##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended April 16, 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 333-131004
 The Restaurant Company
  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
 þ o
 þ
 o o þ
 þ o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIOD ENDED APRIL 16, 2006ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 6. EXHIBITSSignatureEX-31.1  SECTION 302 CERTIFICATION OF THE CEOEX-31.2  SECTION 302 CERTIFICATION OF THE CFOEX-32.1  SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
  
  
 Successor
    
    
    PredecessorSixteen Weeks
    
    
    Sixteen WeeksEnded
    
    
    EndedApril 16, 2006
    
    
    April 17, 2005REVENUES:Food sales
    
    $
    104,962
    
    
    $
    102,461Franchise and other revenue
    
    
    6,649
    
    
    
    6,517Total Revenues
    
    
    111,611
    
    
    
    108,978COSTS AND EXPENSES:Cost of sales (excluding depreciation
shown below):Food cost
    
    
    30,159
    
    
    
    30,675Labor and benefits
    
    
    35,350
    
    
    
    34,650Operating expenses
    
    
    26,058
    
    
    
    20,481General and administrative
    
    
    10,472
    
    
    
    9,595Depreciation and amortization
    
    
    4,089
    
    
    
    5,194Interest, net
    
    
    6,187
    
    
    
    4,719Gain on disposition of assets
    
    
    (47
    )
    
    
    (126
    )Lease Termination
    
    
    366
    
    
    
    Other, net
    
    
    (55
    )
    
    
    (70
    )Total Costs and Expenses
    
    
    112,579
    
    
    
    105,118(Loss) income before income taxes
    
    
    (968
    )
    
    
    3,860Benefit from (provision for) income taxes
    
    
    662
    
    
    
    (1,003
    )NET (LOSS) INCOME
    
    $
    (306
    )
    
    $
    2,857
  2




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Successor
    
    
    SuccessorApril 16, 2006
    
    
    December 25, 2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,937
    
    
    $
    4,474Restricted cash
    
    
    8,843
    
    
    
    8,225Receivables, less allowances for
doubtful accounts of $1,488 and $1,584
    
    
    9,599
    
    
    
    10,554Inventories, net
    
    
    7,875
    
    
    
    6,971Prepaid expenses and other current assets
    
    
    4,499
    
    
    
    3,188Escrow deposits
    
    
    5,063
    
    
    
    18,162Deferred income taxes
    
    
    2,845
    
    
    
    2,845Total current assets
    
    
    43,661
    
    
    
    54,419PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization
    
    
    40,452
    
    
    
    42,433GOODWILL
    
    
    169,326
    
    
    
    154,049INTANGIBLE ASSETS, net of accumulated
amortization of $1,070 and $476
    
    
    47,185
    
    
    
    47,779DEFERRED INCOME TAXES
    
    
    
    
    
    
    OTHER ASSETS
    
    
    9,286
    
    
    
    9,738$
    309,910
    
    
    $
    308,418
  3




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Successor
    
    
    SuccessorApril 16, 2006
    
    
    December 25, 2005LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Current maturities of capital lease obligations
    
    $
    242
    
    
    $
    277Accounts payable
    
    
    7,933
    
    
    
    9,474Franchise advertising contributions
    
    
    5,485
    
    
    
    4,752Accrued expenses
    
    
    32,941
    
    
    
    39,603Accrued income taxes
    
    
    88
    
    
    
    Total current liabilities
    
    
    46,689
    
    
    
    54,106CAPITAL LEASE OBLIGATIONS, less
current maturities
    
    
    210
    
    
    
    260LONG-TERM DEBT
    
    
    187,602
    
    
    
    187,503DEFERRED TAX LIABILITY
    
    
    12,573
    
    
    
    12,573OTHER LIABILITIES
    
    
    3,676
    
    
    
    3,331STOCKHOLDERS INVESTMENT:Common stock, $.01 par value, 100,000 shares authorized,
10,820 issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    59,923
    
    
    
    51,108Other comprehensive income
    
    
    20
    
    
    
    14Accumulated deficit
    
    
    (784
    )
    
    
    (478
    )Total stockholders investment
    
    
    59,160
    
    
    
    50,645$
    309,910
    
    
    $
    308,418
  4




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##### Table of Contents



Successor
    
    
    PredecessorSixteen Weeks
    
    
    Sixteen WeeksEnded
    
    
    EndedApril 16, 2006
    
    
    April 17, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (306
    )
    
