##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIESEXCHANGE ACT OF 1934
 For the quarterly period ended December 13, 2006
 Commission file number: 333-116897
 BUFFETS HOLDINGS, INC.
  Delaware
    
    22-3754018(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)1460 Buffet Way 
Eagan, Minnesota
    
    55121(Address of principal 
executive offices)
    
    (Zip Code)
 (651) 994-8608
 o þ
   o o þ
 o þ




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##### 



BUFFETS HOLDINGS, INC.
TABLE OF CONTENTS
  
 PagePart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets (Unaudited) as of June 28,
2006 and December 13, 2006
    
    
    3Condensed Consolidated Statements of Operations (Unaudited)  12
Weeks and 24 Weeks Ended December 14, 2005 and December 13, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)  12
Weeks and 24 Weeks Ended December 14, 2005 and December 13, 2006
    
    
    5Notes to the Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    41Part II. Other InformationItem 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    42Item 6. Exhibits
    
    
    44Certification of Principal Executive OfficerCertification of Principal Financial and Accounting OfficerCertification of Principal Executive OfficerCertification of Principal Financial Officer
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 28,
    
    
    December 13,2006
    
    
    2006(Unaudited)(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    20,219
    
    
    $
    8,220Receivables
    
    
    4,879
    
    
    
    7,922Inventories
    
    
    18,926
    
    
    
    32,222Prepaid expenses and other current assets
    
    
    5,384
    
    
    
    13,468Deferred income taxes
    
    
    10,324
    
    
    
    15,168Assets held for sale
    
    
    
    
    
    
    47,411Total current assets
    
    
    59,732
    
    
    
    124,411PROPERTY AND EQUIPMENT, net
    
    
    141,404
    
    
    
    243,606GOODWILL
    
    
    312,163
    
    
    
    555,661DEFERRED INCOME TAXES
    
    
    13,683
    
    
    
    8,551OTHER ASSETS, net
    
    
    11,514
    
    
    
    57,136Total assets
    
    $
    538,496
    
    
    $
    989,365LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable
    
    $
    48,101
    
    
    $
    59,582Accrued liabilities
    
    
    68,344
    
    
    
    114,633Income taxes payable
    
    
    6,977
    
    
    
    42,947Short-term debt
    
    
    
    
    
    
    16,250Current maturities of long-term debt
    
    
    1,862
    
    
    
    3,975Total current liabilities
    
    
    125,284
    
    
    
    237,387LONG-TERM DEBT, net of current maturities
    
    
    460,652
    
    
    
    826,025DEFERRED LEASE OBLIGATIONS
    
    
    28,356
    
    
    
    28,600OTHER LONG-TERM LIABILITIES
    
    
    7,355
    
    
    
    16,580Total liabilities
    
    
    621,647
    
    
    
    1,108,592COMMITMENTS
AND CONTINGENCIES (Note 13)SHAREHOLDERS DEFICIT:Preferred stock; $.01 par value, 1,100,000 shares
authorized; none issued and outstanding as of
June 28, 2006 and December 13, 2006
    
    
    
    
    
    
    Common stock; $.01 par value, 3,600,000 shares
authorized; 3,104,510 shares issued and
outstanding as of June 28, 2006 and 3,104,510 as
of December 13, 2006
    
    
    31
    
    
    
    31Additional paid in capital
    
    
    5
    
    
    
    5Accumulated deficit
    
    
    (83,187
    )
    
    
    (119,263
    )Total shareholders deficit
    
    
    (83,151
    )
    
    
    (119,227
    )Total liabilities and shareholders deficit
    
    $
    538,496
    
    
    $
    989,365
  3




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Twelve Weeks Ended
    
    
    Twenty Four Weeks EndedDecember 14,
    
    
    December 13,
    
    
    December 14,
    
    
    December 13,2005
    
    
    2006
    
    
    2005
    
    
    2006(Unaudited)
    
    
    (Unaudited)(In thousands)
    
    
    (In thousands)RESTAURANT SALES
    
    $
    218,274
    
    
    $
    297,891
    
    
    $
    445,012
    
    
    $
    519,167RESTAURANT COSTS:Food
    
    
    74,201
    
    
    
    102,630
    
    
    
    148,976
    
    
    
    179,184Labor
    
    
    63,545
    
    
    
    90,523
    
    
    
    127,687
    
    
    
    153,216Direct and occupancy
    
    
    52,818
    
    
    
    75,703
    
    
    
    105,917
    
    
    
    129,189Total restaurant costs
    
    
    190,564
    
    
    
    268,856
    
    
    
    382,580
    
    
    
    461,589ADVERTISING EXPENSES
    
    
    9,717
    
    
    
    7,722
    
    
    
    16,900
    
    
    
    14,949GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    10,056
    
    
    
    14,285
    
    
    
    20,102
    
    
    
    24,013CLOSED RESTAURANT COSTS
    
    
    842
    
    
    
    817
    
    
    
    1,098
    
    
    
    1,559IMPAIRMENT OF ASSETS
    
    
    1,350
    
    
    
    
    
    
    
    1,350
    
    
    
    MERGER INTEGRATION COSTS
    
    
    
    
    
    
    3,074
    
    
    
    
    
    
    
    3,514LOSS ON SALE LEASEBACK TRANSACTIONS
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    2,498OPERATING INCOME
    
    
    5,745
    
    
    
    639
    
    
    
    22,982
    
    
    
    11,045INTEREST EXPENSE
    
    
    11,913
    
    
    
    17,386
    
    
    
    23,781
    
    
    
    30,614INTEREST INCOME
    
    
    (121
    )
    
    
    (50
    )
    
    
    (203
    )
    
    
    (78
    )LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    40,042
    
    
    
    647
    
    
    
    40,285OTHER INCOME
    
    
    (287
    )
    
    
    (296
    )
    
    
    (484
    )
    
    
    (498
    )LOSS BEFORE INCOME TAXES
    
    
    (5,760
    )
    
    
    (56,443
    )
    
    
    (759
    )
    
    
    (59,278
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    (1,841
    )
    
    
    (21,507
    )
    
    
    36
    
    
    
    (23,202
    )Net loss
    
    $
    (3,919
    )
    
    $
    (34,936
    )
    
    $
    (795
    )
    
    $
    (36,076
    )
  4




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Twenty Four Weeks EndedDecember 14,
    
    
    December 13,2005
    
    
    2006(Unaudited)(In thousands)OPERATING ACTIVITIES:Net loss
    
    $
    (795
    )
    
    $
    (36,076
    )Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    14,611
    
    
    
    16,610Amortization of debt issuance cost
    
    
    707
    
    
    
    1,208Accretion of original issue discount
    
    
    6,151
    
    
    
    5,623Loss related to refinancing:Write off of debt issuance costs
    
    
    
    
    
    
    8,686Refinancing premiums expensed
    
    
    
    
    
    
    31,599Loss on disposal of assets
    
    
    287
    
    
    
    425Impairment of assets
    
    
    1,350
    
    
    
    Loss on sale of leaseback transactions
    
    
    
    
    
    
    2,498Deferred tax benefit
    
    
    
    
    
    
    (30,896
    )Changes in assets and liabilities:Receivables
    
    
    1,161
    
    
    
    1,264Inventories
    
    
    (64
    )
    
    
    195Prepaid expenses and other current assets
    
    
    1,065
    
    
    
    1,123Accounts payable
    
    
    (937
    )
    
    
    (2,574
    )Accrued and other liabilities
    
    
    4,505
    
    
    
    (6,209
    )Income taxes payable
    
    
    (2,256
    )
    
    
    4,371Net cash provided by (used in) operating activities
    
    
    25,785
    
    
    
    (2,153
    )INVESTING ACTIVITIES:Proceeds from sale leaseback transactions
    
    
    
    
    
    
    8,608Acquisitions, net of liabilities assumed
    
    
    
    
    
    
    (168,906
    )Purchase of property and equipment
    
    
    (12,080
    )
    
    
    (14,682
    )Collections on notes receivable
    
    
    360
    
    
    
    710Purchase of other assets
    
    
    (859
    )
    
    
    (258
    )Net cash used in investing activities
    
    
    (12,579
    )
    
    
    (174,528
    )FINANCING ACTIVITIES:Repayment of previous term loan facility
    
    
    (1,008
    )
    
    
    (182,053
    )Repurchase of 111/4 % senior subordinated notes
    
    
    
    
    
    
    (180,778
    )Repurchase of 137/8% senior discount notes
    
    
    
    
    
    
    (105,306
    )Repayment of Ryans debt
    
    
    
    
    
    
    (145,000
    )Proceeds from term loan funding
    
    
    
    
    
    
    530,000Proceeds from new revolver facility
    
    
    
    
    
    
    16,250Proceeds from 121/2% senior note issuance
    
    
    
    
    
    
    300,000Debt issuance costs
    
    
    
    
    
    
    (35,877
    )Payment of refinancing premiums
    
    
    
    
    
    
    (32,554
    )Purchase of treasury stock
    
    
    (6
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (1,014
    )
    
    
    164,682NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    12,192
    
    
    
    (11,999
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    20,662
    
    
    
    20,219CASH AND CASH EQUIVALENTS, end of period
    
    $
    32,854
    
    
    $
    8,220SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for Interest
(net of capitalized interest of $134 and $163)
    
    $
    18,209
    
    
    $
    30,991Income taxes
    
    $
    2,291
    
    
    $
    3,305
  5




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BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Nature of Organization
 Company Background
  Description of Business
 â â â SM â
 Merger with Ryans Restaurant Group, Inc.
    
