##### Table of Contents

Table of ContentsINDEX BUCA, INC. AND SUBSIDIARIES   PART I.  FINANCIAL INFORMATION   Item 1.  Financial Statements      Consolidated Balance Sheets—December 30, 2001 and June 30, 2002  3   Consolidated Statements of Income—Thirteen and Twenty-Six Weeks Ended July 1, 2001 and June 30, 2002  4   Consolidated Statements of Cash Flows—Thirteen and Twenty-Six Weeks Ended July 1, 2001 and June 30, 2002   5   Notes to Consolidated Financial Statements  6Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations  7Item 3.  Quantitative and Qualitative Disclosures about Market Risk  14PART II.  OTHER INFORMATION   Item 1.  Legal Proceedings  14Item 2.  Changes in Securities and Use of Proceeds  14Item 3.  Defaults upon Senior Securities  14Item 4.  Submission of Matters to a Vote of Security Holders  14Item 5.  Other Information  15Item 6.  Exhibits and Reports on Form 8-K  15SIGNATURES     172 
Table of Contents**PART 1.—FINANCIAL INFORMATION** **Item 1.    Financial Statements** **BUCA, Inc. and Subsidiaries****Consolidated Balance Sheets****(Unaudited, in thousands, except share and per share data)**    **December 30,****2001**   **June 30,****2002** **ASSETS**          CURRENT ASSETS:          Cash and cash equivalents  $12,444   $1,829 Accounts receivable   2,026    2,147 Inventories   4,784    6,032 Prepaid expenses and other   2,834    2,755      Total current assets   22,088    12,763 PROPERTY AND EQUIPMENT, net   140,755    166,769 OTHER ASSETS   5,239    6,960 GOODWILL        11,731         $168,082   $198,223      **LIABILITIES AND SHAREHOLDERS’ EQUITY**          CURRENT LIABILITIES:          Accounts payable  $9,928   $9,185 Accrued expenses and other   11,481    8,838 Line of credit        5,000 Current maturities of long-term debt and capital leases   16    7,107      Total current liabilities   21,425    30,130 LONG-TERM DEBT and CAPITAL LEASES, less current maturities   452    14,102 OTHER LIABILITIES   613    766 SHAREHOLDERS’ EQUITY:          Undesignated stock, 5,000,000 shares authorized, none issued or outstanding          Common stock, $.01 par value-30,000,000 authorized; 16,287,510 and 16,544,015 shares issued and outstanding,respectively   163    165 Additional paid-in capital   146,674    149,467 (Accumulated deficit) retained earnings   (311)   4,675          146,526    154,307 Notes receivable from shareholders   (934)   (1,082)         145,592    153,225         $168,082   $198,223       See notes to consolidated financial statements. 3 
Table of Contents**BUCA, Inc. and Subsidiaries****Consolidated Statements of Income****(Unaudited, in thousands, except share and per share data)**     **Thirteen Weeks Ended**   **Twenty-Six Weeks Ended**    **July 1,****2001**   **June 30,****2002**   **July 1,****2001**   **June 30,****2002** Restaurant sales  $43,677   $60,914   $83,166   $117,226 Restaurant costs                    Product   11,000    14,780    21,046    28,928 Labor   13,641    19,566    25,947    37,929 Direct and occupancy   9,587    14,109    18,279    26,844 Depreciation and amortization   2,279    3,326    4,293    6,325          Total restaurant costs   36,507    51,781    69,565    100,026 General and administrative expenses   2,405    3,668    5,076    7,107 Pre-opening costs   1,052    657    2,248    1,685          Operating income   3,713    4,808    6,277    8,408 Interest income   300    44    456    97 Interest expense   (93)   (335)   (190)   (589)         Income before income taxes   3,920    4,517    6,543    7,916 Provision for income taxes   (1,451)   (1,671)   (2,434)   (2,929)         Net income  $2,469   $2,846   $4,109   $4,987          ***Net income per common share—basic:***                    Net income per common share  $0.15   $0.17   $0.26   $0.30          Weighted average common shares outstanding   16,221,879    16,438,307    15,547,043    16,392,907          ***Net income per share—diluted:***                    Net income per common share  $0.15   $0.17   $0.25   $0.29          Weighted average common shares assumed outstanding   16,962,276    17,067,934    16,231,140    17,019,912           See notes to consolidated financial statements. 4 
Table of Contents**BUCA, Inc. and Subsidiaries****Consolidated Statements of Cash Flows****(Unaudited, in thousands)**    **Thirteen Weeks Ended**   **Twenty-Six Weeks Ended**    **July 1,****2001**   **June 30,****2002**   **July 1,****2001**   **June 30,****2002** **CASH FLOWS FROM OPERATING ACTIVITIES:**                    Net income  $2,469   $2,846   $4,109   $4,987 Adjustments to reconcile net income to net cash provided by operating activities:                    Depreciation and amortization   2,279    3,326    4,293    6,325 Tax benefit on option exercises   455    569    914    850 Change in assets and liabilities:                    Accounts receivable   46    40    529    3 Inventories   (362)   (324)   (904)   (923)Prepaid expenses and other   106    28    (349)   269 Accounts payable   (1,189)   (410)   453    (1,436)Accrued expenses and other   (219)   (742)   (3,858)   (3,255)Other   45    64    60    152          Net cash provided by operating activities   3,630    5,397    5,247    6,972 **CASH FLOWS FROM INVESTING ACTIVITIES:**                    Purchase of property and equipment   (11,958)   (10,019)   (27,195)   (22,291)Purchase of available-for-sale marketable securities             (11,415)     Sale and maturity of available-for-sale marketable securities   6,903         6,903      Increase in other assets   (471)   (146)   (815)   (1,647)Purchase of restaurants        129         (20,429)         Net cash used in investing activities   (5,526)   (10,036)   (32,522)   (44,367)**CASH FLOWS FROM FINANCING ACTIVITIES:**                    Proceeds from line of credit borrowings   500    2,000    2,900    5,000 Payments for line of credit borrowings   (500)        (2,900)     Proceeds from issuance of long-term debt                  20,275 Principal payments on long-term debt and capital leases   (1,307)   (32)   (1,331)   (46)Loan acquisition costs   (27)   (247)   (132)   (247)Collection on notes receivable from shareholders   93    100    131    133 Net proceeds from issuance of common stock   1,169    780    33,394    1,665          Net cash (used in) provided by financing activities   (72)   2,601    32,062    26,780          NET CHANGE IN CASH AND CASH EQUIVALENTS   (1,968)   (2,038)   4,787    (10,615)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   16,004    3,867    9,249    12,444          CASH AND CASH EQUIVALENTS AT END OF PERIOD  $14,036   $1,829   $14,036   $1,829           See notes to consolidated financial statements. 5 
