##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended October 1, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from _____________ to ___________.
 Commission file number 333-57925
 Perkins & Marie Callenders Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    62-1254388(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. employer identification no.)6075 Poplar Avenue, Suite 800, Memphis, TN
    
    38119(Address of principal executive offices)
    
    (Zip code)
 
  þ  o þ
 þ
 o o þ
 þ o þ




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    2ITEM 1. FINANCIAL STATEMENTS
    
    
    2ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    32ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    48ITEM 4. CONTROLS AND PROCEDURES
    
    
    48PART II  OTHER INFORMATIONITEM 6. EXHIBITS
    
    
    48Signature
    
    
    49Ex-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification




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##### Table of Contents



SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005REVENUES:Food sales
    
    $
    127,066
    
    
    $
    14,737
    
    
    $
    65,524Franchise and other revenue
    
    
    7,171
    
    
    
    926
    
    
    
    4,669Total revenues
    
    
    134,237
    
    
    
    15,663
    
    
    
    70,193COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    37,412
    
    
    
    5,865
    
    
    
    18,094Labor and benefits
    
    
    43,651
    
    
    
    4,918
    
    
    
    21,738Operating expenses
    
    
    33,588
    
    
    
    1,837
    
    
    
    17,928General and administrative
    
    
    10,914
    
    
    
    1,008
    
    
    
    6,885Transaction costs
    
    
    3,225
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    7,433Depreciation and amortization
    
    
    5,449
    
    
    
    638
    
    
    
    2,528Interest, net
    
    
    6,923
    
    
    
    1,141
    
    
    
    5,146(Gain) loss on disposition of assets
    
    
    5
    
    
    
    1
    
    
    
    (754
    )Asset write-down
    
    
    88
    
    
    
    
    
    
    
    Other, net
    
    
    489
    
    
    
    40
    
    
    
    (115
    )Total costs and expenses
    
    
    141,744
    
    
    
    16,315
    
    
    
    83,515Loss before income taxes and minority interests
    
    
    (7,507
    )
    
    
    (652
    )
    
    
    (13,322
    )(Provision for) benefit from income taxes
    
    
    (324
    )
    
    
    115
    
    
    
    5,897Minority interests
    
    
    (23
    )
    
    
    (4
    )
    
    
    NET LOSS
    
    $
    (7,854
    )
    
    $
    (541
    )
    
    $
    (7,425
    )
  2




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##### Table of Contents



SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27, 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005REVENUES:Food sales
    
    $
    417,188
    
    
    $
    14,737
    
    
    $
    243,446Franchise and other revenue
    
    
    23,605
    
    
    
    926
    
    
    
    16,343Total revenues
    
    
    440,793
    
    
    
    15,663
    
    
    
    259,789COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    123,621
    
    
    
    5,865
    
    
    
    69,976Labor and benefits
    
    
    141,834
    
    
    
    4,918
    
    
    
    82,352Operating expenses
    
    
    105,962
    
    
    
    1,837
    
    
    
    53,438General and administrative
    
    
    36,196
    
    
    
    1,008
    
    
    
    23,711Transaction costs
    
    
    5,513
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    8,925Depreciation and amortization
    
    
    19,764
    
    
    
    638
    
    
    
    11,816Interest, net
    
    
    28,448
    
    
    
    1,141
    
    
    
    13,380(Gain) loss on disposition of assets
    
    
    (89
    )
    
    
    1
    
    
    
    (518
    )Asset write-down
    
    
    137
    
    
    
    
    
    
    
    248Lease termination
    
    
    366
    
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    (12,581
    )
    
    
    
    
    
    
    Other, net
    
    
    388
    
    
    
    40
    
    
    
    (214
    )Total costs and expenses
    
    
    449,559
    
    
    
    16,315
    
    
    
    267,746Loss before income taxes and minority interests
    
    
    (8,766
    )
    
    
    (652
    )
    
    
    (7,957
    )(Provision for) benefit from income taxes
    
    
    (324
    )
    
    
    115
    
    
    
    3,817Minority interests
    
    
    (192
    )
    
    
    (4
    )
    
    
    NET LOSS
    
    $
    (9,282
    )
    
    $
    (541
    )
    
    $
    (4,140
    )
  3




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##### Table of Contents



Successor
    
    
    SuccessorOctober 1, 2006
    
    
    December 25, 2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,358
    
    
    $
    3,988Restricted cash
    
    
    8,203
    
    
    
    8,225Receivables, less allowances for doubtful accounts
    
    
    17,260
    
    
    
    16,108Inventories, net
    
    
    11,925
    
    
    
    11,328Prepaid expenses and other current assets
    
    
    6,902
    
    
    
    4,333Escrow deposits
    
    
    5,022
    
    
    
    18,162Deferred income taxes
    
    
    
    
    
    
    2,845Total current assets
    
    
    53,670
    
    
    
    64,989PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization
    
    
    92,167
    
    
    
    78,515INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
    
    
    157
    
    
    
    311GOODWILL
    
    
    141,153
    
    
    
    154,049INTANGIBLE ASSETS, net of accumulated amortization
    
    
    46,651
    
    
    
    48,088OTHER ASSETS
    
    
    13,857
    
    
    
    14,171$
    347,655
    
    
    $
    360,123
  4




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##### Table of Contents



Successor
    
    
    SuccessorOctober 1, 2006
    
    
    December 25, 2005LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    23,013
    
    
    $
    21,814Accrued expenses
    
    
    59,867
    
    
    
    64,571Franchise advertising contributions
    
    
    5,353
    
    
    
    4,752Current maturities of long-term debt and capital lease obligations
    
    
    4,781
    
    
    
    3,311Total current liabilities
    
    
    93,014
    
    
    
    94,448CAPITAL LEASE OBLIGATIONS, less current maturities
    
    
    6,405
    
    
    
    6,939LONG-TERM DEBT, less current maturities
    
    
    286,557
    
    
    
    293,138DEFERRED INCOME TAXES
    
    
    326
    
    
    
    12,573DEFERRED RENT
    
    
    9,298
    
    
    
    7,440OTHER LIABILITIES
    
    
    7,545
    
    
    
    5,238MINORITY INTEREST IN CONSOLIDATED PARTNERSHIPS
    
    
    75
    
    
    
    177STOCKHOLDERS INVESTMENT:Common stock, $.01 par value, 100,000 shares authorized, 10,820 issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    136,131
    
    
    
    123,907Notes secured by stock
    
    
    
    
    
    
    (1,308
    )Other comprehensive income
    
    
    29
    
    
    
    14Accumulated deficit
    
    
    (191,726
    )
    
    
    (182,444
    )Total stockholders investment
    
    
    (55,565
    )
    
    
    (59,830
    )$
    347,655
    
    
    $
    360,123
  5




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##### Table of Contents



SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (7,854
    )
    
    $
    (541
    )
    
    $
    (7,425
    )Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    5,449
    
    
    
    638
    
    
    
    2,528Amortization of discount
    
    
    75
    
    
    
    
    
    
    
    Other non-cash income and expense items
    
    
    69
    
    
    
    (68
    )
    
    
    2,002(Gain) loss on disposition of assets
    
    
    5
    
    
    
    1
    
    
    
    (754
    )Asset write-down
    
    
    88
    
    
    
    
    
    
    
    Minority interests
    
    
    23
    
    
    
    (4
    )
    
    
    Equity in net loss of unconsolidated partnerships
    
    
    45
    
    
    
    
    
    
    
    Net changes in operating assets and liabilities
    
    
    445
    
    
    
    2,598
    
    
    
    (14,073
    )Total adjustments
    
    
    6,199
    
    
    
    3,165
    
    
    
    (10,297
    )Net cash provided by (used in) operating activities
    
    
    (1,655
    )
    
    
    2,624
    
    
    
    (17,722
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (5,383
    )
    
    
    (476
    )
    
    
    (1,960
    )Acquisition of predecessors business
    
    
    
    
    
    
    (224,972
    )
    
    
    Deposit with trustee returned
    
    
    
    
    
    
    
    
    
    
    152,693Proceeds from sale of assets
    
    
    
    
    
    
    50
    
    
    
    Net cash used in (provided by) investing activities
    
    
    (5,383
    )
    
    
    (225,398
    )
    
    
    150,733CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (225
    )
    
    
    (19
    )
    
    
    (76
    )Payments on long-term debt
    
    
    (254
    )
    
    
    (4,000
    )
    
    
    (148,009
    )Proceeds from long-term debt
    
    
    3,000
    
    
    
    190,440
    
    
    
    4,000Debt issuance costs
    
    
    
    
    
    
    (9,163
    )
    
    
    Proceeds for stock option redemption
    
    
    
    
    
    
    
    
    
    
    9,645Distributions to minority partners
    
    
    (80
    )
    
    
    
    
    
    
    Capital contribution from parent
    
    
    
    
    
    
    44,107
    
    
    
    Net cash provided by (used in) financing activities
    
    
    2,441
    
    
    
    221,365
    
    
    
    (134,440
    )Net decrease in cash and cash equivalents
    
    
    (4,597
    )
    
