##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 27, 2007
 Commission file number: 333-116897
 BUFFETS HOLDINGS, INC.
  Delaware
    
    22-3754018(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)1460 Buffet WayEagan, Minnesota
    
    55121(Address of principal 
executive offices)
    
    (Zip Code)
 (651) 994-8608
   o þ
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  o o þ
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TABLE OF CONTENTS
 PageItemPART I1. Business
    
    31A. Risk Factors/Forward-Looking Statements
    
    81B. Unresolved Staff Comments
    
    142. Properties
    
    143. Legal Proceedings
    
    174. Submission of Matters to a Vote of Security Holders
    
    18PART II5. Market for the Registrants Common Stock and Related Stockholder Matters
    
    186. Selected Financial Data
    
    197. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    207A. Quantitative and Qualitative Disclosures About Market Risks
    
    368. Financial Statements and Supplementary Data
    
    379. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    789A. Controls and Procedures
    
    789B. Other Information
    
    78PART III10. Directors and Executive Officers of the Registrant
    
    7911. Executive Compensation
    
    8112. Security Ownership of Certain Beneficial Owners and Management
    
    9313. Certain Relationships and Related Transactions
    
    9414. Principal Accountant Fees and Services
    
    95PART IV15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    96302 Certification of Principal Executive Officer302 Certification of Principal Financial Officer906 Certification of Principal Executive Officer906 Certification of Principal Financial Officer
  2




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PART I
 
 ITEM 1. BUSINESS
 Unless the context indicates or requires otherwise, (i) the term Buffets Holdings refers to
Buffets Holdings, Inc.; (ii) the term Buffets refers to Buffets, Inc., our principal operating
subsidiary; and (iii) the terms we, our, ours, us and the company refer collectively to
Buffets Holdings and its subsidiaries. The use of these terms is not intended to imply that Buffets
Holdings and Buffets are not separate and distinct legal entities.
 Our Company
      Our Background
  3




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Recent Developments
   ®
 Restaurant Operations and Controls
   4




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Management Training
    Research and Development, Menu Selection and Purchasing
    Franchising and Joint Ventures
  5




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Advertising and Promotion
     Trademarks
  
    
    Old Country Buffet®
    
    HomeTown Buffet®
    
    Country Buffet®
    
    Grannys Buffet®
    
    Fire Mountain®
    
    Ryans®
    
    Tahoe Joes Famous Steakhouse®
  Competition
  6




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Regulation
    ®
  Environmental Matters
  Employees
  7




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ITEM 1A. RISK FACTORS/FORWARD-LOOKING STATEMENTS
  Risks Related to Our Business
 Our core steak-buffet restaurants are a maturing restaurant concept and face intense competition.
    We are dependent on attracting and retaining qualified employees while controlling labor costs .
  8




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We
are dependent on timely delivery of fresh ingredients by our suppliers. We are also substantially dependent on a single food supplier.
   Our restaurant sales are subject to seasonality and major world events.
  Our business is affected by changes in consumer preferences and consumer discretionary spending .
  9




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Current restaurant locations may become unattractive, and attractive new locations may not be
available for a reasonable price, if at all.
  We face risks associated with government regulations.
    Negative publicity relating to one of our restaurants, including our franchised restaurants, could
reduce sales at some or all of our other restaurants.
  Food-borne illness incidents could result in liability to us and could reduce our restaurant sales.
  10




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Any negative development relating to our self-service food service approach would have a material
adverse impact on our primary business.
  We face risks associated with environmental laws.
  We face risks because of the number of restaurants that we lease.
  We may not be able to protect our trademarks and other proprietary rights.
  11




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We may not realize the anticipated benefits of our acquisition of Ryans and we may face certain
challenges regarding the integration of Ryans.
   Complaints or litigation may hurt us.
  We are controlled by a single shareholder and its interests may conflict with yours.
  Risks Related to Our Substantial Indebtedness and Other Liabilities
 Our
indebtedness may limit our cash flow available to invest in our
business, which in turn could prevent us from fulfilling our obligations under our outstanding debt.
   
    
    the impairment of our ability to obtain additional financing in the future for
working capital, capital expenditures for, among other items, restaurant development and
refurbishment, acquisitions, general corporate purposes or other purposes.
    
    the impairment of our ability to refinance our indebtedness on terms that are
favorable to us.
    
    a significant portion of our cash flow from operations must be dedicated to the
payment of principal and interest on our debt, which reduces the funds available to us
for our operations.
    
    placing us at a competitive disadvantage compared to our competitors that have
less debt and therefore may be able to react to industry, regulatory and
economic changes faster that we can.
    
    some of our debt is, and will continue to be, at variable rates of interest, which
may result in higher interest expense in the event of increases in interest rates.
    
    the agreements governing our indebtedness contain financial and restrictive covenants,
which are more difficult to comply with if we have high levels of indebtedness, and our failure
to comply with these covenants may result in an event of default which, if not cured or waived,
could have a material adverse effect on us.
 12




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We are subject to covenants which limit the discretion of our management in operating our business
and could prevent us from engaging in some beneficial activities or
limit our ability to respond to changes.
  
    
    dividends on, and redemptions and repurchases of, capital stock.
    
    liens and sale leaseback transactions.
    
    loans and investments.
    
    the incurrence of additional indebtedness and the use of
hedging arrangements.
    
    mergers, acquisitions and asset sales.
    
    transactions with affiliates.
    
    changes in business activities conducted by us and our subsidiaries.
    
    limitations of capital expenditures.
  
    
    a minimum interest coverage ratio, and
    
    a maximum leverage ratio.
   We have substantial operating lease obligations. Our operating leases contain terms that could
limit our ability to manage our business and result in the termination of our leases.
   We may not be able to generate sufficient cash flow to meet our debt service and operating lease
obligations.
  13




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Restaurant Locations
   14




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Number ofCompany-
    
    Number of
    
    TotalOperated
    
    Franchised
    
    Number ofState
    
    Restaurants
    
    Restaurants
    
    RestaurantsAlabama
    
    
    21
    
    
    
    
    
    
    
    21Arizona
    
    
    5
    
    
    
    8
    
    
    
    13Arkansas
    
    
    10
    
    
    
    
    
    
    
    10California
    
    
    88
    
    
    
    1
    
    
    
    89Colorado
    
    
    12
    
    
    
    1
    
    
    
    13Connecticut
    
    
    6
    
    
    
    
    
    
    
    6Delaware
    
    
    1
    
    
    
    
    
    
    
    1Florida
    
    
    5
    
    
    
    
    
    
    
    5Georgia
    
    
    38
    
    
    
    
    
    
    
    38Idaho
    
    
    1
    
    
    
    
    
    
    
    1Illinois
    
    
    40
    
    
    
    
    
    
    
    40Indiana
    
    
    20
    
    
    
    
    
    
    
    20Iowa
    
    
    4
    
    
    
    
    
    
    
    4Kansas
    
    
    6
    
    
    
    
    
    
    
    6Kentucky
    
    
    15
    
    
    
    
    
    
    
    15Louisiana
    
    
    19
    
    
    
    
    
    
    
    19Maine
    
    
    1
    
    
    
    
    
    
    
    1Maryland
    
    
    9
    
    
    
    
    
    
    
    9Massachusetts
    
    
    9
    
    
    
    
    
    
    
    9Michigan
    
    
    26
    
    
    
    
    
    
    
    26Minnesota
    
    
    15
    
    
    
    
    
    
    
    15Mississippi
    
    
    12
    
    
    
    
    
    
    
    12Missouri
    
    
    28
    
    
    
    
    
    
    
    28Nebraska
    
    
    
    
    
    
    3
    
    
    
    3New Jersey
    
    
    8
    
    
    
    
    
    
    
    8New Mexico
    
    
    
    
    
    
    2
    
    
    
    2New York
    
    
    15
    
    
    
    
    
    
    
    15North Carolina
    
    
    21
    
    
    
    
    
    
    
    21Ohio
    
    
    23
    
    
    
    
    
    
    
    23Oklahoma
    
    
    7
    
    
    
    
    
    
    
    7Oregon
    
    
    8
    
    
    
    
    
    
    
    8Pennsylvania
    
    
    27
    
    
    
    
    
    
    
    27Rhode Island
    
    
    1
    
    
    
    
    
    
    
    1South Carolina
    
    
    33
    
    
    
    
    
    
    
    33Tennessee
    
    
    26
    
    
    
    
    
    
    
    26Texas
    
    
    22
    
    
    
    
    
    
    
    22Utah
    
    
    
    
    
    
    2
    
    
    
    2Virginia
    
    
    15
    
    
    
    
    
    
    
    15Washington
    
    
    16
    
    
    
    
    
    
    
    16West Virginia
    
    
    6
    
    
    
    
    
    
    
    6Wisconsin
    
    
    12
    
    
    
    
    
    
    
    12Wyoming
    
    
    1
    
    
    
    1
    
    
    
    2Total steak-buffet restaurants
    
    
    632
    
    
    
    18
    
    
    
    650Tahoe Joes restaurants (1)
    
    
    10
    
    
    
    
    
    
    
    10Total
    
    
    642
    
    
    
    18
    
    
    
    660
 
 (1)
    
    These restaurants are currently for sale and related activity has been reclassified to
discontinued operations in the accompanying consolidated financial statements.Our corporate headquarters is a leased facility located in Eagan, Minnesota. 15




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Location
    
    Acres
    
    Use and OwnershipAnderson, SC
    
    
    2.40
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Riverdale, GA
    
    
    1.42
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Shively, KY
    
    
    2.66
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Anniston, AL
    
    
    1.71
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Kettering, OH
    
    
    2.10
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Indianapolis, IN
    
    
    1.03
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Toledo, OH
    
    
    5.77
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Lexington, KY
    
    
    3.55
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Battle Creek, MI
    
    
    2.76
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Wichita, KS
    
    
    3.17
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Bradley, IL
    
    
    3.17
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Columbus, OH
    
    
    2.95
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Middletown, OH
    
    
    2.48
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Houston, TX
    
    
    2.66
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Florence, KY
    
    
    2.65
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Gulfport, MS
    
    
    3.57
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Baytown, TX
    
    
    2.45
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.San Antonio, TX
    
    
    3.00
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Independence, MO
    
    
    2.20
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Kokomo, IN
    
    
    3.01
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Lynchburg, VA
    
    
    4.36
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Richmond, IN
    
    
    4.00
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Thomasville, AL
    
    
    2.65
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Laurens, SC
    
    
    5.23
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Lincolnton, NC
    
    
    4.01
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Sikeston, MO
    
    
    1.60
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Bellefontaine, OH
    
    
    2.50
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Shelby, NC
    
    
    3.10
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Natchez, MS
    
    
    2.17
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Union City, TN
    
    
    2.55
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Thomson, GA
    
    
    2.26
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Findlay, OH
    
    
    2.42
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Sterling, IL
    
    
    2.28
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Jacksonville, NC
    
    
    1.96
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Lovejoy, GA
    
    
    3.40
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Columbia, SC
    
    
    1.12
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Rock Hill, SC
    
    
    1.74
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Bossier City, LA
    
    
    2.37
    
    
    Buffet restaurant property owned by Ryans Restaurant Group, Inc.Tomball, TX
    
    
    1.51
    
    
    Land owned by Ryans Restaurant Group, Inc.Freeport, IL
    
    
    2.15
    
    
    Land owned by Ryans Restaurant Group, Inc.S. Boston, VA
    
    
    2.21
    
    
    Land owned by Ryans Restaurant Group, Inc.Niles, OH
    
    
    2.29
    
    
    Land owned by Ryans Restaurant Group, Inc.Rocky Mount, NC
    
    
    2.50
    
    
    Land owned by Ryans Restaurant Group, Inc.Weatherford, TX
    
    
    2.54
    
    
    Land owned by Ryans Restaurant Group, Inc.Rockingham, NC
    
    
    2.78
    
    
    Land owned by Ryans Restaurant Group, Inc.Greer, SC
    
    
    23.15
    
    
    Land owned by Ryans Restaurant Group, Inc.Greer, SC
    
    
    17.85
    
    
    Corporate building owned by Ryans Restaurant Group, Inc.Marshfield, Wisconsin
    
    
    5.04
    
    
    Cabinet shop owned by OCB Restaurant Company, LLC.
 16




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New Restaurant Development
  Improvement of Existing Restaurants
  
 ITEM 3. LEGAL PROCEEDINGS
      17




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
    Sales
of Unregistered Securities
  18




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ITEM 6. SELECTED FINANCIAL DATA
 Fiscal Year
    
    
    Fiscal Year
    
    
    Fiscal Year
    
    
    Fiscal Year
    
    
    Fiscal YearEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 2,
    
    
    June 30,
    
    
    June 29,
    
    
    June 28,
    
    
    June 27,2003 (5)
    
    
    2004 (5)
    
    
    2005 (5)
    
    
    2006 (5)
    
    
    2007 (3)(4)(5)(Dollars in thousands, except average guest check and average weekly sales)Operating Data:Restaurant sales
    
    $
    955,844
    
    
    $
    912,149
    
    
    $
    891,208
    
    
    $
    928,624
    
    
    $
    1,387,489Restaurant costs:Food
    
    
    301,386
    
    
    
    296,039
    
    
    
    294,548
    
    
    
    316,040
    
    
    
    480,686Labor
    
    
    304,555
    
    
    
    277,823
    
    
    
    267,630
    
    
    
    263,879
    
    
    
    414,466Direct and occupancy
    
    
    218,410
    
    
    
    210,375
    
    
    
    212,307
    
    
    
    220,714
    
    
    
    353,608Total restaurant costs
    
    
    824,351
    
    
    
    784,237
    
    
    
    774,485
    
    
    
    800,633
    
    
    
    1,248,760Advertising expenses
    
    
    28,570
    
    
    
    25,906
    
    
    
    24,166
    
    
    
    30,637
    
    
    
    33,896General and administrative expenses
    
    
    43,543
    
    
    
    41,058
    
    
    
    41,906
    
    
    
    42,077
    
    
    
    60,405Shareholders rights repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    Closed restaurant costs
    
    
    645
    
    
    
    1,085
    
    
    
    2,909
    
    
    
    6,023
    
    
    
    3,822Merger integration costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,938Impairment of assets
    
    
    4,803
    
    
    
    1,878
    
    
    
    3,609
    
    
    
    5,964
    
    
    
    415Gain on sale of Original Roadhouse Grill restaurants
    
    
    (7,088
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,641Loss on sale leaseback transactions
    
    
    5,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,498Financing-related compensation expenses
    
    
    
    
    
    
    2,240
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    $
    55,164
    
    
    $
    55,745
    
    
    $
    44,133
    
    
    $
    42,533
    
    
    $
    19,114Net income (loss) from continuing operations
    
    
    10,886
    
    
    
    6,935
    
    
    
    (3,933
    )
    
    
    (6,849
    )
    
    
    (106,386
    )Net income from discontinued operations, net of tax
    
    
    1,041
    
    
    