Table of Contents**BUCA, Inc. and Subsidiaries****Notes to Consolidated Financial Statements****(Unaudited)** 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION  BUCA, Inc. and Subsidiaries (“we”, “us”, or “our”) develops, owns and operates Southern Italian restaurants under the names Buca di Beppo and Vinny Testa’s. At June 30, 2002, we had 87 restaurantslocated in 26 states and the District of Columbia.  The accompanying financial statements have been prepared by us without audit andreflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. The statements have beenprepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) and with the regulations of the Securities and Exchange Commission (SEC). Certain information andfootnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such SEC rules and regulations. Operating results for the thirteen andtwenty-six weeks ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 29, 2002.  The balance sheet at December 30, 2001 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for completefinancial statements. For further information, refer to the financial statements and notes for the fiscal year ended December 30, 2001 included in our Annual Report on Form 10-K.  2. NET INCOME PER SHARE  Basicincome per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted income per share assumes the exercise of stock options using the treasury stock method, if dilutive. The following table setsforth the calculation of basic and diluted net income per common share as of July 1, 2001 and June 30, 2002 (in thousands, except share and per share data):     **Thirteen Weeks Ended**  **Twenty-Six Weeks Ended**   **July 1, 2001**  **June 30, 2002**  **July 1, 2001**  **June 30, 2002****Numerator:**                Numerator for basic and diluted and diluted net income applicable to common stock  $2,469  $2,846  $4,109  $4,987         **Denominator:**                Denominator for basic net income per common share-weighted average shares outstanding   16,221,879   16,438,307   15,547,043   16,392,907Stock options   740,397   629,627   684,097   627,005         Denominator for diluted net income per common shares-weighted average shares assumed outstanding   16,962,276   17,067,934   16,231,140   17,019,912         Basic net income per common share  $0.15  $0.17  $0.26  $0.30         Diluted net income per common share  $0.15  $0.17  $0.25  $0.29          3. RECENT ACCOUNTING PRONOUNCEMENTS  On July of 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, *Goodwill and Intangible Assets* effective for fiscal years beginning afterDecember 15, 2001. SFAS No. 142 requires that goodwill as well as other intangibles determined to have an indefinite life will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. For the first halfof 6 
Table of Contents fiscal 2001, amortization expense, net of income tax effect, would have added $25,000 to net income hadwe applied SFAS No. 142 to that period. In the first half of fiscal 2002, we recognized $175,000 in amortization expense on intangible assets with finite lives. Estimated annual amortization expense for fiscal years 2002 through 2006 is expected tobe $350,000.  In September 2001, the FASB issued SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets.*SFAS No. 144 establishes a single accounting model related to the evaluation of impairment for long-lived assets. The provisions of SFAS No. 144 are effective for us in fiscal year 2002, and generally, are to be applied prospectively. SFAS No.144 did not have a material impact on our historical consolidated results of operations, financial position and cash flows.  4. PURCHASE OF RESTAURANTS  OnJanuary 14, 2002, we acquired the assets and operations of nine Vinny Testa’s restaurant locations. The acquisition was financed through current cash holdings, operating cash flows, and a new credit facility that included a $20 million termloan. The cost of the acquisition was allocated as follows (in thousands):  Current assets  $655Property and equipment   9,873Other assets   497Goodwill   11,731Current liabilities   1,305Capital lease obligations   511 5. PRO-FORMA REVENUES  On apro-forma basis, sales would have been $50.7 million for the thirteen weeks ended July 1, 2001, $60.9 million for the thirteen weeks ended June 30, 2002, $96.3 million for the twenty-six weeks ended July 1, 2001 and $118.4 million for the twenty-sixweeks ended June 30, 2002, assuming that Buca di Beppo and Vinny Testa’s had been combined during those periods. The combination would not have had a material impact on net income or earnings per share.   **Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations** General  At June 30, 2002, we owned and operated 78 Buca di Beppo and nine Vinny Testa’s restaurants. Our Buca diBeppo restaurants are full service, dinner only restaurants that offer high quality, immigrant Southern Italian cuisine served family-style in large portions in a fun and energetic atmosphere that parodies the decor and ambiance of post-WarItalian/American restaurants. Our Vinny Testa’s restaurants serve individual and family-style portions for both lunch and dinner. The Vinny Testa’s restaurants are based upon re-creations of the neighborhood Italian eateries prominent inthe neighborhoods of lower Manhattan, Brooklyn, and South Philadelphia in the 1940’s.  