##### 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 July 15, 2007
 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)
 (Registrants telephone number, including area code)
 þ þ o
 þ
 o o þ
 þ o þ




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    2ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    22ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    39ITEM 4. CONTROLS AND PROCEDURES
    
    
    39PART II  OTHER INFORMATIONITEM 6. EXHIBITS
    
    
    41Signature
    
    
    42EX-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




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##### Table of Contents



Second
    
    
    SecondQuarter
    
    
    Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006
    
    
    July 15, 2007
    
    
    July 9, 2006REVENUES:Food sales
    
    $
    122,702
    
    
    $
    129,507
    
    
    $
    291,590
    
    
    $
    290,122Franchise and other revenue
    
    
    7,408
    
    
    
    7,403
    
    
    
    16,806
    
    
    
    16,434Total Revenues
    
    
    130,110
    
    
    
    136,910
    
    
    
    308,396
    
    
    
    306,556COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    33,685
    
    
    
    37,651
    
    
    
    81,008
    
    
    
    85,691Labor and benefits
    
    
    42,048
    
    
    
    43,938
    
    
    
    100,369
    
    
    
    98,184Operating expenses
    
    
    32,590
    
    
    
    31,961
    
    
    
    76,684
    
    
    
    72,243General and administrative
    
    
    10,676
    
    
    
    11,713
    
    
    
    24,900
    
    
    
    25,282Transaction costs
    
    
    568
    
    
    
    1,736
    
    
    
    752
    
    
    
    2,290Depreciation and amortization
    
    
    5,769
    
    
    
    8,223
    
    
    
    12,890
    
    
    
    14,316Interest, net
    
    
    7,217
    
    
    
    9,778
    
    
    
    16,698
    
    
    
    21,525Asset impairments and closed store expenses
    
    
    (146
    )
    
    
    1
    
    
    
    9
    
    
    
    321Gain on extinguishment of debt
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    344
    
    
    
    599
    
    
    
    314
    
    
    
    544Total Costs and Expenses
    
    
    132,751
    
    
    
    133,019
    
    
    
    313,624
    
    
    
    307,815(Loss) income before income taxes and minority interests
    
    
    (2,641
    )
    
    
    3,891
    
    
    
    (5,228
    )
    
    
    (1,259
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    82
    
    
    
    95
    
    
    
    244
    
    
    
    169NET (LOSS) INCOME
    
    $
    (2,723
    )
    
    $
    3,796
    
    
    $
    (5,472
    )
    
    $
    (1,428
    )
  2




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##### Table of Contents



July 15, 2007
    
    
    December 31, 2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,402
    
    
    $
    9,069Restricted cash
    
    
    10,440
    
    
    
    11,193Receivables, less allowances for doubtful accounts of $1,562 and
$1,624 in 2007 and 2006, respectively
    
    
    19,814
    
    
    
    18,316Inventories
    
    
    13,889
    
    
    
    10,996Prepaid expenses and other current assets
    
    
    6,854
    
    
    
    4,824Total current assets
    
    
    54,399
    
    
    
    54,398PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $106,151 and $96,458 in 2007
and 2006, respectively
    
    
    90,992
    
    
    
    91,044INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
    
    
    203
    
    
    
    238GOODWILL
    
    
    30,038
    
    
    
    30,038INTANGIBLE ASSETS, net of accumulated amortization of
$15,596 and $14,018 in 2007 and 2006, respectively
    
    
    155,214
    
    
    
    156,792DEFERRED INCOME TAXES
    
    
    708
    
    
    
    708OTHER ASSETS
    
    
    12,910
    
    
    
    13,627Total Assets
    
    $
    344,464
    
    
    $
    346,845
  3




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##### Table of Contents



July 15, 2007
    
    
    December 31, 2006(Unaudited)LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    20,639
    
    
    $
    22,799Accrued expenses
    
    
    50,447
    
    
    
    58,288Accrued income taxes
    
    
    198
    
    
    
    75Franchise advertising contributions
    
    
    6,108
    
    
    
    5,392Current maturities of long-term debt and capital lease obligations
    
    
    1,549
    
    
    
    1,706Total current liabilities
    
    
    78,941
    
    
    
    88,260CAPITAL LEASE OBLIGATIONS, less current maturities
    
    
    6,461
    
    
    
    6,249LONG-TERM DEBT, less current maturities
    
    
    296,542
    
    
    
    286,379DEFERRED RENT
    
    
    10,572
    
    
    
    9,768OTHER LIABILITIES
    
    
    12,736
    
    
    
    11,785MINORITY INTEREST IN CONSOLIDATED PARTNERSHIPS
    
    
    119
    
    
    
    75STOCKHOLDERS INVESTMENT:Common stock, $.01 par value, 100,000 shares authorized,
10,820 issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    136,131
    
    
    
    136,131Other comprehensive income
    
    
    66
    
    
    
    13Accumulated deficit
    
    
    (197,105
    )
    
    
    (191,816
    )Total stockholders investment
    
    
    (60,907
    )
    
    
    (55,671
    )Total Liabilities and Stockholders Investment
    
    $
    344,464
    
    
    $
    346,845
  4




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##### Table of Contents



Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (5,472
    )
    
    $
    (1,428
    )Adjustments to reconcile net loss to net cash
(used in) provided by operating activities :Depreciation and amortization
    
    
    12,890
    
    
    
    14,316Amortization of debt discount
    
    
    173
    
    
    
    173Other non-cash income and expense items
    
    
    309
    
    
    
    6,412Gain on extinguishment of debt
    
    
    
    
    
    
    (12,581
    )Gain on disposition of assets
    
    
    (385
    )
    
    
    (94
    )Asset write-down
    
    
    394
    
    
    
    49Minority interests
    
    
    244
    
    
    
    169Equity in net loss of unconsolidated partnerships
    
    
    35
    
    
    
    109Net changes in operating assets and liabilities
    
    
    (12,055
    )
    
    
    (4,970
    )Total adjustments
    
    
    1,605
    
    
    
    3,583Net cash (used in) provided by operating activities
    
    
    (3,867
    )
    
    
    2,155CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (11,190
    )
    
    
    (7,939
    )Proceeds from sale of assets
    
    
    3
    
    
    
    1,547Net cash used in investing activities
    
    
    (11,187
    )
    
    
    (6,392
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (403
    )
    
    
    (439
    )Proceeds from long-term debt
    
    
    
    
    
    
    101,541Payments on long-term debt
    
    
    (510
    )
    
