##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

|                                                   |  |                                                                                         
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(MARK ONE)                                         |  |                                                                                         
|                                                   |  |                                                                                         
|ü                                                  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|                                                   |  |                                                                                         
|For the quarterly period ended    
October 6, 2002
|                                                   |  |                                                                                         
|                                                   |  | OR                                                                                      
|                                                   |  |                                                                                         
|                                                   |  | 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

The Restaurant Company

---

(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)

(901) 766-6400

---

(Registrants
telephone number, including area code)


Indicate by ü whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes ü    No





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TABLE OF CONTENTS



|                                                                                                                                          |                                            |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                                                                           
|ITEM 1. FINANCIAL STATEMENTS                                                                                                             
|                                                                                                                                          | CONSOLIDATED STATEMENTS OF INCOME         
|CONSOLIDATED BALANCE SHEETS                                                                                                              
|                                                                                                                                          | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                                                                          | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED OCTOBER 6, 2002
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                       
|ITEM 4. CONTROLS AND PROCEDURES                                                                                                          
|PART II  OTHER INFORMATION                                                                                                              
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                                                 
|                                                                                                                                          | Signature                                 
|                                                                                                                                          | CERTIFICATIONS                            



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##### Table of Contents



THE RESTAURANT COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS

Part I  Financial Information

|                            |  |                                                                                                                                                       |  |   
|--------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|Item 1.                     |  | Financial Statements (Unaudited)                                                                                                                      |  |   
|                            |  | Consolidated Statements of Income for the Quarter
Ended October 6, 2002 and October 7, 2001;
    Year-to-Date October 6, 2002 and October 7, 2001     |  | 3 
|                            |  | Consolidated Balance Sheets as of October 6, 2002
and December 30, 2001                                                                               |  | 4 
|                            |  | Consolidated Statements of Cash Flows for the Quarter
Ended October 6, 2002 and October 7, 2001;
    Year-to-Date October 6, 2002 and October 7, 2001 |  | 6 
|                            |  | Notes to Consolidated Financial Statements                                                                                                            |  | 7 
|                            |  |                                                                                                                                                       |  |   
|Item 2.                     |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                                                                 |  | 13
|                            |  |                                                                                                                                                       |  |   
|Item 3.                     |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                            |  | 22
|                            |  |                                                                                                                                                       |  |   
|Item 4.                     |  | Controls and Procedures                                                                                                                               |  | 23
|                            |  |                                                                                                                                                       |  |   
|Part II  Other Information
|                            |  |                                                                                                                                                       |  |   
|Item 6.                     |  | Exhibits and Reports on Form 8-K                                                                                                                      |  | 24
|                            |  |                                                                                                                                                       |  |   
|                            |  | Signature                                                                                                                                             |  | 25
|                            |  |                                                                                                                                                       |  |   
|                            |  | Certifications                                                                                                                                        |  | 26





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS


THE RESTAURANT COMPANY AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


(In Thousands)


|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |         | 
|----------------------------------------- | --------------------------- | - | ---------- | ------ | ---------- | - | ---------- | ------ | ---------- | - | ------- | ------- |  | - | ------- | ------- | 
|                                          |                             |   | Quarter    |        | Quarter    |   | Year-to-   |        | Year-to-  
|                                          |                             |   | Ended      |        | Ended      |   | Date       |        | Date      
|                                          |                             |   | October 6, |        | October 7, |   | October 6, |        | October 7,
|                                          |                             |   | 2002       |        | 2001       |   | 2002       |        | 2001      
|                                          |                             |   |            |        |            |   |            |        |           
|REVENUE:                                  |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|                                          | Food sales                  |   | $          | 72,906 |            |   | $          | 70,535 |            |   | $       | 243,952 |  |   | $       | 235,213 | 
|                                          | Franchise and other revenue |   |            | 5,299  |            |   |            | 5,543  |            |   |         | 17,353  |  |   |         | 17,816  | 
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|Total Revenue                             |                             |   | 78,205     |        |            |   | 76,078     |        |            |   | 261,305 |         |  |   | 253,029 |        
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|COSTS AND EXPENSES:                       |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|Cost of sales:                            |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|                                          | Food cost                   |   |            | 19,979 |            |   |            | 19,674 |            |   |         | 67,411  |  |   |         | 65,673  | 
|                                          | Labor and benefits          |   |            | 24,810 |            |   |            | 24,753 |            |   |         | 85,383  |  |   |         | 82,239  | 
|                                          | Operating expenses          |   |            | 15,608 |            |   |            | 15,332 |            |   |         | 50,721  |  |   |         | 49,778  | 
|General and administrative                |                             |   | 6,563      |        |            |   | 6,668      |        |            |   | 23,275  |         |  |   | 23,920  |        
|Depreciation and amortization             |                             |   | 4,843      |        |            |   | 5,357      |        |            |   | 16,614  |         |  |   | 18,077  |        
|Interest, net                             |                             |   | 4,095      |        |            |   | 4,177      |        |            |   | 13,844  |         |  |   | 13,948  |        
|Gain on disposition of assets             |                             |   | (496       | )      |            |   |           |        |            |   | (466    | )       |  |   | (1,097  | )      
|Asset write-down                          |                             |   | 1,027      |        |            |   | 116        |        |            |   | 1,027   |         |  |   | 116     |        
|Other, net                                |                             |   | (70        | )      |            |   | (320       | )      |            |   | (433    | )       |  |   | (1,009  | )      
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|Total Costs and expenses                  |                             |   | 76,359     |        |            |   | 75,757     |        |            |   | 257,376 |         |  |   | 251,645 |        
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|Income before income taxes                |                             |   | 1,846      |        |            |   | 321        |        |            |   | 3,929   |         |  |   | 1,384   |        
|(Provision for) Benefit from income taxes |                             |   | (154       | )      |            |   | 374        |        |            |   | (758    | )       |  |   | 20      |        
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        
|NET INCOME                                |                             | $ | 1,692      |        |            | $ | 695        |        |            | $ | 3,171   |         |  | $ | 1,404   |        
|                                          |                             |   |            |        |            |   |            |        |            |   |         |         |  |   |         |        

The accompanying notes are an integral part of these consolidated statements.

3



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##### Table of Contents



THE RESTAURANT COMPANY AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS


(In Thousands)


|                                                                                  |                      |        |         |             |  |              |         |        |  | 
|--------------------------------------------------------------------------------- | -------------------- | ------ | ------- | ----------- |  | ------------ | ------- | ------ |  | 
|                                                                                  |                      |        |         | October 6,  |  |              |         |       
|                                                                                  |                      |        |         | 2002        |  | December 30,
|                                                                                  |                      |        |         | (Unaudited) |  | 2001        
|                                                                                  |                      |        |         |             |  |             
|                                                                                  |                      | ASSETS |         |             |  |              |         |        |  | 
|CURRENT ASSETS:                                                                   |                      |        |         |             |  |              |         |       
|Cash and cash equivalents                                                         |                      | $      | 4,687   |             |  | $            | 4,501   |       
|Receivables, less allowance for
doubtful accounts of $1,203 and $907              |                      |        | 8,817   |             |  |              | 8,468   |       
|Inventories, at the lower of first-in,
first-out cost or market                   |                      |        | 6,187   |             |  |              | 5,330   |       
|Prepaid expenses and other current assets                                         |                      |        | 1,567   |             |  |              | 2,692   |       
|Deferred income taxes                                                             |                      |        | 705     |             |  |              | 705     |       
|                                                                                  |                      |        |         |             |  |              |         |       
|                                                                                  | Total current assets |        |         | 21,963      |  |              |         | 21,696 | 
|                                                                                  |                      |        |         |             |  |              |         |       
|PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization |                      |        | 130,525 |             |  |              | 136,393 |       
|ASSETS HELD FOR DISPOSITION                                                       |                      |        | 1,716   |             |  |              | 5,087   |       
|GOODWILL                                                                          |                      |        | 27,035  |             |  |              | 27,035  |       
|INTANGIBLE ASSETS, net of accumulated
amortization of $4,385 and $3,651           |                      |        | 4,932   |             |  |              | 5,667   |       
|DEFERRED INCOME TAXES                                                             |                      |        | 6,895   |             |  |              | 6,895   |       
|OTHER ASSETS                                                                      |                      |        | 6,339   |             |  |              | 8,191   |       
|                                                                                  |                      |        |         |             |  |              |         |       
|                                                                                  |                      | $      | 199,405 |             |  | $            | 210,964 |       
|                                                                                  |                      |        |         |             |  |              |         |       