Since 1996, we have pursued a rapid butdisciplined expansion strategy, opening two restaurants in 1996, five in 1997, eight in 1998, 15 in 1999, and 17 in 2000 and 2001. In January 2002, we acquired the assets of nine Vinny Testa’s restaurants. We intend to open 14 new Buca di Bepporestaurants in fiscal 2002, of which 12 have opened through July 2002. Each of the remaining two locations has leases signed and are under construction. In fiscal 2003, we intend to open 17 new Buca di Beppo restaurants and two new VinnyTesta’s restaurants.  Beginning in fiscal 2001, we added a Baked Specialties menu to each of our Buca di Beppo restaurants. TheBaked Specialties menu includes some of our most popular baked specials, such as Baked Ravioli, Cannelloni, Manicotti, and Stuffed Shells. Besides the Baked Specialties, every restaurant offers from two to five specials every day. These DailySpecials are selected from a list of approximately 70 recipes. Both the Baked Specialties and Daily Specials are priced higher than normal menu items and generate higher margins.  Also in 2001, we introduced our Buca per Due menu, which means “Buca for Two,” at our Buca di Beppo restaurants. These new menu offerings, which marry portions of our Baked Specialties withseveral of our most popular entrée items, such as Chicken with Lemon, or Eggplant, Chicken or Veal Parmigiana, are served on our 7 
Table of Contents traditional family-style platters, allowing groups of two to four diners to enjoy a wider selection ofour food each time they visit.  In prior years, the nine Vinny Testa’s restaurants have averaged approximately $3.8 million in salesand approximately 18% restaurant level cash flow. The average restaurant is approximately 8,000 square feet and seats approximately 250 guests. The restaurants are open for lunch and dinner seven days a week.  Compared to our Buca di Beppo restaurants, our Vinny Testa’s restaurants generate higher average unit volumes but lower cash flow as a percentage of salesprimarily due to the relative lower margin lunch sales. Lunch sales, in general, produce higher total product cost, lower liquor mix, higher labor costs and higher direct and occupancy costs, all as a percentage of sales. Our fiscal 2002 resultswill compare the combined company results this year with the Buca di Beppo results only in fiscal 2001. Due to the different unit level economics, we expect that the addition of the Vinny Testa’s restaurants alone would result in a slightincrease in our average weekly sales, and increases of approximately one-half percent of sales in each of product, labor and direct and occupancy costs.  Our restaurant sales are comprised almost entirely of sales of food and beverages. Product costs include the costs of food and beverages. Labor costs include direct hourly and management wages, bonuses, taxes and benefits forrestaurant employees. Direct and occupancy costs include restaurant supplies, marketing costs, rent, utilities, real estate taxes, repairs and maintenance and other related costs. Depreciation and amortization principally includes depreciation oncapital expenditures for restaurants. General and administrative expenses are composed of expenses associated with all corporate and administrative functions that support existing operations, management and staff salaries, employee benefits, travel,information systems and training and market research. Pre-opening costs consist of direct costs related to hiring and training the initial restaurant workforce and certain other direct costs associated with opening new restaurants. Interest incomeincludes the interest income on invested assets. Interest expense includes the cost of interest expense on debt. The provision for income taxes represents our estimate of total income taxes to be paid to the federal and state governments based uponour pre-tax income for the period.  Results of Operations  Our operating results expressed as a percentage of restaurant sales were as follows:     **Thirteen Weeks****Ended**  **Twenty-Six Weeks****Ended**   **July 1,****2001**  **June 30,****2002**  **July 1,****2001**  **June 30,****2002**Restaurant sales (dollar amount, in thousands)  $43,677  $60,914  $83,166  $117,226Restaurant costs            Product  25.2%  24.3%  25.3%  24.7%Labor  31.2%  32.1%  31.2%  32.4%Direct and occupancy  21.9%  23.2%  22.0%  22.9%Depreciation and amortization  5.2%  5.5%  5.2%  5.4%         Total restaurant costs  83.6%  85.0%  83.6%  85.3%General and administrative expenses  5.5%  6.0%  6.1%  6.1%Pre-opening costs  2.4%  1.1%  2.7%  1.4%         Operating income  8.5%  7.9%  7.5%  7.2%Interest income  0.7%  0.1%  0.5%  0.1%Interest expense  (0.2)%  (0.5)%  (0.2)%  (0.5)%         Income before income taxes  9.0%  7.4%  7.9%  6.8%Provision for income taxes  (3.3)%  (2.7)%  (2.9)%  (2.5)%         Net income  5.7%  4.7%  4.9%  4.3%          *Thirteen Weeks Ended July 1, 2001 Compared to the Thirteen Weeks Ended June 30, 2002* Restaurant Sales. Restaurant sales increased by $17.2 million, or 39.5%, to $60.9 million in the second quarter of fiscal 2002 from$43.7 million in the second quarter of fiscal 2001. The increase was the result of sales from new 8 
Table of Contents Buca di Beppo restaurants and the addition of nine Vinny Testa’s restaurants on January 14, 2002.In addition, we implemented a price increase of approximately one percent at our Buca di Beppo restaurants during March 2002. Our Buca di Beppo restaurants’ comparable restaurant sales decreased 1.3 percent in the second quarter of fiscal 2002.Our Vinny Testa’s comparable restaurant sales decreased 6.9 percent. We expect both Buca di Beppo’s and Vinny Testa’s comparable restaurant sales to be negative in the third quarter of fiscal 2002, flat in the fourth quarter of fiscal2002, and then increase approximately 1 percent for fiscal 2003.  