    
    (101,561
    )Proceeds from revolver
    
    
    45,500
    
    
    
    3,800Payments on revolver
    
    
    (35,000
    )
    
    
    (3,800
    )Debt issuance costs
    
    
    
    
    
    
    (2,720
    )Distributions to minority partners
    
    
    (200
    )
    
    
    (162
    )Capital contribution from parent
    
    
    
    
    
    
    12,545Net cash provided by financing activities
    
    
    9,387
    
    
    
    9,204Net
(decrease) increase in cash and cash equivalents
    
    
    (5,667
    )
    
    
    4,967CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    9,069
    
    
    
    3,988Balance, end of period
    
    $
    3,402
    
    
    $
    8,955
  5




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AccumulatedAdditional
    
    
    Notes
    
    
    Other
    
    
    RetainedCommon
    
    
    Paid-in
    
    
    Secured
    
    
    Comprehensive
    
    
    EarningsStock
    
    
    Capital
    
    
    By Stock
    
    
    Income
    
    
    (Deficit)
    
    
    TotalBalance at December 25, 2005
    
    $
    1
    
    
    $
    123,907
    
    
    $
    (1,308
    )
    
    $
    14
    
    
    $
    (182,444
    )
    
    $
    (59,830
    )Capital contribution
    
    
    
    
    
    
    12,545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,545Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,372
    )
    
    
    (9,372
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,373
    )Note forgiveness
    
    
    
    
    
    
    (321
    )
    
    
    1,308
    
    
    
    
    
    
    
    
    
    
    
    987Balance at December 31, 2006
    
    
    1
    
    
    
    136,131
    
    
    
    
    
    
    
    13
    
    
    
    (191,816
    )
    
    
    (55,671
    )Cumulative adjustment (Note 11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    183Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,472
    )
    
    
    (5,472
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    53Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,419
    )Balance at July 15, 2007
    
    $
    1
    
    
    $
    136,131
    
    
    $
    
    
    
    $
    66
    
    
    $
    (197,105
    )
    
    $
    (60,907
    )
  6




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(1) Organization
             (2) Basis of Presentation
  7




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##### Table of Contents



(3) Accounting Reporting Period
    (4) Comprehensive Income/Loss
  (5) Combination of Companies Under Common Control
   8




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(6) Commitments and Contingencies
      (7) Supplemental Cash Flow Information
  Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006(Increase) Decrease in:Receivables
    
    $
    (1,267
    )
    
    $
    1,010Inventories
    
    
    (2,893
    )
    
    
    (958
    )Prepaid expenses and other current assets
    
    
    (2,030
    )
    
    
    386Other assets
    
    
    699
    
    
    
    (629
    )Increase (Decrease) in:Accounts payable
    
    
    (2,160
    )
    
    
    (2,370
    )Accrued expenses and other current liabilities
    
    
    (5,010
    )
    
    
    (1,037
    )Other liabilities
    
    
    606
    
    
    
    (1,372
    )$
    (12,055
    )
    
    $
    (4,970
    )
 9




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##### Table of Contents



(8) Accrued Expenses
  July 15, 2007
    
    
    December 31, 2006Payroll and related benefits
    
    $
    15,810
    
    
    $
    18,209Property, real estate and sales taxes
    
    
    5,716
    
    
    
    4,692Insurance
    
    
    2,282
    
    
    
    5,086Gift cards and gift certificates
    
    
    5,502
    
    
    
    8,233Advertising
    
    
    1,228
    
    
    
    1,262Interest
    
    
    7,151
    
    
    
    6,085Management fees
    
    
    2,055
    
    
    
    2,210Other
    
    
    10,703
    
    
    
    12,511$
    50,447
    
    
    $
    58,288
 (9) Segment Reporting
   10




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Second Quarter
    
    
    Second Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006
    
    
    July 15, 2007
    
    
    July 9, 2006RevenuePerkins Restaurants
    
    $
    67,592
    
    
    $
    66,250
    
    
    $
    158,673
    
    
    $
    156,975Marie Callenders Restaurants
    
    
    45,305
    
    
    
    50,537
    
    
    
    110,575
    
    
    
    102,814Perkins Franchise
    
    
    5,050
    
    
    
    5,160
    
    
    
    11,466
    
    
    
    11,809Marie Callenders Franchise
    
    
    1,153
    
    
    
    1,230
    
    
    
    2,767
    
    
    
    2,507Foxtail
    
    
    13,619
    
    
    
    14,831
    
    
    
    32,201
    
    
    
    34,688Intersegment revenue
    
    
    (3,812
    )
    
    
    (2,111
    )
    
    
    (9,859
    )
    
    
    (4,355
    )Other
    
    
    1,203
    
    
    
    1,013
    
    
    
    2,573
    
    
    
    2,118Total
    
    $
    130,110
    
    
    $
    136,910
    
    
    $
    308,396
    
    
    $
    306,556
 Second Quarter
    
    
    Second Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006
    
    
    July 15, 2007
    
    
    July 9, 2006Segment net income (loss)Perkins Restaurants
    
    $
    6,630
    
    
    $
    4,336
    
    
    $
    14,368
    
    
    $
    11,781Marie Callenders Restaurants
    
    
    1,566
    
    
    
    1,448
    
    
    
    4,620
    
    
    
    3,358Perkins Franchise
    
    
    4,568
    
    
    
    4,570
    
    
    
    10,178
    
    
    
    10,602Marie Callenders Franchise
    
    
    1,153
    
    
    
    1,230
    
    
    
    2,766
    
    
    
    2,507Foxtail
    
    
    1,033
    
    
    
    1,933
    
    
    
    2,540
    
    
    
    4,562Other
    
    
    (17,673
    )
    
    
    (9,721
    )
    
    
    (39,944
    )
    
    
    (34,238
    )Total
    
    $
    (2,723
    )
    
    $
    3,796
    
    
    $
    (5,472
    )
    
    $
    (1,428
    )
 December 31,July 15, 2007
    
    
    2006Segment AssetsPerkins Restaurants
    
    $
    97,875
    
    
    $
    94,146Marie Callenders Restaurants
    
    
    35,284
    
    
    
    36,393Perkins Franchise
    
    
    122,684
    
    
    
    123,392Marie Callenders Franchise
    
    
    382
    
    
    
    386Foxtail
    
    
    44,034
    
    
    
    41,715Other
    
    
    44,205
    
    
    
