**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON, D.C. 20549**

 

----

 

**FORM 10-Q/A**

 

#### **Amendment No. 3**

 

| **(Mark One)** |   |
|----------------|--------|
| **ý**     |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|           |   |   |
|           |   | **For  the quarterly period ended April 1, 2002** |

** **

**OR**

 

| **o**  |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                        |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                 |
|   |   | **For the transition period from                     to                 ** |

 

| **American  Restaurant Group, Inc.**                    |
|---------------------------------------------------------|
| (Exact name of  registrant as specified in its charter) |

 

| **Delaware**                                                     |   | **33-48183**              |   | **33-0193602**                        |
|------------------------------------------------------------------|--------|---------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (Commission File  Number) |   | (I.R.S. employer  identification no.) |

 
| **4410 El Camino Real, Suite 201**                             |
|----------------------------------------------------------------|
| **Los Altos, CA  94022**                                  |
| **(650) 949-6400**                                             |
| (Address and  telephone number of principal executive offices) |

 

| Former name,  former address and former fiscal year  if changed since last report. |
|------------------------------------------------------------------------------------|

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

|   | Yes  ý    No  o |
|--------|----------------------------------------------------|

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Act).

|   | Yes  o    No  ý |
|--------|----------------------------------------------------|

 

The number of outstandingshares of the Company’s Common Stock (one cent par value) as of May 6, 2002 was128,081.

 

 

----

 

**AMERICAN RESTAURANT GROUP, INC.**

 

**INDEX**

 
| **PART I.** | **FINANCIAL INFORMATION**                                                                   | 3      |
|-------------|---------------------------------------------------------------------------------------------|--------|
|        |                                                                                        |   |
| ITEM 1.     | FINANCIAL STATEMENTS:                                                                       | 3      |
|        |                                                                                        |   |
|        | Consolidated  Condensed Balance Sheets                                                      | 3      |
|        |                                                                                        |   |
|        | Consolidated  Condensed Statements of Operations                                            | 5      |
|        |                                                                                        |   |
|        | Consolidated  Condensed Statements of Cash Flows                                            | 6      |
|        |                                                                                        |   |
|        | Notes  to Consolidated Condensed Financial Statements                                       | 7      |
|        |                                                                                        |   |
| ITEM 2.     | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 12     |
|        |                                                                                        |   |
| ITEM  3.    | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 15     |
|        |                                                                                        |   |
| ITEM 4.     | CONTROLS AND  PROCEDURES                                                                    | 15     |
|        |                                                                                        |   |
| **PART II** | **OTHER INFORMATION**                                                                       | 15     |
|        |                                                                                        |   |
| ITEM 6.     | EXHIBITS AND  REPORTS ON FORM 8-K                                                           | 15     |

 

2

----

 

**PART I.        FINANCIALINFORMATION**

 

EXPLANATORY NOTE

 

THIS AMENDMENT NO. 3 TO FORM 10-Q IS FILED TO AMEND CERTAIN FINANCIALSTATEMENTS AND RELATED DISCLOSURES IN THE QUARTERLY REPORT ON FORM 10-Q FOR THEREGISTRANT’S QUARTER ENDED APRIL 1, 2002. AMERICAN RESTAURANT GROUP, INC. (THE “COMPANY”) HAS RESTATED ITSCONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 26, 2001,DECEMBER 31, 2001, AND APRIL 1, 2002. THE RESTATEMENT OF THE COMPANY’S FINANCIAL STATEMENTS FOR THE PERIODSENDING MARCH 26, 2001 AND APRIL 1, 2002 ARE DESCRIBED WITHIN NOTE 2,“RESTATEMENTS OF QUARTERLY FINANCIAL STATEMENTS.”

 

WE HAVE REVISED THE NARRATIVE TO REFLECT RELATED CORRECTIONS.  EXCEPT AS EXPLAINED IN THE NOTES, THISREPORT CONTINUES TO SPEAK AS OF THE DATE OF THE ORIGINAL FILING.

 

**ITEM 1.        FINANCIALSTATEMENTS:**

 

AMERICANRESTAURANT GROUP, INC. AND SUBSIDIARIES

 

CONSOLIDATEDCONDENSED BALANCE SHEETS

 

DECEMBER 31, 2001AND APRIL 1, 2002

 

 
|                                  |   | **(Restated)**

**December  31,  2001** |       | **(Restated  and unaudited)  April 1,  2002** |   |
|---------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------------|--------|
|                                  |   |                                    |       |                                          |   |
| ASSETS                                |   |                                    |       |                                          |   |
|                                  |   |                                    |       |                                          |   |
| CURRENT  ASSETS:                      |   |                                    |       |                                          |   |
| Cash                                  |   | $                                       | 7,384,000  |                                          | $      | 13,015,000 |   |
| Rebates  and other receivables, net   |   | 2,985,000                               |       | 3,298,000                                     |   |
| Inventories                           |   | 2,800,000                               |       | 2,890,000                                     |   |
| Prepaid  expenses                     |   | 3,002,000                               |       | 2,142,000                                     |   |
|                                  |   |                                    |       |                                          |   |
| Total  current assets                 |   | 16,171,000                              |       | 21,345,000                                    |   |
|                                  |   |                                    |       |                                          |   |
| PROPERTY  AND EQUIPMENT, net:         |   |                                    |       |                                          |   |
| Land  and land improvements           |   | 834,000                                 |       | 803,000                                       |   |
| Buildings  and leasehold improvements |   | 36,559,000                              |       | 36,382,000                                    |   |
| Fixtures  and equipment               |   | 11,351,000                              |       | 10,966.000                                    |   |
| Property  held under capital leases   |   | 1,060,000                               |       | 972,000                                       |   |
| Construction  in progress             |   | 1,299,000                               |       | 1,353,000                                     |   |
|                                  |   |                                    |       |                                          |   |
| Net  property and equipment           |   | 51,103,000                              |       | 50,476,000                                    |   |
|                                  |   |                                    |       |                                          |   |
| OTHER  ASSETS, NET:                   |   | 17,450,000                              |       | 16,999,000                                    |   |
|                                  |   |                                    |       |                                          |   |
| Total  assets                         |   | $                                       | 84,724,000 |                                          | $      | 88,820,000 |   |

 

3

----

 
|                                                                                                                                                                                                                  |   | **(Restated)**