The accompanying notes are an integral part of these consolidated balance sheets.

4



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THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par and Share Amounts)

|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |        |        |   | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ---------------------------------------- | ---------------------------------------- | ------ | ----------- | - | ------------ | ------ | ------ | - | 
|                                                                                      |                                                                    |                                          |                                          |        | October 6,  |   |              |        |       
|                                                                                      |                                                                    |                                          |                                          |        | 2002        |   | December 30,
|                                                                                      |                                                                    |                                          |                                          |        | (Unaudited) |   | 2001        
|                                                                                      |                                                                    |                                          |                                          |        |             |   |             
|                                                                                      |                                                                    |                                          | LIABILITIES AND STOCKHOLDERS INVESTMENT |        |             |   |              |        |        |   | 
|CURRENT LIABILITIES:                                                                  |                                                                    |                                          |                                          |        |             |   |              |       
|                                                                                      | Current maturities of long-term debt and capital lease obligations |                                          | $                                        | 9,480  |             |   | $            | 1,030  |       
|                                                                                      | Accounts payable                                                   |                                          |                                          | 11,872 |             |   |              | 13,100 |       
|                                                                                      | Accrued expenses                                                   |                                          |                                          | 21,965 |             |   |              | 18,748 |       
|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |       
|                                                                                      |                                                                    | Total current liabilities                |                                          |        | 43,317      |   |              |        | 32,878 |  
|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |       
|CAPITAL LEASE OBLIGATIONS, less
current maturities                                    |                                                                    |                                          | 1,496                                    |        |             |   | 1,944        |       
|LONG-TERM DEBT                                                                        |                                                                    |                                          | 149,009                                  |        |             |   | 172,831      |       
|OTHER LIABILITIES                                                                     |                                                                    |                                          | 4,860                                    |        |             |   | 5,759        |       
|STOCKHOLDERS INVESTMENT:                                                             |                                                                    |                                          |                                          |        |             |   |              |       
|Common stock $.01 par value, 100,000 shares authorized,
10,820 issued and outstanding |                                                                    |                                          | 1                                        |        |             |   | 1            |       
|Accumulated earnings (deficit)                                                        |                                                                    |                                          | 722                                      |        |             |   | (2,449       | )     
|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |       
|                                                                                      |                                                                    | Total stockholders investment (deficit) |                                          |        | 723         |   |              |        | (2,448 | )
|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |       
|                                                                                      |                                                                    | $                                        | 199,405                                  |        |             | $ | 210,964      |       
|                                                                                      |                                                                    |                                          |                                          |        |             |   |              |       

The accompanying notes are an integral part of these consolidated balance sheets.

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##### Table of Contents



THE RESTAURANT COMPANY AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)
(In Thousands)


|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |        |        | 
|--------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------- | ------ | ---------- | ----- | ---------- | ------ | ---------- | ----- | ---------- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                  |                                                 |                   |        | Quarter    |       | Quarter    |        | Year-to-   |       | Year-to-  
|                                                                                  |                                                 |                   |        | Ended      |       | Ended      |        | Date       |       | Date      
|                                                                                  |                                                 |                   |        | October 6, |       | October 7, |        | October 6, |       | October 7,
|                                                                                  |                                                 |                   |        | 2002       |       | 2001       |        | 2002       |       | 2001      
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Net income                                                                        |                                                 | $                 | 1,692  |            |       | $          | 695    |            |       | $          | 3,171   |        |        | $ | 1,404   |       
|Adjustments to reconcile net income to net cash
provided by operating activities: |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|                                                                                  | Depreciation and amortization                   |                   |        | 4,843      |       |            |        | 5,357      |       |            |         | 16,614 |        |   |         | 18,077 |       
|                                                                                  | Accretion of interest on Senior Discount Notes  |                   |        | 6          |       |            |        | 695        |       |            |         | 19     |        |   |         | 2,253  |       
|                                                                                  | Asset write-down                                |                   |        | 1,027      |       |            |        | 116        |       |            |         | 1,027  |        |   |         | 116    |       
|                                                                                  | Provision for bad debt expense                  |                   |        | 187        |       |            |        | 89         |       |            |         | 408    |        |   |         | 299    |       
|                                                                                  | Gain on disposition of assets                   |                   |        | (496       | )     |            |        |           |       |            |         | (466   | )      |   |         | (1,097 | )     
|                                                                                  | Net changes in operating assets and liabilities |                   |        | 2,528      |       |            |        | (832       | )     |            |         | 2,063  |        |   |         | (3,906 | )     
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|                                                                                  |                                                 | Total adjustments |        |            | 8,095 |            |        |            | 5,425 |            |         |        | 19,665 |   |         |        | 15,742 | 
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Net cash provided by operating activities                                         |                                                 |                   | 9,787  |            |       |            | 6,120  |            |       |            | 22,836  |        |        |   | 17,146  |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Cash paid for property and equipment                                              |                                                 |                   | (3,073 | )          |       |            | (6,399 | )          |       |            | (11,907 | )      |        |   | (17,741 | )     
|Proceeds from sale of assets held for disposition                                 |                                                 |                   | 2,699  |            |       |            |       |            |       |            | 4,712   |        |        |   | 3,687   |       
|Proceeds from notes receivable                                                    |                                                 |                   | 44     |            |       |            | 41     |            |       |            | 383     |        |        |   | 185     |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Net cash used in investing activities                                             |                                                 |                   | (330   | )          |       |            | (6,358 | )          |       |            | (6,812  | )      |        |   | (13,869 | )     
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|(Payments on) net proceeds from long-term debt                                    |                                                 |                   | (9,000 | )          |       |            | 250    |            |       |            | (15,000 | )      |        |   | 1,250   |       
|Principal payments under capital lease obligations                                |                                                 |                   | (150   | )          |       |            | (224   | )          |       |            | (838    | )      |        |   | (745    | )     
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Net cash (used in) provided by financing activities                               |                                                 |                   | (9,150 | )          |       |            | 26     |            |       |            | (15,838 | )      |        |   | 505     |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Net increase (decrease) in cash and cash equivalents                              |                                                 |                   | 307    |            |       |            | (212   | )          |       |            | 186     |        |        |   | 3,782   |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|CASH AND CASH EQUIVALENTS:                                                        |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Balance, beginning of period                                                      |                                                 |                   | 4,380  |            |       |            | 9,355  |            |       |            | 4,501   |        |        |   | 5,361   |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       
|Balance, end of period                                                            |                                                 | $                 | 4,687  |            |       | $          | 9,143  |            |       | $          | 4,687   |        |        | $ | 9,143   |       
|                                                                                  |                                                 |                   |        |            |       |            |        |            |       |            |         |        |        |   |         |       

The accompanying notes are an integral part of these consolidated statements.

