# UNITED STATES

SECURITIES AND
EXCHANGE COMMISSION


WASHINGTON, 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 24, 2003

Commission
file number:  333-98301

# BUFFETS, INC.

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





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|---------------------------------------- | ----------
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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]

The number of shares of Buffets,
Inc.s common stock outstanding as of November 7, 2003 was 100.

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# BUFFETS, INC.

TABLE OF CONTENTS

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

2

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# PART I.     FINANCIAL
INFORMATION

# ITEM 1.     FINANCIAL STATEMENTS

# BUFFETS, INC. AND
SUBSIDIARIES

# CONDENSED CONSOLIDATED
BALANCE SHEETS

|                                                         | July 2, | September 24,
|-------------------------------------------------------- | ------- | -------------
|
|
|
|
|CURRENT ASSETS:                                          |         |              
|Cash and cash equivalents                                |         |              
|Receivables                                              |         |              
|Inventories                                              |         |              
|Prepaid expenses and other current assets                |         |              
|Assets held for sale                                     |         |              
|Deferred income taxes                                    |         |              
|                                                         |         |              
|Total current assets                                     |         |              
|PROPERTY AND EQUIPMENT, net                              |         |              
|GOODWILL                                                 |         |              
|DEFERRED INCOME TAXES                                    |         |              
|OTHER ASSETS, net                                        |         |              
|                                                         |         |              
|Total assets                                             |         |              
|                                                         |         |              
|LIABILITIES AND SHAREHOLDER'S EQUITY                     |         |              
|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                                        |         |              
|SHAREHOLDER'S EQUITY:                                    |         |              
|Common stock; $.01 par value, 100 shares authorized; 100 |         |              
|shares issued and outstanding                            |         |              
|Retained earnings                                        |         |              
|                                                         |         |              
|Total shareholder's equity                               |         |              
|                                                         |         |              
|Total liabilities and shareholder's equity               |         |              
|                                                         |         |              

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

3

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# BUFFETS, 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                     |                   
|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, 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                       |                   
|Deferred income taxes                                    |                   
|Accretion of original issue discount                     |                   
|Loss (gain) 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 fixed assets                                 |                   
|Acquisition of 20% minority interest in Tahoe Joes Inc. |                   
|Proceeds from sale of other assets                       |                   
|Purchase of other assets                                 |                   
|                                                         |                   
|Net cash used in investing activities                    |                   
|                                                         |                   
|FINANCING ACTIVITIES:                                    |                   
|Repayment of debt                                        |                   
|Capital distribution                                     |                   
|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 $88 and $39)    |                   
|                                                         |                   
|Income taxes                                             |                   
|                                                         |                   

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

5

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# BUFFETS, INC. AND
SUBSIDIARIES

# NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)

# 1.     Nature of Organization

Description of Business

The
Company owns and operates a chain of restaurants under the names of Old Country Buffet,
Country Buffet, HomeTown Buffet, Grannys Buffet, Country Roadhouse Buffet &
Grill, Tahoe Joes Famous Steakhouse, and Soup N Salad Unlimited in the United
States. The Company operates principally in the midscale family dining industry segment.
The Company operated 367 Company-owned restaurants (359 buffet restaurants and eight Tahoe
Joes Famous Steakhouse Restaurants) and franchised 23 restaurants as of September
24, 2003.

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 such SEC rules and
regulations. Operating results for the twelve weeks ended September 24, 2003 are not
necessarily indicative of results that may be expected for the year ending June 30, 2004.

The
balance sheet as of July 2, 2003 has been derived from the audited 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 financial statements and the related notes contained in the Companys Form 10-K
filed with the Securities and Exchange Commission on September 30, 2003 and with
Managements Discussion and Analysis of Financial Condition and Results of Operations
appearing on pages 9 through 14 of this report.

Principles of
Consolidation

The
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.

Reclassifications

Certain amounts shown in the
prior-period condensed consolidated financial statements have been reclassified to conform
with the current period condensed consolidated financial statement presentation. These
reclassifications had no effect on net income or shareholders equity as previously
presented.

6

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# 2.     Other Assets

Other
assets consist principally of debt issuance costs, notes receivable and other intangibles
net of accumulated amortization of $1.3 million as of July 2, 2003 and $1.6 million as of
September 24, 2003. Debt issuance costs are the costs incurred to enter into the senior
credit agreement and issue the senior subordinated notes. Debt issuance costs are being
amortized over the terms of the related 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 no longer amortized, as they were determined to have indefinite lives
upon the adoption of Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets. Notes receivable represent the long-term portion of
notes that arose from the sale of certain restaurant facilities. Long-term and short-term
notes receivable collectively totaled $3.4 million as of July 2, 2003 and $3.5 million as
of September 24, 2003. The notes receivable have due dates between 2004 and 2010.