    
    securing a new $640.0 million senior secured credit agreement (the
Credit Facility) comprised of (i) a $530.0 million senior secured
term loan (the Term Facility), (ii) a $40.0 million senior secured
revolving credit facility (the Revolving Facility), and (iii) a
$70.0 million senior secured pre-funded synthetic letter of credit
facility (the Synthetic Letter of Credit Facility), and
    
    issuing $300.0 million of its 121/2% senior notes due 2014 (the 121/2%
Senior Notes) pursuant to an indenture dated November 1, 2006 (the
Indenture).
 1 2
 
    
    pay $704.6 million to purchase the outstanding shares of Ryans common stock,
    
    repay $146.9 million of
Ryans outstanding debt (including accrued interest and breakage fees),
 6




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
    
    repay $196.4 million of existing indebtedness of Buffets, Inc. under its existing credit facility (including accrued
interest and breakage fees),
    
    repurchase or redeem $195.3 million of Buffets, Inc.s 111/4% senior subordinated notes (including accretion of original
issue discount and early redemption premiums),
    
    repurchase $121.5 million
of Buffets Holdings 13 7/8% senior discount notes (including
accretion of original issue discount and early redemption premiums), and
    
    pay approximately $46.1 million for transaction fees and expenses.
     Interim Financial Information
    Principles of Consolidation
  Fiscal Year
  7




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2. Summary of Significant Accounting Policies
 Segment Reporting
  Goodwill
   3. Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes
- an Interpretation of FASB Statement No. 109 (FIN 48), Accounting for Income Taxes.
 4. Stock-Based Compensation
    8




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5. Property and Equipment
  June 28,
    
    
    December 13,2006
    
    
    2006Land
    
    $
    762
    
    
    $
    10,355Buildings
    
    
    3,082
    
    
    
    43,179Equipment
    
    
    151,622
    
    
    
    218,217Leasehold improvements
    
    
    155,034
    
    
    
    150,228Accumulated depreciation and amortization
    
    
    (169,096
    )
    
    
    (178,373
    )$
    141,404
    
    
    $
    243,606
  6. Sale Leaseback Transaction
    9




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7. Other Assets
 June 28,
    
    
    December 13,2006
    
    
    2006Debt issuance costs
    
    $
    9,308
    
    
    $
    35,290Deposits
    
    
    477
    
    
    
    11,341Cash surrender value of deferred compensation funds
    
    
    
    
    
    
    5,608Other long-term assets
    
    
    1,729
    
    
    
    4,897$
    11,514
    
    
    $
    57,136
 1 2
     8. Accrued Liabilities
  June 28,
    
    
    December 13,2006
    
    
    2006Accrued compensation
    
    $
    17,634
    
    
    $
    34,098Accrued sales, use and property taxes
    
    
    6,348
    
    
    
    21,300Accrued workers compensation
    
    
    12,520
    
    
    
    19,985Accrued insurance
    
    
    8,178
    
    
    
    15,070Accrued interest
    
    
    13,552
    
    
    
    6,502Unearned revenue
    
    
    3,998
    
    
    
    6,181Closed restaurant reserve
    
    
    1,685
    
    
    
    1,357Accrued other
    
    
    4,429
    
    
    
    10,140$
    68,344
    
    
    $
    114,633
  10




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Closed Restaurant Reserve
    June 28,
    
    
    December 13,2006
    
    
    2006BALANCE, beginning of period (current and noncurrent in aggregate)
    
    $
    1,499
    
    
    $
    2,776Additions:Lease obligations charged to earnings
    
    
    4,847
    
    
    
    1,168Employee termination benefits charged to earnings
    
    
    444
    
    
    
    114Reductions:Cash payments:Lease termination costs and obligations
    
    
    3,570
    
    
    
    2,055Employee severance benefits
    
    
    444
    
    
    
    114BALANCE, end of period (current and noncurrent in aggregate)
    
    $
    2,776
    
    
    $
    1,889
   June 28,
    
    
    December 13,2006
    
    
    2006Number of restaurants:Expected to close as of the beginning of the period
    
    
    4
    
    
    
    1Closed during the period
    
    
    19
    
    
    
    12Identified for closure during the period
    
    
    16
    
    
    
    15Expected to close as of the end of the period
    
    
    1
    
    
    
    4
 June 28,
    
    
    December 13,2006
    
    
    2006Number of employees:Expected to be terminated as of the beginning of the period
    
    
    140
    
    
    
    35Terminated during the period
    
    
    665
    
    
    
    420Identified for termination during the period
    
    
    560
    
    
    
    525Expected to be terminated as of the end of the period
    
    
    35
    
    
    
    140
  2007
    
    $
    7422008
    
    
    9742009
    
    
    1182010
    
    
    402011
    
    
    14Thereafter
    
    
    1$
    1,889
 â
 11




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9. Debt
  Short-Term borrowings consist of the following:Revolving credit facility, interest at LIBOR plus
3.25%, due December 29, 2006 (interest rate at 8.57% as
of December 13, 2006)
    
    $
    16,250Current maturities of long-term debt
    
    
    3,975Total short-term borrowings
    
    $
    20,225Long-Term borrowings consist of the following:Term loan, interest at LIBOR plus 2.75%, due quarterly
through March 31, 2013 with remaining balance due
November 1, 2013 (interest rate at 8.37% as of December
13, 2006)
    
    
    530,000Senior
notes, interest at 12.5%, due November 1, 2014
    
    
    300,000830,000Less  Current maturities of long-term debt
    
    
    (3,975
    )Total long-term debt
    
    $
    826,025
  2007
    
    $
    1,3252008
    
    
    6,6252009
    
    
    5,3002010
    
    
    5,3002011
    
    
    3,975Thereafter
    
    
    807,475$
    830,000
 Merger Related Refinancing
 1 2 1 4 7 8
 Credit Facility
  12




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##### Table of Contents



121/2% Senior Notes
 1 2
 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
  1 2 1 2
 10. Acquisitions
 Ryans Restaurant Group
  13




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November 1,2006(in thousands)Cash
    
    $
    559,406Assets held for sale
    
    
    47,411Deferred tax assets
    
    
    7,320Other current assets
    
    
    27,723Property, plant & equipment
    
    
    111,241Goodwill
    
    
    243,499Other assets
    
    
    19,429Total assets acquired
    
    
    1,016,029Accounts payable
    
    
    13,998Current portion of long-term debt
    
    
    33,036Income taxes payable
    
    
    31,599Accrued liabilities
    
    
    54,462Deferred tax liability
    
    
    38,504Non-current liabilities
    
    
    119,537Total liabilities assumed
    
    
    291,135Net assets acquired
    
    
    724,894Less cash acquired
    
    
    559,406Net cash paid
    
    $
    165,488
    14




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Twelve Weeks Ended
    
    Twenty Four Weeks EndedDecember 14, 2005
    
    December 13, 2006
    
    December 14, 2005
    
    December 13, 2006Revenue
    
    $
    415,144
    
    
    $
    397,861
    
    
    $
    844,849
    
    
    $
    812,312Net income (loss)
    
    
    (10,911
    ) (1)
    
    
    (10,411
    ) (2)
    
    
    (14,870
    ) (3)
    
    
    (17,570
    ) (4)
 
     Norths Restaurants, Inc.
  11. Income Taxes
  7 8
 15




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##### Table of Contents



12. Related-Party Transactions
      13. Commitments and Contingencies
 Litigation
  16




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Operating Leases
   2007
    
    $
    56,3202008
    
    
    112,1752009
    
    
    109,7082010
    
    
    104,2122011
    
    
    98,113Thereafter
    
    
    1,339,290Total future minimum lease payments
    
    $
    1,819,818
  17




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##### Table of Contents



For the
    
    
    For the 24Year Ended
    
    
    Weeks EndedJune 28,
    
    
    December 13,2006
    
    
    2006Minimum rents
    
    $
    50,192
    
    
    $
    30,316Contingent rents
    
    
    3,708
    
    
    
    1,687Less: Sublease rents
    
    
    (2,357
    )
    
    
    (1,156
    )Deferred rents
    
    
    1,123
    
    
    
    2,068Percentage rents
    
    
    2,296
    
    
    
    1,082$
    54,962
    
    
    $
    33,998
  14. Condensed Consolidating Financial Statements
 1 2
  18




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Condensed Consolidating Balance Sheet
As of June 28, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    37
    
    
    $
    14,068
    
    
    $
    6,114
    
    
    $
    
    
    
    $
    20,219Receivables
    
    
    1,777
    
    
    
    485
    
    
    
    278,857
    
    
    
    (276,240
    )
    
    
    4,879Inventories
    
    
    
    
    
    
    845
    
    
    
    18,081
    
    
    
    
    
    
    
    18,926Prepaid expenses and other current assets
    
    
    3
    
    
    
    4,772
    
    
    
    609
    
    
    
    
    
    
    
    5,384Deferred income taxes
    
    
    64
    
    
    
    8,774
    
    
    
    1,486
    
    
    
    
    
    
    
    10,324Total current assets
    
    
    1,881
    
    
    
    28,944
    
    
    
    305,147
    
    
    
    (276,240
    )
    
    
    59,732PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    5,307
    
    
    
    136,097
    
    
    
    
    
    
    
    141,404GOODWILL, net
    
    
    
    
    
    
    18,730
    
    
    
    293,433
    
    
    
    
    
    
    
    312,163DEFERRED INCOME TAXES
    
    
    6,140
    
    
    
    7,543
    
    
    
    
    
    
    
    
    
    
    
    13,683OTHER ASSETS, net
    
    
    2,203
    
    
    
