# UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

# FORM 10-Q

# QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 21, 2005

Commission file number: 333-116897

# BUFFETS HOLDINGS, INC.

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|(State or other jurisdiction of |  | (IRS Employer      
|incorporation or organization)  |  | Identification No.)





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|(Address of principal executive offices) | (Zip Code)

Registrants telephone number, including area code: (651) 994-8608

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

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).YES [   ] NO [X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES [   ] NO [X]

The number of shares of Buffets Holdings, Inc.s common stock outstanding as of November 2, 2005 was 3,175,135.

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# BUFFETS HOLDINGS, INC.TABLE OF CONTENTS

|                                 |  | 
|-------------------------------- |  | 
|Part I.    Financial Information |  | 
|                                 |  | 
|Item 1.                          |  | 
|                                 |  | 
|                                 |  | 
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|Item 2.                          |  | 
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|Item 3.                          |  | 
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|Item 4.                          |  | 
|                                 |  | 
|Part II.  Other Information      |  | 
|                                 |  | 
|Item 5.                          |  | 
|                                 |  | 
|Item 6.                          |  | 

2

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# PART I. FINANCIAL
INFORMATION

# ITEM 1. FINANCIAL STATEMENTS

# BUFFETS HOLDINGS, INC.
AND SUBSIDIARIES

# CONDENSED CONSOLIDATED BALANCE
SHEETS

|                                                                            | June 29, | September 21,
|--------------------------------------------------------------------------- | -------- | -------------
|
|
|
|ASSETS                                                                      |          |              
|CURRENT ASSETS:                                                             |          |              
|Cash and cash equivalents                                                   |          |              
|Receivables                                                                 |          |              
|Inventories                                                                 |          |              
|Prepaid expenses and other current assets                                   |          |              
|Deferred income taxes                                                       |          |              
|                                                                            |          |              
|Total current assets                                                        |          |              
|PROPERTY AND EQUIPMENT, net                                                 |          |              
|GOODWILL                                                                    |          |              
|DEFERRED INCOME TAXES                                                       |          |              
|OTHER ASSETS, net                                                           |          |              
|                                                                            |          |              
|Total assets                                                                |          |              
|                                                                            |          |              
|LIABILITIES AND SHAREHOLDERS' DEFICIT                                       |          |              
|CURRENT LIABILITIES:                                                        |          |              
|Accounts payable                                                            |          |              
|Accrued liabilities                                                         |          |              
|Income taxes payable                                                        |          |              
|Current maturities of long-term debt                                        |          |              
|                                                                            |          |              
|Total current liabilities                                                   |          |              
|LONG-TERM DEBT, net of current maturities                                   |          |              
|DEFERRED LEASE OBLIGATIONS                                                  |          |              
|OTHER LONG-TERM LIABILITIES                                                 |          |              
|                                                                            |          |              
|Total liabilities                                                           |          |              
|SHAREHOLDERS' DEFICIT:                                                      |          |              
|Preferred stock; $.01 par value, 1,100,000 shares authorized; none issued   |          |              
|and outstanding as of June 29, 2005 and September 21, 2005                  |          |              
|Common stock; $.01 par value, 3,600,000 shares authorized; 3,175,135 shares |          |              
|issued and outstanding as of June 29, 2005 and as of September 21, 2005     |          |              
|Additional paid in capital                                                  |          |              
|Accumulated deficit                                                         |          |              
|                                                                            |          |              
|Total shareholders' deficit                                                 |          |              
|                                                                            |          |              
|Total liabilities and shareholders' deficit                                 |          |              
|                                                                            |          |              

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

3

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# BUFFETS HOLDINGS, INC.
AND SUBSIDIARIES

# CONDENSED CONSOLIDATED INCOME
STATEMENTS

|                                             | Twelve Weeks Ended
|-------------------------------------------- | ------------------
|
|
|
|
|
|RESTAURANT SALES                             |                   
|RESTAURANT COSTS:                            |                   
|Food                                         |                   
|Labor                                        |                   
|Direct and occupancy                         |                   
|                                             |                   
|Total restaurant costs                       |                   
|ADVERTISING EXPENSES                         |                   
|GENERAL AND ADMINISTRATIVE EXPENSES          |                   
|                                             |                   
|OPERATING INCOME                             |                   
|INTEREST EXPENSE                             |                   
|INTEREST INCOME                              |                   
|LOSS RELATED TO REFINANCING                  |                   
|LOSS RELATED TO EARLY EXTINGUISHMENT OF DEBT |                   
|OTHER INCOME                                 |                   
|                                             |                   
|INCOME BEFORE INCOME TAXES                   |                   
|INCOME TAX EXPENSE                           |                   
|                                             |                   
|Net income                                   |                   
|                                             |                   

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

4

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# BUFFETS HOLDINGS, INC.
AND SUBSIDIARIES

# CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS

|                                                                        | Twelve Weeks Ended
|----------------------------------------------------------------------- | ------------------
|
|
|
|
|
|OPERATING ACTIVITIES:                                                   |                   
|Net income                                                              |                   
|Adjustments to reconcile net income to net cash provided by             |                   
|operating activities:                                                   |                   
|Depreciation and amortization                                           |                   
|Amortization of debt issuance cost                                      |                   
|Accretion of original issue discount                                    |                   
|Loss related to early extinguishment of debt                            |                   
|Deferred income taxes                                                   |                   
|Loss on disposal of assets                                              |                   
|Changes in assets and liabilities:                                      |                   
|Receivables                                                             |                   
|Inventories                                                             |                   
|Prepaid expenses and other current assets                               |                   
|Accounts payable                                                        |                   
|Accrued and other liabilities                                           |                   
|Income taxes payable                                                    |                   
|                                                                        |                   
|Net cash provided by operating activities                               |                   
|                                                                        |                   
|INVESTING ACTIVITIES:                                                   |                   
|Purchase of property and equipment                                      |                   
|Purchase of other assets                                                |                   
|                                                                        |                   
|Net cash used in investing activities                                   |                   
|                                                                        |                   
|FINANCING ACTIVITIES:                                                   |                   
|Repayment of debt                                                       |                   
|Reduction of restricted cash available for early extinguishment of debt |                   
|Use of restricted cash for early extinguishment of debt                 |                   
|Debt issuance costs                                                     |                   
|                                                                        |                   
|Net cash used in financing activities                                   |                   
|                                                                        |                   
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                 |                   
|CASH AND CASH EQUIVALENTS, beginning of period                          |                   
|                                                                        |                   
|CASH AND CASH EQUIVALENTS, end of period                                |                   
|                                                                        |                   
|SUPPLEMENTAL CASH FLOW INFORMATION:                                     |                   
|Cash paid during the period for                                        |                   
|Interest (net of capitalized interest of $68 and $73)                   |                   
|                                                                        |                   
|Income taxes                                                            |                   
|                                                                        |                   

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

5

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# BUFFETS HOLDINGS, INC.
AND SUBSIDIARIES

# NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

# 1. Nature of Organization

Description of Business

Buffets
Holdings, Inc., a Delaware corporation, was formed to acquire 100 percent of the common
stock of Buffets, Inc. and its subsidiaries in a buyout from public shareholders on
October 2, 2000 (the Acquisition). Buffets Holdings, Inc. and subsidiaries (Buffets
Holdings) and Buffets, Inc. and subsidiaries are collectively referred to as the Company.
Buffets, Inc., a Minnesota corporation, is the principal operating subsidiary of Buffets
Holdings.