Product. Product costs increased by $3.8 million to $14.8 million inthe second quarter of fiscal 2002 from $11.0 million in the second quarter of fiscal 2001. Product costs as a percentage of restaurant sales decreased to 24.3% in the second quarter of fiscal 2002 from 25.2% in the second quarter of fiscal 2001.This decrease resulted primarily from stronger purchasing contracts for a number of key products, the increased sales of Baked Specialties and specials that have higher product margins, and the price increase implemented during March 2002. We expectproduct costs as a percentage of sales for the remainder of fiscal 2002 to be at or below the product cost percentage in the comparable fiscal 2001 periods.  Labor. Labor costs increased by $6.0 million to $19.6 million in the second quarter of fiscal 2002 from $13.6 million in the second quarter of fiscal 2001. Labor costs increased as a percentage of restaurant sales to 32.1%in the second quarter of fiscal 2002 from 31.2% in the second quarter of fiscal 2001. Labor costs as a percentage of sales were impacted by the decline in average weekly sales and the acquisition of the Vinny Testa’s restaurants. Managementpayroll and benefit costs, which are primarily fixed in nature, were negatively impacted as a percentage of sales due to the decline in average weekly sales. Vinny Testa’s labor costs are higher than Buca di Beppo because Vinny Testa’srestaurants serve lunch, which has a lower margin than dinner. We expect labor costs in the third quarter of fiscal 2002 to decrease slightly as a percentage of sales from the third quarter of fiscal 2001.  Direct and Occupancy. Direct and occupancy costs increased by $4.5 million to $14.1 million in the second quarter of fiscal 2002 from $9.6 million in the secondquarter of fiscal 2001. Direct and occupancy costs increased as a percentage of restaurant sales to 23.2% in the second quarter of fiscal 2002 from 21.9% in the second quarter of fiscal 2001. This increase in direct and occupancy costs, which areprimarily fixed in nature, as a percentage of sales was directly related to declining average weekly restaurant sales and increased marketing spending. We anticipate direct and occupancy costs in the third quarter of fiscal 2002 to increase as apercentage of sales over the third quarter of fiscal 2001 due to increased marketing spending.  Depreciation and Amortization.Depreciation and amortization expenses increased by $1.0 million to $3.3 million in the second quarter of fiscal 2002 from $2.3 million in the second quarter of fiscal 2001. This increase was primarily the result of depreciation recognized oncapital expenditures for new restaurants.  General and Administrative. General and administrative expenses increased by $1.3 million to$3.7 million in the second quarter of fiscal 2002 from $2.4 million in the second quarter of fiscal 2001. General and administrative expenses as a percentage of restaurant sales increased to 6.0% in the second quarter of fiscal 2002 from 5.5% in thesecond quarter of fiscal 2001. The increase in general and administrative expenses as a percentage of sales was primarily due to the decrease in overall restaurant sales. We anticipate general and administrative expenses in the third quarter offiscal 2002 to increase as a percentage of sales compared to the third quarter of fiscal 2001.  Pre-opening. Pre-opening costs decreasedby $395,000 to $657,000 in the second quarter of fiscal 2002 from $1,052,000 in the second quarter of fiscal 2001. Pre-opening costs decreased as a percentage of sales to 1.1% in the second quarter of fiscal 2002 from 2.4% in the second quarter offiscal 2001. The decrease in pre-opening costs as a percentage of sales was due to management’s efforts to reduce these costs on a per restaurant basis and to increased sales on a larger base of restaurants. We expect pre-opening costs in thethird quarter of fiscal 2002 to decrease as a percentage of sales from the third quarter of fiscal 2001.  Interest Income. Interestincome decreased by $256,000 to $44,000 in the second quarter of fiscal 2002 from $300,000 in the second quarter of fiscal 2001. The decrease in interest income resulted from less invested assets during the second quarter of fiscal 2002 than duringthe second quarter of fiscal 2001. We expect interest income in the third quarter of fiscal 2002 to remain consistent with the second quarter of fiscal 2002. 9 
Table of Contents Interest Expense. Interest expense increased $242,000 to $335,000 in the second quarter of fiscal 2002from $93,000 in the second quarter of fiscal 2001. The increase in interest expense primarily resulted from increased borrowings on our $20 million term loan and current $20 million line of credit facility. We expect interest expense to increase inthe third quarter of fiscal 2002 from the third quarter of fiscal 2001 because of continued increases in borrowings under our credit facility.  Provision for Income Taxes. The provision for income taxes in the second quarter of fiscal 2002 represents our estimate of our income tax rate for fiscal 2002. We expect income taxes to be approximately 36 to 37% of pre-tax incomefor fiscal 2002.  *Twenty-Six Weeks Ended July 1, 2001 Compared to the Twenty-Six Weeks Ended June 30, 2002* Restaurant Sales. Restaurant sales increased by $34.0 million, or 41.0%, to $117.2 million in the first half of fiscal 2002 from $83.2 million inthe first half of fiscal 2001. The increase was the result of sales from new Buca di Beppo restaurants and the addition of nine Vinny Testa’s restaurants on January 14, 2002. Our Buca di Beppo restaurants’ comparable restaurant salesdecreased 2.0 percent in the first half of fiscal 2002. On a pro-forma 26-week basis, Vinny Testa’s comparable restaurant sales would have decreased 6.6 percent.  Product. Product costs increased by $7.9 million to $28.9 million in the first half of fiscal 2002 from $21.0 million in the first half of fiscal 2001. Product costs as a percentage of restaurant salesdecreased to 24.7% in the first half of fiscal 2002 from 25.3% in the first half of fiscal 2001. This decrease resulted primarily from stronger purchasing contracts for a number of key products, the increased sales of Baked Specialties and specialsthat have higher product margins, and the price increase implemented during March 2002.  