    141,401
    
    
    
    5,212
    
    
    
    (137,302
    )
    
    
    11,514Total assets
    
    $
    10,224
    
    
    $
    201,925
    
    
    $
    739,889
    
    
    $
    (413,542
    )
    
    $
    538,496LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    325,540
    
    
    
    2,788
    
    
    
    (280,227
    )
    
    
    48,101Accrued liabilities
    
    
    
    
    
    
    44,013
    
    
    
    24,331
    
    
    
    
    
    
    
    68,344Income taxes payable
    
    
    (36
    )
    
    
    7,013
    
    
    
    
    
    
    
    
    
    
    
    6,977Current maturities of long-term debt
    
    
    
    
    
    
    112
    
    
    
    1,750
    
    
    
    
    
    
    
    1,862Total current liabilities
    
    
    (36
    )
    
    
    376,678
    
    
    
    28,869
    
    
    
    (280,227
    )
    
    
    125,284LONG-TERM DEBT, net of current maturities
    
    
    99,991
    
    
    
    21,640
    
    
    
    339,021
    
    
    
    
    
    
    
    460,652DEFERRED LEASE OBLIGATIONS
    
    
    
    
    
    
    1,948
    
    
    
    26,408
    
    
    
    
    
    
    
    28,356OTHER LONG-TERM LIABILITIES
    
    
    
    
    
    
    3,024
    
    
    
    4,331
    
    
    
    
    
    
    
    7,355Total liabilities
    
    
    99,955
    
    
    
    403,290
    
    
    
    398,629
    
    
    
    (280,227
    )
    
    
    621,647COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY (DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    5
    
    
    
    82,311
    
    
    
    199,244
    
    
    
    (281,555
    )
    
    
    5Retained earnings (accumulated deficit)
    
    
    (89,767
    )
    
    
    (283,676
    )
    
    
    142,016
    
    
    
    148,240
    
    
    
    (83,187
    )Total shareholders equity (deficit)
    
    
    (89,731
    )
    
    
    (201,365
    )
    
    
    341,260
    
    
    
    (133,315
    )
    
    
    (83,151
    )Total liabilities and shareholders
equity (deficit)
    
    $
    10,224
    
    
    $
    201,925
    
    
    $
    739,889
    
    
    $
    (413,542
    )
    
    $
    538,496
 19




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##### Table of Contents



Condensed Consolidating Balance Sheet
As of December 13, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(Unaudited)(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    37
    
    
    $
    365
    
    
    $
    7,818
    
    
    $
    
    
    
    $
    8,220Receivables
    
    
    9,035
    
    
    
    910
    
    
    
    806,594
    
    
    
    (808,617
    )
    
    
    7,922Inventories
    
    
    
    
    
    
    846
    
    
    
    31,376
    
    
    
    
    
    
    
    32,222Prepaid expenses and other current
assets
    
    
    
    
    
    
    2,551
    
    
    
    10,917
    
    
    
    
    
    
    
    13,468Assets held for sale
    
    
    
    
    
    
    
    
    
    
    47,411
    
    
    
    
    
    
    
    47,411Deferred income taxes
    
    
    64
    
    
    
    7,784
    
    
    
    7,320
    
    
    
    
    
    
    
    15,168Total current assets
    
    
    9,136
    
    
    
    12,456
    
    
    
    911,436
    
    
    
    (808,617
    )
    
    
    124,411PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    4,283
    
    
    
    239,323
    
    
    
    
    
    
    
    243,606GOODWILL, net
    
    
    
    
    
    
    12,780
    
    
    
    542,881
    
    
    
    
    
    
    
    555,661DEFERRED INCOME TAXES
    
    
    6,140
    
    
    
    40,915
    
    
    
    (38,504
    )
    
    
    
    
    
    
    8,551OTHER ASSETS, net
    
    
    70
    
    
    
    479,414
    
    
    
    (287,557
    )
    
    
    (134,791
    )
    
    
    57,136Total assets
    
    $
    15,346
    
    
    $
    549,848
    
    
    $
    1,367,579
    
    
    $
    (943,408
    )
    
    $
    989,365LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    848,577
    
    
    
    20,193
    
    
    
    (809,188
    )
    
    
    59,582Accrued liabilities
    
    
    
    
    
    
    38,154
    
    
    
    76,479
    
    
    
    
    
    
    
    114,633Income taxes payable
    
    
    16,305
    
    
    
    37,892
    
    
    
    (11,250
    )
    
    
    
    
    
    
    42,947Short-term debt
    
    
    
    
    
    
    374
    
    
    
    15,876
    
    
    
    
    
    
    
    16,250Current maturities of long-term debt
    
    
    
    
    
    
    91
    
    
    
    3,884
    
    
    
    
    
    
    
    3,975Total current liabilities
    
    
    16,305
    
    
    
    925,088
    
    
    
    105,182
    
    
    
    (809,188
    )
    
    
    237,387LONG-TERM DEBT, net of current maturities
    
    
    
    
    
    
    18,999
    
    
    
    807,026
    
    
    
    
    
    
    
    826,025DEFERRED LEASE OBLIGATIONS
    
    
    
    
    
    
    2,128
    
    
    
    26,472
    
    
    
    
    
    
    
    28,600OTHER LONG-TERM LIABILITIES
    
    
    
    
    
    
    2,960
    
    
    
    13,620
    
    
    
    
    
    
    
    16,580Total liabilities
    
    
    16,305
    
    
    
    949,175
    
    
    
    952,300
    
    
    
    (809,188
    )
    
    
    1,108,592COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY (DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    5
    
    
    
    82,311
    
    
    
    196,733
    
    
    
    (279,044
    )
    
    
    5Retained earnings (accumulated deficit)
    
    
    (995
    )
    
    
    (481,638
    )
    
    
    218,546
    
    
    
    144,824
    
    
    
    (119,263
    )Total shareholders equity (deficit)
    
    
    (959
    )
    
    
    (399,327
    )
    
    
    415,279
    
    
    
    (134,220
    )
    
    
    (119,227
    )Total liabilities and shareholders
equity (deficit)
    
    $
    15,346
    
    
    $
    549,848
    
    
    $
    1,367,579
    
    
    $
    (943,408
    )
    
    $
    989,365
 20




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Twelve Weeks Ended December 14, 2005
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    10,095
    
    
    $
    208,179
    
    
    $
    
    
    
    $
    218,274RESTAURANT COSTS:Food
    
    
    
    
    
    
    3,593
    
    
    
    70,608
    
    
    
    
    
    
    
    74,201Labor
    
    
    
    
    
    
    2,999
    
    
    
    60,546
    
    
    
    
    
    
    
    63,545Direct and occupancy
    
    
    
    
    
    
    1,370
    
    
    
    51,448
    
    
    
    
    
    
    
    52,818Total restaurant costs
    
    
    
    
    
    
    7,962
    
    
    
    182,602
    
    
    
    
    
    
    
    190,564ADVERTISING EXPENSES
    
    
    
    
    
    
    449
    
    
    
    9,268
    
    
    
    
    
    
    
    9,717GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    2
    
    
    
    465
    
    
    
    9,589
    
    
    
    
    
    
    
    10,056CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    842IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    1,350OPERATING INCOME (LOSS)
    
    
    (2
    )
    
    
    1,219
    
    
    
    4,528
    
    
    
    
    
    
    
    5,745INTEREST EXPENSE
    
    
    2,978
    
    
    
    536
    
    
    
    8,399
    
    
    
    
    
    
    
    11,913INTEREST INCOME
    
    
    
    
    
    
    (121
    )
    
    
    
    
    
    
    
    
    
    
    (121
    )LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OTHER INCOME
    
    
    
    
    
    
    (287
    )
    
    
    
    
    
    
    
    
    
    
    (287
    )INCOME (LOSS) BEFORE
INCOME TAXES
    
    
    (2,980
    )
    
    
    1,091
    
    
    
    (3,871
    )
    
    
    
    
    
    
    (5,760
    )INCOME TAX EXPENSE
(BENEFIT)
    
    
    (1,474
    )
    
    
    484
    
    
    
    (851
    )
    
    
    
    
    
    
    (1,841
    )Net income (loss)
    
    $
    (1,506
    )
    
    $
    607
    
    
    $
    (3,020
    )
    
    $
    
    
    
    $
    (3,919
    )
 21




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Twenty Four Weeks Ended December 14, 2005
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    20,626
    
    
    $
    424,386
    
    
    $
    
    
    
    $
    445,012RESTAURANT COSTS:Food
    
    
    
    
    
    
    7,337
    
    
    
    141,639
    
    
    
    
    
    
    
    148,976Labor
    
    
    
    
    
    
    6,099
    
    
    
    121,588
    
    
    
    
    
    
    
    127,687Direct and occupancy
    
    
    
    
    
    
    2,871
    
    
    
    103,046
    
    
    
    
    
    
    
    105,917Total restaurant costs
    
    
    
    
    
    
    16,307
    
    
    
    366,273
    
    
    
    
    
    
    
    382,580ADVERTISING EXPENSES
    
    
    
    
    
    
    783
    
    
    
    16,117
    
    
    
    
    
    
    
    16,900GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    3
    
    
    
    932
    
    
    
    19,167
    
    
    
    
    
    
    
    20,102CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    1,098
    
    
    
    
    
    
    
    1,098IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    1,350OPERATING INCOME (LOSS)
    
    
    (3
    )
    
    
    2,604
    
    
    
    20,381
    
    
    
    
    
    
    
    22,982INTEREST EXPENSE
    
    
    5,957
    
    
    
