3,052
)


(7,673
)Sales from New Restaurant


(61
)


191Total

$
(7,034
)

$
(15,121
)





Overall, sales for comparable restaurants were $66,432,000 for the
second quarter of 2002, a $3,052,000 or 4.4% decline from the same period in 2001. For the first six months of 2002, sales of comparable restaurants of $131,969,000 decreased by $7,673,000 or 5.5% as compared to the same period in 2001. As shown in
the following table, these declines resulted from decreased sales in comparable Chi-Chis, Koo Koo Roo and Hamburger Hamlet restaurants for both the second quarter and first six months of 2002.





Change in Second Quarter 2002
Sales


Change in First Six Months
2002 SalesAmount


Percent


Amount


Percent($ in thousands)Comparable Chi-Chis

$
(1,745
)

(3.4
)%

$
(4,840
)

(4.7
)%Comparable Koo Koo Roo


(896
)

(8.7
)


(1,958
)

(9.4
)Comparable Hamburger Hamlet


(411
)

(5.0
)


(875
)

(5.3
)Total

$
(3,052
)

(4.4
)%

$
(7,673
)

(5.5
)%





Sales for comparable Chi-Chis restaurants declined 3.4% in
the second quarter of 2002 compared to the same period in 2001. During the second quarter, Chi-Chis introduced the Salsafication Guarantee that promises guests that they will be totally satisfied or their meal is free. Additionally,
Chi-Chis introduced a new menu section, Southwest Grill, that featured all grilled items with an emphasis on fajitas that are flamed at the table. Both introductions were supported by a combination of print and broadcast media. Sales for Cinco
de Mayo in 2002 were unfavorable compared to sales for the same holiday for 2001 because the holiday fell on Sunday (traditionally, people are less likely to celebrate extensively on a Sunday) in 2002 versus on a Saturday in 2001. In addition,
unusually cold weather in some markets reduced participation in outside celebrations for Cinco de Mayo in 2002.





Koo Koo Roo introduced and promoted three additional bowl offerings during this period, the Chicken Tostada Bowl, the Spicy Ginger Garlic Chicken Bowl and the Firecracker Chicken Bowl. Even though sales of these items doubled sales
of the bowl menu category, during the second quarter of 2002, sales for comparable Koo Koo Roo restaurants were 8.7% lower than the same period in 2001.





Second quarter 2002 comparable sales for Hamburger Hamlet were 5.0% lower than the




19




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second quarter of 2001. From a marketing perspective, the Spring 2002 Hamlet at Night menu which was introduced in March 2002
carried over into the second quarter of 2002. In addition, a coupon program was offered during the second quarter of 2002 which included offers of $10 off $30 or $5 off $20 purchases.





As noted above, sales for comparable restaurants have declined in 2002 as compared to 2001 for each of the Companys restaurant concepts. In spite of this issue, the
Company has reported an improvement in operating loss and EBITDA (as defined) during the first six months of 2002 due to various reductions in costs which are described in the following paragraphs. If sales for comparable restaurants dont
improve in the future, cost reductions may not be available to continue to offset the impact of declining sales, and a reduction in operating cash flow could result. This could cause a risk to the Companys ability to comply with the terms of
its financing agreements.





Product costs of $16,584,000 for the second quarter of 2002 decreased $3,262,000 or
16.4% as compared to the same period in 2001. For the first six months of 2002, product costs of $33,850,000 decreased by $6,457,000 or 16.0% as compared to the same period in 2001. Product costs as a percentage of sales for the second quarter of
2002 decreased 2.0 percentage points from 26.6% in 2001 to 24.6% in 2002. For the first six months of 2002, product costs as a percentage of sales decreased 1.8 percentage points from 26.8% in 2001 to 25.0% in 2002. The product costs decreases as a
percentage of sales were related to improved waste management in the restaurants and favorable produce and poultry prices with declines from closed restaurants also contributing to the overall cost declines.





Payroll and related costs of $23,660,000 decreased $2,849,000 or 10.7% for the second quarter of 2002 as compared to the second quarter of
2001. For the first six months of 2002, payroll and related costs of $48,148,000 decreased $5,968,000 or 11.0% as compared to the same period in 2001. As a percentage of sales, payroll and related costs were 35.1% in the second quarter of 2002, 0.5
percentage point lower than the same period in 2001. For the first six months of 2002, payroll and related costs were 35.6% of sales, 0.4 percentage point lower than the same period in 2001. The payroll and related costs decreases as a percentage of
sales were the result of improved scheduling efficiencies in the restaurants with declines from closed restaurants also contributing to the overall cost declines.