    
    (1,409
    )
    
    
    (1,429
    )CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    8,955
    
    
    
    6,909
    
    
    
    5,699Balance, end of period
    
    $
    4,358
    
    
    $
    5,500
    
    
    $
    4,270
  6




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##### Table of Contents



SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27 , 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (9,282
    )
    
    $
    (541
    )
    
    $
    (4,140
    )Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    19,764
    
    
    
    638
    
    
    
    11,816Amortization of discount
    
    
    248
    
    
    
    
    
    
    
    Other non-cash income and expense items
    
    
    6,481
    
    
    
    (68
    )
    
    
    2,417Gain on extinguishment of debt
    
    
    (12,581
    )
    
    
    
    
    
    
    (Gain) loss on disposition of assets
    
    
    (89
    )
    
    
    1
    
    
    
    (518
    )Asset write-down
    
    
    137
    
    
    
    
    
    
    
    248Minority interests
    
    
    192
    
    
    
    (4
    )
    
    
    Equity in net loss of unconsolidated partnerships
    
    
    154
    
    
    
    
    
    
    
    Net changes in operating assets and liabilities
    
    
    (4,524
    )
    
    
    2,598
    
    
    
    (18,620
    )Total adjustments
    
    
    9,782
    
    
    
    3,165
    
    
    
    (4,657
    )Net cash provided by (used in) operating activities
    
    
    500
    
    
    
    2,624
    
    
    
    (8,797
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (13,322
    )
    
    
    (476
    )
    
    
    (6,271
    )Acquisition of predecessors business
    
    
    
    
    
    
    (224,972
    )
    
    
    Proceeds from sale of assets
    
    
    1,547
    
    
    
    50
    
    
    
    137,228Net cash used in (provided by) investing activities
    
    
    (11,775
    )
    
    
    (225,398
    )
    
    
    130,957CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (664
    )
    
    
    (19
    )
    
    
    (254
    )Payments on long-term debt
    
    
    (105,615
    )
    
    
    (4,000
    )
    
    
    (148,009
    )Proceeds from long-term debt
    
    
    108,341
    
    
    
    190,440
    
    
    
    4,000Debt issuance costs
    
    
    (2,720
    )
    
    
    (9,163
    )
    
    
    Proceeds for stock option redemption
    
    
    
    
    
    
    
    
    
    
    9,645Distributions to minority partners
    
    
    (242
    )
    
    
    
    
    
    
    Capital contribution from parent
    
    
    12,545
    
    
    
    44,107
    
    
    
    Net cash provided by (used in) financing activities
    
    
    11,645
    
    
    
    221,365
    
    
    
    (134,618
    )Net increase (decrease) in cash and cash equivalents
    
    
    370
    
    
    
    (1,409
    )
    
    
    (12,458
    )CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    3,988
    
    
    
    6,909
    
    
    
    16,728Balance, end of period
    
    $
    4,358
    
    
    $
    5,500
    
    
    $
    4,270
  7




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    RetainedCommon
    
    
    Paid-in
    
    
    Note
    
    
    Comprehensive
    
    
    EarningsStock
    
    
    Capital
    
    
    Receivable
    
    
    Income
    
    
    (Deficit)
    
    
    TotalSuccessor:Balance at December 25, 2005
    
    $
    1
    
    
    $
    123,907
    
    
    $
    (1,308
    )
    
    $
    14
    
    
    $
    (182,444
    )
    
    $
    (59,830
    )Capital
contribution
    
    
    
    
    
    
    12,545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,545Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,282
    )
    
    
    (9,282
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,267
    )Note forgiveness
    
    
    
    
    
    
    (321
    )
    
    
    1,308
    
    
    
    
    
    
    
    
    
    
    
    987Balance at October 1, 2006
    
    $
    1
    
    
    $
    136,131
    
    
    $
    
    
    
    $
    29
    
    
    $
    (191,726
    )
    
    $
    (55,565
    )
  8




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##### Table of Contents



(1) Organization
     (2) Basis of Presentation
   Definition of Common Control in
Relation to FASB Statement No. 141
 9




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##### Table of Contents



(3) Accounting Reporting Period
     (4) Comprehensive Income
  (5) Acquisition
    10




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##### Table of Contents



(6) Merger of Companies Under Common Control
     Third Quarter
    
    
    Year-to-DateEnded
    
    
    Ended(in thousands):
    
    October 2, 2005
    
    
    October 2, 2005Net sales
    
    $
    133,559
    
    
    $
    438,904Loss before income taxes and minority interests
    
    
    (2,865
    )
    
    
    (12,579
    )Net loss
    
    
    (2,905
    )
    
    
    (12,797
    )
   (7) Commitments and Contingencies
    (8) Gain/Loss on Disposition of Assets and Lease Termination
  11




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##### Table of Contents



(9) Supplemental Cash Flow Information
  SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005(Increase) Decrease in:Receivables
    
    $
    (1,670
    )
    
    $
    (1,905
    )
    
    $
    1,832Inventories
    
    
    361
    
    
    
    131
    
    
    
    736Prepaid expenses and other current assets
    
    
    (955
    )
    
    
    537
    
    
    
    1,454Other assets
    
    
    418
    
    
    
    9,072
    
    
    
    (33,717
    )Increase (Decrease) in:Accounts payable
    
    
    3,569
    
    
    
    (1,509
    )
    
    
    4,880Accrued expenses
    
    
    (2,098
    )
    
    
    (9,670
    )
    
    
    8,886Other liabilities
    
    
    820
    
    
    
    5,942
    
    
    
    1,856$
    445
    
    
    $
    2,598
    
    
    $
    (14,073
    )
 SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27 , 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005(Increase) Decrease in:Receivables
    
    $
    (660
    )
    
    $
    (1,905
    )
    
    $
    1,661Inventories
    
    
    (597
    )
    
    
    131
    
    
    
    (781
    )Prepaid expenses and other current assets
    
    
    (569
    )
    
    
    537
    
    
    
    (667
    )Other assets
    
    
    (211
    )
    
    
    9,072
    
    
    
    (33,895
    )Increase (Decrease) in:Accounts payable
    
    
    1,199
    
    
    
    (1,509
    )
    
    
    2,126Accrued expenses
    
    
    (3,187
    )
    
    
    (9,670
    )
    
    
    10,700Other liabilities
    
    
    (499
    )
    
    
    5,942
    
    
    
    2,236$
    (4,524
    )
    
    $
    2,598
    
    
    $
    (18,620
    )
  SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005Cash paid for interest
    
    $
    11,640
    
    
    $
    
    
    
    $
    4,699Income taxes paid
    
    
    209
    
    
    
    
    
    
    
    15,003Income tax refunds received
    
    
    307
    
    
    
    
    
    
    
    
 SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27 , 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005Cash paid for interest
    
    $
    21,852
    
    
    $
    
    
    
    $
    12,413Income taxes paid
    
    
    1,057
    
    
    
    
    
    
    
    17,903Income tax refunds received
    
    
    449
    
    
    
    
    
    
    
    4
 12




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##### Table of Contents



(10) Accrued Expenses
  Successor
    
    
    SuccessorOctober 1, 2006
    
    
    December 25, 2005Payroll and related benefits
    
    $
    17,940
    
    
    $
    14,278Property, real estate and sales taxes
    
    
    5,761
    
    
    
    4,182Insurance
    
    
    4,473
    
    
    
    5,137Gift cards and gift certificates
    
    
    4,293
    
    
    
    5,755Advertising
    
    
    1,013
    
    
    
    944Escrow
    
    
    5,000
    
    
    
    11,002Interest
    
    
    1,342
    
    
    
    5,553Management fees
    
    
    10,008
    
    
    
    9,200Other
    
    
    10,037
    
    
    
    8,520$
    59,867
    
    
    $
    64,571
  13




---



##### Table of Contents



(11) Segment Reporting
   Successor
    
    
    Successor
    
    
    PredecessorThird Quarter Ended October 1, 2006
    
    
    September 22, 2005 - October 2, 2005
    
    
    July 11, 2005 - September 21, 2005External
    
    
    Intersegment
    
    
    Segment
    
    
    External
    
    
    Intersegment
    
    
    Segment
    
    
    External
    
    
    Intersegment
    
    
    SegmentRevenue
    
    
    Revenue
    
    
    Profit/(Loss)
    
    
    Revenue
    
    
    Revenue
    
    
    Profit/(Loss)
    
    
    Revenue
    
    
    Revenue
    
    
    Profit/(Loss)Perkins:Restaurant
    
    $
    65,689
    
    
    $
    
    
    
    $
    6,097
    
    
    $
    12,782
    
    
    $
    
    
    
    $
    1,756
    
    
    $
    55,478
    
    
    $
    
    
    
    $
    3,449Franchise
    
    
    5,092
    
    
    
    
    
    
    
    4,598
    
    
    
    817
    
    
    
    
    
    
    
    694
    
    
    
    4,669
    
    
    
    
    
    
    
    3,941WRG:Restaurant
    
    
    47,716
    
    
    
    
    
    
    
    (136
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Franchise
    
    
    1,107
    
    
    