    1,069
    
    
    
    16,755
    
    
    
    
    
    
    
    23,781INTEREST INCOME
    
    
    
    
    
    
    (203
    )
    
    
    
    
    
    
    
    
    
    
    (203
    )LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    647
    
    
    
    
    
    
    
    
    
    
    
    647OTHER INCOME
    
    
    
    
    
    
    (484
    )
    
    
    
    
    
    
    
    
    
    
    (484
    )INCOME (LOSS) BEFORE
INCOME TAXES
    
    
    (5,960
    )
    
    
    1,575
    
    
    
    3,626
    
    
    
    
    
    
    
    (759
    )INCOME TAX EXPENSE
(BENEFIT)
    
    
    (2,053
    )
    
    
    633
    
    
    
    1,456
    
    
    
    
    
    
    
    36Net income (loss)
    
    $
    (3,907
    )
    
    $
    942
    
    
    $
    2,170
    
    
    $
    
    
    
    $
    (795
    )
 22




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Twelve Weeks Ended December 13, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(Unaudited)(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    10,093
    
    
    $
    287,798
    
    
    $
    
    
    
    $
    297,891RESTAURANT COSTS:Food
    
    
    
    
    
    
    3,604
    
    
    
    99,026
    
    
    
    
    
    
    
    102,630Labor
    
    
    
    
    
    
    3,045
    
    
    
    87,478
    
    
    
    
    
    
    
    90,523Direct and occupancy
    
    
    
    
    
    
    (1,381
    )
    
    
    77,084
    
    
    
    
    
    
    
    75,703Total restaurant costs
    
    
    
    
    
    
    5,268
    
    
    
    263,588
    
    
    
    
    
    
    
    268,856ADVERTISING EXPENSES
    
    
    
    
    
    
    250
    
    
    
    7,472
    
    
    
    
    
    
    
    7,722GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    2
    
    
    
    491
    
    
    
    13,792
    
    
    
    
    
    
    
    14,285CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    817
    
    
    
    
    
    
    
    817MERGER INTEGRATION COSTS
    
    
    
    
    
    
    2,795
    
    
    
    279
    
    
    
    
    
    
    
    3,074LOSS ON SALE LEASEBACK
TRANSACTION
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    2,498OPERATING INCOME (LOSS)
    
    
    (2
    )
    
    
    1,289
    
    
    
    (648
    )
    
    
    
    
    
    
    639INTEREST EXPENSE
    
    
    1,818
    
    
    
    935
    
    
    
    14,633
    
    
    
    
    
    
    
    17,386INTEREST INCOME
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )LOSS RELATED TO REFINANCING
    
    
    18,044
    
    
    
    21,998
    
    
    
    
    
    
    
    
    
    
    
    40,042OTHER INCOME
    
    
    
    
    
    
    (296
    )
    
    
    
    
    
    
    
    
    
    
    (296
    )INCOME (LOSS) BEFORE
INCOME TAXES
    
    
    (19,864
    )
    
    
    (21,298
    )
    
    
    (15,281
    )
    
    
    
    
    
    
    (56,443
    )INCOME TAX EXPENSE
(BENEFIT)
    
    
    (8,936
    )
    
    
    (19,114
    )
    
    
    (11,329
    )
    
    
    
    
    
    
    (21,507
    )Net income (loss)
    
    $
    (28,800
    )
    
    $
    (2,184
    )
    
    $
    (3,952
    )
    
    $
    
    
    
    $
    (34,936
    )
 23




---



##### Table of Contents



Condensed Consolidating Statement of Operations
For the Twenty Four Weeks Ended December 13, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(Unaudited)(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    20,586
    
    
    $
    498,581
    
    
    $
    
    
    
    $
    519,167RESTAURANT COSTS:Food
    
    
    
    
    
    
    7,365
    
    
    
    171,819
    
    
    
    
    
    
    
    179,184Labor
    
    
    
    
    
    
    6,119
    
    
    
    147,097
    
    
    
    
    
    
    
    153,216Direct and occupancy
    
    
    
    
    
    
    110
    
    
    
    129,079
    
    
    
    
    
    
    
    129,189Total restaurant costs
    
    
    
    
    
    
    13,594
    
    
    
    447,995
    
    
    
    
    
    
    
    461,589ADVERTISING EXPENSES
    
    
    
    
    
    
    593
    
    
    
    14,356
    
    
    
    
    
    
    
    14,949GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    3
    
    
    
    952
    
    
    
    23,058
    
    
    
    
    
    
    
    24,013CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    1,559
    
    
    
    
    
    
    
    1,559MERGER INTEGRATION COSTS
    
    
    
    
    
    
    3,235
    
    
    
    279
    
    
    
    
    
    
    
    3,514LOSS ON SALE LEASEBACK
TRANSACTIONS
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    2,498OPERATING INCOME (LOSS)
    
    
    (3
    )
    
    
    2,212
    
    
    
    8,836
    
    
    
    
    
    
    
    11,045INTEREST EXPENSE
    
    
    5,455
    
    
    
    1,510
    
    
    
    23,649
    
    
    
    
    
    
    
    30,614INTEREST INCOME
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    (78
    )LOSS RELATED TO REFINANCING
    
    
    18,044
    
    
    
    22,241
    
    
    
    
    
    
    
    
    
    
    
    40,285OTHER INCOME
    
    
    
    
    
    
    (498
    )
    
    
    
    
    
    
    
    
    
    
    (498
    )INCOME (LOSS) BEFORE
INCOME TAXES
    
    
    (23,502
    )
    
    
    (20,963
    )
    
    
    (14,813
    )
    
    
    
    
    
    
    (59,278
    )INCOME TAX EXPENSE
(BENEFIT)
    
    
    6,940
    
    
    
    (18,988
    )
    
    
    (11,154
    )
    
    
    
    
    
    
    (23,202
    )Net income (loss)
    
    $
    (30,442
    )
    
    $
    (1,975
    )
    
    $
    (3,659
    )
    
    $
    
    
    
    $
    (36,076
    )
 24




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Twenty Four Weeks Ended December 14, 2005
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (3,907
    )
    
    $
    942
    
    
    $
    2,170
    
    
    $
    
    
    
    $
    (795
    )Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    1,313
    
    
    
    13,298
    
    
    
    
    
    
    
    14,611Amortization of debt issuance costs
    
    
    163
    
    
    
    33
    
    
    
    511
    
    
    
    
    
    
    
    707Accretion of original issue discount
    
    
    5,793
    
    
    
    21
    
    
    
    337
    
    
    
    
    
    
    
    6,151Impairment of assets
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    
    
    
    
    1,350Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    
    
    
    
    287Changes in assets and liabilities:Receivables
    
    
    
    
    
    
    30,758
    
    
    
    (29,294
    )
    
    
    (303
    )
    
    
    1,161Inventories
    
    
    
    
    
    
    (8
    )
    
    
    (56
    )
    
    
    
    
    
    
    (64
    )Prepaid expenses and other current assets
    
    
    3
    
    
    
    3,356
    
    
    
    (2,266
    )
    
    
    
    
    
    
    1,093Accounts payable
    
    
    
    
    
    
    (535
    )
    
    
    (402
    )
    
    
    
    
    
    
    (937
    )Accrued and other liabilities
    
    
    
    
    
    
    595
    
    
    
    3,910
    
    
    
    
    
    
    
    4,505Income taxes payable/refundable
    
    
    (2,053
    )
    
    
    (203
    )
    
    
    
    
    
    
    
    
    
    
    (2,256
    )Net cash provided by (used in)
operating activities
    
    
    (1
    )
    
    
    36,272
    
    
    
    (10,155
    )
    
    
    (303
    )
    
    
    25,813INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    
    
    
    
    (818
    )
    
    
    (11,262
    )
    
    
    
    
    
    
    (12,080
    )Corporate cash advances (payments)
    
    
    
    
    
    
    (20,834
    )
    
    
    20,531
    
    
    
    303
    
    
    
    Collection of notes receivable
    
    
    
    
    
    
    
    
    
    
    360
    
    
    
    
    
    
    
    360Proceeds from sale (purchase) of other assets
    
    
    1
    
    
    
    
    
    
    
    (888
    )
    
    
    
    
    
    
    (887
    )Net cash provided by (used in) investing
activities
    
    
    1
    
    
    
    (21,652
    )
    
    
    8,741
    
    
    
    303
    
    
    
    (12,607
    )FINANCING ACTIVITIES:Repayment of debt
    
    
    
    
    
    
    (60
    )
    
    
    (948
    )
    
    
    
    
    
    
    (1,008
    )Purchase of treasury stock
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Net cash used in financing activities
    
    
    (6
    )
    
    
    (60
    )
    
    
    (948
    )
    
    
    
    
    
    
    (1,014
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (6
    )
    
    
    14,560
    
    
    
    (2,362
    )
    
    
    
    
    
    
    12,192CASH AND CASH EQUIVALENTS, beginning of period
    
    
    49
    
    
    
    14,154
    
    
    
    6,459
    
    
    
    
    
    
    
    20,662CASH AND CASH EQUIVALENTS, end of period
    
    $
    43
    
    
    $
    28,714
    
    
    $
    4,097
    
    
    $
    
    
    
    $
    32,854
 25




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Twenty Four Weeks Ended December 13, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(Unaudited)(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (30,442
    )
    
    $
    (1,975
    )
    
    $
    (3,659
    )
    
    $
    
    
    
    $
    (36,076
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    1,244
    
    
    
    15,366
    
    
    
    
    
    
    
    16,610Amortization of debt issuance costs
    
    
    315
    
    
    
