##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    FORM 10-K
 (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    January 2, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number
    001-31904
  CENTERPLATE, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State of
    incorporation)

13-3870167(I.R.S. Employer
    Identification No.)300 First Stamford Place
    Stamford, Connecticut 06902

(203) 975-5900(Address of principal executive
    offices, including zip code)

(Registrants telephone
    number, including area
    code)   http://www.centerplate.com
 (Registrants
    URL)
  Securities of Centerplate, Inc. registered pursuant to
    Section 12(b) of the Act
  Title of Each Class

Name of Each Exchange on Which RegisteredIncome Deposit Securities
    (representing shares of
    common stock and subordinated notes)

American Stock Exchange
    Toronto Stock Exchange   Securities of Centerplate, Inc. registered pursuant to
    Section 12(g) of the Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K. Form 10-K




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##### 



CENTERPLATE,
    INC.
  FISCAL YEAR 2006
 Form 10-K
  ANNUAL REPORT
    TABLE OF CONTENTS
  PagePART IItem 1.

Business


3Item 1A.

Risk
    Factors


12Item 1B.

Unresolved Staff
    Comments


29Item 2.

Properties


29Item 3.

Legal
    Proceedings


29Item 4.

Submission of
    Matters to a Vote of Security Holders


30PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


30Item 6.

Selected Financial
    Data


34Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


38Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


50Item 8.

Financial
    Statements and Supplementary Data


F-1Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


54Item 9A.

Controls and
    Procedures


54Item 9B.

Other
    Information


56PART IIIItem 10.*

Directors and
    Executive Officers of the Registrant


56Item 11.*

Executive
    Compensation


56Item 12.*

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


56Item 13.*

Certain
    Relationships and Related Transactions


56Item 14.*

Principal
    Accountant Fees and Services


56PART IVItem 15.

Exhibits and
    Financial Statement Schedules


56EX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-21.1: SUBSIDIARIESEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION      *
    Incorporated by reference to the registrants definitive
    proxy statement for its 2007 annual meeting of security holders,
    which proxy statement is expected to be filed not later than
    May 2, 2007. 2




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PART I  Introductory
    Note
  Throughout this Annual Report on
    Form 10-K,
    we refer to Centerplate, Inc., a Delaware corporation, as
    Centerplate, and, together with its consolidated
    operations, as we, our and
    us, unless otherwise indicated. Any reference to
    VSA refers to our wholly owned subsidiary, Volume
    Services America, Inc., a Delaware corporation, and its
    consolidated operations, unless otherwise indicated. Centerplate
    is a holding company and has no direct operations. In addition
    to VSA, Centerplates subsidiaries also include Volume
    Services, Inc. (VS) and Service America Corporation
    (Service America), each a Delaware corporation.
  When discussing the number of facilities we serve, we have
    counted all facilities held by a single client as one facility,
    even though we sometimes service more than one building or
    location for a particular client. For instance, under our client
    relationship with the New York Racing Association, which is
    included as one facility, we service buildings at three
    different locations: the Aqueduct Racetrack, Belmont Park
    Racetrack and Saratoga Race Course.
  Item 1.
    Business  Overview
    
    One of the two largest providers to National Football League
    (NFL) facilities (10 teams);
    The third largest provider to Major League Baseball
    (MLB) facilities (6 teams);
    The largest provider to minor league baseball and spring
    training facilities (25 teams); and
    One of the largest providers to major convention centers, which
    we define as those with greater than approximately
    300,000 square feet of exhibition space (10 centers).      
    24 World Series games;
    nine U.S. Presidential Inaugural Balls;
    10 Super Bowls;
    nine NCAA Final Four Mens Basketball Tournaments; and
    14 World Cup Soccer games.  History
   3




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Strategic
    Initiatives and Infrastructure Development
      Services
    and Clients
  Services
      state-of-the-art
 4




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Clients
          2007


2008


2009Facility
    CategorySports facilities


8



9



10Convention centers


9



2



5Other entertainment facilities


9



4



2Total number of contracts


26



15



17Percentage of fiscal 2006 net
    sales


18.7
%


10.0
%


12.5
%   Facilities
  Sports
    Facilities
   5




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SeatingFacility Name

Location

Sports Team Tenant

Sport

CapacityArrowhead Stadium

Kansas City, MO

Kansas City Chiefs

NFL


79,000AT&T Park (formerly SBC Park)

San Francisco, CA

San Francisco Giants

MLB


42,000FedEx Field

Landover, MD

Washington Redskins

NFL


92,000HHH Metrodome

Minneapolis, MN

Minnesota Vikings

NFL


64,000Minnesota Twins

MLB


44,000INVESCO Field at Mile High Stadium

Denver, CO

Denver Broncos

NFL


76,000Kauffman Stadium

Kansas City, MO

Kansas City Royals

MLB


40,600Louisiana Superdome

New Orleans, LA

New Orleans Saints

NFL


70,054Monster Park

San Francisco, CA

San Francisco 49ers

NFL


68,000New Orleans Arena

New Orleans, LA

New Orleans Hornets

NBA


18,500Palace of Auburn Hills

Auburn Hills, MI

Detroit Pistons

NBA


21,000Qualcomm Stadium

San Diego, CA

San Diego Chargers

NFL


71,400RCA Dome

Indianapolis, IN

Indianapolis Colts

NFL


60,000Safeco Field

Seattle, WA

Seattle Mariners

MLB


47,145The Coliseum

Nashville, TN

Tennessee Titans

NFL


68,500Tropicana Field

St. Petersburg,

Tampa Bay Devil Rays

MLB


48,500University of Phoenix Stadium

Glendale, AZ

Arizona Cardinals

NFL


63,400Xcel Energy Center

St. Paul, MN

Minnesota Wild

NHL


18,064Yankee Stadium

New York, NY

New York Yankees

MLB


55,000   Convention
    Centers
     6




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Size(Approx.Facility Name

Location

Sq. Ft.)(1)Colorado Convention Center

Denver, CO


584,000Dallas Convention Center

Dallas, TX


1,019,142Indiana Convention Center

Indianapolis, IN


493,123Jacob K. Javits Center

New York, NY


814,400Kentucky Fair & Expo
    Center

Louisville, KY


1,068,050San Diego Convention Center

San Diego, CA


616,363San Jose McEnery Convention Center

San Jose, CA


223,000Washington Convention Center

Washington, DC


725,000     (1)
    
    Source: Tradeshow Weeks Major Exhibit Hall Directory
    2005.  Other
    Entertainment Facilities
          Facility Name

Location

Venue TypeDTE Energy Music Theatre

Auburn Hills, MI

AmphitheaterLos Angeles Zoo

Los Angeles, CA

ZooNational Hot Rod Association

FL, GA, IN, OH

SpeedwaysNew York Racing Association
    (Belmont Park Racetrack, Aqueduct Racetrack and Saratoga Race
    Course)

NY

Horse Racetracks   Client
    Contracts
     7




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Profit
    and Loss Contracts
      Profit
    Sharing Contracts
    Management
    Fee Contracts
  on-site
  Additional
    Contract Characteristics
     8




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Sales and
    Marketing
    on-site
      Competition
  Competitors
      e.g.
    Competition
    for Contracts
   9




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request-for-proposal
    Suppliers
          Controls
    Employees
  on-site event-by-event
   10




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Seasonality
    of Operations
      Regulatory
    Matters
            Environmental
    Matters
   11




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Intellectual
    Property
    Available
    Information
  Form 10-K, Form 10-Q Form 8-K,
    Item 1A.
    Risk
    Factors  An investment in our securities including the IDSs, and the
    shares of our common stock and our subordinated notes
    represented by the IDSs, involves a number of risks. There are a
    number of important factors that could affect our business and
    future operating results, including without limitation, the
    factors set forth below. The information contained in this
    annual report should be read in light of such factors.
  Risks
    Relating to the IDSs and the Shares of Common Stock and
    Subordinated Notes Represented by the IDSs
  We
    have substantial indebtedness, which could restrict our ability
    to pay interest and principal on the subordinated notes,
    restrict our ability to pay dividends with respect to shares of
    our common stock represented by the IDSs or impact our financing
    options and liquidity position.
    
    our ability in the future to obtain additional financing for
    working capital, capital expenditures or acquisitions may be
    limited;
    our ability to refinance our indebtedness on terms acceptable to
    us or at all may be limited; 12




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
    our funds available for future operations, capital expenditures
    and/or
    dividends on our common stock may be reduced due to a
    significant portion of our cash flow from operations being
    dedicated to the payment of the principal of and interest on our
    indebtedness; and
    our vulnerability to economic downturns may increase and our
    ability to withstand competitive pressures may be limited.    We are
    not required to pay any dividends and our board of directors may
    decide not to pay dividends at any time, for any
    reason.
    The
    terms of our credit facility and the indenture governing our
    subordinated notes limit our ability to pay
    dividends.
    Our
    dividend policy may negatively impact our ability to finance
    capital expenditures or operations.
    We may
    amend the terms of our credit facility, or we may enter into new
    agreements that govern our senior indebtedness with terms that
    may significantly affect our ability to pay interest and
    dividends to our securityholders.
   13




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We are
    subject to restrictive debt covenants and other requirements
    related to our outstanding debt that limit our business
    flexibility by imposing operating and financial restrictions on
    our operations.
    
    the incurrence of additional indebtedness and the issuance of
    preferred stock and certain redeemable capital stock;
    the payment of dividends on, and purchase or redemption of,
    capital stock;
    a number of other restricted payments, including investments;
    specified sales of assets:
    specified transactions with affiliates;
    the creation of a number of liens; and
    consolidations, mergers and transfers of all or substantially
    all of our assets.    and/or
  If we
    are required to defer interest at any time prior to
    December 18, 2008, investors may not be paid any deferred
    interest until December 18, 2008, and if we are required to
    defer interest at any time after December 18, 2008 and
    before December 10, 2013, investors may not be paid all of
    the deferred interest owed to them until December 10,
    2013.
   14