The
Company owns and operates a chain of restaurants under the names of Old Country Buffet,
Country Buffet, HomeTown Buffet, Grannys Buffet, and Tahoe Joes Famous
Steakhouse in the United States. The Company, operating principally in the buffet/grill
segment, owned and operated 355 restaurants (346 family buffet restaurants) and franchised
18 restaurants operating as of September 21, 2005.

Interim Financial
Information

In
the opinion of management, the accompanying unaudited condensed consolidated financial
statements contain all necessary adjustments, which are of a normal recurring nature, to
present fairly the Companys financial position and the results of its operations and
cash flows for the periods presented, in conformity with accounting principles generally
accepted in the United States of America and with the regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote disclosures,
normally included in accordance with accounting principles generally accepted in the
United States of America, have been condensed or omitted pursuant to SEC rules and
regulations. Operating results for the twelve weeks ended September 21, 2005 are not
necessarily indicative of results that may be achieved for the fiscal year ending June 28,
2006.

The
balance sheet as of June 29, 2005 has been derived from the audited consolidated financial
statements at that date but does not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for complete
financial statements.

These
unaudited condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the related notes contained in the
Companys Form 10-K filed with the Securities and Exchange Commission on September
23, 2005 and with Managements Discussion and Analysis of Financial Condition and
Results of Operations appearing on pages 16 through 22 of this report.

Principles of
Consolidation

The
condensed consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation.

Fiscal Year

The
Companys fiscal year is comprised of fifty-two or fifty-three weeks divided into
four fiscal quarters of twelve, twelve, sixteen, and twelve or thirteen weeks.

6

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# 2. Recent Accounting
Pronouncements

In
June 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections.
SFAS No. 154 replaces APB (Accounting Principles Board) Opinion No. 20,
Accounting Changes, and SFAS No. 3, Reporting Accounting
Changes in Interim Financial Statements, and changes the requirements for the
accounting for and reporting of a change in accounting principle. This Statement applies
to all voluntary changes in accounting principle. It also applies to changes required by
an accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition provisions. When a pronouncement includes specific transition
provisions, those provisions should be followed. This Statement shall be effective for
accounting changes and corrections of errors made in fiscal years beginning after December
15, 2005. The Company does not believe that the adoption of SFAS No. 154 will have a
material impact on its results of operations or financial position.

In
December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. This
statement requires all entities to recognize compensation expense in an amount equal to
the fair value of share-based payments granted to employees. SFAS No. 123(R) is effective
as of the beginning of the first annual reporting period after December 15, 2005. The
Company is in the process of evaluating the impact that the adoption of SFAS No. 123(R)
will have on its financial statements.

# 3. Stock-Based
Compensation

The
Company accounts for activity under its stock-based employee compensation plans under the
recognition and measurement principles of APB Opinion No. 25, Accounting for Stock
Issued to Employees. Accordingly, the Company does not recognize compensation
expense in connection with employee stock option grants because stock options are granted
at exercise prices not less than the fair value of the common stock on the date of grant.

There would
have no effect on net income had the Company applied the fair value
expense recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation for the twelve weeks ended September 22, 2004
and September 21, 2005, respectively.

# 4. Other Assets

Other
assets consist principally of debt issuance costs, notes receivable and other intangibles
net of accumulated amortization of $2.5 million and $2.8 million as of June 29, 2005 and
September 21, 2005, respectively. Debt issuance costs are the capitalized costs incurred
in conjunction with amending Buffets, Inc.s senior credit agreement, issuing
Buffets, Inc.s senior subordinated notes and issuing Buffets Holdings senior
discount notes. Debt issuance costs are being amortized over the terms of the
financing arrangements using the effective interest method. Other intangibles include
trademarks, franchise fees and liquor licenses. Trademarks and franchise fees are being
amortized on a straight-line basis over 10 years. Liquor licenses are not amortized, as
they have indefinite lives. Notes receivable principally arose from the sale of certain
restaurant facilities. Long-term and short-term notes receivable collectively totaled $1.9
million as of June 29, 2005 and $1.7 million as of September 21, 2005. The notes
receivable have due dates between 2006 and 2008.

The
gross carrying amount and accumulated amortization of each major intangible asset class
was as follows (in thousands):

|                            | Franchise fees | Trademarks | Liquor licenses | Total |  |   |     |  
|--------------------------- | -------------- | ---------- | --------------- | ----- |  | - | --- | -
|
|
|
|BALANCE, June 29, 2005      |                |            | $               | 69    |  | $ | (65 | )
|FY 2005 Activity:           |                |           
|Amortization                |                |            |                 |      |  |   | (1  | )
|                            |                |            |                 |       |  |   |     |  
|BALANCE, September 21, 2005 |                |            | $               | 69    |  | $ | (66 | )
|                            |                |            |                 |       |  |   |     |  

7

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# 5. Long-Term Debt

As
of September 21, 2005, long-term debt outstanding was as follows (in thousands):

|Buffets, Inc.                                                     | 
|----------------------------------------------------------------- | 
|Credit Facility:                                                  | 
|Revolving credit facility                                         | 
|Term loan, interest at LIBOR plus 3.50%, due quarterly through    | 
|June 28, 2009 (interest rate at 6.3% as of September 21, 2005)    | 
|                                                                  | 
|Total Credit Facility                                             | 
|Senior subordinated notes, interest at 11.25%, due July 15, 2010, | 
|net of discount of $4,803                                         | 
|                                                                  | 
|Total long-term debt at Buffets, Inc.                             | 





|Buffets Holdings, Inc.                                             | 
|------------------------------------------------------------------ | 
|Senior discount notes, interest at 13.875%, due December 15, 2010, | 
|net of discount of $41,665                                         | 
|                                                                   | 
|Grand total long-term debt                                         | 
|Less - Current maturities                                          | 
|                                                                   | 
|                                                                   | 
|                                                                   | 

Credit Facility

Effective
as of July 28, 2005, Buffets Holdings, Inc. entered into Amendment No. 1, dated as of
April 6, 2005 (the Amendment), to Buffets, Inc.s Amended and Restated
Credit Agreement, dated as of February 20, 2004. The Amendment relaxed the interest
coverage and maximum leverage ratios of the Amended and Restated Credit Agreement with
which Buffets, Inc. is required to comply. The Amendment also added a repricing protection
clause relating to the prepayment of term loans borrowed under the Credit Facility. The
repricing protection provides that Buffets, Inc. must pay a 1% prepayment premium on all
such prepayments prior to January 27, 2006.

The
amended and restated Credit Facility provides for total borrowings of up to $310,000,000,
including (i) a $230,000,000 term loan, (ii) a $30,000,000 revolving credit facility,
(iii) a $20,000,000 letter of credit facility, and (iv) a $30,000,000 synthetic letter of
credit facility. The terms of the Credit Facility permit Buffets, Inc. to borrow, subject
to availability and certain conditions, incremental term loans or to issue additional
notes in an aggregate amount up to $25,000,000. The borrowings under the term loan
facility bear interest, at Buffets, Inc.s option, at either adjusted LIBOR plus
3.50% or at an alternate base rate plus 2.50%, subject to a leverage-based pricing grid.
The term loan and the synthetic letter of credit facility mature on June 28, 2009, while
the revolving facility and the letter of credit facilities mature on June 28, 2007. The
borrowings due under the term loan are payable in equal quarterly installments in an
annual amount equal to 1% of the term loan during each of the first four and a half years
of the loan, with the remaining balance payable due in equal quarterly installments during
the last year of the loan. The Credit Facility is fully and unconditionally guaranteed by
Buffets Holdings, which has no independent assets or operations, and is secured by
substantially all of the Companys assets. Availability under the Credit Facility
depends upon our continued compliance with certain covenants and financial ratios
including leverage, interest coverage and fixed charge coverage as specifically defined in
the Credit Facility and its amendments. Buffets, Inc. was in compliance with all financial
ratio covenants of the amended Credit Facility as of September 21, 2005. The financial
ratio covenant requirements increase over time, however, as set forth in Amendment No. 1
to the senior credit agreement.

