##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended October 7, 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)
 
  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
    
    
    23ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    40ITEM 4. CONTROLS AND PROCEDURES
    
    
    41PART II  OTHER INFORMATIONITEM 6. EXHIBITS
    
    
    42Signature
    
    
    43EX-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



Third Quarter
    
    
    Third Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006REVENUES:Food sales
    
    $
    124,031
    
    
    $
    127,066
    
    
    $
    415,621
    
    
    $
    417,188Franchise and other revenue
    
    
    7,281
    
    
    
    7,171
    
    
    
    24,087
    
    
    
    23,605Total Revenues
    
    
    131,312
    
    
    
    134,237
    
    
    
    439,708
    
    
    
    440,793COSTS AND EXPENSES:Cost of sales (excluding depreciation shown below):Food cost
    
    
    35,379
    
    
    
    37,252
    
    
    
    116,387
    
    
    
    122,943Labor and benefits
    
    
    42,700
    
    
    
    43,651
    
    
    
    143,069
    
    
    
    141,834Operating expenses
    
    
    34,693
    
    
    
    33,748
    
    
    
    111,377
    
    
    
    106,640General and administrative
    
    
    8,675
    
    
    
    10,914
    
    
    
    33,575
    
    
    
    36,196Transaction costs
    
    
    261
    
    
    
    3,225
    
    
    
    1,013
    
    
    
    5,513Depreciation and amortization
    
    
    6,051
    
    
    
    5,449
    
    
    
    18,941
    
    
    
    19,764Interest, net
    
    
    7,189
    
    
    
    6,923
    
    
    
    23,887
    
    
    
    28,448Asset impairments and closed store expenses
    
    
    472
    
    
    
    93
    
    
    
    481
    
    
    
    414Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    (37
    )
    
    
    489
    
    
    
    277
    
    
    
    388Total Costs and Expenses
    
    
    135,383
    
    
    
    141,744
    
    
    
    449,007
    
    
    
    449,559Loss before income taxes and minority interests
    
    
    (4,071
    )
    
    
    (7,507
    )
    
    
    (9,299
    )
    
    
    (8,766
    )Provision for income taxes
    
    
    (109
    )
    
    
    (324
    )
    
    
    (109
    )
    
    
    (324
    )Minority interests
    
    
    165
    
    
    
    23
    
    
    
    409
    
    
    
    192NET LOSS
    
    $
    (4,345
    )
    
    $
    (7,854
    )
    
    $
    (9,817
    )
    
    $
    (9,282
    )
  2




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##### Table of Contents



October 7, 2007
    
    
    December 31, 2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    5,540
    
    
    $
    9,069Restricted cash
    
    
    9,147
    
    
    
    11,193Receivables, less allowances for doubtful
accounts of $1,761 and $1,624 in 2007 and
2006, respectively
    
    
    21,529
    
    
    
    18,316Inventories
    
    
    14,809
    
    
    
    10,996Prepaid expenses and other current assets
    
    
    6,538
    
    
    
    4,824Total current assets
    
    
    57,563
    
    
    
    54,398PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization
of $109,482 and $96,458 in 2007 and 2006,
respectively
    
    
    96,857
    
    
    
    91,044INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
    
    
    45
    
    
    
    238GOODWILL
    
    
    30,038
    
    
    
    30,038INTANGIBLE ASSETS, net of accumulated
amortization of $16,558 and $14,018 in
2007 and 2006, respectively
    
    
    154,252
    
    
    
    156,792DEFERRED INCOME TAXES
    
    
    806
    
    
    
    708OTHER ASSETS
    
    
    12,622
    
    
    
    13,627Total Assets
    
    $
    352,183
    
    
    $
    346,845
  3




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##### Table of Contents



October 7, 2007
    
    
    December 31, 2006(Unaudited)LIABILITIES AND STOCKHOLDERS INVESTMENTCURRENT LIABILITIES:Accounts payable
    
    $
    28,017
    
    
    $
    22,799Accrued expenses
    
    
    43,999
    
    
    
    58,288Accrued income taxes
    
    
    5
    
    
    
    75Franchise advertising contributions
    
    
    6,233
    
    
    
    5,392Current maturities of long-term debt and capital lease obligations
    
    
    1,565
    
    
    
    1,706Total current liabilities
    
    
    79,819
    
    
    
    88,260CAPITAL LEASE OBLIGATIONS, less current maturities
    
    
    8,907
    
    
    
    6,249LONG-TERM DEBT, less current maturities
    
    
    303,075
    
    
    
    286,379DEFERRED RENT
    
    
    11,213
    
    
    
    9,768OTHER LIABILITIES
    
    
    12,272
    
    
    
    11,785MINORITY INTEREST IN CONSOLIDATED PARTNERSHIPS
    
    
    326
    
    
    
    75STOCKHOLDERS INVESTMENT:Common stock, $.01 par value, 100,000 shares authorized,
10,820 issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    137,923
    
    
    
    136,131Other comprehensive income
    
    
    97
    
    
    
    13Accumulated deficit
    
    
    (201,450
    )
    
    
    (191,816
    )Total stockholders investment
    
    
    (63,429
    )
    
    
    (55,671
    )Total Liabilities and Stockholders Investment
    
    $
    352,183
    
    
    $
    346,845
  4




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##### Table of Contents



Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (9,817
    )
    
    $
    (9,282
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:Depreciation and amortization
    
    
    18,941
    
    
    