    $
    2,857Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    4,089
    
    
    
    5,194Amortization of discount
    
    
    99
    
    
    
    Other non-cash income and expense items
    
    
    107
    
    
    
    185Payments on notes receivable
    
    
    216
    
    
    
    104Gain on disposition of assets
    
    
    (47
    )
    
    
    (126
    )Net changes in operating assets and liabilities
    
    
    (2,781
    )
    
    
    1,751Total adjustments
    
    
    1,683
    
    
    
    7,108Net cash provided by operating activities
    
    
    1,377
    
    
    
    9,965CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (2,570
    )
    
    
    (2,231
    )Acquisition of business, escrow settlements
    
    
    (8,178
    )
    
    
    Proceeds from sale of assets
    
    
    1,103
    
    
    
    30Net cash used in investing activities
    
    
    (9,645
    )
    
    
    (2,201
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (85
    )
    
    
    (102
    )Capital contribution from parent
    
    
    8,816
    
    
    
    Net cash provided by (used in) financing activities
    
    
    8,731
    
    
    
    (102
    )Net increase in cash and cash equivalents
    
    
    463
    
    
    
    7,662CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    4,474
    
    
    
    17,988Balance, end of period
    
    $
    4,937
    
    
    $
    25,650
  5




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(1) Organization
   (2) Basis of Presentation
  (3) Accounting Reporting Period
  6




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(4) Comprehensive Income
  (5) 1999 RHC Acquisition
     PredecessorSixteen WeeksEndedApril 17, 2005Statement of Operations Data (in thousands):Depreciation and amortization
    
    $
    178Interest expense
    
    
    58Benefit for income taxes
    
    
    (143
    )Net Loss
    
    $
    (93
    )
 7




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(6) Acquisition
    (7) Commitments and Contingencies
   Consolidation of Variable
Interest Entities
 (8) Gain on Disposition of Assets and Lease Termination
   8




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(9) Supplemental Cash Flow Information
  Successor
    
    
    PredecessorSixteen Weeks
    
    
    Sixteen WeeksEnded
    
    
    EndedApril 16, 2006
    
    
    April 17, 2005(Increase) Decrease in:Receivables
    
    $
    702
    
    
    $
    (421
    )Inventories
    
    
    (904
    )
    
    
    (610
    )Prepaid expenses and
other current assets
    
    
    (1,311
    )
    
    
    (1,238
    )Other assets
    
    
    386
    
    
    
    (321
    )Increase (Decrease) in:Accounts payable
    
    
    (1,541
    )
    
    
    (1,103
    )Accrued expenses
    
    
    (1,279
    )
    
    
    5,828Other liabilities
    
    
    1,166
    
    
    
    (384
    )$
    (2,781
    )
    
    $
    1,751
 9




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(10) Segment Reporting
  Restaurants
    
    Franchise
    
    Manufacturing
    
    Other
    
    TotalsSuccessorSixteen weeks ended April 16, 2006:Revenue from
external customers
    
    $
    90,726
    
    
    $
    6,649
    
    
    $
    14,236
    
    
    $
    
    
    
    $
    111,611Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    2,244
    
    
    
    
    
    
    
    2,244Segment profit (loss)
    
    
    7,445
    
    
    
    6,032
    
    
    
    1,950
    
    
    
    (15,733
    )
    
    
    (306
    )PredecessorSixteen weeks ended April 17, 2005:Revenue from external customers
    
    $
    88,017
    
    
    $
    6,517
    
    
    $
    14,444
    
    
    $
    
    
    
    $
    108,978Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    2,626
    
    
    
    
    
    
    
    2,626Segment profit (loss)
    
    
    9,476
    
    
    
    5,704
    
    
    
    2,095
    
    
    
    (14,418
    )
    
    
    2,857
  Successor
    
    
    PredecessorSixteen Weeks
    
    
    Sixteen WeeksEnded
    
    
    EndedApril 16, 2006
    
    
    April 17, 2005General and administrative expenses
    
    $
    9,052
    
    
    $
    8,145Depreciation and amortization expenses
    
    
    874
    
    
    
    684Interest expense, net
    
    
    6,187
    
    
    
    4,719Gain on disposition of assets
    
    
    (47
    )
    
    
    (126
    )Lease termination
    
    
    366
    
    
    
    (Benefit from) provision for income taxes
    
    
    (662
    )
    