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##### Table of Contents



THE RESTAURANT COMPANY AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


Organization

The Restaurant Company (the Company, Perkins, or TRC) is a wholly-owned
subsidiary of The Restaurant Holding Corporation (RHC). TRC conducts business
under the name Perkins Restaurant and Bakery. TRC is also the sole stockholder
of TRC Realty LLC, The Restaurant Company of Minnesota and Perkins Finance Corp.
RHCs principal stockholders are Donald N. Smith (Mr. Smith), TRCs Chairman
and Chief Executive Officer, and BancBoston Ventures, Inc. (BBV). Mr. Smith is
also the Chairman and Chief Executive Officer of Friendly Ice Cream Corporation
(FICC), which operates and franchises approximately 550 restaurants, located
primarily in the northeastern United States.

Basis of Presentation

The accompanying unaudited consolidated financial statements of TRC have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and notes necessary for complete financial statements in
conformity with generally accepted accounting principles. The results for the
periods indicated are unaudited but reflect all adjustments (consisting only of
normal recurring adjustments) which management considers necessary for a fair
presentation of the operating results. Results of operations for the interim
periods are not necessarily indicative of a full year of operations. The notes
to the financial statements contained in the 2001 Annual Report on Form 10-K
should be read in conjunction with these statements.

Certain prior year amounts have been reclassified to conform to current year
presentation.

Change in Accounting Reporting Period

Effective January 1, 2001, the Company converted its financial reporting from a
calendar year basis to thirteen four-week periods ending on the last Sunday in
December. The first quarter each year will include four four-week periods. The
first, second and third quarters of 2002 ended on April 21, July 14 and October
6, respectively. The fourth quarter will end on December 29.

Contingencies

The Company is a party to various legal proceedings in the ordinary course of
business. Management does not believe it is likely that these proceedings,
either individually or in the aggregate, will have a material adverse effect on
the Companys financial position or results of operations.

In the past, the Company has sponsored financing programs offered by certain
lending institutions to assist its franchisees in procuring funds for the
construction of new franchised restaurants and to purchase and install in-store
bakeries. The Company provided a limited guaranty of funds borrowed. The
Companys obligations under these agreements expired during the first quarter of
2002.

On June 9, 2000, the Company entered into an agreement to guarantee fifty
percent of borrowings up to a total guarantee of $1,500,000 for use by a
franchisee to remodel and upgrade existing restaurants. As of October 6, 2002,
there were $3,000,000 in borrowings outstanding under this agreement of which
$1,500,000 were guaranteed by the Company.

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Supplemental Cash Flow Information

The increase or decrease in cash and cash equivalents due to changes in
operating assets and liabilities for the quarters and year-to-date periods ended
October 6 and October 7, consists of the following (in thousands):

|                        |                                           |   |            |        |            |   |            |        |            |   |       |        |   |   |        |        |  
|----------------------- | ----------------------------------------- | - | ---------- | ------ | ---------- | - | ---------- | ------ | ---------- | - | ----- | ------ | - | - | ------ | ------ | -
|                        |                                           |   | Quarter    |        | Quarter    |   | Year-to-   |        | Year-to-  
|                        |                                           |   | Ended      |        | Ended      |   | Date       |        | Date      
|                        |                                           |   | October 6, |        | October 7, |   | October 6, |        | October 7,
|                        |                                           |   | 2002       |        | 2001       |   | 2002       |        | 2001      
|                        |                                           |   |            |        |            |   |            |        |           
|(Increase) Decrease in: |                                           |   |            |        |            |   |            |        |            |   |       |        |   |   |        |       
|                        | Receivables                               |   | $          | 228    |            |   | $          | (944   | )          |   | $     | (1,055 | ) |   | $      | (1,580 | )
|                        | Inventories                               |   |            | (356   | )          |   |            | (1,170 | )          |   |       | (857   | ) |   |        | (1,329 | )
|                        | Prepaid expenses and
other current assets |   |            | 821    |            |   |            | 232    |            |   |       | 1,125  |   |   |        | (235   | )
|                        | Other assets                              |   |            | 1,468  |            |   |            | 227    |            |   |       | 2,041  |   |   |        | 507    |  
|Increase (Decrease) in: |                                           |   |            |        |            |   |            |        |            |   |       |        |   |   |        |       
|                        | Accounts payable                          |   |            | (1,079 | )          |   |            | (34    | )          |   |       | (1,273 | ) |   |        | (94    | )
|                        | Accrued expenses                          |   |            | 2,228  |            |   |            | 1,151  |            |   |       | 3,982  |   |   |        | (962   | )
|                        | Other liabilities                         |   |            | (782   | )          |   |            | (294   | )          |   |       | (1,900 | ) |   |        | (213   | )
|                        |                                           |   |            |        |            |   |            |        |            |   |       |        |   |   |        |       
|                        |                                           | $ | 2,528      |        |            | $ | (832       | )      |            | $ | 2,063 |        |   | $ | (3,906 | )     
|                        |                                           |   |            |        |            |   |            |        |            |   |       |        |   |   |        |       

Other supplemental cash flow information is as follows (in thousands):

|                            |  |            |     |            |  |            |     |            |  |   |       |  |  |   |       | 
|--------------------------- |  | ---------- | --- | ---------- |  | ---------- | --- | ---------- |  | - | ----- |  |  | - | ----- | 
|                            |  | Quarter    |     | Quarter    |  | Year-to-   |     | Year-to-  
|                            |  | Ended      |     | Ended      |  | Date       |     | Date      
|                            |  | October 6, |     | October 7, |  | October 6, |     | October 7,
|                            |  | 2002       |     | 2001       |  | 2002       |     | 2001      
|                            |  |            |     |            |  |            |     |           
|Cash paid for interest      |  | $          | 230 |            |  | $          | 306 |            |  | $ | 9,006 |  |  | $ | 7,875 | 
|Income taxes paid           |  |            | 704 |            |  |            | 793 |            |  |   | 1,600 |  |  |   | 2,545 | 
|Income tax refunds received |  |            |    |            |  |            | 5   |            |  |   | 639   |  |  |   | 22    | 