    
    
    
    
    1,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Combined:Manufacturing
    
    
    13,662
    
    
    
    2,155
    
    
    
    1,904
    
    
    
    1,955
    
    
    
    253
    
    
    
    206
    
    
    
    10,046
    
    
    
    1,654
    
    
    
    1,572Other
    
    
    971
    
    
    
    
    
    
    
    (21,424
    )
    
    
    109
    
    
    
    
    
    
    
    (3,197
    )
    
    
    
    
    
    
    
    
    
    
    (16,387
    )Total
    
    $
    134,237
    
    
    $
    2,155
    
    
    $
    (7,854
    )
    
    $
    15,663
    
    
    $
    253
    
    
    $
    (541
    )
    
    $
    70,193
    
    
    $
    1,654
    
    
    $
    (7,425
    )
 Successor
    
    
    Successor
    
    
    PredecessorYear-to-Date
Ended October 1, 2006
    
    
    September 22, 2005 - October 2, 2005
    
    
    December 27, 2004 - September 21, 2005External
    
    
    Intersegment
    
    
    Segment
    
    
    External
    
    
    Intersegment
    
    
    Segment
    
    
    External
    
    
    Intersegment
    
    
    SegmentRevenue
    
    
    Revenue
    
    
    Profit/(Loss)
    
    
    Revenue
    
    
    Revenue
    
    
    Profit/(Loss)
    
    
    Revenue
    
    
    Revenue
    
    
    Profit/(Loss)Perkins:Restaurant
    
    $
    222,663
    
    
    $
    
    
    
    $
    17,878
    
    
    $
    12,782
    
    
    $
    
    
    
    $
    1,756
    
    
    $
    209,242
    
    
    $
    
    
    
    $
    21,090Franchise
    
    
    16,901
    
    
    
    
    
    
    
    15,200
    
    
    
    817
    
    
    
    
    
    
    
    694
    
    
    
    16,343
    
    
    
    
    
    
    
    14,158WRG:Restaurant
    
    
    150,530
    
    
    
    
    
    
    
    3,222
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Franchise
    
    
    3,614
    
    
    
    
    
    
    
    3,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Combined:Manufacturing
    
    
    43,996
    
    
    
    6,510
    
    
    
    6,466
    
    
    
    1,955
    
    
    
    253
    
    
    
    206
    
    
    
    34,204
    
    
    
    6,267
    
    
    
    5,293Other
    
    
    3,089
    
    
    
    
    
    
    
    (55,662
    )
    
    
    109
    
    
    
    
    
    
    
    (3,197
    )
    
    
    
    
    
    
    
    
    
    
    (44,681
    )Total
    
    $
    440,793
    
    
    $
    6,510
    
    
    $
    (9,282
    )
    
    $
    15,663
    
    
    $
    253
    
    
    $
    (541
    )
    
    $
    259,789
    
    
    $
    6,267
    
    
    $
    (4,140
    )
 14




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##### Table of Contents



SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005General and administrative expenses
    
    $
    9,847
    
    
    $
    975
    
    
    $
    5,649Depreciation and amortization expenses
    
    
    1,446
    
    
    
    342
    
    
    
    255Interest expense, net
    
    
    6,923
    
    
    
    1,141
    
    
    
    5,146(Gain) loss on disposition of assets
    
    
    5
    
    
    
    
    
    
    
    (754
    )Asset write-down
    
    
    88
    
    
    
    
    
    
    
    Transaction costs
    
    
    3,224
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    7,433Provision for (benefit from) income taxes
    
    
    324
    
    
    
    (115
    )
    
    
    (5,897
    )Minority interest
    
    
    23
    
    
    
    4
    
    
    
    Other
    
    
    (456
    )
    
    
    (17
    )
    
    
    (77
    )$
    21,424
    
    
    $
    3,197
    
    
    $
    16,387
 SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27, 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005General and administrative expenses
    
    $
    32,511
    
    
    $
    975
    
    
    $
    20,064Depreciation and amortization expenses
    
    
    2,832
    
    
    
    342
    
    
    
    1,981Interest expense, net
    
    
    28,448
    
    
    
    1,141
    
    
    
    13,380(Gain) loss on disposition of assets
    
    
    (89
    )
    
    
    
    
    
    
    (518
    )Asset write-down
    
    
    137
    
    
    
    
    
    
    
    248Lease termination
    
    
    366
    
    
    
    
    
    
    
    Transaction costs
    
    
    5,514
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    8,925Provision for (benefit from) income taxes
    
    
    324
    
    
    
    (115
    )
    
    
    (3,817
    )Minority interest
    
    
    192
    
    
    
    4
    
    
    
    Gain on early extinguishment of debt
    
    
    (12,581
    )
    
    
    
    
    
    
    Other
    
    
    (1,992
    )
    
    
    (17
    )
    
    
    (214
    )$
    55,662
    
    
    $
    3,197
    
    
    $
    44,681
 (12) Sale-Leaseback Transaction
  (13) Long-Term Debt
   15




---



##### Table of Contents



1.
    
    The Company would, at the time of such Restricted Payments and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least $1.00 of additional
indebtedness pursuant to the fixed charge coverage ratio tests as defined in the indenture.2.
    
    Such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company after September 21, 2005, is less than the sum, without
duplication, of (i) 50% of the consolidated net income of the Company for the period from
the beginning of the first full fiscal quarter commencing after the date of the indenture to
the end of the Companys most recent ended fiscal quarter for which internal financial
statements are available at the time of the Restricted Payment; (ii) 100% of the aggregate
net proceeds received by the Company since the date of the indenture as a contribution to
its equity capital or from the sale of equity interests of the Company or from the
conversion of interests or debt securities that have been converted to equity interests and
(iii) to the extent that any Restricted Investment, as defined, that was made after the date
of the indenture is sold for cash, the lesser of (a) the cash return of capital or (b) the
aggregate amount of such restricted investment that was treated as a Restricted Payment when
made.
  (14) Income Tax
  16




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##### Table of Contents



(15) Recent Accounting Pronouncements
 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB
Statements No. 87, 88, 106, and 132(R) (FASB 158)
 Fair Value
Measurements
 Financial Statements  Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
 Share-Based Payment
 17




---



##### Table of Contents



(16) Condensed Consolidated Financial Information
   Consolidating Statement of Operations for the quarter ended October 1, 2006 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    57,181
    
    
    $
    18,982
    
    
    $
    44,396
    
    
    $
    
    
    
    $
    6,507
    
    
    $
    
    
    
    $
    127,066Franchise and other revenue
    
    
    3,129
    
    
    
    3,543
    
    
    
    2,079
    
    
    
    
    
    
    
    
    
    
    
    (1,580
    )
    
    
    7,171Total revenues
    
    
    60,310
    
    
    
    22,525
    
    
    
    46,475
    
    
    
    
    
    
    
    6,507
    
    
    
    (1,580
    )
    
    
    134,237Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    16,877
    
    
    
    4,199
    
    
    
    14,511
    
    
    
    
    
    
    
    1,825
    
    
    
    
    
    
    
    37,412Labor and benefits
    
    
    18,945
    
    
    
    6,762
    
    
    
    15,863
    
    
    
    
    
    
    
    2,081
    
    
    
    
    
    
    
    43,651Operating expenses
    
    
    13,902
    
    
    
    6,218
    
    
    
    11,789
    
    
    
    
    
    
    
    2,497
    
    
    
    (818
    )
    
    
    33,588General and administrative
    
    
    8,349
    
    
    
    762
    
    
    
    2,565
    
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    10,914Transaction costs
    
    
    1,330
    
    
    
    
    
    
    
    1,895
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,225Depreciation and amortization
    
    
    2,311
    
    
    
    1,237
    
    
    
    1,561
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    5,449Interest, net
    
    
    6,651
    
    
    
    (71
    )
    
    
    341
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    6,923Loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    5Asset write-down
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    88Other, net
    
    
    (51
    )
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489Total costs and expenses
    
    
    68,314
    
    
    
    19,107
    
    
    
    49,146
    
    
    
    
    
    
    
    6,757
    
    
    
    (1,580
    )
    
    
    141,744(Loss) income before income taxes and minority
interests
    
    
    (8,004
    )
    
    
    3,418
    
    
    
    (2,671
    )
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    (7,507
    )Benefit from (provision for) income taxes
    
    
    1,178
    
    
    
    (1,502
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (23
    )Equity in earnings (loss) of subsidiaries
    
    
    (1,028
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,028
    
    
    
    NET (LOSS) INCOME
    
    $
    (7,854
    )
    
    $
    1,916
    
    
    $
    (2,683
    )
    
    $
    
    
    
    $
    (261
    )
    
    $
    1,028
    
    
    $
    (7,854
    )
 18




---



##### Table of Contents



Consolidating Statement of Operations from September 22, 2005 through October 2, 2005 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    7,436
    
    
    $
    2,775
    
    
    $
    3,927
    
    
    $
    
    
    
    $
    599
    
    
    $
    
    
    
    $
    14,737Franchise and other revenue
    
    
    435
    
    
    
    450
    
    
    