Labor. Labor costs increased by $12.0 million to$37.9 million in the first half of fiscal 2002 from $25.9 million in the first half of fiscal 2001. Labor costs increased as a percentage of restaurant sales to 32.4% in the first half of fiscal 2002 from 31.2% in the first half of fiscal 2001.Labor costs as a percentage of sales were impacted by the decline in average weekly sales and the acquisition of the Vinny Testa’s restaurants. Management payroll and benefit costs, which are primarily fixed in nature, were negatively impactedas a percentage of sales due to the decline in average weekly sales. Vinny Testa’s labor costs are higher than Buca di Beppo because they serve lunch, which has a lower margin than dinner.  Direct and Occupancy. Direct and occupancy costs increased by $8.5 million to $26.8 million in the first half of fiscal 2002 from $18.3 million in the first half of fiscal 2001. Direct andoccupancy costs increased as a percentage of restaurant sales increased to 22.9% in the first half of fiscal 2002 from 22.0% in the first half of fiscal 2001. This increase in direct and occupancy costs, which are primarily fixed in nature, as apercentage of sales was directly related to declining average weekly restaurant sales and increased marketing spending.  Depreciation andAmortization. Depreciation and amortization expenses increased by $2.0 million to $6.3 million in the first half of fiscal 2002 from $4.3 million in the first half of fiscal 2001. This increase was primarily the result of depreciation recognized oncapital expenditures for new restaurants.  General and Administrative. General and administrative expenses increased by $2.0 million to$7.1 million in the first half of fiscal 2002 from $5.1 million in the first half of fiscal 2001. General and administrative expenses as a percentage of restaurant sales for the first half of 2002 remained consistent with the first half of 2001 at6.1%.  Pre-opening. Pre-opening costs decreased by $500,000 to $1.7 million in the first half of fiscal 2002 from $2.2 million in thefirst half of fiscal 2001. Pre-opening costs decreased as a percentage of sales to 1.4% in the first half of fiscal 2002 from 2.7% in the first half of fiscal 2001. The decrease in pre-opening costs as a percentage of sales was due tomanagement’s efforts to reduce these costs on a per restaurant basis and to increased sales on a larger base of restaurants.  Interest Income. Interest income decreased by $359,000 to $97,000 in the first half of fiscal 2002 from $456,000 in the first half of fiscal 2001. The decrease in interest income resulted from less invested assets during the firsthalf of fiscal 2002 than during the first half of fiscal 2001. 10 
Table of Contents Interest Expense. Interest expense increased $399,000 to $589,000 in the first half of fiscal 2002 from$190,000 in the first half of fiscal 2001. The increase in interest expense primarily resulted from increased borrowings on our $20 million term loan and current $20 million line of credit facility.  Provision for Income Taxes. The provision for income taxes in the first half of fiscal 2002 represents our estimate of our income tax rate for fiscal 2002. Liquidity and Capital Resources  Net cash provided by operating activities increased $1.8 million to $7.0 million in the first half of 2002 from $5.2 million in the first half of 2001. We expect to continue to generate cash from operating activities in futureperiods.  We use cash primarily to fund the development and construction of new restaurants. Capital expenditures were $22.3 million inthe first half of fiscal 2002 compared with $27.2 million in the first half of fiscal 2001. We opened 10 new restaurants in the first half of 2002, compared to 13 new restaurants in the first half of 2001. In the future, each new leased restaurantis expected to require, on average, a total cash investment of between $1.0 million and $1.5 million, excluding pre-opening costs expected to be approximately $185,000 for a Buca di Beppo and $200,000 for a Vinny Testa’s restaurant. Prior to1999, the majority of our restaurants were renovations of existing facilities ranging in size from 4,500 to 10,000 square feet. We anticipate that future restaurants will typically range in size from 7,000 to 9,000 square feet. Beginning in 1999, webegan building restaurants based upon our prototype designs. These designs are expected to require between $1.5 million to $2.0 million in total cash investment per restaurant. This investment represents an incremental $500,000 increase over thehistorical cash investment for remodeled restaurants. However, the rental cost on these restaurants is also significantly lower than on remodeled restaurants, as our lease costs relate to the land only and not the building. In the future, we mayrefinance any purchases of land or buildings through sale-leaseback transactions. We cannot predict whether this financing will be available when needed or on terms acceptable to us.  In January 2002, we purchased the assets and operations of nine Vinny Testa’s restaurants in the Boston and Philadelphia areas. During the first half of fiscal 2002, we spent $20.4 million on theacquisition of the restaurants. The acquisition was funded primarily through a $20 million term loan, current cash holdings, and cash flows from operations.  Net cash provided by financing operations was $26.8 million for the first half of fiscal 2002 compared with $32.1 million for the first half of fiscal 2001. Financing activities in the first half of fiscal 2002 consistedprimarily of $20.3 million in long-term debt borrowings and $5.0 million in line of credit borrowings. In the first quarter of fiscal 2001, we completed a private placement of our common stock for approximately $30.9 million in net proceeds. Theproceeds from financing activities in the first half of fiscal 2002 were used primarily to fund the acquisition of Vinny Testa’s, development of new restaurants and general corporate purposes.  