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Segment Reporting

The following presents revenue and other financial information by business
segment for the quarters and year-to-date periods ended October 6 and October 7
(in thousands):

|                                |  |             |        |           |  |               |       |       |  |        |       |  |  |   |         |   |  |   |        | 
|------------------------------- |  | ----------- | ------ | --------- |  | ------------- | ----- | ----- |  | ------ | ----- |  |  | - | ------- | - |  | - | ------ | 
|Quarter:                        |  | Restaurants |        | Franchise |  | Manufacturing |       | Other |  | Totals
|                                |  |             |        |           |  |               |       |       |  |       
|Quarter ended October 6, 2002:  |  |             |        |           |  |               |       |       |  |        |       |  |  |   |         |   |  |   |        | 
|Revenue from
external customers |  | $           | 63,783 |           |  | $             | 5,198 |       |  | $      | 8,726 |  |  | $ | 498     |   |  | $ | 78,205 | 
|Intersegment revenue            |  |             |       |           |  |               |      |       |  |        | 1,770 |  |  |   |        |   |  |   | 1,770  | 
|Segment profit (loss)           |  |             | 6,464  |           |  |               | 4,404 |       |  |        | 1,978 |  |  |   | (11,154 | ) |  |   | 1,692  | 
|Quarter ended October 7, 2001:  |  |             |        |           |  |               |       |       |  |        |       |  |  |   |         |   |  |   |        | 
|Revenue from
external customers |  | $           | 62,271 |           |  | $             | 5,410 |       |  | $      | 8,057 |  |  | $ | 340     |   |  | $ | 76,078 | 
|Intersegment revenue            |  |             |       |           |  |               |      |       |  |        | 2,111 |  |  |   |        |   |  |   | 2,111  | 
|Segment profit (loss)           |  |             | 4,852  |           |  |               | 4,510 |       |  |        | 1,993 |  |  |   | (10,660 | ) |  |   | 695    | 

|                                    |  |             |         |           |  |               |        |       |  |        |        |  |  |   |         |   |  |   |         | 
|----------------------------------- |  | ----------- | ------- | --------- |  | ------------- | ------ | ----- |  | ------ | ------ |  |  | - | ------- | - |  | - | ------- | 
|Year-to-date:                       |  | Restaurants |         | Franchise |  | Manufacturing |        | Other |  | Totals
|                                    |  |             |         |           |  |               |        |       |  |       
|Year-to-Date ended October 6, 2002: |  |             |         |           |  |               |        |       |  |        |        |  |  |   |         |   |  |   |         | 
|Revenue from
external customers     |  | $           | 217,283 |           |  | $             | 17,005 |       |  | $      | 25,210 |  |  | $ | 1,807   |   |  | $ | 261,305 | 
|Intersegment revenue                |  |             |        |           |  |               |       |       |  |        | 6,556  |  |  |   |        |   |  |   | 6,556   | 
|Segment profit (loss)               |  |             | 20,922  |           |  |               | 14,352 |       |  |        | 5,754  |  |  |   | (37,857 | ) |  |   | 3,171   | 
|Year-to-Date ended October 7, 2001: |  |             |         |           |  |               |        |       |  |        |        |  |  |   |         |   |  |   |         | 
|Revenue from
external customers     |  | $           | 210,253 |           |  | $             | 17,347 |       |  | $      | 24,483 |  |  | $ | 946     |   |  | $ | 253,029 | 
|Intersegment revenue                |  |             |        |           |  |               |       |       |  |        | 6,777  |  |  |   |        |   |  |   | 6,777   | 
|Segment profit (loss)               |  |             | 18,193  |           |  |               | 14,693 |       |  |        | 5,774  |  |  |   | (37,256 | ) |  |   | 1,404   | 

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A reconciliation of other segment loss is as follows (in thousands):

|                                       |  |            |        |            |  |            |        |            |  |   |        |   |  |   |        |  
|-------------------------------------- |  | ---------- | ------ | ---------- |  | ---------- | ------ | ---------- |  | - | ------ | - |  | - | ------ | -
|                                       |  | Quarter    |        | Quarter    |  | Year-to-   |        | Year-to-  
|                                       |  | Ended      |        | Ended      |  | Date       |        | Date      
|                                       |  | October 6, |        | October 7, |  | October 6, |        | October 7,
|                                       |  | 2002       |        | 2001       |  | 2002       |        | 2001      
|                                       |  |            |        |            |  |            |        |           
|General and administrative expenses    |  | $          | 5,396  |            |  | $          | 5,611  |            |  | $ | 19,681 |   |  | $ | 20,458 |  
|Depreciation and amortization expenses |  |            | 1,017  |            |  |            | 1,442  |            |  |   | 3,311  |   |  |   | 4,746  |  
|Interest expense                       |  |            | 4,095  |            |  |            | 4,177  |            |  |   | 13,844 |   |  |   | 13,948 |  
|Gain on disposition of assets          |  |            | (496   | )          |  |            |       |            |  |   | (466   | ) |  |   | (1,097 | )
|Asset write-down                       |  |            | 1,027  |            |  |            | 116    |            |  |   | 1,027  |   |  |   | 116    |  
|Income tax expense (benefit)           |  |            | 154    |            |  |            | (374   | )          |  |   | 758    |   |  |   | (20    | )
|Other                                  |  |            | (39    | )          |  |            | (312   | )          |  |   | (298   | ) |  |   | (895   | )
|                                       |  |            |        |            |  |            |        |            |  |   |        |   |  |   |        |  
|                                       |  | $          | 11,154 |            |  | $          | 10,660 |            |  | $ | 37,857 |   |  | $ | 37,256 |  
|                                       |  |            |        |            |  |            |        |            |  |   |        |   |  |   |        |  

Asset Impairment

During the third quarter, the Company committed to a plan to close both Sage Hen
Cafes. In accordance with accounting standards, the Company recorded an
impairment charge of approximately $1,027,000 to adjust the assets at the Sage
Hen Cafes to net realizable value. The Company has also recorded approximately
$280,000 of estimated exit costs associated with the properties.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142 goodwill and other intangible assets are no longer amortized but are tested
for impairment using a fair value methodology. The Company adopted SFAS No. 142 effective December 31, 2001 and
ceased amortization of goodwill in 2002 under the provisions of the statement.

Under the guidelines of SFAS 142, the Company was required to test all existing
goodwill for impairment as of December 31, 2001 on a reporting unit basis. The
Company has determined that its operating segments are its reporting units under
the provisions of SFAS 142. In this assessment of the carrying value of
goodwill, the Company developed its best estimate of operating cash flow for
each reporting unit and applied current market multiples, by reporting unit, to
determine the fair value of the assets, including goodwill. Based on this
assessment, the Company has determined that no impairment of goodwill existed as
of December 31, 2001.

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The following schedule provides the carrying amount of goodwill, by segment.

|                              |  |             |        |           |  |               |        |       |  |         |   |  |  |   |   |  |  |       |        | 
|----------------------------- |  | ----------- | ------ | --------- |  | ------------- | ------ | ----- |  | ------- | - |  |  | - | - |  |  | ----- | ------ | 
|                              |  |             |        |           |  |               |        |       |  |         |   |  |  |   |   |  |  | Total
|                              |  | Restaurants |        | Franchise |  | Manufacturing |        | Other |  | Company
|                              |  |             |        |           |  |               |        |       |  |        
|Balance as of October 6, 2002 |  | $           | 14,037 |           |  | $             | 12,998 |       |  | $       |  |  |  | $ |  |  |  | $     | 27,035 | 

The following schedule adjusts reported net income to exclude amortization
expense related to goodwill.