    1,035
    
    
    
    1,749
    
    
    
    2,077
    
    
    
    863Net income (loss)
    
    $
    11,927
    
    
    $
    7,970
    
    
    $
    (2,184
    )
    
    $
    (4,772
    )
    
    $
    (105,523
    )Cash Flow and Other Financial Data:Capital expenditures
    
    $
    25,722
    
    
    $
    33,007
    
    
    $
    29,131
    
    
    $
    31,346
    
    
    $
    40,875Depreciation and amortization
    
    
    36,885
    
    
    
    33,807
    
    
    
    32,247
    
    
    
    32,067
    
    
    
    40,836Cash flow from operating activities
    
    
    57,656
    
    
    
    50,490
    
    
    
    52,675
    
    
    
    49,305
    
    
    
    5,969Cash flow from (used in) investing activities
    
    
    26,662
    
    
    
    (28,383
    )
    
    
    (28,471
    )
    
    
    (32,722
    )
    
    
    (180,608
    )Cash flow from (used in) financing activities
    
    
    (76,825
    )
    
    
    (11,890
    )
    
    
    (29,614
    )
    
    
    (17,026
    )
    
    
    159,090Balance Sheet Data (at end of period)Total assets
    
    $
    552,986
    
    
    $
    567,531
    
    
    $
    545,023
    
    
    $
    538,496
    
    
    $
    952,299Total debt (1)
    
    
    421,122
    
    
    
    498,339
    
    
    
    466,194
    
    
    
    462,514
    
    
    
    841,675Supplemental Data (2):Number of company-owned steak-buffet restaurants
(at end of period)
    
    
    364
    
    
    
    352
    
    
    
    345
    
    
    
    329
    
    
    
    632Buffet brands:Same store average guest check
 
    $
    6.82
    
    
    $
    7.02
    
    
    $
    7.20
    
    
    $
    7.70
    
    
    $
    7.91Average weekly sales
    
    $
    48,078
    
    
    $
    49,412
    
    
    $
    49,597
    
    
    $
    52,838
    
    
    $
    53,290Same store sales change
    
    
    (4.4
    )%
    
    
    1.2
    %
    
    
    (0.7
    )
    %
    
    4.8
    %
    
    
    (0.7
    )%Ryans brands:Same store average guest check
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8.41Average weekly sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    44,458Same store sales change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.3
    )%
 
 (1)
    
    Total debt represents the amount of our
long-term debt, including current maturities.(2)
    
    Reflects data relating to all of our
company-owned restaurants.(3)
    
    Includes activity of Ryans Restaurant Group, Inc. from November 1, 2006, the date of
acquisition, to the end of the fiscal year. For further discussion of the acquisition, see
Note 10  Acquisitions to our accompanying
consolidated financial statements.(4)
    
    On June 29, 2006, we adopted the fair value based method of accounting for stock-based
employee compensation as required by SFAS No. 123(R),
Share-Based Payment, a revision of
SFAS No. 123, Accounting for Stock-Based Compensation. The fair value based method requires
us to expense all stock-based employee compensation. We have adopted SFAS 123(R) using the
modified prospective method. Accordingly, we have expensed all unvested and newly granted
stock-based employee compensation beginning June 29, 2006, however, prior period amounts have
not been retrospectively adjusted.(5)
    
    Results have been adjusted to reflect the reclassification of certain Tahoe Joes activity
to discontinued operations. 19




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion in conjunction with Selected Financial Data and our
consolidated financial statements and related notes included elsewhere in this report. Some of the
statements in the following discussion are forward-looking statements. See Risk
Factors/Forward-Looking Statements.
 Overview
  Restaurants operating as of June 28, 2006
    
    
    329For the fiscal year ended June 27, 2007:Restaurants opened
    
    
    3Restaurants closed
    
    
    32Restaurants acquired
    
    
    332Restaurants operating as of June 27, 2007
    
    
    632
      
    
    We recognize as restaurant sales the proceeds from the sale of food and beverages at
our company-owned restaurants at the time of such sale. We recognize the proceeds from the
sale of gift cards/certificates when the gift cards/certificates are redeemed at our
restaurants. Until redemption, the unearned revenue from the sale of gift
cards/certificates is included in Accrued Liabilities on our accompanying Consolidated
Balance Sheets. Our franchise income includes royalty fees and initial franchise fees
received from our franchisees. We recognize royalty fees in Other Income on our
accompanying Consolidated Statements of Operations based on the sales reported at the
franchise restaurants.
 20




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##### Table of Contents




    
    Restaurant costs reflect only direct restaurant operating costs, including food, labor
and direct and occupancy costs. Labor costs include compensation and benefits for both
hourly and restaurant management employees. Direct and occupancy costs consist primarily of
costs of supplies, maintenance, utilities, rent, real estate taxes, insurance, depreciation
and amortization.
    
    Advertising expenses reflect all
advertising and promotional costs.
    
    General and administrative expenses reflect all costs, other than advertising expenses,
not directly related to the operation of restaurants. These expenses consist primarily of
corporate administrative compensation and overhead, district and regional management
compensation and related management expenses and the costs of recruiting, training and
supervising restaurant management personnel.
    
    Closed restaurant costs represent costs associated with store closure of
underperforming restaurants, including, but not limited to lease termination costs and
obligations and employee termination costs.
    
    Impairment of assets reflects fair market adjustments to the carrying value of
long-lived assets, primarily comprised of leasehold improvements and
equipment.
    
    Merger integration costs represent professional fees, performance bonuses and employee
travel and expenses related to integration activities associated with the Ryans and
Norths acquisitions.
    
    Shareholders rights repurchase reflects the costs associated with the repurchase of
certain rights associated with shares of common stock previously held by former management
shareholders who separated from the company.
    
    Loss on litigation settlement represents the costs associated with the settlement of a
class action lawsuit against HomeTown Buffet, Inc. and OCB Restaurant
Company, LLC.
    
    Loss on sale leaseback transaction reflects transaction costs and net impairment
losses associated with the sale and leaseback of the leasehold interests and leasehold
improvements of seven restaurants relating to the November 1,
2006 refinancing.
    
    Interest expense reflects interest costs associated with our debt and amortization of
debt issuance cost. Interest expense also reflects accretion of original issuance discount
on Buffets 11 1/4% senior subordinated notes and Buffets Holdings 13 7/8% senior discount
notes, which were repurchased on November 1, 2006.
    
    Interest income reflects interest earned
on our short-term investments.
    
    Loss related to refinancing for fiscal years 2006 and 2007 represents transaction costs
associated with amendments to Buffets Amended and Restated Credit Agreement in fiscal year
2006, repurchasing or redeeming Buffets 11 1/4% senior subordinated notes and our 13 7/8%
senior discount notes on November 1, 2006 and transaction costs associated with an
amendment to our credit facility agreement in March 2007.
    
    Other income primarily reflects
franchise fees earned.
    
    Income tax (benefit) expense reflects the current and deferred tax provision (benefit)
determined in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income
Taxes.
 Recent Developments
   21




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##### Table of Contents




    
    securing a new $640.0 million senior secured credit agreement (the
Credit Facility) comprised of (i) a $530.0 million senior secured
term loan facility (the Term Facility), (ii) a $40.0 million senior
secured revolving credit facility (the Revolving Facility), and
(iii) a $70.0 million senior secured pre-funded synthetic letter of
credit facility (see Note 9   Long-Term Debt for details regarding
the subsequent conversion of this facility to a synthetic revolving
facility), and
    
    issuing $300.0 million of its 12 1/2% Senior Notes due 2014 (the 12
1/2% Senior Notes) pursuant to an indenture, dated as of November 1,
2006 (the Indenture).
  
    
    pay $704.6 million to purchase the outstanding shares of Ryans common stock,
    
    repay $146.9 million of Ryans outstanding debt (including accrued interest and breakage fees),
    
    repay $196.4 million of existing indebtedness of Buffets under its prior credit facility (including accrued interest and
breakage fees),
    
    repurchase $195.3 million of Buffets 11 1/4% senior subordinated notes (including accretion of original issue discount and
early redemption premiums),
    
    repurchase $121.5 million of Buffets Holdings 13 7/8% senior discount notes (including accretion of original issue
discount and early redemption premiums), and
    
    pay approximately $46.1 million for transaction fees and expenses.
    22




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##### Table of Contents



Critical Accounting Policies
   Long-Lived Assets
    Goodwill and Other Intangible Assets
  Insurance Reserves
  23




---



##### Table of Contents



Closed Restaurant Reserve
  Accounting for Costs Associated
with Exit or Disposal Activities, Recognition of Liabilities in
Connection with a Purchase Business Combination.
 Income Taxes
   Gift Cards
  24




---



##### Table of Contents



Share-Based Compensation
 Share-based
Payment, Accounting for Stock Issued to Employees.
    Lease Accounting
  Merger Integration Costs
  25




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##### Table of Contents



Results of Operations
 The following discussion reflects our historical results for the fiscal years ended June 29,
2005, June 28, 2006 and June 27, 2007. Our operating results include the impact of Ryans
operations and the impact of the related refinancing of our indebtedness and Ryans indebtedness
for the period November 1, 2006 ( the acquisition date) through June 27, 2007, but exclude the
impact of Ryans operations and related refinancing for the fiscal years ended June 29, 2005 and
June 28, 2006. Our future results may not be consistent with our historical results. The following
discussion should be read in conjunction with our consolidated financial statements and related
notes included elsewhere in this report.
 Fiscal Year 2007 compared to Fiscal Year 2006
 Year EndedJune 28,
    
    June 27,2006
    
    2007(Dollars in thousands)Significant items that impacted results of operations:Credit card claim settlement (1)
    
    $
    (715
    )
    
    $
    Shareholders rights repurchase (2)
    
    
    757
    
    
    
    Closed restaurant costs (3)
    
    
    6,023
    
    
    
    3,822Impairment of assets (4)
    
    
    5,964
    
    
    
    415Loss related to refinancing (5)
    
    
    647
    
    
    
    41,134Merger integration costs (6)
    
    
    
    
    
    
    10,938Loss on sale leaseback transactions (7)
    
    
    
    
    
    
    2,498Loss on litigation settlement (8)
    
    
    
    
    
    
    7,641
 
 (1)
    
    Credit card claim settlement reflects funds received from the Visa Check/MasterMoney
Antitrust Litigation class action lawsuit. The settlement was recorded in Direct and
Occupancy Costs in our accompanying Consolidated Statement of
Operations.(2)
    
    Shareholders rights repurchase reflects the costs of the repurchase of certain rights
associated with shares of common stock previously held by former management shareholders who
separated from the Company.(3)
    
    Closed restaurant costs were $3.8 million for fiscal 2007 as compared to $6.0 million for
fiscal 2006. The decrease was in large part due to the closure of eleven under performing Old
Country Buffet ® and HomeTown Buffet® restaurants in fiscal 2007 compared with nineteen store
closures in fiscal 2006. During fiscal 2007, we incurred cash charges related to these store
closures of approximately $1.7 million. These charges included approximately $1.1 million
related to lease termination costs and obligations, $0.2 million related to employee
termination costs and obligations, and $0.4 million related to other associated costs. In
addition, non-cash charges related to these closures were approximately $0.4 million. The
remaining charges of approximately $1.7 million relate to changes in reserve estimates related
to previously closed stores, terminations of sublease agreements and other related costs. In
addition, we closed eighteen Ryans® restaurants and three Fire Mountain® restaurants between
November 1, 2006 (acquisition date) and June 27, 2007. Charges related to these 21
restaurants were charged to goodwill pursuant to EITF 95-3, Recognition of Liabilities in
Connection with a Purchase Business Combination. See Note 10  Acquisitions to our
accompanying consolidated financial statements for further discussion of our merger with
Ryans.(4)
    
    We test property and equipment for impairment annually or whenever events or circumstances
indicate that the carrying amount of a restaurants assets may not be recoverable. Assets are
grouped and evaluated for impairment at the lowest level for which there are identifiable cash
flows, namely as individual restaurants. During fiscal 2007 and 2006, we recognized losses of
approximately $0.4 million and $6.0 million, respectively, related to impairments of the
carrying value of our long-lived assets for one and 33 under performing restaurant(s),
respectively, as the carrying value of these long-lived assets exceeded their fair value.(5)
    
    Effective as of July 28, 2005, we entered into an amendment to our prior credit facility. In
connection with this amendment, we incurred $0.6 million in transaction fees during the first
quarter of fiscal 2006. On November 1, 2006, due to the merger with Ryans, we refinanced our
long-term debt. In connection with this refinancing, we wrote off approximately $30.6 million
of cumulative debt discount related to Buffets senior subordinated notes and Buffets Holdings
senior discount notes and approximately $8.7 million of debt issuance costs related to the
predecessor credit facility, senior subordinated notes and senior discount notes. The
remaining charges represent transaction fees, including $0.8 million incurred in conjunction
with an amendment to our credit facility in March 2007. See Liquidity and Capital Resources
elsewhere in this report for further details regarding this amendment.(6)
    
    Merger integration costs represent professional fees, performance bonuses and employee travel
and expenses related to integration activities associated with the Ryans and Norths
acquisitions. 26




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##### Table of Contents



(7)
    
    During the second quarter of fiscal 2007, we entered into a sale leaseback transaction
whereby we transferred our leasehold interests and leasehold improvements with respect to
seven restaurants to a third party for net proceeds of approximately $8.4 million. We
simultaneously entered into long-term leases for those restaurants with an aggregate initial
annual rent of approximately $0.9 million. In connection with this sale leaseback transaction,
we recorded a loss of approximately $2.5 million primarily to reflect the impairment of
certain of the properties for which the net proceeds were less than the book value of the
leasehold assets. In addition, the net proceeds for certain of the properties were greater
than the book value of the leasehold assets resulting in a deferred gain of approximately $0.9
million. The deferred gain will be accreted over the life of the respective restaurant
leases, ranging from 19-21 years.(8)
    
    Loss on litigation settlement represents the costs associated with the settlement of a class
action lawsuit against HomeTown Buffets, Inc. and OCB Restaurant Company, LLC. See Item 2.
Legal Proceedings elsewhere in this report for further
details. The settlement received preliminary court
approval on September 12, 2007. While the Company is currently not
able to predict the outcome of this action, the Company estimates
that, should the court provide final approval of the settlement, we will pay approximately $7.2 million
to resolve this matter. The remaining $0.4 represents attorney fees paid to our external
counsel for services rendered through June 27, 2007 specifically related to negotiating this
settlement.  Year Ended
    
    
    Year EndedJune 28, 2006
    
    
    June 27 2007(Dollars in thousands)Restaurant sales
    
    $
    928,624
    
    
    
    100.0
    %
    
    $
    1,387,489
    
    
    
    100.0
    %Restaurant costs:Food
    
    
    316,040
    
    
    
    34.0
    
    
    
    480,686
    
    
    
    34.6Labor
    
    
    263,879
    
    
    