    50,813Total
    
    $
    344,464
    
    
    $
    346,845
 11




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Second Quarter
    
    
    Second Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 15, 2007
    
    
    July 9, 2006
    
    
    July 15, 2007
    
    
    July 9, 2006General and administrative expenses
    
    $
    9,554
    
    
    $
    10,514
    
    
    $
    22,128
    
    
    $
    22,664Depreciation and amortization expenses
    
    
    1,143
    
    
    
    572
    
    
    
    2,045
    
    
    
    1,386Interest expense, net
    
    
    7,217
    
    
    
    9,778
    
    
    
    16,698
    
    
    
    21,525Gain on disposition of assets, net
    
    
    (394
    )
    
    
    (39
    )
    
    
    (385
    )
    
    
    (94
    )Asset write-down
    
    
    248
    
    
    
    40
    
    
    
    394
    
    
    
    49Lease termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366Transaction costs
    
    
    568
    
    
    
    1,736
    
    
    
    752
    
    
    
    2,290Minority interest
    
    
    82
    
    
    
    95
    
    
    
    244
    
    
    
    169Licensing revenue
    
    
    (1,093
    )
    
    
    (965
    )
    
    
    (2,322
    )
    
    
    (1,909
    )Gain on extinguishment of debt
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    (12,581
    )Other
    
    
    348
    
    
    
    571
    
    
    
    390
    
    
    
    373$
    17,673
    
    
    $
    9,721
    
    
    $
    39,944
    
    
    $
    34,238
 (10) Long-Term Debt
    (11) Income Tax
  
 12




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##### Table of Contents



(12) Employee
Subscription Agreements and Strip Subscription Agreements
   Date
  
  PercentageFirst anniversary of January 31, 2007
  
  25
  %Second anniversary of January 31, 2007
  
  50
  %Third anniversary of January 31, 2007
  
  75
  %Fourth anniversary of January 31, 2007
  
  100
  %
     (13) Recent Accounting Pronouncements
   13




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##### Table of Contents



(14) Condensed Consolidated Financial Information
   Consolidating Statement of Operations for the quarter ended July 15, 2007 (unaudited; in
thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCIRevenueFood sales
    
    $
    76,823
    
    
    $
    39,798
    
    
    $
    
    
    
    $
    6,081
    
    
    $
    
    
    
    $
    122,702Franchise and other revenue
    
    
    5,051
    
    
    
    2,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,408Total revenues
    
    
    81,874
    
    
    
    42,155
    
    
    
    
    
    
    
    6,081
    
    
    
    
    
    
    
    130,110Cost and expensesCost of sales (excluding depreciation shown
below):Food cost
    
    
    20,872
    
    
    
    11,155
    
    
    
    
    
    
    
    1,658
    
    
    
    
    
    
    
    33,685Labor and benefits
    
    
    25,695
    
    
    
    14,285
    
    
    
    
    
    
    
    2,068
    
    
    
    
    
    
    
    42,048Operating expenses
    
    
    19,573
    
    
    
    10,905
    
    
    
    
    
    
    
    2,112
    
    
    
    
    
    
    
    32,590General and administrative
    
    
    9,043
    
    
    
    1,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,676Transaction costs
    
    
    568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    568Depreciation and amortization
    
    
    4,146
    
    
    
    1,326
    
    
    
    
    
    
    
    297
    
    
    
    
    
    
    
    5,769Interest, net
    
    
    6,971
    
    
    
    249
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    7,217Asset impairments and closed store expenses
    
    
    (394
    )
    
    
    224
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    (146
    )Other, net
    
    
    (25
    )
    
    
    369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344Total costs and expenses
    
    
    86,449
    
    
    
    40,146
    
    
    
    
    
    
    
    6,156
    
    
    
    
    
    
    
    132,751(Loss) income before income taxes and minority
interests
    
    
    (4,575
    )
    
    
    2,009
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (2,641
    )Benefit from (provision for) income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    82Equity in earnings (loss) of subsidiaries
    
    
    1,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,852
    )
    
    
    NET (LOSS) INCOME
    
    $
    (2,723
    )
    
    $
    2,009
    
    
    $
    
    
    
    $
    (157
    )
    
    $
    (1,852
    )
    
    $
    (2,723
    )
 14




---



##### Table of Contents



Consolidating Statement of Operations for the quarter ended July 9, 2006 (unaudited; in
thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    PMCM
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCIRevenueFood sales
    
    $
    57,703
    
    
    $
    18,731
    
    
    $
    45,862
    
    
    $
    
    
    
    $
    7,211
    
    
    $
    
    
    
    $
    129,507Franchise and other revenue
    
    
    3,187
    
    
    
    3,654
    
    
    
    2,243
    
    
    
    
    
    
    
    
    
    
    
    (1,681
    )
    
    
    7,403Total revenues
    
    
    60,890
    
    
    
    22,385
    
    
    
    48,105
    
    
    
    
    
    
    
    7,211
    
    
    
    (1,681
    )
    
    
    136,910Cost and expensesCost of sales (excluding depreciation shown
below):Food cost
    
    
    16,785
    
    
    
    4,162
    
    
    
    14,711
    
    
    
    
    
    
    
    1,993
    
    
    
    
    
    
    
    37,651Labor and benefits
    
    
    18,906
    
    
    
    6,736
    
    
    
    15,914
    
    
    
    
    
    
    
    2,382
    
    
    
    
    
    
    
    43,938Operating expenses
    
    
    12,743
    
    
    
    5,926
    
    
    
    11,802
    
    
    
    
    
    
    
    2,409
    
    
    
    (919
    )
    
    
    31,961General and administrative
    
    
    8,325
    
    
    
    765
    
    
    
    3,385
    
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    11,713Transaction costs
    
    
    1,187
    
    
    
    
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,736Depreciation and amortization
    
    
    5,776
    
    
    
    461
    
    
    
    1,650
    
    
    
    
    
    
    
    336
    
    
    
    
    
    
    
    8,223Interest, net
    
    
    6,243
    
    
    
    (31
    )
    
    
    3,564
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    9,778Asset impairments and closed store expenses
    
    
    (49
    )
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    1Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    (46
    )
    
    
    
    
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    599Total costs and expenses
    
    
    69,870
    
    
    
    18,019
    
    
    
    39,666
    
    
    
    
    
    
    
    7,145
    
    
    
    (1,681
    )
    
    
    133,019(Loss) income before income taxes and minority
interests
    
    
    (8,980
    )
    
    
    4,366
    
    
    