    
    1,003Other
    
    
    (37
    )
    
    
    (7
    )$
    15,733
    
    
    $
    14,418
 10




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(11) Revolving Credit Agreement
  (12) Sale-Leaseback Transaction
  (13) Senior Notes
  (14) Income tax
  (15) Recent Accounting Pronouncement
 Accounting for Certain Hybrid Financial Instruments Accounting for Derivative Instruments and
Hedging Activities
 11




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Share Based
Payments (revised 2004)
 12




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(16) Condensed Consolidated Financial Information
   Consolidating Statement of Operations for the sixteen weeks ended April 16, 2006 (Successor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)RevenueFood sales
    
    $
    80,466
    
    
    $
    24,496
    
    
    
    
    
    
    
    
    
    
    $
    104,962Franchise and other revenue
    
    
    4,109
    
    
    
    4,637
    
    
    
    15
    
    
    
    (2,112
    )
    
    
    6,649Total Revenues
    
    
    84,575
    
    
    
    29,133
    
    
    
    15
    
    
    
    (2,112
    )
    
    
    111,611Costs and ExpensesCost of Sales (excluding depreciation shown below):Food cost
    
    
    24,396
    
    
    
    5,763
    
    
    
    
    
    
    
    
    
    
    
    30,159Labor and benefits
    
    
    26,442
    
    
    
    8,908
    
    
    
    
    
    
    
    
    
    
    
    35,350Operating expenses
    
    
    19,775
    
    
    
    7,365
    
    
    
    15
    
    
    
    (1,097
    )
    
    
    26,058General and administrative
    
    
    10,468
    
    
    
    1,019
    
    
    
    
    
    
    
    (1,015
    )
    
    
    10,472Depreciation and amortization
    
    
    2,414
    
    
    
    1,675
    
    
    
    
    
    
    
    
    
    
    
    4,089Interest, net
    
    
    6,369
    
    
    
    (182
    )
    
    
    
    
    
    
    
    
    
    
    6,187Gain on disposition of assets
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Lease termination
    
    
    366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366Other, net
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )Total Costs and Expenses
    
    
    90,128
    
    
    
    24,548
    
    
    
    15
    
    
    
    (2,112
    )
    
    
    112,579(Loss) income before income taxes
    
    
    (5,553
    )
    
    
    4,585
    
    
    
    
    
    
    
    
    
    
    
    (968
    )Benefit from (provision for) income taxes
    
    
    2,367
    
    
    
    (1,705
    )
    
    
    
    
    
    
    
    
    
    
    662Equity in earnings (loss) of subsidiaries
    
    
    2,880
    
    
    
    
    
    
    
    
    
    
    
    (2,880
    )
    
    
    NET (LOSS) INCOME
    
    $
    (306
    )
    
    $
    2,880
    
    
    $
    
    
    
    $
    (2,880
    )
    
    $
    (306
    )
 13




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##### Table of Contents



Consolidating Statement of Operations for the sixteen weeks ended April 17, 2005
(Predecessor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)RevenueFood sales
    
    $
    79,503
    
    
    $
    22,958
    
    
    $
    
    
    
    $
    
    
    
    $
    102,461Franchise and other revenue
    
    
    3,936
    
    
    
    4,478
    
    
    
    64
    
    
    
    (1,961
    )
    
    
    6,517Total Revenues
    
    
    83,439
    
    
    
    27,436
    
    
    
    64
    
    
    
    (1,961
    )
    
    
    108,978Costs and ExpensesCost of Sales (excluding depreciation shown below):Food cost
    
    
    24,887
    
    
    
    5,788
    
    
    
    
    
    
    
    
    
    
    
    30,675Labor and benefits
    
    
    26,159
    
    
    
    8,491
    
    
    
    
    
    
    
    
    
    
    
    34,650Operating expenses
    
    
    14,288
    
    
    
    7,062
    
    
    
    59
    
    
    
    (928
    )
    
    
    20,481General and administrative
    
    
    9,559
    
    
    
    1,069
    
    
    
    
    
    
    
    (1,033
    )
    
    
    9,595Depreciation and amortization
    
    
    4,492
    
    
    
    697
    
    
    
    5
    
    
    
    
    
    
    
    5,194Interest, net
    
    
    4,830
    
    
    
    (111
    )
    
    
    
    
    
    
    
    
    