The Company is subject to Federal and state laws governing matters such as minimum wages, overtime and other working conditions. Approximately half of the Companys
employees are paid at rates related to the minimum wage. Therefore, increases in the minimum wage or decreases in the allowable tip credit (tip credits reduce the minimum wage that must be paid to tipped employees in certain states) increase the
Companys labor costs. This is especially true in California, where there is no tip credit. In October 2000, the California Industrial Welfare Commission voted to increase the states minimum wage by 50¢ to $6.25 on January 1, 2001
and another 50¢ increase to $6.75 on January 1, 2002. No increases to the $5.15 Federal minimum wage are currently scheduled for 2002. In response to previous minimum wage increases, the Company has implemented various menu price increases.
Each of the Companys concepts raised prices in early 2001 and again in the second quarter of 2002.





Occupancy and other operating expenses were $18,856,000 for the second quarter of 2002, $3,546,000 or 15.8% lower than the same period in 2001. For the first six months of 2002, occupancy and other operating expenses of $37,778,000
decreased by $7,012,000 or 15.7% as compared to the same period in 2001. As a percentage of sales, occupancy and other operating expenses were 27.9% in the second quarter of 2002, 2.2 percentage points lower than the same period in 2001. For the
first six months of 2002, occupancy and other operating expenses were 27.9% as a percentage of sales, 1.9 percentage points lower than the same period in 2001. The primary reasons for the decreased percentage of sales were reduced advertising
expenses in Chi-Chis and Koo Koo Roo and lower utilities expense, particularly natural gas for Chi-Chis. The remainder of the decrease in occupancy and other operating expenses was related to closed restaurants.




20




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Depreciation and amortization of $3,062,000 for the second quarter of 2002
decreased by $838,000 or 21.5% as compared to the same period in 2001. For the first six months of 2002, depreciation and amortization of $6,085,000 decreased by $1,992,000 or 24.7% as compared to the same period in 2001. These decreases were due to
the impact of restaurants sold or closed since the beginning of 2001 and the reduced depreciable basis from the reclassification of assets from property and equipment to assets held for sale and the impairment write-down of certain long-lived
assets.





General and administrative expenses for the second quarter of 2002 were $4,094,000, $1,748,000 or 29.9%
lower than the same period in 2001. For the first six months of 2002, general and administrative expenses were $8,765,000, $2,950,000 or 25.2% lower than the first six months of 2001. As a percentage of sales, general and administrative expenses
were 6.1% in the second quarter of 2002, 1.7 percentage points lower than the same period in 2001 and 6.5% in the first six months of 2002, 1.3 percentage points lower than the first six months of 2001. Structural reductions in the Companys
support center implemented in 2001 generated approximately $1.0 million of savings in the second quarter of 2002 and $2.1 million of savings in the first six months of 2002. Additional cost savings measures have been introduced in 2002 and were
responsible for the remainder of the year-over-year improvement.





Opening costs are incurred in connection with
the opening or remodeling of a restaurant and are principally related to stocking the restaurant and training its staff. There were no opening costs in the second quarter of 2002 and only $1,000 in the first six months of 2002 as no new restaurants
or remodels were opened in 2002. Opening costs for the second quarter and first six months of 2001 were $57,000 and $107,000, respectively.





The Company reported a loss on disposition of properties of $513,000 in the second quarter of 2002 as compared to a loss of $369,000 for the second quarter of 2001. For the first six months of 2002,
the Company reported a loss on disposition of properties of $654,000 as compared to a loss on disposition of properties of $771,000 for the same period in 2001.





In the second quarter and first six months of 2002, the Company recorded provisions for divestitures and write-down of long-lived assets of $550,000 and $2,757,000, respectively. In 2001, the Company
recorded a provision for divestitures of $189,000. The provisions for divestitures in 2002 were primarily composed of (i) $250,000 for the write-off of a liquor license; (ii) $481,000 for lease terminations; and (iii) $2.0 million related to the
proposed sale of the Hamburger Hamlet Chain.