|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|----------------------------------- |  | ----------- | ------ | --------- |  | ------------- | ------ | ----- |  | ------- | ----- |  |  | - | ------- | - |  | ----- | ----- | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  | Total
|                                    |  | Restaurants |        | Franchise |  | Manufacturing |        | Other |  | Company
|                                    |  |             |        |           |  |               |        |       |  |        
|Quarter ended October 6, 2002:      |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 6,464  |           |  | $             | 4,404  |       |  | $       | 1,978 |  |  | $ | (11,154 | ) |  | $     | 1,692 | 
|Add back: Goodwill amortization     |  |             |       |           |  |               |       |       |  |         |      |  |  |   |        |   |  |       |      | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 6,464  |           |  | $             | 4,404  |       |  | $       | 1,978 |  |  | $ | (11,154 | ) |  | $     | 1,692 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Quarter ended October 7, 2001:      |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 4,852  |           |  | $             | 4,510  |       |  | $       | 1,993 |  |  | $ | (10,660 | ) |  | $     | 695   | 
|Add back: Goodwill amortization     |  |             | 145    |           |  |               | 153    |       |  |         |      |  |  |   |        |   |  |       | 298   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 4,997  |           |  | $             | 4,663  |       |  | $       | 1,993 |  |  | $ | (10,660 | ) |  | $     | 993   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Year-to-date ended October 6, 2002: |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 20,922 |           |  | $             | 14,352 |       |  | $       | 5,754 |  |  | $ | (37,857 | ) |  | $     | 3,171 | 
|Add back: Goodwill amortization     |  |             |       |           |  |               |       |       |  |         |      |  |  |   |        |   |  |       |      | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 20,922 |           |  | $             | 14,352 |       |  | $       | 5,754 |  |  | $ | (37,857 | ) |  | $     | 3,171 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Year-to-date ended October 7, 2001: |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 18,193 |           |  | $             | 14,693 |       |  | $       | 5,774 |  |  | $ | (37,256 | ) |  | $     | 1,404 | 
|Add back: Goodwill amortization     |  |             | 484    |           |  |               | 510    |       |  |         |      |  |  |   |        |   |  |       | 994   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 18,677 |           |  | $             | 15,203 |       |  | $       | 5,774 |  |  | $ | (37,256 | ) |  | $     | 2,398 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets.
SFAS No. 144 modifies the rules for evaluating the recoverability of assets (including intangibles) when events
and circumstances indicate that the assets might be impaired. The Company adopted SFAS No. 144 effective December
31, 2001, with no material impact on the Companys financial position or results of operations.

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In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of
Debt, requiring that gains and losses from the extinguishment of debt be
classified as extraordinary items only if certain criteria are met. SFAS 145
also amends SFAS No. 13, Accounting for Leases, and the required accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. SFAS 145 is
effective for the Company on December 30, 2002.

In July 2002, the FASB issued SFAS No. 146 which requires that a liability for a
cost associated with an exit or disposal activity be recognized initially at
fair value when the liability is incurred. SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002 and will be
applied on a prospective basis.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED OCTOBER 6, 2002

RESULTS OF OPERATIONS

Overview:

The Company is a leading operator and franchisor of mid-scale restaurants
located in 35 states and four Canadian provinces. As of October 6, 2002, the
Company owned and operated 154 and franchised 345 Perkins Restaurants. Both the
Company-operated and franchised Perkins Restaurants operate under the names
Perkins Restaurant and Bakery, Perkins Family Restaurant, Perkins Family
Restaurant and Bakery, or Perkins Restaurant and the mark Perkins. The
Company manufactures and distributes bakery products that are sold to
Company-operated restaurants, franchisees, third-party bakers and food
distributors. The business of Perkins was founded in 1958, and since then
Perkins has continued to adapt its menus, product offerings, building designs
and decor to meet changing consumer preferences. Perkins is a highly recognized
brand in the geographic areas it serves.

The Companys revenues are derived primarily from the operation of Company-owned
restaurants, the sale of bakery products produced by its manufacturing division,
Foxtail Foods (Foxtail), and franchise royalties. In order to ensure
consistency and availability of Perkins proprietary products to each unit in
the system, Foxtail offers cookie doughs, muffin batters, pancake mixes, pies
and other food products to Company-operated and franchised restaurants through
food service distributors. Additionally, it produces a variety of
non-proprietary products for sale in various retail markets. Sales to
Company-operated restaurants are eliminated in the accompanying statements of
income. For the quarter ended October 6, 2002, revenues from Company-operated
restaurants, Foxtail, and franchise and other accounted for 81.6%, 11.2% and
7.2% of total revenue, respectively.

TRC leases an executive aircraft through TRC Realty LLC. The aircraft is
operated for the benefit of, and all operating costs are reimbursed by, TRC and
FICC. Revenue received from FICC is included in franchise and other revenue in
the accompanying statements of income.

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A summary of the Companys results for the quarters and year-to-date periods
ended October 6, 2002 and October 7, 2001 are presented in the following table.
All revenues, costs and expenses are expressed as a percentage of total revenue.

|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |      |      |      | 
|----------------------------------------- | ----------------------------- | --------------------------- | ------------------ | ---- | ---------- | ---- | ---------- | ---- | ---------- | ---- | ---------- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | 
|                                          |                               |                             |                    |      | Quarter    |      | Quarter    |      | Year-to-   |      | Year-to-  
|                                          |                               |                             |                    |      | Ended      |      | Ended      |      | Date       |      | Date      
|                                          |                               |                             |                    |      | October 6, |      | October 7, |      | October 6, |      | October 7,
|                                          |                               |                             |                    |      | 2002       |      | 2001       |      | 2002       |      | 2001      
|                                          |                               |                             |                    |      |            |      |            |      |            |      |           
|Revenue:                                  |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|                                          |                               | Food sales                  |                    |      | 93.2       | %    |            |      | 92.7       | %    |            |      | 93.4 | %    |       |      | 93.0 | %   
|                                          |                               | Franchise and other revenue |                    |      | 6.8        |      |            |      | 7.3        |      |            |      | 6.6  |      |       |      | 7.0  |     
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|Total Revenue                             |                               |                             | 100.0              |      |            |      | 100.0      |      |            |      | 100.0      |      |      |      | 100.0 |     
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|Costs and Expenses:                       |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|                                          | Cost of sales:                |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |      |     
|                                          |                               |                             | Food cost          |      |            | 25.5 |            |      |            | 25.9 |            |      |      | 25.8 |       |      |      | 26.0 | 
|                                          |                               |                             | Labor and benefits |      |            | 31.7 |            |      |            | 32.4 |            |      |      | 32.7 |       |      |      | 32.5 | 
|                                          |                               |                             | Operating expenses |      |            | 20.0 |            |      |            | 20.2 |            |      |      | 19.4 |       |      |      | 19.5 | 
|                                          | General and administrative    |                             |                    | 8.4  |            |      |            | 8.8  |            |      |            | 8.9  |      |      |       | 9.6  |     
|                                          | Depreciation and amortization |                             |                    | 6.2  |            |      |            | 7.0  |            |      |            | 6.4  |      |      |       | 7.1  |     
|                                          | Interest, net                 |                             |                    | 5.2  |            |      |            | 5.5  |            |      |            | 5.3  |      |      |       | 5.5  |     
|                                          | Gain on disposition of assets |                             |                    | (0.6 | )          |      |            |     |            |      |            | (0.2 | )    |      |       | (0.3 | )   
|                                          | Asset write-down              |                             |                    | 1.3  |            |      |            | 0.2  |            |      |            | 0.4  |      |      |       |     |     
|                                          | Other, net                    |                             |                    | (0.1 | )          |      |            | (0.4 | )          |      |            | (0.2 | )    |      |       | (0.4 | )   
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|Total Costs and Expenses                  |                               |                             | 97.6               |      |            |      | 99.6       |      |            |      | 98.5       |      |      |      | 99.5  |     
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|Income before income taxes                |                               |                             | 2.4                |      |            |      | 0.4        |      |            |      | 1.5        |      |      |      | 0.5   |     
|(Provision for) Benefit from income taxes |                               |                             | (0.2               | )    |            |      | 0.5        |      |            |      | (0.3       | )    |      |      | 0.1   |     
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     
|Net Income                                |                               |                             | 2.2                | %    |            |      | 0.9        | %    |            |      | 1.2        | %    |      |      | 0.6   | %   
|                                          |                               |                             |                    |      |            |      |            |      |            |      |            |      |      |      |       |     

Net income for the third quarter of 2002 was $1,692,000 versus $695,000 for the
third quarter of 2001. For the year-to-date period ended October 6, 2002, net
income was $3,171,000 compared to $1,404,000 for the year-to-date period ended
October 7, 2001.