    246
    
    
    
    7
    
    
    
    
    
    
    
    (212
    )
    
    
    926Total revenues
    
    
    7,871
    
    
    
    3,225
    
    
    
    4,173
    
    
    
    7
    
    
    
    599
    
    
    
    (212
    )
    
    
    15,663Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    3,862
    
    
    
    572
    
    
    
    1,258
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    5,865Labor and benefits
    
    
    2,455
    
    
    
    852
    
    
    
    1,416
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    4,918Operating expenses
    
    
    90
    
    
    
    633
    
    
    
    995
    
    
    
    
    
    
    
    215
    
    
    
    (96
    )
    
    
    1,837General and administrative
    
    
    701
    
    
    
    118
    
    
    
    298
    
    
    
    7
    
    
    
    
    
    
    
    (116
    )
    
    
    1,008Transaction costs
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867Depreciation and amortization
    
    
    370
    
    
    
    111
    
    
    
    133
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    638Interest, net
    
    
    671
    
    
    
    (13
    )
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,141Loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Other, net
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Total costs and expenses
    
    
    9,056
    
    
    
    2,273
    
    
    
    4,584
    
    
    
    7
    
    
    
    607
    
    
    
    (212
    )
    
    
    16,315(Loss) income before income taxes and minority
interests
    
    
    (1,185
    )
    
    
    952
    
    
    
    (411
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (652
    )Benefit from (provision for) income taxes
    
    
    447
    
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Minority interests
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )Equity in earnings (loss) of subsidiaries
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    NET (LOSS) INCOME
    
    $
    (541
    )
    
    $
    620
    
    
    $
    (414
    )
    
    $
    
    
    
    $
    (9
    )
    
    $
    (197
    )
    
    $
    (541
    )
 19




---



##### Table of Contents



Consolidating Statement of Operations from July 11, 2005 through September 21, 2005 (Predecessor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    Other
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    49,351
    
    
    $
    16,173
    
    
    $
    
    
    
    $
    
    
    
    $
    65,524Franchise and other revenue
    
    
    3,226
    
    
    
    3,047
    
    
    
    58
    
    
    
    (1,662
    )
    
    
    4,669Total revenues
    
    
    52,577
    
    
    
    19,220
    
    
    
    58
    
    
    
    (1,662
    )
    
    
    70,193Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    14,261
    
    
    
    3,833
    
    
    
    
    
    
    
    
    
    
    
    18,094Labor and benefits
    
    
    13,999
    
    
    
    7,739
    
    
    
    
    
    
    
    
    
    
    
    21,738Operating expenses
    
    
    15,648
    
    
    
    2,910
    
    
    
    58
    
    
    
    (688
    )
    
    
    17,928General and administrative
    
    
    6,873
    
    
    
    986
    
    
    
    
    
    
    
    (974
    )
    
    
    6,885Transaction costs
    
    
    4,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,632Stock compensation
    
    
    7,433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,433Depreciation and amortization
    
    
    793
    
    
    
    1,735
    
    
    
    
    
    
    
    
    
    
    
    2,528Interest, net
    
    
    5,243
    
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    5,146Loss on disposition of assets
    
    
    (888
    )
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    (754
    )Other, net
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )Total costs and expenses
    
    
    67,879
    
    
    
    17,240
    
    
    
    58
    
    
    
    (1,662
    )
    
    
    83,515(Loss) income before income taxes and minority
interests
    
    
    (15,302
    )
    
    
    1,980
    
    
    
    
    
    
    
    
    
    
    
    (13,322
    )Benefit from (provision for) income taxes
    
    
    6,620
    
    
    
    (723
    )
    
    
    
    
    
    
    
    
    
    
    5,897Equity in earnings (loss) of subsidiaries
    
    
    1,257
    
    
    
    
    
    
    
    
    
    
    
    (1,257
    )
    
    
    NET (LOSS) INCOME
    
    $
    (7,425
    )
    
    $
    1,257
    
    
    $
    
    
    
    $
    (1,257
    )
    
    $
    (7,425
    )
 20




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##### Table of Contents



Consolidating Statement of Operations for the year-to-date period ended October 1, 2006 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    195,351
    
    
    $
    62,208
    
    
    $
    138,245
    
    
    $
    
    
    
    $
    21,384
    
    
    $
    
    
    
    $
    417,188Franchise and other revenue
    
    
    10,424
    
    
    
    11,476
    
    
    
    6,704
    
    
    
    15
    
    
    
    
    
    
    
    (5,014
    )
    
    
    23,605Total revenues
    
    
    205,775
    
    
    
    73,684
    
    
    
    144,949
    
    
    
    15
    
    
    
    21,384
    
    
    
    (5,014
    )
    
    
    440,793Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    58,057
    
    
    
    14,125
    
    
    
    45,356
    
    
    
    
    
    
    
    6,083
    
    
    
    
    
    
    
    123,621Labor and benefits
    
    
    64,294
    
    
    
    22,405
    
    
    
    48,480
    
    
    
    
    
    
    
    6,655
    
    
    
    
    
    
    
    141,834Operating expenses
    
    
    45,043
    
    
    
    20,528
    
    
    
    35,174
    
    
    
    15
    
    
    
    7,678
    
    
    
    (2,476
    )
    
    
    105,962General and administrative
    
    
    26,588
    
    
    
    2,545
    
    
    
    9,601
    
    
    
    
    
    
    
    
    
    
    
    (2,538
    )
    
    
    36,196Transaction costs
    
    
    3,071
    
    
    
    
    
    
    
    2,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,513Depreciation and amortization
    
    
    11,523
    
    
    
    2,351
    
    
    
    4,882
    
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    19,764Interest, net
    
    
    19,621
    
    
    
    (642
    )
    
    
    9,465
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    28,448(Gain) loss on disposition of assets
    
    
    (96
    )
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (89
    )Asset write-down
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    137Lease termination
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    (152
    )
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Total costs and expenses
    
    
    228,315
    
    
    
    61,312
    
    
    
    143,467
    
    
    
    15
    
    
    
    21,464
    
    
    
    (5,014
    )
    
    
    449,559(Loss) income before income taxes and minority
interests
    
    
    (22,540
    )
    
    
    12,372
    
    
    
    1,482
    
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (8,766
    )Benefit from (provision for) income taxes
    
    
    4,528
    
    
    
    (4,852
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (193
    )
    
    
    
    
    
    
    (192
    )Equity in earnings (loss) of subsidiaries
    
    
    8,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,730
    )
    
    
    NET (LOSS) INCOME
    
    $
    (9,282
    )
    
    $
    7,520
    
    
    $
    1,483
    
    
    $
    
    
    
    $
    (273
    )
    
    $
    (8,730
    )
    
    $
    (9,282
    )
 21




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##### Table of Contents



Consolidating Statement of Operations from September 22, 2005 through October 2, 2005 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    7,436
    
    
    $
    2,775
    
    
    $
    3,927
    
    
    $
    
    
    
    $
    599
    
    
    $
    
    
    
    $
    14,737Franchise and other revenue
    
    
    435
    
    
    
    450
    
    
    
    246
    
    
    
    7
    
    
    
    
    
    
    
    (212
    )
    
    
    926Total revenues
    
    
    7,871
    
    
    
    3,225
    
    
    
    4,173
    
    
    
    7
    
    
    
    599
    
    
    
    (212
    )
    
    
    15,663Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    3,862
    
    
    
    572
    
    
    
    1,258
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    5,865Labor and benefits
    
    
    2,455
    
    
    
    852
    
    
    
    1,416
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    4,918Operating expenses
    
    
    90
    
    
    
    633
    
    
    
    995
    
    
    
    
    
    
    
    215
    
    
    
    (96
    )
    
    
    1,837General and administrative
    
    
    701
    
    
    
    118
    
    
    
    298
    
    
    
    7
    
    
    
    
    
    
    
    (116
    )
    
    
    1,008Transaction costs
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867Depreciation and amortization
    
    
    370
    
    
    
    111
    
    
    
    133
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    638Interest, net
    
    
    671
    
    
    
    (13
    )
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,141Loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Other, net
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Total costs and expenses
    
    
    9,056
    
    
    
    2,273
    
    
    
    4,584
    
    
    
    7
    
    
    
    607
    
    
    
    (212
    )
    
    
    16,315(Loss) income before income taxes and minority
interests
    
    
    (1,185
    )
    
    
    952
    
    
    
    (411
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (652
    )Benefit from (provision for) income taxes
    
    
    447
    
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Minority interests
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )Equity in earnings (loss) of subsidiaries
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    NET (LOSS) INCOME
    
    $
    (541
    )
    
    $
    620
    
    
    $
    (414
    )
    
    $
    
    
    
    $
    (9
    )
    
    $
    (197
    )
    
    $
    (541
    )
 22




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##### Table of Contents



Consolidating Statement of Operations from December 27, 2004 through September 21, 2005 (Predecessor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    Other
    
    
    Eliminations
    
    
    TRCRevenueFood sales
    
    $
    185,771
    
    
    $
    57,675
    
    
    $
    
    
    
    $
    
    
    