In January 2002, we amended our credit facility to include a $20 million term loan and a $20 million line of credit with the option to borrow an additional $10million provided we are not in default under the terms of the agreement. The credit facility expires on December 31, 2004. The term loan is required to be paid as follows: $5.0 million in fiscal 2002; $7.0 million in fiscal 2003; and$8.0 million in fiscal 2004. The credit facility bears interest at the lower of our lenders reference rate plus 0.75 percent to 1.50 percent or the London InterBank Offered Rate (LIBOR) plus 2.25 percent to 3.00 percent (approximately 4.03percent to 4.78 percent as of August 12, 2002), dependent upon our meeting certain financial ratios. We are required to pay 0.50 percent on all unused line of credit funds. The credit agreement contains covenants that place restrictions on sales ofproperties, transactions with affiliates, creation of additional debt, limitations on capital expenditures and other customary covenants. Our current facility requires us to raise an additional $25 million in equity or subordinated debt by March 31,2003. If we do not raise additional capital by March 31, 2003, our capital expenditures would be limited to $25 million for fiscal 2003. Borrowings under the credit agreement are collateralized by substantially all of our assets. As of August 12,2002, we had $28.3 million in debt borrowings under our credit facility. 11 
Table of Contents In August of 2002, we signed a commitment letter with FleetBoston Financial for a new credit facilitywith a $25 million term loan, required to be paid evenly over a five-year period, a $25 million line of credit, and an option to borrow an additional $10 million provided we are not in default under the loan agreement at that time. The pricing ofthe facility is substantially the same as our current credit facility. The revised credit facility eliminates the requirement to raise additional equity or subordinated debt. Subject to normal loan underwriting procedures, we anticipate the revisedcredit facility to be completed by the end of fiscal 2002. Upon completion of the revised debt facility, we expect to write off approximately $550,000 in unamortized loan acquisition costs from the previous credit facility.  Our capital requirements, including development costs related to the opening of additional restaurants, have been and will continue to be significant. We willneed substantial capital to finance our expansion plans, which require funds for capital expenditures, pre-opening costs and initial operating losses related to new restaurant openings. The adequacy of available funds and our future capitalrequirements will depend on many factors, including the pace of expansion, the costs of capital expenditures for new restaurant development and the nature of contributions, loans and other arrangements negotiated with landlords. Although we can makeno assurance, we believe that current assets, cash flow from operations, the revised credit facility with FleetBoston Financial and other available borrowings will be sufficient to fund our capital requirements through the year 2004. To fund futureoperations, we may need to raise additional capital through public or private equity or debt financing to continue our growth. In addition, we may from time to time consider acquiring the operations of other restaurants. We may obtain additionalequity or debt financing to fund such acquisitions. The sale of additional equity or debt securities could result in additional dilution to our shareholders. We cannot predict whether additional capital will be available on favorable terms, if atall.  Critical Accounting Policies  Our consolidated financial statements include accounts of BUCA, Inc. and all wholly owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, we have used our best estimates andjudgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policy describedbelow. However, application of this accounting policy involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.  Impairment of Assets. We review our long-lived assets, such as fixed assets; intangible assets and goodwill for impairment whenever events or changes incircumstances indicate the carrying value amount of an asset or group of assets may not be recoverable. We consider a history of consistent and significant operating losses to be a primary indicator of potential asset impairment. Assets are groupedand evaluated for impairment at the lowest level for which there are identifiable cash flows, the individual restaurants. A restaurant is deemed to be impaired if a forecast of undiscounted future operating cash flows directly related to therestaurant is less than its carrying amount. If a restaurant is determined to be impaired, the loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair value. Fair value is an estimate based on the bestinformation available, including prices for similar assets or the results of valuation techniques such as discounted estimated future cash flows as if the decision to continue to use the impaired restaurant was a new investment decision. Recent Accounting Pronouncements  In September 2001, the FASB issued SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets.*SFAS No. 144 establishes a single accounting model related to the evaluation of impairment for long-lived assets.The provisions of SFAS No. 144 are effective for us in fiscal year 2002, and generally, are to be applied prospectively. SFAS No. 144 did not have a material impact on our historical consolidated results of operations, financial position and cashflows. 12 