The
gross carrying amount and accumulated amortization of each major class of other intangible
assets were as follows (in thousands):

|                            | Franchise fees | Trademarks | Liquor licenses | Total |  |   |     |  
|--------------------------- | -------------- | ---------- | --------------- | ----- |  | - | --- | -
|
|
|
|BALANCE, July 2, 2003       |                |            | $               | 69    |  | $ | (44 | )
|FY 2004 Activity:           |                |           
|Amortization                |                |            |                 | --    |  |   | (3  | )
|                            |                |            |                 |       |  |   |     |  
|BALANCE, September 24, 2003 |                |            | $               | 69    |  | $ | (47 | )
|                            |                |            |                 |       |  |   |     |  

# 3.     Long-Term Debt

As
of September 24, 2003, long-term debt outstanding was as follows (in thousands):

|                                                       | 
|------------------------------------------------------ | 
|Credit facility:                                       | 
|Revolver                                               | 
|Term loan, interest at LIBOR plus 3.50%, due quarterly | 
|through June 28, 2009 (interest rate at 4.6%)          | 
|                                                       | 
|Total credit facility                                  | 
|Senior subordinated notes, interest at 11.25%, due     | 
|July 15, 2010, net of discount of $7,861               | 
|                                                       | 
|Total long term debt                                   | 
|Less-- current maturities                              | 
|                                                       | 
|                                                       | 
|                                                       | 

Credit Facility

On June
28, 2002, the Company entered into a senior credit facility (the Credit Facility) which
provided for total borrowings of up to $295,000,000, including (i) a $245,000,000 term
loan, (ii) a $30,000,000 revolving credit facility, of which up to $20,000,000 is
available in the form of letters of credit, and (iii) a separate $20,000,000 letter of
credit facility. The terms of the Credit Facility permit the Company 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 term loan matures on June 28, 2009, while
the revolving facility and the letter of credit facility 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 six years of the loan
(beginning on September 30, 2002), with the remaining balance payable due in equal
quarterly installments during the seventh year of the loan. The term loan is secured by
all of the Companys assets. Buffets Holdings, Inc., the sole shareholder of the
Company, has guaranteed the repayment of the Credit Facility. Pursuant to the Credit
Facilitys requirement, the Company purchased an interest rate cap with a notional
value of $15,000,000 and a 5% LIBOR strike price that expires on June 30, 2004.
Availability under the senior 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 senior Credit Agreement dated June 28,
2002. The Company was in compliance with all financial ratio covenants as of September 24,
2003. The financial ratio covenant requirements increase over time, however, as set forth
in the senior Credit Agreement.

7

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As
of September 24, 2003, the Company had $27,116,360 in outstanding letters of credit, which
expire through August 23, 2004. As of September 24, 2003, the total borrowing availability
under the revolving credit facility was $21,000,000 and the total borrowing capacity under
the letter of credit facility was $1,883,640.

The
Company 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.

11 1/4% Senior
Subordinated Notes

On
June 28, 2002, the Company issued 11 1/4% senior subordinated notes in the principal
amount of $230 million due July 15, 2010. Such notes were issued at 96.181%. Interest is
payable semi-annually on January 15 and July 15 of each year through July 15, 2010. Except
in the event of an initial public offering, we are not entitled to redeem the notes at our
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, the Company may redeem up to 35% of the
aggregate principal amount of the notes at a redemption price of 111.25%. In addition, in
the event of an initial public offering by either the Company or Buffets Holdings, Inc.
prior to July 15, 2005, the Company is required to offer to purchase up to an aggregate
principal amount of the notes as may be purchased with funds equal in amount to 50% of the
net cash proceeds from that initial public offering at a price of 111.25% of the
outstanding principal amount of the notes, plus any accrued and unpaid interest to the
date of repurchase, provided, however, that, in no event will the Company be required to
make an offer to purchase more than $80.5 million aggregate principal amount of the notes.