The Company reported restructuring costs of $1,391,000 in the second
quarter of 2002 as compared to $2,057,000 for the second quarter of 2001. For the first six months of 2002, the Company reported restructuring costs of $1,772,000 as compared to $2,553,000 for the same period of 2001. In 2002, these costs are
primarily related to amounts paid to legal and financial advisors in connection with the Companys restructuring, including a $750,000 success fee earned by the Companys financial advisor in the second quarter of 2002. In 2001, these
costs also included accrued severance and related costs due to an organizational restructuring.





Interest expense,
net for the second quarter of 2002 of $3,056,000 decreased by $4,010,000 or 56.8% as compared to the same period in 2001. For the first six months of 2002, interest expense, net of $10,529,000 decreased by $3,183,000 or 23.2% as compared to the same
period in 2001. These decreases were due to the non-accrual of $4,317,000 of contractual interest on the Prandium




21




---

Notes and the Old FRI-MRD Notes since the filing of the Reorganization Case, partially offset by charges related to defaults under the Old
Credit Facility and reduced interest income on excess cash balances.





The Company reported reorganization items of
$492,000 for the second quarter of 2002. These costs relate to legal and professional fees incurred during the pendency of the Reorganization Case.





Seasonality





The Company, as a whole, does not experience significant seasonal
fluctuations in sales. However, the Companys sales tend to be slightly greater during the spring and summer months.





Selected
Division Operating Data





The following table sets forth certain information regarding (i) the Company;
(ii) its ongoing Chi-Chis restaurants, Koo Koo Roo restaurants and Hamburger Hamlet restaurants (both acquired on October 30, 1998) and other operating restaurants; and (iii) the El Torito restaurant division divested on June 28, 2000. At June
30, 2002, the Company operated 131 full-service Chi-Chis restaurants, 30 fast-casual Koo Koo Roo restaurants, 14 full-service Hamburger Hamlet restaurants and one other restaurant.







22




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For the Quarters Ended


For the Six Months EndedJune 30, 2002


July 1, 2001


June 25, 2000


June 30, 2002


July 1, 2001


June 25, 2000($ in thousands, except average check amount)Chi-Chis Restaurant DivisionRestaurants Open at End of Period:Owned/operated


131



139



143



131



139



143Franchised and Licensed


8



13



13



8



13



13Sales

$
49,288


$
52,602


$
55,916


$
98,503


$
106,059


$
111,855Restaurant Level Cashflow(a)


5,991



3,734



3,882



11,335



7,215



9,571Divisional EBITDA(b)


2,982



528



579



5,022



857



2,965Percentage increase (decrease) in comparable restaurant sales


(3.4
)%


(3.5
)%


0.3
%


(4.7
)%


(2.1
)%


0.7
%Average check (excluding alcoholic beverage sales)

$
11.53


$
10.96


$
9.96


$
11.50


$
10.87


$
10.03Koo Koo Roo Restaurants(c)Restaurants Open at End of Period:Owned/operated


30



38



43



30



38



43Franchised and Licensed






















Sales

$
9,678


$
12,420


$
13,794


$
19,658


$
25,280


$
27,576Restaurant Level Cashflow(a)


1,278



653



1,351



2,144



1,434



2,655Divisional EBITDA(b)


429



(524
)


132



397



(955
)


188Percentage decrease in comparable restaurant sales


(8.7
)%


(9.2
)%


(5.9
)%


(9.4
)%


(7.7
)%


(4.8
)%Average transaction

$
10.05


$
9.62


$
9.26


$
9.84


$
9.69


$
9.23Hamburger Hamlet Restaurants(c)Restaurants Open at End of Period:Owned/operated


14



14



14



14



14



14Franchised and Licensed






















Sales

$
7,811


$
8,222


$
8,323


$
15,713


$
16,588


$
16,541Restaurant Level Cashflow(a)


1,043



1,307



1,374



2,133



2,600



2,713Divisional EBITDA(b)


777



980



1,059



1,590



1,951



2,106Percentage increase (decrease) in comparable restaurant sales


(5.0
)%


(1.2
)%


(0.4
)%


(5.3
)%


0.3
%


0.3
%Average check (including alcoholic beverage sales)

$
11.96


$
11.70


$
11.28


$
11.99


$
11.78


$
11.28Other Operating RestaurantsRestaurants Open at End of Period:Owned operated