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Deferral
    of interest payments would have adverse tax consequences for
    investors by causing them to recognize interest income and pay
    taxes before they receive any cash payment of such
    interest.
    Deferral
    of interest payments may adversely affect the trading price of
    the IDSs or subordinated notes. The trading prices of the IDSs
    and the subordinated notes may be lower in value and more
    volatile than those of other securities that do not provide for
    interest deferral.
    If we
    are unable to deduct the interest on our subordinated notes for
    U.S. federal income tax purposes, our tax liabilities could
    increase significantly, and this could significantly affect our
    after-tax cash flow.
    We are
    a holding company and rely on dividends, interest and other
    payments, advances and transfers of funds from our subsidiaries
    to meet our debt service and other obligations.
   15




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Our
    interest expense may increase significantly and could cause our
    net income and distributable cash to decline
    significantly.
    We may
    not generate sufficient funds from operations to pay our
    indebtedness at maturity, or upon the exercise by holders of
    their rights upon a change of control.
    To
    service our indebtedness and to fund our liquidity needs, we
    will require a significant amount of cash which may not be
    available to us. Our ability to generate cash depends on many
    factors beyond our control.
      We may
    not be able to repay or refinance the subordinated notes, or our
    credit facility, upon terms acceptable to us, if at
    all.
    
    sale of assets to meet our debt service requirements; 16




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
    sale of equity;
    negotiations with our lenders or noteholders to restructure the
    applicable debt; and
    seeking protection under the U.S. federal bankruptcy code
    or other applicable bankruptcy, insolvency or other applicable
    laws dealing with creditors rights generally.  and/or and/or
  The
    realizable value of our assets upon liquidation may be
    insufficient to satisfy claims.
    Because
    of the subordinated nature of the subordinated notes, holders of
    our subordinated notes may not be entitled to be paid in full,
    if at all, in a bankruptcy, liquidation or reorganization or
    similar proceeding.
         17




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In the
    event of bankruptcy or insolvency, our investors ability
    to recover amounts owed on the subordinated notes and guarantees
    of the notes by our subsidiaries could be adversely affected by
    principles of equitable subordination or
    recharacterization.
    Holders
    of our subordinated notes will be structurally subordinated to
    the debt of our non-guarantor subsidiaries.
        The
    validity and enforceability of the subordinated notes and the
    guarantees of the subordinated notes by our subsidiaries may be
    limited by fraudulent conveyance laws and foreign laws
    restricting guarantees.
    Seasonality
    and variability of our business may cause volatility in the
    market value of an investment in Centerplate and may hinder our
    ability to make timely distributions on the IDSs.
    
    seasonality of sporting and other events;
    scheduling of events;
    unpredictability in the number, timing and type of new contracts; 18




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
    timing of contract expirations and special events; and
    level of attendance at facilities which we serve.      The
    U.S. federal income tax consequences of the purchase,
    ownership and disposition of IDSs are unclear.
    The
    IRS or the courts could successfully assert a treatment of the
    IDSs different than our intended treatment, which could affect
    our tax liability and subject foreign holders to additional
    withholding tax.
  non-U.S. holders
  We may
    have to establish a reserve for contingent tax liabilities in
    the future, which could adversely affect our ability to make
    interest and dividend payments on the IDSs.
   19




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Because
    of the deferral of interest provisions, the subordinated notes
    may be treated as issued with original issue
    discount.
    If
    interest rates rise, the trading value of our IDSs may
    decline.
    There
    is a limited active trading market for securities similar to the
    IDSs in the United States.
    We do
    not expect our common stock or subordinated notes to develop
    separate active trading markets.
    If the
    IDSs automatically separate, the limited liquidity of the market
    for our subordinated notes and our shares of common stock may
    adversely affect investors ability to sell our
    subordinated notes and our shares of common stock.
   20




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The
    price of the IDSs may fluctuate substantially, which could
    negatively affect holders of IDSs.
    Future
    sales or the possibility of future sales of a substantial amount
    of IDSs, shares of our common stock or our subordinated notes
    may depress the price of the IDSs and the shares of our common
    stock and our subordinated notes.
      Our
    capital structure and our subordinated notes lack some features
    that have been adopted by other issuers of IDSs. This may affect
    the way our securities are viewed in comparison to other IDSs in
    the market or IDSs issued by others in the future.
    The
    accounting treatment for the IDSs and subordinated notes is
    complex and subject to judgments concerning the valuation of
    embedded derivative rights within the indenture governing the
    subordinated notes. Fluctuations in the valuation of these
    rights could make our financial results
    unpredictable.
    Our
    certificate of incorporation and by-laws and several other
    factors could limit another partys ability to acquire us
    and deprive our investors of the opportunity to obtain a
    takeover premium for their securities.
   21




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We may
    not be able to repurchase the subordinated notes upon a change
    of control.
    Risks
    Relating to our Business and the Industry
  If
    attendance or the number of events held at our clients
    facilities decreases, our net sales and cash flow would
    significantly decline.
    
    maintenance and physical condition of the facility;
    poor performance by the sports teams using the facility;
    relocation or loss of a major sports team using a facility;
    ticket prices;
    changing consumer preferences for leisure time activities;
    inclement weather;
    natural disasters or pandemics;
    power outages;
    war, insurrection or acts of terrorism;
    scheduling of conventions, meetings and large catered events;
    construction of attractive alternative arenas, stadiums,
    convention centers or other venues or facilities;
    labor stoppages; and
    weaker economic conditions. 22




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The
    pricing and termination provisions of our contracts may limit
    our ability to recover costs or make a profit on our
    contracts.
        We
    have a history of losses and may experience losses in the
    future.
    We may
    not be able to recover our capital investments in clients
    facilities, which may significantly reduce our profits or cause
    losses.
    If the
    sports team tenant of a facility we serve relocates or the
    ownership of a sports team tenant or the facility we serve
    changes, we may lose the contract for that
    facility.
   23




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If we
    were to lose any of our largest clients, our net sales would
    decline significantly.
    
    our largest client accounted for approximately 9.6% of our net
    sales;
    our three largest clients together accounted for approximately
    18.9% of our net sales;
    our 10 largest clients together accounted for approximately
    39.9% of our net sales; and
    our 20 largest clients together accounted for approximately
    59.0% of our net sales.    If any
    significant client were to become bankrupt, our revenues would
    be likely to decline and we could lose our investment in the
    client.
    If we
    are unable to redeploy any capital returned to us from our
    existing contracts it could have a material adverse impact on
    our financial results.
  and/or
  A
    contraction of MLB, or other sports played in facilities that we
    service, that eliminates any of the teams playing in any of the
    facilities served by us could reduce our revenues.
    We may
    not have sufficient funds available to make capital investments
    in clients facilities that are necessary to maintain these
    relationships and as a consequence we could lose
    business.
    Increased
    capital investments or commissions to renew existing business
    relationships may lower our profitability.
   24




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Our
    cash resources may be strained and we may need to seek
    additional financing from time to time because of the need to
    make capital investments in order to obtain or maintain
    contractual relationships.
    Our
    ability to grow is limited by our capital structure and dividend
    policy and our reliance on other financing
    sources.
    If
    labor or other operating costs increase, we may not be able to
    make a corresponding increase in the prices of our products and
    services and our profitability may decline
    significantly.
    We are
    heavily dependent on key personnel, and a loss of such personnel
    could have a detrimental effect on our business.
    We may
    incur significant liability for withdrawing from multi-employer
    pension plans.
   25




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We may
    harm our reputation or incur significant liabilities if claims
    of illness or injury associated with our service of food and
    beverage to the public are brought against us.
    
    consumer product liability;
    product tampering;
    nutritional and health-related concerns; and
    federal, state, provincial and local food controls.    The
    loss of any of our liquor licenses or permits would adversely
    affect our ability to carry out our business.
    If one
    of our employees sells alcoholic beverages to an intoxicated or
    minor patron, we could be liable to third parties for the acts
    of the patron.
     26




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If we
    fail to comply with applicable governmental regulations, we may
    become subject to lawsuits and other liabilities or restrictions
    on our operations which could significantly reduce our net sales
    and cash flow and undermine the growth of our
    business.
    
    the service of food and alcoholic beverages;
    minimum wage;
    other employment terms and conditions;
    environmental protection; and
    human health and safety.      We are
    subject to litigation, which, if determined adversely, could be
    material.
    We may
    be subject to significant environmental
    liabilities.
  and/or
  If we
    fail to remain competitive within our industry, we will not be
    able to maintain our clients or obtain new clients, which would
    materially adversely affect our financial condition, results of
    operations and liquidity.
      
    the ability to make capital investments;
    commission or management fee structures;
    service innovation; 27




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
    quality and breadth of products and services; and
    reputation within the industry.  .
  A
    terrorist attack on any facility which we serve, or an attack or
    threat of an attack on large sports facilities in general, could
    significantly harm our business, and our contracts do not
    provide for the recovery by us of our costs in the event of a
    terrorist attack on a facility. Additionally, the response to
    terrorist threats or the outbreak or escalation of any
    insurrection or armed conflict involving the United States or
    any other national or international calamity could significantly
    harm our business.
  .
  A
    natural disaster such as Hurricane Katrina, or a pandemic such
    as a widespread outbreak of avian flu, could have a material
    adverse effect on our financial condition and
    business.
      We may
    not be able to obtain insurance, or obtain insurance on
    commercially acceptable terms, which could result in significant
    liabilities and cause a default under contracts requiring us to
    maintain insurance.
   28




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties      Item 3.
    Legal
    Proceedings    Cooper Industries, Inc. v. Aviall Services
    clean-up
 29




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Form 10-K, Holden v.
    Volume Services America, Inc. et al
  Perez v. Volume Services Inc, d/b/a Centerplate Holden Holden Holden
    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   30




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High


LowFiscal 2005First Quarter

$
14.05


$
12.40Second Quarter

$
12.80


$
12.10Third Quarter

$
13.04


$
10.90Fourth Quarter

$
13.05


$
10.20Fiscal 2006First Quarter

$
13.25


$
12.50Second Quarter

$
14.45


$
12.78Third Quarter

$
16.51


$
13.25Fourth Quarter

$
19.06


$
14.94     High


LowFiscal 2005First Quarter

C$
17.00


C$
15.50Second Quarter

C$
16.00


C$
15.20Third Quarter

C$
16.10


C$
13.01Fourth Quarter

C$
15.00


C$
12.30Fiscal 2006First Quarter

C$
15.13


C$
14.10Second Quarter

C$
15.60


C$
14.68Third Quarter

C$
18.40


C$
14.75Fourth Quarter

C$
22.00


C$
16.00     Dividend
    Policy and Restrictions
      
    Nothing requires us to pay dividends;
    Our dividend policy could be modified or revoked at any time at
    the discretion of the board of directors; 31