    28.4
    
    
    
    414,466
    
    
    
    29.9Direct and occupancy
    
    
    220,714
    
    
    
    23.8
    
    
    
    353,608
    
    
    
    25.5Total restaurant costs
    
    
    800,633
    
    
    
    86.2
    
    
    
    1,248,760
    
    
    
    90.0Advertising expenses
    
    
    30,637
    
    
    
    3.3
    
    
    
    33,896
    
    
    
    2.4General and administrative expenses
    
    
    42,077
    
    
    
    4.5
    
    
    
    60,405
    
    
    
    4.4Shareholders rights repurchase
    
    
    757
    
    
    
    0.1
    
    
    
    
    
    
    
    0.0Closed restaurant costs
    
    
    6,023
    
    
    
    0.6
    
    
    
    3,822
    
    
    
    0.3Impairment of assets
    
    
    5,964
    
    
    
    0.6
    
    
    
    415
    
    
    
    0.0Merger integration costs
    
    
    
    
    
    
    0.0
    
    
    
    10,938
    
    
    
    0.8Loss on sale leaseback transactions
    
    
    
    
    
    
    0.0
    
    
    
    2,498
    
    
    
    0.2Loss on litigation settlement
    
    
    
    
    
    
    0.0
    
    
    
    7,641
    
    
    
    0.6Operating income
    
    
    42,533
    
    
    
    4.6
    
    
    
    19,114
    
    
    
    1.4Interest expense
    
    
    52,242
    
    
    
    5.6
    
    
    
    79,664
    
    
    
    5.7Interest income
    
    
    (375
    )
    
    
    (0.0
    )
    
    
    (215
    )
    
    
    (0.0
    )Loss related to refinancing
    
    
    647
    
    
    
    0.1
    
    
    
    41,134
    
    
    
    3.0Other income
    
    
    (994
    )
    
    
    (0.1
    )
    
    
    (936
    )
    
    
    (0.1
    )Loss before income taxes
    
    
    (8,987
    )
    
    
    (1.0
    )
    
    
    (100,533
    )
    
    
    (7.2
    )Income tax (benefit) expense
    
    
    (2,138
    )
    
    
    (0.2
    )
    
    
    5,853
    
    
    
    0.4Net loss from continuing operations
    
    
    (6,849
    )
    
    
    (0.7
    )
    
    
    (106,386
    )
    
    
    (7.7
    )Income from discontinued
operations, net of tax of $1,396
and $579 in 2006 and 2007,
respectively
    
    
    2,077
    
    
    
    0.2
    
    
    
    863
    
    
    
    0.1Net loss
    
    $
    (4,772
    )
    
    
    (0.5
    )
    
    $
    (105,523
    )
    
    
    (7.6
    )
  27




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##### Table of Contents



The following narrative should be read in conjunction with the significant items that impacted
results of operations discussed above.
 Restaurant Sales.
  Restaurant Costs.
    Advertising Expenses.
 General and Administrative Expenses.
 Interest Expense.
 Income Taxes.
 28




---



##### Table of Contents



Fiscal Year 2006 compared to Fiscal Year 2005
 Year EndedJune 29,
    
    June 28,2005
    
    2006(Dollars in thousands)Significant items that impacted results of operations:Credit card claim settlement (1)
    
    $
    
    
    
    $
    (715
    )Shareholders rights repurchase (2)
    
    
    
    
    
    
    757Closed restaurant costs (3)
    
    
    2,909
    
    
    
    6,023Impairment of assets (2)
    
    
    3,609
    
    
    
    5,964Loss related to refinancing (3)
    
    
    856
    
    
    
    647Loss related to early extinguishment of debt (4)
    
    
    1,923
    
    
    
    
 
 (1)
    
    Credit card claim settlement reflects funds received from the Visa Check/MasterMoney
Antitrust Litigation class action lawsuit. The settlement was recorded in Direct and
Occupancy Costs in our accompanying Consolidated Statement of Operations.(2)
    
    Shareholders rights repurchase reflects the costs of the repurchase of certain rights
associated with shares of common stock previously held by former management shareholders who
separated from the Company.(3)
    
    Closed restaurant costs were $6.0 million for fiscal 2006 as compared to $2.9 million for the
fiscal 2005. The increase was in large part due to the closure of nineteen under performing
restaurants in fiscal 2006 compared with eleven store closures in fiscal 2005. We incurred
charges related to these store closures of approximately $4.5 million and $2.1 million in
fiscal 2006 and fiscal 2005, respectively. In addition, we incurred charges of approximately
$1.5 million and $0.8 million in fiscal 2006 and fiscal 2005, respectively, related to the
termination of sublease agreements and other related costs.(4)
    
    We test property and equipment for impairment annually or whenever events or circumstances
indicate that the carrying amount of a restaurants assets may not be recoverable. Assets are
grouped and evaluated for impairment at the lowest level for which there are identifiable cash
flows, namely as individual restaurants. During fiscal 2006 and 2007, we recognized losses of
approximately $6.0 million and $3.6 million, respectively, related to impairments of the
carrying value of our long-lived assets for 33 and 29 under performing restaurants,
respectively, as the carrying value of these long-lived assets exceeded their fair value.(5)
    
    We incurred approximately $0.9 million of costs related to an initial public offering of
Income Deposit Securities that was withdrawn due to unfavorable market conditions during the
second quarter of fiscal 2005. Effective as of July 28, 2005, we entered into an amendment to
Buffets credit agreement and incurred $0.6 million in transaction fees in the first quarter of
fiscal 2006.(6)
    
    During the first quarter of fiscal 2005, we paid approximately $15.7 million to repurchase
approximately $14.3 million of Buffets
 11 1/4% senior subordinated notes at an average price
of 106.7%. The difference between the premium purchase price and the discounted carrying value
of the senior subordinated notes, as well as the associated write-off of debt issuance costs,
was recognized as a loss related to the early extinguishment of debt. 29




---



##### Table of Contents



Year Ended
    
    
    Year EndedJune 29, 2005
    
    
    June 28, 2006(Dollars in thousands)Restaurant sales
    
    $
    891,208
    
    
    
    100.0
    %
    
    $
    928,624
    
    
    
    100.0
    %Restaurant costs:Food
    
    
    294,548
    
    
    
    33.1
    
    
    
    316,040
    
    
    
    34.0Labor
    
    
    267,630
    
    
    
    30.0
    
    
    
    263,879
    
    
    
    28.4Direct and occupancy
    
    
    212,307
    
    
    
    23.8
    
    
    
    220,714
    
    
    
    23.8Total restaurant costs
    
    
    774,485
    
    
    
    86.9
    
    
    
    800,633
    
    
    
    86.2Advertising expenses
    
    
    24,166
    
    
    
    2.7
    
    
    
    30,637
    
    
    
    3.3General and administrative expenses
    
    
    41,906
    
    
    
    4.7
    
    
    
    42,077
    
    
    
    4.5Shareholders rights repurchase
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    0.1Closed restaurant costs
    
    
    2,909
    
    
    
    0.3
    
    
    
    6,023
    
    
    
    0.6Impairment of assets
    
    
    3,609
    
    
    
    0.4
    
    
    
    5,964
    
    
    
    0.6Operating income
    
    
    44,133
    
    
    
    5.0
    
    
    
    42,533
    
    
    
    4.6Interest expense
    
    
    48,100
    
    
    
    5.4
    
    
    
    52,242
    
    
    
    5.6Interest income
    
    
    (515
    )
    
    
    (0.1
    )
    
    
    (375
    )
    
    
    (0.0
    )Loss related to refinancing
    
    
    856
    
    
    
    0.1
    
    
    
    647
    
    
    
    0.1Loss related to early extinguishment of debt
    
    
    1,923
    
    
    
    0.2
    
    
    
    
    
    
    
    Other income
    
    
    (935
    )
    
    
    (0.1
    )
    
    
    (994
    )
    
    
    (0.1
    )Loss before income taxes
    
    
    (5,296
    )
    
    
    (0.6
    )
    
    
    (8,987
    )
    
    
    (1.0
    )Income tax benefit
    
    
    (1,363
    )
    
    
    (0.1
    )
    
    
    (2,138
    )
    
    
    (0.2
    )Net loss from continuing operations
    
    
    (3,933
    )
    
    
    (0.4
    )
    
    
    (6,849
    )
    
    
    (0.7
    )Income from discontinued operations, net of
tax of $1,084 and $1,205 for 2005 and 2006,
respectively
    
    
    1,749
    
    
    
    0.2
    
    
    
    2,077
    
    
    
    0.2Net loss
    
    $
    (2,184
    )
    
    
    (0.2
    )
    
    $
    (4,772
    )
    
    
    (0.5
    )
  The following narrative should be read in conjunction with the significant items that impacted
results of operations discussed above.
 Restaurant Sales.
 Restaurant Costs.
  30




---



##### Table of Contents



Advertising Expenses.
 General and Administrative Expenses.
 Interest Expense.
 Income Taxes.
 Liquidity and Capital Resources
    31




---



##### Table of Contents



Operating Activities.
 Investing Activities.
 Financing
Activities.
 Future Capital Expenditures.
 §
    
    Spend approximately $10 million to $19 million on
remodeling and improvement costs that will be capitalized. These
capital improvements will depend on the specific needs of the restaurants and the
availability of liquidity through our existing credit lines. Remodels incorporate design
elements to update the décor of our existing facilities including a lighter, more contemporary
interior design and expanded dessert displays. Other improvement costs include a variety of
outlays such as new carpet, equipment and minor leasehold improvements and display grill
installations.§
    
    Spend approximately $1 million on
miscellaneous corporate and information systems investments.§
    
    Spend approximately $10 million to $20 million on capital improvements specifically related to the restaurants we
acquired in the Merger. These capital improvements will depend on the specific
needs of the restaurants and the availability of liquidity
through our existing credit lines. In addition, we plan to spend approximately $1 million to $3 million on the
integration of Ryans that will not be capitalized.
  32




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##### Table of Contents



Credit Facilities and Other Long Term Debt
 Credit Facility
      12 1/2% Senior Notes
   33




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by Fiscal Year2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total(in thousands)Long-term debt (1)
    
    $
    6,625
    
    
    $
    5,300
    
    
    $
    5,300
    
    
    $
    3,975
    
    
    $
    5,300
    
    
    $
    802,175
    
    
    $
    828,675Interest (2)
    
    
    56,250
    
    
    
    37,500
    
    
    
    18,750
    
    
    
    37,500
    
    
    
    37,500
    
    
    
    106,250
    
    
    
    293,750Operating leases (3)
    
    
    113,082
    
    
    
    111,873
    
    
    
    106,392
    
    
    
    100,370
    
    
    
    94,472
    
    
    
    1,247,324
    
    
    
    1,773,513Advisory fees (4)
    
    
    4,000
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    20,000Purchase obligations (5)
    
    
    23,037
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,037Total contractual cash obligations
    
    $
    202,994
    
    
    $
    158,673
    
    
    $
    134,442
    
    
    $
    145,845
    
    
    $
    141,272
    
    
    $
    2,155,749
    
    
    $
    2,938,975
 
 (1)
    
    Long-term debt payments for fiscal years 2008 through 2011 represent the required principal
payments on Buffets Term Facility. Long-term debt payments in the Thereafter column
represent the remaining principal amounts due on Buffets Term Facility and the aggregate
balance of Buffets 12 1/2% Senior Notes. Debt payments could be accelerated upon violation of
debt covenants. We believe the likelihood of debt covenant violations to be remote. See Note 9
 Long-Term Debt to our accompanying consolidated financial statements for details of our
long-term obligations.(2)
    
    Amounts represent contractual interest payments on Buffets 12 1/2% Senior Notes. We pay
interest on our 12 1/2% Senior Notes on January 1 and July 1 of each year. Due to the timing
of these payments in relation to our fiscal year-end, the number of interest payments made in
any given year could vary. Interest payments on Buffets variable-rate Term Facility are
excluded. The borrowings under the Term Facility and Synthetic Revolving Facility bear
interest at an adjusted LIBOR rate plus a margin of either 2.50%, 2.75% or 3.00% in the case
of Eurodollar borrowings and at a certain alternate base rate plus a margin of either 1.50%,
1.75% or 2.00% in the case of alternate base borrowings, depending on Buffets leverage ratio,
and borrowings under the Revolving Facility bear interest at an adjusted LIBOR rate plus a
margin of 3.25% or at an alternate base rate plus a margin of 2.25%. The Term Facility
matures on November 1, 2013. Interest payments are due quarterly. The interest rate, at LIBOR
plus 2.75%, was 8.11% as of June 27, 2007. The borrowings due under the Term Facility are
payable in equal quarterly installments in an annual amount equal to 1% of the term loan
during each of the first six and a half years of the loan, with the remaining balance payable
due on November 1, 2013. See Note 9  Long-Term Debt to our accompanying consolidated
financial statements for details of our long-term obligations.(3)
    
    Operating leases is comprised of minimum rents and contingent rents. Operating leases have
not been reduced by minimum sublease rentals of approximately $8.5 million. See Note 17 
Commitments and Contingencies to our accompanying consolidated financial statements for
details of our operating lease obligations.(4)
    
    The advisory fees comprise our contractual obligation to pay annual advisory fees to each of
Roe H. Hatlen, Sentinel Capital Partners, L.L.C. and the Caxton-Iseman Party. See Item 13 -
Certain Relationships and Related Transactions elsewhere
in this report for further discussion of these agreements.
Under the terms of these agreements, Mr. Hatlen and Sentinel Capital are each paid a fixed
annual fee. The fee of the Caxton-Iseman Party is calculated as a percentage of our earnings
before interest, taxes, depreciation and amortization and is estimated to be approximately
$3.6 million per year. The fee paid to each of Roe H. Hatlen and Sentinel Capital Partners,
L.L.C. is fixed at $0.2 million per year. The agreements with the Caxton-Iseman Party and
Sentinel Capital are of perpetual duration, and hence no estimate of the aggregate amount of
future obligations (represented in the Thereafter column, above) is provided. 34




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##### Table of Contents



(5)
    
    In determining purchase obligations for this table we used our interpretation of the
definition set forth in the SEC Final Rule, Disclosure in Managements Discussion and Analysis
about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations, which states, a
purchase obligation is defined as an agreement to purchase goods or services that is
enforceable and legally binding on the registrant and that specifies all significant terms,
including: fixed minimum quantities to be purchased; fixed, minimum or variable/price
provisions, and the approximate timing of the transaction. In applying this definition, we
have only included purchase obligations to the extent the failure to perform would result in
formal recourse against us. Accordingly, certain procurement arrangements that indicate we are
to purchase future items are included, but only to the extent they include a recourse
provision for our failure to purchase. Other Commercial Commitments
  Seasonality and Quarterly Fluctuations
  New Accounting Standards
 The Fair Value Option for Financial Assets and
Liabilities
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
 Fair Value Measurements
 35