    
    4,719Gain on disposition of assets
    
    
    (126
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126
    )Other, net
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Total Costs and Expenses
    
    
    84,019
    
    
    
    22,996
    
    
    
    64
    
    
    
    (1,961
    )
    
    
    105,118(Loss) income before income taxes
    
    
    (580
    )
    
    
    4,440
    
    
    
    
    
    
    
    
    
    
    
    3,860Benefit from (provision for) income taxes
    
    
    531
    
    
    
    (1,534
    )
    
    
    
    
    
    
    
    
    
    
    (1,003
    )Equity in earnings (loss) of subsidiaries
    
    
    2,906
    
    
    
    
    
    
    
    
    
    
    
    (2,906
    )
    
    
    NET (LOSS) INCOME
    
    $
    2,857
    
    
    $
    2,906
    
    
    $
    
    
    
    $
    (2,906
    )
    
    $
    2,857
 14




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Consolidating Balance Sheet as of April 16, 2006 (Successor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)CURRENT ASSETS:Cash and cash equivalents
    
    $
    4,738
    
    
    $
    199
    
    
    
    
    
    
    
    
    
    
    $
    4,937Restricted cash
    
    
    1,710
    
    
    
    7,133
    
    
    
    
    
    
    
    
    
    
    
    8,843Trade receivables, less allowance for
doubtful accounts
    
    
    9,595
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    9,599Inventories, net
    
    
    7,403
    
    
    
    472
    
    
    
    
    
    
    
    
    
    
    
    7,875Prepaid expenses and other current assets
    
    
    4,138
    
    
    
    361
    
    
    
    
    
    
    
    
    
    
    
    4,499Escrow deposits
    
    
    5,063
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,063Deferred income taxes
    
    
    2,845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,845Total current assets
    
    
    35,492
    
    
    
    8,169
    
    
    
    
    
    
    
    
    
    
    
    43,661PROPERTY AND EQUIPMENT, net
    
    
    33,305
    
    
    
    7,147
    
    
    
    
    
    
    
    
    
    
    
    40,452GOODWILL
    
    
    169,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,326INTANGIBLE ASSETS, net
    
    
    47,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,185INVESTMENTS IN SUBSIDIARIES
    
    
    55,595
    
    
    
    
    
    
    
    
    
    
    
    (55,595
    )
    
    
    DUE FROM TRC
    
    
    
    
    
    
    50,049
    
    
    
    
    
    
    
    (50,049
    )
    
    
    OTHER ASSETS
    
    
    9,296
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    9,286$
    350,199
    
    
    $
    65,365
    
    
    $
    (10
    )
    
    $
    (105,644
    )
    
    $
    309,910LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Current maturities of capital lease obligations
    
    $
    242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    242Accounts payable
    
    
    5,661
    
    
    
    2,272
    
    
    
    
    
    
    
    
    
    
    
    7,933Franchisee advertising contributions
    
    
    5,485
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,485Accrued expenses
    
    
    25,453
    
    
    
    7,488
    
    
    
    
    
    
    
    
    
    
    
    32,941Accrued income taxes
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Total current liabilities
    
    
    36,929
    
    
    
    9,760
    
    
    
    
    
    
    
    
    
    
    
    46,689CAPITAL LEASE OBLIGATIONS, LESS CURRENT MATURITIES
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210LONG-TERM DEBT
    
    
    187,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,602DEFERRED TAX LIABILITY
    
    
    12,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,573OTHER LIABILITIES
    
    
    3,676
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,676DUE TO TRCM/TRC Realty
    
    
    50,049
    
    
    
    
    
    
    
    
    
    
    
    (50,049
    )
    
    
    STOCKHOLDERS INVESTMENT:Common stock
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    1Additional paid-in capital
    
    
    59,923
    
    
    
    50,132
    
    
    
    
    
    
    
    (50,132
    )
    
    
    59,923Other comprehensive income
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Retained earnings (deficit)
    
    
    (784
    )
    
    
    5,472
    
    
    
    (10
    )
    
    
    (5,462
    )
    
    
    (784
    )Total stockholders investment
    
    
    59,160
    
    
    
    55,605
    
    
    
    (10
    )
    
    
    (55,595
    )
    
    
    59,160$
    350,199
    
    
    $
    65,365
    
    
    $
    (10
    )
    
    $
    (105,644
    )
    