    19,764Amortization of debt discount
    
    
    248
    
    
    
    248Other non-cash income and expense items
    
    
    629
    
    
    
    6,481Gain on extinguishment of debt
    
    
    
    
    
    
    (12,581
    )Gain on disposition of assets
    
    
    (157
    )
    
    
    (89
    )Asset write-down
    
    
    638
    
    
    
    137Minority interests
    
    
    409
    
    
    
    192Equity in net loss of unconsolidated partnerships
    
    
    90
    
    
    
    154Net changes in operating assets and liabilities
    
    
    (12,364
    )
    
    
    (4,524
    )Total adjustments
    
    
    8,434
    
    
    
    9,782Net cash (used in) provided by operating activities
    
    
    (1,383
    )
    
    
    500CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (22,554
    )
    
    
    (13,322
    )Proceeds from sale of assets
    
    
    3
    
    
    
    1,547Net cash used in investing activities
    
    
    (22,551
    )
    
    
    (11,775
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (549
    )
    
    
    (664
    )Proceeds from long-term debt
    
    
    1,950
    
    
    
    105,341Payments on long-term debt
    
    
    (775
    )
    
    
    (105,615
    )Proceeds from revolver
    
    
    62,600
    
    
    
    6,800Payments on revolver
    
    
    (47,300
    )
    
    
    (3,800
    )Debt issuance costs
    
    
    
    
    
    
    (2,720
    )Landlord
financing
    
    
    2,915
    
    
    
    Distributions to minority partners
    
    
    (228
    )
    
    
    (242
    )Capital contribution
    
    
    1,792
    
    
    
    12,545Net cash provided by financing activities
    
    
    20,405
    
    
    
    11,645Net (decrease) increase in cash and cash equivalents
    
    
    (3,529
    )
    
    
    370CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    9,069
    
    
    
    3,988Balance, end of period
    
    $
    5,540
    
    
    $
    4,358
  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
    
    
    
    183Capital contribution
    
    
    
    
    
    
    1,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,792Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,817
    )
    
    
    (9,817
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    84Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,733
    )Balance at October 7, 2007
    
    $
    1
    
    
    $
    137,923
    
    
    $
    
    
    
    $
    97
    
    
    $
    (201,450
    )
    
    $
    (63,429
    )
  6




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(1) Organization
             7




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##### Table of Contents



(2) Basis of Presentation
    (3) Accounting Reporting Period
    (4) Comprehensive Income/Loss
  8




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(5) Combination of Companies Under Common Control
    (6) Commitments, Contingencies and Concentrations
      9




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##### Table of Contents



(7) Supplemental Cash Flow Information
  Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006(Increase) Decrease in:Receivables
    
    $
    (3,123
    )
    
    $
    (660
    )Inventories
    
    
    (3,788
    )
    
    
    (597
    )Prepaid expenses and other current assets
    
    
    (1,710
    )
    
    
    (569
    )Other assets
    
    
    1,001
    
    
    
    (211
    )Increase (Decrease) in:Accounts payable
    
    
    5,114
    
    
    
    1,199Accrued expenses and other current liabilities
    
    
    (9,908
    )
    
    
    (3,187
    )Other liabilities
    
    
    50
    
    
    
    (499
    )$
    (12,364
    )
    
    $
    (4,524
    )
 (8) Accrued Expenses
  October 7, 2007
    
    
    December 31, 2006Payroll and related benefits
    
    $
    14,570
    
    
    $
    18,209Property, real estate and sales taxes
    
    
    6,012
    
    
    
    4,692Insurance
    
    
    2,189
    
    
    
    5,086Gift cards and gift certificates
    
    
    4,574
    
    
    
    8,233Advertising
    
    
    1,247
    
    
    
    1,262Interest
    
    
    1,830
    
    
    
    6,085Management fees
    
    
    4,050
    
    
    
    2,210Other
    
    
    9,527
    
    
    
    12,511$
    43,999
    
    
    $
    58,288
 (9) Segment Reporting
   10




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Third Quarter
    
    
    Third Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006RevenueRestaurant operations
    
    $
    112,376
    
    
    $
    113,405
    
    
    $
    381,624
    
    
    $
    373,193Franchise operations
    
    
    6,200
    
    
    
    6,199
    
    
    
    20,433
    
    
    
    20,515Foxtail
    
    
    15,290
    
    
    
    15,817
    
    
    
    47,491
    
    
    
    50,506Intersegment revenue
    
    
    (3,635
    )
    
    
    (2,155
    )
    
    
    (13,494
    )
    
    
    (6,510
    )Other
    
    
    1,081
    
    
    
    971
    
    
    
    3,654
    
    
    
    3,089Total
    
    $
    131,312
    
    
    $
    134,237
    
    
    $
    439,708
    
    
    $
    440,793Segment net income (loss)Restaurant operations
    
    $
    5,074
    
    
    $
    5,961
    
    
    $
    24,061
    
    
    $
    21,100Franchise operations
    
    
    5,579
    
    
    
    5,705
    
    
    
    18,525
    
    
    
    18,814Foxtail
    
    
    901
    
    
    
    1,904
    
    
    
    3,441
    
    
    
    6,466Other
    
    
    (15,899
    )
    
    
    (21,424
    )
    
    
    (55,844
    )
    
    
    (55,662
    )Total
    
    $
    (4,345
    )
    
    $
    (7,854
    )
    
    $
    (9,817
    )
    