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##### Table of Contents



Considering the
Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial
Statements
 Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109 (FIN 48), Accounting for Income Taxes.
 How Taxes
Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is Gross versus Net Presentation)
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risks.
 Food Commodity Risks.
 36




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 PageReport of Independent Registered Public Accounting Firm
    
    
    38Consolidated Balance Sheets as of June 28, 2006 and June 27, 2007
    
    
    39Consolidated Statements of Operations for the Years Ended June 29, 2005, June 28, 2006 and June 27, 2007
    
    
    40Consolidated Statements of Shareholders Equity (Deficit) for the Years Ended June 29, 2005, June 28,
2006 and June 27, 2007
    
    
    41Consolidated Statements of Cash Flows for the Years Ended June 29, 2005, June 28, 2006 and June 27, 2007
    
    
    42Notes to Consolidated Financial Statements
    
    
    44
 37




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
 38




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 28,
    
    
    June 27,2006
    
    
    2007(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    20,194
    
    
    $
    4,645Receivables
    
    
    4,879
    
    
    
    10,219Inventories
    
    
    18,226
    
    
    
    32,087Prepaid expenses and other current assets
    
    
    5,314
    
    
    
    8,632Deferred income taxes (Note 15)
    
    
    10,324
    
    
    
    3,000Assets held for sale
    
    
    
    
    
    
    34,959Current assets related to discontinued operations
    
    
    795
    
    
    
    14,117Total current assets
    
    
    59,732
    
    
    
    107,659PROPERTY AND EQUIPMENT, net (Note 5)
    
    
    132,287
    
    
    
    221,092GOODWILL
    
    
    312,163
    
    
    
    502,046OTHER INTANGIBLE ASSETS (Note 6)
    
    
    
    
    
    
    83,998DEFERRED INCOME TAXES (Note 15)
    
    
    13,683
    
    
    
    OTHER ASSETS, net (Note 7)
    
    
    11,194
    
    
    
    37,092Non-current assets related to discontinued operations
    
    
    9,437
    
    
    
    412Total assets
    
    $
    538,496
    
    
    $
    952,299LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable
    
    $
    48,101
    
    
    $
    81,090Accrued liabilities (Note 8)
    
    
    67,166
    
    
    
    132,783Income taxes payable (Note 15)
    
    
    6,977
    
    
    
    3,147Short-term debt
    
    
    
    
    
    
    13,000Current maturities of long-term debt
    
    
    1,862
    
    
    
    6,625Current liabilities related to discontinued operations
    
    
    1,178
    
    
    
    1,137Total current liabilities
    
    
    125,284
    
    
    
    237,782LONG-TERM DEBT, net of current maturities (Note 9)
    
    
    460,652
    
    
    
    822,050DEFERRED INCOME TAXES (Note 15)
    
    
    
    
    
    
    33,456DEFERRED LEASE OBLIGATIONS
    
    
    28,356
    
    
    
    38,209OTHER LONG-TERM LIABILITIES
    
    
    7,355
    
    
    
    9,341Total liabilities
    
    
    621,647
    
    
    
    1,140,838COMMITMENTS AND CONTINGENCIES (Note 17)SHAREHOLDERS DEFICIT:Preferred stock, $.01 par value; 1,100,000 shares
authorized; none issued and outstanding as of June
28, 2006 and June 27, 2007
    
    
    
    
    
    
    Common stock, $.01 par value; 3,600,000 shares
authorized; shares issued and outstanding of
3,104,510 as of June 28, 2006 and June 27, 2007
    
    
    31
    
    
    
    31Additional paid in capital
    
    
    5
    
    
    
    82Accumulated deficit
    
    
    (83,187
    )
    
    
    (188,710
    )Accumulated other comprehensive income
    
    
    
    
    
    
    58Total shareholders deficit
    
    
    (83,151
    )
    
    
    (188,539
    )Total liabilities and shareholders deficit
    
    $
    538,496
    
    
    $
    952,299
  39




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007(In thousands)RESTAURANT SALES
    
    $
    891,208
    
    
    $
    928,624
    
    
    $
    1,387,489RESTAURANT COSTS:Food
    
    
    294,548
    
    
    
    316,040
    
    
    
    480,686Labor
    
    
    267,630
    
    
    
    263,879
    
    
    
    414,466Direct and occupancy
    
    
    212,307
    
    
    
    220,714
    
    
    
    353,608Total restaurant costs
    
    
    774,485
    
    
    
    800,633
    
    
    
    1,248,760ADVERTISING EXPENSES
    
    
    24,166
    
    
    
    30,637
    
    
    
    33,896GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    41,906
    
    
    
    42,077
    
    
    
    60,405SHAREHOLDERS RIGHTS REPURCHASE
    
    
    
    
    
    
    757
    
    
    
    CLOSED RESTAURANT COSTS
    
    
    2,909
    
    
    
    6,023
    
    
    
    3,822IMPAIRMENT OF ASSETS
    
    
    3,609
    
    
    
    5,964
    
    
    
    415MERGER INTEGRATION COSTS
    
    
    
    
    
    
    
    
    
    
    10,938LOSS ON LITIGATION SETTLEMENT
    
    
    
    
    
    
    
    
    
    
    7,641LOSS ON SALE LEASEBACK TRANSACTIONS
    
    
    
    
    
    
    
    
    
    
    2,498OPERATING INCOME
    
    
    44,133
    
    
    
    42,533
    
    
    
    19,114INTEREST EXPENSE
    
    
    48,100
    
    
    
    52,242
    
    
    
    79,664INTEREST INCOME
    
    
    (515
    )
    
    
    (375
    )
    
    
    (215
    )LOSS RELATED TO REFINANCING
    
    
    856
    
    
    
    647
    
    
    
    41,134LOSS RELATED TO EARLY EXTINGUISHMENT OF DEBT
    
    
    1,923
    
    
    
    
    
    
    
    OTHER INCOME
    
    
    (935
    )
    
    
    (994
    )
    
    
    (936
    )LOSS BEFORE INCOME TAXES
    
    
    (5,296
    )
    
    
    (8,987
    )
    
    
    (100,533
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    (1,363
    )
    
    
    (2,138
    )
    
    
    5,853Loss from continuing operations
    
    
    (3,933
    )
    
    
    (6,849
    )
    
    
    (106,386
    )Net income from discontinued
operations, net of tax of $1,176,
$1,396 and $579 for 2005, 2006, and
2007, respectively
    
    
    1,749
    
    
    
    2,077
    
    
    
    863Net loss
    
    $
    (2,184
    )
    
    $
    (4,772
    )
    
    $
    (105,523
    )
  40




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
 AccumulatedAdditional
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Total(In thousands, except share data)BALANCE, June 30, 2004
    
    
    
    
    
    $
    
    
    
    
    3,185,672
    
    
    $
    32
    
    
    $
    
    
    
    $
    (75,948
    )
    
    $
    
    
    
    $
    (75,916
    )Issuance of stock
    
    
    
    
    
    
    
    
    
    
    144,150
    
    
    
    1
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    15Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (154,687
    )
    
    
    (1
    )
    
    
    
    
    
    
    (283
    )
    
    
    
    
    
    
    (284
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,184
    )
    
    
    
    
    
    
    (2,184
    )BALANCE, June 29, 2005
    
    
    
    
    
    
    
    
    
    
    3,175,135
    
    
    
    32
    
    
    
    14
    
    
    
    (78,415
    )
    
    
    
    
    
    
    (78,369
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (70,625
    )
    
    
    (1
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,772
    )
    
    
    
    
    
    
    (4,772
    )BALANCE, June 28, 2006
    
    
    
    
    
    
    
    
    
    
    3,104,510
    
    
    
    31
    
    
    
    5
    
    
    
    (83,187
    )
    
    
    
    
    
    
    (83,151
    )Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,523
    )
    
    
    
    
    
    
    (105,523
    )Other comprehensive income:Change in fair value of
derivatives, net of tax of
$35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    58Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77BALANCE, June 27, 2007
    
    
    
    
    
    $
    
    
    
    
    3,104,510
    
    
    $
    31
    
    
    $
    82
    
    
    $
    (188,710
    )
    
    $
    58
    
    
    $
    (188,539
    )
  41




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007(In thousands)OPERATING ACTIVITIES:Net loss
    
    $
    (2,184
    )
    
    $
    (4,772
    )
    
    $
    (105,523
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    32,247
    
    
    
    32,067
    
    
    
    40,836Amortization of debt issuance costs
    
    
    1,386
    
    
    
    1,532
    
    
    
    4,032Accretion of original issue discount
    
    
    11,906
    
    
    
    13,336
    
    
    
    5,623Loss related to refinancing:Write-off of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    8,686Refinancing premiums expensed
    
    
    
    
    
    
    
    
    
    
    31,599Loss related to early extinguishment of debt
    
    
    1,923
    
    
    
    
    
    
    
    Deferred tax benefit
    
    
    (3,780
    )
    
    
    (3,279
    )
    
    
    (4,886
    )Loss on disposal of assets
    
    
    2,280
    
    
    
    1,218
    
    
    
    1,326Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    77Impairment of assets
    
    
    3,609
    
    
    
    5,964
    
    
    
    415Loss on sale leaseback transactions
    
    
    
    
    
    
    
    
    
    
    2,498Changes in assets and liabilities:Receivables
    
    
    331
    
    
    
    1,753
    
    
    
    (891
    )Inventories
    
    
    (683
    )
    
    
    (703
    )
    
    
    (763
    )Prepaid expenses and other current assets
    
    
    (1,074
    )
    
    
    1,283
    
    
    
    20,294Accounts payable
    
    
    1,704
    
    
    
    2,189
    
    
    
    15,388Accrued and other liabilities
    
    
    2,551
    
    
    
    (1,270
    )
    
    
    6,197Income taxes payable
    
    
    2,459
    
    
    
    (13
    )
    
    
    (18,939
    )Net cash provided by operating activities
    
    
    52,675
    
    
    
    49,305
    
    
    
    5,969INVESTING ACTIVITIES:Proceeds from sale leaseback transactions
    
    
    
    
    
    
    
    
    
    
    8,608Proceeds from sale of assets held for sale
    
    
    
    
    
    
    
    
    
    
    18,113Purchase of property and equipment
    
    
    (29,131
    )
    
    
    (31,346
    )
    
    
    (40,875
    )Collections on notes receivable
    
    
    733
    
    
    
    1,062
    
    
    
    1,753Acquisitions, net of liabilities assumed
    
    
    
    
    
    
    
    
    
    
    (168,848
    )(Purchase) Proceeds from sale of other assets
    
    
    (73
    )
    
    
    (2,438
    )
    
    
    641Net cash used in investing activities
    
    
    (28,471
    )
    
    
    (32,722
    )
    
    
    (180,608
    )
 42




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007(In thousands)FINANCING ACTIVITIES:Repayment of previous term loan facility
    
    $
    (29,781
    )
    
    $
    (17,016
    )
    
    $
    (182,053
    )Repurchase of 11 1/4% senior subordinated notes
    
    
    
    
    
    
    
    
    
    
    (180,778
    )Repurchase of 13 7/8% senior discount notes
    
    
    
    
    
    
    
    
    
    
    (105,306
    )Repayment of Ryans debt
    
    
    
    
    
    
    
    
    
    
    (145,000
    )Proceeds from term loan funding
    
    
    
    
    
    
    
    
    
    
    530,000Repayment of term loan funding
    
    
    
    
    
    
    
    
    
    
    (1,325
    )Proceeds from new revolver facility
    
    
    
    
    
    
    
    
    
    
    13,000Purchase of treasury stock
    
    
    (284
    )
    
    
    (10
    )
    
    
    Proceeds from issuance of common stock
    
    
    15
    
    
    
    
    
    
    
    Proceeds from 12 1/2% senior note issuance
    
    
    
    
    
    
    
    
    
    
    300,000Reduction of restricted cash available for early extinguishment of debt
    
    
    16,228
    
    
    
    
    
    
    
    Use of restricted cash for early extinguishment of debt
    
    
    (15,736
    )
    
    
    
    
    
    
    Payment of refinancing premiums
    
    
    
    
    
    
    
    
    
    
    (32,554
    )Debt issuance costs
    
    
    (56
    )
    
    
    
    
    
    
    (36,894
    )Net cash (used in) provided by financing activities
    
    
    (29,614
    )
    
    
    (17,026
    )
    
    
    159,090NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (5,410
    )
    
    
    (443
    )
    
    
    (15,549
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    26,047
    
    
    
    20,637
    
    
    
    20,194CASH AND CASH EQUIVALENTS, end of period
    
    $
    20,637
    
    
    $
    20,194
    
    
    $
    4,645SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for:Interest (net of capitalized interest of $538, $330 and $402, respectively)
    
    $
    32,530
    
    
    $
    37,242
    
    
    $
    61,370Income taxes
    
    $
    1,130
    
    
    $
    2,549
    
    
    $
    30,241
  43




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of Organization
 Company Background
   Description of Business
  Buffets Franchise Holdings, LLC
   Merger with Ryans Restaurant Group, Inc.
   44




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##### Table of Contents




    
    securing a new $640.0 million senior secured credit agreement (the
Credit Facility) comprised of (i) a $530.0 million senior secured
term loan (the Term Facility), (ii) a $40.0 million senior secured
revolving credit facility (the Revolving Facility), and (iii) a
$70.0 million senior secured pre-funded synthetic letter of credit
facility (see Note 9  Long-Term Debt for details regarding the
subsequent conversion of this facility to a synthetic revolving
facility), and
    
    issuing $300.0 million of its 12 1/2% senior notes due 2014 (the 12
1/2% Senior Notes) pursuant to an indenture dated November 1, 2006
(the Indenture).
  
    
    pay $704.6 million to purchase the outstanding shares of Ryans common stock,
    
    repay $146.9 million of Ryans outstanding debt (including accrued interest and breakage fees),
    
    repay $196.4 million of existing indebtedness of Buffets under its existing credit facility (including accrued interest and
breakage fees),
    
    repurchase or redeem $195.3 million of Buffets 11 1/4% senior subordinated notes (including accretion of original issue
discount and early redemption premiums),
    
    repurchase $121.5 million of Buffets Holdings 13 7/8% senior discount notes (including accretion of original issue
discount and early redemption premiums), and
    
    pay approximately $46.1 million for transaction fees and expenses.
   Principles of Consolidation
  Fiscal Year
  45




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##### Table of Contents



Reclassifications
  2. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
  Receivables
  Inventories
  Property and Equipment
   Assets Held for Sale
 Accounting for the
Impairment or Disposal of Long-Lived Assets.
  46




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##### Table of Contents



Debt Issuance Costs
  Goodwill and Other Intangible Assets
  Long-Lived Assets
    Insurance Reserves
  47




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##### Table of Contents



Closed Restaurant Reserve
  Pre-opening Costs
 Reporting on the Costs of Start-up Activities.
 Advertising Expenses
  Income Taxes
   Derivative Instruments and Hedging Activities
   48