    21
    
    
    
    872
    
    
    
    
    
    
    
    1,208Loss related to refinancing:Write-off of debt issuance costs
    
    
    1,992
    
    
    
    154
    
    
    
    6,540
    
    
    
    
    
    
    
    8,686Refinancing premiums expensed
    
    
    16,052
    
    
    
    358
    
    
    
    15,189
    
    
    
    
    
    
    
    31,599Deferred income taxes
    
    
    
    
    
    
    (711
    )
    
    
    (30,185
    )
    
    
    
    
    
    
    (30,896
    )Accretion of original issue discount
    
    
    5,315
    
    
    
    7
    
    
    
    301
    
    
    
    
    
    
    
    5,623Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    425
    
    
    
    
    
    
    
    425Loss on sale leaseback transaction
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    
    
    
    
    2,498Changes in assets and liabilities:Receivables
    
    
    (9,027
    )
    
    
    129,479
    
    
    
    (122,604
    )
    
    
    3,416
    
    
    
    1,264Inventories
    
    
    
    
    
    
    (1
    )
    
    
    196
    
    
    
    
    
    
    
    195Prepaid expenses and other current assets
    
    
    3
    
    
    
    1,512
    
    
    
    (392
    )
    
    
    
    
    
    
    1,123Due from parent
    
    
    (108
    )
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    Accounts payable
    
    
    1,877
    
    
    
    (7,858
    )
    
    
    3,407
    
    
    
    
    
    
    
    (2,574
    )Accrued and other liabilities
    
    
    
    
    
    
    (4,731
    )
    
    
    (1,478
    )
    
    
    
    
    
    
    (6,209
    )Income taxes payable/refundable
    
    
    16,341
    
    
    
    30,879
    
    
    
    (42,849
    )
    
    
    
    
    
    
    4,371Net cash provided by (used in) operating activities
    
    
    2,318
    
    
    
    150,876
    
    
    
    (158,763
    )
    
    
    3,416
    
    
    
    (2,153
    )INVESTING ACTIVITIES:Proceeds from sale leaseback transactions
    
    
    
    
    
    
    8,608
    
    
    
    
    
    
    
    
    
    
    
    8,608Issuance of notes receivable to Ryans
    
    
    
    
    
    
    (149,800
    )
    
    
    
    
    
    
    149,800
    
    
    
    Acquisitions, net of liabilities assumed
    
    
    
    
    
    
    (165,488
    )
    
    
    (3,418
    )
    
    
    
    
    
    
    (168,906
    )Purchase of property and equipment
    
    
    
    
    
    
    (298
    )
    
    
    (14,384
    )
    
    
    
    
    
    
    (14,682
    )Collection of notes receivable
    
    
    
    
    
    
    710
    
    
    
    
    
    
    
    
    
    
    
    710Corporate cash advances (payments)
    
    
    
    
    
    
    396,073
    
    
    
    (392,657
    )
    
    
    (3,416
    )
    
    
    Proceeds from purchase of other assets
    
    
    (174
    )
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Net cash provided by (used in) investing activities
    
    
    (174
    )
    
    
    89,721
    
    
    
    (410,459
    )
    
    
    146,384
    
    
    
    (174,528
    )FINANCING ACTIVITIES:Repayment of previous term loan facility
    
    
    
    
    
    
    (4,187
    )
    
    
    (177,866
    )
    
    
    
    
    
    
    (182,053
    )Repurchase of 111/4% senior subordinated notes
    
    
    
    
    
    
    (4,158
    )
    
    
    (176,620
    )
    
    
    
    
    
    
    (180,778
    )Repurchase of 137/8% senior discount notes
    
    
    (105,306
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,306
    )Repayment of Ryans debt
    
    
    
    
    
    
    (145,000
    )
    
    
    
    
    
    
    
    
    
    
    (145,000
    )Proceeds from new term loan funding
    
    
    
    
    
    
    12,190
    
    
    
    517,810
    
    
    
    
    
    
    
    530,000Proceeds from new revolver facility
    
    
    
    
    
    
    374
    
    
    
    15,876
    
    
    
    
    
    
    
    16,250Proceeds from 121/2% senior note issuance
    
    
    
    
    
    
    6,900
    
    
    
    293,100
    
    
    
    
    
    
    
    300,000Debt issuance costs
    
    
    
    
    
    
    (825
    )
    
    
    (35,052
    )
    
    
    
    
    
    
    (35,877
    )Payment of refinancing premiums
    
    
    (16,052
    )
    
    
    (380
    )
    
    
    (16,122
    )
    
    
    
    
    
    
    (32,554
    )Dividends
    
    
    119,214
    
    
    
    (119,214
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of notes receivable from parent
    
    
    
    
    
    
    
    
    
    
    149,800
    
    
    
    (149,800
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (2,144
    )
    
    
    (254,300
    )
    
    
    570,926
    
    
    
    (149,800
    )
    
    
    164,682NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    (13,703
    )
    
    
    1,704
    
    
    
    
    
    
    
    (11,999
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    37
    
    
    
    14,068
    
    
    
    6,114
    
    
    
    
    
    
    
    20,219CASH AND CASH EQUIVALENTS, end of period
    
    $
    37
    
    
    $
    365
    
    
    $
    7,818
    
    
    $
    
    
    
    $
    8,220
 26




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this report. Unless the context
indicates or requires otherwise, (i) the term Buffets Holdings refers to Buffets Holdings, Inc.;
(ii) the term Buffets refers to Buffets, Inc., our principal operating subsidiary; (iii) the
terms we, our, ours, and the Company refer to Buffets Holdings, Inc. and its subsidiaries.
Some of the statements in the following discussion are forward-looking statements. See
Forward-Looking Statements and Risk Factors. Historical results will not be indicative of future
results due to the consummation of the merger transaction with Ryans Restaurant Group, Inc.
(Ryans) and the related refinancing of our indebtedness and Ryans indebtedness..
 Overview
 â â
 Restaurants operating as of June 28, 2006
    
    
    338For the 24 week period ended December 13, 2006:Restaurants opened
    
    
    Restaurants closed
    
    
    12Restaurants acquired
    
    
    332Restaurants operating as of December 13, 2006
    
    
    658
 â â
     
    
    We recognize as restaurant sales the proceeds from the sale of food and beverages at our
company-owned restaurants at the time of such sale. We recognize the proceeds from the sale of
gift certificates/cards when the gift certificates/cards are redeemed at our
restaurants.
 27




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##### Table of Contents



Until redemption, the unearned revenue from the sale of gift certificates/cards is included in accrued liabilities on
our consolidated balance sheets. Our franchise income includes royalty fees and initial franchise fees received from our franchisee.
We recognize royalty fees as other income based on the sales reported at the franchise restaurants.
    
    Restaurant costs reflect only direct restaurant operating costs, including food, labor and direct and
occupancy costs. Labor costs include compensation and benefits for both hourly and restaurant management
employees. Direct and occupancy costs consist primarily of costs of supplies, maintenance, utilities,
rent, real estate taxes, insurance, depreciation and amortization.
    
    Advertising expenses reflect all advertising and promotional costs.
    
    General and administrative expenses reflect all costs, other than advertising expenses, not directly
related to the operation of restaurants. These expenses consist primarily of corporate administrative
compensation and overhead, district and regional management compensation and related management expenses
and the costs of recruiting, training and supervising restaurant management personnel.
    
    Closed restaurant costs represent costs associated with store closure of underperforming restaurants,
including, but not limited to lease termination costs and obligations and employee termination costs.
    
    Impairment of assets reflects fair market adjustments to the carrying value of long-lived assets,
primarily comprised of leasehold improvements and equipment.
    
    Merger integration costs represent professional fees and employee travel and expenses related to
integration activities associated with the merger with Ryans.
    
    Loss on sale-leaseback transaction reflects transaction costs and net impairment losses associated with
the sale and leaseback of the leasehold interests and leasehold improvements of seven restaurants relating
to the November 1, 2006 refinancing.
    
    Interest expense reflects interest costs associated with our debt and amortization of debt issuance cost.
Interest expense also reflects accretion of original issuance discount on our 111/4% senior subordinated
notes and 13 7¤ 8 % senior discount notes, which were repurchased on
November 1, 2006.
    
    Interest income reflects interest earned on our short-term investments.
    
    Loss related to refinancing for fiscal years 2006 and 2007 represents transaction costs associated with
amendments to Buffets Amended and Restated Credit
Agreement in fiscal year 2006 and repurchasing or redeeming
our 111/4% senior subordinated notes and 13 7¤ 8 % senior discount notes on
November 1, 2006.
    
    Other income primarily reflects franchise fees earned.
    