    $
    309,910
 15




---



##### Table of Contents



Consolidating Balance Sheet as of December 25, 2005 (Successor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)CURRENT ASSETS:Cash and cash equivalents
    
     $
   2,930
    
    
    $
    1,567
    
    
    $
    (23
    )
    
    
    
    
    
    $
    4,474Restricted cash
    
    
    3,496
    
    
    
    4,729
    
    
    
    
    
    
    
    
    
    
    
    8,225Trade receivables, less allowance for
doubtful accounts
    
    
    10,551
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    10,554Inventories, net
    
    
    6,415
    
    
    
    556
    
    
    
    
    
    
    
    
    
    
    
    6,971Prepaid expenses and other current assets
    
    
    2,927
    
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    3,188Escrow deposits
    
    
    18,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,162Deferred income taxes
    
    
    2,845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,845Total current assets
    
    
    47,326
    
    
    
    7,116
    
    
    
    (23
    )
    
    
    
    
    
    
    54,419PROPERTY AND EQUIPMENT, net
    
    
    34,826
    
    
    
    7,607
    
    
    
    
    
    
    
    
    
    
    
    42,433GOODWILL
    
    
    154,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,049INTANGIBLE ASSETS, net
    
    
    47,779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,779INVESTMENTS IN SUBSIDIARIES
    
    
    52,714
    
    
    
    
    
    
    
    
    
    
    
    (52,714
    )
    
    
    DUE FROM TRC
    
    
    
    
    
    
    45,584
    
    
    
    38
    
    
    
    (45,622
    )
    
    
    OTHER ASSETS
    
    
    9,730
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    9,738$
    346,424
    
    
    $
    60,307
    
    
    $
    23
    
    
    $
    (98,336
    )
    
    $
    308,418LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Current maturities of capital lease obligations
    
    $
    277
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    277Accounts payable
    
    
    7,939
    
    
    
    1,527
    
    
    
    8
    
    
    
    
    
    
    
    9,474Franchisee advertising contributions
    
    
    4,752
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,752Accrued expenses
    
    
    33,522
    
    
    
    6,056
    
    
    
    25
    
    
    
    
    
    
    
    39,603Total current liabilities
    
    
    46,490
    
    
    
    7,583
    
    
    
    33
    
    
    
    
    
    
    
    54,106CAPITAL
LEASE OBLIGATIONS, LESS CURRENT MATURITIES
    
    
    260
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260LONG-TERM DEBT
    
    
    187,503
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,503DEFERRED TAX LIABILITY
    
    
    12,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,573OTHER LIABILITIES
    
    
    3,331
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,331DUE TO TRCM/TRC Realty
    
    
    45,622
    
    
    
    
    
    
    
    
    
    
    
    (45,622
    )
    
    
    STOCKHOLDERS INVESTMENT:Common stock
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    1Additional paid-in capital
    
    
    51,108
    
    
    
    50,132
    
    
    
    
    
    
    
    (50,132
    )
    
    
    51,108Other comprehensive income
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Retained earnings (deficit)
    
    
    (478
    )
    
    
    2,591
    
    
    
    (10
    )
    
    
    (2,581
    )
    
    
    (478
    )Total stockholders investment
    
    
    50,645
    
    
    
    52,724
    
    
    
    (10
    )
    
    
    (52,714
    )
    
    
    50,645$
    346,424
    
    
    $
    60,307
    
    
    $
    23
    
    
    $
    (98,336
    )
    
    $
    308,418
 16




---



##### Table of Contents



Consolidating Statement of Cash Flows for the sixteen weeks ended April 16, 2006 (Successor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (306
    )
    
    $
    2,880
    
    
    
    
    
    
    $
    (2,880
    )
    
    $
    (306
    )Adjustments to reconcile net income to net
cash provided by operating activities:Equity in earnings of subsidiary
    
    
    (2,880
    )
    
    
    
    
    
    
    
    
    
    
    2,880
    
    
    
    Depreciation and amortization
    
    
    2,414
    
    
    
    1,675
    
    
    
    
    
    
    
    
    
    
    
    4,089Amortization of discount
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99Other non-cash income and expense items, net
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Payments on notes receivable of franchise fees
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216Gain on disposition of assets
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Net changes in other operating assets and liabilities
    
    
    (2,560
    )
    
    
    (244
    )
    
    
    23
    
    
    
    
    
    
    
    (2,781
    )Total adjustments
    
    
    (2,651
    )
    