As
of September 21, 2005, Buffets, Inc. had $32.3 million in outstanding letters of credit,
which expire through August 23, 2006. As of September 21, 2005, total borrowing
availability under the revolving credit facility was $30.0 million and total borrowing
capacity under the letter of credit facilities was $17.7 million.

Buffets,
Inc. has the option of tying its borrowings to LIBOR or a base rate when calculating the
interest rate for the term loan. The base rate is the greater of Credit Suisse First
Bostons prime rate, or the federal funds effective rate plus one-half of 1 percent.

8

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111⁄4% Senior
Subordinated Notes

On
June 28, 2002, Buffets, Inc. issued 111⁄4% senior subordinated notes in the principal
amount of $230 million due July 15, 2010. Such notes were issued at a 96.181% discount,
resulting in an effective yield of 12% to the initial principal amount. Interest is
payable semi-annually on January 15 and July 15 of each year through July 15, 2010.
Accretion of the original issue discount was approximately $0.2 million during the first
twelve weeks of fiscal years 2005 and 2006, and is included in interest expense in the
accompanying condensed consolidated income statements. Except in the event of an initial
public offering, Buffets, Inc. is not entitled to redeem the notes at its option prior to
July 15, 2006. The redemption price during the first twelve-month period following July
15, 2006 is 105.625%. The redemption price declines by 1.875% per year until July 15,
2009, at which point there is no redemption price premium. In the event of an initial
public offering prior to July 15, 2006, Buffets, Inc. may redeem up to 35% of the
aggregate principal amount of the notes at a redemption price of 111.25%. Furthermore, in
the event of a change in control, as defined in the indenture governing those notes, the
holders of the notes may require the Company to repurchase the notes at a purchase price
of 101% of the outstanding principal amount plus accrued and unpaid interest.

13 7/8%
Senior Discount Notes

On
May 18, 2004, Buffets Holdings issued $132 million aggregate principal amount at
maturity of 13 7/8% senior discount notes due December 15, 2010. The 13 7/8% senior
discount notes were issued at a discount to their aggregate principal amount at maturity.
Prior to July 31, 2008, interest will accrue on the 13 7/8% senior discount
notes in the form of an increase in the accreted value of those notes. The accreted value
of each note will increase until July 31, 2008 at a rate of 13.875% per annum. After this
date, cash interest on the notes will accrue and be payable on January 31 and July 31 of
each year at a rate of 13.875% per annum. Accretion of the discount was approximately $2.6
million and $2.9 million during the first twelve weeks of fiscal years 2005 and 2006,
respectively, and is included in interest expense in the accompanying condensed
consolidated income statements. If the Company fails to meet certain leverage ratio tests
on or about July 31, 2006 or July 31, 2008, additional interest will accrue on the notes
from that date at a rate of 1% per annum, up to a maximum of 2% per annum.

# 6. Litigation

On
November 12, 2004, two former restaurant managers of our wholly-owned subsidiary, HomeTown
Buffet, Inc. (HomeTown Buffet), individually and on behalf of all others
similarly situated, filed a class action lawsuit against HomeTown Buffet in California
Superior Court in San Francisco County. The lawsuit alleges that HomeTown Buffet violated
California wage and hour laws by failing to pay all of its California managers and
assistant managers overtime, and for making deductions from bonus compensation based on
the companys workers compensation costs. The plaintiffs seek compensatory
damages, penalties, restitution of unpaid overtime and deductions, pre-judgment interest,
costs of suit and reasonable attorneys fees. The complaint does not make a specific
monetary demand. This action is in a preliminary stage, and we are currently not able to
predict the outcome of this action or reasonably estimate a range of possible loss. We
intend to defend this action vigorously.

The
Company is also involved in various legal actions arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Companys consolidated financial position or
the results of operations.

# 7. Condensed
Consolidating Financial Statements

The following
condensed consolidating financial statements are presented pursuant to Rule 3-10 of
Regulation S-X. Buffets, Inc. is a subsidiary issuer of 111⁄4% senior subordinated
notes that are fully and unconditionally guaranteed by its parent, Buffets Holdings, as
well as each of its subsidiaries including HomeTown Buffets, Inc., OCB Restaurant Co.,
LLC, OCB Purchasing Co., Restaurant Innovations, Inc., Distinctive Dining, Inc., Tahoe
Joes, Inc., Buffets Leasing Company, LLC, HomeTown Leasing Company, LLC, OCB Leasing
Company, LLC, and Tahoe Joes Leasing Company, LLC. All guarantees are joint and
several and the subsidiary issuer and the subsidiary guarantors are 100% owned by the
parent company. There are certain restrictions on the ability of the Company to obtain
funds from its subsidiaries.

9

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# Condensed
Consolidating Balance Sheet  As of June 29, 2005

|                                          |  | Subsidiary | Subsidiary |         |  
|----------------------------------------- |  | ---------- | ---------- | ------- | -
|
|
|ASSETS                                    |  |            |            |         |  
|CURRENT ASSETS:                           |  |           
|Cash and cash equivalents                 |  |            | $          | 49      |  
|Receivables                               |  |            |            |        |  
|Inventories                               |  |            |            |        |  
|Prepaid expenses and other current assets |  |            |            | 4       |  
|Deferred income taxes                     |  |            |            | 187     |  
|                                          |  |            |            |         |  
|Total current assets                      |  |            |            | 240     |  
|PROPERTY AND EQUIPMENT, net               |  |            |            |        |  
|GOODWILL, net                             |  |            |            |        |  
|DEFERRED INCOME TAXES                     |  |            |            | 2,792   |  
|OTHER ASSETS, net                         |  |            |            | 2,556   |  
|                                          |  |            |            |         |  
|Total assets                              |  |            | $          | 5,588   |  
|                                          |  |            |            |         |  
|LIABILITIES AND SHAREHOLDERS'             |  |           
|EQUITY (DEFICIT)                          |  |           
|CURRENT LIABILITIES:                      |  |           
|Accounts payable                          |  |            |            |        |  
|Accrued liabilities                       |  |            |            |        |  
|Income taxes payable                      |  |            |            | (1,877  | )
|Current maturities of long-term debt      |  |            |            |        |  
|                                          |  |            |            |         |  
|Total current liabilities                 |  |            |            | (1,877  | )
|                                          |  |            |            |         |  
|LONG-TERM DEBT, net of current maturities |  |            |            | 87,439  |  
|DEFERRED LEASE OBLIGATIONS                |  |            |            |        |  
|OTHER LONG-TERM LIABILITIES               |  |            |            |        |  
|                                          |  |            |            |         |  
|Total liabilities                         |  |            |            | 85,562  |  
|                                          |  |            |            |         |  
|COMMITMENTS AND CONTINGENCIES             |  |           
|SHAREHOLDERS' EQUITY (DEFICIT)            |  |           
|Common stock                              |  |            |            | 32      |  
|Additional paid in capital                |  |            |            | 14      |  
|Retained earnings (accumulated deficit)   |  |            |            | (80,020 | )
|                                          |  |            |            |         |  
|Total shareholders' equity (deficit)      |  |            |            | (79,974 | )
|                                          |  |            |            |         |  
|Total liabilities and shareholders'       |  |           
|equity (deficit)                          |  |            | $          | 5,588   |  
|                                          |  |            |            |         |  