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
    Even if our dividend policy were not modified or revoked, the
    actual amount of dividends distributed under the policy and the
    decision to make any distribution is entirely at the discretion
    of our board of directors;
    The amount of dividends distributed is subject to debt covenant
    restrictions under our indenture, our credit facility and other
    indebtedness;
    The distribution and amount of dividends distributed is subject
    to state law restrictions;
    Our board of directors may determine to use or retain our cash
    for other purposes;
    Our stockholders have no contractual or other legal right to
    dividends; and
    We may not have enough cash to pay dividends depending on our
    operating earnings, working capital requirements, level of
    contract renewals and anticipated cash needs.  30-day
    
    We may not pay dividends if the payment will exceed the
    quarterly base dividend level in any fiscal quarter; provided
    that if the payment is less than the quarterly base dividend
    level in any fiscal quarter, 50% of the difference between the
    aggregate amount of dividends actually paid and the quarterly
    base dividend level for the quarter will be available for the
    payment of dividends at a later date. The quarterly base
    dividend level for any given fiscal quarter equals 85% of our
    excess cash (as defined below) for the
    12-month
    period ending on the last day of our then most recently ended
    fiscal quarter for which internal financial statements are
    available at the time the dividend is declared and paid, divided
    by four (4). Excess cash means, with respect to any
    period, Adjusted EBITDA, as defined in the indenture, minus the
    sum of (i) cash interest expense and (ii) cash income
    tax expense, in each case, for the period;
    We may not pay any dividends if not permitted under any of our
    senior indebtedness;
    We may not pay any dividends while interest on the subordinated
    notes is being deferred or, after the end of any interest
    deferral, so long as any deferred interest has not been paid in
    full; and
    We may not pay any dividends if a default or event of default
    under the indenture has occurred and is continuing.   32




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and/or
  Performance
    Graph
    
  FISCAL YEAR ENDINGCOMPANY/INDEX/MARKET

12/05/2003

12/30/2003

12/28/2004

1/03/2006

1/2/2007Centerplate Inc. IDS Units


100.00



108.52



93.82



105.74



173.86Eating Places


100.00



98.72



119.08



127.43



154.56Russell 2000 Index


100.00



101.90



119.73



123.71



144.83    33




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K, Form 10-K.
  Fiscal(1)2002


2003


2004


2005


2006(In millions, except per share data)Statement of operations
    data:Net sales

$
577.2


$
616.1


$
607.2


$
643.1


$
681.1Cost of sales (excluding
    depreciation and amortization)


470.9



504.0



492.5



519.4



554.8Selling, general and administrative


55.3



59.6



61.5



71.4



70.5Depreciation and amortization


26.2



27.1



26.6



29.3



28.9Transaction related expenses


0.6



2.6







1.0



0.7Contract related losses


0.7



0.8



0.4



0.4



0.4Operating income


23.5



22.0



26.1



21.7



25.9Interest expense(2)


20.7



32.8



25.0



31.3



24.4Other income, net


(1.5
)


(0.1
)


(0.3
)


(1.2
)


(1.7
)Income (loss) before income taxes


4.3



(10.7
)


1.4



(8.4
)


3.2Income tax benefit


(0.2
)


(6.3
)


(1.0
)


(3.9
)


(0.2
)Net income (loss)


4.5



(4.4
)


2.3



(4.6
)


3.5Accretion of conversion options










0.3







Net income (loss) available to
    common stock with or without the conversion option

$
4.5


$
(4.4
)

$
2.0


$
(4.6
)

$
3.5   2002


2003


2004


2005


2006(In millions, except per share data)Per share data:Net income (loss) per share with
    conversion option:Basic and diluted

$



$
(0.31
)

$
0.17


$
(0.20
)

$
0.15Net income (loss) per share
    without conversion option:Basic and diluted

$
0.33


$
(0.31
)

$
0.09


$
(0.20
)

$
0.15Dividends declared per share

$



$
0.09


$
0.79


$
0.79


$
0.79Cash flow data:Net cash provided by operating
    activities

$
38.6


$
27.2


$
28.4


$
28.4


$
39.4Net cash provided by (used in)
    investing activities

$
(45.0
)

$
(45.4
)

$
7.1


$
(24.7
)

$
(38.8
)Net cash provided by (used in)
    financing activities

$
1.7


$
30.8


$
(33.7
)

$
13.0


$
(2.4
)Other data:Maintenance capital expenditures(3)

$
31.2


$
8.3


$
18.2


$
16.7


$
19.3Growth capital expenditures(3)


16.4



15.6



5.7



8.4



8.5Aggregate capital expenditures(3)

$
47.6


$
23.9


$
23.9


$
25.1


$
27.8Ratio of earnings to fixed
    charges(4)


1.2
x






1.1
x






1.1
xDeficiency in the coverage of
    earnings to fixed charges(4)





$
(10.7
)





$
(8.4
)


   34




---



##### Table of Contents



12/31/02


12/30/03


12/28/04


1/03/06


1/02/07(In millions)Balance sheet data:Total assets

$
280.2


$
322.3


$
299.0


$
318.0


$
332.4Long-term debt (including current
    portion)

$
225.4


$
186.5


$
170.2


$
211.9


$
225.9   Fiscal(1)2002


2003


2004


2005


2006(In millions)EBITDA(5):Net income (loss)

$
4.5


$
(4.4
)

$
2.3


$
(4.6
)

$
3.5Income tax benefit


0.2



6.3



1.0



3.9



0.2Income (loss) before income taxes

$
4.3


$
(10.7
)

$
1.4


$
(8.4
)

$
3.2Adjustments:Interest expense(2)


20.7



32.8



25.0



31.3



24.4Depreciation and amortization


26.2



27.1



26.6



29.3



28.9EBITDA(5)

$
51.2


$
49.2


$
53.0


$
52.1


$
56.5Unusual item included in EBITDA:Return of bankruptcy funds to
    Service America(6)

$
1.4















     (1)
    
    We have adopted a
    52-53 week
    period ending on the Tuesday closest to December 31 as our
    fiscal year. The 2002, 2003, 2004 and 2006 fiscal years
    consisted of 52 weeks, and the 2005 fiscal year consisted
    of 53 weeks.(2)
    
    Interest expense for fiscal 2003 includes a $5.3 million
    non-cash charge related to the early extinguishment of debt as a
    result of the refinancing of our 1998 credit facility and
    $7.2 million in expenses associated with the repurchase of
    the notes that we issued in 1999 (the 1999 notes).
    Interest expense for fiscal 2004 includes a $1.2 million
    non-cash charge related to the repayment of the remaining 1999
    notes and a $2.0 million non-cash charge for the change in
    the fair value of our derivatives. Interest expense for fiscal
    2005 includes $5.8 million in expenses related to entering
    into a new credit agreement on April 1, 2005. The
    $5.8 million includes a prepayment premium of
    $4.6 million on the prior credit facility and a
    $1.2 million non-cash charge for the write-off of deferred
    financing costs. Interest expense for fiscal 2006 includes a
    $3.4 million non-cash credit for the change in the fair
    value of our derivatives.(3)
    
    The sum of maintenance and growth capital expenditures equals
    the sum of contract rights acquired (purchase of contract
    rights) and the purchase of property and equipment, for the
    relevant periods as displayed in the statement of cash flows, as
    follows:  Fiscal(1)2002


2003


2004


2005


2006(In millions)Statement of cash flow data:Contract rights acquired (purchase
    of contract rights)

$
37.7


$
16.0


$
15.9


$
10.4


$
14.0Purchase of property and equipment


9.9



7.9



8.0



14.7



13.8Aggregate capital expenditures

$
47.6


$
23.9


$
23.9


$
25.1


$
27.8
    35




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##### Table of Contents



(4)
    
    For purposes of determining the ratio of earnings to fixed
    charges, earnings are defined as income (loss) before income
    taxes and cumulative effect of change in accounting principle
    plus fixed charges. Fixed charges include interest expense on
    all indebtedness, amortization of deferred financing costs and
    one-third of rental expense on operating leases representing
    that portion of rental expense deemed to be attributable to
    interest. Where earnings are inadequate to cover fixed charges,
    the deficiency is reported.(5)
    
    EBITDA is not a measure in accordance with GAAP. EBITDA is not
    intended to represent cash flows from operations as determined
    by GAAP and should not be used as an alternative to income
    (loss) before taxes or net income (loss) as an indicator of
    operating performance or to cash flows as a measure of
    liquidity. We believe that EBITDA is an important measure of the
    cash returned on our investment in capital expenditures under
    our contracts.  pro forma pro
    forma
 36




---



##### Table of Contents



Fiscal(1)2002


2003


2004


2005


2006(In millions, except ratios)EBITDA

$
51.2


$
49.2


$
53.0


$
52.1


$
56.5Adjustments:Transaction related expenses


0.6



2.6







1.0



0.7Contract related losses


0.7



0.8



0.4



0.4



0.4Non-cash compensation


0.6



0.1











Management fees paid to affiliates
    of Blackstone and GE Capital


0.4



0.4











Adjusted EBITDA

$
53.5


$
53.1


$
53.4


$
53.5


$
57.5Unusual item included in EBITDA
    and Adjusted EBITDA:Return of bankruptcy funds to
    Service America
    (see note 6 below)