1



3



6



1



3



6Franchised and Licensed






















Sales

$
717


$
1,284


$
1,763


$
1,515


$
2,583


$
3,497Restaurant Level Cashflow(a)


82



77



119



1



48



173Divisional EBITDA(b)


11



(997
)


54



(156
)


(2,189
)


38Ongoing OperationsRestaurants Open at End of Period:Owned/operated


176



194



206



176



194



206Franchised and Licensed


8



13



13



8



13



13Sales

$
67,494


$
74,528


$
79,796


$
135,389


$
150,510



159,469Restaurant Level Cashflow(a)


8,394



5,771



6,726



15,613



11,297



15,112Divisional EBITDA(b)


4,199



(13
)


1,824



6,853



(336
)


5,297Divested Operations(d)Restaurants Open at End of Period:Owned/operated










95











95Franchised and Licensed










11











11Sales

$



$



$
58,059


$



$



$
111,500Restaurant Level Cashflow(a)










10,386











18,791Divisional EBITDA(b)










7,648











13,238Total CompanyRestaurants Open at End of Period:Owned/operated


176



194



301



176



194



301Franchised and Licensed


8



13



24



8



13



24Sales

$
67,494


$
74,528


$
137,855


$
135,389



150,510


$
270,969EBITDA(e)


4,300



(71
)


9,419



6,848



(418
)


18,427


---

|(a) |  | Restaurant Level Cashflow with respect to any operating division represents Divisional EBITDA (as defined below) before general and administrative expenses and
any net franchise profit or miscellaneous income (expense) reported by the respective division.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Divisional EBITDA with respect to any operating division is defined as earnings (loss) before opening costs, gain (loss) on disposition of properties, interest,
taxes, depreciation and amortization. Corporate general and administrative expenses that would have been allocated to the El Torito Division prior to the sale of that division are being charged to Other Operating Restaurants in 2001 so as not to
distort the year-over-year comparisons of the Chi-Chis, Koo Koo Roo and Hamburger Hamlet restaurants.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | During fiscal 2001 and 2000, Koo Koo Roo and Hamburger Hamlet shared certain divisional support functions, the cost of which was absorbed by Koo Koo Roo.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | Divested Operations represents the results of the El Torito Division until it was divested on June 28, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------

|(e) |  | EBITDA is defined as earnings (loss) before opening costs, gain (loss) on disposition of properties, gain on sale of division, provision for divestitures and
write-down of long-lived assets, restructuring costs, reorganization items, interest, taxes, depreciation and amortization and extraordinary items. The Company has included information concerning EBITDA herein because it understands that such
information is used by certain investors as one measure of an issuers historical ability to service debt. EBITDA should not be considered as an alternative to, or more meaningful than, operating income (loss) as an indicator of operating
performance or to cash flows from operating activities as a measure of liquidity. Furthermore, other companies may compute EBITDA differently, and therefore, EBITDA amounts among companies may not be comparable.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






23




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Item 3.    Quantitative and Qualitative Disclosure about Market Risk





Interest Rate Risk





The Companys primary exposure to financial market risks is the impact that interest rate changes could have had on the Old Credit Facility and could have on the New Credit Facility, under which
no working capital borrowings were outstanding as of June 30, 2002 and August 9, 2002, respectively. Borrowings under the New Credit Facility bear interest at the prime rate as announced by Wells Fargo Bank plus 4.25%.




24




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PART II.  OTHER INFORMATION





Item 1.    Legal Proceedings





On January 26, 2001, a purported stockholder of Prandium initiated a stockholder derivative suit against the Company and Kevin S. Relyea, in the Superior Court of the State of California for the County
of Orange, seeking, among other things, compensatory damages, a constructive trust, punitive damages and attorneys fees. The suit arose out of the sale by AIF II, L.P. on December 29, 2000, of 95,831,997 shares of Prandiums common stock
to Mr. Relyea for a cash purchase price of $15,000. Mr. Relyea is Prandiums Chief Executive Officer and President. The suit alleged that Mr. Relyea improperly usurped the stock purchase opportunity from the Company and also alleged
constructive fraud.