    $
    (9,282
    )
 October 7, 2007
    
    
    December 31, 2006Segment AssetsRestaurant operations
    
    $
    137,839
    
    
    $
    130,539Franchise operations
    
    
    122,136
    
    
    
    123,778Foxtail
    
    
    47,171
    
    
    
    41,715Other
    
    
    45,037
    
    
    
    50,813Total
    
    $
    352,183
    
    
    $
    346,845
 11




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##### Table of Contents



Third Quarter
    
    
    Third Quarter
    
    
    Year-to-Date
    
    
    Year-to-DateEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006General and administrative expenses
    
    $
    7,679
    
    
    $
    9,847
    
    
    $
    29,807
    
    
    $
    32,511Depreciation and amortization expenses
    
    
    1,173
    
    
    
    1,446
    
    
    
    3,218
    
    
    
    2,832Interest expense, net
    
    
    7,189
    
    
    
    6,923
    
    
    
    23,887
    
    
    
    28,448Gain on disposition of assets, net
    
    
    228
    
    
    
    5
    
    
    
    (157
    )
    
    
    (89
    )Asset write-down
    
    
    244
    
    
    
    88
    
    
    
    638
    
    
    
    137Lease termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366Transaction costs
    
    
    261
    
    
    
    3,225
    
    
    
    1,013
    
    
    
    5,513Provision for income taxes
    
    
    109
    
    
    
    324
    
    
    
    109
    
    
    
    324Minority interest
    
    
    165
    
    
    
    23
    
    
    
    409
    
    
    
    192Licensing revenue
    
    
    (1,052
    )
    
    
    (917
    )
    
    
    (3,374
    )
    
    
    (2,826
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other
    
    
    (97
    )
    
    
    460
    
    
    
    294
    
    
    
    835$
    15,899
    
    
    $
    21,424
    
    
    $
    55,844
    
    
    $
    55,662
 (10) Long-Term Debt
    (11) Income Tax
  12




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##### Table of Contents



(12) Employee Subscription Agreements and Strip Subscription Agreements
       Date
    
    CumulativePercentageFirst 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




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##### Table of Contents



Unvested
    
    
    VestedClass C Units as of December 31, 2006
    
    
    
    
    
    
    Granted
    
    
    116,715
    
    
    
    Purchased
    
    
    
    
    
    
    17,673Vested
    
    
    
    
    
    
    Forfeited
    
    
    (2,993
    )
    
    
    Class C Units as of October 7, 2007
    
    
    113,722
    
    
    
    17,673
  Class A Units outstanding as of December 31, 2006
    
    
    
    
    
    
    1,104,589Purchased
    
    
    
    
    
    
    17,673Forfeited
    
    
    
    
    
    
    Class A Units outstanding as of October 7, 2007
    
    
    
    
    
    
    1,122,262
 (13) Recent Accounting Pronouncements
   14




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##### Table of Contents



(14) Condensed Consolidated Financial Information
   Consolidating Statement of Operations for the quarter ended October 7, 2007 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCIRevenueFood sales
    
    $
    77,629
    
    
    $
    40,489
    
    
    $
    
    
    
    $
    5,913
    
    
    $
    
    
    
    $
    124,031Franchise and other revenue
    
    
    5,203
    
    
    
    2,078
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,281Total revenues
    
    
    82,832
    
    
    
    42,567
    
    
    
    
    
    
    
    5,913
    
    
    
    
    
    
    
    131,312Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    21,873
    
    
    
    11,893
    
    
    
    
    
    
    
    1,613
    
    
    
    
    
    
    
    35,379Labor and benefits
    
    
    26,507
    
    
    
    14,123
    
    
    
    
    
    
    
    2,070
    
    
    
    
    
    
    
    42,700Operating expenses
    
    
    20,817
    
    
    
    11,939
    
    
    
    
    
    
    
    1,937
    
    
    
    
    
    
    
    34,693General and administrative
    
    
    7,853
    
    
    
    822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,675Transaction costs
    
    
    157
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261Depreciation and amortization
    
    
    4,298
    
    
    
    1,618
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    6,051Interest, net
    
    
    6,946
    
    
    
    243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,189Asset impairments and closed store expenses
    
    
    (21
    )
    
    
    492
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    472Other, net
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )Total costs and expenses
    
    
    88,393
    
    
    
    41,234
    
    
    
    
    
    
    
    5,756
    
    
    
    
    
    
    
    135,383(Loss) income before income taxes and minority interests
    
    
    (5,561
    )
    
    
    1,333
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    (4,071
    )Provision for income taxes
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    165Equity in earnings (loss) of subsidiaries
    
    
    (1,325
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,325
    
    
    
    NET (LOSS) INCOME
    
    $
    (4,345
    )
    
    $
    1,333
    
    
    $
    
    
    
    $
    (8
    )
    
    $
    (1,325
    )
    
    $
    (4,345
    )
 15




---



##### Table of Contents



Consolidating Statement of Operations for the quarter ended October 1, 2006 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    PMCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCIRevenueFood sales
    
    $
    57,181
    
    
    $
    18,982
    
    
    $
    44,396
    
    
    $
    
    
    
    $
    6,507
    
    
    $
    
    
    
    $
    127,066Franchise and other revenue
    
    
    3,129
    
    
    
    3,543
    
    
    
    2,079
    
    
    
    
    
    
    
    
    
    
    
    (1,580
    )
    
    
    7,171Total revenues
    
    
    60,310
    
    
    