    $
    243,446Franchise and other revenue
    
    
    10,338
    
    
    
    11,004
    
    
    
    181
    
    
    
    (5,180
    )
    
    
    16,343Total revenues
    
    
    196,109
    
    
    
    68,679
    
    
    
    181
    
    
    
    (5,180
    )
    
    
    259,789Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    55,976
    
    
    
    14,000
    
    
    
    
    
    
    
    
    
    
    
    69,976Labor and benefits
    
    
    59,481
    
    
    
    22,871
    
    
    
    
    
    
    
    
    
    
    
    82,352Operating expenses
    
    
    40,138
    
    
    
    15,467
    
    
    
    181
    
    
    
    (2,348
    )
    
    
    53,438General and administrative
    
    
    23,657
    
    
    
    2,886
    
    
    
    
    
    
    
    (2,832
    )
    
    
    23,711Transaction costs
    
    
    4,632
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,632Stock compensation
    
    
    8,925
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,925Depreciation and amortization
    
    
    9,081
    
    
    
    2,735
    
    
    
    
    
    
    
    
    
    
    
    11,816Interest, net
    
    
    13,684
    
    
    
    (304
    )
    
    
    
    
    
    
    
    
    
    
    13,380(Gain) loss on disposition of assets
    
    
    (652
    )
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    (518
    )Asset write-down
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other, net
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214
    )Total costs and expenses
    
    
    214,956
    
    
    
    57,789
    
    
    
    181
    
    
    
    (5,180
    )
    
    
    267,746(Loss) income before income taxes and minority
interests
    
    
    (18,847
    )
    
    
    10,890
    
    
    
    
    
    
    
    
    
    
    
    (7,957
    )Benefit from (provision for) income taxes
    
    
    7,639
    
    
    
    (3,822
    )
    
    
    
    
    
    
    
    
    
    
    3,817Equity in earnings (loss) of subsidiaries
    
    
    7,068
    
    
    
    
    
    
    
    
    
    
    
    (7,068
    )
    
    
    NET (LOSS) INCOME
    
    $
    (4,140
    )
    
    $
    7,068
    
    
    $
    
    
    
    $
    (7,068
    )
    
    $
    (4,140
    )
 23




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##### Table of Contents



Consolidating Balance Sheet as of October 1, 2006 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,165
    
    
    $
    1,081
    
    
    $
    3,111
    
    
    $
    
    
    
    $
    (1,999
    )
    
    $
    
    
    
    $
    4,358Restricted cash
    
    
    1,556
    
    
    
    6,647
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,203Trade receivables, less allowance for
doubtful accounts
    
    
    12,359
    
    
    
    17
    
    
    
    4,854
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    17,260Inventories, net
    
    
    7,121
    
    
    
    422
    
    
    
    4,094
    
    
    
    
    
    
    
    288
    
    
    
    
    
    
    
    11,925Prepaid expenses and other current assets
    
    
    4,224
    
    
    
    285
    
    
    
    2,333
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    6,902Escrow deposits
    
    
    5,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,022Total current assets
    
    
    32,447
    
    
    
    8,452
    
    
    
    14,392
    
    
    
    
    
    
    
    (1,621
    )
    
    
    
    
    
    
    53,670PROPERTY AND EQUIPMENT, net
    
    
    46,718
    
    
    
    9,440
    
    
    
    33,513
    
    
    
    
    
    
    
    2,496
    
    
    
    
    
    
    
    92,167INVESTMENTS IN CONSOLIDATED PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    157GOODWILL
    
    
    30,553
    
    
    
    110,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,153INTANGIBLE ASSETS, net
    
    
    46,331
    
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,651INVESTMENTS IN SUBSIDIARIES
    
    
    19,385
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,385
    )
    
    
    DUE FROM TRC
    
    
    
    
    
    
    8,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,943
    )
    
    
    DUE FROM SUBSIDIARIES
    
    
    109,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,978
    )
    
    
    OTHER ASSETS
    
    
    11,490
    
    
    
    
    
    
    
    (866
    )
    
    
    
    
    
    
    3,233
    
    
    
    
    
    
    
    13,857$
    296,902
    
    
    $
    137,435
    
    
    $
    47,506
    
    
    $
    
    
    
    $
    4,118
    
    
    $
    (138,306
    )
    
    $
    347,655LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    11,641
    
    
    $
    2,332
    
    
    $
    8,145
    
    
    $
    
    
    
    $
    895
    
    
    $
    
    
    
    $
    23,013Accrued expenses
    
    
    23,585
    
    
    
    7,430
    
    
    
    27,247
    
    
    
    
    
    
    
    1,605
    
    
    
    
    
    
    
    59,867Franchise advertising contributions
    
    
    5,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,353Current maturities of long term debt
    
    
    4,763
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,78145,342
    
    
    
    9,762
    
    
    
    35,410
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    93,014CAPITAL LEASE OBLIGATIONS, less current
maturities
    
    
    134
    
    
    
    
    
    
    
    6,271
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,405LONG-TERM DEBT, less current maturities
    
    
    286,501
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286,557DEFERRED INCOME TAXES
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326DEFERRED RENT
    
    
    4,925
    
    
    
    
    
    
    
    4,160
    
    
    
    
    
    
    
    213
    
    
    
    
    
    
    
    9,298OTHER LIABILITIES
    
    
    6,296
    
    
    
    
    
    
    
    1,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,545DUE TO TRCM / TRC Realty
    
    
    8,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,943
    )
    
    
    DUE TO PARENT
    
    
    
    
    
    
    
    
    
    
    112,010
    
    
    
    10
    
    
    
    (2,042
    )
    
    
    (109,978
    )
    
    
    MINORITY INTERESTS IN CONSOLIDATED
PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    417
    
    
    
    
    
    
    
    (342
    )
    
    
    
    
    
    
    75STOCKHOLDERS INVESTMENT:Common Stock
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1Preferred Stock
    
    
    
    
    
    
    
    
    
    
    63,277
    
    
    
    
    
    
    
    
    
    
    
    (63,277
    )
    
    
    Capital in excess of par
    
    
    
    
    
    
    
    
    
    
    (177
    )
    
    
    
    
    
    
    9,515
    
    
    
    (9,338
    )
    
    
    Additional paid-in capital
    
    
    136,131
    
    
    
    117,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117,561
    )
    
    
    136,131Treasury stock
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    Notes secured by stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Retained earnings (deficit)
    
    
    (191,726
    )
    
    
    10,111
    
    
    
    (175,030
    )
    
    
    (10
    )
    
    
    (5,726
    )
    
    
    170,655
    
    
    
    (191,726
    )(55,565
    )
    
    
    127,673
    
    
    
    (112,067
    )
    
    
    (10
    )
    
    
    3,789
    
    
    
    (19,385
    )
    
    
    (55,565
    )$
    296,902
    
    
    $
    137,435
    
    
    $
    47,506
    
    
    $
    
    
    
    $
    4,118
    
    
    $
    (138,306
    )
    
    $
    347,655
 24




---



##### Table of Contents



Consolidating
Balance Sheet as of December 25, 2005 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,591
    
    
    $
    1,567
    
    
    $
    2,609
    
    
    $
    (23
    )
    
    $
    (1,756
    )
    
    $
    
    
    
    $
    3,988Restricted cash
    
    
    3,496
    
    
    
    4,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,225Trade receivables, less allowance for
doubtful accounts
    
    
    11,890
    
    
    
    3
    
    
    
    4,198
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    16,108Inventories, net
    
    
    6,415
    
    
    
    556
    
    
    
    4,035
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    11,328Prepaid expenses and other current assets
    
    
    2,927
    
    
    
    261
    
    
    
    1,105
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    4,333Escrow deposits
    
    
    18,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,162Deferred
income taxes
    
    
    2,845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,84547,326
    
    
    
    7,116
    
    
    
    11,947
    
    
    
    (23
    )
    
    
    (1,377
    )
    
    
    
    
    
    
    64,989PROPERTY AND EQUIPMENT, net
    
    
    34,826
    
    
    
    7,607
    
    
    
    33,637
    
    
    
    
    
    
    
    2,445
    
    
    
    
    
    
    
    78,515INVESTMENTS IN CONSOLIDATED PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    301
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    311GOODWILL
    
    
    154,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,049INTANGIBLE ASSETS, net
    
    
    47,779
    
    
    
    
    
    
    
    309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,088INVESTMENTS IN SUBSIDIARIES
    
    
    (57,761)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,761
    
    
    
    DUE FROM TRC
    
    
    
    
    
    
    45,584
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    (45,622
    )
    
    
    DUE FROM SUBSIDIARIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OTHER ASSETS
    
    
    9,730
    
    
    
    
    
    
    
    724
    
    
    
    8
    
    
    
    3,709
    
    
    
    
    
    
    
    14,171$
    235,949
    
    
    $
    60,307
    
    
    $
    46,918
    
    
    $
    23
    
    
    $
    4,787
    
    
    $
    12,139
    
    
    $
    360,123LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    7,939
    
    
    $
    1,527
    
    
    $
    11,389
    
    
    $
    8
    
    
    $
    951
    
    
    $
    
    
    