On February 13, 2001, a similar stockholder derivative suit was filed in the Superior Court
of the State of California for the County of Orange by another purported stockholder against the Company and Mr. Relyea. This suit arose out of the same set of facts as the suit filed on January 26, 2001 and sought similar damages and fees. On April
25, 2001, the court ruled that the two cases were related and would proceed before the same judge. However, on June 28, 2001, the court in the case filed on February 13, 2001 granted the plaintiffs request to dismiss his complaint without
prejudice. While the Company and Mr. Relyea believe that there exist valid defenses to each of the claims asserted, it was determined that a potentially successful defense of the suit would likely be more expensive than settlement.





The Company, Mr. Relyea, and the plaintiff in the suit filed on January 26, 2001 executed a Stipulated Settlement of Derivative
Claims, under which Mr. Relyea agreed to certain restrictions on the sale of the block of Prandiums stock purchased on December 29, 2000. Such stock, together with the rest of Prandiums old common stock, was cancelled without receiving
any consideration on July 2, 2002 pursuant to the Plan. Without admitting liability, the Company and Mr. Relyea agreed not to oppose an application for attorneys fees by plaintiffs counsel of $99,000 as part of the settlement. On March
14, 2002, the Board of Directors voted to approve the Stipulated Settlement of Derivative Claims, with Mr. Relyea abstaining from voting. The plaintiff subsequently filed a Motion to Approve Settlement of Action and for an Award of Attorneys
Fees. The Superior Court held a hearing on this motion on April 9, 2002 and entered a Notice of Entry of Judgment and Final Judgment approving the Stipulated Settlement of Derivative Claims and the award of attorneys fees. The cost of the
settlement was covered by insurance. On July 22, 2002, the Superior Court granted a request to dismiss the January 26, 2001 suit with prejudice.





See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebt Restructuring1.  Reorganization
Plan for a discussion of the Reorganization Case.





The Company is involved in various other litigation
matters incidental to its business. The Company does not believe that any of the existing claims or actions will have a material adverse effect upon the consolidated financial position or results of operations of the Company.





Item 2.    Changes in Securities and Use of Proceeds





None.





Item 3.    Defaults
Upon Senior Securities




25




---




Prandium failed to pay the interest and principal that came due February 1, 2001,
August 1, 2001 and February 1, 2002 with respect to the Prandium Notes. In addition, FRI-MRD failed to pay the interest and principal due January 31, 2001, July 31, 2001 and January 24, 2002 with respect to the Old FRI-MRD Notes. Under the terms of
the note agreements governing the Old FRI-MRD Notes and the indentures governing the Prandium Notes, these non-payments became Events of Default and the holders of all such debt became entitled to certain rights, including the right to
accelerate the debt. The unpaid principal amount on the Old FRI-MRD Notes as of May 5, 2002 amounted to $99,000,000 and the amount of interest due and not paid on the Old FRI-MRD Notes as of May 5, 2002 amounted to $25,848,000. The unpaid principal
amount on the Prandium Notes as of May 5, 2002 amounted to $134,356,000 and the amount of interest due and not paid on the Prandium Notes as of May 5, 2002 amounted to $23,791,000. The Prandium Notes and Old FRI-MRD Notes were cancelled in
accordance with the terms of the Plan which was confirmed by the Bankruptcy Court on June 20, 2002 and for which the Closing occurred on July 2, 2002.





Item 4.    Submission of Matters to a Vote of Security Holders





On April 8, 2002, Prandium and FRI-MRD commenced a solicitation of acceptances of the Plan from the holders of the 93/4% Prandium Notes and the holders of the Old FRI-MRD Notes through the mailing of a copy of (i) a disclosure statement describing the Plan, (ii) the Plan and (iii) the appropriate ballots for voting. The Company established
May 3, 2002 as the deadline for the receipt of votes to accept or reject the Plan. Prandium did not solicit votes from the holders of the 107/8% Prandium Notes or its old common stock who were deemed to have rejected the Plan. Holders of the requisite amounts of the Old FRI-MRD Notes and the 93/4% Prandium Notes voted to accept the Plan. Specifically,





(1)    Three beneficial holders of the 14% FRI-MRD Notes, holding an aggregate principal amount of $24,000,000 (100% of the total outstanding principal)
voted to accept the Plan;





(2)    Sixteen beneficial holders of the 15% FRI-MRD Notes, holding
an aggregate principal amount of $72,500,000 (100% of the outstanding principal amount of holders who voted and 96.67% of the total outstanding principal), voted to accept the Plan; and





(3)    One hundred nineteen beneficial holders of the 93/4% Prandium Notes, holding an aggregate principal amount of $62,886,000 (98.18% of the outstanding principal amount of holders who voted and approximately 61% of the total outstanding principal), voted
to accept the Plan. Twenty-eight beneficial holders, holding an aggregate principal amount of $1,165,000 (1.82% of the outstanding principal amount of holders who voted and approximately 1% of the total outstanding principal), voted to reject the
Plan.