10

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# Condensed Consolidating
Balance Sheet As of September 21, 2005

|                                          |  | Subsidiary | Subsidiary |         |  
|----------------------------------------- |  | ---------- | ---------- | ------- | -
|
|
|ASSETS                                    |  |            |            |         |  
|CURRENT ASSETS:                           |  |           
|Cash and cash equivalents                 |  |            | $          | 49      |  
|Receivables                               |  |            |            |        |  
|Inventories                               |  |            |            |        |  
|Prepaid expenses and other current assets |  |            |            | 2       |  
|Deferred income taxes                     |  |            |            | 187     |  
|                                          |  |            |            |         |  
|Total current assets                      |  |            |            | 238     |  
|PROPERTY AND EQUIPMENT, net               |  |            |            |        |  
|GOODWILL, net                             |  |            |            |        |  
|DEFERRED INCOME TAXES                     |  |            |            | 2,792   |  
|OTHER ASSETS, net                         |  |            |            | 2,474   |  
|                                          |  |            |            |         |  
|Total assets                              |  |            | $          | 5,504   |  
|                                          |  |            |            |         |  
|LIABILITIES AND SHAREHOLDERS'             |  |           
|EQUITY (DEFICIT)                          |  |           
|CURRENT LIABILITIES:                      |  |           
|Accounts payable                          |  |            |            |        |  
|Accrued liabilities                       |  |            |            |        |  
|Income taxes payable                      |  |            |            | (2,456  | )
|Current maturities of long-term debt      |  |            |            |        |  
|                                          |  |            |            |         |  
|Total current liabilities                 |  |            |            | (2,456  | )
|LONG-TERM DEBT, net of current maturities |  |            |            | 90,335  |  
|DEFERRED LEASE OBLIGATIONS                |  |            |            |        |  
|OTHER LONG-TERM LIABILITIES               |  |            |            |        |  
|                                          |  |            |            |         |  
|Total liabilities                         |  |            |            | 87,879  |  
|                                          |  |            |            |         |  
|COMMITMENTS AND CONTINGENCIES             |  |           
|SHAREHOLDERS' EQUITY (DEFICIT)            |  |           
|Common stock                              |  |            |            | 32      |  
|Additional paid in capital                |  |            |            | 14      |  
|Retained earnings (accumulated deficit)   |  |            |            | (82,421 | )
|                                          |  |            |            |         |  
|Total shareholders' equity (deficit)      |  |            |            | (82,375 | )
|                                          |  |            |            |         |  
|Total liabilities and shareholders'       |  |           
|equity (deficit)                          |  |            | $          | 5,504   |  
|                                          |  |            |            |         |  

11

---



# Condensed
Consolidating Statement of Operations For the Twelve Weeks
Ended September 22, 2004

|                                  |  | Subsidiary | Subsidiary |        |  
|--------------------------------- |  | ---------- | ---------- | ------ | -
|
|
|
|RESTAURANT SALES                  |  |            | $          |       |  
|RESTAURANT COSTS:                 |  |           
|Food                              |  |            |            |       |  
|Labor                             |  |            |            |       |  
|Direct and occupancy              |  |            |            |       |  
|                                  |  |            |            |        |  
|Total restaurant costs            |  |            |            |       |  
|ADVERTISING EXPENSES              |  |            |            |       |  
|GENERAL AND ADMINISTRATIVE        |  |           
|EXPENSES                          |  |            |            | 3      |  
|                                  |  |            |            |        |  
|OPERATING INCOME (LOSS)           |  |            |            | (3     | )
|INTEREST EXPENSE                  |  |            |            | 2,646  |  
|INTEREST INCOME                   |  |            |            |       |  
|LOSS RELATED TO EARLY             |  |           
|EXTINGUISHMENT OF DEBT            |  |            |            |       |  
|OTHER INCOME                      |  |            |            |       |  
|                                  |  |            |            |        |  
|INCOME (LOSS) BEFORE INCOME TAXES |  |            |            | (2,649 | )
|INCOME TAX EXPENSE (BENEFIT)      |  |            |            | (879   | )
|                                  |  |            |            |        |  
|Net income (loss)                 |  |            | $          | (1,770 | )
|                                  |  |            |            |        |  

12

---



# Condensed
Consolidating Statement of Operations For the Twelve Weeks
Ended September 21, 2005

|                                  |  | Subsidiary | Subsidiary |        |  
|--------------------------------- |  | ---------- | ---------- | ------ | -
|
|
|
|RESTAURANT SALES                  |  |            | $          |       |  
|RESTAURANT COSTS:                 |  |           
|Food                              |  |            |            |       |  
|Labor                             |  |            |            |       |  
|Direct and occupancy              |  |            |            |       |  
|                                  |  |            |            |        |  
|Total restaurant costs            |  |            |            |       |  
|ADVERTISING EXPENSES              |  |            |            |       |  
|GENERAL AND ADMINISTRATIVE        |  |           
|EXPENSES                          |  |            |            | 1      |  
|                                  |  |            |            |        |  
|OPERATING INCOME (LOSS)           |  |            |            | (1     | )
|INTEREST EXPENSE                  |  |            |            | 2,979  |  
|INTEREST INCOME                   |  |            |            |       |  
|LOSS RELATED TO REFINANCING       |  |            |            |       |  
|OTHER INCOME                      |  |            |            |       |  
|                                  |  |            |            |        |  
|INCOME (LOSS) BEFORE INCOME TAXES |  |            |            | (2,980 | )
|INCOME TAX EXPENSE (BENEFIT)      |  |            |            | (579   | )
|                                  |  |            |            |        |  
|Net income (loss)                 |  |            | $          | (2,401 | )
|                                  |  |            |            |        |  