# 4.     Purchase of Minority
Interest in Joint Venture

During
August 2003, the Company acquired the remaining 20% interest in Tahoe Joes Inc. from
the minority holder for $370,000. The Company concurrently eliminated its remaining excess
minority interest liability recorded in the condensed consolidated balance sheets in other
long-term liabilities resulting in approximately $345,000 of income that was recorded in
other income in the condensed consolidated income statements during the first quarter of
fiscal 2004. As a consequence of the transaction, Tahoe Joes, Inc. became a
co-guarantor with the other wholly owned subsidiaries of Buffets, Inc. with respect to
both the Credit Facility and the 11 1/4% Senior Subordinated Notes.

8

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# 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 terms Buffets,
we, our and Company refer to Buffets, Inc. and its
subsidiaries and (ii) the terms parent company and Buffets
Holdings refer to Buffets Holdings, Inc., our sole shareholder. Some of the
statements in the following discussion are forward-looking statements. See
Forward-Looking Statements and Risk Factors.

# General

As
of September 24, 2003, we operated 367 company-owned restaurant locations in 35 states
comprised of 359 buffet restaurants and eight Tahoe Joes Famous Steakhouse®
restaurants. The buffet restaurants are principally operated under the Old Country
Buffet® or HomeTown Buffet® brands. We also franchise 23 locations in ten states.

We
were founded in 1983 to develop buffet-style restaurants under the name Old Country
Buffet. In October 1985, we completed our initial public offering and were listed on the
Nasdaq National Market. In September 1996, we merged with HomeTown Buffet, Inc., which was
developed by one of our 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.

A
significant portion of our cost structure is fixed in nature, particularly over shorter
time horizons. Accordingly, changes in marginal sales volume can have a more significant
impact on our profitability than for a business possessing a more variable cost structure.

The
mid-scale sector of the restaurant business, of which we are a part, is highly competitive
with respect to food quality, concept, location, price and service. We have recently
experienced improving restaurant sales trends, primarily in the form of increased guest
traffic. We believe this improvement is due in large part to the upturn in the economy as
well as the rollout of new menu items, which has caused an increase in restaurant visits
by our target customers. We expect restaurant sales to continue to improve gradually in
the next quarter, but believe that future sales strength in general and guest traffic in
particular will be significantly influenced by general economic conditions.

Our
fiscal year is comprised of 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 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 balance sheet. Our franchise
income includes royalty fees and initial franchise fees received from our franchisees.
Management recognizes 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 marketing 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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

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

| |  | Other income primarily reflects franchise fees earned, less minority interest associated
with our Tahoe Joes Inc. subsidiary during fiscal 2003.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Income tax expense reflects the current and deferred tax provision (benefit) determined in
accordance with the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Critical Accounting
Policies

Our
condensed consolidated financial statements have been prepared in accordance with
accounting policies generally accepted in the United States of America. The preparation of
our 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,
revenue recognition and goodwill. The Company bases its estimates and assumptions on
historical experience and on various other factors that are believed to be reasonable at
the time the estimates and assumptions are 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.

Recoverability of
Long-Lived Assets

The
Company periodically evaluates long-lived assets and goodwill related to those assets for
impairment whenever events or changes in circumstances indicate the carrying value amount
of an asset or group of assets may not be recoverable. The Company considers a history of
operating losses and the other factors described to be its primary indicator of potential
impairment. Assets are grouped and evaluated for impairment at the lowest level for which
there are identifiable cash flows, namely individual restaurants. A restaurant is deemed
to be impaired if a forecast of undiscounted future operating cash flows directly related
to the restaurant, including disposal value, if any, are 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,
an estimate of fair value is based on the best information available, including prices for
similar assets or the results of valuation techniques such as discounted estimated future
cash flows as if the decision to continue to use the impaired restaurant was a new
investment decision. The Company generally measures fair value by discounting estimated
future cash flows. Considerable management judgment is necessary to estimate discounted
future cash flows. Accordingly, actual results could vary significantly from such
estimates. There were no impairment charges during the first quarter of 2004 or 2003.

Goodwill and Other
Intangible Assets

Goodwill
represents the excess of our acquisition cost over the fair market value of the net assets
acquired. We amortized that goodwill on a straight-line basis over a 30-year life through
the end of the fiscal year ended January 2, 2002. However, on January 3, 2002, we began
applying the new rules on accounting for goodwill and other intangible assets issued by
the Financial Accounting Standards Board in SFAS No. 142 Goodwill and Other
Intangible Assets. There were no impairments to goodwill and other intangible assets
identified for the first quarter of 2004 or 2003.

10

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# Results of Operations

The
following discussion reflects our historical results for the 12-week periods ended
September 24, 2003 and September 25, 2002.