Pursuant to the Plan, on July 2, 2002, the Board of Directors of Prandium is to be comprised of five
members. Initially, the Plan appointed Kevin S. Relyea, William G. Knuff III, Joseph C. Miller, Paul E. Suckow and an individual to be designated by the Representative. As of August 9, 2002, the Board of Directors consisted of Messrs. Relyea, Knuff,
Miller and Suckow with a vacancy existing as a result of the Representatives designee not yet having been chosen. The members of the Board of Directors of Prandium prior to July 2, 2002, other than Mr. Relyea, were deemed to have resigned at
the Closing.




26




---







Item 5.    Other InformationNone.Item 6.    Exhibits and Reports on Form 8-K(a)    Exhibits


2 (a)

Agreement and Plan of Merger, dated as of June 9, 1998 by and among Prandium, Fri-Sub, Inc. and Koo Koo Roo, Inc. (Filed as Exhibit 2.1 to the
Companys Form S-4 filed with the SEC on July 1, 1998.)2 (b)

Stock Purchase Agreement dated as of March 27, 2000, by and among Prandium, FRI-MRD Corporation and Acapulco Acquisition Corp. (Filed as Exhibit
2(b) to the Companys Form 10-K filed with the SEC on March 29, 2000.)2 (c)

Amendment No. 1 to Stock Purchase Agreement dated as of June 28, 2000, by and among Prandium, FRI-MRD Corporation and Acapulco Acquisition Corp.
(Filed as Exhibit 2.2 to the Companys Form 8-K filed with the SEC on July 5, 2000.)2 (d)

Stock Purchase Agreement, dated as of May 10, 2002, by and among FRI-MRD Corporation, Prandium and Latin Intellectual Properties, Inc. (Filed as
Exhibit 2(d) to the Companys Form 10-Q filed with the SEC on May 15, 2002.)3 (a)

Seventh Restated Certificate of Incorporation of Prandium. (Filed as Exhibit 4.1 to the Companys Form S-8 filed with the SEC on July 3,
2002.)3 (b)

Third Amended and Restated Bylaws of Prandium. (Filed as Exhibit 4.2 to the Companys Form S-8 filed with the SEC on July 3,
2002.)4 (a)

Indenture Dated as of January 27, 1994Re: $300,000,000 93/4% Senior Notes Due 2002. (Filed as Exhibit 4(a) to the Companys Form 10-K filed with the SEC on March 28, 1994.)4 (b)

Indenture Dated as of January 27, 1994Re: $150,000,000 107/8% Senior Subordinated Discount Notes Due 2004. (Filed as Exhibit 4(b) to the Companys Form 10-K filed with the SEC on March 28, 1994.)4 (c)

First Supplemental Indenture, dated as of July 3, 1996, between Prandium and IBJ Schroder Bank & Trust Company, a New York Banking
corporation, as Trustee. (Filed as Exhibit 10.1 to the Companys Form 8-K filed with the SEC on July 9, 1996.)




27




---




4
(d)

First Supplemental Indenture, dated as of July 3, 1996, between Prandium and Fleet National Bank, as successor by
merger to Fleet National Bank of Massachusetts, formerly known as Shawmut Bank, N.A., as Trustee. (Filed as Exhibit 10.2 to the Companys Form 8-K filed with the SEC on July 9, 1996.)4
(e)

Note Agreement Dated as of August 12, 1997 Re: Up to $75,000,000 FRI-MRD Corporation Senior Discount Notes Due January 24, 2002. (Filed as Exhibit 4(e) to the Companys Form 10-Q filed with the SEC on November 12, 1997.)4
(f)