**December  31,  2001** |       | **(Restated  and  unaudited)  April 1,  2002** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|------------------------------------------------|--------|
| LIABILITIES  AND COMMON STOCKHOLDERS’ DEFICIT                                                                                                                                                                    |   |                                    |       |                                           |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| CURRENT  LIABILITIES:                                                                                                                                                                                                 |   |                                    |       |                                           |   |
| Accounts  payable                                                                                                                                                                                                     |   | $                                       | 11,126,000 |                                           | $      | 14,106,000 |   |
| Accrued  liabilities                                                                                                                                                                                                  |   | 4,585,000                               |       | 3,411,000                                      |   |
| Gift-certificate  liability                                                                                                                                                                                           |   | 6,755,000                               |       | 4,118,000                                      |   |
| Self-insurance  reserves                                                                                                                                                                                              |   | 3,312,000                               |       | 3,360,000                                      |   |
| Accrued  interest                                                                                                                                                                                                     |   | 3,447,000                               |       | 7,882,000                                      |   |
| Accrued  occupancy costs                                                                                                                                                                                              |   | 3,998,000                               |       | 3,923,000                                      |   |
| Accrued  employee costs                                                                                                                                                                                               |   | 4,207,000                               |       | 4,626,000                                      |   |
| Current  portion of obligations under capital leases                                                                                                                                                                  |   | 796,000                                 |       | 819,000                                        |   |
| Current  portion of long-term debt                                                                                                                                                                                    |   | 402,000                                 |       | 3,724,000                                      |   |
| Liabilities  from discontinued operations                                                                                                                                                                             |   | 525,000                                 |       | 147,000                                        |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| Total  current liabilities                                                                                                                                                                                            |   | 39,153,000                              |       | 46,116,000                                     |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| LONG-TERM  LIABILITIES, net of current portion:                                                                                                                                                                       |   |                                    |       |                                           |   |
| Obligations  under capital leases                                                                                                                                                                                     |   | 1,799,000                               |       | 1,585,000                                      |   |
| Long-term  debt, net of unamortized discount                                                                                                                                                                          |   | 157,272,000                             |       | 154,322,000                                    |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| Total  long-term liabilities                                                                                                                                                                                          |   | 159,071,000                             |       | 155,907,000                                    |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| DEFERRED  GAIN ON SALE-LEASEBACK                                                                                                                                                                                      |   | 3,990,000                               |       | 3,940,000                                      |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| COMMITMENTS  AND CONTINGENCIES                                                                                                                                                                                        |   |                                    |       |                                           |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| CUMULATIVE  PREFERRED STOCK, MANDATORILY REDEEMABLE:                                                                                                                                                                  |   |                                    |       |                                           |   |
| Senior  pay-in-kind exchangeable preferred stock, $0.01 par value; 160,000 shares  authorized; 58,883 shares outstanding and accrued at December 31, 2001 and  61,052 shares outstanding and accrued at April 1, 2002 |   | 64,108,000                              |       | 66,593,000                                     |   |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| COMMON  STOCKHOLDERS’ (DEFICIT):                                                                                                                                                                                 |   |                                    |       |                                           |   |
| Common  stock, $0.01 par value; 1,000,000 shares authorized; 128,081 shares issued  and outstanding at December 31, 2001 and April 1, 2002                                                                            |   | 1,000                                   |       | 1,000                                          |   |
| Paid-in  capital                                                                                                                                                                                                      |   | 1,390,000                               |       | —                                         |   |
| Accumulated  (deficit)                                                                                                                                                                                                |   | (182,989,000                            | )          | (183,737,000                                   | )      |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| Total  common stockholders’ (deficit)                                                                                                                                                                            |   | (181,598,000                            | )          | (183,736,000                                   | )      |
|                                                                                                                                                                                                                  |   |                                    |       |                                           |   |
| Total  liabilities and common stockholders’ deficit                                                                                                                                                              |   | $                                       | 84,724,000 |                                           | $      | 88,820,000 |   |

 

The accompanyingnotes are an integral part of these consolidated condensed statements.

 

4

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AMERICANRESTAURANT GROUP, INC. AND SUBSIDIARIES

 

CONSOLIDATEDCONDENSED STATEMENTS OF OPERATIONS

 

FOR THE THIRTEENWEEKS ENDED MARCH 26, 2001 AND APRIL 1, 2002

 

(UNAUDITED)

 
|                                             |   | **Thirteen  Weeks Ended**           |       |
|--------------------------------------------------|--------|-------------------------------------|------------|
|                                             |   | **(Restated)**

**March 26,  2001** |       | **(Restated)**

**April 1,  2002** |   |
|                                             |   |                                |       |   |   |
| REVENUES                                         |   | $                                   | 82,044,000 |   | $ | 81,816,000 |   |
|                                             |   |                                |       |   |   |
| RESTAURANT  COSTS:                               |   |                                |       |   |   |
| Food  and beverage                               |   | 27,140,000                          |       | 27,057,000 |   |
| Payroll                                          |   | 22,642,000                          |       | 24,607,000 |   |
| Direct  operating                                |   | 21,207,000                          |       | 20,248,000 |   |
| Depreciation  and amortization                   |   | 2,152,000                           |       | 1,909,000 |   |
|                                             |   |                                |       |   |   |
| GENERAL  AND ADMINISTRATIVE EXPENSES             |   | 2,472,000                           |       | 2,342,000 |   |
|                                             |   |                                |       |   |   |
| Operating  profit                                |   | 6,431,000                           |       | 5,653,000 |   |
|                                             |   |                                |       |   |   |
| INTEREST  EXPENSE, net                           |   | 4,221,000                           |       | 5,282,000 |   |
|                                             |   |                                |       |   |   |
| Income  (Loss) before provision for income taxes |   | 2,210,000                           |       | 371,000 |   |
|                                             |   |                                |       |   |   |
| PROVISION  FOR INCOME TAXES                      |   | 119,000                             |       | 24,000 |   |
|                                             |   |                                |       |   |   |
| Net  Income (Loss)                               |   |                                | 2,091,000  |   |   | 347,000 |   |
|                                             |   |                                |       |   |   |   |   |
| Preferred  stock dividends, issued and accrued   |   |                                | 2,165,000  |   |   | 2,485,000 |   |
|                                             |   |                                |       |   |   |   |   |
| Loss  to common stockholders                     |   | $                                   | (74,000    | ) | $ | (2,138,000 | ) |

 

The accompanying notes are an integral part of theseconsolidated condensed statements.