    $
    21,814Accrued expenses
    
    
    30,852
    
    
    
    6,056
    
    
    
    26,355
    
    
    
    25
    
    
    
    1,283
    
    
    
    
    
    
    
    64,571Franchise advertising contributions
    
    
    4,752
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,752Current
maturities of long-term debt
    
    
    277
    
    
    
    
    
    
    
    3,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,311Current
portion of reserve for store closures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,820
    
    
    
    7,583
    
    
    
    40,778
    
    
    
    33
    
    
    
    2,234
    
    
    
    
    
    
    
    94,448CAPITAL LEASE OBLIGATIONS, less current
maturities
    
    
    260
    
    
    
    
    
    
    
    6,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,939LONG-TERM DEBT
    
    
    187,503
    
    
    
    
    
    
    
    105,635
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    293,138DEFERRED INCOME TAXES
    
    
    12,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,573DEFERRED RENT
    
    
    2,690
    
    
    
    
    
    
    
    4,529
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    7,440RESERVE FOR
STORE CLOSURES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UNFAVORABLE
LEASE INTEREST
    
    
    
    
    
    
    
    
    
    
    4,529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OTHER LIABILITIES
    
    
    3,331
    
    
    
    
    
    
    
    1,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,238DUE TO TRCM / TRC Realty
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DUE TO PARENT
    
    
    45,622
    
    
    
    
    
    
    
    2,042
    
    
    
    
    
    
    
    (2,042
    )
    
    
    (45,622
    )
    
    
    MINORITY
INTERESTS OF CONSOLIDATED
PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    391
    
    
    
    
    
    
    
    (214
    )
    
    
    
    
    
    
    177STOCKHOLDERS INVESTMENT:Common stock
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    1Preferred stock
    
    
    
    
    
    
    
    
    
    
    63,277
    
    
    
    
    
    
    
    
    
    
    
    (63,277
    )
    
    
    Capital in excess of par
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    
    
    
    
    9,515
    
    
    
    (9,659
    )
    
    
    Additional paid-in capital
    
    
    123,907
    
    
    
    50,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,132
    )
    
    
    123,907Treasury stock
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    Notes secured by stock
    
    
    (1,308
    )
    
    
    
    
    
    
    (1,308
    )
    
    
    
    
    
    
    
    
    
    
    1,308
    
    
    
    (1,308
    )Other comprehensive income
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Retained earnings (deficit)
    
    
    (182,444
    )
    
    
    2,591
    
    
    
    (177,019
    )
    
    
    (10
    )
    
    
    (4,947
    )
    
    
    179,385
    
    
    
    (182,444
    )(59,830
    )
    
    
    52,724
    
    
    
    (115,043
    )
    
    
    (10
    )
    
    
    4,568
    
    
    
    57,761
    
    
    
    (59,830
    )$
    235,949
    
    
    $
    60,307
    
    
    $
    46,918
    
    
    $
    23
    
    
    $
    4,787
    
    
    $
    12,139
    
    
    $
    360,123
 25




---



##### Table of Contents



Consolidating Statement of Cash Flows for the quarter ended October 1, 2006 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (7,854
    )
    
    $
    1,916
    
    
    $
    (2,683
    )
    
    $
    
    
    
    $
    (261
    )
    
    $
    1,028
    
    
    $
    (7,854
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    1,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,028
    )
    
    
    Depreciation and amortization
    
    
    2,311
    
    
    
    1,237
    
    
    
    1,561
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    5,449Amortization of discount
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Other non-cash income and expense items
    
    
    96
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69(Gain) loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    5Asset write-down
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    88Change in partnerships minority interests
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    23Equity in
(income) net loss of unconsolidated partnerships
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45Net changes
in operating assets and liabilities
    
    
    1,853
    
    
    
    917
    
    
    
    (2,674
    )
    
    
    
    
    
    
    349
    
    
    
    
    
    
    
    445Total adjustments
    
    
    5,363
    
    
    
    2,154
    
    
    
    (923
    )
    
    
    
    
    
    
    633
    
    
    
    (1,028
    )
    
    
    6,199Net cash (used in) provided by operating activities
    
    
    (2,491
    )
    
    
    4,070
    
    
    
    (3,606
    )
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    (1,655
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (2,055
    )
    
    
    (857
    )
    
    
    (2,016
    )
    
    
    
    
    
    
    (455
    )
    
    
    
    
    
    
    (5,383
    )Intercompany activities
    
    
    69,758
    
    
    
    (69,758
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    67,703
    
    
    
    (70,615
    )
    
    
    (2,016
    )
    
    
    
    
    
    
    (455
    )
    
    
    
    
    
    
    (5,383
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    (64
    )
    
    
    
    
    
    
    (161
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )Payments on long-term debt
    
    
    (250
    )
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )Proceeds from long-term debt
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Intercompany financing
    
    
    (6,389
    )
    
    
    
    
    
    
    6,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )Capital contribution from parent
    
    
    (67,429
    )
    
    
    67,429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (71,132
    )
    
    
    67,429
    
    
    
    6,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,441Net increase (decrease) in cash and cash equivalents
    
    
    (5,920
    )
    
    
    884
    
    
    
    522
    
    
    
    
    
    
    
    (83
    )
    
    
    
    
    
    
    (4,597
    )CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    8,085
    
    
    
    197
    
    
    
    2,589
    
    
    
    
    
    
    
    (1,916
    )
    
    
    
    
    
    
    8,955Balance, end of year
    
    $
    2,165
    
    
    $
    1,081
    
    
    $
    3,111
    
    
    $
    
    
    
    $
    (1,999
    )
    
    $
    
    
    
    $
    4,358
 26




---



##### Table of Contents



Consolidating Statement of Cash Flows for the period September 22, 2005 through October 2, 2005 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (541
    )
    
    $
    620
    
    
    $
    (414
    )
    
    $
    
    
    
    $
    (9
    )
    
    $
    (197
    )
    
    $
    (541
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (197
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    Depreciation and amortization
    
    
    370
    
    
    
    111
    
    
    
    133
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    638Other non-cash income and expense items
    
    
    (65
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )(Gain) loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Change in partnerships minority interests
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )Net changes
in operating assets and liabilities
    
    
    2,673
    
    
    
    (20
    )
    
    
    (17
    )
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    2,598Total adjustments
    
    
    2,781
    
    
    
    91
    
    
    
    111
    
    
    
    
    
    
    
    (15
    )
    
    
    197
    
    
    
    3,165Net cash (used in) provided by operating activities
    
    
    2,240
    
    
    
    711
    
    
    
    (303
    )
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    2,624CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (327
    )
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (476
    )Acquisition of predecessors business
    
    
    (224,972
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (224,972
    )Proceeds from sale of assets
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Intercompany activities
    
    
    727
    
    
    
    (727
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (224,522
    )
    
    
    (727
    )
    
    
    (120
    )
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (225,398
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Payments on long-term debt
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000
    )Proceeds from long-term debt
    
    
    190,029
    
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,440Debt issuance costs
    
    
    (9,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,163
    )Capital contribution from parent
    
    
    44,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,107Net cash (used in) provided by financing activities
    
    
    220,973
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221,365Net increase (decrease) in cash and cash equivalents
    
    
    (1,309
    )
    
    
    (16
    )
    
    
    (31
    )
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (1,409
    )CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    4,138
    
    
    
    169
    
    
    
    3,621
    
    
    
    (37
    )
    
    
    (982
    )
    
    
    
    
    
    
    6,909Balance, end of year
    
    $
    2,829
    
    
    $
    153
    
    
    $
    3,590
    
    
    $
    (37
    )
    
    $
    (1,035
    )
    
    $
    
    
    
    $
    5,500
 27




---



##### Table of Contents



Consolidating Statement of Cash Flows for the period July 11, 2005 through September 21, 2005 (Predecessor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    Other
    
    
    Eliminations
    
    
    TRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (7,425
    )
    
    $
    1,257
    
    
    $
    
    
    
    $
    (1,257
    )
    
    $
    (7,425
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (1,257
    )
    
    
    
    
    
    
    
    
    
    
    1,257
    
    
    
    Depreciation and amortization
    
    
    793
    
    
    
    1,735
    
    
    
    
    
    
    
    
    
    
    
    2,528Other non-cash income and expense items
    
    
    2,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,002(Gain) loss on disposition of assets
    
    
    (405
    )
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    (754
    )Net changes in operating assets and liabilities
    
    
    (15,221
    )
    
    
    1,074
    
    
    
    74
    
    
    
    
    
    
    
    (14,073
    )Total adjustments
    
    
    (14,088
    )
    
    
    2,460
    
    
    
    74
    
    
    
    1,257
    
    
    
    (10,297
    )Net cash (used in) provided by operating activities
    
    
    (21,513
    )
    
    
    3,717
    
    
    
    74
    
    
    
    
    
    
    
    (17,722
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (2,460
    )
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    (1,960
    )Deposit with Trustee
    
    
    123,893
    
    
    
    28,800
    
    
    
    
    
    
    
    
    
    
    