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.

For the 12 Weeks Ended September
24, 2003 Compared to the 12 Weeks Ended September 25, 2002

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:

|                                    | 12 Weeks | 12 Weeks |  
|----------------------------------- | -------- | -------- | -
|
|
|
|                                    |          |          |  
|Restaurant sales                    |          |          | $
|Restaurant costs                    |          |          |  
|Advertising expenses                |          |          |  
|General and administrative expenses |          |          |  
|                                    |          |          |  
|Operating income                    |          |          |  
|Interest expense                    |          |          |  
|Interest income                     |          |          |  
|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 for the 12 weeks ended September 24, 2003 decreased $15.9
million, or 6.7%, compared with the 12 weeks ended September 25, 2002. The decline in
sales for the quarter ended September 24, 2003 versus the prior year period was primarily
attributable to the closure of 18 buffet restaurants and the sale of 13 Original Roadhouse
Grill restaurants, partially offset by the opening of 5 units, over the past year. Average
weekly sales for the first quarter of fiscal 2004 of $50,002 were slightly higher than the
comparable prior year periods average weekly sales of $49,989. Same-store sales for
the first quarter of fiscal 2004 declined by 2.1% compared to the comparable prior year
period, reflecting a 3.8% decline in guest traffic partially offset by a 1.7% increase in
average check. The Company currently expects same-store sales for the second quarter of
the fiscal 2004 (the 12-week period ending December 17, 2003) to increase by approximately
1% to 3% versus the comparable period in fiscal 2003 due to the improved macro-economic
environment and our improved menu offerings.

Restaurant
Costs. Restaurant costs for the first quarter of fiscal 2004 increased by 1.7% as a
percentage of sales compared with the comparable prior year period. Food cost increased
1.5% as a percentage of sales primarily due to our expanded and enriched menu offerings.
Labor costs were 0.2% lower as a percentage of sales than those experienced in the
comparable quarter in the prior year, primarily due to a reduction in our restaurant
management staffing levels substantially effected during the third quarter of fiscal 2003.
Direct and occupancy costs increased by 0.4% measured as a percentage of sales versus the
comparable quarter in the prior year. The increase was primarily attributable to an
increase in utility costs, partially offset by decreases in depreciation and amortization
expense resulting from the sale and leaseback of 30 restaurants during fiscal 2003. We
currently expect that restaurant costs will remain stable as a percentage of sales during
the second quarter of fiscal 2004.

Advertising
Expenses. Advertising costs decreased 0.4% as a percentage of sales during the first
quarter of fiscal 2004 versus the comparable quarter in the prior year. Approximately 62%
of our buffet restaurants received television-advertising support in the first quarter of
2004 compared with 79% during the comparable quarter in 2003. Last year we invested in
heavier advertising weights in a number of markets during prime time and late news in an
effort to drive traffic. These investments did not produce returns at levels justifying
their continuation. Accordingly, our weights were reduced to more historic levels for
2004. For the past two quarters, we have focused our television-advertising investments in
our most media-efficient markets. We expect a similar level of advertising costs as a
percentage of sales during the second quarter of this year.

11

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General
and Administrative Expenses. General and administrative expenses decreased 0.5% as a
percentage of sales during the first quarter of 2004 as compared to the 12 weeks ended
September 25, 2002. This reduction was largely due to a decrease in professional fees and a
workforce reduction of approximately 70 non-store employees completed during the
third quarter of fiscal 2003. We expect that general and administrative expense as a
percentage of sales will remain stable for the second quarter of fiscal 2004.

Interest
Expense. Interest expense decreased 0.3% as a percentage of sales during the first
quarter of fiscal 2004 versus the comparable prior year period primarily due to lower
weighted average outstanding debt balances.

Interest Income. Interest income was flat as a percentage of sales between the respective periods.

Other
Income. Other income increased 0.2% as a percentage of sales during the first quarter
of 2004 compared with the comparable prior year period. The improvement was primarily
attributable to an adjustment of the Companys excess minority interest liability of
approximately $345,000, concurrent with our acquisition of the remaining 20% interest in
Tahoe Joes Inc. from the minority holder.

Income
Taxes. Income taxes decreased 0.2% as a percentage of sales for the 12 weeks ended
September 24, 2003 compared to the 12 weeks ended September 25, 2002 principally due to a
decrease in income before income taxes.