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##### Table of Contents



Revenue Recognition
    Use of Estimates
  Fair Value Disclosure of Financial Instruments
     Segment Reporting
  49




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##### Table of Contents



Stock-Based Compensation
 Share-based Payment, Accounting for Stock Issued to Employees.
  Merger Integration Costs
  3. Recent Accounting Pronouncements
 The Fair Value Option for Financial Assets and
Liabilities
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
 Fair Value Measurements
 Considering the
Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial
Statements
 50




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##### Table of Contents



Accounting for Uncertainty in Income Taxes 
an Interpretation of FASB Statement No. 109 (FIN 48), Accounting for Income Taxes.
 How Taxes
Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is Gross versus Net Presentation)
 4. Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based
Compensation Accounting for Stock
Issued to Employees.
    51




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##### Table of Contents



For the Year EndedJune 27, 2007Risk-free interest rate
    
    
    4.91
    %Expected volatility
    
    
    45.0
    %Expected dividend yield
    
    
    0.0
    %Expected life in years
    
    
    2.0
 5. Property and Equipment
  June 28,
    
    
    June 27,2006
    
    
    2007Land
    
    $
    762
    
    
    $
    16,829Buildings
    
    
    3,082
    
    
    
    16,213Equipment
    
    
    146,152
    
    
    
    221,767Leasehold improvements
    
    
    143,909
    
    
    
    157,150Accumulated depreciation and amortization
    
    
    (161,618
    )
    
    
    (190,867
    )$
    132,287
    
    
    $
    221,092
  Sale Leaseback Transaction
  Accounting for Leases
  52




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##### Table of Contents



6. Other Intangible Assets
  June 28, 2006
    
    
    June 27, 2007Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized Intangible Assets:Leasehold interests
    
    $
    
    
    
    $
    
    
    
    $
    2,323
    
    
    $
    211Recipes
    
    
    
    
    
    
    
    
    
    
    2,602
    
    
    
    156$
    
    
    
    $
    
    
    
    $
    4,925
    
    
    $
    367Unamortized Intangible Assets:Trademarks
    
    $
    
    
    
    
    
    
    
    $
    79,440
    7. Other Assets
  June 28,
    
    
    June 27,2006
    
    
    2007Debt issuance costs
    
    $
    9,308
    
    
    $
    33,483Prepaid acquisition costs
    
    
    1,346
    
    
    
    Deposits
    
    
    477
    
    
    
    3,491Other long-term assets
    
    
    63
    
    
    
    118$
    11,194
    
    
    $
    37,092
    53




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##### Table of Contents



8. Accrued Liabilities
  June 28,
    
    
    June 27,2006
    
    
    2007Accrued compensation
    
    $
    17,634
    
    
    $
    32,710Accrued workers compensation
    
    
    12,520
    
    
    
    21,427Accrued interest
    
    
    13,552
    
    
    
    22,603Accrued insurance
    
    
    8,178
    
    
    
    17,350Accrued litigation reserve
    
    
    504
    
    
    
    9,926Accrued sales, use and property taxes
    
    
    6,348
    
    
    
    16,856Unearned revenue (gift certificates/cards)
    
    
    2,820
    
    
    
    4,290Closed restaurant reserve, current portion
    
    
    1,685
    
    
    
    1,196Accrued other
    
    
    3,925
    
    
    
    6,425$
    67,166
    
    
    $
    132,783
  Accrued Workers Compensation Liability
  Closed Restaurant Reserve
 Accounting for Costs Associated
with Exit or Disposal Activities.
  54




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##### Table of Contents



For the Year EndedJune 28,
    
    
    June 27,2006
    
    
    2007BALANCE, beginning of period (current and noncurrent in aggregate)
    
    $
    1,499
    
    
    $
    2,776Additions:Lease obligations charged to earnings
    
    
    4,847
    
    
    
    2,141Lease obligations charged to goodwill
    
    
    
    
    
    
    131Employee termination benefits charged to earnings
    
    
    444
    
    
    
    5Employee termination benefits charged to goodwill
    
    
    
    
    
    
    183Reductions:Cash payments:Lease termination costs and obligations
    
    
    3,570
    
    
    
    3,394Employee severance benefits
    
    
    444
    
    
    
    188BALANCE, end of period (current and noncurrent in aggregate)
    
    $
    2,776
    
    
    $
    1,654
   For the Year EndedJune 28,
    
    June 27,2006
    
    2007Number of restaurants:Expected to close as of the beginning of the period
    
    
    4
    
    
    
    1Closed during the period
    
    
    19
    
    
    
    32Identified for closure during the period
    
    
    16
    
    
    
    36Expected to close as of the end of the period
    
    
    1
    
    
    
    5
 For the Year EndedJune 28,
    
    June 27,2006
    
    2007Number of employees:Expected to be terminated as of the beginning of the period
    
    
    140
    
    
    
    35Terminated during the period
    
    
    665
    
    
    
    1,120Identified for termination during the period
    
    
    560
    
    
    
    1,260Expected to be terminated as of the end of the period
    
    
    35
    
    
    
    175
  2008
    
    $
    1,1962009
    
    
    4062010
    
    
    382011
    
    
    132012
    
    
    1Thereafter
    
    
    $
    1,654
 ® ® Recognition of Liabilities in Connection with a Purchase Business
Combination.
 55




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##### Table of Contents



9. Long-Term Debt
  June 28,
    
    
    June 27,2006
    
    
    2007Short-Term borrowings consisted of the following:Letter of credit facility at 2.85% plus borrowings at LIBOR, due July 19,
2007 (interest at 8.17% as of June 27, 2007)
    
    $
    
    
    
    $
    5,000Revolving credit facility, interest at Prime plus 2.25%, due June 29, 2007
    
    
    
    
    
    
    8,000Current maturities of long-term debt
    
    
    1,862
    
    
    
    6,625Total short-term borrowings
    
    
    1,862
    
    
    
    19,625Long-Term borrowings consisted of the following:Term loan, interest at LIBOR plus 2.75%, due quarterly through March 31,
2013 (interest at 8.11% as of June 27, 2007)
    
    
    182,053
    
    
    
    528,675Senior discount notes, interest at 13.875%, due December 15, 2010, net of
discount $32,009 at June 28, 2006
    
    
    99,991
    
    
    
    Senior subordinated notes, interest at 11.25%, due July 15, 2010, net of
discount of $4,195 at June 28, 2006
    
    
    180,470
    
    
    
    Senior notes, interest at 12.50%, due November 1, 2014
    
    
    
    
    
    
    300,000462,514
    
    
    
    828,675Less  Current maturities
    
    
    1,862
    
    
    
    6,625Total long-term debt
    
    $
    460,652
    
    
    $
    822,050
  2008
    
    $
    6,6252009
    
    
    5,3002010
    
    
    5,3002011
    
    
    3,9752012
    
    
    5,300Thereafter
    
    
    802,175$
    828,675
 Merger Related Refinancing
  Credit Facility
  56




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##### Table of Contents



12 1/2% Senior Notes
  57




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##### Table of Contents



10. Acquisitions
 Ryans Restaurant Group, Inc.
 ® ® ® ®
  58




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##### Table of Contents



November 1,2006(in thousands)Cash
    
    $
    559,406Assets held for sale
    
    
    53,072Deferred tax assets
    
    
    Other current assets
    
    
    43,210Property, plant & equipment
    
    
    98,985Goodwill
    
    
    192,188Other intangible assets (1)
    
    
    83,071Other assets
    
    
    3,750Total assets acquired
    
    
    1,033,682Accounts payable
    
    
    15,735Current portion of long-term debt
    
    
    33,036Income taxes payable
    
    
    15,109Accrued liabilities
    
    
    69,126Deferred tax liability
    
    
    61,619Long-term debt
    
    
    111,964Other long-term liabilities
    
    
    2,257Total liabilities assumed
    
    
    308,846Net assets acquired
    
    
    724,836Less cash acquired
    
    
    559,406Net cash paid
    
    $
    165,430
 
 (1)
    
    In connection with the Merger, we acquired approximately $79.4 million in trademarks, $2.4
million in recipes and $1.0 million in leasehold interests. Recognition of Liabilities in Connection with a Purchase Business
Combination.
 Business
Combinations.
  Twelve Weeks Ended
    
    Fifty-two Weeks EndedJune 28, 2006
    
    June 27, 2007
    
    June 28, 2006
    
    June 28, 2007Revenue
    
    $
    426,624
    
    
    $
    383,346
    
    
    $
    1,751,049
    
    
    $
    1,680,649Net loss
    
    
    (7,070
    )(1)
    
    
    (55,050
    )(2)
    
    
    (27,618
    )(3)
    
    
    (116,766
    )(4)
 
 (1)
    
    Pro forma net loss is increased by additional rent expense of $12.4 million related to the
Sale Leaseback Transaction, as adjusted for depreciation expense on assets sold in the Sale
Leaseback Transaction, and additional interest expense of $6.2 million. Pro forma net loss is
reduced by general and administrative expense synergies of $0.5 million and an increase in tax
benefit of $6.8 million assuming a 37.8% tax rate.(2)
    
    There are no pro forma adjustments necessary for the twelve weeks ended June 27, 2007 given
that Ryans operating results are included in the consolidated statement of operations for the
full sixteen-week period. Pro forma net loss has not been adjusted for nonrecurring items
including loss on litigation of $1.6 million and merger integration costs of approximately
$3.9. 59




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##### Table of Contents



(3)
    
    Pro forma net loss is increased by additional rent expense of $53.7 million related to the
Sale Leaseback Transaction, as adjusted for depreciation expense on assets sold in the Sale
Leaseback Transaction, and additional interest expense of $26.9 million. Pro forma net loss is
reduced by general and administrative expense synergies of $1.5 million and an increase in tax
benefit of $29.7 million assuming a 37.8% tax rate.(4)
    
    Pro forma net loss is increased by additional rent expense of $18.6 million related to the
Sale Leaseback Transaction, as adjusted for depreciation expense on assets sold in the Sale
Leaseback Transaction, additional interest expense of $7.5 million and an increase in tax
expense of $7.1 million assuming a 37.8% tax rate. Pro forma net loss is reduced by general
and administrative expense synergies of $0.7 million and the elimination of Ryans loss on
sale leaseback of $43.8 million during the period preceding the merger. Pro forma net loss has
not been adjusted for loss on sale leaseback of $2.5 million, loss on litigation settlement of
$7.6 million, merger integration costs of $10.9 million, and the loss related to refinancing
of $41.1 million. Norths Restaurants, Inc.
 Business
Combinations.
 11. Discontinued Operations
 ® Accounting for Impairment or
Disposal of Long-Lived Assets,
  Year Ended
    
    Year Ended
    
    Year EndedJune 29, 2005
    
    June 28, 2006
    
    June 27, 2007Revenue
    
    $
    35,573
    
    
    $
    34,537
    
    
    $
    31,619Income from discontinued operations
    
    
    1,749
    
    
    
    2,077
    
    
    
    863
  June 28, 2006
    
    
    June 27, 2007Current assets related to discontinued operations:Assets held for sale
    
    $
    
    
    
    $
    13,186Inventory and prepaids
    
    
    795
    
    
    
    931Total current assets
    
    $
    795
    
    
    $
    14,117Noncurrent assets related to discontinued operations:Property and equipment
    
    $
    9,117
    
    
    $
    Liquor licenses
    
    
    320
    
    
    
    412Total noncurrent assets
    
    $
    9,437
    
    
    $
    412Current liabilities related to discontinued operations:Gift card liability
    
    $
    1,178
    
    
    $
    1,137Total current liabilities
    
    $
    1,178
    
    
    $
    1,137
 60




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##### Table of Contents



12. Shareholders Deficit
 Stock Shares
  Stock Warrants
  Call Rights and Put Rights
  Equity Participation Plan
   For the Year EndedJune 29, 2005
    
    June 28, 2006
    
    June 27, 2007Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of year
    
    
    98,142
    
    
    $
    16.42
    
    
    
    97,029
    
    
    $
    14.51
    
    
    
    77,823
    
    
    $
    14.34Granted
    
    
    11,671
    
    
    
    0.11
    
    
    
    1,124
    
    
    
    0.11
    
    
    
    29,232
    
    
    
    9.17Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    12,784
    
    
    
    16.05
    
    
    
    20,330
    
    
    
    14.36
    
    
    
    4,355
    
    
    
    18.33Outstanding at end of year
    
    
    97,029
    
    
    $
    14.51
    
    
    
    77,823
    
    
    $
    14.34
    
    
    
    102,700
    
    
    $
    12.70
 61




---



##### Table of Contents



Options OutstandingWeighted-AvgRemainingNumber
    
    Option Term
    
    Weighted-AvgRange of Exercise Price
    
    Outstanding
    
    (in years)
    
    Exercise Price$0   - $10
    
    
    34,114
    
    
    
    9.74
    
    
    $
    7.17$11 - $20
    
    
    55,856
    
    
    
    13.26
    
    
    
    11.56$21 - $30
    
    
    6,624
    
    
    
    9.31
    
    
    
    25.22$31 - $40
    
    
    456
    
    
    
    9.53
    
    
    
    32.09$41 - $50
    
    
    5,650
    
    
    
    9.84
    
    
    
    41.07$0   - $50
    
    
    102,700
    
    
    
    11.63
    
    
    $
    12.70
 Cash and Phantom Incentive Unit Award Agreements
     Accumulated Other Comprehensive Income
  13. Retirement Plan
  62




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14. Postretirement Benefits
  63




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##### Table of Contents



15. Income Taxes
  For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007Federal:Current
    
    $
    2,665
    
    
    $
    1,776
    
    
    $
    (5,107
    )Deferred
    
    
    (3,308
    )
    
    
    (2,606
    )
    
    
    11,086(643
    )
    
    
    (830
    )
    
    
    5,979State:Current
    
    
    928
    
    
    
    761
    
    
    
    182Deferred
    
    
    (472
    )
    
    
    (673
    )
    
    
    271456
    
    
    
    88
    
    
    
    453Income tax (benefit) expense
    
    
    (187
    )
    
    
    (742
    )
    
    
    6,432Less: Income tax expense from discontinued operations
    
    
    1,176
    
    
    
    1,396
    
    
    
    579Income tax (benefit) expense from continuing operations
    
    $
    (1,363
    )
    
    $
    (2,138
    )
    
    $
    5,853
  June 28, 2006
    
    
    June 27, 2007Non-
    
    
    
    
    
    
    Non-Current
    
    
    current
    
    
    Current
    
    
    currentAsset
    
    
    Asset
    
    
    Asset
    
    
    LiabilityProperty and equipment
    
    $
    
    
    
    $
    2,595
    
    
    $
    
    
    
    $
    (22,247
    )Deferred rent
    
    
    
    
    
    
    8,716
    
    
    
    
    
    
    
    12,278Self-insurance reserve
    
    
    1,759
    
    
    
    
    
    
    
    4,998
    
    
    
    Accrued workers compensation
    
    
    4,481
    
    
    
    
    
    
    
    8,355
    
    
    