Revenue:

Total revenues for the third quarter of 2002 increased 2.8% over the prior year
third quarter. Year-to- date, total revenues increased 3.3% over the prior
year-to-date period. This increase is primarily due to the opening of ten new
Company-operated Perkins Restaurants and the addition of nine formerly franchised
restaurants acquired from franchisees since January 1, 2001. These sales increases were partially offset by the
continued impact of the closing of five Company-operated restaurants since
January 1, 2001 and the sale of five Company-operated restaurants to a
franchisee during 2001.

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Same store comparable sales in Company-operated restaurants decreased
approximately 3.4% for the third quarter and 1.7% year-to-date due to a decline
in comparable guest visits of 6.6% and 4.0%, respectively. The decrease in
comparable guest visits was partially offset by an increase in the guest check
average due to cumulative price increases and higher prices on promotional
items.

Revenues from Foxtail increased approximately 8.3% over the prior year quarter,
increased 3.0% over the prior year-to-date period and constituted approximately
11.2% and 9.6%, respectively, of the Companys total revenues.
The increase in
the quarter is primarily due to an increase in sales outside the Perkins system.

Franchise revenue, composed mainly of franchise royalties, decreased 3.9% over
the third quarter of 2001 and decreased 2.0% year-to-date. For the quarter and
year-to-date periods, royalty revenues declined slightly due to a decrease in
both average franchise stores in operation and comparable sales. These decreases
were partially offset by higher average sales in new franchised restaurants. An
increase in franchise opening fees partially offset these declines. Since the
third quarter of 2001, the Companys franchisees have opened 17 restaurants and
have closed 16 restaurants. The Company has purchased nine franchised
restaurants.

Costs and Expenses:

Food cost:

In terms of total revenues, food cost decreased 0.4 percentage points over the
third quarter of 2001 and decreased 0.2 percentage points over the previous
year-to-date period. Restaurant food cost, as a percentage of restaurant sales,
decreased 1.4 percentage points over the third quarter of 2001 due primarily to
menu price increases and commodity cost decreases. For the year-to-date period,
restaurant food cost decreased 0.5 percentage points over the prior year. As a
percentage of Foxtail sales, Foxtail food cost increased 2.4 percentage points
over the prior year quarter and was flat compared to the prior year-to-date
period.

Labor and benefits:

As a percentage of total revenues, labor and benefits expense decreased by 0.7
percentage points from the third quarter of 2001 and increased 0.2 percentage
points for the year-to-date period ended October 6, 2002. For the quarter, the
decrease is due mainly to managements emphasis on controlling costs. The
year-to-date increase is primarily due to a decrease in productivity in
Company-operated restaurants in the first quarter and an increase in workers
compensation costs. The Company anticipates that increased workers compensation
costs will negatively impact labor and benefits expense for the remainder of the
year. Workers compensation costs increased approximately 23.6% in the
year-to-date period.

Federal and state minimum wage laws impact the wage rates of the Companys
hourly employees. Certain states do not allow tip credits for servers which
results in higher payroll costs as well as greater exposure to increases in
minimum wage rates. In the past, the Company has been able to offset increases
in labor costs through selective menu price increases and improvements in labor
productivity. However, there is no assurance that future increases can be
mitigated through raising menu prices.

Operating expenses:

Expressed as a percentage of total revenues, operating expenses decreased 0.2
and 0.1 percentage points from the third quarter of 2001 and the previous
year-to-date period, respectively. Favorable variances resulting from a decrease
in natural gas costs were partially offset by increased property insurance
expenses and by incremental repairs and maintenance costs as a result of a focus
by the Company on improving the image of its restaurants.

General and administrative:

General and administrative expenses, as a percentage of total revenues decreased
0.4 percentage points over the third quarter 2001 and decreased 0.7 percentage
points over the year-to-date period of 2001. The decrease for the quarter was
primarily due to the increase in revenues for the quarter . The year-to-date
decrease was primarily due to selected staff reductions in the third quarter of
2001.

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Depreciation and amortization:

Depreciation and amortization expense decreased from 7.0 percent of sales to 6.2
percent of sales over the third quarter 2001 primarily due to the adoption of
SFAS No. 142 and the increase in total revenue. Had SFAS No. 142 been adopted as
of January 1, 2001, depreciation and amortization expense would have been
approximately $298,000 and $994,000 lower in the third quarter and year-to-date
period of 2001, respectively.

Interest, net:

Interest expense, as a percentage of total revenue, decreased 0.3 and 0.2
percentage points over the third quarter and year-to-date periods of 2001,
respectively. The decrease is the result of reduced average borrowings and lower
variable interest rates on the Companys revolving line of credit.

Other, net:

Other income decreased due to the reduction in the number of properties leased
and subleased to third parties.

CAPITAL RESOURCES AND LIQUIDITY

The Companys primary sources of funding during the quarter and year-to-date
period were cash flows from operating activities and proceeds from the sale of
assets. The principal uses of cash during the same periods were payments on
long-term debt and capital expenditures. Capital expenditures consisted
primarily of building and equipment purchases for new Company-operated
restaurants, capital required to maintain operations and costs related to
remodeling and upgrading existing restaurants.

The following table summarizes capital expenditures for the periods ended
October 6, 2002 and October 7, 2001 (in thousands):

|                           |  |              |        |            |  |   |        | 
|-------------------------- |  | ------------ | ------ | ---------- |  | - | ------ | 
|                           |  | Year-to-Date
|                           |  |             
|                           |  | October 6,   |        | October 7,
|                           |  | 2002         |        | 2001      
|                           |  |              |        |           
|New restaurants            |  | $            | 2,121  |            |  | $ | 8,729  | 
|Maintenance                |  |              | 4,537  |            |  |   | 3,497  | 
|Remodeling and reimaging   |  |              | 2,399  |            |  |   | 1,636  | 
|Manufacturing              |  |              | 239    |            |  |   | 645    | 
|Other                      |  |              | 2,611  |            |  |   | 3,234  | 
|                           |  |              |        |            |  |   |        | 
|Total Capital Expenditures |  | $            | 11,907 |            |  | $ | 17,741 | 
|                           |  |              |        |            |  |   |        | 

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The Companys capital budget for 2002 is $16.0 million. Actual capital
expenditures have been primarily applied to remodeling of existing restaurants,
restaurant maintenance and new Company stores. Capital spending for new Company
stores for 2002 includes expenditures for the building of one new restaurant,
furniture, fixtures and equipment for three new restaurants and the conversion
of a fourth property. As of November 20, 2002, the Company has completed the
construction and opened all four Company-operated restaurants planned for 2002.
The primary source of funding for these projects was cash flows from operating
activities.

The Company ordinarily operates with a working capital deficit since funds
generated by cash sales in excess of those needed to service short-term
obligations are used by the Company to reduce debt and acquire capital assets.
At October 6, 2002, this working capital deficit was $21,354,000.