Joinder Agreement Dated as of January 14, 1998Re: FRI-MRD Corporation Senior Discount Notes due January 24, 2002. (Filed as Exhibit 4(f) to the Companys Form
10-K filed with the SEC on March 30, 1998.)4
(g)

First Amendment dated as of June 9, 1998 to the Note Agreement dated August 12, 1997. (Filed as Exhibit 4.7 to the
Companys Form S-4 filed with the SEC on July 1, 1998.)4
(h)

Note Agreement dated as of June 9, 1998 Re: $24,000,000 FRI-MRD Corporation Senior Secured Discount Notes due January
24, 2002. (Filed as Exhibit 4.8 to the Companys Form S-4 filed with the SEC on July 1, 1998.)4
(i)

First Amendment dated as of October 30, 1998 to the Note Agreement dated as of June 9, 1998. (Filed as Exhibit 4(i)
to the Companys Form 10-Q filed with the SEC on November 12, 1998.)4
(j)

Waiver dated as of January 29, 1999 to the Note Agreements dated as of August 12, 1997 and June 9, 1998. (Filed as
Exhibit 4(j) to the Companys Form 10-K filed with the SEC on March 29, 1999.)*4
(k)

Note Agreement Dated as of July 2, 2002 Re: Up to $80,000,000 FRI-MRD Corporation Senior Secured Notes Due January
31, 2005.10
(a)

Offering Memorandum and Disclosure Statement describing Prandium and FRI-MRD Corporations Chapter 11 Plan of
Reorganization dated April 1, 2002 (including Prandium and FRI-MRD Corporations Chapter 11 Plan of Reorganization and all exhibits thereto, except for filings under the Securities Act of 1934). (Filed as Exhibit 99.2 to the Companys Form
8-K filed with the SEC on April 9, 2002.)10
(b)

First Supplement, dated April 5, 2002, to Offering Memorandum and Disclosure Statement describing Prandium and
FRI-MRD Corporations Chapter 11 Plan of Reorganization dated April 1, 2002. (Filed as Exhibit 99.3 to the Companys Form 8-K filed with the SEC on April 9, 2002.)




28




---




10
(c)

Lock-up Agreement, dated as of April 1, 2002, by and among Prandium and certain members of that certain informal
group of holders of Prandiums 93/4% Senior Notes due 2002 listed therein. (Filed as Exhibit 99.4 to the
Companys Form 8-K filed with the SEC on April 9, 2002.)10
(d)

Order (1) Confirming Prandium and FRI-MRDs Joint Reorganization Plan; and (2) Granting Related Relief by order
of the United States Bankruptcy Court for the Central District of California, dated June 20, 2002. (Filed as Exhibit 99.1 to the Companys Form 8-K filed with the SEC on June 24, 2002.)10
(e)

Prandium and FRI-MRDs Joint Reorganization Plan, dated May 6, 2002, filed with the United States Bankruptcy
Court for the Central District of California. (Filed as Exhibit 99.2 to the Companys Form 8-K filed with the SEC on June 24, 2002.)10
(f)

Prandium, Inc. 2002 Stock Incentive Plan (Filed as Exhibit 99.1 to the Companys Form S-8 filed with the SEC on
July 3, 2002.)*10
(g)

Loan and Security Agreement by and among Prandium, FRI-MRD Corporation, Chi-Chis, Inc., Koo Koo Roo, Inc.,
certain of their subsidiaries and Foothill Capital Corporation, dated as of July 2, 2002.*10
(h)

Nominating Agreement, dated July 2, 2002, by and between Prandium and MacKay Shields LLC.*99


Certification of the Chief Executive Officer and Chief Financial Officer.


---

|* |  | Filed herewith.
|- |  | ---------------




(b)  Reports on Form 8-K.





On April 9, 2002, the Company
filed a report on Form 8-K announcing that the Company and FRI-MRD had commenced a solicitation of votes on a joint prepackaged reorganization plan.





On June 25, 2002, the Company filed a report on Form 8-K announcing that the Bankruptcy Court had entered an order confirming the Company and FRI-MRDs joint prepackaged reorganization
plan.




29




---




SIGNATURE





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.





Prandium, Inc.


(Registrant)





By: /s/ Robert T. Trebing,
Jr.


Robert T. Trebing, Jr.


Executive Vice President and


Chief Financial Officer


(Duly Authorized Officer and


Principal Financial Officer)





Date: August 14, 2002




30