1.4















Ratio of Adjusted EBITDA to fixed
    charges


2.8
x


2.1
x


2.3
x


1.9
x


2.6
x     
    Transaction related expenses include:  
    For fiscal 2002, $0.6 million of acquisition related cash
    costs relating primarily to expenses incurred in connection with
    the structuring and evaluation of financing and recapitalization
    strategies;
    For fiscal 2003, $2.6 million in expenses related to
    executive compensation associated with the issuance of the IDSs;
    For fiscal 2005, $1.0 million of expenses incurred in
    connection with the contemplated follow-on offering to the 2003
    IPO;
    For fiscal 2006, $0.7 million of expenses incurred in
    connection with the contemplated follow-on offering to the 2003
    IPO.  
    Contract related losses include:  
    For fiscal 2002, $0.7 million of non-cash charges related
    to the write-down of impaired assets for a contract which was
    terminated;
    For fiscal 2003, $0.8 million of non-cash charges for the
    write-down of impaired assets for certain terminated
    and/or
    assigned contracts;
    For fiscal 2004, $0.4 million of non-cash charges for the
    write-down of impaired assets for certain terminated contracts
    and contracts for which we intend to continue
    operations; and
    For fiscal 2005, $0.3 million for the write-off of contract
    rights for a terminated contract and $0.1 million for the
    write-down of impaired contract rights and property and
    equipment.
    For fiscal 2006, $0.4 million for the write-off of impaired
    assets associated with the Companys contracts.  
    Non-cash compensation expenses related to the revaluation of
    partnership units purchased by certain members of our management
    financed with nonrecourse loans include for fiscal 2002 and
    2003, $0.6 million and $0.1 million, respectively.
    Management fees paid to affiliates of Blackstone and GE Capital
    include $0.4 million for each of fiscal 2002 and 2003. The
    management fees were paid quarterly in arrears and ceased upon
    the closing of the IPO. 37




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##### Table of Contents



(6)
    
    During fiscal 2002, Service America received approximately
    $1.4 million from funds previously set aside to satisfy
    creditors pursuant to a plan of reorganization approved in 1993.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  General
    Overview
        Critical
    Accounting Policies
    
    Recoverability of Property and Equipment, Contract Rights,
    Cost in Excess of Net Assets Acquired and Other Intangible
    Assets.  As of January 2, 2007, net property
    and equipment of $50.7 million and net contract rights of
    $79.2 million were recorded. In accordance with Statement
    of Financial Accounting Standards (SFAS)
    No. 144, we evaluate long-lived assets with finite lives
    for possible impairment when an event occurs which would
    indicate that its carrying amount may not be recoverable. The
    impairment analysis is made at the contract level and evaluates
    the net property and equipment as well as the contract rights
    related to that contract. The undiscounted future cash flows
    from a contract are 38




---



##### Table of Contents



compared to the carrying value of the related long-lived assets.
    If the undiscounted future cash flows are lower than the
    carrying value, an impairment charge is recorded. The amount of
    the impairment charge is equal to the difference between the
    carrying value (or net book value) of the long-lived assets and
    the future discounted cash flows related to the assets (using a
    rate based on our incremental borrowing rate). As we base our
    estimates of undiscounted future cash flows on past operating
    performance, including anticipated labor and other cost
    increases, and prevailing market conditions, we cannot make
    assurances that our estimates are achievable. Different
    conditions or assumptions, if significantly negative or
    unfavorable, could have a material adverse effect on the outcome
    of our evaluation and our financial condition or future results
    of operations. Events that would trigger an evaluation at the
    contract level include the loss of a tenant team, intent to
    cease operations at a facility due to contract termination or
    other means, the bankruptcy of a client, and the discontinuation
    of a sports league or a significant increase in competition that
    could reduce the future profitability of the contract, among
    others.    
    Insurance.  We have a high-deductible insurance
    program for general liability, auto liability and workers
    compensation risk. We are required to estimate and accrue for
    the amount of losses that we expect to incur. These amounts are
    recorded in cost of sales and selling, general and
    administrative expenses on the statement of operations and
    accrued liabilities and long-term liabilities on the balance
    sheet. Our estimates consider a number of factors, including
    historical experience and an actuarial assessment of the
    liabilities for reported claims and claims incurred but not
    reported. We discount our estimated liabilities to their present
    value based on expected loss patterns determined by experience.
    While we use outside parties to assist us in making these
    estimates, we cannot provide assurance that the actual amounts
    will not be materially different than what we have recorded. In
    addition we are self-insured for employee medical benefits and
    related liabilities. Our liabilities are based on historical
    trends and claims filed and are estimated for claims incurred
    but not reported. While the liabilities represent
    managements best estimate, actual results could differ
    significantly from those estimates. 39




---



##### Table of Contents




    Accounting Treatment for IDSs, Common Stock Owned by Initial
    Equity Investors and Derivative Financial
    Instruments.  Our IDSs are composed of common
    stock and subordinated notes, the latter of which have three
    embedded derivative features. The embedded derivative features
    include a call option, a change of control put option, and a
    term-extending option on the notes. The call option allows us to
    repay the principal amount of the subordinated notes after the
    fifth anniversary of the issuance, provided that we also pay all
    of the interest that would have been paid during the initial
    10-year term
    of the notes, discounted to the date of repayment at a risk-free
    rate. Under the change of control put option, the holders have
    the right to cause us to repay the subordinated notes at 101% of
    face value upon a change of control, as defined in the indenture
    governing the subordinated notes. The term-extending option
    allows us to unilaterally extend the term of the subordinated
    notes for two five-year periods at the end of the initial
    10-year
    period provided that we are in compliance with the requirements
    of the indenture. We have accounted for these embedded
    derivatives in accordance with SFAS No. 133,
    Accounting for Derivative Instruments and Hedging
    Activities, as amended and interpreted. Based on
    SFAS No. 133, as amended and interpreted, the call
    option and the change of control put option are required to be
    separately valued. As of January 2, 2007, the fair value of
    these embedded derivatives was determined to be insignificant.
    The term extending option was determined to be inseparable from
    the underlying subordinated notes. Accordingly, it has not been
    separately accounted for in the accompanying consolidated
    financial statements.    Redeemable Preferred Stocks. 180-day
 40




---



##### Table of Contents




    Deferred Income Taxes.  We recognize deferred
    tax assets and liabilities based on the expected future tax
    consequences of temporary differences between the carrying
    amounts and the tax basis of assets and liabilities and the
    future tax benefits of net operating loss carryforwards and tax
    credits. Our primary deferred tax assets relate to net operating
    losses and credit carryovers. The realization of these deferred
    tax assets depends upon our ability to generate future taxable
    income. If our results of operations are adversely affected and
    we do not generate taxable income, not all of our deferred tax
    assets, if any, may be realized.    Seasonality
    and Quarterly Results
    
    Seasonality and variations in scheduling of sporting and other
    events;
    Unpredictability in the number, timing and type of new contracts;
    Timing of contract expirations and special events; and
    Level of attendance at the facilities which we serve.     41




---



##### Table of Contents



2006Basic andBasic and





DilutedDiluted





Income (Loss)Operating





per ShareOperating


Income


Net


withoutIncome


(Loss) per


Income


ConversionNet Sales


(Loss)


Share


(Loss)


Option1st Quarter

$
113,505


$
(3,989
)

$
(0.18
)

$
(5,598
)

$
(0.25
)2nd Quarter

$
190,699


$
12,038


$
0.53


$
(66
)

$
0.003rd Quarter

$
218,929


$
16,130


$
0.72


$
12,269


$
0.544th Quarter

$
157,929


$
1,739


$
0.08


$
(3,127
)

$
(0.14
)   2005Basic andBasic and





DilutedDiluted





Income (Loss)Operating





per ShareOperating


Income


Net


withoutIncome


(Loss) per


Income


ConversionNet Sales


(Loss)


Share


(Loss)


Option1st Quarter

$
107,220


$
(4,382
)

$
(0.19
)

$
(4,433
)

$
(0.20
)2nd Quarter

$
182,071


$
10,481


$
0.47


$
(2,473
)

$
(0.11
)3rd Quarter

$
208,619


$
14,972


$
0.66


$
4,512


$
0.204th Quarter

$
145,202


$
611


$
0.03


$
(2,194
)

$
(0.10
)   Results
    of Operations
  Fiscal
    2006 Compared to Fiscal 2005
  Net sales
  Cost of sales (excluding depreciation and
    amortization)
  Selling, general and administrative expenses
 42




---



##### Table of Contents



Depreciation and amortization step-up
  Transaction related expenses
  Contract related losses
  Operating income
  Interest expense
  Other income
  Income taxes Accounting for Income
    Taxes
  Fiscal
    2005 Compared to Fiscal 2004
  Net sales 2004-2005
  Cost of sales (excluding depreciation and
    amortization)
 43




---



##### Table of Contents



Selling, general and administrative expenses
  Depreciation and amortization
  Transaction related expenses
  Contract related losses and/or
  Operating income
  Interest expense
  Other income
  Income taxes Accounting for Income
    Taxes.
  Outlook
   44




---



##### Table of Contents



Liquidity
    and Capital Resources
         45




---



##### Table of Contents



Future
    Liquidity and Capital Resources
                 46




---



##### Table of Contents



Contracts Expiring in:2007


2008


2009


2010


2011 and After(In millions)$
127.5


$
68.2


$
84.9


$
82.9


$
308.2   Subordinated
    Notes Issued in 2003
    2005
    Credit Agreement
    sub-limit sub-limit.
  thirty-day
 47




---



##### Table of Contents




    an interest coverage ratio (Adjusted EBITDA to cash interest
    expense for the last 12 months) at least equal to 2.05 to
    1.00 through fiscal 2006 and 2.00 to 1.00 thereafter;
    a maximum total leverage ratio (net debt as of the date of
    determination to Adjusted EBITDA for the 12 months ending
    on such date) of 4.65 to 1.00; and
    a maximum senior leverage ratio (net senior debt as of the date
    of determination to Adjusted EBITDA for the 12 months
    ending on such date) of 2.25 to 1.00 through fiscal 2006 and
    2.15 to 1.00 thereafter.        Other
    Relationships
      Off-Balance
    Sheet Arrangements
   48




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodLess Than


1-3


4-5


More ThanTotal


1 Year


Years


Years


5 Years(In millions)Long-term borrowings

$
225.9


$
16.1


$
104.6


$



$
105.2Interest for fixed rate debt


98.5



14.2



42.6



28.4



13.3Interest for variable rate debt(1)


34.7



9.7



25.0







Insurance


12.7



5.0



4.0



1.7



2.0Operating leases


1.4



0.1



1.2



0.1



Commissions and Royalties


55.2



8.3



23.4



11.0



12.5Capital commitments(2)


34.1



30.9



3.2







Other long-term liabilities


1.2



0.4



0.8







Total Contractual

$
463.7


$
84.7


$
204.8


$
41.2


$
133.0     (1)
    
    Interest for variable rate debt based on forward-looking
    interest rates as disclosed in Item 7A.(2)
    
    Represents capital commitments in connection with several
    long-term concession contracts.    Payments Due by PeriodLess Than