    22,525
    
    
    
    46,475
    
    
    
    
    
    
    
    6,507
    
    
    
    (1,580
    )
    
    
    134,237Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    16,877
    
    
    
    4,199
    
    
    
    14,351
    
    
    
    
    
    
    
    1,825
    
    
    
    
    
    
    
    37,252Labor and benefits
    
    
    18,945
    
    
    
    6,762
    
    
    
    15,863
    
    
    
    
    
    
    
    2,081
    
    
    
    
    
    
    
    43,651Operating expenses
    
    
    13,902
    
    
    
    6,218
    
    
    
    11,949
    
    
    
    
    
    
    
    2,497
    
    
    
    (818
    )
    
    
    33,748General and administrative
    
    
    8,349
    
    
    
    762
    
    
    
    2,565
    
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    10,914Transaction costs
    
    
    1,330
    
    
    
    
    
    
    
    1,895
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,225Depreciation and amortization
    
    
    2,311
    
    
    
    1,237
    
    
    
    1,561
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    5,449Interest, net
    
    
    6,651
    
    
    
    (71
    )
    
    
    341
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    6,923Asset impairments and closed store expenses
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    93Other, net
    
    
    (51
    )
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489Total costs and expenses
    
    
    68,314
    
    
    
    19,107
    
    
    
    49,146
    
    
    
    
    
    
    
    6,757
    
    
    
    (1,580
    )
    
    
    141,744(Loss) income before income taxes and minority interests
    
    
    (8,004
    )
    
    
    3,418
    
    
    
    (2,671
    )
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    (7,507
    )Benefit from (provision for) income taxes
    
    
    1,178
    
    
    
    (1,502
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    23Equity in earnings (loss) of subsidiaries
    
    
    (1,028
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,028
    
    
    
    NET (LOSS) INCOME
    
    $
    (7,854
    )
    
    $
    1,916
    
    
    $
    (2,683
    )
    
    $
    
    
    
    $
    (261
    )
    
    $
    1,028
    
    
    $
    (7,854
    )
 16




---



##### Table of Contents



Consolidating Statement of Operations for the year-to-date period ended October 7, 2007 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCIRevenueFood sales
    
    $
    256,391
    
    
    $
    138,259
    
    
    $
    
    
    
    $
    20,971
    
    
    $
    
    
    
    $
    415,621Franchise and other revenue
    
    
    16,670
    
    
    
    7,417
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,087Total revenues
    
    
    273,061
    
    
    
    145,676
    
    
    
    
    
    
    
    20,971
    
    
    
    
    
    
    
    439,708Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    70,547
    
    
    
    40,019
    
    
    
    
    
    
    
    5,821
    
    
    
    
    
    
    
    116,387Labor and benefits
    
    
    87,125
    
    
    
    49,032
    
    
    
    
    
    
    
    6,912
    
    
    
    
    
    
    
    143,069Operating expenses
    
    
    66,443
    
    
    
    37,829
    
    
    
    
    
    
    
    7,105
    
    
    
    
    
    
    
    111,377General and administrative
    
    
    29,293
    
    
    
    4,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,575Transaction costs
    
    
    772
    
    
    
    241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,013Depreciation and amortization
    
    
    13,437
    
    
    
    4,683
    
    
    
    
    
    
    
    821
    
    
    
    
    
    
    
    18,941Interest, net
    
    
    23,061
    
    
    
    826
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,887Asset impairments and closed store expenses
    
    
    (403
    )
    
    
    858
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    481Other, net
    
    
    (73
    )
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277Total costs and expenses
    
    
    290,202
    
    
    
    138,120
    
    
    
    
    
    
    
    20,685
    
    
    
    
    
    
    
    449,007(Loss) income before income taxes and minority interests
    
    
    (17,141
    )
    
    
    7,556
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    (9,299
    )Provision for income taxes
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    409Equity in earnings (loss) of subsidiaries
    
    
    7,433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,433
    )
    
    
    NET (LOSS) INCOME
    
    $
    (9,817
    )
    
    $
    7,556
    
    
    $
    
    
    
    $
    (123
    )
    
    $
    (7,433
    )
    
    $
    (9,817
    )
 17




---



##### Table of Contents



Consolidating Statement of Operations for the year-to-date period ended October 1, 2006 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    PMCM
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCIRevenueFood sales
    
    $
    195,351
    
    
    $
    62,208
    
    
    $
    138,245
    
    
    $
    
    
    
    $
    21,384
    
    
    $
    
    
    
    $
    417,188Franchise and other revenue
    
    
    10,424
    
    
    
    11,476
    
    
    
    6,704
    
    
    
    15
    
    
    
    
    
    
    
    (5,014
    )
    
    
    23,605Total revenues
    
    
    205,775
    
    
    
    73,684
    
    
    
    144,949
    
    
    
    15
    
    
    
    21,384
    
    
    
    (5,014
    )
    
    
    440,793Cost and expensesCost of sales (excluding depreciation shown below):Food cost
    
    
    58,057
    
    
    
    14,125
    
    
    
    44,678
    
    
    
    
    
    
    
    6,083
    
    
    
    
    
    
    
    122,943Labor and benefits
    
    
    64,294
    
    
    
    22,405
    
    
    
    48,480
    
    
    
    
    
    
    
    6,655
    
    
    
    
    
    
    
    141,834Operating expenses
    
    
    45,043
    
    
    
    20,528
    
    
    