    8,439
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    3,891(Benefit from) provision for income taxes
    
    
    (1,643
    )
    
    
    1,643
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Equity in earnings (loss) of subsidiaries
    
    
    11,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,133
    )
    
    
    NET
 INCOME (LOSS)
    
    $
    3,796
    
    
    $
    2,723
    
    
    $
    8,439
    
    
    $
    
    
    
    $
    (29
    )
    
    $
    (11,133
    )
    
    $
    3,796
 15




---



##### Table of Contents



Consolidating
Statement of Operations for the year-to-date period ended July 15, 2007 (unaudited; in
thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCIRevenueFood sales
    
    $
    178,762
    
    
    $
    97,770
    
    
    $
    
    
    
    $
    15,058
    
    
    $
    
    
    
    $
    291,590Franchise and other revenue
    
    
    11,467
    
    
    
    5,339
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,806Total revenues
    
    
    190,229
    
    
    
    103,109
    
    
    
    
    
    
    
    15,058
    
    
    
    
    
    
    
    308,396Cost and expensesCost of sales (excluding depreciation shown
below):Food cost
    
    
    48,674
    
    
    
    28,126
    
    
    
    
    
    
    
    4,208
    
    
    
    
    
    
    
    81,008Labor and benefits
    
    
    60,618
    
    
    
    34,909
    
    
    
    
    
    
    
    4,842
    
    
    
    
    
    
    
    100,369Operating expenses
    
    
    45,626
    
    
    
    25,890
    
    
    
    
    
    
    
    5,168
    
    
    
    
    
    
    
    76,684General and administrative
    
    
    21,440
    
    
    
    3,460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,900Transaction costs
    
    
    615
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    752Depreciation and amortization
    
    
    9,139
    
    
    
    3,065
    
    
    
    
    
    
    
    686
    
    
    
    
    
    
    
    12,890Interest, net
    
    
    16,115
    
    
    
    583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,698Asset impairments and closed store expenses
    
    
    (382
    )
    
    
    366
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    9Other, net
    
    
    (36
    )
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314Total costs and expenses
    
    
    201,809
    
    
    
    96,886
    
    
    
    
    
    
    
    14,929
    
    
    
    
    
    
    
    313,624(Loss) income before income taxes and minority
interests
    
    
    (11,580
    )
    
    
    6,223
    
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    (5,228
    )Benefit from (provision for) income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244
    
    
    
    
    
    
    
    244Equity in earnings (loss) of subsidiaries
    
    
    6,108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,108
    )
    
    
    NET (LOSS) INCOME
    
    $
    (5,472
    )
    
    $
    6,223
    
    
    $
    
    
    
    $
    (115
    )
    
    $
    (6,108
    )
    
    $
    (5,472
    )
 16




---



##### Table of Contents



Consolidating
Statement of Operations for the year-to-date period ended July 9, 2006 (unaudited; in thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    PMCM
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCIRevenueFood sales
    
    $
    138,169
    
    
    $
    43,227
    
    
    $
    93,849
    
    
    $
    
    
    
    $
    14,877
    
    
    $
    
    
    
    $
    290,122Franchise and other revenue
    
    
    7,296
    
    
    
    8,004
    
    
    
    4,625
    
    
    
    15
    
    
    
    
    
    
    
    (3,506
    )
    
    
    16,434Total revenues
    
    
    145,465
    
    
    
    51,231
    
    
    
    98,474
    
    
    
    15
    
    
    
    14,877
    
    
    
    (3,506
    )
    
    
    306,556Cost and expensesCost of sales (excluding depreciation shown
below):Food cost
    
    
    41,181
    
    
    
    9,925
    
    
    
    30,358
    
    
    
    
    
    
    
    4,227
    
    
    
    
    
    
    
    85,691Labor and benefits
    
    
    45,347
    
    
    
    15,645
    
    
    
    32,479
    
    
    
    
    
    
    
    4,713
    
    
    
    
    
    
    
    98,184Operating expenses
    
    
    31,228
    
    
    
    14,294
    
    
    
    23,362
    
    
    
    15
    
    
    
    5,073
    
    
    
    (1,729
    )
    
    
    72,243General and administrative
    
    
    18,239
    
    
    
    1,784
    
    
    
    7,036
    
    
    
    
    
    
    
    
    
    
    
    (1,777
    )
    
    
    25,282Transaction costs
    
    
    1,741
    
    
    
    
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,290Depreciation and amortization
    
    
    9,211
    
    
    
    1,115
    
    
    
    3,321
    
    
    
    
    
    
    
    669
    
    
    
    
    
    
    
    14,316Interest, net
    
    
    12,881
    
    
    
    (482
    )
    
    
    9,124
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    21,525Asset impairments and closed store expenses
    
    
    270
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    321Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    (101
    )
    
    
    
    
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    544Total costs and expenses
    
    
    159,997
    
    
    
    42,281
    
    
    
    94,321
    
    
    
    15
    
    
    
    14,707
    
    
    
    (3,506
    )
    
    
    307,815(Loss) income before income taxes and minority
interests
    
    
    (14,532
    )
    
    
    8,950
    
    
    
    4,153
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    (1,259
    )(Benefit from) provision for income taxes
    
    
    (3,346
    )
    
    
    3,346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    169Equity in earnings (loss) of subsidiaries
    
    
    9,758
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,758
    )
    
    
    NET (LOSS) INCOME
    
    $
    (1,428
    )
    
    $
    5,604
    
    
    $
    4,153
    
    
    $
    
    
    
    $
    1
    
    
    $
    (9,758
    )
    
    $
    (1,428
    )
 17




---



##### Table of Contents



Consolidating Balance Sheet as of July 15, 2007 (unaudited; in thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCICURRENT ASSETS:Cash and cash equivalents
    
    $
    3,135
    
    
    $
    2,566
    
    
    $
    
    
    
    $
    (2,299
    )
    
    $
    
    
    
    $
    3,402Restricted cash
    
    
    10,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,440Trade receivables, less allowance for
doubtful accounts
    
    
    13,310
    
    
    
    6,462
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    19,814Inventories
    
    
    9,231
    
    
    
    4,414
    
    
    
    
    
    
    
    244
    
    
    
    
    
    
    
    13,889Prepaid expenses and other current
assets
    
    
    5,772
    
    
    
    1,083
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    6,854Total current assets
    
    
    41,888
    
    
    
    14,525
    
    
    
    
    
    
    
    (2,014
    )
    
    
    
    
    