1-3


4-5


More ThanOther Commercial Commitments

Total


1 Year


Years


Years


5 YearsLetters of credit

$
22.5


$
22.5


$



$



$
   New
    Accounting Standards
  New Accounting Standards
 49




---



##### Table of Contents



Cautionary
    Statement Regarding Forward-Looking Statements
  Form 10-K
  Form 10-K.
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest rate risk
  2007


2008


2009


2010


2011


Total(In millions)Fixed rate debt:Represented by IDSs

















$
105.2


$
105.2Average interest rate


















13.5
%


Variable rate debt:Revolving loans

$
15.0


















$
15.0Average interest rate


9.75
%


















Term loans

$
1.1


$
1.1


$
1.1


$
102.3






$
105.6Average interest rate


8.61
%


8.61
%


8.61
%


8.61
%






  50




---



##### Table of Contents



Market risk
  Form 10-K
 51




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  CENTERPLATE,
    INC. AND SUBSIDIARIES
  TABLE OF
    CONTENTS
  PageREPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


F-2CONSOLIDATED FINANCIAL STATEMENTS
    AS OF JANUARY 3, 2006 AND JANUARY 2, 2007 AND FOR THE
    THREE YEARS IN THE PERIOD ENDED JANUARY 2, 2007:Consolidated
    Balance Sheets


F-3Consolidated
    Statements of Operations


F-4Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)


F-5Consolidated
    Statements of Cash Flows


F-6Notes to
    Consolidated Financial Statements


F-7  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Internal Control 
    Integrated Framework
      F-2




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 JANUARY 3, 2006 AND JANUARY 2, 2007
  January 3,


January 2,2006


2007(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
41,410


$
39,591Restricted cash






13,080Accounts receivable, less allowance
    for doubtful accounts of $1,049 and $1,013 at January 3,
    2006 and January 2, 2007, respectively


23,459



23,172Merchandise inventories


16,852



19,347Prepaid expenses and other


3,141



3,865Deferred tax assets


3,928



3,139Total current assets


88,790



102,194PROPERTY AND EQUIPMENT:Leasehold improvements


41,969



41,770Merchandising equipment


63,821



71,043Vehicles and other equipment


16,493



17,350Construction in process


218



1,708Total


122,501



131,871Less accumulated depreciation and
    amortization


(72,776
)


(81,187
)Property and equipment, net


49,725



50,684OTHER LONG-TERM ASSETS:Contract rights, net


80,557



79,209Restricted cash


8,616



9,041Cost in excess of net assets
    acquired


41,142



41,142Deferred financing costs, net


15,499



12,930Trademarks


17,523



17,523Deferred tax assets


13,116



14,612Other


3,057



5,035Total other long-term assets


179,510



179,492TOTAL ASSETS

$
318,025


$
332,370LIABILITIES AND
    STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt

$
1,075


$
1,075Short-term borrowings






15,000Accounts payable


16,814



21,710Accrued salaries and vacations


13,263



15,437Liability for insurance


6,689



4,975Accrued taxes, including income
    taxes


4,205



5,307Accrued commissions and royalties


15,838



23,458Liability for derivatives


4,615



1,251Accrued interest


988



1,020Accrued dividends


1,487



1,487Advance deposits


2,588



3,662Other


3,260



4,318Total current liabilities


70,822



98,700LONG-TERM LIABILITIES:Long-term debt


210,864



209,789Liability for insurance


5,874



7,744Other liabilities


510



535Total long-term liabilities


217,248



218,068COMMITMENTS AND CONTINGENCIESCOMMON STOCK WITH CONVERSION
    OPTION, PAR VALUE $0.01, EXCHANGEABLE FOR SUBORDINATED DEBT, NET
    OF DISCOUNT


14,352



14,352STOCKHOLDERS EQUITY:Common stock, $0.01 par
    value  authorized: 100,000,000 shares;issued: 18,463,995 shares
    without conversion option; outstanding:
    18,463,995 shares without conversion option


185



185issued: 21,531,152 shares with
    conversion option; outstanding:
    4,060,997 shares with conversion option


215



215Additional paid-in capital


218,331



218,331Accumulated deficit


(82,920
)


(97,282
)Accumulated other comprehensive
    income


732



741Treasury stock  at cost
    (17,470,153 shares)


(120,940
)


(120,940
)Total stockholders equity


15,603



1,250TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
318,025


$
332,370    F-3




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 YEARS
    ENDED DECEMBER 28, 2004, JANUARY 3, 2006 AND
    JANUARY 2, 2007
  December 28,


January 3,


January 2,2004


2006


2007(In thousands, except per share data)Net sales

$
607,154


$
643,112


$
681,120Cost of sales (excluding
    depreciation and amortization)


492,462



519,395



554,752Selling, general and administrative


61,540



71,405



70,538Depreciation and amortization


26,644



29,255



28,854Transaction related expenses






1,006



700Contract related losses


411



369



358Operating income


26,097



21,682



25,918Interest expense


25,010



31,274



24,360Other income


(266
)


(1,151
)


(1,690
)Income (loss) before income taxes


1,353



(8,441
)


3,248Income tax benefit


(967
)


(3,853
)


(230
)Net income (loss)


2,320



(4,588
)


3,478Accretion of conversion option


(317
)






Net income (loss) available to
    common stock with or without the conversion option

$
2,003


$
(4,588
)

$
3,478Basic and Diluted Net Income
    (Loss) per share with conversion option

$
0.17


$
(0.20
)

$
0.15Basic and Diluted Net Income
    (Loss) per share without conversion option

$
0.09


$
(0.20
)

$
0.15Weighted average shares
    outstanding with conversion option


4,060,997



4,060,997



4,060,997Weighted average shares
    outstanding without conversion option


18,463,995



18,463,995



18,463,995Total weighted average shares
    outstanding


22,524,992



22,524,992



22,524,992Dividends declared per share

$
0.79


$
0.79


$
0.79    F-4




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY AND
 COMPREHENSIVE INCOME (LOSS)
 YEARS ENDED DECEMBER 28, 2004, JANUARY 3, 2006
    AND JANUARY 2, 2007
  Common


CommonShares


Stock


Common


Common








Accumulatedwithout


without


Shares with


Stock with


Additional





OtherConversion


Conversion


Conversion


Conversion


Paid-in


Accumulated


Comprehensive


TreasuryOption


Option


Option


Option


Capital


Deficit


Income/(Loss)


Stock


Total(In thousands, except share data)Balance, December 30, 2003


18,463,995


$
185



21,531,152


$
215



218,598



(44,655
)


224



(120,940
)


53,627Payment of issuance costs


















(267
)














(267
)Foreign currency translation


























351







351Accretion of conversion option






















(317
)










(317
)Dividends declared






















(17,840
)










(17,840
)Net income






















2,320











2,320Balance, December 28, 2004


18,463,995


$
185



21,531,152


$
215


$
218,331


$
(60,492
)

$
575


$
(120,940
)

$
37,874Foreign currency translation


























157







157Dividends declared






















(17,840
)










(17,840
)Net loss






















(4,588
)










(4,588
)Balance, January 3, 2006


18,463,995


$
185



21,531,152


$
215


$
218,331


$
(82,920
)

$
732


$
(120,940
)

$
15,603Foreign currency translation


























9







9Dividends declared






















(17,840
)










(17,840
)Net income






















3,478











3,478Balance, January 2, 2007


18,463,995


$
185



21,531,152


$
215


$
218,331


$
(97,282
)

$
741


$
(120,940
)

$
1,250   December 28,


January 3,


January 2,2004


2006


2007Net income (loss)

$
2,320


$
(4,588
)

$
3,478Other comprehensive
    income  foreign currency translation adjustment


351



157



9Comprehensive income (loss)

$
2,671


$
(4,431
)

$
3,487    F-5




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 28, 2004, JANUARY 3, 2006 AND
    JANUARY 2, 2007 Years EndedDecember 28,


January 3,


January 2,2004


2006


2007(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
2,320


$
(4,588
)

$
3,478Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Depreciation and amortization


26,644



29,255



28,854Amortization of deferred financing
    costs


1,814



3,474



2,569Charge for impaired assets


411



1,375



358Change in fair value of derivative


2,001



(40
)


(3,364
)Non-cash interest earned on
    restricted cash






(196
)


(425
)Deferred tax benefit


(1,272
)


(3,547
)


(707
)Loss on disposition of assets


103



15



22Other


351



157



9Changes in assets and liabilities:Decrease (increase) in assets:Accounts receivable


(4,139
)


(1,149
)


279Merchandise inventories


(1,684
)


(303
)


(2,495
)Prepaid expenses


7



174



(724
)Other assets


(1,412
)


(423
)


(2,420
)Increase (decrease) in liabilities:Accounts payable


(617
)


1,045



2,830Accrued salaries and vacations


(60
)


2,026



2,174Liability for insurance


2,676



1,105



156Accrued commissions and royalties


155



1,410



5,471Other liabilities


1,141



(1,382
)


3,291Net cash provided by operating
    activities


28,439



28,408



39,356CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchase of property and equipment


(7,969
)


(14,712
)


(13,752
)Proceeds from sale of property and
    equipment


809



338



250Contract rights acquired


(15,900
)


(10,363
)


(14,014
)Return of unamortized capital
    investment


16,531







1,828Restricted cash


13,628







(13,080
)Net cash provided by (used in)
    investing activities


7,099



(24,737
)


(38,768
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Repayments  revolving
    loans

$
(33,000
)

$
(44,250
)

$
(10,000
)Borrowings  revolving
    loans


29,000



44,250



25,000Principal payments on long-term debt






(806
)


(1,075
)Proceeds from issuance of long-term
    debt






107,500



Retirement of existing long-term
    borrowings






(65,000
)


Payment of existing subordinated
    notes


(12,250
)






Payments of debt issuance costs


(267
)






Payments of financing costs


(504
)


(7,266
)


Increase (decrease) in bank
    overdrafts


1,666



(3,626
)


1,508Dividend payments


(18,335
)


(17,840
)


(17,840
)Net cash provided by (used in)
    financing activities


(33,690
)