The Company has a secured $40,000,000 revolving line of credit facility (the
Credit Facility) with a sub-limit for up to $5,000,000 of letters of credit.
All amounts under the Credit Facility bear interest at floating rates based on
the agents base rate or Eurodollar rates as defined in the agreement. All
indebtedness under the Credit Facility is secured by a first priority lien on
substantially all of the assets of the Company. As of October 6, 2002,
$1,000,000 in borrowings and approximately $2,659,000 of letters of credit were
outstanding under the Credit Facility.

On November 15, 2001 the Company elected to begin accruing cash interest on its
11.25% Senior Discount Notes (the Notes). Cash interest will be payable
semi-annually on May 15 and November 15. The principal balance of the Notes on
October 6, 2002 was $26,849,000. On May 15, 2003 the Company will be required to
redeem $8,383,000 in principal of the Notes at a redemption price of 105.625% of
the face amount of the notes. The Company has limited capital spending in 2002
to provide funds for the payment of cash interest on the Notes, which is
expected to total $2,969,000 in 2002.

The Company has contractual obligations and commercial commitments including
long-term debt, land lease obligations for Company operated restaurants and
office space for corporate operations. The table below presents, as of October
6, 2002, the Companys future scheduled principal repayments of long-term debt
and lease obligations (in thousands).

|                      |                               |   |           |       |             |   |             |      |                  |   |        |       |  |   |         |        | 
|--------------------- | ----------------------------- | - | --------- | ----- | ----------- | - | ----------- | ---- | ---------------- | - | ------ | ----- |  | - | ------- | ------ | 
|                      |                               |   |           |       |             |   | Capital     |      | Operating        |   | Total 
|                      |                               |   | Long-Term |       | Lease       |   | Lease       |      | Contractual     
|                      |                               |   | Debt      |       | Obligations |   | Obligations |      | Cash Obligations
|                      |                               |   |           |       |             |   |             |      |                 
|                      | 2002                          |   | $         |      |             |   | $           | 208  |                  |   | $      | 1,560 |  |   | $       | 1,768  | 
|                      | 2003                          |   |           | 8,840 |             |   |             | 823  |                  |   |        | 7,943 |  |   |         | 17,606 | 
|                      | 2004                          |   |           |      |             |   |             | 575  |                  |   |        | 7,203 |  |   |         | 7,778  | 
|                      | 2005                          |   |           | 1,000 |             |   |             | 398  |                  |   |        | 6,502 |  |   |         | 7,900  | 
|                      | 2006                          |   |           |      |             |   |             | 312  |                  |   |        | 6,118 |  |   |         | 6,430  | 
|Thereafter            |                               |   | 148,009   |       |             |   | 279         |      |                  |   | 35,523 |       |  |   | 183,811 |       
|                      |                               |   |           |       |             |   |             |      |                  |   |        |       |  |   |         |       
|Total                 |                               | $ | 157,849   |       |             | $ | 2,595       |      |                  | $ | 64,849 |       |  | $ | 225,293 |       
|Less: Current Portion |                               |   | (8,840    | )     |             |   | (640        | )    |                  |   |        |       |  |   |         |       
|                      | Amounts representing interest |   |           |      |             |   |             | (459 | )                |   |        |       |  |   |         |        | 
|                      |                               |   |           |       |             |   |             |      |                  |   |        |       |  |   |         |       
|Total                 |                               | $ | 149,009   |       |             | $ | 1,496       |      |                  |   |        |       |  |   |         |       

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TRC is a wholly-owned subsidiary of RHC. The common shares of RHC not owned by
Mr. Smith are subject to an option to require RHC to redeem the shares at any
time after December 22, 2004 at fair market value (the Put). As of October 6,
2002, these shares represented 30% of the outstanding common stock of RHC. As of
December 31, 2001, the estimated fair market value of the Put was $12,727,000.
RHC has a management fee agreement dated as of December 22, 1999, with BBV
whereby BBV provides certain consulting services to RHC. In consideration for
these services, a fee of $250,000 accrues annually and is payable by RHC on
December 22, 2004.

Additionally, RHC issued 50,000 shares of non-voting preferred stock on December
22, 1999. The preferred stock is mandatorily redeemable for $1,000 per share
(the Liquidation Value) plus all accrued but unpaid dividends, if any, on
December 22, 2006. Preferred dividends of 8% per annum of the Liquidation Value
of each share are payable quarterly. As of October 6, 2002, approximately
$12,358,000 of in-kind dividends had been paid through the issuance of
additional shares of preferred stock. Assuming a continuation of in-kind
dividends, the redemption price on December 22, 2006 is estimated to be
$87,044,000. The holders of preferred stock are entitled to be paid in cash the
Liquidation Value of each share of preferred stock before any payments are made
to any holders of common stock. The preferred stock is redeemable at the option
of the Company at any time prior to the mandatory redemption date at the
Liquidation Value plus a redemption premium as specified in the Companys
Charter. The redemption premium is 3% through December 21, 2002 after which the
preferred stock is redeemable at par.

RHC has no material assets other than its investment in TRC. The ability of TRC
to pay dividends to or make distributions to RHC in order to redeem common or
preferred shares or pay the management fee to BBV is restricted under its senior
notes and the Credit Facility. Therefore, TRC may need to recapitalize or
refinance all or a portion of its obligations on or prior to maturity.

The Companys ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance, its indebtedness,
or to fund planned capital expenditures, or to meet its or RHCs other liquidity
needs will depend on the Companys future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond control of the Company. Based upon
the current level of operations, management believes that cash flow from
operating activities and available cash, together with available borrowings
under the Credit Facility, will be adequate to meet the Companys liquidity
needs in the normal course of its operations. There can be no assurance that the
Company will generate sufficient cash flow from operations, have access to
capital markets or that future borrowings will be available in an amount
sufficient to enable the Company to service its indebtedness or to fund its
other liquidity needs. In addition, there can be no assurance that the Company
will be able to effect any necessary recapitalization or refinancing on
commercially reasonable terms or at all.

SEASONALITY

Company revenues are subject to seasonal fluctuations. Customer counts (and
consequently revenues) are highest in the summer months and lowest during the
winter months because of the high proportion of restaurants located in states
where inclement weather adversely affects guest visits.

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ASSET IMPAIRMENT

During the third quarter, the Company committed to a plan to close both Sage Hen
Cafes. In accordance with accounting standards, the Company recorded an
impairment charge of approximately $1,027,000 to adjust the assets at the Sage
Hen Cafes to net realizable value. The Company has also recorded approximately
$280,000 of estimated exit costs associated with the properties.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142 goodwill and other intangible assets are no longer amortized but are tested
for impairment using a fair value methodology. The Company adopted SFAS No. 142 effective December 31, 2001 and
ceased amortization of goodwill in 2002 under the provisions of the statement.

Under the guidelines of SFAS 142, the Company was required to test all existing
goodwill for impairment as of December 31, 2001 on a reporting unit basis. The
Company has determined that its operating segments are its reporting units under
the provisions of SFAS 142. In this assessment of the carrying value of
goodwill, the Company developed its best estimate of operating cash flow for
each reporting unit and applied current market multiples, by reporting unit, to
determine the fair value of the assets, including goodwill. Based on this
assessment, the Company has determined that no impairment of goodwill existed as
of December 31, 2001.