# Liquidity and Capital
Resources

Cash
flows generated from operating activities provide us with a significant source of
liquidity. Since most of our sales are for cash or credit with settlement within a few
days and most vendors are paid on typical terms ranging from approximately 14 to 35 days,
we operate on a significant working capital deficit. In addition to cash flows from
operations, a revolving credit facility is available to us for general corporate purposes
as revolving credit loans or as swing-line loans. Letters of credit issued under the
revolving loan facility or 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, the installation of new corporate information systems and debt
service obligations. We expect these requirements to continue in the foreseeable future.

Net
cash provided by operating activities was $8.5 million for the 12 weeks ended September
24, 2003 and $25.8 million for the 12 weeks ended September 25, 2002. Net cash provided by
operating activities exceeded the net income for the first quarter of fiscal 2004
principally due to the effect of depreciation and amortization, an increase in income
taxes payable and a decrease in prepaid expenses and other current assets, partially
offset by a decrease in accrued and other liabilities. Net cash provided by operating
activities exceeded net income for the first quarter of fiscal 2003 primarily due to the
effect of depreciation and amortization, a decrease in prepaid expenses and other current
assets and an increase in accrued and other liabilities. The decrease in cash provided by
operating activities between the first quarter of 2004 and 2003 was largely attributable
to the timing of interest payments on our term loans and senior subordinated debt.

Net
cash used in investment activities was $4.0 million for the 12 weeks ended September 24,
2003 and $5.6 million for the 12 weeks ended September 25, 2002. Investment activities
were largely comprised of capital expenditures for both periods.

Net
cash used in financing activities totaled $1.5 million for the first quarter of fiscal
2004 and $2.5 million for the first quarter of fiscal 2003. Financing activities consisted
primarily of accelerated repayments of debt in fiscal 2004 and debt issuance costs during
fiscal 2003.

On
June 28, 2002, we entered into new debt agreements to refinance our existing debt, make a
distribution to our parent, Buffets Holdings, Inc., and repurchase our outstanding
preferred stock warrants. We issued 111⁄4% senior subordinated notes in the principal
amount of $230 million, net of a discount of $8.8 million, and borrowed $245 million under
a $295 million senior credit facility.

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In
connection with the redemption of our 14% senior subordinated notes and Buffets
Holdings 16% senior subordinated notes on June 28, 2002, we agreed to pay $18.0
million of redemption fees, of which $1.0 million was paid at closing out of the net
proceeds of the offering of the initial notes and was accounted for as part of the
transaction fees and expenses relating to the Refinancing Transactions. An additional $5.0
million of redemption fees was paid on each of September 30, 2002 and December 31, 2002.
The final payment of $7.0 million was made on February 4, 2003. The redemption fees were
included in accrued liabilities on our balance sheet until these periodic installment
payments were paid from our cash flow generated from operations. The redemption fees were
recognized as a loss related to refinancing in the 26-week transitional period ended July
3, 2002.

The
Companys $295 million senior credit facility is comprised of (i) a $245 million term
loan, (ii) a $30 million revolving credit facility, of which up to $20 million is
available in the form of letters of credit, and (iii) a separate $20 million letter of
credit facility. The terms of the senior 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 million. The Company 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. The term loan matures on June 28,
2009 while the revolving facility and the letter of credit facility 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 six years of the
loan (beginning on September 30, 2002), with the remaining balance payable due in equal
quarterly installments during the seventh year of the loan. The term loan is secured by
all of our assets. Buffets Holdings, Inc. has also guaranteed the repayment of the senior
credit facility. Pursuant to the Credit Facilitys requirement, the Company purchased
an interest rate cap with a notional value of $15,000,000 and a 5% LIBOR strike price that
expires on June 30, 2004. Availability under the senior 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 senior Credit
Agreement dated June 28, 2002. The Company was in compliance with all financial ratio
covenants as of September 24, 2003. The financial ratio covenant requirements increase
over time, however, as set forth in the senior Credit Agreement.

As
of September 24, 2003, we had approximately $27.1 million in outstanding letters of
credit, which expire through August 23, 2004. As of September 24, 2003, the total
borrowing availability under the revolving credit facility was $21 million and the total
borrowing capacity under the letter of credit facility was approximately $1.9 million.