    Accrued payroll and related benefits
    
    
    2,031
    
    
    
    
    
    
    
    2,961
    
    
    
    Accrued store closing costs
    
    
    1,049
    
    
    
    
    
    
    
    638
    
    
    
    Net operating loss and tax credit carryforwards
    
    
    807
    
    
    
    
    
    
    
    
    
    
    
    34,549Deferred gain on sale leaseback transaction
    
    
    
    
    
    
    936
    
    
    
    
    
    
    
    2,229Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,260Intangible Assets
    
    
    
    
    
    
    (2,242
    )
    
    
    
    
    
    
    (33,279
    )Other
    
    
    197
    
    
    
    3,678
    
    
    
    788
    
    
    
    (1,986
    )Total deferred tax assets (liabilities)
    
    
    10,324
    
    
    
    13,683
    
    
    
    17,740
    
    
    
    (6,196
    )Valuation allowance for deferred tax assets
    
    
    
    
    
    
    
    
    
    
    (14,740
    )
    
    
    (27,260
    )Net deferred tax assets (liabilities)
    
    $
    10,324
    
    
    $
    13,683
    
    
    $
    3,000
    
    
    $
    (33,456
    )
  64




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##### Table of Contents



For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007Federal income tax benefit at statutory rate of 35%
    
    $
    (830
    )
    
    $
    (1,930
    )
    
    $
    (34,682
    )State income taxes, net of federal benefit
    
    
    296
    
    
    
    57
    
    
    
    (1,317
    )General business credits
    
    
    (1,591
    )
    
    
    (1,546
    )
    
    
    (2,566
    )Non-deductible interest on high-yield notes
    
    
    1,316
    
    
    
    1,497
    
    
    
    635Change in deferred tax rate
    
    
    
    
    
    
    
    
    
    
    1,268Valuation allowance for deferred tax assets
    
    
    
    
    
    
    
    
    
    
    42,000Other
    
    
    622
    
    
    
    1,180
    
    
    
    1,094Income tax (benefit) expense
    
    
    (187
    )
    
    
    (742
    )
    
    
    6,432Less: Income tax expense from discontinued operations
    
    
    1,176
    
    
    
    1,396
    
    
    
    579Income tax (benefit) expense from continuing operations
    
    $
    (1,363
    )
    
    $
    (2,138
    )
    
    $
    5,853
  16. Related-Party Transactions
     65




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##### Table of Contents



17. Commitments and Contingencies
 Litigation
   66




---



##### Table of Contents



Operating Leases
   2008
    
    $
    113,0822009
    
    
    111,8732010
    
    
    106,3922011
    
    
    100,3702012
    
    
    94,472Thereafter
    
    
    1,247,324Total future minimum lease payments
    
    $
    1,773,513
   67




---



##### Table of Contents



For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007Minimum rents
    
    $
    50,111
    
    
    $
    50,192
    
    
    $
    89,066Contingent rents
    
    
    3,522
    
    
    
    3,708
    
    
    
    3,251Less: Sublease rents
    
    
    (2,844
    )
    
    
    (2,357
    )
    
    
    (2,082
    )Deferred rents
    
    
    1,482
    
    
    
    1,123
    
    
    
    8,862Percentage rents
    
    
    1,617
    
    
    
    2,296
    
    
    
    1,958$
    53,888
    
    
    $
    54,962
    
    
    $
    101,055
 VISA Settlement
  18. Condensed Consolidating Financial Statements
   68




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##### Table of Contents



Condensed Consolidating Balance Sheet
As of June 28, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    37
    
    
    $
    14,068
    
    
    $
    6,089
    
    
    $
    
    
    
    $
    20,194Receivables
    
    
    1,777
    
    
    
    485
    
    
    
    278,857
    
    
    
    (276,240
    )
    
    
    4,879Inventories
    
    
    
    
    
    
    845
    
    
    
    17,381
    
    
    
    
    
    
    
    18,226Prepaid expenses and other current assets
    
    
    3
    
    
    
    4,772
    
    
    
    539
    
    
    
    
    
    
    
    5,314Deferred income taxes
    
    
    64
    
    
    
    8,774
    
    
    
    1,486
    
    
    
    
    
    
    
    10,324Assets related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    795
    
    
    
    
    
    
    
    795Total current assets
    
    
    1,881
    
    
    
    28,944
    
    
    
    305,147
    
    
    
    (276,240
    )
    
    
    59,732PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    5,307
    
    
    
    126,980
    
    
    
    
    
    
    
    132,287GOODWILL, net
    
    
    
    
    
    
    18,730
    
    
    
    293,433
    
    
    
    
    
    
    
    312,163DEFERRED INCOME TAXES
    
    
    6,140
    
    
    
    7,543
    
    
    
    
    
    
    
    
    
    
    
    13,683OTHER ASSETS, net
    
    
    2,203
    
    
    
    141,401
    
    
    
    4,892
    
    
    
    (137,302
    )
    
    
    11,194NONCURRENT ASSETS related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    9,437
    
    
    
    
    
    
    
    9,437Total assets
    
    $
    10,224
    
    
    $
    201,925
    
    
    $
    739,889
    
    
    $
    (413,542
    )
    
    $
    538,496LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    325,540
    
    
    
    2,788
    
    
    
    (280,227
    )
    
    
    48,101Accrued liabilities
    
    
    
    
    
    
    44,013
    
    
    
    23,153
    
    
    
    
    
    
    
    67,166Income taxes payable
    
    
    (36
    )
    
    
    7,013
    
    
    
    
    
    
    
    
    
    
    
    6,977Current maturities of long-term debt
    
    
    
    
    
    
    112
    
    
    
    1,750
    
    
    
    
    
    
    
    1,862Liabilities related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,178
    
    
    
    
    
    
    
    1,178Total current liabilities
    
    
    (36
    )
    
    
    376,678
    
    
    
    28,869
    
    
    
    (280,227
    )
    
    
    125,284LONG-TERM DEBT, net of current maturities
    
    
    99,991
    
    
    
    21,640
    
    
    
    339,021
    
    
    
    
    
    
    
    460,652DEFERRED LEASE OBLIGATIONS
    
    
    
    
    
    
    1,948
    
    
    
    26,408
    
    
    
    
    
    
    
    28,356OTHER LONG-TERM LIABILITIES
    
    
    
    
    
    
    3,024
    
    
    
    4,331
    
    
    
    
    
    
    
    7,355Total liabilities
    
    
    99,955
    
    
    
    403,290
    
    
    
    398,629
    
    
    
    (280,227
    )
    
    
    621,647COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY
(DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    5
    
    
    
    82,311
    
    
    
    199,244
    
    
    
    (281,555
    )
    
    
    5Retained earnings (accumulated deficit)
    
    
    (89,767
    )
    
    
    (283,676
    )
    
    
    142,016
    
    
    
    148,240
    
    
    
    (83,187
    )Total shareholders equity (deficit)
    
    
    (89,731
    )
    
    
    (201,365
    )
    
    
    341,260
    
    
    
    (133,315
    )
    
    
    (83,151
    )Total liabilities and shareholders equity (deficit)
    
    $
    10,224
    
    
    $
    201,925
    
    
    $
    739,889
    
    
    $
    (413,542
    )
    
    $
    538,496
 69




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##### Table of Contents



Condensed Consolidating Balance Sheet
As of June 27, 2007
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    37
    
    
    $
    (1,852
    )
    
    $
    6,460
    
    
    $
    
    
    
    $
    4,645Receivables
    
    
    (312
    )
    
    
    1,944
    
    
    
    338,780
    
    
    
    (330,193
    )
    
    
    10,219Inventories
    
    
    
    
    
    
    858
    
    
    
    31,229
    
    
    
    
    
    
    
    32,087Prepaid expenses and other current assets
    
    
    
    
    
    
    6,383
    
    
    
    2,249
    
    
    
    
    
    
    
    8,632Assets held for sale
    
    
    
    
    
    
    
    
    
    
    34,959
    
    
    
    
    
    
    
    34,959Deferred income taxes
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Assets related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    14,117
    
    
    
    
    
    
    
    14,117Total current assets
    
    
    (275
    )
    
    
    10,333
    
    
    
    427,794
    
    
    
    (330,193
    )
    
    
    107,659PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    7,577
    
    
    
    213,515
    
    
    
    
    
    
    
    221,092GOODWILL, net
    
    
    
    
    
    
    11,547
    
    
    
    490,499
    
    
    
    
    
    
    
    502,046OTHER INTANGIBLE ASSETS
    
    
    
    
    
    
    
    
    
    
    83,998
    
    
    
    
    
    
    
    83,998DEFERRED INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OTHER ASSETS, net
    
    
    38
    
    
    
    462,842
    
    
    
    5,452
    
    
    
    (431,240
    )
    
    
    37,092NONCURRENT ASSETS related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    412Total assets
    
    $
    (237
    )
    
    $
    492,299
    
    
    $
    1,221,670
    
    
    $
    (761,433
    )
    
    $
    952,299LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    399,685
    
    
    
    11,598
    
    
    
    (330,193
    )
    
    
    81,090Accrued liabilities
    
    
    
    
    
    
    70,912
    
    
    
    61,871
    
    
    
    
    
    
    
    132,783Income taxes payable
    
    
    6,274
    
    
    
    (3,127
    )
    
    
    
    
    
    
    
    
    
    
    3,147Current maturities of long-term debt
    
    
    
    
    
    
    451
    
    
    
    19,174
    
    
    
    
    
    
    
    19,625Liabilities related to discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,137
    
    
    
    
    
    
    
    1,137Total current liabilities
    
    
    6,274
    
    
    
    467,921
    
    
    
    93,780
    
    
    
    (330,193
    )
    
    
    237,782LONG-TERM DEBT, net of current maturities
    
    
    
    
    
    
    18,907
    
    
    
    952,943
    
    
    
    (149,800
    )
    
    
    822,050DEFERRED INCOME TAXES
    
    
    
    
    
    
    33,456
    
    
    
    
    
    
    
    
    
    
    
    33,456DEFERRED LEASE OBLIGATIONS
    
    
    
    
    
    
    2,328
    
    
    
    35,881
    
    
    
    
    
    
    
    38,209OTHER LONG-TERM LIABILITIES
    
    
    
    
    
    
    2,842
    
    
    
    6,499
    
    
    
    
    
    
    
    9,341Total liabilities
    
    
    6,274
    
    
    
    525,454
    
    
    
    1,089,103
    
    
    
    (479,993
    )
    
    
    1,140,838COMMITMENTS AND CONTINGENCIES SHAREHOLDERS EQUITY
(DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82Retained earnings (accumulated deficit)
    
    
    (6,624
    )
    
    
    (33,213
    )
    
    
    132,567
    
    
    
    (281,440
    )
    
    
    (188,710
    )Accumulated other comprehensive income
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    58Total shareholders equity (deficit)
    
    
    (6,511
    )
    
    
    (33,155
    )
    
    
    132,567
    
    
    
    (281,440
    )
    
    
    (188,539
    )Total liabilities and shareholders equity (deficit)
    
    $
    (237
    )
    
    $
    492,299
    
    
    $
    1,221,670
    
    
    $
    (761,433
    )
    
    $
    952,299
 70




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Year Ended June 29, 2005
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    40,550
    
    
    $
    850,658
    
    
    $
    
    
    
    $
    891,208RESTAURANT COSTS:Food
    
    
    
    
    
    
    14,594
    
    
    
    279,954
    
    
    
    
    
    
    
    294,548Labor
    
    
    
    
    
    
    12,618
    
    
    
    255,012
    
    
    
    
    
    
    
    267,630Direct and occupancy
    
    
    
    
    
    
    7,169
    
    
    
    205,138
    
    
    
    
    
    
    
    212,307Total restaurant costs
    
    
    
    
    
    
    34,381
    
    
    
    740,104
    
    
    
    
    
    
    
    774,485ADVERTISING EXPENSES
    
    
    
    
    
    
    1,057
    
    
    
    23,109
    
    
    
    
    
    
    
    24,166GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    5
    
    
    
    1,912
    
    
    
    39,989
    
    
    
    
    
    
    
    41,906CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    2,909
    
    
    
    
    
    
    
    2,909IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    3,609
    
    
    
    
    
    
    
    3,609OPERATING INCOME (LOSS)
    
    
    (5
    )
    
    
    3,200
    
    
    
    40,938
    
    
    
    
    
    
    
    44,133INTEREST EXPENSE
    
    
    11,453
    
    
    
    2,199
    
    
    
    34,448
    
    
    
    
    
    
    
    48,100INTEREST INCOME
    
    
    
    
    
    
    (515
    )
    
    
    
    
    
    
    
    
    
    
    (515
    )LOSS RELATED TO REFINANCING
    
    
    856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    856LOSS RELATED TO EARLY EXTINGUISHMENT OF DEBT
    
    
    
    
    
    
    1,923
    
    
    
    
    
    
    
    
    
    
    
    1,923OTHER INCOME
    
    
    
    
    
    
    (935
    )
    
    
    
    
    
    
    
    
    
    
    (935
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (12,314
    )
    
    
    528
    
    
    
    6,490
    
    
    
    
    
    
    
    (5,296
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    (3,237
    )
    
    
    162
    
    
    
    1,712
    
    
    
    
    
    
    
    (1,363
    )Net income (loss) from continuing operations
    
    
    (9,077
    )
    
    
    366
    
    
    
    4,778
    
    
    
    
    
    
    
    (3,933
    )Net income (loss) from discontinued
operations, net of tax of $1,176
    
    
    
    
    
    
    
    
    
    
    1,749
    
    
    
    
    
    
    
    1,749Net income (loss)
    
    $
    (9,077
    )
    
    $
    366
    
    
    $
    6,527
    
    
    $
    
    
    
    $
    (2,184
    )
 71




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Year Ended June 28, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    44,287
    
    
    $
    884,337
    
    
    $
    
    
    
    $
    928,624RESTAURANT COSTS:Food
    
    
    
    
    
    
    15,788
    
    
    
    300,252
    
    
    
    
    
    
    
    316,040Labor
    
    
    
    
    
    
    13,194
    
    
    
    250,685
    
    
    
    
    
    
    
    263,879Direct and occupancy
    
    
    
    
    
    
    6,335
    
    
    
    214,379
    
    
    
    
    
    
    
    220,714Total restaurant costs
    
    
    
    
    
    
    35,317
    
    
    
    765,316
    
    
    
    
    
    
    
    800,633ADVERTISING EXPENSES
    
    
    
    
    
    
    1,409
    
    
    
    29,228
    
    
    
    
    
    
    
    30,637GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    6
    
    
    
    2,032
    
    
    
    40,039
    
    
    
    
    
    
    
    42,077SHAREHOLDERS RIGHTS REPURCHASE
    
    
    757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    757CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    6,023
    
    
    
    
    
    
    
    6,023IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    5,964
    
    
    
    
    
    
    
    5,964OPERATING INCOME (LOSS)
    
    
    (763
    )
    