    
    54,399PROPERTY AND EQUIPMENT, net
    
    
    56,328
    
    
    
    32,125
    
    
    
    
    
    
    
    2,539
    
    
    
    
    
    
    
    90,992INVESTMENTS IN CONSOLIDATED
PARTNERSHIPS
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    203GOODWILL
    
    
    30,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,038INTANGIBLE ASSETS, net
    
    
    154,944
    
    
    
    270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155,214INVESTMENTS IN SUBSIDIARIES
    
    
    (97,559
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,559
    
    
    
    DUE FROM SUBSIDIARIES
    
    
    106,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106,193
    )
    
    
    DEFERRED INCOME TAXES
    
    
    708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    708OTHER ASSETS
    
    
    10,894
    
    
    
    (718
    )
    
    
    
    
    
    
    2,734
    
    
    
    
    
    
    
    12,910$
    303,434
    
    
    $
    46,395
    
    
    $
    
    
    
    $
    3,269
    
    
    $
    (8,634
    )
    
    $
    344,464LIABILITIES AND 
STOCKHOLDERS
INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    14,890
    
    
    $
    5,117
    
    
    $
    
    
    
    $
    632
    
    
    $
    
    
    
    $
    20,639Accrued expenses
    
    
    34,252
    
    
    
    14,704
    
    
    
    
    
    
    
    1,491
    
    
    
    
    
    
    
    50,447Accrued income taxes
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198Franchise advertising contributions
    
    
    6,108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,108Current maturities of long term debt and
capital lease obligations
    
    
    1,150
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,54956,598
    
    
    
    20,220
    
    
    
    
    
    
    
    2,123
    
    
    
    
    
    
    
    78,941CAPITAL LEASE OBLIGATIONS, less
current maturities
    
    
    483
    
    
    
    5,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,461LONG-TERM DEBT, less current
maturities
    
    
    296,498
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    296,542DEFERRED INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DEFERRED RENT
    
    
    6,533
    
    
    
    3,829
    
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    10,572OTHER LIABILITIES
    
    
    4,229
    
    
    
    8,503
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    12,736DUE TO PARENT
    
    
    
    
    
    
    109,673
    
    
    
    
    
    
    
    (3,480
    )
    
    
    (106,193
    )
    
    
    MINORITY INTERESTS IN

CONSOLIDATED PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119
    
    
    
    
    
    
    
    119STOCKHOLDERS INVESTMENT :Common Stock
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Preferred Stock
    
    
    
    
    
    
    63,277
    
    
    
    
    
    
    
    
    
    
    
    (63,277
    )
    
    
    Capital in excess of par
    
    
    
    
    
    
    (177
    )
    
    
    
    
    
    
    9,515
    
    
    
    (9,338
    )
    
    
    Additional paid-in capital
    
    
    136,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,131Treasury stock
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    Other comprehensive income
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Retained earnings (deficit)
    
    
    (197,105
    )
    
    
    (164,815
    )
    
    
    
    
    
    
    (5,222
    )
    
    
    170,037
    
    
    
    (197,105
    )(60,907
    )
    
    
    (101,852
    )
    
    
    
    
    
    
    4,293
    
    
    
    97,559
    
    
    
    (60,907
    )$
    303,434
    
    
    $
    46,395
    
    
    $
    
    
    
    $
    3,269
    
    
    $
    (8,634
    )
    
    $
    344,464
 18




---



##### Table of Contents



Consolidating balance sheet as of December 31, 2006 (in thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    
    PMCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCICURRENT ASSETS:Cash and cash equivalents
    
    $
    3,132
    
    
    $
    201
    
    
    $
    7,158
    
    
    $
    
    
    
    $
    (1,422
    )
    
    $
    
    
    
    $
    9,069Restricted cash
    
    
    4,209
    
    
    
    6,984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,193Trade receivables, less allowance
for doubtful accounts
    
    
    12,662
    
    
    
    43
    
    
    
    5,576
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    18,316Inventories
    
    
    6,364
    
    
    
    481
    
    
    
    3,882
    
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    10,996Prepaid expenses and other
current assets
    
    
    3,781
    
    
    
    316
    
    
    
    693
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    4,824Total current assets
    
    
    30,148
    
    
    
    8,025
    
    
    
    17,309
    
    
    
    
    
    
    
    (1,084
    )
    
    
    
    
    
    
    54,398PROPERTY AND EQUIPMENT,
net
    
    
    44,762
    
    
    
    10,885
    
    
    
    32,755
    
    
    
    
    
    
    
    2,642
    
    
    
    
    
    
    
    91,044INVESTMENTS IN
CONSOLIDATED
PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    238GOODWILL
    
    
    30,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,038INTANGIBLE ASSETS, net
    
    
    45,885
    
    
    
    110,600
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,792INVESTMENTS IN
SUBSIDIARIES
    
    
    31,105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,105
    )
    
    
    DUE FROM PMCI
    
    
    
    
    
    
    14,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,494
    )
    
    
    DUE FROM SUBSIDIARIES
    
    
    105,884
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,884
    )
    
    
    DEFERRED INCOME TAXES
    
    
    708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    708OTHER ASSETS
    
    
    11,560
    
    
    
    
    
    
    
    (1,008
    )
    
    
    
    
    
    
    3,075
    
    
    
    
    
    
    
    13,627$
    300,090
    
    
    $
    144,004
    
    
    $
    49,591
    
    
    $
    
    
    
    $
    4,643
    
    
    $
    (151,483
    )
    
    $
    346,845CURRENT LIABILITIES:Accounts payable
    
    $
    10,756
    
    
    $
    2,310
    
    
    $
    8,324
    
    
    $
    
    
    
    $
    1,409
    
    
    $
    
    
    
    $
    22,799Accrued expenses
    
    
    28,455
    
    
    
    7,547
    
    
    
    20,707
    
    
    
    
    
    
    
    1,579
    
    
    
    
    
    
    
    58,288Accrued income taxes
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Franchise advertising
contributions
    
    
    5,392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,392Current maturities of long term
debt and capital lease obligations
    
    
    1,166
    
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,70645,844
    
    
    
    9,857
    
    
    
    29,571
    
    
    
    
    
    
    
    2,988
    
    
    
    
    
    
    
    88,260CAPITAL LEASE
OBLIGATIONS, less current
maturities
    
    
    94
    
    
    
    
    
    
    
    6,155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,249LONG-TERM DEBT, less current
maturities
    