As
discussed above, on June 28, 2002, we issued $230.0 aggregate principal amount of our
111⁄4% senior subordinated notes due July 15, 2010. Gross proceeds from the offering
of the notes were approximately $221.2 million. 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 the notes prior to July 15, 2006, after which we can choose to
redeem some or all of the notes at specified redemption prices. The indenture governing
the notes contains covenants limiting our ability to (1) incur additional indebtedness,
(2) pay dividends on our capital stock or redeem, repurchase or retire our capital stock
or subordinated indebtedness, (3) make investments, (4) create restrictions on the payment
of dividends, (5) engage in transactions with affiliates, (6) sell assets, and (7)
consolidate, merge or transfer assets. The payment of principal, premium and interest on
the notes is fully and unconditionally guaranteed, jointly and severally, by all of our
wholly-owned subsidiaries, namely Distinctive Dining, Inc., Hometown Buffet, Inc., OCB
Purchasing Co., OCB Restaurant Co., Tahoe Joes Inc. and Restaurant Innovations, Inc.

During
the second quarter of fiscal 2004, we do not plan to open any restaurants. We estimate
that we will spend approximately $2 million in the aggregate on construction of new
restaurants, principally for leasehold improvements. We anticipate spending approximately
$10 million in remodeling, relocation and improvement costs for existing facilities and an
additional $1 million for corporate and system investments.

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.

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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. Our restaurant sales may also be affected
by unusual weather patterns, major world events or matters of public interest that compete
for customers attention. 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 will be mitigated in our future quarterly data presentations
through the inclusion of 16 weeks in the quarter ending in late April of each year,
compared to only 12 or 13 weeks in each of the other fiscal quarters.

# 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 Buffets
Form 10-K filed with the Securities and Exchange Commission on September 30, 2003. 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.

Interest
Rate Risks. We have interest rate exposure relating to the variable portion of our
long-term obligations. Our 111⁄4% senior subordinated notes are fixed and the
interest rates on the term loans under our senior credit facility are variable. A 1%
change in interest rates on our variable rate debt would have resulted in our interest
expense fluctuating by approximately $0.4 million for the 12 weeks ended September 24,
2003. Our interest rate risk is mitigated, in part, by an interest rate cap purchased on
November 25, 2002 with a notional value of $15 million and a 5% LIBOR strike price that
expires on June 30, 2004.

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 price increases
were approximately 2% for the 12 weeks ended September 24, 2003. Accordingly, we believe
that a hypothetical 10% increase in food product costs would not have a material effect on
our operating results.

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# 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 chief executive officer
and chief financial officer, as appropriate, to allow timely decisions regarding required
disclosures based closely on the definition of disclosure controls and
procedures in Rule 13a-15(e) of the Securities Exchange Act of 1934. In designing
and evaluating the disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired objectives, and management was required to
apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

As
of September 24, 2003, we carried out an evaluation, under the supervision and with the
participation of our management, including our chief executive officer and our chief
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 Controls. During the 12 weeks ended September 24, 2003, there were no
significant changes in our internal controls over financial reporting or in other factors
that could significantly affect these controls that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial reporting.

# PART II.     OTHER
INFORMATION

# ITEM 5.     OTHER INFORMATION

We
are not required to file reports with the Securities and Exchange Commission pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, but are filing
this Quarterly Report on Form 10-Q on a voluntary basis. Accordingly, we are not an
issuer as defined in Section 2(a)(7) of the Sarbanes-Oxley Act of 2002.

# ITEM 6.     EXHIBITS AND
REPORTS ON FORM 8-K

(a)       
          Exhibits

| | 4.1 | First Supplemental Indenture ("Subsidiary Guaranty"), dated as of September 26, 2003, among HomeTown Buffet Merger Company, Inc., Buffets, Inc. and U.S. Bank National Association, as trustee.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.2. | Second Supplemental Indenture, dated as of November 5, 2003, between Tahoe Joe's, Inc. and U.S. Bank National Association, as trustee.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 | Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer.
| | ---- | ------------------------------------------------------------------------

| | 31.2. | Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer.
| | ----- | ------------------------------------------------------------------------

| | 32.1. | Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer.
| | ----- | ------------------------------------------------------------------------

| | 32.2. | Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer.
| | ----- | ------------------------------------------------------------------------

(b)       
          Reports on Form 8-K

| | 1. | On August 18, 2003, we furnished a current report on Form 8-K (Items 7 and 12)
                    announcing a conference call to discuss fiscal 2003 results and reporting same
                    store sales trends for the fourth quarter of fiscal 2003.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | On September 9, 2003, we furnished a current report on Form 8-K (Items 7 and 12)
                    announcing year-end results for fiscal 2003 and reporting same store sales
                    guidance for the first quarter of 2004.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 7, 2003 | 
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