13

---



# Condensed
Consolidating Statement of Cash Flows For the Twelve Weeks
Ended September 22, 2004

|                                                  |  | Subsidiary | Subsidiary |        |  
|------------------------------------------------- |  | ---------- | ---------- | ------ | -
|
|
|
|OPERATING ACTIVITIES:                             |  |            |            |        |  
|Net income (loss)                                 |  |            | $          | (1,770 | )
|Adjustments to reconcile net income (loss) to net |  |           
|cash provided by (used in) operating activities:  |  |           
|Depreciation and amortization                     |  |            |            |       |  
|Amortization of debt issuance costs               |  |            |            |       |  
|Accretion of original issue discount              |  |            |            | 2,571  |  
|Loss related to early extinguishment of debt      |  |            |            |       |  
|Deferred income taxes                             |  |            |            | (1,024 | )
|Loss on disposal of assets                        |  |            |            |       |  
|Changes in assets and liabilities:                |  |           
|Receivables                                       |  |            |            |       |  
|Inventories                                       |  |            |            |       |  
|Prepaid expenses and other assets                 |  |            |            |       |  
|Accounts payable                                  |  |            |            | (67    | )
|Accrued and other liabilities                     |  |            |            |       |  
|Income taxes payable/refundable                   |  |            |            | 145    |  
|                                                  |  |            |            |        |  
|Net cash provided by (used in)                    |  |           
|operating activities                              |  |            |            | (145   | )
|                                                  |  |            |            |        |  
|INVESTING ACTIVITIES:                             |  |           
|Purchase of property and equipment                |  |            |            |       |  
|Corporate cash advances (payments)                |  |            |            |       |  
|Proceeds from sale of other assets                |  |            |            | 77     |  
|                                                  |  |            |            |        |  
|Net cash provided by (used in) investing          |  |           
|activities                                        |  |            |            | 77     |  
|                                                  |  |            |            |        |  
|FINANCING ACTIVITIES:                             |  |           
|Repayment of debt                                 |  |            |            |       |  
|Reduction of restricted cash available for        |  |           
|early extinguishment of debt                      |  |            |            |       |  
|Use of restricted cash for early extinguishment   |  |           
|of debt                                           |  |            |            |       |  
|Dividends                                         |  |            |            | 74     |  
|Debt issuance costs                               |  |            |            | (56    | )
|                                                  |  |            |            |        |  
|Net cash provided by (used in) financing          |  |           
|activities                                        |  |            |            | 18     |  
|                                                  |  |            |            |        |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS           |  |            |            | (50    | )
|CASH AND CASH EQUIVALENTS, beginning of           |  |           
|period                                            |  |            |            | 96     |  
|                                                  |  |            |            |        |  
|CASH AND CASH EQUIVALENTS, end of period          |  |            | $          | 46     |  
|                                                  |  |            |            |        |  

14

---



# Condensed
Consolidating Statement of Cash Flows  For the Twelve Weeks
Ended September 21, 2005

|                                                  |  | Subsidiary | Subsidiary |        |  
|------------------------------------------------- |  | ---------- | ---------- | ------ | -
|
|
|
|OPERATING ACTIVITIES:                             |  |            |            |        |  
|Net income (loss)                                 |  |            | $          | (2,401 | )
|Adjustments to reconcile net income (loss) to net |  |           
|cash provided by (used in) operating activities:  |  |           
|Depreciation and amortization                     |  |            |            |       |  
|Amortization of debt issuance costs               |  |            |            | 82     |  
|Accretion of original issue discount              |  |            |            | 2,896  |  
|Loss on disposal of assets                        |  |            |            |       |  
|Changes in assets and liabilities:                |  |           
|Receivables                                       |  |            |            |       |  
|Inventories                                       |  |            |            |       |  
|Prepaid expenses and other assets                 |  |            |            | 2      |  
|Accounts payable                                  |  |            |            |       |  
|Accrued and other liabilities                     |  |            |            |       |  
|Income taxes payable/refundable                   |  |            |            | (579   | )
|                                                  |  |            |            |        |  
|Net cash provided by (used in) operating          |  |           
|activities                                        |  |            |            |       |  
|                                                  |  |            |            |        |  
|INVESTING ACTIVITIES:                             |  |           
|Purchase of property and equipment                |  |            |            |       |  
|Corporate cash advances (payments)                |  |            |            |       |  
|Proceeds from sale of other assets                |  |            |            |       |  
|                                                  |  |            |            |        |  
|Net cash provided by (used in) investing          |  |           
|activities                                        |  |            |            |       |  
|                                                  |  |            |            |        |  
|FINANCING ACTIVITIES:                             |  |           
|Repayment of debt                                 |  |            |            |       |  
|                                                  |  |            |            |        |  
|Net cash used in financing activities             |  |            |            |       |  
|                                                  |  |            |            |        |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS           |  |            |            |       |  
|CASH AND CASH EQUIVALENTS, beginning of period    |  |            |            | 49     |  
|                                                  |  |            |            |        |  
|CASH AND CASH EQUIVALENTS, end of period          |  |            | $          | 49     |  
|                                                  |  |            |            |        |  

15

---



# ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# 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.

# Overview

We
are the largest operator of company-owned stores in the buffet/grill sector (through
Buffets and its subsidiaries), as measured in both sales and number of restaurants. Our
restaurants are principally operated under the names Old Country Buffet and HomeTown
Buffet. As of September 21, 2005, we had 355 company-owned restaurants and 18 franchised
locations in 36 states.

Buffets
was founded in 1983 to develop buffet-style restaurants under the name Old Country Buffet.
In October 1985, Buffets completed its initial public offering and was listed on The
NASDAQ National Market. In September 1996, Buffets merged with HomeTown Buffet, Inc.,
which was developed by one of Buffets co-founders and had 80 company-owned HomeTown
Buffet restaurants in 11 states and 19 franchised restaurants in eight states. In October
2000, Buffets was acquired by Buffets Holdings, a company organized by Caxton-Iseman
Capital, Inc., in a buyout from public shareholders.

Our
financial results are significantly impacted by changes in sales at our company-owned
restaurants. Changes in sales are largely driven by changes in average weekly guest counts
and average guest check. Average weekly guest counts are affected by changes in consumer
confidence, competition, economic conditions and unusual weather patterns. We monitor
average weekly guest counts very closely, as they directly impact our revenues and
profits, and focus substantial efforts on growing these numbers on a same-store basis.
Same-store average weekly sales and guest counts are affected by our ability to
consistently deliver a high-quality, value-priced selection of home-style cooked meals in
a clean and pleasant self-service buffet format, the success of our marketing promotions
and other business strategies.

Our
business model is characterized by a relatively fixed cost structure, particularly in the
short term. Accordingly, changes in marginal average weekly sales volume can have a more
significant impact on our profitability than for a business possessing a more variable
cost structure. Over a longer time horizon, by virtue of our diversified food offerings,
we are able to address the semi-fixed element of food cost by modifying our offerings or
by highlighting other foods on the menu in order to reduce consumption on the higher cost
items. In addition, we monitor our labor costs and hourly employee productivity, as
measured by the number of guests served per labor hour, on a weekly basis to ensure that
restaurants are responsive in scheduling and managing our labor to varying levels of guest
traffic.

Since
we acquired Buffets in a buyout from its public shareholders in October 2000, we have
focused on improving asset management and optimizing our capital structure. As a result,
we have had net closures of 49 restaurants in less attractive locations either through
early termination, or non-renewal at lease end, since October 2000.

Our
fiscal year comprises 52 or 53 weeks divided into four fiscal quarters of 12, 12, 16 and
12 or 13 weeks.

The
following is a description of the line items from our condensed consolidated income
statements:

| |  |  | 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. 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 franchisees. We recognize royalty fees as other income based on the sales
              reported at the franchise restaurants.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

---



| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Interest expense reflects interest costs associated with our debt, amortization of debt issuance cost and accretion of
              original issuance discount on our subordinated notes and bonds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Interest income reflects interest earned on our short-term investments.
| | - |  | -----------------------------------------------------------------------

| |  |  | Effective as of July 28, 2005,  we entered into  Amendment No. 1, dated as of April 6, 2005,  to Buffets'  Amended and
              Restated Credit  Agreement,  dated as of February 20, 2004. Loss related to refinancing is comprised of transaction  fees
              incurred in conjunction with this amendment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Loss related to the early extinguishment of debt reflects the costs associated with redeeming a portion of Buffets' 11 1/4%
              senior subordinated notes prior to their maturity during fiscal year 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Other income primarily reflects franchise fees earned.
| | - |  | ------------------------------------------------------

| |  |  | Income tax expense 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."
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Critical Accounting
Policies

Our
condensed consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation
of our condensed consolidated financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. On an ongoing
basis, management evaluates its estimates and assumptions, including those related to
recoverability of long-lived assets, goodwill, self-insurance reserves and income taxes.
Management bases its estimates and assumptions on historical experience and on various
other factors made. Actual results may differ from these estimates and assumptions under
different circumstances or conditions.