    152,693Proceeds from sale of assets
    
    
    (995
    )
    
    
    995
    
    
    
    
    
    
    
    
    
    
    
    Intercompany activities
    
    
    34,082
    
    
    
    (33,979
    )
    
    
    (103
    )
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    154,520
    
    
    
    (3,684
    )
    
    
    (103
    )
    
    
    
    
    
    
    150,733CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    (76
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76
    )Payments on long-term debt
    
    
    (148,009
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148,009
    )Proceeds from long-term debt
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Proceeds from stock option redemption
    
    
    9,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,645Net cash (used in) provided by financing activities
    
    
    (134,440
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (134,440
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,433
    )
    
    
    33
    
    
    
    (29
    )
    
    
    
    
    
    
    (1,429
    )CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    5,571
    
    
    
    136
    
    
    
    (8
    )
    
    
    
    
    
    
    5,699Balance, end of year
    
    $
    4,138
    
    
    $
    169
    
    
    $
    (37
    )
    
    $
    
    
    
    $
    4,270
 28




---



##### Table of Contents



Consolidating Statement of Cash Flows for the year-to-date ended October 1, 2006 (Successor) (unaudited):
 GuarantorsTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    

ConsolidatedTRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (9,282
    )
    
    $
    7,520
    
    
    $
    1,483
    
    
    $
    
    
    
    $
    (273
    )
    
    $
    (8,730
    )
    
    $
    (9,282
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (8,730
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,730
    
    
    
    Depreciation and amortization
    
    
    11,523
    
    
    
    2,351
    
    
    
    4,882
    
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    19,764Amortization of discount
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other non-cash income and expense items
    
    
    (143
    )
    
    
    
    
    
    
    6,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,481Gain on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )(Gain) loss on disposition of assets
    
    
    (96
    )
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (89
    )Asset write-down
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    137Change in partnerships minority interests
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    (128
    )
    
    
    
    
    
    
    192Equity in
(income) net loss of unconsolidated partnerships
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Net changes in operating assets and liabilities
    
    
    (258
    )
    
    
    358
    
    
    
    (4,856
    )
    
    
    23
    
    
    
    209
    
    
    
    
    
    
    
    (4,524
    )Total adjustments
    
    
    2,544
    
    
    
    2,709
    
    
    
    (5,349
    )
    
    
    23
    
    
    
    1,125
    
    
    
    8,730
    
    
    
    9,782Net cash (used in) provided by operating activities
    
    
    (6,738
    )
    
    
    10,229
    
    
    
    (3,866
    )
    
    
    23
    
    
    
    852
    
    
    
    
    
    
    
    500CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (6,282
    )
    
    
    (1,051
    )
    
    
    (4,894
    )
    
    
    
    
    
    
    (1,095
    )
    
    
    
    
    
    
    (13,322
    )Proceeds from sale of assets
    
    
    1,534
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,547Intercompany activities
    
    
    77,093
    
    
    
    (77,093
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    72,345
    
    
    
    (78,144
    )
    
    
    (4,881
    )
    
    
    
    
    
    
    (1,095
    )
    
    
    
    
    
    
    (11,775
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    (213
    )
    
    
    
    
    
    
    (451
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (664
    )Payments on long-term debt
    
    
    (4,050
    )
    
    
    
    
    
    
    (101,565
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,615
    )Proceeds from long-term debt
    
    
    106,800
    
    
    
    
    
    
    
    1,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,341Intercompany financing
    
    
    (109,966
    )
    
    
    
    
    
    
    109,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (2,720
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,720
    )Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (242
    )Capital contribution from parent
    
    
    (54,884
    )
    
    
    67,429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,545Net cash (used in) provided by financing activities
    
    
    (65,033
    )
    
    
    67,429
    
    
    
    9,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,645Net increase (decrease) in cash and cash equivalents
    
    
    574
    
    
    
    (486
    )
    
    
    502
    
    
    
    23
    
    
    
    (243
    )
    
    
    
    
    
    
    370CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    1,591
    
    
    
    1,567
    
    
    
    2,609
    
    
    
    (23
    )
    
    
    (1,756
    )
    
    
    
    
    
    
    3,988Balance, end of year
    
    $
    2,165
    
    
    $
    1,081
    
    
    $
    3,111
    
    
    $
    
    
    
    $
    (1,999
    )
    
    $
    
    
    
    $
    4,358
 29




---



##### Table of Contents



Consolidating Statement of Cash Flows for the period September 22, 2005 through October 2, 2005 (Successor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    TRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (541
    )
    
    $
    620
    
    
    $
    (414
    )
    
    $
    
    
    
    $
    (9
    )
    
    $
    (197
    )
    
    $
    (541
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (197
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    Depreciation and amortization
    
    
    370
    
    
    
    111
    
    
    
    133
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    638Other non-cash income and expense items
    
    
    (65
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )(Gain) loss on disposition of assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Change in partnerships minority interests
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )Net changes in operating assets and
    
    
    2,673
    
    
    
    (20
    )
    
    
    (17
    )
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    2,598liabilitiesTotal adjustments
    
    
    2,781
    
    
    
    91
    
    
    
    111
    
    
    
    
    
    
    
    (15
    )
    
    
    197
    
    
    
    3,165Net cash (used in) provided by operating activities
    
    
    2,240
    
    
    
    711
    
    
    
    (303
    )
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    2,624CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (327
    )
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (476
    )Acquisition of predecessors business
    
    
    (224,972
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (224,972
    )Proceeds from sale of assets
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Intercompany activities
    
    
    727
    
    
    
    (727
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (224,522
    )
    
    
    (727
    )
    
    
    (120
    )
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (225,398
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Payments on long-term debt
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000
    )Proceeds from long-term debt
    
    
    190,029
    
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,440Debt issuance costs
    
    
    (9,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,163
    )Capital contribution from parent
    
    
    44,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,107Net cash (used in) provided by financing activities
    
    
    220,973
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221,365Net increase (decrease) in cash and cash equivalents
    
    
    (1,309
    )
    
    
    (16
    )
    
    
    (31
    )
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (1,409
    )CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    4,138
    
    
    
    169
    
    
    
    3,621
    
    
    
    (37
    )
    
    
    (982
    )
    
    
    
    
    
    
    6,909Balance, end of year
    
    $
    2,829
    
    
    $
    153
    
    
    $
    3,590
    
    
    $
    (37
    )
    
    $
    (1,035
    )
    
    $
    
    
    
    $
    5,500
 30




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##### Table of Contents



Consolidating Statement of Cash Flows for the period December 27, 2004 through September 21, 2005 (Predecessor) (unaudited):
 GuarantorsConsolidatedTRC
    
    
    TRCM
    
    
    Other
    
    
    Eliminations
    
    
    TRCCASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (4,140
    )
    
    $
    7,068
    
    
    $
    
    
    
    $
    (7,068
    )
    
    $
    (4,140
    )Adjustments to reconcile net income to net cash
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (7,068
    )
    
    
    
    
    
    
    
    
    
    
    7,068
    
    
    
    Depreciation and amortization
    
    
    9,081
    
    
    
    2,735
    
    
    
    
    
    
    
    
    
    
    
    11,816Other non-cash income and expense items
    
    
    2,417
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,417(Gain) loss on disposition of assets
    
    
    (652
    )
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    (518
    )Asset write-down
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Net changes
in operating assets and liabilities
    
    
    (18,205
    )
    
    
    (485
    )
    
    
    70
    
    
    
    
    
    
    
    (18,620
    )Total adjustments
    
    
    (14,179
    )
    
    
    2,384
    
    
    
    70
    
    
    
    7,068
    
    
    
    (4,657
    )Net cash (used in) provided by operating activities
    
    
    (18,319
    )
    
    
    9,452
    
    
    
    70
    
    
    
    
    
    
    
    (8,797
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (6,271
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,271
    )Proceeds from sale of assets
    
    
    107,433
    
    
    
    29,795
    
    
    
    
    
    
    
    
    
    
    
    137,228Intercompany activities
    
    
    25,382
    
    
    
    (25,279
    )
    
    
    (103
    )
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    126,544
    
    
    
    4,516
    
    
    
    (103
    )
    
    
    
    
    
    
    130,957CASH FLOWS FROM FINANCING ACTIVITIES:Principal
payments under capital lease obligations
    
    
    (254
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )Payments on long-term debt
    
    
    (148,009
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148,009
    )Proceeds from long-term debt
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Proceeds
from stock option redemption
    
    
    9,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,645Dividend to TRC
    
    
    16,000
    
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (118,618
    )
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    (134,618
    )Net increase (decrease) in cash and cash equivalents
    
    
    (10,393
    )
    
    
    (2,032
    )
    
    
    (33
    )
    
    
    
    
    
    
    (12,458
    )CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    14,531
    
    
    
    2,201
    
    
    
    (4
    )
    
    
    
    
    
    
    16,728Balance, end of year
    
    $
    4,138
    
    
    $
    169
    
    
    $
    (37
    )
    
    $
    
    
    