 

5

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AMERICANRESTAURANT GROUP, INC. AND SUBSIDIARIES

 

CONSOLIDATEDCONDENSED STATEMENTS OF CASH FLOWS

 

FOR THE THIRTEENWEEKS ENDED MARCH 26, 2001 AND APRIL 1, 2002

 

(UNAUDITED)

### ** **

|                                                                                                                                  |   | **(Restated)**

**March 26,  2001** |       | **(Restated)**

**April 1,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|------------------------------------|--------|
| CASH FLOWS FROM CONTINUING  OPERATING ACTIVITIES:                                                                                     |   |                                |       |                               |   |
|                                                                                                                                  |   |                                |       |                               |   |
| Income  from continuing operations                                                                                                    |   | $                                   | 2,091,000  |                               | $      | 347,000 |   |
| Adjustments  to reconcile net income from continuing operations to net cash provided by /  (used in) continuing operating activities: |   |                                |       |                               |   |
| Depreciation  and amortization                                                                                                        |   | 2,152,000                           |       | 1,909,000                          |   |
| Amortization  of deferred gain                                                                                                        |   | (50,000                             | )          | (50,000                            | )      |
| Amortization  of non-cash interest expense                                                                                            |   | —                              |       | 467,000                            |   |
| Decrease  in current assets                                                                                                           |   | 1,193,000                           |       | 457,000                            |   |
| Increase  (decrease) in current liabilities                                                                                           |   | (7,362,000                          | )          | 3,996,000                          |   |
|                                                                                                                                  |   |                                |       |                               |   |
| Net  cash provided by (used in) continuing operating activities                                                                       |   | (1,976,000                          | )          | 7,126,000                          |   |
|                                                                                                                                  |   |                                |       |                               |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                                                                |   |                                |       |                               |   |
| Capital  expenditures                                                                                                                 |   | (220,000                            | )          | (824,000                           | )      |
| Net  (increase) decrease in other assets                                                                                              |   | 18,000                              |       | (7,000                             | )      |
| Proceeds  from disposition of assets                                                                                                  |   | (19,000                             | )          |                               |   |
| Net  cash (used in) investing activities                                                                                              |   | (221,000                            | )          | (831,000                           | )      |
|                                                                                                                                  |   |                                |       |                               |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                                                                |   |                                |       |                               |   |
| Payments  on indebtedness                                                                                                             |   | (89,000                             | )          | (95,000                            | )      |
| Payments  on capital lease obligations                                                                                                |   | (179,000                            | )          | (191,000                           | )      |
|                                                                                                                                  |   |                                |       |                               |   |
| Net  cash (used in) financing activities                                                                                              |   | (268,000                            | )          | (286,000                           | )      |
|                                                                                                                                  |   |                                |       |                               |   |
| NET  INCREASE / (DECREASE) FROM CONTINUING OPERATIONS                                                                                 |   | (2,465,000                          | )          | 6,009,000                          |   |
|                                                                                                                                  |   |                                |       |                               |   |
| NET  (DECREASE) FROM DISCONTINUED OPERATIONS                                                                                          |   | (937,000                            | )          | (378,000                           | )      |
|                                                                                                                                  |   |                                |       |                               |   |
| NET  CHANGE IN CASH, CURRENT PERIOD                                                                                                   |   | (3,402,000                          | )          | 5,631,000                          |   |
|                                                                                                                                  |   |                                |       |                               |   |
| CASH,  at beginning of period                                                                                                         |   | 3,938,000                           |       | 7,384,000                          |   |
|                                                                                                                                  |   |                                |       |                               |   |
| CASH,  at end of period                                                                                                               |   | $                                   | 536,000    |                               | $      | 13,015,000 |   |
|                                                                                                                                  |   |                                |       |                               |   |
| Cash  payments during the period:                                                                                                     |   |                                |       |                               |   |
| Interest                                                                                                                              |   | $                                   | (8,322,000 | )                                  | $      | (348,000 | ) |
| Income  taxes                                                                                                                         |   | (24,000                             | )          | (25,000                            | )      |
|                                                                                                                                  |   |                                |       |                               |   |

 

The accompanyingnotes are an integral part of these consolidated condensed statements.

 

6

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AMERICAN RESTAURANTGROUP, INC. AND SUBSIDIARIES

NOTES TOCONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

1.                                       BASISOF PRESENTATION

 

The Consolidated Condensed Financial Statementsincluded were prepared by American Restaurant Group, Inc. without audit, inaccordance with Securities and Exchange Commission Regulation S-X.  (References to “the Company,” “we,” “us,” or“our” refer to American Restaurant Group, Inc.)  In the opinion of our management, these Consolidated CondensedFinancial Statements contain all adjustments necessary to present fairly ourfinancial position as of December 31, 2001 and April 1, 2002, and the resultsof our operations for the thirteen weeks ended March 26, 2001 and April 1, 2002and our cash flows for the thirteen weeks ended March 26, 2001 and April 1,2002.  Our results for an interim periodare not necessarily indicative of the results that may be expected for theyear.

 

Although we believe thatwe included all adjustments necessary for a fair presentation of the interimperiods presented and that the disclosures are adequate to make the informationpresented not misleading, we suggest that these Consolidated CondensedFinancial Statements be read in conjunction with the Consolidated FinancialStatements and related notes included in our annual report on Form 10-K for thefiscal year ended December 30, 2002, which restated the financial results forthe fiscal year ended December 31, 2001.

 

2.               RESTATEMENT OFQUARTERLY FINANCIAL STATEMENTS

 

The Company’s previouslyissued consolidated financial statements as of and for the fiscal periods endedMarch 26, 2001, December 31, 2001, and April 1, 2002 are restated to correctthe accounting of certain items. Significant items are noted below.

 

The Company’s previousliability for gift certificates was understated. The Company corrected itsaccounting for its gift-certificate liability and adjusted the liability on thebalance sheet.  The cumulativeadjustment to the balance sheet as of December 31, 2001 was an increase to thegift-certificate liability of $2,408,000. This adjustment decreased the net income for the thirteen weeks endedMarch 26, 2001 by $148,000 and increased the net loss for the thirteen weeksended April 1, 2002 by $40,000.  

 

In connection with theissuance of the Company’s preferred stock in 1998, the Company did not properlyrecord the accretion of the redemption price due at maturity.  Accordingly, the Company has recorded anadjustment that increased the carrying amount on the balance sheet forpreferred stock and correspondingly adjusted paid-in capital, accumulateddeficit, and loss to common stockholders. There was no impact to net income or loss in 2001 or 2002.