The following schedule provides the carrying amount of goodwill, by segment.

|                              |  |             |        |           |  |               |        |       |  |         |   |  |  |   |   |  |  |       |        | 
|----------------------------- |  | ----------- | ------ | --------- |  | ------------- | ------ | ----- |  | ------- | - |  |  | - | - |  |  | ----- | ------ | 
|                              |  |             |        |           |  |               |        |       |  |         |   |  |  |   |   |  |  | Total
|                              |  | Restaurants |        | Franchise |  | Manufacturing |        | Other |  | Company
|                              |  |             |        |           |  |               |        |       |  |        
|Balance as of October 6, 2002 |  | $           | 14,037 |           |  | $             | 12,998 |       |  | $       |  |  |  | $ |  |  |  | $     | 27,035 | 

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The following schedule adjusts reported net income to exclude amortization
expense related to goodwill.

|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|----------------------------------- |  | ----------- | ------ | --------- |  | ------------- | ------ | ----- |  | ------- | ----- |  |  | - | ------- | - |  | ----- | ----- | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  | Total
|                                    |  | Restaurants |        | Franchise |  | Manufacturing |        | Other |  | Company
|                                    |  |             |        |           |  |               |        |       |  |        
|Quarter ended October 6, 2002:      |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 6,464  |           |  | $             | 4,404  |       |  | $       | 1,978 |  |  | $ | (11,154 | ) |  | $     | 1,692 | 
|Add back: Goodwill amortization     |  |             |       |           |  |               |       |       |  |         |      |  |  |   |        |   |  |       |      | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 6,464  |           |  | $             | 4,404  |       |  | $       | 1,978 |  |  | $ | (11,154 | ) |  | $     | 1,692 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Quarter ended October 7, 2001:      |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 4,852  |           |  | $             | 4,510  |       |  | $       | 1,993 |  |  | $ | (10,660 | ) |  | $     | 695   | 
|Add back: Goodwill amortization     |  |             | 145    |           |  |               | 153    |       |  |         |      |  |  |   |        |   |  |       | 298   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 4,997  |           |  | $             | 4,663  |       |  | $       | 1,993 |  |  | $ | (10,660 | ) |  | $     | 993   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Year-to-date ended October 6, 2002: |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 20,922 |           |  | $             | 14,352 |       |  | $       | 5,754 |  |  | $ | (37,857 | ) |  | $     | 3,171 | 
|Add back: Goodwill amortization     |  |             |       |           |  |               |       |       |  |         |      |  |  |   |        |   |  |       |      | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 20,922 |           |  | $             | 14,352 |       |  | $       | 5,754 |  |  | $ | (37,857 | ) |  | $     | 3,171 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Year-to-date ended October 7, 2001: |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Reported net income (loss)          |  | $           | 18,193 |           |  | $             | 14,693 |       |  | $       | 5,774 |  |  | $ | (37,256 | ) |  | $     | 1,404 | 
|Add back: Goodwill amortization     |  |             | 484    |           |  |               | 510    |       |  |         |      |  |  |   |        |   |  |       | 994   | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 
|Adjusted net income (loss)          |  | $           | 18,677 |           |  | $             | 15,203 |       |  | $       | 5,774 |  |  | $ | (37,256 | ) |  | $     | 2,398 | 
|                                    |  |             |        |           |  |               |        |       |  |         |       |  |  |   |         |   |  |       |       | 

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets.
SFAS No. 144 modifies the rules for evaluating the recoverability of assets (including intangibles) when events
and circumstances indicate that the assets might be impaired. The Company adopted SFAS No. 144 effective December
31, 2001, with no material impact on the Companys financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of
Debt, requiring that gains and losses from the extinguishment of debt be
classified as extraordinary items only if certain criteria are met. SFAS 145
also amends SFAS No. 13, Accounting for Leases, and the required accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. SFAS 145 is
effective for the Company on December 30, 2002.

In July 2002, the FASB issued SFAS No. 146 which requires that a liability for a
cost associated with an exit or disposal activity be recognized initially at
fair value when the liability is incurred. SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002 and will be
applied on a prospective basis.

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FORWARD-LOOKING STATEMENTS

This discussion contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are based on current expectations that are subject to known and
unknown risks, uncertainties and other factors that could cause actual results
to differ materially from those contemplated by the forward-looking statements.
Such factors include, but are not limited to, the following: general economic
conditions, competitive factors, consumer taste and preferences and adverse
weather conditions. The Company does not undertake to publicly update or revise
the forward-looking statements even if experience or future changes make it
clear that the projected results expressed or implied therein will not be
realized.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company currently has market risk sensitive instruments related to interest
rates. The Company is not subject to significant exposure for changing interest
rates on its senior notes because the interest rates are fixed. The Company has
in place a $40,000,000 line of credit facility which matures on January 1, 2005.
All borrowings under the facility bear interest at floating rates based on the
agents base rate or Eurodollar rates. The Company had $1,000,000 outstanding
under the line of credit facility at October 6, 2002. While changes in market
interest rates would affect the cost of funds borrowed in the future, the
Company believes that the effect, if any, of reasonably possible near-term
changes in interest rates on the Companys consolidated financial position,
results of operations or cash flows would not be material.

Commodity Price Risk

Many of the food products purchased by the Company are affected by commodity
pricing and are, therefore, subject to price volatility caused by weather,
production problems, delivery difficulties and other factors that are outside
the control of the Company. The Companys supplies and raw materials are
available from several sources and the Company is not dependent upon any single
source for these items. If any existing suppliers fail, or are unable to deliver
in quantities required by the Company, the Company believes that there are
sufficient other quality suppliers in the marketplace, and therefore, its
sources of supply can be replaced as necessary. At times, the Company enters
into purchase contracts of one year or less or purchases bulk quantities for
future use of certain items in order to control commodity pricing risks. Certain
significant items that could be subject to price fluctuations are beef, pork,
coffee, eggs, poultry, wheat products and corn products. The Company believes it
will be able to pass through increased commodity costs by adjusting menu pricing
in most cases. Additionally, the Companys product offerings and marketing
events are relatively diverse. Therefore, the Company has the flexibility to
adjust its product mix to take advantage of or limit exposure to commodity cost
fluctuations. The Company believes that any changes in commodity pricing, which
cannot be offset by changes in menu pricing or other product delivery
strategies, would not be material to the Companys consolidated financial
position, results of operations or cash flows.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in our filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. Our principal executive and financial officers
have evaluated our disclosure controls and procedures within 90 days prior to
the filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.

Subsequent to our evaluation, there were no significant changes in
internal controls or other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

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PART II  OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits  None

(b)  Reports on Form 8-K  The Company did not file any reports on Form 8-K
during the quarter ended October 6, 2002.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |  |                   |  |                                                                                                            
|----- |  | ----------------- |  | -----------------------------------------------------------------------------------------------------------
|      |  |                   |  | THE RESTAURANT COMPANY                                                                                     
|     
|DATE: |  | November 20, 2002 |  | BY: /s/ Michael P. DonahoeMichael P. Donahoe
Executive Vice President,
Chief Financial Officer and Director

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CERTIFICATIONS

I, Donald N. Smith , certify that:

1.     I have reviewed this quarterly report on Form 10-Q of The Restaurant Company.

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 20, 2002

| |  |                                                                                     
| |  | ------------------------------------------------------------------------------------
| |  | /s/ Donald N. SmithDonald N. Smith
Chairman of the Board and Chief Executive Officer

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CERTIFICATIONS

I, Michael P. Donahoe, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of The Restaurant Company.

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 20, 2002

| |  |                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------
| |  | /s/ Michael P. DonahoeMichael P. Donahoe
Executive Vice President,
Chief Financial Officer and Director

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