    
    286,325
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286,379DEFERRED RENT
    
    
    5,384
    
    
    
    
    
    
    
    4,164
    
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    9,768OTHER LIABILITIES
    
    
    4,095
    
    
    
    
    
    
    
    7,690
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,785DUE TO PMCM / PMCR
    
    
    14,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,494
    )
    
    
    DUE TO PARENT
    
    
    
    
    
    
    
    
    
    
    108,974
    
    
    
    10
    
    
    
    (3,100
    )
    
    
    (105,884
    )
    
    
    MINORITY INTERESTS IN
CONSOLIDATED
PARTNERSHIPS
    
    
    (475
    )
    
    
    
    
    
    
    423
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    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
    
    
    
    121,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121,300
    )
    
    
    136,131Treasury stock
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    Other comprehensive income
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Retained earnings (deficit)
    
    
    (191,816
    )
    
    
    12,846
    
    
    
    (170,403
    )
    
    
    (10
    )
    
    
    (5,107
    )
    
    
    162,674
    
    
    
    (191,816
    )(55,671
    )
    
    
    134,147
    
    
    
    (107,440
    )
    
    
    (10
    )
    
    
    4,408
    
    
    
    (31,105
    )
    
    
    (55,671
    )$
    300,090
    
    
    $
    144,004
    
    
    $
    49,591
    
    
    $
    
    
    
    $
    4,643
    
    
    $
    (151,483
    )
    
    $
    346,845
 19




---



##### Table of Contents



Consolidating
Statement of Cash Flows for the year-to-date period ended July 15, 2007
(unaudited; in thousands):
 Guarantors
    
    
    
    
    
    
    
    
    
    ConsolidatedPMCI
    
    WRG
    
    Other
    
    Non-Guarantors
    
    Eliminations
    
    PMCICASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (5,472
    )
    
    $
    6,223
    
    
    $
    
    
    
    $
    (115
    )
    
    $
    (6,108
    )
    
    $
    (5,472
    )Adjustments
to reconcile net income to net cash (used in)
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (6,108
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,108
    
    
    
    Depreciation and amortization
    
    
    9,139
    
    
    
    3,065
    
    
    
    
    
    
    
    686
    
    
    
    
    
    
    
    12,890Amortization of discount
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173Other non-cash income and expense items
    
    
    293
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309Gain on disposition of assets
    
    
    (382
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (385
    )Asset write-down
    
    
    
    
    
    
    371
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    394Change in partnerships minority interests
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    244Equity in net loss of unconsolidated partnerships
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Net changes in operating assets and liabilities
    
    
    (679
    )
    
    
    (10,899
    )
    
    
    
    
    
    
    (477
    )
    
    
    
    
    
    
    (12,055
    )Total adjustments
    
    
    2,436
    
    
    
    (7,340
    )
    
    
    
    
    
    
    401
    
    
    
    6,108
    
    
    
    1,605Net cash
(used in) provided by operating activities
    
    
    (3,036
    )
    
    
    (1,117
    )
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    (3,867
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (7,816
    )
    
    
    (2,768
    )
    
    
    
    
    
    
    (606
    )
    
    
    
    
    
    
    (11,190
    )Proceeds from sale of assets
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net cash investing activities
    
    
    (7,816
    )
    
    
    (2,765
    )
    
    
    
    
    
    
    (606
    )
    
    
    
    
    
    
    (11,187
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease
obligations
    
    
    (85
    )
    
    
    (318
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (403
    )Payments on long-term debt
    
    
    (500
    )
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )Proceeds from revolver
    
    
    45,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,500Payments on revolver
    
    
    (35,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,000
    )Intercompany financing
    
    
    739
    
    
    
    (359
    )
    
    
    
    
    
    
    (380
    )
    
    
    
    
    
    
    Distributions to minority partners
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    (177
    )
    
    
    
    
    
    
    (200
    )Net cash
provided by (used in) financing activities
    
    
    10,654
    
    
    
    (710
    )
    
    
    
    
    
    
    (557
    )
    
    
    
    
    
    
    9,387Net decrease in cash and cash equivalents
    
    
    (198
    )
    
    
    (4,592
    )
    
    
    
    
    
    
    (877
    )
    
    
    
    
    
    
    (5,667
    )CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    3,333
    
    
    
    7,158
    
    
    
    
    
    
    
    (1,422
    )
    
    
    
    
    
    
    9,069Balance, end of period
    
    $
    3,135
    
    
    $
    2,566
    
    
    $
    
    
    
    $
    (2,299
    )
    
    $
    
    
    
    $
    3,402
 20




---



##### Table of Contents



Consolidating
Statement of Cash Flows for the year-to-date period ended July 9, 2006 (unaudited; in thousands):
 Guarantors
    
    Non-
    
    
    
    
    
    ConsolidatedPMCI
    
    PMCM
    
    WRG
    
    Other
    
    Guarantors
    
    Eliminations
    
    PMCICASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (1,428
    )
    
    $
    5,604
    
    
    $
    4,153
    
    
    $
    
    
    
    $
    1
    
    
    $
    (9,758
    )
    
    $
    (1,428
    )Adjustments
to reconcile net income to net cash (used in)
provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (9,758
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,758
    
    
    
    Depreciation and amortization
    
    
    9,211
    
    
    
    1,115
    
    
    
    3,321
    
    
    
    
    
    
    
    669
    
    
    
    
    
    
    
    14,316Amortization of discount
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173Other non-cash income and expense items
    
    
    (239
    )
    
    
    
    
    
    
    6,651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,412Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )(Gain) loss on disposition of assets
    
    
    (96
    )
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94
    )Asset write-down
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49Change in partnerships minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    169Equity in net loss of unconsolidated partnerships
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Net changes in operating assets and liabilities
    
    
    (2,110
    )
    
    
    (560
    )
    
    
    (2,421
    )
    
    
    23
    
    
    
    98
    
    
    
    
    
    
    
    (4,970
    )Total adjustments
    
    
    (2,819
    )
    
    
    555
    
    
    
    (4,870
    )
    
    
    23
    
    
    
    936
    
    
    
    9,758
    
    
    
    3,583Net cash
(used in) provided by operating activities
    
    
    (4,247
    )
    
    
    6,159
    
    
    
    (717
    )
    
    
    23
    
    
    
    937
    
    
    
    
    
    
    
    2,155CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (3,370
    )
    
    
    (1,051
    )
    
    
    (2,901
    )
    
    
    
    
    