    35,852
    
    
    
    15
    
    
    
    7,678
    
    
    
    (2,476
    )
    
    
    106,640General and administrative
    
    
    26,588
    
    
    
    2,545
    
    
    
    9,601
    
    
    
    
    
    
    
    
    
    
    
    (2,538
    )
    
    
    36,196Transaction costs
    
    
    3,071
    
    
    
    
    
    
    
    2,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,513Depreciation and amortization
    
    
    11,523
    
    
    
    2,351
    
    
    
    4,882
    
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    19,764Interest, net
    
    
    19,621
    
    
    
    (642
    )
    
    
    9,465
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    28,448Asset impairments and closed store expenses
    
    
    270
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    414Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )Other, net
    
    
    (152
    )
    
    
    
    
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Total costs and expenses
    
    
    228,315
    
    
    
    61,312
    
    
    
    143,467
    
    
    
    15
    
    
    
    21,464
    
    
    
    (5,014
    )
    
    
    449,559(Loss) income before income taxes and minority interests
    
    
    (22,540
    )
    
    
    12,372
    
    
    
    1,482
    
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (8,766
    )Benefit from (provision for) income taxes
    
    
    4,528
    
    
    
    (4,852
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    192Equity in earnings (loss) of subsidiaries
    
    
    8,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,730
    )
    
    
    NET (LOSS) INCOME
    
    $
    (9,282
    )
    
    $
    7,520
    
    
    $
    1,483
    
    
    $
    
    
    
    $
    (273
    )
    
    $
    (8,730
    )
    
    $
    (9,282
    )
 18




---



##### Table of Contents



Consolidating Balance Sheet as of October 7, 2007 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCICURRENT ASSETS:Cash and cash equivalents
    
    $
    4,864
    
    
    $
    2,605
    
    
    $
    
    
    
    $
    (1,929
    )
    
    $
    
    
    
    $
    5,540Restricted cash
    
    
    9,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,147Trade
receivables, less allowance for doubtful accounts
    
    
    13,384
    
    
    
    8,103
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    21,529Inventories
    
    
    9,791
    
    
    
    4,742
    
    
    
    
    
    
    
    276
    
    
    
    
    
    
    
    14,809Prepaid expenses and other current assets
    
    
    5,229
    
    
    
    1,307
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    6,538Total current assets
    
    
    42,415
    
    
    
    16,757
    
    
    
    
    
    
    
    (1,609
    )
    
    
    
    
    
    
    57,563PROPERTY AND EQUIPMENT, net
    
    
    62,964
    
    
    
    31,177
    
    
    
    
    
    
    
    2,716
    
    
    
    
    
    
    
    96,857INVESTMENTS
IN UNCONSOLIDATED PARTNERSHIPS
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    45GOODWILL
    
    
    30,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,038INTANGIBLE ASSETS, net
    
    
    153,998
    
    
    
    254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,252INVESTMENTS IN SUBSIDIARIES
    
    
    (96,234
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,234
    
    
    
    DUE FROM SUBSIDIARIES
    
    
    101,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,855
    )
    
    
    DEFERRED INCOME TAXES
    
    
    806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    806OTHER ASSETS
    
    
    10,618
    
    
    
    (621
    )
    
    
    
    
    
    
    2,625
    
    
    
    
    
    
    
    12,622$
    306,460
    
    
    $
    47,602
    
    
    $
    
    
    
    $
    3,742
    
    
    $
    (5,621
    )
    
    $
    352,183CURRENT LIABILITIES:Accounts payable
    
    $
    19,196
    
    
    $
    8,039
    
    
    $
    
    
    
    $
    782
    
    
    $
    
    
    
    $
    28,017Accrued expenses
    
    
    25,941
    
    
    
    16,720
    
    
    
    
    
    
    
    1,338
    
    
    
    
    
    
    
    43,999Accrued income taxes
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Franchise advertising contributions
    
    
    6,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,233Current maturities of long term debt and
capital lease obligations
    
    
    1,200
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,565Total
current liabilities
    
    
    52,575
    
    
    
    25,124
    
    
    
    
    
    
    
    2,120
    
    
    
    
    
    
    
    79,819CAPITAL LEASE OBLIGATIONS, less current
maturities
    
    
    2,998
    
    
    
    5,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,907LONG-TERM DEBT, less current maturities
    
    
    303,036
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    303,075DEFERRED RENT
    
    
    7,266
    
    
    
    3,732
    
    
    
    
    
    
    
    215
    
    
    
    
    
    
    
    11,213OTHER LIABILITIES
    
    
    4,014
    
    
    
    8,256
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    12,272DUE TO PARENT
    
    
    
    
    
    
    105,164
    
    
    
    
    
    
    
    (3,309
    )
    
    
    (101,855
    )
    
    
    MINORITY INTERESTS IN CONSOLIDATED PARTNERSHIPS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326
    
    
    
    
    
    
    
    326STOCKHOLDER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
    
    
    137,923
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,923Treasury stock
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    Other comprehensive income
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Retained
(deficit) earnings
    
    
    (201,450
    )
    
    
    (163,585
    )
    
    
    
    
    
    
    (5,127
    )
    
    
    168,712
    
    
    
    (201,450
    )(63,429
    )
    
    
    (100,622
    )
    
    
    
    
    
    
    4,388
    
    
    
    96,234
    
    
    
    (63,429
    )$
    306,460
    
    
    $
    47,602
    
    
    $
    
    
    