We
believe the following critical accounting policies affect managements significant
estimates and assumptions used in the preparation of our condensed consolidated financial
statements.

Long-Lived Assets

We
test property and equipment for impairment annually or whenever events or circumstances
indicate that the carrying amount of a restaurants assets may not be recoverable. We
test for impairment using historical cash flows and other relevant facts and circumstances
as the primary basis for its estimates of future cash flows. Assets are grouped and
evaluated for impairment at the lowest level for which there are identifiable cash flows,
namely as individual restaurants. A restaurant is deemed to be impaired if a forecast of
undiscounted future operating cash flows, including disposal value, if any, is less than
its carrying amount.

If
a restaurant is determined to be impaired, the loss is measured as the amount by which the
carrying amount of the restaurant exceeds its fair value. Fair value is based on quoted
market prices in active markets, if available. If quoted market prices are not available,
we generally measure fair value by discounting estimated future cash flows. This process
requires the use of estimates and assumptions, which are subject to a high degree of
judgment. Accordingly, actual results could vary significantly from such estimates. There
were no impairment charges during the first quarter of fiscal 2006 or fiscal 2005.

17

---



Goodwill

We
test the recoverability of goodwill annually or whenever events or circumstances indicate
that the carrying amount may not be recoverable. Goodwill is deemed to be impaired if the
fair value of a reporting unit is less than its carrying value. If goodwill is determined
to be impaired, the loss is measured as the amount by which the carrying amount of a
reporting units goodwill exceeds its implied fair value. The fair value of a
reporting unit is an estimate based on assumptions regarding its future cash flows. In the
event that these assumptions change in the future, we may be required to record impairment
charges related to our goodwill. There were no impairment charges during the first quarter
of fiscal 2006 or fiscal 2005.

Self-Insurance Reserves

We
are self-insured and reserve for exposure related to our workers compensation, general
liability, medical and dental programs. We maintain stop loss coverage with third party
insurers to limit our total exposure. The self-insurance liability represents an estimate
of the ultimate cost of claims incurred and unpaid as of the balance sheet date, including
both reported claims and claims that have been incurred but not reported. The estimated
liability is established based upon historical claims data and third-party actuarial
estimates of settlement costs for incurred claims. Our estimates include our judgments and
independent actuarial assumptions regarding economic conditions, the frequency and
severity of claims and claim development patterns and settlement practices. These
estimates and assumptions are monitored and adjusted when warranted by changing
circumstances. Changes in these factors may produce materially different amounts of
expense and liabilities that would be reported under these insurance programs.

Store Closing Reserve

We
maintain a store closing reserve for restaurants that are no longer being utilized in
current operations. The store closing costs are principally comprised of our estimates of
lease termination costs and obligations, net of sublease and other cash receipts, and
employee termination benefits. Many factors including the local business environment,
other available lease sites, the ability to secure subleases, the creditworthiness of
subtenants, and our success at negotiating early termination agreements with lessors are
considered in establishing the accruals. Adjustments to the reserve primarily relate to
changes in subtenant income or actual exit costs differing from original estimates.
Adjustments are made for changes in estimates in the period in which the changes become
known. The store closing reserve was $1.5 million and $1.0 million as of June 29, 2005 and
September 21, 2005, respectively.

Income Taxes

We
estimate certain components of our provision for income taxes. These estimates include,
among other items, depreciation and amortization expense allowable for tax purposes,
allowable tax credits for items such as the Working Opportunity Tax Credit and taxes paid
on reported employee tip income, effective rates for state and local taxes, and the tax
deductibility of certain other items. Our estimates are based on current tax laws, the
best available information at the time of the provision and historical experience. Income
tax returns are subject to audit by federal, state, and local governments, generally years
after the returns are filed. These returns could be subject to material adjustments or
differing interpretations of the tax laws.

Deferred
tax assets and liabilities are recognized for the expected future tax consequences of
temporary differences between financial reporting amounts and the tax basis of existing
assets and liabilities based on currently enacted tax laws and tax rates in effect for the
periods in which the differences are expected to reverse. Income tax expense is the tax
payable for the quarter, plus the change during the quarter in deferred income taxes.
Valuation allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.

Gift Cards

Historically,
Buffets has sold gift certificates to its guests. Beginning in November 2002, Buffets
stopped selling paper gift certificates and began selling gift cards. Proceeds from the
sale of gift cards are initially recorded as a liability when received. Revenues from the
sale of gift cards at our restaurants are recognized upon redemption. In estimating the
related gift card liability, we analyze historical trends to derive our estimates of
future gift card redemption patterns. The assumptions and activity are closely monitored
for changes in escheatment laws and redemption patterns. We periodically adjust our gift
card liability based on historical and expected non-redemption trends. These adjustments
are classified within direct and occupancy costs in our condensed consolidated income
statements. The gift card/certificate liability was $4.1 million and $3.5 million as of
June 29, 2005 and September 21, 2005, respectively.

18

---



# Results of Operations

The
following discussion reflects our historical results for the 12-week periods ended
September 21, 2005 and September 22, 2004.

Our
future results may not be consistent with our historical results. Our fiscal 2005 results
included a loss related to the redemption of approximately $14.3 million of 111⁄4%
Senior Subordinated notes due 2010. 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. Our fiscal 2006 results include a loss
related to refinancing comprised of $0.6 million of transaction fees incurred in
conjunction with this amendment. The following discussion should be read in conjunction
with our condensed consolidated financial statements and related notes included elsewhere
in this report.

The
following table sets forth our results of operations based on the percentage relationship
of the items listed to our restaurant sales during the periods shown:

|                                             | Twelve Weeks Ended
|-------------------------------------------- | ------------------
|
|
|
|Restaurant sales                             |                   
|Restaurant costs                             |                   
|Advertising expenses                         |                   
|General and administrative expenses          |                   
|                                             |                   
|Operating income                             |                   
|Interest expense                             |                   
|Interest income                              |                   
|Loss related to refinancing                  |                   
|Loss related to early extinguishment of debt |                   
|Other income                                 |                   
|                                             |                   
|Income before income taxes                   |                   
|Income tax expense                           |                   
|                                             |                   
|Net income                                   |                   
|                                             |                   

Certain percentage
amounts do not sum to total due to rounding.

Restaurant Sales. Restaurant sales increased $9.5 million, or 4.4%, during the 12
weeks ended September 21, 2005 over the comparable prior year period. Average
weekly sales for the first quarter of fiscal 2006 increased 5.6% over the comparable prior
year period to $53,451. This improvement was primarily due to an increased check average.
Same-store sales for the first quarter of fiscal 2006 increased by 4.2% compared to the
comparable prior year period. The increase was comprised of a 5.7% increase in average
check, partially offset by a 1.5% decline in guest traffic.  We believe rising gasoline prices,
natural gas prices and interest rates have had an adverse impact on our target
customers discretionary spending and have negatively affected our guest counts. We
currently expect same-store sales for the second quarter of fiscal 2006 (the 12-week
period ending December 14, 2005) to range between a four and a six percent
improvement versus the comparable period in fiscal 2005.