    $
    4,270
 31




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  OVERVIEW
          32




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##### Table of Contents



33




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##### Table of Contents



KEY FACTORS AFFECTING OUR RESULTS
   SUMMARY OF CRITICAL ACCOUNTING POLICIES
         34




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35




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##### Table of Contents



RESULTS OF OPERATIONS
 Definition of Common Control in
Relation to FASB Statement No. 141.
   SuccessorThird Quarter
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    July 11, 2005 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005REVENUES:Food sales
    
    $
    127,066
    
    
    $
    14,737
    
    
    $
    65,524Franchise and other revenue
    
    
    7,171
    
    
    
    926
    
    
    
    4,669Total revenues
    
    
    134,237
    
    
    
    15,663
    
    
    
    70,193COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    37,412
    
    
    
    5,865
    
    
    
    18,094Labor and benefits
    
    
    43,651
    
    
    
    4,918
    
    
    
    21,738Operating expenses
    
    
    33,588
    
    
    
    1,837
    
    
    
    17,928General and administrative
    
    
    10,914
    
    
    
    1,008
    
    
    
    6,885Transaction costs
    
    
    3,225
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    7,433Depreciation and amortization
    
    
    5,449
    
    
    
    638
    
    
    
    2,528Interest, net
    
    
    6,923
    
    
    
    1,141
    
    
    
    5,146(Gain) loss on disposition of assets
    
    
    5
    
    
    
    1
    
    
    
    (754
    )Asset write-down
    
    
    88
    
    
    
    
    
    
    
    Other, net
    
    
    489
    
    
    
    40
    
    
    
    (115
    )Total costs and expenses
    
    
    141,744
    
    
    
    16,315
    
    
    
    83,515Loss before income taxes and minority interests
    
    
    (7,507
    )
    
    
    (652
    )
    
    
    (13,322
    )(Provision for) Benefit from income taxes
    
    
    (324
    )
    
    
    115
    
    
    
    5,897Minority interests
    
    
    (23
    )
    
    
    (4
    )
    
    
    NET LOSS
    
    $
    (7,854
    )
    
    $
    (541
    )
    
    $
    (7,425
    )
  36




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SuccessorYear-to-Date
    
    
    Successor
    
    
    PredecessorEnded
    
    
    September 22, 2005 -
    
    
    December 27, 2004 -October 1, 2006
    
    
    October 2, 2005
    
    
    September 21, 2005REVENUES:Food sales
    
    $
    417,188
    
    
    $
    14,737
    
    
    $
    243,446Franchise and other revenue
    
    
    23,605
    
    
    
    926
    
    
    
    16,343Total revenues
    
    
    440,793
    
    
    
    15,663
    
    
    
    259,789COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    123,621
    
    
    
    5,865
    
    
    
    69,976Labor and benefits
    
    
    141,834
    
    
    
    4,918
    
    
    
    82,352Operating expenses
    
    
    105,962
    
    
    
    1,837
    
    
    
    53,438General and administrative
    
    
    36,196
    
    
    
    1,008
    
    
    
    23,711Transaction costs
    
    
    5,513
    
    
    
    867
    
    
    
    4,632Stock compensation
    
    
    
    
    
    
    
    
    
    
    8,925Depreciation and amortization
    
    
    19,764
    
    
    
    638
    
    
    
    11,816Interest, net
    
    
    28,448
    
    
    
    1,141
    
    
    
    13,380(Gain) loss on disposition of assets
    
    
    (89
    )
    
    
    1
    
    
    
    (518
    )Asset write-down
    
    
    137
    
    
    
    
    
    
    
    248Lease termination
    
    
    366
    
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    (12,581
    )
    
    
    
    
    
    
    Other, net
    
    
    388
    
    
    
    40
    
    
    
    (214
    )Total costs and expenses
    
    
    449,559
    
    
    
    16,315
    
    
    
    267,746Loss before income taxes and minority interests
    
    
    (8,766
    )
    
    
    (652
    )
    
    
    (7,957
    )(Provision for) Benefit from income taxes
    
    
    (324
    )
    
    
    115
    
    
    
    3,817Minority interests
    
    
    (192
    )
    
    
    (4
    )
    
    
    NET LOSS
    
    $
    (9,282
    )
    
    $
    (541
    )
    
    $
    (4,140
    )
  37




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##### Table of Contents



ird Quarter Ended October 1, 2006 Compared to the Combined Predecessors Period from July 11,
2005 through September 21, 2005 and Successors Period from September 22, 2005 through October 2,
2005
      Food cost
  Labor and benefits
   38




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Operating expenses
  General and administrative
  Depreciation and amortization
  Interest, net
  Gain/loss on disposition of assets
  Provision for income taxes
  39




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Year-to-Date Period Ended October 1, 2006 Compared to the Combined Predecessors Period from
December 27, 2004 through September 21, 2005 and Successors Period from September 22, 2005 through
October 2, 2005
      Food cost
  Labor and benefits
  40




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Operating expenses
  General and administrative
  Depreciation and amortization
  Interest, net
  Gain/loss on disposition of assets, Asset write-down and Lease termination
   41




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Gain on extinguishment of debt
  Provision for income taxes
  42




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CAPITAL RESOURCES AND LIQUIDITY
    Year-to-DateEnded
    
    
    September 22, 2005
    
    
    December 27, 2004October 1, 2006
    
    
    - October 2, 2005
    
    
    - September 21, 2005(in thousands)New restaurants
    
    $
    1,606
    
    
    $
    
    
    
    $
    Restaurant improvements
    
    
    5,757
    
    
    
    318
    
    
    
    3,247Restaurant remodeling
    
    
    4,655
    
    
    
    54
    
    
    
    1,042Manufacturing
    
    
    392
    
    
    
    34
    
    
    
    655Other
    
    
    912
    
    
    
    70
    
    
    
    1,327Total capital expenditures
    
    $
    13,322
    
    
    $
    476
    
    
    $
    6,271
   43




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CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
   RemainderofFiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalContractual Obligations10% Senior Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,000
    
    
    
    190,000Term Loan
    
    
    250
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    95,500
    
    
    
    99,750Revolver
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Capital lease obligations
    
    
    439
    
    
    
    1,509
    
    
    
    1,260
    
    
    
    1,110
    
    
    
    1,007
    
    
    
    28,379
    
    
    
    33,704Operating leases
    
    
    8,938
    
    
    
    33,555
    
    
    
    32,250
    
    
    
    29,623
    
    
    
    27,890
    
    
    
    283,694
    
    
    
    415,950Interest on indebtedness (1)
    
    
    6,226
    
    
    
    26,980
    
    
    
    26,980
    
    
    
    26,980
    
    
    
    26,980
    
    
    
    70,870
    
    
    
    185,016Purchase
commitments (2)
    
    
    9,981
    
    
    
    11,148
    
    
    
    2,431
    
    
    
    1,255
    
    
    
    133
    
    
    
    
    
    
    
    24,948Management
fee (3)
    
    
    10,369
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    2,270
    
    
    
    19,747Total contractual obligations
    
    $
    39,203
    
    
    $
    75,969
    
    
    $
    65,698
    
    
    $
    61,745
    
    
    $
    58,787
    
    
    $
    670,713
    
    
    $
    972,115
 
 (1)
    
    Represents interest expense using the interest rate of 10.0% on the $190,000,000 of 10%
Senior Notes and 8.0% on the $99,750,000 Term Loan and assumes no borrowings are drawn under
our Revolver. Excludes interest on capital lease obligations and fees on any letters of credit
that may be issued under our Credit Agreement.(2)
    
    Primarily represents commitments to purchase food products
for the restaurant and manufacturing segments.(3)
    
    The Company is obligated for management fees due to CHI;
however, as long as the current lending agreements are in place, the
Company is limited as to the amount that can be paid each year.   44




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RECENT ACCOUNTING PRONOUNCEMENTS
 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB
Statements No. 87, 88, 106, and 132(R) (FASB 158)
 Fair Value
Measurements
 Financial Statements  Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
   IMPACT OF INFLATION
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INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
   
    
    competitive pressures and trends in the restaurant industry;
    
    prevailing prices and availability of food, supplies and labor;
    
    relationships with franchisees and financial health of franchisees;
    
    general economic conditions and demographic patterns;
    
    our substantial indebtedness;
    
    our ability to integrate acquisitions;
    
    our development and expansion plans; and
    
    statements covering our business strategy.
  46




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
 Foreign Currency Exchange Rate Risk
 Commodity Price Risk
 
 ITEM 4. CONTROLS AND PROCEDURES
     47




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##### Table of Contents



ITEM 1. Legal Proceedings
  ITEM 1A. Risk Factors
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  ITEM 3. Defaults Upon Senior Securities
  ITEM 4. Submission of Matters to a Vote of Security Holders.
  ITEM 5. Other Information
  
 ITEM 6. Exhibits
 31.1
    
    
    Chief Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.31.2
    
    
    Chief Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.32.1
    
    
    Chief Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.32.2
    
    
    Chief Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.
 48




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Signature
  PERKINS & MARIE CALLENDERS INC.DATE: November 15, 2006
    BY: /s/ James W. StrykerJames W. StrykerChief Financial Officer 49