    Income tax expense (benefit) reflects the current and deferred tax provision (benefit) determined in
accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes.
 Recent Developments
 Merger with Ryans Restaurant Group, Inc.
 ® ® ® ®
 28




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##### Table of Contents




    
    securing a new $640.0 million senior secured credit agreement (the
Credit Facility) comprised of (i) a $530.0 million senior secured
term loan facility (the Term Facility), (ii) a $40.0 million senior
secured revolving credit facility (the Revolving Facility), and
(iii) a $70.0 million senior secured pre-funded synthetic letter of
credit facility (the Synthetic Letter of Credit Facility), and
    
    issuing $300.0 million of
its
121/2% Senior Notes due
2014 (the 121/2% Senior Notes) pursuant to an indenture, dated as of
November 1, 2006 (the Indenture).
 1 2
 
    
    pay $704.6 million to purchase the outstanding shares of Ryans common stock,
    
    repay $146.9 million of
Ryans outstanding debt (including accrued interest and breakage fees),
    
    repay $196.4 million of existing indebtedness of Buffets, Inc. under its existing credit facility (including accrued
interest and breakage fees),
    
    repurchase $195.3 million
of Buffets 111/4% senior subordinated notes (including accretion of original issue discount
and early redemption premiums),
    
    repurchase $121.5 million of Buffets Holdings 13 7/8% senior discount notes (including
accretion of original issue discount and early redemption premiums), and
    
    pay approximately $46.1 million for transaction fees and expenses.
    Litigation Challenging the Merger
  29




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##### Table of Contents



Critical Accounting Policies
   Long-Lived Assets
   Goodwill
  Insurance Reserves
  30




---



##### Table of Contents



Closed Restaurant Reserve
  â
 Income Taxes
   Gift Cards
  Share Based Compensation
   31




---



##### Table of Contents



Lease Accounting
  Merger Integration Costs
  Results of Operations
 The following discussion reflects our historical results for the 12-week periods ended
December 14, 2005 and December 13, 2006. Our operating results include the impact of Ryans
operations from November 1, 2006, the merger date, to December 13, 2006 and the impact of the
related refinancing of our indebtedness and Ryans indebtedness. Our future results may not be
consistent with our historical results. The following discussion should be read in conjunction with
our condensed consolidated financial statements and related notes included elsewhere in this
report.
 Twelve Weeks EndedDecember 14,
    
    December 13,2005
    
    2006(dollars in thousands)Significant items that impacted results of operations:Closed restaurant costs (1)
    
    $
    842
    
    
    $
    817Impairment of assets (2)
    
    
    1,350
    
    
    
    Merger integration costs (3)
    
    
    
    
    
    
    3,074Loss on sale leaseback transactions (4)
    
    
    
    
    
    
    2,498Loss related to refinancing (5)
    
    
    
    
    
    
    40,042
 32




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##### Table of Contents



(1)
    
    Closed restaurant costs were approximately $0.8 million for both the second quarter of fiscal
2007 and the second quarter of
fiscal 2006. We closed nine underperforming restaurants in the
twelve-week period ended December 13, 2006. Charges related to seven restaurants were treated
as a liability assumed pursuant to EITF 95-3, Recognition of Liabilities in Connection with a
Purchase Business Combination. See Note 10 to the condensed consolidated financial
statements elsewhere in this report for further discussion of our merger with Ryans. For the
remaining two restaurants, cash charges were incurred related to these restaurant closures of
approximately $0.2 million. These charges included approximately $0.1 million related to lease
termination costs and obligations and $0.1 million related to employee termination costs and
other associated costs. In addition, non-cash charges related to these closures were
approximately $0.1 million. The remaining charges of approximately $0.5 million relate to
changes in reserve estimates related to previously closed stores, terminations of sublease
agreements and other related costs. We closed two stores in the comparable prior year period.(2)
    
    During the second quarter of fiscal 2006, we recognized a loss of approximately $1.4 million
related to impairments of the carrying value of our long-lived assets for sixteen
under-performing restaurants.(3)
    
    Merger integration costs represent professional fees and employee travel and expenses related
to integration activities associated with the merger with Ryans.(4)
    
    During the second quarter of fiscal 2007, we entered into a sale-leaseback transaction
whereby we transferred our leasehold interests and leasehold improvements with respect to
seven restaurants to a third party for net proceeds of approximately $8.4 million. We
simultaneously entered into long-term leases for those restaurants with an aggregate initial
annual rent of approximately $0.9 million. In connection with this sale-leaseback transaction,
we recorded a loss of approximately $2.5 million primarily to reflect the impairment of
certain of the properties for which the net proceeds were less than the book value of the
leasehold assets. In addition, the net proceeds for certain of the properties were greater
than the book value of the leasehold assets resulting in a deferred gain of approximately $0.9
million. The deferred gain will be accreted over the life of the respective restaurant leases,
ranging from 19 to 21 years.(5)
    
    On November 1, 2006, due to the merger with Ryans, we refinanced our long-term debt. In
connection with this refinancing, we wrote off approximately $30.6 million of cumulative debt
discount related to our senior subordinated notes and senior discount notes and approximately
$8.7 million of debt issuance costs related to the predecessor Credit Facility, senior
subordinated notes and senior discount notes. The remaining charges represent transaction
fees.  Twelve Weeks EndedDecember 14, 2005
    
    
    December 13, 2006(dollars in thousands)Restaurant sales
    
    $
    218,274
    
    
    
    100.0
    %
    
    $
    297,891
    
    
    
    100.0
    %Restaurant costs
    
    
    190,564
    
    
    
    87.3
    
    
    
    268,856
    
    
    
    90.3Advertising expenses
    
    
    9,717
    
    
    
    4.5
    
    
    
    7,722
    
    
    
    2.6General and administrative expenses
    
    
    10,056
    
    
    
    4.6
    
    
    
    14,285
    
    
    
    4.8Closed restaurant costs
    
    
    842
    
    
    
    0.4
    
    
    
    817
    
    
    
    0.3Impairment of assets
    
    
    1,350
    
    
    
    0.6
    
    
    
    
    
    
    
    Merger integration costs
    
    
    
    
    
    
    
    
    
    
    3,074
    
    
    
    1.0Loss on sale leaseback transactions
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    0.8Operating income
    
    
    5,745
    
    
    
    2.6
    
    
    
    639
    
    
    
    0.2Interest expense
    
    
    11,913
    
    
    
    5.5
    
    
    
    17,386
    
    
    
    5.8Interest income
    
    
    (121
    )
    
    
    (0.1
    )
    
    
    (50
    )
    
    
    (0.0
    )Loss related to refinancing
    
    
    
    
    
    
    
    
    
    
    40,042
    
    
    
    13.4Other income
    
    
    (287
    )
    
    
    (0.1
    )
    
    
    (296
    )
    
    
    (0.1
    )Loss before income taxes
    
    
    (5,760
    )
    
    
    (2.6
    )
    
    
    (56,443
    )
    
    
    (18.9
    )Income tax expense (benefit)
    
    
    (1,841
    )
    
    
    (0.8
    )
    
    
    (21,507
    )
    
    
    (7.2
    )Net loss
    
    $
    (3,919
    )
    
    
    (1.8
    )
    
    $
    (34,936
    )
    
    
    (11.7
    )
 Certain percentage amounts do not sum to total due to rounding.
 Restaurant Sales.
 â â
 33




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##### Table of Contents



Restaurant Costs.
    Advertising Expenses.
 General and Administrative Expenses.
 Interest Expense.
 Income Taxes.
 The following discussion reflects our historical results for the 24-weeks ended December 14, 2005
and December 13, 2006. Our operating results include the impact of Ryans operations from November
1, 2006, the merger date, to December 13, 2006 and the impact of the related refinancing of our
indebtedness and Ryans indebtedness. Our future results may not be consistent with our historical
results. The following discussion should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this report.
 34




---



##### Table of Contents



Twenty Four Weeks EndedDecember 14,
    
    December 13,2005
    
    2006(dollars in thousands)Significant items that impacted results of operations:Closed restaurant costs (1)
    
    $
    1,098
    
    
    $
    1,559Impairment of assets (2)
    
    
    1,350
    
    
    
    Merger integration costs (3)
    
    
    
    
    
    
    3,514Loss on sale leaseback transactions (4)
    
    
    
    
    
    
    2,498Loss related to refinancing (5)
    
    
    647
    
    
    
    40,285
 
 (1)
    
    Closed restaurant costs were $1.6 million during the first half of fiscal 2007 as compared to
$1.1 million for the comparable prior year period. The increase was due in large part due to
the closure of twelve under performing restaurants in the first twenty-four weeks of fiscal
2007 compared with two store closures in the comparable prior year period. The Company closed
twelve underperforming restaurants in the twenty four week period ended December 13, 2006.
Charges related to seven restaurants were treated as a liability assumed pursuant to EITF
95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. See
Note 10 to the condensed consolidated financial statements elsewhere in this report for
further discussion of the Companys merger with Ryans. For the remaining five restaurants,
cash charges were incurred related to these restaurant closures of approximately $1.1 million.
These charges included approximately $0.9 million related to lease termination costs and
obligations, $0.1 million related to employee termination costs and $0.1 million related to
other associated costs. In addition, non-cash charges related to these closures were
approximately $0.2 million. The remaining charges of approximately $0.3 million relate to the
termination of sublease agreements and other related costs.(2)
    
    During the first twenty four weeks of fiscal 2006, we recognized a loss of approximately $1.4
million related to impairments of the carrying value of our long-lived assets for sixteen
under-performing restaurants.(3)
    
    Merger integration costs represent professional fees and employee travel and expenses related
to integration activities associated with the merger with Ryans(4)
    
    During the first twenty four weeks of fiscal 2007, we entered into a sale-leaseback
transaction whereby we transferred our leasehold interests and leasehold improvements with
respect to seven restaurants to a third party for net proceeds of approximately $8.4 million.
We simultaneously entered into long-term leases for those restaurants with an aggregate
initial annual rent of approximately $0.9 million. In connection with this sale-leaseback
transaction, we recorded a loss of approximately $2.5 million primarily to reflect the
impairment of certain of the properties for which the net proceeds were less than the book
value of the leasehold assets. In addition, the net proceeds for certain of the properties
were greater than the book value of the leasehold assets resulting in a deferred gain of
approximately $0.9 million. The deferred gain will be accreted over the life of the respective
restaurant leases, ranging from 19 to 21 years.(5)
    