12,962



(2,407
)INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS


1,848



16,633



(1,819
)CASH AND CASH EQUIVALENTS:Beginning of year


22,929



24,777



41,410End of year

$
24,777


$
41,410


$
39,591SUPPLEMENTAL CASH FLOW INFORMATION:Interest paid

$
22,209


$
27,563


$
25,123Income taxes paid

$
68


$
31


$
402SUPPLEMENTAL NON-CASH FLOW
    INVESTING AND FINANCING ACTIVITIES:Non-cash investing and financing
    activities:Reduction in cost of net assets
    acquired due to the recognition of acquired tax assets

$
5,314


$



$
Capital investment commitment
    accrued

$
1,744


$
200


$
2,742Dividends declared and unpaid

$
1,487


$
1,487


$
1,487    F-6




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 28, 2004, JANUARY 3, 2006
    AND JANUARY 2, 2007
  1.
    GENERAL      2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation
  Fiscal Year 52-53 week
  Cash and Cash Equivalents
  Restricted Cash
  Revenue Recognition
  Merchandise Inventories first-in,
 F-7




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Depreciation
  
    Leasehold improvements  10 years 
    limited by the lease term or contract term, if applicable
    Merchandising equipment  5 to
    10 years  limited by the contract term, if
    applicable
    Vehicles and other equipment  2 to
    10 years  limited by the contract term, if
    applicable  Contract Rights
  Cost in Excess of Net Assets Acquired and
    Trademarks Goodwill and Other Intangible Assets
  Deferred Financing Costs
  Impairment of Long-Lived Assets and Contract
    Rights Accounting for the Impairment
    or Disposal of Long-Lived Assets
  Accounting Treatment for IDSs, Common Stock Owned by Initial
    Equity Investors and Derivative Financial
    Instruments 10-year
 F-8




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10-year Accounting for Derivative Instruments and Hedging
    Activities
    Redeemable Preferred Stocks. 180-day
   F-9




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Insurance
    Cash Overdrafts
  Dividends
  Foreign Currency
    Transaction Related Expenses
  Interest
  Income Taxes
 F-10




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Segment Reporting
  Net Income (Loss) per Share 
  Fiscal Year Ended December 28, 2004Income


Shares


Per Share(Numerator)


(Denominator)


Amount(In thousands, except share data)Net Income

$
2,320Accretion of conversion option


(317
)Net Income available to common
    stock with or without the conversion option

$
2,003Weighted Average
    Shares Outstanding with conversion option






4,060,997Weighted Average
    Shares Outstanding without conversion option






18,463,995Total Weighted Average
    Shares Outstanding






22,524,992Net Income available to common
    stock with or without the conversion option

$
2,003



22,524,992


$
0.09Accretion of conversion option

$
317



4,060,997


$
0.08Basic and Diluted Net Income per
    share with conversion option









$
0.17Basic and Diluted Net Income per
    share without conversion option

$
2,003



22,524,992


$
0.09   F-11




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal Year Ended January 3, 2006Income (Loss)


Shares


Per Share(Numerator)


(Denominator)


AmountNet Loss

$
(4,588
)Accretion of conversion option


Net Loss available to common stock
    with or without the conversion option

$
(4,588
)Weighted Average
    Shares Outstanding with conversion option






4,060,997Weighted Average
    Shares Outstanding without conversion option






18,463,995Total Weighted Average
    Shares Outstanding






22,524,992Basic and Diluted Net Loss per
    share with conversion option

$
(4,588
)


22,524,992


$
(0.20
)Basic and Diluted Net Loss per
    share without conversion option

$
(4,588
)


22,524,992


$
(0.20
)   Fiscal Year Ended January 2, 2007Income (Loss)


Shares


Per Share(Numerator)


(Denominator)


AmountNet income

$
3,478Accretion of conversion option


Net Loss available to common stock
    with or without the conversion option

$
3,478Weighted Average
    Shares Outstanding with conversion option






4,060,997Weighted Average
    Shares Outstanding without conversion option






18,463,995Total Weighted Average
    Shares Outstanding






22,524,992Basic and Diluted Net Loss per
    share with conversion option

$
3,478



22,524,992


$
0.15Basic and Diluted Net Loss per
    share without conversion option

$
3,478



22,524,992


$
0.15   Reclassifications
  New Accounting Standards 
 F-12




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value Measurements
    3.
    SIGNIFICANT
    RISKS AND UNCERTAINTIES  Use of Estimates
  Certain Risk Concentrations
     F-13




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    DEBT    2005


2006(In thousands)Term Loans  2005 Credit
    Agreement

$
106,694


$
105,619Centerplate subordinated
    notes  Issued in 2003


105,245



105,245211,939



210,864Less  current portion
    of long-term debt


1,075



1,075Total long-term debt

$
210,864


$
209,789   Subordinated Notes Issued in 2003 non-U.S. subsidiary.
  2005 Credit Agreement sub-limit sub-limit.
   F-14




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     
    Interest coverage ratio (Adjusted EBITDA to cash interest
    expense for the last 12 months) at least equal to 2.05 to
    1.0 through fiscal 2006 and 2.00 to 1.00 thereafter;
    A maximum total leverage ratio (net debt as of the date of
    determination to Adjusted EBITDA for the 12 months ended on
    such date) of 4.65 to 1.00; and
    A maximum senior leverage ratio (net senior debt as of the date
    of determination to Adjusted EBITDA for the 12 months
    ending on such date) of 2.25 to 1.00 through fiscal 2006 and
    2.15 to 1.00 thereafter.      2007

$
1,0752008


1,0752009


1,0752010


102,3942011


Thereafter


105,245Total

$
210,864   5.
    INCOME
    TAXES  2005


2006(In thousands)Deferred tax liabilities:Intangibles (goodwill, contract
    rights and trademarks)

$
(6,407
)

$
(7,151
)Differences between book and tax
    basis of property


(747
)


Other


(1,628
)


(905
)(8,782
)


(8,056
) F-15




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005


2006(In thousands)Deferred tax assets:Differences between book and tax
    basis of property

$



$
182Bad debt reserves


364



354Inventory reserves


172



170Insurance reserves


5,118



4,903Other reserves and accrued
    liabilities


463



1,237General business and AMT credit
    carryforwards


8,356



9,170Accrued compensation and vacation


1,133



1,380Net operating loss carryforward


10,220



8,41125,826



25,807Net deferred tax asset

$
17,044


$
17,751Net deferred tax asset is
    recognized as follows in the accompanying 2005 and 2006
    consolidated balance sheets:Current deferred tax asset

$
3,928


$
3,139Noncurrent deferred tax asset


13,116



14,612Net deferred tax asset

$
17,044


$
17,751         Fiscal Year EndedDecember 28,


January 3,


January 2,2004


2006


2007(In thousands)Current provision (benefit)

$
305


$
(306
)

$
477Deferred benefit


(1,272
)


(3,547
)


(707
)Total benefit for income taxes

$
(967
)

$
(3,853
)

$
(230
)  F-16




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2004


2005


2006Statutory rate


34
%


(34
)%


34
%Differences:State and local income taxes, net
    of Federal benefit


20



(6
)


3Foreign tax rate differential










(1
)Nondeductible expenses (meals and
    entertainment, etc.)


9



1



17Non-cash interest (income) expense


51







(35
)Federal tax credits


(143
)


(4
)


(23
)Change in liability for income tax
    contingencies


(44
)






Change in effective state tax rates






(4
)


8Adjustment to Canadian deferreds










(8
)Other






1



(2
)Total benefit for income taxes


(73
)%


(46
)%


(7
)%     6.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS    Long-Term Debt
 F-17




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value of Financial Instruments
  7.
    COMMITMENTS
    AND CONTINGENCIES  Leases and Client Contracts
  month-to-month
    Operating


CommissionsYear

Leases


and Royalties(In thousands)2007

$
627


$
8,3402008


473



8,1852009


190



8,2052010


63



6,9882011


1



5,645Thereafter






17,878Total

$
1,354


$
55,241   Employment Contracts
  Commitments
   F-18




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2008


2009


2010


2011


Thereafter


Total(In thousands)Insurance


2,315



1,653



1,009



684



2,083



7,744Other


386



111



19



19







535Total

$
2,701


$
1,764


$
1,028


$
703


$
2,083


$
8,279   Litigation
  Cooper Industries, Inc. v. Aviall Services
     F-19




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Form 10-K, Holden v.
    Volume Services America, Inc. et al.
  Perez v. Volume Services Inc, d/b/a Centerplate Holden Holden Holden
    8.
    RELATED
    PARTY TRANSACTIONS  Consulting Fees
  Leasing Services
  Credit Agreement
     F-20




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    9.
    BENEFIT
    PLANS    Multi-Employer Pension Plans
  Annual Bonus Plan
  Long-Term Performance Plan
      10.
    DEMAND
    FOR REGISTRATION   F-21




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Form S-3
  11.
    QUARTERLY
    RESULTS OF OPERATIONS (UNAUDITED)    First


Second


Third


FourthYear Ended January 3, 2006

Quarter


Quarter


Quarter


Quarter


Total(In thousands, except per share data)Net sales

$
107,220


$
182,071


$
208,619


$
145,202


$
643,112Cost of sales (excluding
    depreciation and amortization)


89,031



146,410



166,297



117,657



519,395Selling, general, and
    administrative


15,766



17,884



19,738



18,017



71,405Depreciation and amortization


6,805



7,296



7,332



7,822



29,255Transaction related expenses(1)














1,006



1,006Contract related losses










280



89



369Operating income (loss)


(4,382
)


10,481



14,972



611



21,682Interest expense(2)


5,400



13,123



6,955



5,796



31,274Other income, net


(86
)


(219
)


(322
)


(524
)


(1,151
)Income (loss) before income taxes


(9,696
)


(2,423
)


8,339



(4,661
)


(8,441
)Income tax provision (benefit)


(5,263
)


50



3,827



(2,467
)


(3,853
)Net income (loss)


(4,433
)


(2,473
)


4,512



(2,194
)


(4,588
)Basic and Diluted Net Income
    (Loss) per share with and without conversion option

$
(0.20
)

$
(0.11
)

$
0.20


$
(0.10
)

$
(0.20
)     (1)
    
    Reflects the write-off of costs associated with a contemplated
    follow-on offering to the Companys 2003 IPO.(2)
    
    Included in interest expense in the second quarter is
    $5.8 million in expenses related to refinancing the
    Companys senior credit facility.  F-22