 

Certain deposits,previously reported as other assets at December 31, 2001 and earlier periods,no longer represented recoverable assets as of December 27, 1999.  The cumulative adjustment to the balancesheet as of December 31, 2001 was a decrease to other assets of $985,000. Therewas no impact to net income or loss in 2001 or 2002.

 

The Company improperlyrecorded certain credit-card receivables and rebate receivables in 2001.  The Company reduced the carrying amount ofthe receivables on the balance sheet. The cumulative adjustment to the balancesheet as of December 31, 2001 was a decrease to rebates and other receivablesof $1,086,000.  This adjustmentdecreased net income for the thirteen weeks ended March 26, 2001 by $634,000and decreased the net loss for the thirteen weeks ended April 1, 2002 by$452,000.  

 

The Company incorrectlyreduced an insurance accrual during the fiscal year ended December 25,2000.  The Company adjusted the accrualaccordingly.  The cumulative adjustmentto the balance sheet as of December 31, 2001 was an increase to accruedliabilities of $352,000.

 

The Company previouslyrecorded in the fiscal year ended December 31, 2001 certain interest incomeearned in the fiscal year ended December 25, 2000. The Company adjusted therecognition of the interest income accordingly. The cumulative adjustment tothe balance sheet as of December 31, 2001 was an increase to cash of $544,000.  This adjustment increased the net income forthe thirteen weeks ended March 26, 2001 by $56,000 and had no impact on the netloss for the thirteen weeks ended April 1, 2002. 

 

The effects of the corrections to the Company’sconsolidated financial statements as of December 31, 2001 and for the periodsended March 26, 2001 and April 1, 2002 are as follows (in thousands):

7

----

 

 
|                                                     |   | **As of  December 31, 2001**      |   | **(Unaudited)  As of April 1, 2002** |   |
|----------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|
| **(in thousands)**                                       |   | **As  Previously  Reported  (1)** |   | **As  Restated**                     |   | **As  Previously  Reported  (1)** |   | **As  Restated** |   |
|                                                     |   |                              |   |                                 |
|                                                     |   |                              |   |                                 |
| ASSETS                                                   |   |                              |   |                                 |   |   |   |   |   |
| CURRENT ASSETS:                                          |   |                              |   |                                 |   |   |   |   |   |
| Cash                                                     |   | $                                 | 7,814  |                                 | $      | 7,384 |   | $ | 13,306 |   | $ | 13,015 |   |
| Rebates and  Other receivables, net                      |   | 4,071                             |   | 2,985                                |   | 3,932 |   | 3,298 |   |
| Inventories                                              |   | 3,040                             |   | 2,800                                |   | 3,130 |   | 2,890 |   |
| Prepaid expenses                                         |   | 3,002                             |   | 3,002                                |   | 2,142 |   | 2,142 |   |
| Total current  assets                                    |   | 17,927                            |   | 16,171                               |   | 22,510 |   | 21,345 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| Net Property  & Equipment                            |   | 51,103                            |   | 51,103                               |   | 50,476 |   | 50,476 |   |
| Net Other Assets                                         |   | 18,435                            |   | 17,450                               |   | 17,984 |   | 16,999 |   |
| Total Assets                                             |   | $                                 | 87,465 |                                 | $      | 84,724 |   | $ | 90,970 |   | $ | 88,820 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND  COMMON STOCKHOLDERS’ DEFICIT       |   |                              |   |                                 |   |   |   |   |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| CURRENT  LIABILITIES:                                    |   |                              |   |                                 |   |   |   |   |   |
| Accounts payable                                         |   | $                                 | 11,126 |                                 | $      | 11,126 |   | $ | 14,106 |   | $ | 14,106 |   |
| Other Current  liabilities                               |   | 25,267                            |   | 28,027                               |   | 29,210 |   | 32,010 |   |
| Total current  liabilities                               |   | 36,393                            |   | 39,153                               |   | 43,316 |   | 46,116 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| LONG-TERM  LIABILITIES, net of current position          |   | 159,071                           |   | 159,071                              |   | 155,907 |   | 155,907 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| DEFERRED GAIN ON  SALE-LEASEBACK                         |   | 3,990                             |   | 3,990                                |   | 3,940 |   | 3,940 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| CUMULATIVE  PREFERRED STOCK                              |   | 58,219                            |   | 64,108                               |   | 60,487 |   | 66,593 |   |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| COMMON  STOCKHOLDERS’ (DEFICIT):                    |   |                              |   |                                 |   |   |   |   |   |
| Common Stock                                             |   | 1                                 |   | 1                                    |   | 1 |   | 1 |   |
| Paid-in capital                                          |   | 7,279                             |   | 1,390                                |   | 5,011 |   | — |   |
| Accumulated  (deficit)                                   |   | (177,488                          | )      | (182,989                             | )      | (177,692 | ) | (183,737 | ) |
| Total common  stockholders’ (deficit)               |   | (170,208                          | )      | (181,598                             | )      | (172,680 | ) | (183,736 | ) |
|                                                     |   |                              |   |                                 |   |   |   |   |   |
| Total  liabilities and common stockholders’ deficit |   | $                                 | 87,465 |                                 | $      | 84,724 |   | $ | 90,970 |   | $ | 88,820 |   |

 

----

(1) Certain accounts have been reclassified to conform with the currentperiod’s presentation.

 

8

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|                                              |   | **(Unaudited)  Thirteen Weeks Ended  March 26, 2001** |   | **(Unaudited)  Thirteen Weeks Ended  April 1, 2002** |   |
|---------------------------------------------------|--------|-------------------------------------------------------|--------|------------------------------------------------------|--------|
|                                              |   |                                                  |   |
| **(in thousands)**                                |   | **As  Previously  Reported**