Restaurant
Costs. Restaurant costs for the first quarter of fiscal 2006 declined by 1.3% as a
percentage of sales compared with the comparable prior year period. Food costs increased
0.3% as a percentage of sales during the first quarter in fiscal 2006 as compared to the
prior year period primarily due to our steak promotion which commenced late in fiscal
2005. Labor costs decreased 1.3% as a percentage of sales in large part due to improved
sales leverage, as well as a reduction in workers compensation costs as compared to the prior year
period. Direct and occupancy costs decreased by 0.3% as a percentage of sales versus the
comparable quarter in the prior year primarily due to improved sales leverage attributable
to reasonably fixed costs on an improving sales base. We currently expect that restaurant
costs will range between 85.9% and 87.9% as a percentage of sales during the
second quarter of fiscal 2006.

Advertising
Expenses. Advertising costs increased 0.4% as a percentage of sales during the first
quarter of fiscal 2006 versus the comparable quarter in the prior year as we significantly
increased promotional advertising during August and September. We expect that advertising
costs will range between 3.9% and 4.2% as a percentage of sales during the
second quarter of fiscal 2006.

General
and Administrative Expenses. General and administrative expenses decreased 0.1% as a
percentage of sales during the first quarter of fiscal 2006 as compared to the 12 weeks
ended September 22, 2004. This decrease was largely due to reasonably fixed costs on an
improving sales base. We currently expect that general and administrative expenses will
range between 4.4% and 4.7% as a percentage of sales for the second quarter
of fiscal 2006.

19

---



Interest
Expense. Interest expense increased 0.2% as a percentage of sales during the first
quarter of fiscal 2006 versus the comparable prior year period primarily due to rising
interest rates on our term loans and the impact of cumulative accretion on our 13 7/8%
senior discount notes. We currently expect that interest expense will range between
5.3% and 5.5% as a percentage of sales for the second quarter of fiscal
2006.

Loss
Related to Refinancing.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.

Loss
Related to the Early Extinguishment of Debt. During the first quarter of fiscal 2005,
we repurchased $14.3 million of Buffets' 111⁄4% senior subordinated notes due in 2010 at an
average price of 106.7%. The difference between the premium purchase price and the
discounted carrying value of the senior subordinated notes, as well as the associated
write-off of debt issuance costs, was recognized as a loss related to the early
extinguishment of debt.

Income
Taxes. Income taxes increased 0.4% as a percentage of sales for the 12 weeks ended
September 21, 2005 compared to the 12 weeks ended September 22, 2004 principally due to an
increase in income before income taxes. The decrease in the effective tax rate was largely
attributable to the impact of relatively stable permanent non-deductible items on an
increasing pre-tax income base.

# Liquidity and Capital
Resources

We
are a holding company with no operations or assets of our own other than the capital stock
of our subsidiaries. Operations are conducted through our subsidiaries and our ability to
make payments on the senior discount notes is dependent on the earnings and the
distribution of funds from our subsidiaries through loans, dividends or otherwise.
However, none of our subsidiaries is obligated to make funds available to us for payment
on the senior subordinated notes. The terms of our credit facility place restrictions on
Buffets ability to pay dividends and otherwise transfer assets to us. Further, the
terms of the indenture governing Buffets senior subordinated notes place
restrictions on the ability of Buffets and our other subsidiaries to pay dividends and
otherwise transfer assets to us.

Cash
flows generated from Buffets operating activities provide us with a significant
source of liquidity. Because most of our sales are for cash or credit with settlement
within a few days and most vendors are paid on terms ranging from 14 to 35 days, we
operate on a significant working capital deficit. In addition to cash flows from
operations, revolving credit loans and swingline loans are available to us under our
credit facility. Letters of credit issued under the letter of credit facility are also
available to us to support payment obligations incurred for our general corporate
purposes.

Historically,
our capital requirements have been for the development and construction of new
restaurants, restaurant refurbishment and the installation of new information systems. We
expect these requirements to continue in the foreseeable future.

Operating
Activities. Net cash provided by operating activities was $5.7 million for the 12
weeks ended September 21, 2005 and $8.0 million for the 12 weeks ended September 22, 2004.
Net cash provided by operating activities exceeded the net income for the first 12 weeks
of fiscal 2006 principally due to the effect of depreciation and amortization, accretion
of original issue discount and a decrease in prepaid expenses, partially offset by
decreases in accounts payable and accrued and other liabilities. Net cash provided by
operating activities exceeded the net income for the first quarter of fiscal 2005
principally due to the effect of depreciation and amortization, accretion of original
issue discount and the loss related to the early extinguishment of debt, partially offset
by decreases in accounts payable and accrued and other liabilities.

Investing
Activities. Net cash used in investment activities was $6.0 million for the 12 weeks
ended September 21, 2005 and $4.3 million for the 12 weeks ended September 22, 2004.
Investment activities were largely comprised of capital expenditures for both periods.
During the first 12 weeks of fiscal 2006, remodeling and improvement costs on our existing
restaurants accounted for approximately $4.5 million of our capital expenditures. The bulk
of the remainder of our capital expenditures during the first 12 weeks of fiscal 2006 were
comprised of new construction expenditures. During the first 12 weeks of fiscal 2005, we
opened two new restaurants that accounted for approximately $2.3 million of our capital
expenditures. The remaining capital expenditures during the first
12 weeks of fiscal 2005 were comprised of remodeling and improvement costs on our existing
restaurants.

20

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Financing
Activities. Net cash used in financing activities totaled $0.5 million for the first
12 weeks of fiscal 2006 and $0.7 million for the first 12 weeks of fiscal 2005. Financing
activities consisted primarily of repayments of debt in both periods. In addition,
Buffets, Inc. completed its partial bond repurchase program in August 2004, cumulatively
expending $49.5 million to redeem $43.9 million of senior subordinated notes at an average
price of 109.2% over a period of approximately six months. Buffets, Inc. spent $15.7
million during the first quarter of fiscal 2005 to redeem $14.3 million of senior
subordinated notes at an average price of 106.7%.

Future
Capital Expenditures.During the remainder of fiscal 2006, we plan to:

| |  |  | Spend approximately
$3 million on a new restaurant to be opened this fiscal year.
| | - |  | ---------------------------------------------------------------------------------

| |  |  | Spend  approximately $16 million on remodeling and improvement  costs that will be capitalized.  Remodels  incorporate  design
        elements to update the decor of our existing  facilities  including a lighter,  more contemporary  interior design and expanded
        dessert  displays.  Other  improvement  costs include a variety of outlays such as new carpet,  equipment  and minor  leasehold
        improvements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Spend approximately $0.5 million
on miscellaneous corporate and information systems investments.
| | - |  | ------------------------------------------------------------------------------------------------

In
addition, we plan to spend approximately $15 million on the repair and maintenance of our
existing restaurant locations, which amounts will be expensed. This will encompass expenditures to
keep equipment in good working order and leasehold improvements in good condition, without
substantially extending the economic lives of the underlying assets.

We
are not aware of any other event or trend that would potentially affect our capital
requirements or liquidity. For the next twelve months, we believe that cash flow from
operations, landlord contributions, credits received from trade suppliers and available
borrowing capacity will be adequate to finance our development plans, on-going operations
and debt service obligations.