    
    5,529
    
    
    
    37,767
    
    
    
    
    
    
    
    42,533INTEREST EXPENSE
    
    
    12,907
    
    
    
    2,360
    
    
    
    36,975
    
    
    
    
    
    
    
    52,242INTEREST INCOME
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (375
    )LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    647
    
    
    
    
    
    
    
    
    
    
    
    647OTHER INCOME
    
    
    
    
    
    
    (994
    )
    
    
    
    
    
    
    
    
    
    
    (994
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (13,670
    )
    
    
    3,891
    
    
    
    792
    
    
    
    
    
    
    
    (8,987
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    (3,261
    )
    
    
    1,202
    
    
    
    (79
    )
    
    
    
    
    
    
    (2,138
    )Net income (loss) from continuing operations
    
    
    (10,409
    )
    
    
    2,689
    
    
    
    871
    
    
    
    
    
    
    
    (6,849
    )Net income (loss) from discontinued
operations, net of tax of $1,396
    
    
    
    
    
    
    
    
    
    
    2,077
    
    
    
    
    
    
    
    2,077Net income (loss)
    
    $
    (10,409
    )
    
    $
    2,689
    
    
    $
    2,948
    
    
    $
    
    
    
    $
    (4,772
    )
 72




---



##### Table of Contents



Condensed Consolidating Statement of Operations
For the Year Ended June 27, 2007
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    43,242
    
    
    $
    1,344,247
    
    
    $
    
    
    
    $
    1,387,489RESTAURANT COSTS:Food
    
    
    
    
    
    
    15,617
    
    
    
    465,069
    
    
    
    
    
    
    
    480,686Labor
    
    
    
    
    
    
    13,075
    
    
    
    401,391
    
    
    
    
    
    
    
    414,466Direct and occupancy
    
    
    
    
    
    
    3,631
    
    
    
    352,508
    
    
    
    (2,531
    )
    
    
    353,608Total restaurant costs
    
    
    
    
    
    
    32,323
    
    
    
    1,218,968
    
    
    
    (2,531
    )
    
    
    1,248,760ADVERTISING EXPENSES
    
    
    
    
    
    
    1,033
    
    
    
    32,863
    
    
    
    
    
    
    
    33,896GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    434
    
    
    
    1,888
    
    
    
    58,740
    
    
    
    (657
    )
    
    
    60,405CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    3,822
    
    
    
    
    
    
    
    3,822IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    415
    
    
    
    
    
    
    
    415MERGER INTEGRATION COSTS
    
    
    
    
    
    
    7,304
    
    
    
    3,634
    
    
    
    
    
    
    
    10,938LOSS ON LITIGATION SETTLEMENT
    
    
    
    
    
    
    7,641
    
    
    
    
    
    
    
    
    
    
    
    7,641LOSS ON SALE LEASEBACK TRANSACTIONS
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    2,498OPERATING INCOME (LOSS)
    
    
    (434
    )
    
    
    (6,947
    )
    
    
    23,307
    
    
    
    3,188
    
    
    
    19,114INTEREST EXPENSE
    
    
    5,455
    
    
    
    4,453
    
    
    
    69,195
    
    
    
    561
    
    
    
    79,664INTEREST INCOME
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    (561
    )
    
    
    (215
    )LOSS RELATED TO REFINANCING
    
    
    18,044
    
    
    
    23,090
    
    
    
    
    
    
    
    
    
    
    
    41,134OTHER INCOME
    
    
    
    
    
    
    (1,593
    )
    
    
    
    
    
    
    657
    
    
    
    (936
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (23,933
    )
    
    
    (33,243
    )
    
    
    (45,888
    )
    
    
    2,531
    
    
    
    (100,533
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    6,275
    
    
    
    72
    
    
    
    (494
    )
    
    
    
    
    
    
    5,853Net income (loss) from continuing operations
    
    
    (30,208
    )
    
    
    (33,315
    )
    
    
    (45,394
    )
    
    
    2,531
    
    
    
    (106,386
    )Net income (loss) from discontinued
operations, net of tax of $579
    
    
    
    
    
    
    
    
    
    
    863
    
    
    
    
    
    
    
    863Net income (loss)
    
    $
    (30,208
    )
    
    $
    (33,315
    )
    
    $
    (44,531
    )
    
    $
    2,531
    
    
    $
    (105,523
    )
 73




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Year Ended June 29, 2005
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (9,077
    )
    
    $
    366
    
    
    $
    6,527
    
    
    $
    
    
    
    $
    (2,184
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    3,214
    
    
    
    29,033
    
    
    
    
    
    
    
    32,247Amortization of debt issuance costs
    
    
    315
    
    
    
    64
    
    
    
    1,007
    
    
    
    
    
    
    
    1,386Accretion of original issue discount
    
    
    11,139
    
    
    
    46
    
    
    
    721
    
    
    
    
    
    
    
    11,906Loss related to early extinguishment of debt
    
    
    
    
    
    
    1,923
    
    
    
    
    
    
    
    
    
    
    
    1,923Impairment of assets
    
    
    
    
    
    
    
    
    
    
    3,609
    
    
    
    
    
    
    
    3,609Deferred income taxes
    
    
    (2,979
    )
    
    
    (48
    )
    
    
    (753
    )
    
    
    
    
    
    
    (3,780
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    2,280
    
    
    
    
    
    
    
    2,280Changes in assets and liabilities:Receivables
    
    
    
    
    
    
    40,610
    
    
    
    (39,643
    )
    
    
    (636
    )
    
    
    331Inventories
    
    
    
    
    
    
    (38
    )
    
    
    (645
    )
    
    
    
    
    
    
    (683
    )Prepaid expenses and other assets
    
    
    (4
    )
    
    
    (1,274
    )
    
    
    204
    
    
    
    
    
    
    
    (1,074
    )Accounts payable
    
    
    (180
    )
    
    
    1,544
    
    
    
    340
    
    
    
    
    
    
    
    1,704Accrued and other liabilities
    
    
    
    
    
    
    1,787
    
    
    
    764
    
    
    
    
    
    
    
    2,551Income taxes payable/refundable
    
    
    (258
    )
    
    
    4,336
    
    
    
    (1,619
    )
    
    
    
    
    
    
    2,459Net cash provided by (used in) operating activities
    
    
    (1,044
    )
    
    
    52,530
    
    
    
    1,825
    
    
    
    (636
    )
    
    
    52,675INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    
    
    
    
    (1,601
    )
    
    
    (27,530
    )
    
    
    
    
    
    
    (29,131
    )Collections on notes receivable
    
    
    
    
    
    
    733
    
    
    
    
    
    
    
    
    
    
    
    733Corporate cash advances (payments)
    
    
    
    
    
    
    (53,499
    )
    
    
    52,863
    
    
    
    636
    
    
    
    (Purchase) sale of other assets
    
    
    32
    
    
    
    (733
    )
    
    
    628
    
    
    
    
    
    
    
    (73
    )Net cash provided by (used in) investing activities
    
    
    32
    
    
    
    (55,100
    )
    
    
    25,961
    
    
    
    636
    
    
    
    (28,471
    )FINANCING ACTIVITIES:Repayment of debt
    
    
    
    
    
    
    (1,787
    )
    
    
    (27,994
    )
    
    
    
    
    
    
    (29,781
    )Redemption of subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (284
    )Proceeds from issuance of common stock
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Reduction of restricted cash available for early
extinguishment of debt
    
    
    
    
    
    
    974
    
    
    
    15,254
    
    
    
    
    
    
    
    16,228Use of restricted cash for early extinguishment of debt
    
    
    
    
    
    
    (944
    )
    
    
    (14,792
    )
    
    
    
    
    
    
    (15,736
    )Dividends
    
    
    1,290
    
    
    
    (1,290
    )
    
    
    
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )Net cash provided by (used in) investing activities
    
    
    965
    
    
    
    (3,047
    )
    
    
    (27,532
    )
    
    
    
    
    
    
    (29,614
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (47
    )
    
    
    (5,617
    )
    
    
    254
    
    
    
    
    
    
    
    (5,410
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    96
    
    
    
    19,771
    
    
    
    6,180
    
    
    
    
    
    
    
    26,047CASH AND CASH EQUIVALENTS, end of period
    
    $
    49
    
    
    $
    14,154
    
    
    $
    6,434
    
    
    $
    
    
    
    $
    20,637
 74




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Year Ended June 28, 2006
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (10,409
    )
    
    $
    2,689
    
    
    $
    2,948
    
    
    $
    
    
    
    $
    (4,772
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    2,907
    
    
    
    29,160
    
    
    
    
    
    
    
    32,067Amortization of debt issuance costs
    
    
    354
    
    
    
    71
    
    
    
    1,107
    
    
    
    
    
    
    
    1,532Accretion of original issue discount
    
    
    12,552
    
    
    
    47
    
    
    
    737
    
    
    
    
    
    
    
    13,336Impairment of assets
    
    
    
    
    
    
    
    
    
    
    5,964
    
    
    
    
    
    
    
    5,964Deferred income taxes
    
    
    (3,225
    )
    
    
    (3
    )
    
    
    (51
    )
    
    
    
    
    
    
    (3,279
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    1,218
    
    
    
    
    
    
    
    1,218Changes in assets and liabilities:Receivables
    
    
    (1,885
    )
    
    
    52,985
    
    
    
    (50,568
    )
    
    
    1,221
    
    
    
    1,753Inventories
    
    
    
    
    
    
    (18
    )
    
    
    (685
    )
    
    
    
    
    
    
    (703
    )Prepaid expenses and other assets
    
    
    1
    
    
    
    1,562
    
    
    
    (280
    )
    
    
    
    
    
    
    1,283Accounts payable
    
    
    
    
    
    
    4,137
    
    
    
    (71
    )
    
    
    (1,877
    )
    
    
    2,189Accrued and other liabilities
    
    
    
    
    
    
    (1,547
    )
    
    
    277
    
    
    
    
    
    
    
    (1,270
    )Income taxes payable/refundable
    
    
    1,841
    
    
    
    (1,854
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Net cash provided by (used in) operating activities
    
    
    (771
    )
    
    
    60,976
    
    
    
    (10,244
    )
    
    
    (656
    )
    
    
    49,305INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    
    
    
    
    (1,721
    )
    
    
    (29,625
    )
    
    
    
    
    
    
    (31,346
    )Collection on notes receivable
    
    
    
    
    
    
    1,062
    
    
    
    
    
    
    
    
    
    
    
    1,062Corporate cash advances (payments)
    
    
    
    
    
    
    (57,265
    )
    
    
    56,609
    
    
    
    656
    
    
    
    Purchase of other assets
    
    
    (1
    )
    
    
    (1,347
    )
    
    
    (1,090
    )
    
    
    
    
    
    
    (2,438
    )Net cash provided by (used in) investing activities
    
    
    (1
    )
    
    
    (59,271
    )
    
    
    25,894
    
    
    
    656
    
    
    
    (32,722
    )FINANCING ACTIVITIES:Repayment of debt
    
    
    
    
    
    
    (1,021
    )
    
    
    (15,995
    )
    
    
    
    
    
    
    (17,016
    )Repurchase of common stock
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Dividends
    
    
    770
    
    
    
    (770
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    760
    
    
    
    (1,791
    )
    
    
    (15,995
    )
    
    
    
    
    
    
    (17,026
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (12
    )
    
    
    (86
    )
    
    
    (345
    )
    
    
    
    
    
    
    (443
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    49
    
    
    
    14,154
    
    
    
    6,434
    
    
    
    
    
    
    
    20,637CASH AND CASH EQUIVALENTS, end of period
    
    $
    37
    
    
    $
    14,068
    
    
    $
    6,089
    
    
    $
    
    
    
    $
    20,194
 75




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Year Ended June 27, 2007
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (30,208
    )
    
    $
    (33,315
    )
    
    $
    (44,531
    )
    
    $
    2,531
    
    
    $
    (105,523
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    2,840
    
    
    
    37,996
    
    
    
    
    
    
    
    40,836Amortization of debt issuance costs
    
    
    140
    
    
    
    90
    
    
    
    3,802
    
    
    
    
    
    
    
    4,032Loss related to refinancing:Write-off of debt issuance costs
    
    
    1,992
    
    
    
    154
    
    
    
    6,540
    
    
    
    
    
    
    
    8,686Premium expensed
    
    
    16,052
    
    
    
    358
    
    
    
    15,189
    
    
    
    
    
    
    
    31,599Accretion of original issue discount
    
    
    5,315
    
    
    
    7
    
    
    
    301
    
    
    
    
    
    
    
    5,623Impairment of assets
    
    
    
    
    
    
    
    
    
    
    415
    
    
    
    
    
    
    
    415Deferred income taxes
    
    
    6,204
    
    
    
    (255
    )
    
    
    (10,835
    )
    
    
    
    
    
    
    (4,886
    )Loss on disposal of assets
    
    
    
    
    
    
    (2,825
    )
    
    
    6,682
    
    
    
    (2,531
    )
    
    
    1,326Stock-based compensation
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77Loss on sale leaseback transaction
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    
    
    
    
    2,498Changes in assets and liabilities:Receivables
    
    
    320
    
    
    
    206,287
    
    
    
    (211,485
    )
    
    
    3,987
    
    
    
    (891
    )Inventories
    
    
    
    
    
    
    (13
    )
    
    
    (750
    )
    
    
    
    
    
    
    (763
    )Prepaid expenses and other assets
    
    
    3
    
    
    
    (3,291
    )
    
    
    23,582
    
    
    
    
    
    
    
    20,294Due from parent
    
    
    (108
    )
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    Accounts payable
    
    
    1,877
    
    
    
    22,245
    
    
    
    (8,734
    )
    
    
    
    
    
    
    15,388Accrued and other liabilities
    
    
    
    
    
    
    28,109
    
    
    
    (21,912
    )
    
    
    
    
    
    
    6,197Income taxes payable/refundable
    
    
    6,310
    
    
    
    (40,359
    )
    
    
    15,110
    
    
    
    
    
    
    
    (18,939
    )Net cash provided by (used in) operating activities
    
    
    7,974
    
    
    
    182,530
    
    
    
    (188,522
    )
    
    
    3,987
    
    
    
    5,969INVESTING ACTIVITIES:Proceeds from sale leaseback transactions
    
    
    
    
    
    
    8,608
    
    
    
    
    
    
    
    
    
    
    
    8,608Proceeds from sale of assets held for sale
    
    
    
    
    
    
    
    
    
    
    18,113
    
    
    
    
    
    
    
    18,113Issuance of notes receivable to Ryans
    
    
    
    
    
    
    (149,800
    )
    
    
    
    
    
    
    149,800
    
    
    
    Acquisition, net of liabilities assumed
    
    
    
    
    
    
    (165,430
    )
    
    
    (3,418
    )
    
    
    
    
    
    
    (168,848
    )Purchase of property and equipment
    
    
    
    
    
    
    (1,593
    )
    
    
    (39,282
    )
    