**(1)**                 |   | **As  Restated**                                     |   | **As  Previously Reported**

**(1)** |   | **As  Restated** |   |
|                                              |   |                                                  |   |                                                 |
|                                              |   |                                                  |   |                                                 |
|                                              |   |                                                  |   |                                                 |
| REVENUES                                          |   | $                                                     | 82,181 |                                                 | $      | 82,044 |   | $ | 81,845 |   | $ | 81,816 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| RESTAURANT  COSTS:                                |   |                                                  |   |                                                 |   |   |   |   |   |
| Food and  beverage                                |   | 27,140                                                |   | 27,140                                               |   | 27,509 |   | 27,057 |   |
| Payroll                                           |   | 22,642                                                |   | 22,642                                               |   | 24,607 |   | 24,607 |   |
| Direct operating                                  |   | 20,397                                                |   | 21,207                                               |   | 20,276 |   | 20,248 |   |
| Depreciation and  amortization                    |   | 2,152                                                 |   | 2,152                                                |   | 1,909 |   | 1,909 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| GENERAL AND  ADMIN. EXPENSES                      |   | 2,466                                                 |   | 2,472                                                |   | 2,335 |   | 2,342 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| Operating profit  from continuing operations      |   | 7,384                                                 |   | 6,431                                                |   | 5,209 |   | 5,653 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| INTEREST  EXPENSE, net                            |   | 4,244                                                 |   | 4,221                                                |   | 5,389 |   | 5,282 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| Income /(Loss)  before provision for income taxes |   | 3,140                                                 |   | 2,210                                                |   | (180 | ) | 371 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| PROVISION FOR  INCOME TAXES                       |   | 119                                                   |   | 119                                                  |   | 24 |   | 24 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |
| Net  Income/(Loss)                                |   |                                                  | 3,021  |                                                 |   | 2,091 |   |   | (204 | ) |   | 347 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |   |   |   |   |
| Preferred stock  dividends, issued and accrued    |   |                                                  | 1,977  |                                                 |   | 2,165 |   |   | 2,269 |   |   | 2,485 |   |
|                                              |   |                                                  |   |                                                 |   |   |   |   |   |   |   |   |   |
| Loss to common  stockholders                      |   | $                                                     | 1,044  |                                                 | $      | (74 | ) | $ | (2,473 | ) | $ | (2,138 | ) |

 

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(1) Certain accounts have been reclassified to conform with the currentperiod’s presentation.

 

3.                                       OPERATIONSAND REFINANCING

 

The Company’s operations are affected by local andregional economic conditions, including competition in the restaurant industry.

 

On October 31, 2001, we completed an exchange offer(the “Exchange”) in which we offered to exchange our 111⁄2% Senior Secured Notesdue 2006 (the “New Notes”) for all of our $142,600,000 outstanding 111⁄2% SeniorSecured Notes due 2003 (the “Old Notes”). We simultaneously completed an offering (the “Offering”) of $30,000,000 aggregateprincipal amount of New Notes.  Afterthe consummation of the Exchange, the Offering, and related transactions(collectively, the “Refinancing”), we have no further payment obligations withrespect to over 97.6% of the outstanding Old Notes (constituting all but$3,410,000 aggregate principal amount of the Old Notes) and assumed paymentobligations equivalent to $161,774,000 of the New Notes. The Refinancingsubstantially eliminates debt principal payments until November 2006.

 

9

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We do not, however, expect to generate sufficient cashflows from operations in the future to pay fully the principal of the seniorindebtedness upon maturity in 2006 and, accordingly, we expect to refinance allor a portion of such debt, obtain new financing, or possibly sell assets.

 

4.                                       INCOMETAXES

 

The tax provision againstthe pre-tax income in 2002 and in 2001 consisted of certain state income taxesand estimated Federal income tax.  Wepreviously established a valuation allowance against net-operating-loss carryforwards.

 

5.                                       PREFERREDSTOCK

 

As part of therecapitalization plan in February 1998, we issued 35,000 preferred stock units(the “Units”) of the Company.  Each Unitconsists of $1,000 initial liquidation preference of 12% senior pay-in-kindexchangeable preferred stock and one common-stock purchase warrant initially topurchase 2.66143 shares of the common stock at an initial exercise price of onecent per share.  Our preferred stock ismandatorily redeemable on August 15, 2003. If on August 15, 2003 we do not redeem our preferred stock for cash at aprice per share equal to 110% of the then-applicable liquidation preference,our preferred stock will be automatically redeemed for shares of our commonstock at that time and all rights of the preferred stock will terminate.  Management believes that the preferred stockwill convert to common stock.

 

We issued preferred stockdividends of 4,181 shares on February 15, 2002.  At April 1, 2002, we had 61,052 preferred shares outstanding andaccrued.

 

6.                                       SUBSIDIARYGUARANTORS

 

Separatefinancial statements of our subsidiaries are not included in this report onForm 10-Q.  The subsidiaries are fully,unconditionally, jointly, and severally liable for our obligations under theCompany’s Old Notes and New Notes, and the aggregate net assets, earnings, andequity of such subsidiary guarantors are substantially equivalent to the netassets, earnings, and equity of the Company (issuer) on a consolidated basis,as the Company has no significant operations.

 

7.                                       INSURANCE

 

The Company self-insurescertain risks, including medical, workers’ compensation, property, and generalliability, up to varying limits. Deductible and self-insured limits have variedhistorically, ranging from $0 to $1,000,000 per incident depending on the typeof risk. The policy deductibles are $125,000 for annual medical and dentalbenefits per person. Reserves for losses are established based upon presentlyestimated obligations for the claim over time and the deductible orself-insured retention in place at the time of the loss.

 

10

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8.                                       GOODWILLAND INTANGIBLES

 

The Company adopted Statement of Financial AccountingStandards (“SFAS”) No. 141 and SFAS No. 142 on January 1, 2002, and is nolonger amortizing goodwill, thereby eliminating annual goodwill amortization ofapproximately $331,000, based on anticipated amortization for fiscal year 2002that would have been incurred under the prior accounting standard.The adoption reduced amortization expense by approximately $83,000 for thethirteen weeks ended April 1, 2002.  Inaccordance with SFAS No. 142, the Company reclassified $501,000 net fromintangible assets to goodwill relating to acquisition costs connected with the1987 acquisition of Stuart Anderson’s from Saga Corporation. The Companycompleted the first step of the transitional goodwill-impairment test in thefirst quarter of 2002 and determined that no potential impairment existed.However, no assurances can be given that future evaluations of goodwill willnot result in charges as a result of future impairment. The Company willevaluate goodwill at least on an annual basis and whenever events and changesin circumstances suggest that the carrying amount may not be recoverable fromits estimated future cash flow.  TheCompany will continue to amortize the identified intangibles. The amortizationexpense is estimated to be $1.5 million for fiscal 2002 and estimatedthereafter to be $1.5 million each for fiscal years 2003, 2004, and 2005.  Amortization of intangibles for the thirteenweeks ended April 1, 2002 was approximately $0.4 million.