    $
    3,742
    
    
    $
    (5,621
    )
    
    $
    352,183
 19




---



##### Table of Contents



Consolidating balance sheet as of December 31, 2006 (in thousands):
 GuarantorsConsolidatedPMCI
    
    
    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
UNCONSOLIDATED 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,706Total
current liabilities
    
    
    45,844
    
    
    
    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
(deficit) earnings
    
    
    (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
 20




---



##### Table of Contents



Consolidating Statement of Cash Flows for the year-to-date period ended October 7, 2007 (unaudited; in thousands):
 GuarantorsConsolidatedPMCI
    
    
    WRG
    
    
    Other
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    PMCICASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (9,817
    )
    
    $
    7,556
    
    
    $
    
    
    
    $
    (123
    )
    
    $
    (7,433
    )
    
    $
    (9,817
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Equity in the earnings of subsidiaries
    
    
    (7,433
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,433
    
    
    
    Depreciation and amortization
    
    
    13,437
    
    
    
    4,683
    
    
    
    
    
    
    
    821
    
    
    
    
    
    
    
    18,941Amortization
of debt discount
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other non-cash income and expense items
    
    
    487
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    629Gain on disposition of assets
    
    
    (547
    )
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )Asset write-down
    
    
    144
    
    
    
    468
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    638Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    409Equity in net loss of unconsolidated partnerships
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Net changes in operating assets and liabilities
    
    
    (2,862
    )
    
    
    (9,078
    )
    
    
    
    
    
    
    (424
    )
    
    
    
    
    
    
    (12,364
    )Total adjustments
    
    
    3,474
    
    
    
    (3,305
    )
    
    
    
    
    
    
    832
    
    
    
    7,433
    
    
    
    8,434Net cash (used in) provided by operating activities
    
    
    (6,343
    )
    
    
    4,251
    
    
    
    
    
    
    
    709
    
    
    
    
    
    
    
    (1,383
    )CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (18,272
    )
    
    
    (3,555
    )
    
    
    
    
    
    
    (727
    )
    
    
    
    
    
    
    (22,554
    )Proceeds from sale of assets
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net cash used in investing activities
    
    
    (18,272
    )
    
    
    (3,552
    )
    
    
    
    
    
    
    (727
    )
    
    
    
    
    
    
    (22,551
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital lease obligations
    
    
    (128
    )
    
    
    (421
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (549
    )Proceeds from long-term debt
    
    
    1,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,950Payments on long-term debt
    
    
    (760
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (775
    )Proceeds from revolver
    
    
    62,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,600Payments on revolver
    
    
    (47,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,300
    )Landlord
financing
    
    
    2,915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,915Intercompany financing
    
    
    5,077
    
    
    
    (4,816
    )
    
    
    
    
    
    
    (261
    )
    
    
    
    
    
    
    Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    
    
    
    
    (228
    )Capital contribution
    
    
    1,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,792Net cash provided by (used in) financing activities
    
    
    26,146
    
    
    
    (5,252
    )
    
    
    
    
    
    
    (489
    )
    
    
    
    
    
    
    20,405Net increase (decrease) in cash and cash equivalents
    
    
    1,531
    
    
    
    (4,553
    )
    
    
    
    
    
    
    (507
    )
    
    
    
    
    
    
    (3,529
    )CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    3,333
    
    
    
    7,158
    
    
    
    
    
    
    
    (1,422
    )
    
    
    
    
    
    
    9,069Balance, end of period
    
    $
    4,864
    
    
    $
    2,605
    
    
    $
    
    
    
    $
    (1,929
    )
    
    $
    
    
    
    $
    5,540
 21




---



##### Table of Contents



Consolidating Statement of Cash Flows for the year-to-date period ended October 1, 2006 (unaudited; in thousands):
 Guarantors
    
    
    Non-
    
    
    
    
    
    
    ConsolidatedPMCI
    
    
    PMCM
    
    
    WRG
    
    
    Other
    
    
    Guarantors
    
    
    Eliminations
    
    
    PMCICASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (9,282
    )
    
    $
    7,520
    
    
    $
    1,483
    
    
    $
    
    
    
    $
    (273
    )
    
    $
    (8,730
    )
    
    $
    (9,282
    )Adjustments to reconcile net (loss)
income to net cash
(used in) provided by operating
activities:Equity in the earnings of subsidiaries
    
    
    (8,730
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,730
    
    
    
    Depreciation and amortization
    
    
    11,523
    
    
    
    2,351
    
    
    
    4,882
    
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    19,764Amortization
of debt discount
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other non-cash income and expense items
    
    
    (143
    )
    
    
    
    
    
    
    6,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,481Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (12,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,581
    )(Gain) loss on disposition of assets
    
    
    (96
    )
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (89
    )Asset write-down
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    137Minority interests
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    (128
    )
    
    
    
    
    
    
    192Equity in net loss of unconsolidated
partnerships
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Net changes in operating assets and
liabilities
    
    
    (258
    )
    
    
    358
    
    
    
    (4,856
    )
    
    
    23
    
    
    
    209
    
    
    
    
    
    
    
    (4,524
    )Total adjustments
    
    
    2,544
    
    
    
    2,709
    
    
    
    (5,349
    )
    
    
    23
    
    
    
    1,125
    
    
    
    8,730
    
    
    
    9,782Net cash (used in) provided by
operating activities
    
    
    (6,738
    )
    
    
    10,229
    
    
    