# Credit Facilities and
Other Long Term Debt

On
February 20, 2004, Buffets entered into an amended and restated senior credit
facility (Credit Facility). The Credit Facility provides for total borrowings
of up to $310,000,000, including (i) a $230,000,000 term loan, (ii) a $30,000,000
revolving credit facility, (iii) a $20,000,000 letter of credit facility, and (iv) a
$30,000,000 synthetic letter of credit facility. The terms of the Credit Facility permit
us to borrow, subject to availability and certain conditions, incremental term loans or to
issue additional notes in an aggregate amount up to $25,000,000.

Effective
as of July 28, 2005, Buffets Holdings, Inc. entered into Amendment No. 1, dated as of
April 6, 2005 (the Amendment), to Buffets, Inc.s Amended and Restated
Credit Agreement, dated as of February 20, 2004. The Amendment relaxed the interest
coverage and maximum leverage ratios of the Amended and Restated Credit Agreement with
which Buffets, Inc. is required to comply. The Amendment also added a repricing protection
clause relating to the prepayment of term loans borrowed under the Credit Facility. The
repricing protection provides that Buffets, Inc. must pay a 1% prepayment premium on all
such prepayments prior to January 27, 2006.

As
of September 21, 2005, we had $32.3 million in outstanding letters of credit, which expire
through August 23, 2006. As of September 21, 2005, the total borrowing availability under
the revolving credit facility was $30.0 million and the total borrowing capacity under the
letter of credit facilities was $17.7 million.

On
June 28, 2002, Buffets issued $230.0 million aggregate principal amount of its
111⁄4% senior subordinated notes due July 15, 2010 at 96.181%. Interest is payable
semi-annually on January 15 and July 15 of each year. Except in the event of an initial
public offering, we are not entitled to redeem Buffets 111⁄4% Notes prior to July 15,
2006, after which we can choose to redeem some or all of Buffets 111⁄4% Notes at
specified redemption prices.

On
May 18, 2004, we issued $132 million aggregate principal amount at maturity of our 13 7/8%
senior discount notes due December 15, 2010. Our 13 7/8% Notes were issued at a discount
to their aggregate principal amount at maturity. Prior to July 31, 2008, interest will
accrue on our 13 7/8% Notes in the form of an increase in the accreted value of those
notes. The accreted value of each 13 7/8% Note will increase until July 31, 2008 at a rate
of 13.875% per annum. After this date, cash interest on the 13 7/8% Notes will accrue and
be payable on January 31 and July 31 of each year at a rate of 13.875% per annum. If we
fail to meet certain leverage ratio tests on or about July 31, 2006 or July 31, 2008,
additional interest will accrue on our 13 7/8% Notes from that date at a rate of 1% per
annum, up to a maximum of 2% per annum.

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# Seasonality and
Quarterly Fluctuations

Our
sales are seasonal, with a lower percentage of annual sales occurring in most of our
current market areas during the winter months. Generally, restaurant sales per unit are
lower in the winter months, our third fiscal quarter ending in April of each year. The
impact of these reduced average weekly sales are mitigated in our quarterly data
presentations through the inclusion of 16 weeks in the quarter ending in early April of
each year, compared to only 12 or 13 weeks in each of the other fiscal quarters. Our
restaurant sales may also be affected by unusual weather patterns, particularly during the
winter months, major world events or matters of public interest that compete for
customers attention.

# Forward-Looking
Statements and Risk Factors

The
statements contained in this report which are not historical facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual results to
differ materially from those set forth in, or implied by, forward-looking statements. We
have tried, whenever possible, to identify these forward-looking statements using words
such as projects, anticipates, believes,
estimates, expects, plans, intends, and
similar expressions. Similarly, statements herein that describe our business strategy,
outlook, objectives, plans, intentions or goals are also forward-looking statements. The
risks and uncertainties involving forward-looking statements include, but are not limited
to, general business and economic conditions, negative publicity, the impact of
competition, the seasonality of our business, adverse weather conditions, future commodity
prices, fuel and utility costs, labor costs, employment and environmental laws,
governmental regulations, and inflation. For a detailed discussion of risks and
uncertainties that may cause our future performance to differ from that projected in the
forward-looking statements, please refer to the Risk Factors/Forward-Looking
Statements section contained in our Form 10-K filed with the Securities and Exchange
Commission on September 23, 2005. All forward-looking statements speak only as of the date
of this report. All subsequent written and oral forward-looking statements attributable to
us or any person acting on our behalf are qualified by the cautionary statements in this
section. We undertake no obligation to update or publicly release any revisions to
forward-looking statements to reflect events, circumstances or changes in expectations
after the date of this report.

# ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest
Rate Risks. We have interest rate exposure relating to the variable portion of our
long-term obligations. Buffets 111⁄4% senior subordinated notes and our 13 7/8%
senior discount notes are fixed rate instruments, while the interest rates on the term
loans under the Credit Facility are variable. A 1% change in interest rates on our
variable rate debt would have resulted in our interest rate expense fluctuating by
approximately $0.5 million for the twelve weeks ended September 21, 2005.

Food
Commodity Risks. Many of the food products purchased by us are affected by commodity
pricing and are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties and other factors that are outside our control. To control
this risk in part, we have fixed price purchase commitments with terms of one year or less
for some key food and supplies from vendors who supply our national food distributor. In
addition, we believe that substantially all of our food and supplies are available from
several sources, which helps to control food commodity risks. We believe we have the
ability to increase menu prices, or vary the menu items offered, if needed, in response to
food product price increases within the range that has been experienced historically. To
compensate for a hypothetical price increase of 10% for food and beverages, we would need
to increase menu prices by an average of approximately 3%. Our average menu price
increases were approximately 6% for the twelve weeks ended September 21, 2005.
Accordingly, we believe that a hypothetical 10% increase in food product costs would not
have a material effect on our operating results.

# ITEM 4. CONTROLS AND
PROCEDURES

Disclosure
Controls and Procedures. We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and regulations, and that the information
is accumulated and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosures based closely on the definition of disclosure controls and
procedures in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.

As
of September 21, 2005, we carried out an evaluation, under the supervision and with the
participation of our management, including our principal executive officer and our
principal financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, we concluded that our
disclosure controls and procedures were effective.

Changes
in Internal Control. During the 12 weeks ended September 21, 2005, there were no
significant changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Securities and Exchange Act of 1934) that have materially
affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

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It
should be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the system
will be met. In addition, the design of any control system is based in part upon certain
assumptions about the likelihood of future events. Because of these and other inherent
limitations of control systems, there is only reasonable assurance that our controls will
succeed in achieving the stated goals under all potential future conditions.

# PART II. OTHER
INFORMATION

# ITEM 5. OTHER INFORMATION

We are a voluntary filer and file annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
amendments to those reports and other information with the Securities and Exchange
Commission (SEC). The public can obtain copies of these materials by
contacting the SEC at 1-800-SEC-0330, or by accessing the SECs website at
www.sec.gov. In addition, a link to our SEC filings is provided on our website at
www.buffet.com.

# ITEM 6. EXHIBITS

See
Index to Exhibits on page 25 of this report.

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# SIGNATURES

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.

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|
|Date:   November 2, 2005 | By:
|                        
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|                         |    
|                         | By:
|                        
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|                         |    
|                         |    

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# INDEX TO EXHIBITS

|      | 
|----- | 
|
|
|10.1* | 
|      | 
|10.2* | 
|      | 
|10.3* | 
|      | 
|31.1  | 
|      | 
|31.2  | 
|      | 

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*     Previously provided or incorporated
by reference.

25

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