 

9.                                       NEWACCOUNTING PRONOUNCEMENTS

 

In April 2002, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendmentof FAS 13, and Technical Corrections” (“SFAS 145”).  SFAS 145 rescinds FASB Statement No. 4, Reporting Gains andLosses from Extinguishment of Debt, and an amendment of that Statement, FASBStatement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-FundRequirements,” as well as FASB Statement No. 44, “Accounting for IntangibleAssets of Motor Carriers.”  ThisStatement amends FASB Statement No.  13,“Accounting for Leases,” to eliminate an inconsistency between the requiredaccounting for sale-leaseback transactions and the required accounting forcertain lease modifications that have economic effects that are similar tosale-leaseback transactions.  ThisStatement also amends other existing authoritative pronouncements to makevarious technical corrections, clarify meanings, or describe theirapplicability under changed conditions. The provisions of SFAS 145 will be adopted during fiscal year 2003. Wedo not anticipate that adoption of this statement will have a material impacton our consolidated balance sheets or consolidated statements of operations.

 

In June 2002, the FASB issued SFAS No. 146,“Accounting for Exit or Disposal Activities” (“SFAS 146”). SFAS 146 addresses significant issues regarding therecognition, measurement, and reporting of costs that are associated with exitand disposal activities, including restructuring activities that are currentlyaccounted for under EITF No. 94-3, “Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity (including CertainCosts Incurred in a Restructuring).” The scope of SFAS 146 also includes costs related to terminating acontract that is not a capital lease and termination benefits that employeeswho are involuntarily terminated receive under the terms of a one-time benefitarrangement that is not an ongoing benefit arrangement or an individualdeferred-compensation contract. SFAS 146 will be effective for exit or disposalactivities that are initiated after December 31, 2002 and early application isencouraged. The provisions of EITF No. 94-3 shall continue to apply for an exitactivity initiated under an exit plan that met the criteria of EITF No. 94-3prior to the adoption of SFAS 146. We do not anticipate that adoption of thisstatement will have a material impact on our consolidated balance sheets orconsolidated statements of operations.

 

10.                                 COMMITMENTSAND CONTINGENCIES

 

The Company is obligatedunder an employment agreement with an officer. The obligation under theagreement is $500,000 per year and expires in 2002 unless extended.

 

The Company has beennamed as defendant in various lawsuits. Management’s opinion is that the outcome of such litigation will notmaterially affect the Company's financial position, results of operations, orcash flows. 

 

 

11

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| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|--------------------------------------------------------------------------------------------------|

 

Management’s Discussion and Analysis of Financial Condition and Resultsof Operations presented below reflects certain restatements to our previouslyreported consolidated financial statements as of December 31, 2001 and for theperiods ended March 26, 2001 and April 1, 2002. (See “Restatement of FinancialStatements” below.) The information set forth below should be read togetherwith the Company’s consolidated financial statements and related notesappearing elsewhere in this report.

 

Certain statementscontained in this Form 10-Q are forward-looking regarding cash flows fromoperations, restaurant openings, capital requirements, and other matters. Theseforward-looking statements involve risks and uncertainties and, consequently,could be affected by general business conditions, the impact of competition,governmental regulations, and inflation.

 

The following discussion and analysis of our financial condition andresults of operations should be read in conjunction with the historicalfinancial information included in the Consolidated Condensed FinancialStatements.

 

**Results of Operations**

 

*Thirteen weeks ended March 26, 2001 and April 1, 2002:*

 

*Revenues. *Totalrevenues decreased slightly to $81.8 million in the first quarter of 2002 from$82.0 million in the first quarter of 2001. The 103 base same-store sales decreased by 3.1% in the first quarter of2002 compared to 2001. Significantly, of this unfavorable variance, customercounts accounted for only 0.3%; the introduction of more casual “value” itemson the dinner menu, which caused the average check to decline, accounted forthe balance of the decrease.  There were108 Black Angus restaurants operating as of April 1, 2002 and 105 Black Angusrestaurants operating as of March 26, 2001.

 

*Food and Beverage Costs.*  As a percentage of revenues, food andbeverage costs remained flat at 33.1% in the first quarter of 2002 from thefirst quarter of 2001.

 

*Payroll Costs.*  As a percentage of revenues, labor costs increased to 30.1% inthe first quarter of 2002 from 27.6% in the first quarter of 2001.  The increase is primarily from higher labor-relatedcosts for vacation, medical/dental, and employee incentives.

 

*Direct Operating Costs: *Direct operating costs consist of occupancy,advertising, and other expenses incurred by individual restaurants.  As a percentage of revenues, these costsdecreased to 24.7% in the first quarter of 2002.

 

*Depreciation and Amortization.*  Depreciation and amortization consists ofdepreciation of fixed assets used by individual restaurants and at the BlackAngus and corporate offices, as well as amortization of intangible assets.  As a percentage of revenues, depreciationand amortization decreased to 2.3% in the first quarter of 2002 from 2.6% inthe first quarter of 2001. The decrease primarily relates to the reduction ofamortization of the deferred debt costs for Old Notes purchased as part of theRefinancing in the fourth quarter of 2001 and the discontinued amortization ofgoodwill in 2002.

 

*General and Administrative Expenses.*  General and administrative expensesdecreased to $2.3 million in the first quarter of 2002 from $2.5 million in thefirst quarter of 2001.  The decrease isfrom continued reduction of corporate expenses.

 

*Operating Profit.*  As a result of the above items, operatingprofit decreased to $5.7 million in the first quarter of 2002 from $6.4 millionin the first quarter of 2001. As a percentage of revenues, operating profitdecreased to 6.9% in the first quarter of 2002 compared to 7.8% in the firstquarter of 2001.

 

*Interest Expense – Net.* Our interestexpense increased to $5.3 million in the first quarter of 2002 from $4.2million in the first quarter of 2001. The increase is from refinancing thesenior notes in the fourth quarter of 2001. The face value of senior notes increased by $22.6 million ($165.2million face value) compared to the first quarter of 2001 ($142.6 million facevalue) at the same interest rate (11.5%).

 

## **Liquidityand Capital Resources**

 

Our primary sources of liquidity are cash flows from operations andborrowings under our revolving credit facilities.  We require capital principally for the acquisition andconstruction of new restaurants, the remodeling of existing restaurants, thepurchase of new equipment and leasehold improvements, and working capital. Asof April 1, 2002, we had approximately $13.0 million of cash.