    Effective as of July 28, 2005, we entered into Amendment No. 1, dated as of April 6, 2005, to
Buffets, Inc.s Amended and Restated Credit Agreement, dated as of February 20, 2004. In
conjunction with this amendment, we incurred $0.6 million in transaction fees during the first
quarter of fiscal 2006. On November 1, 2006, due to the merger with Ryans, we refinanced our
long-term debt. In connection with this refinancing, we wrote off approximately $30.6 million
of cumulative debt discount related to our senior subordinated notes and senior discount notes
and approximately $8.7 million of debt issuance costs related to the predecessor Credit
Facility, senior subordinated notes and senior discount notes. The remaining charges
represent transaction fees.  24 Weeks EndedDecember 14, 2005
    
    
    December 13, 2006(dollars in thousands)Restaurant sales
    
    $
    445,012
    
    
    
    100.0
    %
    
    $
    519,167
    
    
    
    100.0
    %Restaurant costs
    
    
    382,580
    
    
    
    86.0
    
    
    
    461,589
    
    
    
    88.9Advertising expenses
    
    
    16,900
    
    
    
    3.8
    
    
    
    14,949
    
    
    
    2.9General and administrative expenses
    
    
    20,102
    
    
    
    4.5
    
    
    
    24,013
    
    
    
    4.6Closed restaurant costs
    
    
    1,098
    
    
    
    0.2
    
    
    
    1,559
    
    
    
    0.3Impairment of assets
    
    
    1,350
    
    
    
    0.3
    
    
    
    
    
    
    
    Merger integration costs
    
    
    
    
    
    
    
    
    
    
    3,514
    
    
    
    0.7Loss on sale leaseback transactions
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    0.5Operating income
    
    
    22,982
    
    
    
    5.2
    
    
    
    11,045
    
    
    
    2.1Interest expense
    
    
    23,781
    
    
    
    5.3
    
    
    
    30,614
    
    
    
    5.9
 35




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##### Table of Contents



24 Weeks EndedDecember 14, 2005
    
    
    December 13, 2006(dollars in thousands)Interest income
    
    
    (203
    )
    
    
    
    
    
    
    (78
    )
    
    
    0.0Loss related to refinancing
    
    
    647
    
    
    
    0.1
    
    
    
    40,285
    
    
    
    7.8Other income
    
    
    (484
    )
    
    
    (0.1
    )
    
    
    (498
    )
    
    
    (0.1
    )Loss before income taxes
    
    
    (759
    )
    
    
    (0.2
    )
    
    
    (59,278
    )
    
    
    (11.4
    )Income tax expense (benefit)
    
    
    36
    
    
    
    
    
    
    
    (23,202
    )
    
    
    (4.5
    )Net loss
    
    $
    (795
    )
    
    
    (0.2
    )
    
    $
    (36,076
    )
    
    
    (6.9
    )
 Certain percentage amounts do not sum to total due to rounding.
 Restaurant Sales.
 â â
 Restaurant Costs.
    Advertising Expenses.
 General and Administrative Expenses.
 Interest Expense.
 36




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##### Table of Contents



Income Taxes.
 Liquidity and Capital Resources
 1 2
   Operating Activities.
 Investing Activities.
 Financing Activities. 1 2 1 4 7 8 1 2
 37




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##### Table of Contents



Future Capital Expenditures.
 §
    
    Open two new Tahoe Joes Famous Steakhouseâ restaurants with combined capital outlay of approximately $4.5 million.§
    
    Spend approximately $25.0-$30.0 million on remodeling and improvement costs that will be capitalized. Our remodel
projects incorporate design elements to update the décor of our existing facilities including a lighter, more
contemporary interior design and expanded dessert displays. Our other improvement costs include a variety of outlays
such as new carpet, equipment and minor
leasehold improvements and display grill installations.§
    
    Spend approximately $0.7 million on miscellaneous corporate and information systems investments.
 Integration Costs.
 Tax Payment
 Credit Facilities and Other Long Term Debt
 Credit Facility
    121/2% Senior Notes
 1 2 1 2 1 2
 38




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##### Table of Contents



1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
  Contractual Obligations
  Payments Due by Fiscal Year
 2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total(in thousands)Long-term debt(1)
    
    $
    1,325
    
    
    $
    6,625
    
    
    $
    5,300
    
    
    $
    5,300
    
    
    $
    3,975
    
    
    $
    807,475
    
    
    $
    830,000Interest (2)
    
    
    20,137
    
    
    
    37,500
    
    
    
    37,500
    
    
    
    37,500
    
    
    
    37,500
    
    
    
    150,000
    
    
    
    320,137Operating leases(3)
    
    
    56,320
    
    
    
    112,175
    
    
    
    109,708
    
    
    
    104,212
    
    
    
    98,113
    
    
    
    1,339,290
    
    
    
    1,819,818Advisory fees(4)
    
    
    1,050
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    9,050Purchase obligations(5)
    
    
    52,108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,108Total contractual cash obligations
    
    $
    130,940
    
    
    $
    158,300
    
    
    $
    154,508
    
    
    $
    149,012
    
    
    $
    141,588
    
    
    $
    2,296,765
    
    
    $
    3,031,113
 
 (1)
    
    Long-term debt payments for fiscal years 2007 through 2011 represent the required principal
payments on Buffets Term Facility. Long-term debt payments in fiscal year 2011 represent the
remaining principal amounts due on Buffets Term Facility and the aggregate balance of
Buffets 12 1/2% Senior Notes. Debt payments could be accelerated upon violation of debt
covenants. We believe the likelihood of debt covenant violations to be remote. See Note 9 to
our consolidated financial statements included elsewhere in this report for details of our
long-term obligations.(2)
    
    Amounts represent contractual interest payments on Buffets 121/2% Senior Notes. Interest
payments on Buffets variable-rate Term Facility are excluded. The borrowings under the Term
Facility bear interest, at Buffets option, at an adjusted LIBOR rate plus a margin of either
2.75% or 3.00% in the case of Eurodollar borrowings and at a certain alternate base rate
plus a margin of either 1.75% or 2.00% in the case of alternate base rate borrowings,
depending on Buffets leverage ratio. The Term Facility matures on November 1, 2013. Interest
payments are due quarterly. The interest rate, at LIBOR plus 2.75%, was 8.37% as of December
13, 2006. The borrowings due under the Term Facility are payable in equal quarterly
installments in an annual amount equal to 1% of the term loan during each of the first six and
a half years of the loan, with the remaining balance payable due on November 1, 2012. See Note
9 to our consolidated financial statements included elsewhere in this report for details of
our long-term obligations.(3)
    
    Operating leases is comprised of minimum rents and contingent rents. Operating leases have
not been reduced by minimum sublease rentals of approximately $13.6 million. See Note 13 to
our consolidated financial statements included elsewhere in this report for details of our
operating lease obligations.(4)
    
    The advisory fees comprise our contractual obligation to pay annual advisory fees to each of
Roe H. Hatlen, Sentinel Capital Partners, L.L.C. and the Caxton-Iseman Party. See Certain
Relationships and Related Transactions. Under the terms of these agreements, Mr. Hatlen and
Sentinel Capital are each paid a fixed annual fee. The fee of the Caxton-Iseman Party is
calculated as a percentage of our earnings before interest, taxes, depreciation and
amortization, which in fiscal 2005 resulted in a payment of $1.8 million. This figure has been
used as an estimate for our obligations under that agreement for fiscal 2007 and each fiscal
year thereafter. The agreements with the Caxton-Iseman Party and Sentinel Capital are of
perpetual duration, and hence no estimate of the aggregate amount of future obligations
(represented in the Thereafter column, above) is provided. 39




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##### Table of Contents



(5)
    
    In determining purchase obligations for this table we used our interpretation of the
definition set forth in the SEC Final Rule, Disclosure in Managements Discussion and Analysis
about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations, which states, a
purchase obligation is defined as an agreement to purchase goods or services that is
enforceable and legally binding on the registrant and that specifies all significant terms,
including: fixed minimum quantities to be purchased; fixed, minimum or variable/price
provisions, and the approximate timing of the transaction. In applying this definition, we
have only included purchase obligations to the extent the failure to perform would result in
formal recourse against the Company. Accordingly, certain procurement arrangements that
indicate we are to purchase future items are included, but only to the extent they include a
recourse provision for our failure to purchase. Other Commercial Commitments
  Amount of Commitment Expiration by Fiscal Year
 2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total(in thousands)Letters of credit(1)
    
    $
    50,005
    
    
    $
    1,922
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51,927Total commercial commitments
    
    $
    50,005
    
    
    $
    1,922
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51,927
 
 (1)
    
    Our outstanding letters of credit expire at various times with final expirations in February
2008. As of December 13, 2006, total letter of credit borrowing availability was $38.1
million, which is comprised of additional availability of
$18.1 million under our Synthetic Letter of
Credit Facility and $20.0 million available through a sub
facility to our Revolving
Facility in the form of letters of credit. Seasonality and Quarterly Fluctuations
  Forward-Looking Statements and Risk Factors
   40




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risks. 1 2
 Food Commodity Risks.
 
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Employee Litigation
  41




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##### Table of Contents



Litigation Challenging the Merger
   
 ITEM 1A. RISK FACTORS
 Risks Relating to Our Business
 We are dependent on timely delivery of fresh ingredients by our suppliers. We are also
substantially
dependent on a single food supplier.
   42




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##### Table of Contents



Our restaurant sales are subject to seasonality and major world events.
  Our business is affected by changes in consumer preferences and consumer discretionary
spending.
   Current restaurant locations may become unattractive, and attractive new locations may not be
available for a reasonable price, if at all.
  Food-borne illness incidents could result in liability to us and could reduce our restaurant
sales.
   Complaints or litigation may hurt us.
  43




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##### Table of Contents



We are controlled by a single shareholder and its interests may conflict with yours.
  