Table of ContentsInflation  The primaryinflationary factors affecting our operations are food and labor costs. A large number of our restaurant personnel are paid at rates based on the applicable minimum wage, and increases in the minimum wage directly affect our labor costs. To date,inflation has not had a material impact on our operating results.  Disclosure Regarding Forward-Looking Statements  This Form 10-Q for the second quarter ended June 30, 2002 contains forward-looking statements within the meaning of the safe harbor provisions ofSection 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us at the time the statements were made. Whenused in this Form 10-Q, the words “anticipate”, “believe”, “estimate”, “expect”, “intend” and similar expressions, as they relate to us, are intended to identify the forward-looking statements.Although we believe that these statements are reasonable, you should be aware that actual results could differ materially from those projected by the forward-looking statements. Because actual results may differ, readers are cautioned not to placeundue reliance on forward-looking statements.  · The actual number of restaurants opened during any period could be higher or lower than the projected amount based upon the timing and success of locatingsuitable sites, negotiating acceptable leases, managing construction and recruiting qualified operating personnel. · The effect of our price increase could be affected by changes in product and liquor mix. · Product costs could be adversely affected by increased distribution prices by SYSCO Corporation, our principal food supplier, or a failure to perform by SYSCO,as well as the availability of food and supplies from other sources, adverse weather conditions, governmental regulation, inflation and general economic conditions. · Labor costs could increase due to increases in the minimum wage as well as competition for qualified employees and the need to pay higher wages to attract asufficient number of employees. · Direct and occupancy costs could be adversely affected by an inability to negotiate favorable lease terms, increasing utility costs or general economicconditions. · General and administrative expenses could increase due to competition for qualified employees and the need to pay higher wages to attract sufficient employeesas well as general economic conditions. · Our ability to generate interest income could be adversely affected by the rate of return on our investments and the amount we are able to invest. · Interest expense could be adversely affected by our need for additional borrowings on our credit facilities and an increase in interest rates. · Pre-opening expenses could increase due to additional restaurant openings, acceleration or delays in new restaurant openings or increased expenses in openingnew restaurants. · Our ability to generate cash from operating activities could be adversely affected by increases in expenses as well as decreases in our average check and guestcounts. · The borrowing availability under our credit facilities could be higher or lower due to increases or decreases in our financial performance, ability to maintaindebt covenants, and other debt-related issues. · The success in obtaining a new credit facility of up to $60 million is subject to a number of factors, including the negotiation and execution of a mutuallyagreeable definitive credit agreement and the satisfaction of other customary conditions. · Completion and timing of our revised credit facility could be affected by due diligence and other loan underwriting procedures. · Our capital requirements through the year 2002, or the year 2003 pending completion of the revised credit facility, could be higher or lower due to increases ordecreases in the amount of new restaurants we build or acquire and general economic conditions. · The actual federal and state income taxes paid could be higher or lower than projected based upon the amount of pre-tax income, changes in income taxes, orother conditions. · Additional factors that could cause actual results to differ include: risks associated with terrorism and our country’s war on terrorism, risks associatedwith future growth; inability to achieve and manage planned expansion; fluctuations in operating results; the need for additional capital; risks associated with discretionary consumer spending; inability to compete with larger, more establishedcompetitors; potential labor shortages; our dependence on governmental licenses; weather and natural disasters; results of marketing and other efforts aimed at promoting Buca di Beppo restaurants for mainstream casual utility dining; and legalactions arising in the normal course of business, including complaints or litigation from guests.  Our restaurantsfeature Southern Italian cuisine served both in individual and family-style portions. Our continued success depends, in part, upon the popularity of this type of Italian cuisine and this style of informal dining. Shifts in consumer preferences awayfrom our cuisine or dining style could materially adversely affect our future 13 
Table of Contentsprofitability. Also, our success depends to a significant extent on numerous factors affecting discretionary consumer spending, includingeconomic conditions, disposable consumer income and consumer confidence. Adverse changes in these factors could reduce guest traffic or impose practical limits on pricing, either of which could materially adversely affect our business, financialcondition, operating results or cash flows.  Certain of these risk factors are more fully discussed in our Annual Report on Form 10-K forthe period ended December 30, 2001. We caution you, however, that the list of factors above may not be exhaustive and that those or other factors, many of which are outside of our control, could have a material adverse effect on us and our resultsof operations. All forward-looking statements attributable to persons acting on our behalf or us are expressly qualified in their entirety by the cautionary statements set forth here. We assume no obligation to publicly release the results of anyrevision or updates to these forward-looking statements to reflect future events or unanticipated occurrences.   **Item 3.    Quantitative and Qualitative Disclosures about Market Risk** We are exposed tomarket risk from changes in interest rates on borrowings under our revolving line of credit and term debt facility that bears interest at the lower of the lending bank’s reference rate plus 0.75% to 1.50% or LIBOR plus 2.25% to 3.00%. At June30, 2002, we had $25.0 million in debt borrowings under our credit facility. Thus, a 1% change in interest rates would cause annual interest expense to increase by $250,000.  