 

In general, restaurant businesses do not have significant accountsreceivable because sales are made for cash or by credit-card vouchers, whichare ordinarily paid within three to five days. The restaurants do not maintain substantial inventory as a result of therelatively brief shelf life and frequent turnover of food products.Additionally, restaurants generally are able to obtain trade credit inpurchasing food and restaurant supplies. As a result, restaurants are frequently able to operate withworking-capital deficits, i.e., current liabilities exceed current assets.  At April 1, 2002, our working-capitaldeficit was $24.8 million.

 

12

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We estimate that capital expenditures of $3.0 million to $6.0 millionare required annually to maintain and refurbish our existing restaurants.  Other capital expenditures, which aregenerally discretionary, are primarily for the construction of new restaurantsand for expanding, reformatting, and extending the capabilities of existing restaurantsand for general corporate purposes. Total capital expenditures for continuing operations were approximately$0.8 million through the first quarter of 2002 and $0.2 million through thefirst quarter of 2001.  We estimate thatcapital expenditures in 2002 will be approximately $5.0 million.  We intend to open new restaurants with smallcapital outlays and to finance most of the expenditures through leases.

 

On October 31, 2001, we completed an exchange offer (the “Exchange”) inwhich we offered to exchange our 111⁄2% Senior Secured Notes due 2006 (the “NewNotes”) for all of our $142,600,000 outstanding 111⁄2% Senior Secured Notes due2003 (the “Old Notes”).  Wesimultaneously completed an offering (the “Offering”) of $30,000,000 aggregateprincipal amount of New Notes.  Afterthe consummation of the Exchange, the Offering, and related transactions(collectively, the “Refinancing”), we have no further payment obligations withrespect to over 97.6% of the outstanding Old Notes (constituting all but $3,410,000aggregate principal amount of the Old Notes) and assumed payment obligationsequivalent to $161,774,000 of the New Notes. The Refinancing substantiallyeliminates debt principal payments until November 2006.

 

The principal elements ofthe Refinancing were: (a) the Exchange (approximately $124 million aggregateprincipal amount of Old Notes were exchanged for approximately $132 millionaggregate principal amount New Notes); (b) the Offering (the issuance of $30million aggregate principal amount of New Notes); (c) the consent of theholders of our outstanding preferred stock to amend the terms of the preferredstock to provide that if we do not redeem the preferred stock for cash onAugust 15, 2003 in accordance with its terms, then the preferred stock willautomatically be redeemed for shares of our common stock at that time and allthe rights of the preferred stock will terminate, including any rights ofacceleration; to eliminate provisions that allow the holders to exchangepreferred stock for new subordinate debt; and to amend the covenants of thepreferred stock so that they are substantially similar to the covenants underthe New Notes; and, (d) the consent of the lender under our former revolvingcredit facility (“Old Credit Facility”) to permit the issuance of the New Notesand any other aspects of the Refinancing requiring the lender’s consent.

 

$3,410,000 of the OldNotes were outstanding at April 1, 2002. Under the Old Notes, we are obligated to make semiannual interestpayments on February 15 and August 15 through February 2003.  Accordingly, we made an interest payment of$196,075 on February 15, 2002.

 

Under the New Notes, weare obligated to make semiannual interest payments on May 1 and November 1through November 2006. Accordingly, we made an interest payment of $9,353,683on May 1, 2002.

 

We have an additional$2.7 million in long-term debt that relates to mortgages and capital leases forimprovements and equipment.

 

On December 17, 2001, weentered into a loan agreement for a revolving credit facility (“New CreditFacility”) with Foothill Capital Corporation to replace the Old CreditFacility.  Our New Credit Facilitypresently provides for up to $15 million in borrowings, including support forletters of credit. As of April 1, 2002, we had approximately $8.5 million ofletters of credit outstanding and no borrowings, leaving approximately $6.5million remaining under the New Credit Facility. The New Credit Facilityexpires in December 2005.

 

The Company and its subsidiaries do not guaranty the debt of any otherparties outside the consolidated group.

 

The Company’s contractual obligations can be summarized as follows (inthousands):

 

| **Contractual Obligations**                  |   | **Paid  in Q1- 2002** |   | **Remainder  of  Fiscal  2002** |   | **Fiscal  Years  2003&2004** |   | **Fiscal  Years  2005&2006** |   | **Fiscal  Years  Beyond  2006** |   | **Total  Remaining** |   |
|----------------------------------------------|--------|-----------------------|--------|---------------------------------|--------|----------------------------------|--------|----------------------------------|--------|---------------------------------|--------|----------------------|--------|
| **Long-Term  Debt – Interest on Notes** |   | $                     | 196    |                            | $      | 18,800                           |   | $                                | 37,404 |                            | $      | 37,208               |   | $ | — |   | $ | 93,608 |   |
| **Long-Term  Debt – Other**             |   | 103                   |   | 299                             |   | 3,476                            |   | 161,867                          |   | 949                             |   | 166,694              |   |
| **Capital  Leases**                          |   | 268                   |   | 809                             |   | 1,092                            |   | 464                              |   | 1,115                           |   | 3,748                |   |
| **Operating  Leases**                        |   | 5,038                 |   | 12,047                          |   | 34,189                           |   | 28,528                           |   | 180,276                         |   | 260,078              |   |
| **Employment  Agreements**                   |   | —                |   | 500                             |   | —                           |   | —                           |   | —                          |   | 500                  |   |
| **Total  Contractual Cash**                  |   | $                     | 5,605  |                            | $      | 32,455                           |   | $                                | 76,161 |                            | $      | 228,067              |   | $ | 182,340 |   | $ | 524,628 |   |

 

Preferred stock dividends of 4,181 shares were issued on February 15,2002.  There were 61,052 shares ofpreferred stock outstanding and accrued at April 1, 2002. Our preferred stockis mandatorily redeemable on August 15, 2003. If we do not redeem our preferredstock for cash at a price per share equal to 110% of the then-applicableliquidation preference, our preferred stock will be automatically redeemed forshares of our common stock at that time and all of the rights of the preferredstock will terminate. Management believes that the preferred stock will convertto common stock.

 

13

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Substantially all ourassets are pledged to our senior lenders. In addition, our direct subsidiaries guarantee most of our indebtedness andsuch guarantees are secured by substantially all of the assets of thesubsidiaries. In connection with such indebtedness, contingent and mandatoryprepayments may be required under certain specified conditions and events.  There are no compensating balancerequirements.