    
    1,431
    
    
    
    23
    
    
    
    2,880
    
    
    
    1,683Net cash (used in) provided by operating
activities
    
    
    (2,957
    )
    
    
    4,311
    
    
    
    23
    
    
    
    
    
    
    
    1,377CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (1,355
    )
    
    
    (1,215
    )
    
    
    
    
    
    
    
    
    
    
    (2,570
    )Acquisition of business, escrow settlement
    
    
    (8,178
    )
    
    
    
    
    

    

    


    
    
    
    
    
    (8,178
    )Proceeds from sale of property and
equipment
    
    
    1,103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,103Intercompany activities
    
    
    4,464
    
    
    
    (4,464
    )
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (3,966
    )
    
    
    (5,679
    )
    
    
    
    
    
    
    
    
    
    
    (9,645
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease
obligations
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )Capital contribution from parent
    
    
    8,816
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,816Net cash provided by financing activities
    
    
    8,731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,731Net increase (decrease) in cash and cash equivalents
    
    
    1,808
    
    
    
    (1,368
    )
    
    
    23
    
    
    
    
    
    
    
    463CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    2,930
    
    
    
    1,567
    
    
    
    (23
    )
    
    
    
    
    
    
    4,474Balance, end of year
    
    $
    4,738
    
    
    $
    199
    
    
    
    
    
    
    
    
    
    
    $
    4,937
 17




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##### Table of Contents



Consolidating Statement of Cash Flows for the sixteen weeks ended April 17, 2005 (Predecessor):
 Other
    
    
    
    
    
    
    ConsolidatedTRC
    
    
    TRCM
    
    
    Guarantors
    
    
    Eliminations
    
    
    TRC(in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    2,857
    
    
    $
    2,906
    
    
    
    
    
    
    $
    (2,906
    )
    
    $
    2,857Adjustments to reconcile net income to net
cash provided by operating activities:Equity in earnings of subsidiary
    
    
    (2,906
    )
    
    
    
    
    
    
    
    
    
    
    2,906
    
    
    
    Depreciation and amortization
    
    
    4,492
    
    
    
    697
    
    
    
    5
    
    
    
    
    
    
    
    5,194Other
non-cash income and expense items, net
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Payments on notes receivable of franchise fees
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104Gain on disposition of assets
    
    
    (126
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126
    )Net changes in other operating assets and liabilities
    
    
    3,292
    
    
    
    (1,540
    )
    
    
    (1
    )
    
    
    
    
    
    
    1,751Total adjustments
    
    
    5,041
    
    
    
    (843
    )
    
    
    4
    
    
    
    2,906
    
    
    
    7,108Net cash provided by operating activities
    
    
    7,898
    
    
    
    2,063
    
    
    
    4
    
    
    
    
    
    
    
    9,965CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (2,214
    )
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (2,231
    )Proceeds from sale of property and
equipment
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Intercompany activities
    
    
    (11,840
    )
    
    
    11,840
    
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) provided by investing
activities
    
    
    (14,024
    )
    
    
    11,823
    
    
    
    
    
    
    
    
    
    
    
    (2,201
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease
obligations
    
    
    (102
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102
    )Dividend to TRC
    
    
    16,000
    
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    15,898
    
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    (102
    )Net increase (decrease) in cash and cash equivalents
    
    
    9,772
    
    
    
    (2,114
    )
    
    
    4
    
    
    
    
    
    
    
    7,662CASH AND CASH EQUIVALENTS:Balance, beginning of year
    
    
    15,791
    
    
    
    2,201
    
    
    
    (4
    )
    
    
    
    
    
    
    17,988Balance, end of year
    
    $
    25,563
    
    
    $
    87
    
    
    
    
    
    
    
    
    
    
    $
    25,650
 18




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##### Table of Contents



(17) Subsequent Events
    19




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE PERIOD ENDED APRIL 16, 2006
  OVERVIEW:
      20




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##### Table of Contents



KEY FACTORS AFFECTING OUR RESULTS:
   SALE-LEASEBACK TRANSACTION AND BOND REDEMPTION:
  21




---



##### Table of Contents



SUMMARY
OF CRITICAL ACCOUNTING POLICIES:
         22




---



##### Table of Contents



23




---



##### Table of Contents



RESULTS OF OPERATIONS
    Successor
    
    PredecessorSixteen Weeks
    
    Sixteen WeeksEnded
    
    EndedApril 16, 2006
    
    April 17, 2005Revenues:Food sales
    
    
    94.0
    %
    
    
    94.0
    %Franchise and other revenue
    
    
    6.0
    
    
    