 ITEM 6. EXHIBITS
  44




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##### Table of Contents



SIGNATURES
  BUFFETS HOLDINGS, INC.Date:  January 29, 2007
    By:
    /s/ R. Michael Andrews, Jr.R. Michael Andrews, Jr.Chief Executive Officer

(Principal Executive Officer)By:
    /s/ A. Keith WallA. Keith WallChief Financial Officer

(Principal Financial and Accounting Officer) 45




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger dated as of July 24, 2006 among Ryans Restaurant Group, Inc.,
Buffets, Inc. and Buffets Southeast, Inc. (incorporated by reference to Exhibit 2.1 to
Buffets Holdings, Inc.s Current Report on Form 8-K, filed on July 25, 2006 (Commission
file No. 333-116897)).3.1
    
    Articles of Organization of OCB Restaurant Company, LLC (incorporated by reference to
Exhibit 3.15 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.2
    
    Bylaws of OCB Restaurant Company, LLC (incorporated by reference to Exhibit 3.16 to Buffets
Holdings, Inc.s Registration Statement on Form S-4 (Commission file No. 333-139436)).3.3
    
    Articles of Incorporation of Ryans Restaurant Group, Inc. (incorporated by reference to
Exhibit 3.21 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.4
    
    Bylaws of Ryans Restaurant Group, Inc. (incorporated by reference to Exhibit 3.22 to
Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).3.5
    
    Certificate of Formation of Big R Procurement Company, LLC (incorporated by reference to
Exhibit 3.23 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.6
    
    Operating Agreement of Big R Procurement Company, LLC (incorporated by reference to Exhibit
3.24 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).3.7
    
    Certificate of Formation of Fire Mountain Restaurants, LLC (incorporated by reference to
Exhibit 3.25 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.8
    
    Limited Liability Company Agreement of Fire Mountain Restaurants, LLC (incorporated by
reference to Exhibit 3.26 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).3.9
    
    Articles of Organization of Ryans Restaurant Leasing Company, LLC (incorporated by
reference to Exhibit 3.27 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).3.10
    
    Bylaws of Ryans Restaurant Leasing Company, LLC (incorporated by reference to Exhibit 3.28
to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).3.11
    
    Articles of Organization of Ryans Restaurant Management Group, LLC (incorporated by
reference to Exhibit 3.29 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).3.12
    
    Bylaws of Ryans Restaurant Management Group, LLC (incorporated by reference to Exhibit
3.30 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).3.13
    
    Articles of Organization of Fire Mountain Leasing Company, LLC (incorporated by reference
to Exhibit 3.31 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.14
    
    Bylaws of Fire Mountain Leasing Company, LLC (incorporated by reference to Exhibit 3.32 to
Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).3.15
    
    Articles of Organization of Fire Mountain Management Group, LLC (incorporated by reference
to Exhibit 3.33 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission
file No. 333-139436)).3.16
    
    Bylaws of Fire Mountain Management Group, LLC (incorporated by reference to Exhibit 3.34 to
Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).4.1
    
    Indenture, dated as of November 1, 2006, by and among Buffets Inc., the guarantors named
therein and U.S. Bank National Association, as trustee (incorporated by reference to
Exhibit 4.1 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file
No. 333-139436)).4.2
    
    First Supplemental Indenture, dated as of November 1, 2006, by and among Buffets, Inc., the
additional subsidiary guarantors named therein and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.2 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).
 46




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##### Table of Contents



ExhibitNumber
    
    Description4.3
    
    Second Supplemental Indenture, dated as of November 22, 2006, by and among Buffets, Inc.,
the guarantors named therein and U.S. Bank National Association, as trustee (incorporated
by reference to Exhibit 4.3 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).4.4
    
    Registration Rights Agreement, dated as of November 1, 2006, by and among Buffets Inc., the
guarantors named therein and the initial purchasers named therein (incorporated by
reference to Exhibit 4.5 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).10.1
    
    Second Amended and Restated Management and Fee Agreement, dated as of November 1, 2006
between Buffets, Inc. and Caxton-Iseman Capital, Inc. (incorporated by reference to Exhibit
10.8 to Buffets Holdings, Inc.s Registration Statement on Form S-4/A (Commission file No.
333-139436)).10.2
    
    Credit Agreement, dated as of November 1, 2006, among Buffets, Inc., Buffets Holdings,
Inc., the lenders named therein, and Credit Suisse as Administrative Agent (incorporated by
reference to Exhibit 10.9 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).10.3
    
    Guarantee and Collateral Agreement, dated as of November 1, 2006, by and among Buffets,
Inc., Buffets Holdings, Inc., Buffets, Inc.s subsidiaries named therein and Credit Suisse
(incorporated by reference to Exhibit 10.10 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).10.4
    
    Supplement No. 1 dated as of November 22, 2006, to the Guarantee and Collateral Agreement
dated as of November 1, 2006, among Buffets, Inc., Buffets Holdings, Inc., Buffets, Inc.s
subsidiaries named therein and Credit Suisse (incorporated by reference to Exhibit 10.11 to
Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).10.5
    
    Agreement Regarding Leasehold Mortgages and Landlords Purchase Option dated as of November
1, 2006 among the certain landlords named therein, Credit Suisse, Ryans Restaurant Group,
Inc., Fire Mountain Restaurants, LLC, OCB Restaurant Company, LLC and HomeTown Buffet, Inc.
(incorporated by reference to Exhibit 10.12 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).10.6
    
    Trademark Security Agreement, dated as of November 1, 2006, among Buffets, Buffets
Holdings, Inc., Buffets, Inc.s subsidiaries named therein and Credit Suisse, as Collateral
Agent (incorporated by reference to Exhibit 10.13 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).10.7
    
    Master Land and Building Lease, dated as of November 1, 2006, by and between FIGRYANF LLC,
as landlord, and Fire Mountain Restaurants, LLC, as tenant (Fortress Set 1 Lease)
(incorporated by reference to Exhibit 10.14 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).10.8
    
    Master Land and Building Lease, dated as of November 1, 2006, by and among (x) FIGRYANH
LLC, FIGRYANH-1 LLC, FIGRYANH-2 LLC, FIGRYANH-3 LLC, FIGRYANH-4 LLC, FIGRYANH-5 LLC,
FIGRYANH-6 LLC, FIGRYANH-7 LLC, FIGRYANH-8 LLC, FIGRYANH-9 LLC, FIGRYANH-10 LLC,
FIGRYANH-11 LLC, FIGRYANH-12 LLC, FIGRYANH-13 LLC, FIGRYANH-14 LLC, FIGRYANH-15 LLC, and
FIGRYANH-16 LLC (the FIGRYANH Group), as landlord, and (y) Fire Mountain Restaurants,
LLC, OCB Restaurant Company, LLC, and HomeTown Buffet, Inc., as tenant (Fortress Set 2
Lease) (incorporated by reference to Exhibit 10.15 to Buffets Holdings, Inc.s
Registration Statement on Form S-4 (Commission file No. 333-139436)).10.9
    
    Guaranty by Buffets, Inc., dated as of November 1, 2006, for the benefit of FIGRYANF LLC,
relating to the tenants obligations under the Fortress Set 1 Lease (incorporated by
reference to Exhibit 10.16 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).10.10
    
    Guaranty by Buffets, Inc., dated as of November 1, 2006, for the benefit of the FIGRYANH
Group, relating to the tenants obligations under the Fortress Set 2 Lease (incorporated by
reference to Exhibit 10.17 to Buffets Holdings, Inc.s Registration Statement on Form S-4
(Commission file No. 333-139436)).10.11
    
    Purchase and Sale Agreement, dated as of November 1, 2006, by and among Fire Mountain
Restaurants, LLC, Ryans Restaurant Group, Inc., HomeTown Buffet, Inc., OCB Restaurant
Company, LLC, FIGRYANF LLC, and the FIGRYANH Group (incorporated by reference to Exhibit
10.18 to Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).10.12
    
    Purchase Agreement, dated as of October 19, 2006, by and among Buffets, Inc., the
guarantors named therein and the purchasers of the initial notes named therein
(incorporated by reference to Exhibit 10.19 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).10.13
    
    Counterpart to the Purchase Agreement, dated as of November 1, 2006, among Ryans
Restaurant Group, Inc., Fire Mountain Restaurants, LLC and Big R Procurement Company, LLC
(incorporated by reference to Exhibit 10.20 to Buffets Holdings, Inc.s Registration
Statement on Form S-4 (Commission file No. 333-139436)).
 47




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##### Table of Contents



ExhibitNumber
    
    Description10.14
    
    Agreement Regarding Leasehold Mortgages and Landlords Purchase Option dated as of November
1, 2006 among the certain landlords named therein, Credit Suisse, Ryans Restaurant Group,
Inc., Fire Mountain Restaurants, LLC, OCB Restaurant Company, LLC, HomeTown Buffet, Inc.
and German American Capital Corporation (incorporated by reference to Exhibit 10.21 to
Buffets Holdings, Inc.s Registration Statement on Form S-4 (Commission file No.
333-139436)).31.1*
    
    Certification of Principal Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Principal Financial and
Accounting Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Principal Executive
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Principal Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.**
    
    Shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act
of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be
deemed incorporated by reference into any filing under the Securities Act of 1933 or
Securities Exchange Act of 1934. 48