 

Although we are highly leveraged, based upon current levels ofoperations and anticipated growth, we expect that cash flows generated fromoperations together with our other available sources of liquidity will be adequate to make requiredpayments of principal and interest on our indebtedness, to make anticipatedcapital expenditures, and to finance working-capital requirements for the nextseveral years. We do not, however, expect to generate sufficient cash flowsfrom operations in the future to pay fully the principal of the seniorindebtedness upon maturity in 2006 and, accordingly, we expect to refinance allor a portion of such debt, obtain new financing, or possibly sell assets.

 

### **CriticalAccounting Policies**

 

*Revenue Recognition.  *We record revenue from the sale of food,beverage, and alcohol as products are sold.  We record proceeds from the sale of a gift card of gift certificate incurrent liabilities and recognize income when a holder redeems a gift card ofgift certificate.  We recognizeunredeemed gift cards and certificates as revenue only after such a period oftime indicates, based on the Company’s historical experience, the likelihood ofredemption is remote.

 

*Use of Estimates. *Thepreparation of financial statements in conformity with generally acceptedaccounting principles in the United States requires our management to makeestimates and assumptions that affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities, and thereported amounts of revenues and expenses. Actual results could differ fromthose estimates.

 

We believe that our financial statements are a reasonablerepresentation of the realizable values of our assets, the level of ourliabilities, and the amounts of revenues and expenses incurred in any givenperiod.  There are estimates inherent inthese amounts.  We may not be able torecover the assumed value of all of our assets, such as property and equipmentor intangible assets, if circumstances cause us to close restaurants or weexperience a decline in revenues.  Ouractual liabilities for matters, such as self-insurance or discontinuedoperations, could possibly be significantly higher or lower than our estimatesif actual conditions are ultimately different than the assumptions used indetermining the estimates.

 

*Leases*. We lease equipment and operating facilities under both capital andoperating leases.  In future periods,leases for similar equipment or facilities may not qualify for the accountingapplied historically because of changes in terms or our credit status. Thiswould mean that we may be required to recognize more leases as capital leasesin the future than we have in the past, causing a corresponding increase in ourassets and liabilities, and the associated depreciation and interestexpense.  Conversely, if many leases inthe future were classified as operating leases, rental expense would increase.

 

*Valuation Allowance for Deferred Tax Assets. *We provided a valuationallowance of $37.0 million and $34.1 million against the entire amount of ourdeferred tax assets as of the fiscal year-end 2000 and 2001, respectively. TheCompany fully reserves both the net-operating-loss and general-business-creditcarry forwards because sufficient doubt exists regarding the Company’s abilityto use the carryforwards before expiration.

 

*Long-LivedAssets.*The Company periodically reviews for impairment thecarrying value of its long-lived assets. The Company assesses the recoverability of the assets based on theestimated undiscounted cash flows of the assets.  If impairment is indicated, the Company writes down the assets tofair market value based on discounted cash flows.

* *

*AdvertisingCosts.*  Advertisingcosts are expensed either as incurred or the first time the advertising takesplace, in accordance with Statement of Position 93-7 *“Reporting on Advertising Costs.”*

 

*Reclassification. *Certain accounts have beenreclassified to conform with the current year’s presentation.

 

*Self-InsuranceReserves.*The Company self-insures certain risks, includingmedical, workers’ compensation, property, and general liability, up to varyinglimits. Deductible and self-insured limits have varied historically, rangingfrom $0 to $1,000,000 per incident depending on the type of risk. The policydeductibles are $125,000 for annual medical and dental benefits per person.Reserves for losses are established on a claims-made basis plus an actuariallydetermined provision for incurred-but-not-reported claims and the deductible orself-insured retention in place at the time of the loss.  The self-insured reserves are reported onthe balance sheet under self-insurance reserves.

 

14

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**ITEM 3.        QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The market risk of our financial instruments as of April 1, 2002 hasnot materially changed since December 31, 2001.  The market risk profile on December 31, 2001 is disclosed inour annual report on Form 10-K, File No. 33-48183, for the fiscal year endedDecember 31, 2001.

 

**ITEM 4.        CONTROLSAND PROCEDURES**

 

The Company’s management hasdesigned and periodically reviews and internally audits the effectiveness ofthe design and operation of the Company’s disclosure controls andprocedures.  Based on those periodicreviews, the Company’s management, including the CEO and CFO, concluded thatthe Company’s disclosure controls and procedures were effective as of December30, 2002.  There have been nosignificant changes in the Company’s internal controls or in other factors thatcould significantly affect internal controls subsequent to December 30, 2002.

 

**PARTII.****                   OTHERINFORMATION**

 

**ITEM 6.****                        EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)                                  Listof Exhibits

 
| Exhibit No. |   | Description                                                         |
|-------------|--------|---------------------------------------------------------------------|
|        |   |                                                                |
| 99.1        |   | Certificate of Chief Executive  Officer and Chief Financial Officer |

 

15

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**SIGNATURE**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   | AMERICAN RESTAURANT  GROUP, INC**.** |                                                    |
|--------|--------------------------------------|---------------------------------------------------------|
|   | (Registrant)                         |                                                    |
|   |                                 |                                                    |   |
|   |                                 |                                                    |   |
| Date:  | March 28, 2003                       |                                                    | /s/ Ralph S.  Roberts |   |
|   |                                 |                                                    |   |
|   |                                 | Ralph S. Roberts  Chief Executive Officer and President |   |
|   |                                 |                                                    |   |
|   |                                 |                                                    |   |
| Date:  | March 28, 2003                       | By:                                                     | /s/ William G.  Taves |   |
|   |                                 |                                                    |   |
|   |                                 | William G. Taves  Chief Financial Officer               |   |

 

16

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CERTIFICATION

 

I, Ralph S. Roberts,certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q/A of American RestaurantGroup, Inc;

 

2.                                     Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                     Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

 
| Date:  | March 28, 2003                            |   |
|--------|-------------------------------------------|--------|
|   |                                      |
|   |                                      |
|   | /s/ Ralph S. Roberts                      |   |
|   | Ralph S. Roberts  Chief Executive Officer |

 

 

----

 

CERTIFICATION

 

I, William G. Taves,certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q/A of American RestaurantGroup, Inc;

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

 
| Date:  | March 28, 2003                            |   |
|--------|-------------------------------------------|--------|
|   |                                      |
|   |                                      |
|   | /s/ William G. Taves                      |   |
|   | William G. Taves  Chief Financial Officer |

 

 

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