    6.0Total Revenues
    
    
    100.0
    
    
    
    100.0Costs and Expenses:Cost of sales (excluding depreciation shown below):Food cost
    
    
    27.0
    
    
    
    28.1Labor and benefits
    
    
    31.7
    
    
    
    31.8Operating expenses
    
    
    23.3
    
    
    
    18.8General and administrative
    
    
    9.4
    
    
    
    8.8Depreciation and amortization
    
    
    3.7
    
    
    
    4.8Interest, net
    
    
    5.5
    
    
    
    4.3Gain on disposition of assets
    
    
    
    
    
    
    (0.1
    )Lease termination
    
    
    0.3
    
    
    
    Other, net
    
    
    
    
    
    
    Total Costs and Expenses
    
    
    100.9
    
    
    
    96.5(Loss) Income before income taxes
    
    
    (0.9
    )
    
    
    3.5Benefit from (provision for) income taxes
    
    
    0.6
    
    
    
    (0.9
    )Net (Loss) Income
    
    
    (0.3
    )%
    
    
    2.6
    %
  24




---



##### Table of Contents



Sixteen Weeks Ended April 16, 2006 Compared to Sixteen Weeks Ended April 17, 2005
      Food cost
  Labor and benefits
   25




---



##### Table of Contents



Operating expenses
   General and administrative
  Depreciation and amortization
  Interest, net
  Gain on Disposition of Assets and Lease Termination:
    Other,
net
  Provision for Income Taxes
  26




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##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
    Successor
    
    
    PredecessorSixteen
    
    
    SixteenWeeks Ended
    
    
    Weeks EndedApril 16, 2006
    
    
    April 17, 2005(in thousands)New restaurants
    
    $
    
    
    
    $
    Capital improvements
    
    
    1,102
    
    
    
    1,188Remodeling and re-imaging
    
    
    969
    
    
    
    20Manufacturing
    
    
    168
    
    
    
    242Other
    
    
    331
    
    
    
    781Total capital expenditures
    
    $
    2,570
    
    
    $
    2,231
  27




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##### Table of Contents



CONTRACTUAL
OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
   Remainder ofFiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalContractual Obligations10% Senior Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    190,000
    
    
    $
    190,000Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    218
    
    
    
    166
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    496Operating leases
    
    
    15,231
    
    
    
    20,335
    
    
    
    20,121
    
    
    
    19,086
    
    
    
    19,208
    
    
    
    238,622
    
    
    
    332,603Interest on indebtedness (1)
    
    
    13,154
    
    
    
    19,000
    
    
    
    19,000
    
    
    
    19,000
    
    
    
    19,000
    
    
    
    52,250
    
    
    
    141,404Purchase commitments
    
    
    29,944
    
    
    
    11,148
    
    
    
    2,431
    
    
    
    1,255
    
    
    
    133
    
    
    
    
    
    
    
    44,911Management fee
    
    
    1,230
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    1,777
    
    
    
    2,270
    
    
    
    10,608Total contractual obligations
    
    $
    59,777
    
    
    $
    52,426
    
    
    $
    43,441
    
    
    $
    41,118
    
    
    $
    40,118
    
    
    $
    483,142
    
    
    $
    720,022
 
 (1)
  28




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##### Table of Contents




    
    Any obligation under certain guarantees or contracts;
    
    A retained or contingent interest in assets transferred to an unconsolidated entity
or similar entity or similar arrangement that serves as credit, liquidity or market
risk support to that entity for such assets;
    
    Any obligation under certain derivative instruments;
    
    Any obligation under a material variable interest held by the registrant in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk
support to the registrant, or engages in leasing, hedging or research and development
services with the registrant.
  Consolidation of Variable Interest Entities
  29




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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
   IMPACT OF INFLATION:
  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;
 30




---



##### Table of Contents




    
    our development and expansion plans; and
    
    statements covering our business strategy.
  31




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
  32




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##### Table of Contents



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.
 33




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##### Table of Contents



Signature
  THE RESTAURANT COMPANYDATE: May 31, 2006
    
    BY:
    
    /s/ James W. StrykerJames W. StrykerChief Financial Officer
 34