    (3,866
    )
    
    
    23
    
    
    
    852
    
    
    
    
    
    
    
    500CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for property and equipment
    
    
    (6,282
    )
    
    
    (1,051
    )
    
    
    (4,894
    )
    
    
    
    
    
    
    (1,095
    )
    
    
    
    
    
    
    (13,322
    )Proceeds from sale of assets
    
    
    1,534
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,547Intercompany activities
    
    
    77,093
    
    
    
    (77,093
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in)
investing activities
    
    
    72,345
    
    
    
    (78,144
    )
    
    
    (4,881
    )
    
    
    
    
    
    
    (1,095
    )
    
    
    
    
    
    
    (11,775
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments under capital
lease obligations
    
    
    (213
    )
    
    
    
    
    
    
    (451
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (664
    )Proceeds from long-term debt
    
    
    103,800
    
    
    
    
    
    
    
    1,541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,341Payments on long-term debt
    
    
    (4,050
    )
    
    
    
    
    
    
    (101,565
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,615
    )Proceeds
from revolver
    
    
    6,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,800Payments on
revolver
    
    
    (3,800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,800
    )Intercompany financing
    
    
    (109,966
    )
    
    
    
    
    
    
    109,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (2,720
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,720
    )Distributions to minority partners
    
    
    
    
    
    
    
    
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (242
    )Capital contribution
    
    
    (54,884
    )
    
    
    67,429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,545Net cash (used in) provided by
financing activities
    
    
    (65,033
    )
    
    
    67,429
    
    
    
    9,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,645Net increase (decrease) in cash and
cash equivalents
    
    
    574
    
    
    
    (486
    )
    
    
    502
    
    
    
    23
    
    
    
    (243
    )
    
    
    
    
    
    
    370CASH AND CASH EQUIVALENTS:Balance, beginning of period
    
    
    1,591
    
    
    
    1,567
    
    
    
    2,609
    
    
    
    (23
    )
    
    
    (1,756
    )
    
    
    
    
    
    
    3,988Balance, end of period
    
    $
    2,165
    
    
    $
    1,081
    
    
    $
    3,111
    
    
    $
    
    
    
    $
    (1,999
    )
    
    $
    
    
    
    $
    4,358
 22




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ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 GENERAL
  OUR COMPANY
        23




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OVERVIEW
    24




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KEY FACTORS AFFECTING OUR RESULTS
    25




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SUMMARY OF CRITICAL ACCOUNTING POLICIES
         26




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27




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RESULTS OF OPERATIONS
        28




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##### Table of Contents



Percentage of Total RevenuesThird Quarter
    
    
    Year-to-DateEnded
    
    
    EndedOctober 7, 2007
    
    
    October 7, 2007Restaurant operations
    
    
    85.6
    %
    
    
    86.8
    %Franchise operations
    
    
    4.7
    %
    
    
    4.7
    %Foxtail
    
    
    8.9
    %
    
    
    7.7
    %Other
    
    
    0.8
    %
    
    
    0.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Consolidated Results
    
    
    Restaurant Operations
    
    
    Franchise OperationsThird Quarter Ended
    
    
    Third Quarter Ended
    
    
    Third Quarter EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006Food sales
    
    $
    127,666
    
    
    $
    129,221
    
    
    $
    112,376
    
    
    $
    113,405
    
    
    $
    
    
    
    $
    Franchise and other revenue
    
    
    7,281
    
    
    
    7,171
    
    
    
    
    
    
    
    
    
    
    
    6,200
    
    
    
    6,199Intersegment revenue
    
    
    (3,635
    )
    
    
    (2,155
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenues
    
    
    131,312
    
    
    
    134,237
    
    
    
    112,376
    
    
    
    113,405
    
    
    
    6,200
    
    
    
    6,199Food cost
    
    
    28.5
    %
    
    
    29.3
    %
    
    
    26.5
    %
    
    
    26.7
    %
    
    
    0.0
    %
    
    
    0.0
    %Labor and benefits
    
    
    34.4
    %
    
    
    34.4
    %
    
    
    36.3
    %
    
    
    36.9
    %
    
    
    0.0
    %
    
    
    0.0
    %Operating expenses
    
    
    26.4
    %
    
    
    25.1
    %
    
    
    28.8
    %
    
    
    28.1
    %
    
    
    10.0
    %
    
    
    8.0
    %Segment Profit (Loss)
    
    $
    (4,345
    )
    
    $
    (7,854
    )
    
    $
    5,074
    
    
    $
    5,961
    
    
    $
    5,579
    
    
    $
    5,705
 Foxtail
    
    
    Other (a)Third Quarter Ended
    
    
    Third Quarter EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006Food sales
    
    $
    15,290
    
    
    $
    15,817
    
    
    $
    
    
    
    $
    Franchise and other revenue
    
    
    
    
    
    
    
    
    
    
    1,081
    
    
    
    971Intersegment revenue
    
    
    (3,635
    )
    
    
    (2,155
    )
    
    
    
    
    
    
    Total Revenues
    
    
    11,655
    
    
    
    13,662
    
    
    
    1,081
    
    
    
    971Food cost
    
    
    60.8
    %
    
    
    57.9
    %
    
    
    0.0
    %
    
    
    0.0
    %Labor and benefits
    
    
    12.9
    %
    
    
    11.1
    %
    
    
    -3.0
    %
    
    
    9.1
    %Operating expenses
    
    
    11.5
    %
    
    
    9.1
    %
    
    
    0.0
    %
    
    
    -7.2
    %Segment Profit (Loss)
    