    
    (617
    )
    
    
    
    
    
    
    (7,939
    )Proceeds from sale of assets
    
    
    1,534
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,547Intercompany activities
    
    
    6,478
    
    
    
    (6,478
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash
provided by (used in)  investing activities
    
    
    4,642
    
    
    
    (7,529
    )
    
    
    (2,888
    )
    
    
    
    
    
    
    (617
    )
    
    
    
    
    
    
    (6,392
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (149
    )
    
    
    
    
    
    
    (290
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (439
    )Proceeds from long-term debt
    
    
    100,000
    
    
    
    
    
    
    
    1,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,541Payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (101,561
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,561
    )Proceeds from revolver
    
    
    3,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,800Payments on revolver
    
    
    (3,800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,800
    )Intercompany financing
    
    
    (103,577
    )
    
    
    
    
    
    
    103,896
    
    
    
    
    
    
    
    (319
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (2,720
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,720
    )Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    (162
    )Capital contribution from parent
    
    
    12,545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,545Net cash
provided by (used in) financing activities
    
    
    6,099
    
    
    
    
    
    
    
    3,586
    
    
    
    
    
    
    
    (481
    )
    
    
    
    
    
    
    9,204Net increase (decrease) in cash and cash equivalents
    
    
    6,494
    
    
    
    (1,370
    )
    
    
    (19
    )
    
    
    23
    
    
    
    (161
    )
    
    
    
    
    
    
    4,967CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    1,591
    
    
    
    1,567
    
    
    
    2,609
    
    
    
    (23
    )
    
    
    (1,756
    )
    
    
    
    
    
    
    3,988Balance, end of period
    
    $
    8,085
    
    
    $
    197
    
    
    $
    2,590
    
    
    $
    
    
    
    $
    (1,917
    )
    
    $
    
    
    
    $
    8,955
 21




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GENERAL
  OUR COMPANY
          22




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OVERVIEW
     23




---



##### Table of Contents



KEY FACTORS AFFECTING OUR RESULTS
    SUMMARY OF CRITICAL ACCOUNTING POLICIES
    24




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25




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26




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RESULTS OF OPERATIONS
        Percentage of Total RevenuesSecond Quarter
    
    Year-to-DateEnded
    
    EndedJuly 15, 2007
    
    July 15, 2007Perkins restaurants
    
    
    51.9
    %
    
    
    51.5
    %Marie Callenders restaurants
    
    
    34.8
    %
    
    
    35.9
    %Perkins franchisees
    
    
    3.9
    %
    
    
    3.7
    %Marie Callenders franchisees
    
    
    0.9
    %
    
    
    0.9
    %Foxtail
    
    
    7.5
    %
    
    
    7.2
    %Other
    
    
    1.0
    %
    
    
    0.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
 27




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##### Table of Contents



Marie CallendersConsolidated Results
    
    Perkins Restaurants
    
    Restaurants
    
    Perkins FranchiseSecond Quarter Ended
    
    Second Quarter Ended
    
    Second Quarter Ended
    
    Second Quarter EndedJuly 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006Food sales
    
    $
    126,514
    
    
    $
    131,618
    
    
    $
    67,592
    
    
    $
    66,249
    
    
    $
    45,304
    
    
    $
    50,537
    
    
    $
    
    
    
    $
    Franchise and 
other
revenue
    
    
    7,408
    
    
    
    7,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,051
    
    
    
    5,160Intersegment revenue
    
    
    (3,812
    )
    
    
    (2,111
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenues
    
    
    130,110
    
    
    
    136,910
    
    
    
    67,592
    
    
    
    66,249
    
    
    
    45,304
    
    
    
    50,537
    
    
    
    5,051
    
    
    
    5,160Food cost
    
    
    27.5
    %
    
    
    29.1
    %
    
    
    24.4
    %
    
    
    24.5
    %
    
    
    29.4
    %
    
    
    30.0
    %
    
    
    
    
    
    
    Labor and benefits
    
    
    34.3
    %
    
    
    33.9
    %
    
    
    35.6
    %
    
    
    36.5
    %
    
    
    35.3
    %
    
    
    35.6
    %
    
    
    
    
    
    
    Operating expenses
    
    
    25.0
    %
    
    
    23.3
    %
    
    
    26.5
    %
    
    
    24.4
    %
    
    
    28.1
    %
    
    
    27.4
    %
    
    
    9.5
    %
    
    
    11.4
    %Segment 
(Loss) Profit
    
    $
    (2,723
    )
    
    $
    3,796
    
    
    $
    6,630
    
    
    $
    4,336
    
    
    $
    1,566
    
    
    $
    1,448
    
    
    $
    4,568
    
    
    $
    4,570
 Marie CallendersFranchise
    
    Foxtail
    
    Other (a)Second Quarter Ended
    
    Second Quarter Ended
    
    Second Quarter EndedJuly 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006Food sales
    
    $
    
    
    
    $
    
    
    
    $
    13,618
    
    
    $
    14,832
    
    
    $
    
    
    
    $
    Franchise and
 other revenue
    
    
    1,153
    
    
    
    1,230
    
    
    
    
    
    
    
    
    
    
    
    1,204
    
    
    
    1,013Intersegment 
revenue
    
    
    
    
    
    
    
    
    
    
    (3,812
    )
    
    
    (2,111
    )
    
    
    
    
    
    
    Total Revenues
    
    
    1,153
    
    
    
    1,230
    
    
    
    9,806
    
    
    
    12,721
    
    
    
    1,204
    
    
    
    1,013Food cost
    
    
    
    
    
    
    
    
    
    
    56.5
    %
    
    
    56.7
    %
    
    
    
    
    
    
    Labor and 
benefits
    
    
    
    
    
    
    
    
    
    
    14.0
    %
    
    
    11.2
    %
    
    
    9.7
    %
    
    
    8.7
    %Operating 
expenses
    
    
    
    
    
    
    
    
    
    
    11.0
    %
    
    
    9.6
    %
    
    
    
    
    
    
    Segment Profit (Loss)
    
    $
    1,153
    
    
    $
    1,230
    
    
    $
    1,033
    
    
    $
    1,933
    
    
    $
    (17,673
    )
    
    $
    (9,721
    )
 
 (a)
    
    Licensing revenue of $1,093,000 and $965,000 for the second quarter of 2007 and
2006, respectively, is included in the Other segment revenues. The Other segment loss
includes corporate general and administrative expenses, interest expense and other
non-operational expenses. For details of the Other segment loss, see Note 9, Segment
Reporting in the Notes to Consolidated Financial Statements. 28