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  First


Second


Third


FourthYear Ended January 2, 2007

Quarter


Quarter


Quarter


Quarter


Total(In thousands, except per share data)Net sales

$
113,505


$
190,699


$
218,929


$
157,987


$
681,120Cost of sales (excluding
    depreciation and amortization


95,660



154,174



175,999



128,919



554,752Selling, general, and
    administrative


14,683



17,413



19,588



18,854



70,538Depreciation and amortization


7,051



7,074



7,212



7,517



28,854Transaction related expenses(1)














700



700Contract related losses


100











258



358Operating income (loss)


(3,989
)


12,038



16,130



1,739



25,918Interest expense


6,539



6,207



5,502



6,112



24,360Other income, net


(322
)


(341
)


(501
)


(526
)


(1,690
)Income (loss) before income taxes


(10,206
)


6,172



11,129



(3,847
)


3,248Income tax provision (benefit)


(4,608
)


6,238



(1,140
)


(720
)


(230
)Net income (loss)


(5,598
)


(66
)


12,269



(3,127
)


3,478Basic and Diluted Net Income
    (Loss) per share with and without conversion option

$
(0.25
)

$
0.00


$
0.54


$
(0.14
)

$
0.15     (1)
    
    Reflects fees and expenses associated with a follow-on offering
    to the Companys 2003 IPO.  12.
    CONDENSED
    CONSOLIDATING INFORMATION  non-U.S. subsidiary.
 F-23




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  
 Consolidating
    Condensed Statement of Operations and Comprehensive Income,
    Year Ended December 28, 2004
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Eliminations


Consolidated(In thousands)Net sales

$



$
566,653


$
40,501


$



$
607,154Cost of sales (excluding D&A)






458,692



33,732



38



492,462Selling, general, and
    administrative


1,184



55,294



5,062







61,540Depreciation and amortization


109



25,484



1,051







26,644Contract related losses






411











411Operating income (loss)


(1,293
)


26,772



656



(38
)


26,097Interest expense


17,408



7,602











25,010Intercompany interest, net


(15,611
)


15,611











Other income, net


(4
)


(258
)


(4
)






(266
)Income (loss) before income taxes


(3,086
)


3,817



660



(38
)


1,353Income tax benefit


(945
)


(22
)










(967
)Equity in earnings of subsidiaries


4,461



622







(5,083
)


Net income


2,320



4,461



660



(5,121
)


2,320Accretion of conversion option


(317
)














(317
)Net income available to common
    stock with or without conversion option

$
2,003


$
4,461


$
660


$
(5,121
)

$
2,003Net income


2,320



4,461



660



(5,121
)


2,320Other comprehensive income foreign
    currency translation adjustment










351







351Comprehensive income

$
2,320


$
4,461


$
1,011


$
(5,121
)

$
2,671  F-24




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Statement of Cash Flows, Year Ended December 28,
    2004
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Consolidated(In thousands)Cash flows Provided by (used in)
    operating activities

$
(456
)

$
25,916


$
2,979


$
28,439Cash flows from investing
    activities:Purchase of property and equipment






(6,987
)


(982
)


(7,969
)Proceeds from sale of property and
    equipment






702



107



809Contract rights acquired






(15,900
)






(15,900
)Return of unamortized capital
    investment






16,531







16,531Restricted cash






13,628







13,628Net cash provided by (used in)
    investing activities






7,974



(875
)


7,099Cash flows from financing
    activities:Repayments  revolving
    loans






(33,000
)






(33,000
)Borrowings  revolving
    loans






29,000







29,000Payment of existing subordinated
    notes






(12,250
)






(12,250
)Payment of debt issuance costs


(267
)










(267
)Payments of financing costs


(263
)


(241
)






(504
)Increase in bank overdrafts






1,666







1,666Dividend payments


(18,335
)










(18,335
)Change in intercompany, net


19,324



(17,427
)


(1,897
)


Net cash provided by (used in)
    financing activities


459



(32,252
)


(1,897
)


(33,690
)Increase in cash


3



1,638



207



1,848Cash and cash equivalents:Beginning of year


192



22,504



233



22,929End of year

$
195


$
24,142


$
440


$
24,777  F-25




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Balance Sheet, January 3, 2006
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Eliminations


Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
199


$
39,612


$
1,599


$



$
41,410Accounts receivable






21,861



1,598







23,459Other current assets


7



22,471



1,443







23,921Total current assets


206



83,944



4,640







88,790Property and equipment






46,269



3,456







49,725Contract rights, net


147



79,758



652







80,557Cost in excess of net assets
    acquired, net


6,974



34,168



-







41,142Intercompany receivable (payable)


134,674



(133,373
)


(3,909
)


2,608



Investment in subsidiaries


(8,747
)


2,608







6,139



Other assets


8,511



48,316



984







57,811Total assets

$
141,765


$
161,690


$
5,823


$
8,747


$
318,025LIABILITIES AND
    STOCKHOLDERS EQUITY (DEFICIENCY)Current liabilities

$
6,565


$
61,573


$
2,140


$
544


$
70,822Long-term debt


105,245



105,619











210,864Other liabilities






6,384











6,384Total liabilities


111,810



173,576



2,140



544



288,070Common stock with conversion
    option, par value $0.01 exchangeable for subordinated debt, net
    of discount


14,352















14,352Stockholders equity
    (deficiency):Common stock


400















400Additional paid-in capital


218,331







-







218,331Accumulated deficit


(82,920
)


(11,886
)


2,951



8,935



(82,920
)Treasury stock and other


(120,208
)






732



(732
)


(120,208
)Total stockholders equity
    (deficiency)


15,603



(11,886
)


3,683



8,203



15,603Total liabilities and
    stockholders equity (deficiency)

$
141,765


$
161,690


$
5,823


$
8,747


$
318,025  F-26




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Statement of Operations and Comprehensive Income
    (Loss),
    Year Ended January 3, 2006
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Eliminations


Consolidated(In thousands)Net sales

$



$
594,146


$
48,966


$



$
643,112Cost of sales (excluding D&A)






478,677



40,382



336



519,395Selling, general, and
    administrative


1,146



65,380



4,879







71,405Depreciation and amortization


106



27,875



1,274







29,255Transaction related expenses


1,006















1,006Contract related losses






369











369Operating income (loss)


(2,258
)


21,845



2,431



(336
)


21,682Interest expense


15,367



15,907











31,274Intercompany interest, net


(15,876
)


15,876











Other income, net


(4
)


(1,134
)


(13
)






(1,151
)Income (loss) before income taxes


(1,745
)


(8,804
)


2,444



(336
)


(8,441
)Income tax benefit


(349
)


(3,504
)










(3,853
)Equity in earnings of subsidiaries


(3,192
)


2,108







1,084



Net income (loss)


(4,588
)


(3,192
)


2,444



748



(4,588
)Accretion of conversion option


















Net income (loss) available to
    common stock with or without conversion option


(4,588
)


(3,192
)


2,444



748



(4,588
)Net income (loss)


(4,588
)


(3,192
)


2,444



748



(4,588
)Other comprehensive income foreign
    currency translation adjustment










157







157Comprehensive income (loss)

$
(4,588
)

$
(3,192
)

$
2,601


$
748


$
(4,431
)  F-27




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Statement of Cash Flows, Year Ended January 3,
    2006
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Consolidated(In thousands)Cash flows Provided by (used in)
    operating activities

$
(381
)

$
25,276


$
3,513


$
28,408Cash flows from investing
    activities:Purchase of property and equipment






(13,823
)


(889
)


(14,712
)Proceeds from sale of property,
    plant and equipment






338







338Contract rights acquired






(10,363
)






(10,363
)Net cash used in investing
    activities






(23,848
)


(889
)


(24,737
)Cash flows from financing
    activities:Repayments  revolving
    loans






(44,250
)






(44,250
)Borrowings  revolving
    loans






44,250







44,250Principal payments on long-term
    debt






(806
)






(806
)Proceeds from long-term borrowings






107,500







107,500Retirement of existing long-term
    borrowings






(65,000
)






(65,000
)Payments of financing costs






(7,266
)






(7,266
)Decrease in bank overdrafts






(3,626
)






(3,626
)Change in intercompany, net


18,225



(16,760
)


(1,465
)


Dividend payments


(17,840
)










(17,840
)Net cash provided by (used in)
    financing activities


385



14,042



(1,465
)


12,962Increase in cash


4



15,470



1,159



16,633Cash and cash equivalents:Beginning of period


195



24,142



440



24,777End of period

$
199


$
39,612


$
1,599


$
41,410  F-28




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Balance Sheet, January 2, 2007
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Eliminations


Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
210


$
36,631


$
2,750


$



$
39,591Accounts receivable






21,780



1,392







23,172Other current assets


24



37,923



1,484







39,431Total current assets


234



96,334



5,626







102,194Property and equipment






48,295



2,389







50,684Contract rights, net


54



78,699



456







79,209Cost in excess of net assets
    acquired, net


6,974



34,168



-







41,142Intercompany receivable (payable)


116,286



(122,640
)


208



6,146



Investment in subsidiaries


(6,390
)


6,146



-



244



Other assets


8,533



49,818



790







59,141Total assets

$
125,691


$
190,820


$
9,469


$
6,390


$
332,370LIABILITIES AND STOCKHOLDERS
    EQUITY (DEFICIENCY)Current liabilities

$
4,844


$
90,858


$
2,230


$
768


$
98,700Long-term debt


105,245



104,544











209,789Other liabilities






8,279











8,279Total liabilities


110,089



203,681



2,230



768



316,768Common stock with conversion
    option, par value $0.01 exchangeable for subordinated debt, net
    of discount


14,352















14,352Stockholders equity
    (deficiency):Common stock


400















400Additional paid-in capital


218,331















218,331Accumulated deficit


(97,282
)


(12,861
)


6,498



6,363



(97,282
)Treasury stock and other


(120,199
)






741



(741
)


(120,199
)Total stockholders equity
    (deficiency)


1,250



(12,861
)


7,239



5,622



1,250Total liabilities and
    stockholders equity (deficiency)

$
125,691


$
190,820


$
9,469


$
6,390


$
332,370  F-29




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Statement of Operations and Comprehensive Income
    (Loss),
    Year Ended January 2, 2007
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Eliminations


Consolidated(In thousands)Net sales

$



$
629,595


$
51,525


$



$
681,120Cost of sales (excluding
    D & A)