    $
    901
    
    
    $
    1,904
    
    
    $
    (15,899
    )
    
    $
    (21,424
    )
  (a)
    
    Licensing revenue of $1,052,000 and $917,000 for the third 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. 29




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Consolidated Results
    
    
    Restaurant Operations
    
    
    Franchise OperationsYear-to-date Ended
    
    
    Year-to-date Ended
    
    
    Year-to-date EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006Food sales
    
    $
    429,115
    
    
    $
    423,698
    
    
    $
    381,624
    
    
    $
    373,193
    
    
    $
    
    
    
    $
    Franchise and other revenue
    
    
    24,087
    
    
    
    23,605
    
    
    
    
    
    
    
    
    
    
    
    20,433
    
    
    
    20,515Intersegment revenue
    
    
    (13,494
    )
    
    
    (6,510
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenues
    
    
    439,708
    
    
    
    440,793
    
    
    
    381,624
    
    
    
    373,193
    
    
    
    20,433
    
    
    
    20,515Food cost
    
    
    28.0
    %
    
    
    29.5
    %
    
    
    26.8
    %
    
    
    27.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Labor and benefits
    
    
    34.4
    %
    
    
    34.0
    %
    
    
    35.7
    %
    
    
    36.4
    %
    
    
    0.0
    %
    
    
    0.0
    %Operating expenses
    
    
    25.3
    %
    
    
    24.2
    %
    
    
    27.4
    %
    
    
    26.9
    %
    
    
    9.3
    %
    
    
    8.3
    %Segment Profit (Loss)
    
    $
    (9,817
    )
    
    $
    (9,282
    )
    
    $
    24,061
    
    
    $
    21,100
    
    
    $
    18,525
    
    
    $
    18,814
 Foxtail
    
    
    Other (a)Year-to-date Ended
    
    
    Year-to-date EndedOctober 7, 2007
    
    
    October 1, 2006
    
    
    October 7, 2007
    
    
    October 1, 2006Food sales
    
    $
    47,491
    
    
    $
    50,506
    
    
    $
    
    
    
    $
    Franchise and other revenue
    
    
    
    
    
    
    
    
    
    
    3,654
    
    
    
    3,089Intersegment revenue
    
    
    (13,494
    )
    
    
    (6,510
    )
    
    
    
    
    
    
    Total Revenues
    
    
    33,997
    
    
    
    43,996
    
    
    
    3,654
    
    
    
    3,089Food cost
    
    
    58.0
    %
    
    
    56.7
    %
    
    
    0.0
    %
    
    
    0.0
    %Labor and benefits
    
    
    13.7
    %
    
    
    11.4
    %
    
    
    8.1
    %
    
    
    9.4
    %Operating expenses
    
    
    10.6
    %
    
    
    9.8
    %
    
    
    0.0
    %
    
    
    0.0
    %Segment Profit (Loss)
    
    $
    3,441
    
    
    $
    6,466
    
    
    $
    (55,844
    )
    
    $
    (55,662
    )
  Quarter Ended October 7, 2007 Compared to the Quarter Ended October 1, 2006
 Restaurant Operations Overview
  30




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Foxtail Overview
   Franchise Operations Overview
      31




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##### Table of Contents



Food Cost
   Labor and Benefits Expenses
  Operating Expenses
  32




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##### Table of Contents



General and Administrative Expenses
  Transaction Costs
  Depreciation and Amortization
  Interest, net
  Asset Impairments and Closed Store Expenses
  Taxes
  Year-to-Date Ended October 7, 2007 Compared to the Year-to-Date Ended October 1, 2006
 Restaurant Operations Overview
  33




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Foxtail Overview
   Franchise Operations Overview
      34




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##### Table of Contents



Food Cost
   Labor and Benefits Expenses
  Operating Expenses
  35




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##### 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
  36




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##### Table of Contents



Taxes
  CAPITAL RESOURCES AND LIQUIDITY
      37




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##### Table of Contents



Working Capital and Cash Flows
   Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006Cash flows (used in) provided by operating activities
    
    $
    (1,383
    )
    
    $
    500Cash flows used in investing activities
    
    
    (22,551
    )
    
    
    (11,775
    )Cash flows provided by financing activities
    
    
    20,405
    
    
    
    11,645
 Operating activities
  Investing activities
   Year-to-Date
    
    
    Year-to-DateEnded
    
    
    EndedOctober 7, 2007
    
    
    October 1, 2006New restaurants
    
    $
    10,237
    
    
    $
    1,606Restaurant improvements
    
    
    6,422
    
    
    
    5,757Restaurant remodeling and reimaging
    
    
    3,133
    
    
    
    4,655Manufacturing plant improvements
    
    
    1,329
    
    
    
    392Other
    
    
    1,433
    
    
    
    912Total Capital Expenditures
    
    $
    22,554
    
    
    $
    13,322
  38




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Financing activities
  CASH CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
   RECENT ACCOUNTING PRONOUNCEMENTS
   IMPACT OF INFLATION
  INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
   39




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
    
    general economic conditions and demographic patterns;
    
    our substantial indebtedness;
    
    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
 40




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
    41




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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.
 42




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Signature
   PERKINS & MARIE CALLENDERS INC.By:

/s/
James W. StrykerJames W. StrykerChief Financial Officer 43