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##### Table of Contents



Marie CallendersConsolidated Results
    
    Perkins Restaurants
    
    Restaurants
    
    Perkins FranchiseYear-to-date Ended
    

Year-to-date Ended
    

Year-to-date Ended
    

Year-to-date EndedJuly 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006Food sales
    
    $
    301,449
    
    
    $
    294,477
    
    
    $
    158,673
    
    
    $
    156,975
    
    
    $
    110,575
    
    
    $
    102,813
    
    
    $
    
    
    
    $
    Franchise and 
other
revenue
    
    
    16,806
    
    
    
    16,434
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,467
    
    
    
    11,809Intersegment revenue
    
    
    (9,859
    )
    
    
    (4,355
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenues
    
    
    308,396
    
    
    
    306,556
    
    
    
    158,673
    
    
    
    156,975
    
    
    
    110,575
    
    
    
    102,813
    
    
    
    11,467
    
    
    
    11,809Food cost
    
    
    27.8
    %
    
    
    29.5
    %
    
    
    25.0
    %
    
    
    25.2
    %
    
    
    29.8
    %
    
    
    30.2
    %
    
    
    
    
    
    
    Labor and benefits
    
    
    34.4
    %
    
    
    33.8
    %
    
    
    35.7
    %
    
    
    36.6
    %
    
    
    35.1
    %
    
    
    35.5
    %
    
    
    
    
    
    
    Operating expenses
    
    
    24.9
    %
    
    
    23.6
    %
    
    
    26.4
    %
    
    
    25.5
    %
    
    
    27.3
    %
    
    
    26.9
    %
    
    
    11.2
    %
    
    
    10.2
    %Segment
 (Loss) Profit
    
    $
    (5,472
    )
    
    $
    (1,428
    )
    
    $
    14,368
    
    
    $
    11,781
    
    
    $
    4,620
    
    
    $
    3,358
    
    
    $
    10,178
    
    
    $
    10,602
 Marie CallendersFranchise
    
    Foxtail
    
    Other (a)Year-to-date
Ended
    

Year-to-date
Ended
    

Year-to-date
EndedJuly 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006
    
    July 15, 2007
    
    July 9, 2006Food sales
    
    $
    
    
    
    $
    
    
    
    $
    32,201
    
    
    $
    34,689
    
    
    $
    
    
    
    $
    Franchise and 
other revenue
    
    
    2,766
    
    
    
    2,507
    
    
    
    
    
    
    
    
    
    
    
    2,573
    
    
    
    2,118Intersegment 
revenue
    
    
    
    
    
    
    
    
    
    
    (9,859
    )
    
    
    (4,355
    )
    
    
    
    
    
    
    Total Revenues
    
    
    2,766
    
    
    
    2,507
    
    
    
    22,342
    
    
    
    30,334
    
    
    
    2,573
    
    
    
    2,118Food cost
    
    
    
    
    
    
    
    
    
    
    56.7
    %
    
    
    56.2
    %
    
    
    
    
    
    
    Labor and 
benefits
    
    
    
    
    
    
    
    
    
    
    14.1
    %
    
    
    11.6
    %
    
    
    12.7
    %
    
    
    9.5
    %Operating 
expenses
    
    
    
    
    
    
    
    
    
    
    10.2
    %
    
    
    10.0
    %
    
    
    
    
    
    
    Segment 
Profit (Loss)
    
    $
    2,766
    
    
    $
    2,507
    
    
    $
    2,540
    
    
    $
    4,562
    
    
    $
    (39,944
    )
    
    $
    (34,238
    )
 
  Quarter Ended July 15, 2007 Compared to the Quarter Ended July 9, 2006
 Restaurant Segments Overview
   29




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##### Table of Contents



Foxtail Segment Overview
   Franchise Segments Overview
        30




---



##### Table of Contents



Food Cost
   Labor and Benefits Expenses
  Operating Expenses
  31




---



##### Table of Contents



General and Administrative Expenses
  Transaction Costs
  Depreciation and Amortization
  Interest, net
  Asset Impairments and Closed Store Expenses
  Gain on Extinguishment of Debt
  Taxes
  Year-to-date
Period Ended July 15, 2007 Compared to the Year-to-date Period Ended July 9, 2006
 Restaurant Segments Overview
  32




---



##### Table of Contents



Foxtail Segment Overview
   Franchise Segments Overview
       33




---



##### Table of Contents



Food Cost
   Labor and Benefits Expenses
  Operating Expenses
  34




---



##### Table of Contents



General and Administrative Expenses
  Transaction Costs
  Depreciation and Amortization
  Interest, net
  Asset Impairments and Closed Store Expenses
  Gain on Extinguishment of Debt
  Taxes
  35




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##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
      36




---



##### Table of Contents



Working Capital and Cash Flows
   Year-to-Date
    
    Year-to-DateEnded
    
    EndedJuly 15, 2007
    
    July 9, 2006Cash flows (used in) provided by operating activities
    
    $
    (3,867
    )
    
    $
    2,155Cash flows used in investing activities
    
    
    (11,187
    )
    
    
    (6,392
    )Cash flows provided by financing activities
    
    
    9,387
    
    
    
    9,204
 Operating activities
  Investing activities
   Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedJuly
15, 2007
    
    

July
9, 2006New restaurants
    
    $
    2,826
    
    
    $
    742Restaurant improvements
    
    
    4,544
    
    
    
    3,493Restaurant remodeling and reimaging
    
    
    1,884
    
    
    
    3,324Manufacturing plant improvements
    
    
    804
    
    
    
    327Other
    
    
    1,132
    
    
    
    53Total Capital Expenditures
    
    $
    11,190
    
    
    $
    7,939
  37




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##### Table of Contents



Financing activities
  CASH CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
   RECENT ACCOUNTING PRONOUNCEMENTS
   IMPACT OF INFLATION
  INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
   
    
    general economic conditions and demographic patterns;
    
    our substantial indebtedness;
 38




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##### Table of Contents




    
    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;
    
    our ability to integrate acquisitions;
    
    our development and expansion plans; and
    
    statements covering our business strategy.
  
 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
  39




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40




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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.
 41




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Signature
  PERKINS & MARIE CALLENDERS INC.DATE: August 29, 2007
    
    BY:
    
    /s/ James W. StrykerJames W. StrykerChief Financial Officer
 42