We have no derivative financial instruments or derivative commodity instruments in our cash and cash equivalents and marketable securities. We invest our cash and cash equivalents and marketablesecurities in investment grade, highly liquid investments, consisting of money market instruments, bank certificates of deposit, overnight investments in commercial paper, and short term government and corporate bonds.  Many of the food products purchased by us are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, productionproblems, delivery difficulties and other factors that are outside our control. To control this risk in part, we have fixed price purchase commitments with terms of one year or less for food and supplies from vendors who supply our national fooddistributor. In addition, we believe that substantially all of our food and supplies are available from several sources, which helps to control food commodity risks. We believe we have the ability to increase menu prices, or vary the menu itemsoffered, if needed in response to a food product price increases. To compensate for a hypothetical price increase of 10% for food and supplies, we would need to increase menu prices by an average of 2.5%, which is consistent with our average priceincrease of approximately 1% in fiscal 2002 and fiscal 2001, 2% in fiscal 2000, and 3% in fiscal 1998. Accordingly, we believe that a hypothetical 10% increase in food product costs would not have a material effect on our operating results.  **PART II.    OTHER INFORMATION** **Item 1.    Legal Proceedings** On July 29, 2002, Jennifer Percival, the former Senior VicePresident of Family Resources of BUCA, Inc., filed a lawsuit against BUCA, Inc. in Hennepin County District Court in Minnesota. Alleging a variety of tort and statutory violation theories, Ms. Percival claims that she was a victim of discriminationbecause she planned to get married. She seeks damages in excess of $50,000. We believe Ms. Percival’s allegations are without merit and intend to defend the company vigorously.  In addition to the foregoing, we are currently subject to various legal actions arising in the normal course of business, none of which are expected to have a material effect on our results ofoperations, financial condition or cash flows.  **Item 2.    Changes in Securities and Use of Proceeds** None  **Item 3.    Defaults upon Senior Securities** None  **Item 4.    Submission of Matters to a Vote of Security Holders** At our Annual Meeting ofShareholders held on June 4, 2002, the shareholders voted on the following matters:  (1) Election of two Class III directors to serve a three-year term and one Class I director to serve a one-year term. The nominated directors were elected asfollows: 14 
Table of Contents**Director-Nominee**  **For**  **Withhold**Joseph P. Micatrotto (Class III)  10,665,426  3,706,066Philip A. Roberts (Class III)  13,104,989  1,266,503John P. Whaley (Class I)  13,107,796  1,263,696 (2) Approval of amendments to our Amended and Restated Articles of Incorporation. The proposal was approved as follows:  **For**  **Against**  **Abstain**    **Broker****Non-Vote**14,242,120        125,284  4,088    0 (3) Approval of amendments to our 1996 Stock Incentive Plan. The proposal was approved as follows:  **For**    **Against**    **Abstain**    **Broker****Non-Vote**  7,795,314    6,568,785    7,393    0 (4) Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the 2002 fiscal year. The proposal was approved asfollows:  **For**    **Against**    **Abstain**    **Broker****Non-Vote**13,084,458    1,283,186    3,848    0 **Item 5.    Other Information** None  **Item 6.    Exhibits and Reports on Form 8-K** (a) Exhibits  **Exhibit No.**  **Description   **  **Method of Filing   **  3.1  Amended and Restated Articles of Incorporation of the Registrant (1)  Incorporated By Reference  3.2  Amended and Restated Bylaws of the Registrant (2)  Incorporated By Reference  4.1  Specimen of Common Stock Certificate (3)  Incorporated By Reference99.1  Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002  Filed Electronically99.2  Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002  Filed Electronically (1) Incorporated by reference to Exhibit 3.4 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-72593), filed withthe Commission on March 24, 1999. (2) Incorporated by reference to Exhibit 3.5 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-72593), filed withthe Commission on March 24, 1999. (3) Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-72593), filed withthe Commission on March 24, 1999. 15 
Table of Contents(b) Reports on Form 8-K  We filedwith the Securities and Exchange Commission a Current Report on Form 8-K on May 15, 2002, reporting under “Item 5 Other Events” then current comparable restaurant sales information.  We filed with the Securities and Exchange Commission a Current Report on Form 8-K on July 18, 2002, disclosing under “Item 5 Other Events” that (1) we issued a press release onJuly 16, 2002 and (2) we announced our expected total restaurant level cash flow, products cost and operating income for fiscal 2002; and filing under “Item 7 Financial Statements and Exhibits” a copy of the press release, dated July 16,2002.  We filed with the Securities and Exchange Commission a Current Report on Form 8-K on August 13, 2002, disclosing under “Item5 Other Events” that we issued a press release on August 12, 2002 and filing under “Item 7 Financial Statements and Exhibits” a copy of the press release, dated August 12, 2002. 16 
Table of ContentsSIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned thereunto duly authorized.     BUCA, Inc.(Registrant)Date: August 14, 2002 by: /s/    JOSEPH P. MICATROTTO      Joseph P. Micatrotto,Chairman,President and ChiefExecutive Officer(Principal ExecutiveOfficer) Date: August 14, 2002 by: /s/    GREG A. GADEL      Greg A. GadelExecutive Vice President, Chief Financial Officer, Secretary and Treasurer(Principal Financial Accounting Officer) 17