512,266



42,114



372



554,752Selling, general, and
    administrative


1,928



62,075



6,535







70,538Depreciation and amortization


93



27,458



1,303







28,854Transaction related expenses


700















700Contract related losses






358











358Operating income (loss)


(2,721
)


27,438



1,573



(372
)


25,918Interest expense


12,151



12,067



142







24,360Intercompany interest, net


(15,700
)


15,700











Other income, net


(10
)


(1,627
)


(53
)






(1,690
)Income (loss) before income taxes


838



1,298



1,484



(372
)


3,248Income tax benefit


(293
)


63











(230
)Equity in earnings of subsidiaries


2,347



1,112







(3,459
)


Net income (loss)


3,478



2,347



1,484



(3,831
)


3,478Accretion of conversion option














Net income (loss) available to
    common stock with or without conversion option


3,478



2,347



1,484



(3,831
)


3,478Net income (loss)


3,478



2,347



1,484



(3,831
)


3,478Other comprehensive income foreign
    currency translation adjustment










9







9Comprehensive income (loss)

$
3,478


$
2,347


$
1,493


$
(3,831
)

$
3,487  F-30




---



##### Table of Contents



CENTERPLATE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidating
    Condensed Statement of Cash Flows, Year Ended January 2,
    2007
  Combined


CombinedGuarantor


Non-guarantorCenterplate


Subsidiaries


Subsidiaries


Consolidated(In thousands)Cash flows Provided by (used in)
    operating activities

$
(537
)

$
33,292


$
6,601


$
39,356Cash flows from investing
    activities:Purchase of property and equipment






(13,647
)


(105
)


(13,752
)Proceeds from sale of property,
    plant and equipment






250







250Contract rights acquired






(14,014
)






(14,014
)Return of unamortized capital
    investment






1,828







1,828Restricted cash






(13,080
)






(13,080
)Net cash used in investing
    activities






(38,663
)


(105
)


(38,768
)Cash flows from financing
    activities:Repayments  revolving
    loans






(10,000
)






(10,000
)Borrowings  revolving
    loans






25,000







25,000Principal payments on long-term
    debt






(1,075
)






(1,075
)Increase in bank overdrafts






1,508







1,508Change in intercompany, net


18,388



(13,043
)


(5,345
)


Dividend payments


(17,840
)










(17,840
)Net cash provided by (used in)
    financing activities


548



2,390



(5,345
)


(2,407
)Increase in cash


11



(2,981
)


1,151



(1,819
)Cash and cash equivalents:Beginning of period


199



39,612



1,599



41,410End of period

$
210


$
36,631


$
2,750


$
39,591  F-31




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation of disclosure controls and
    procedures.
  Changes in internal control over financial
    reporting. Form 10-K
  Managements Report on Internal Control Over Financial
    Reporting. Rule 13a-15(f)
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    our assets that could have a material effect on the consolidated
    financial statements.    Internal Control  Integrated
    Framework.
   54




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm.
     Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
        55




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III    Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Item 11.
    Executive
    Compensation.  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.  Item 14.
    Principal
    Accounting Fees and Services. PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Page F-1
        ExhibitNumber

Description of Exhibit3
.1(1)

Restated Certificate of
    Incorporation of Centerplate, Inc.3
.2(2)

Amendments to Restated Certificate
    of Incorporation adopted on October 13, 2004.3
.3(3)

Amended and Restated By-Laws of
    Centerplate, Inc.3
.4(2)

Amendments to Amended and Restated
    By-Laws adopted on October 13, 2004.4
.1(4)

Indenture, dated as of
    December 10, 2003, among Volume Services America Holdings,
    Inc., the guarantors thereto and The Bank of New York, as
    Trustee.4
.2(16)

First Amendment to Indenture,
    dated as of October 24, 2006.4
.3(4)

Form of Subordinated Note
    (included in Exhibit 4.3).4
.4(4)

Registration Rights Agreement
    dated as of December 10, 2003, among Volume Services
    America Holdings, Inc., BCP Volume L.P., BCP Offshore Volume
    L.P., Management Direct L.P., Lawrence E. Honig, Kenneth R.
    Frick and Recreational Services, L.L.C.4
.5(4)

Amended and Restated Stockholders
    Agreement, dated as of December 10, 2003, among Volume
    Services America Holdings, Inc., BCP Volume L.P., BCP Offshore
    Volume L.P., VSI Management Direct L.P. and Recreational
    Services, L.L.C.4
.6(5)

Form of stock certificate for
    common stock.4
.7(4)

Global IDS Certificate.4
.8(3)

Board Observer Agreement, dated
    December 10, 2003, between Volume Services America
    Holdings, Inc. and Blackstone Capital Partners II Merchant
    Banking Fund. 56




---



##### Table of Contents



ExhibitNumber

Description of Exhibit10
.1(6)

Credit Agreement, dated as of
    April 1, 2005, among Volume Services America, Inc., Volume
    Services, Inc., and Service America Corporation as Borrowers,
    Centerplate, Inc. as Guarantor, certain financial institutions
    as the Lenders, GECC Capital Markets Group, Inc. as Lead
    Arranger and Book Runnov and General Electric Capital
    Corporation as Administrative Agent and Lender.10
.2(7)

Form of Centerplate Deferred
    Compensation Plan.*10
.3(8)

Employment Agreement dated as of
    September 29, 1998, by and between VSI Acquisition II
    Corporation and Janet L. Steinmayer (the
    September 29, 1989 Employment Agreement).*10
.4(9)

Amendment, dated September 7,
    2005, to the September 29, 1998 Employment Agreement.*10
.5(14)

Second Amendment, dated as of
    March 1, 2006, to the September 29, 1998 Employment
    Agreement.*10
.6(9)

Letter Agreement, dated
    September 7, 2005, between Centerplate, Inc. and Paul W.
    MacPhail.*10
.6(15)

Employment Agreement, dated as of
    October 25, 2006, between Centerplate, Inc. and William H.
    Peterson.*10
.7(15)

Employment Agreement dated as of
    October 25, 2006, between Centerplate, Inc. and Kevin
    McNamara.*10
.7(10)

Centerplate, Inc. Long-Term
    Performance Plan.*10
.8(8)

Employment Agreement dated as of
    November 17, 1995, by and between Volume Services, Inc.
    (a Delaware corporation) and Kenneth R. Frick.*10
.8(11)

Form of Award Letter under
    Long-Term Performance Plan for senior executive officers.*10
.9(11)

Form of Award Letter under
    Long-Term Performance Plan for participants other than senior
    executive officers.*10
.10(12)

First Amendment to Credit
    Agreement, dated as of April 15, 2005, by and among Volume
    Services America, Inc., Volume Services, Inc. and Service
    America Corporation, as the Borrowers, Centerplate, Inc., the
    Lenders party to the Credit Agreement, Wachovia Bank, National
    Association, as a Lender and Syndication Agent, and General
    Electric Capital Corporation, as a Lender and as Administrative
    Agent.10
.11(13)

Form of Consent and Amendment,
    dated as of September 30, 2005, by and among Volume
    Services America, Inc., Volume Services, Inc., Service America
    Corporation, Centerplate, Inc., the Lenders signatory thereto,
    and General Electric Capital Corporation, as a Lender and as the
    Administrative Agent.12
.1

Computation of Ratio of Earnings
    to Fixed Charges21
.1

Subsidiaries of Centerplate, Inc.31
.1

Certification of Principal
    Executive Officer of Centerplate, Inc. pursuant to
    Rule 13a-14
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Principal
    Financial Officer of Centerplate, Inc. pursuant to
    Rule 13a-14
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of Principal
    Executive Officer of Centerplate, Inc. pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Principal
    Financial Officer of Centerplate, Inc. pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     (1)
    
    Incorporated by reference to the
    Form S-1/A
    filed on December 4, 2003.(2)
    
    Incorporated by reference to the
    Form 10-Q
    for the quarterly period ended September 28, 2004.(3)
    
    Incorporated by reference to the
    Form 10-K
    filed for the fiscal year ended December 30, 2003.(4)
    
    Incorporated by reference to the
    Form 8-K
    filed on December 22, 2003.(5)
    
    Incorporated by reference to the
    Form S-1/A
    filed on November 7, 2003. 57




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##### Table of Contents



(6)
    
    Incorporated by reference to the
    Form 8-K
    filed on April 6, 2005.(7)
    
    Incorporated by reference to the
    Form 10-K
    for the fiscal year ended December 28, 2004.(8)
    
    Incorporated by reference to the
    Form S-1/A
    filed on May 14, 2003.(9)
    
    Incorporated by reference to the
    Form 8-K
    filed on September 7, 2005.(10)
    
    Incorporated by reference to the
    Form 8-K
    filed on October 18, 2004.(11)
    
    Incorporated by reference to the
    Form 8-K
    filed on November 23, 2004.(12)
    
    Incorporated by reference to the
    Form 10-Q
    for the quarterly period ended March 29, 2005.(13)
    
    Incorporated by reference to the
    Form 10-K
    for the fiscal year ended January 3, 2006.(14)
    
    Incorporated by reference to the
    Form 10-Q
    for the quarterly period ended April 4, 2006.(15)
    
    Incorporated by reference to the
    Form 8-K
    filed on October 31, 2006.(16)
    
    Incorporated by reference to the
    Form 8-K
    filed on October 27, 2006.*
    
    Management contract or compensatory plan or arrangement required
    to be filed and herein incorporated as an exhibit. 58




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##### Table of Contents



SIGNATURES
      By:
    /s/  Janet
    L. Steinmayer       Name

Title

Date/s/  Janet
    L. SteinmayerJanet
    L. Steinmayer

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 19, 2007/s/  Kevin
    F. McNamaraKevin
    F. McNamara

Executive Vice President and Chief
    Financial Officer (Principal Financial and Accounting Officer)

March 19, 2007/s/  David
    M. WilliamsDavid
    M. Williams

Director and Chairman of the Board

March 19, 2007/s/  Felix
    P. CheeFelix
    P. Chee

Director

March 19, 2007/s/  Sue
    Ling GinSue
    Ling Gin

Director

March 19, 2007/s/  Alfred
    PoeAlfred
    Poe

Director

March 19, 2007/s/  Peter
    F. WallacePeter
    F. Wallace

Director

March 19, 2007/s/  Glenn
    R. ZanderGlenn
    R. Zander

Director

March 19, 2007  59