    
    
    
    
    
    (40,875
    )Collection on notes receivable
    
    
    
    
    
    
    1,753
    
    
    
    
    
    
    
    
    
    
    
    1,753Corporate cash advances (payments)
    
    
    
    
    
    
    356,578
    
    
    
    (352,591
    )
    
    
    (3,987
    )
    
    
    Purchase of other assets
    
    
    33
    
    
    
    
    
    
    
    608
    
    
    
    
    
    
    
    641Net cash provided by (used in) investing activities
    
    
    33
    
    
    
    50,116
    
    
    
    (376,570
    )
    
    
    145,813
    
    
    
    (180,608
    )FINANCING ACTIVITIES:Repayment of previous term loan facility
    
    
    
    
    
    
    (4,187
    )
    
    
    (177,866
    )
    
    
    
    
    
    
    (182,053
    )Repurchase of 11 1/4% senior subordinated notes
    
    
    
    
    
    
    (4,158
    )
    
    
    (176,620
    )
    
    
    
    
    
    
    (180,778
    )Repurchase of 13 7/8% senior discount notes
    
    
    (105,306
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,306
    )Repayment of Ryans debt
    
    
    
    
    
    
    (145,000
    )
    
    
    
    
    
    
    
    
    
    
    (145,000
    )Proceeds from new term loan funding
    
    
    
    
    
    
    12,190
    
    
    
    517,810
    
    
    
    
    
    
    
    530,000Payments on new term loan funding
    
    
    
    
    
    
    (30
    )
    
    
    (1,295
    )
    
    
    
    
    
    
    (1,325
    )Proceeds from new revolver facility
    
    
    
    
    
    
    299
    
    
    
    12,701
    
    
    
    
    
    
    
    13,000Proceeds from 12 1/2% senior note issuance
    
    
    
    
    
    
    6,900
    
    
    
    293,100
    
    
    
    
    
    
    
    300,000Debt issuance costs
    
    
    
    
    
    
    (849
    )
    
    
    (36,045
    )
    
    
    
    
    
    
    (36,894
    )Payment of refinancing premiums
    
    
    (16,052
    )
    
    
    (380
    )
    
    
    (16,122
    )
    
    
    
    
    
    

    (32,554
    )Dividends
    
    
    113,351
    
    
    
    (113,351
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of notes receivable from parent
    
    
    
    
    
    
    
    
    
    
    149,800
    
    
    
    (149,800
    )
    
    
    Net cash provided by (used in) investing activities.
    
    
    (8,007
    )
    
    
    (248,566
    )
    
    
    565,463
    
    
    
    (149,800
    )
    
    
    159,090NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    (15,920
    )
    
    
    371
    
    
    
    
    
    
    
    (15,549
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    37
    
    
    
    14,068
    
    
    
    6,089
    
    
    
    
    
    
    
    20,194CASH AND CASH EQUIVALENTS, end of period
    
    $
    37
    
    
    $
    (1,852
    )
    
    $
    6,460
    
    
    $
    
    
    
    $
    4,645
 76




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##### Table of Contents



19. Interim Financial Results (Unaudited)
  For the Year Ended June 27, 2007First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterRevenues
    
    $
    213,904
    
    
    $
    291,005
    
    
    $
    499,234
    
    
    $
    383,346Operating income
    
    
    9,889
    
    
    
    307
    
    
    
    5,128
    
    
    
    3,790Loss before income taxes
    
    
    (3,352
    )
    
    
    (56,775
    )
    
    
    (23,838
    )
    
    
    (16,568
    )Net Loss from continuing operations
    
    
    (1,449
    )
    
    
    (35,135
    )
    
    
    (14,717
    )
    
    
    (55,085
    )Net income (loss) from discontinued operations
    
    
    309
    
    
    
    199
    
    
    
    320
    
    
    
    35Net loss
    
    
    (1,140
    )
    
    
    (34,936
    )
    
    
    (14,397
    )
    
    
    (55,050
    )
 For the Year Ended June 28, 2006First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterRevenues
    
    $
    218,806
    
    
    $
    210,690
    
    
    $
    281,375
    
    
    $
    217,753Operating income
    
    
    16,460
    
    
    
    5,071
    
    
    
    9,778
    
    
    
    11,224Income (loss) before income taxes
    
    
    4,224
    
    
    
    (6,434
    )
    
    
    (6,113
    )
    
    
    (664
    )Net income (loss) from continuing operations
    
    
    2,659
    
    
    
    (4,322
    )
    
    
    (2,133
    )
    
    
    (3,053
    )Net income from discontinued operations
    
    
    465
    
    
    
    403
    
    
    
    844
    
    
    
    365Net income (loss)
    
    
    3,124
    
    
    
    (3,919
    )
    
    
    (1,289
    )
    
    
    (2,688
    )
      77




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   
 ITEM 9B. OTHER INFORMATION
  78




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionFrederick J. Iseman
    
    54
    
    Chairman of the Board and Director of Buffets HoldingsRoe H. Hatlen
    
    63
    
    Vice Chairman of the Board and Director of Buffets HoldingsR. Michael Andrews, Jr.
    
    43
    
    Chief Executive OfficerMario O. Lee
    
    47
    
    Executive Vice President of Operations  Buffets DivisionM. Richard Kirk
    
    50
    
    Executive Vice President of Operations  Ryans DivisionA. Keith Wall
    
    55
    
    Executive Vice President and Chief Financial OfficerKarlin A. Linhardt
    
    44
    
    Executive Vice President of MarketingFred P. Williams
    
    49
    
    Executive Vice President of Concept Development and Real EstateH. Thomas Mitchell
    
    50
    
    Executive Vice President, General Counsel and SecretaryJane L. Binzak
    
    40
    
    Executive Vice President of Human ResourcesLinda J. Allison
    
    53
    
    Executive Vice President of Operations ServicesSteven M. Lefkowitz
    
    43
    
    Director of Buffets HoldingsRobert A. Ferris
    
    65
    
    Director of Buffets HoldingsDavid S. Lobel
    
    54
    
    Director of Buffets HoldingsRobert M. Rosenberg
    
    69
    
    Director of Buffets HoldingsAnkur A. Vora
    
    30
    
    Director of Buffets Holdings
 Frederick J. Iseman
 Roe H. Hatlen
 R. Michael Andrews, Jr.
 Mario O. Lee
 M. Richard Kirk
 79




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##### Table of Contents



A. Keith Wall
 Karlin A. Linhardt
 Fred P. Williams
 H. Thomas Mitchell
 Jane L. Binzak
 Linda J. Allison
 Steven M. Lefkowitz
 Robert A. Ferris
 David S. Lobel
 Robert M. Rosenberg
 80




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##### Table of Contents



Ankur A. Vora has
 Board of Directors
    Audit Committee
  Code of Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION AND ANALYSIS
 Introduction
  
    
    Align executive compensation and rewards with our overall business strategy;
    
    Attract and retain the best executive talent in the industry; and
    
    Promote the values of our company while rewarding excellent performance.
  81




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##### Table of Contents



th
 Compensation Committee
  Material Elements of the Compensation Program
 Base Salary
 th
 
    
    Buffalo Wild Wings
    
    Bob Evans Farms, Inc.
    
    CBRL Group, Inc.
    
    CEC Entertainment, Inc.
    
    Dennys Corporation
    
    Frischs Restaurants, Inc.
    
    Lubys, Inc.
   82




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##### Table of Contents



2007
    
    2008R. Michael
Andrews, Jr., CEO
    
    $
    465,385
    
    
    $
    535,000A. Keith Wall, CFO
    
    
    264,615
    
    
    
    286,000Karlin A. Linhardt, EVP of Marketing
    
    
    266,346
    
    
    
    286,000Fred P. Williams, EVP of Concept Development and Real Estate
    
    
    229,000
    
    
    
    240,450Mario O. Lee, EVP of Operations
    
    
    245,000
    
    
    
    259,000
 Non-Equity Incentive Compensation
  Enterprise Equity Value Growth Bonus Plan
     83




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##### Table of Contents



2007
    

    2008Threshold
    
    Target
    
    Threshold
    
    TargetEnterprise Equity Values
    
    $
    30.5
    
    
    $
    124.1
    
    
    $
    228.0
    
    
    $
    303.0
  R. Michael Andrews, CEO
    
    
    80
    %A. Keith Wall, CFO
    
    
    50
    %Karlin A. Linhardt, EVP of Marketing
    
    
    70
    %Fred P. Williams, EVP of Concept Development and Real Estate
    
    
    50
    %Mario O. Lee, EVP of Operations
    
    
    70
    %
 Discretionary Bonuses
    R. Michael Andrews, CEO
    
    $
    350,000A. Keith Wall, CFO
    
    
    250,000Karlin A. Linhardt, EVP of Marketing
    
    
    Fred P. Williams, EVP of Concept
Development and Real Estate
    
    
    114,500Mario O. Lee, EVP of Operations
    
    
    150,000
 84




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##### Table of Contents



Equity Incentive Compensation
 Equity
Participation Plan
     R. Michael Andrews, Jr.
    
    
    
    
    
    optionsA. Keith Wall
    
    
    
    
    
    optionsKarlin A. Linhardt
    
    
    
    
    
    optionsFred P. Williams
    
    
    2,500
    
    
    optionsMario O. Lee
    
    
    10,000
    
    
    options
 Cash
and Phantom Incentive Unit Awards
    85




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##### Table of Contents



Other Benefits
  
    
    Executive Physical  We provide each named executive officer the option to
participate in an annual physical with the Mayo Clinic Executive Medical Program at
no cost to the executive. Upon completion of the physical, the bills are first
submitted to the Companys medical insurance provider and any balance remaining
following the application of pre-negotiated provider discounts is paid by the
Company.
    
    Executive Life Insurance  Our named executive officers are not eligible for the
401(k) Savings Plan because their participation could reduce the opportunity for
other employees to participate based on ERISA standards for qualified plans.
Instead, the Company offers executives a personally owned whole-life policy, with
the premiums paid for by the Company. The face amount of this policy is $500,000 for
each executive, and the premiums are treated as income to the executives. Upon
the death of the named executive officer, proceeds are payable to the designated
beneficiary of their choice.
    
    Company Car Allowance  We provide a car allowance to Messrs. Andrews, Williams,
Linhardt and Lee. During fiscal 2007, the aggregate annual allowance did not exceed
$25,000 for any named executive officer.
    
    Founders Club Trip  On an annual basis, named executive officers participate in
the Founders Club trip, which is an event to reward high-performing restaurant
managers in the Company. The presence of these executives is required due to their
active involvement in the event. Spouse participation is optional, although the
Company will pay the travel expenses of spouses choosing to attend and will reflect
such expenses as income to the executives.
    
    Commuting and relocation reimbursement  We reimburse the cost of commuting
and/or relocation expenses for our named executive officers, as applicable. Total
reimbursed commuting and relocation costs to Messrs. Wall, Linhardt, Williams and
Lee were $81,000 for fiscal 2007.
  COMPENSATION COMMITTEE REPORT
      86




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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
  87




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##### Table of Contents



SUMMARY
COMPENSATION TABLE FOR THE 2007 FISCAL YEAR
  (4)Fiscal
    
    
    
    
    
    (1)
    
    (2)
    
    (3)
    
    All Other
    
    TotalName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Option Awards
    
    Stock Awards
    
    Compensation
    
    CompensationR. Michael Andrews, Jr.,
Chief Executive Officer
and Director
    
    
    2007
    
    
    $
    465,385
    
    
    $
    350,000
    
    
    $
    
    
    
    $
    102
    
    
    $
    29,988
    
    
    $
    845,475A. Keith Wall, Executive Vice President and Chief
 Financial
Officer
    
    
    2007
    
    
    
    264,615
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    28,877
    
    
    
    543,492Fred P. Williams, Executive
Vice President of Concept
Development and Real Estate
    
    
    2007
    
    
    
    229,000
    
    
    
    114,500
    
    
    
    6,578
    
    
    
    23
    
    
    
    62,293
    (5)
    
    
    412,394Karlin A. Linhardt ExecutiveVice President of Marketing
    
    
    2007
    
    
    
    266,346
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    29,752
    
    
    
    296,200Mario O. Lee, Executive
 Vice President of Operations
    
    
    2007
    
    
    
    245,000
    
    
    
    150,000
    
    
    
    26,320
    
    
    
    8
    
    
    
    68,709
    (6)
    
    
    490,037
 
 (1)
    
    Amounts in this column represent discretionary bonuses
awarded during the 2007 fiscal year.(2)
    
    These awards related to options granted during the year under the Equity Participation Plan.
Their value is determined using the grant date fair value, as defined
in SFAS 123(R). See Note 4  Stock-based Compensation for
details on the assumptions used to calculate the value.(3)
    
    These awards relate to the Phantom Incentive Unit Awards discussed in the Material Elements
of the Compensation Program section above. The grant date of the phantom incentive unit
awards preceded the adoption date of SFAS 123(R). Therefore, for financial reporting
purposes, they are accounted for based on the intrinsic value method pursuant to APB 25.
However, for purposes of calculating compensation for disclosure in the table above, these
phantom incentive unit awards are required to be valued in accordance with the disclosure
requirements of SFAS 123(R). As such, their value is determined using the grant date fair
value, as defined in SFAS 123(R). See Note 4  Stock-based Compensation for
details on the assumptions used to calculate the value.(4)
    
    Perquisites included in this column include executive
physicals, company car allowances, Founders Club Trip, and
commuting and relocation reimbursements. This column also includes the value
of premium payments for death benefits under an executive whole life
insurance policy. See
the Other Benefits section for details of these perquisites. All individual perquisites
exceeding the greater of $25,000 or 10% of the total amount of perquisites for the executive
officer are quantified and disclosed in subsequent footnotes to this
schedule.(5)
    
    Amount includes $35,489 in commuting allowance.(6)
    
    Amount includes $32,500 of relocation expense. 88




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GRANTS
IN PLAN-BASED AWARDS FOR THE 2007 FISCAL YEAR
 All OtherOptionawards:Number ofEstimated Possible Payouts
    
    
    
    
    
    Securities
    
    Exercise or Base
    
    Grant DateUnder non-Equity Incentive
    
    
    
    
    
    Underlying
    
    Price of Option
    
    Fair Value ofPlan Awards
    
    Grant Date
    
    Options
    
    Awards ($/Sh)
    
    Option AwardsName
    
    Threshold ($)
    
    Target ($)R. Michael Andrews,
Jr.
    
    $
    200,000
    
    
    $
    400,000
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    A. Keith Wall
    
    
    68,750
    
    
    
    137,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Karlin A. Linhardt
    
    
    96,250
    
    
    
    192,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mario O. Lee
    
    
    85,750
    
    
    
    171,500
    
    
    
    4/5/2007
    
    
    
    7,500
    
    
    
    9.17
    
    
    
    26,320Fred P. Williams
    
    
    57,250
    
    
    
    114,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  89




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##### Table of Contents



OUTSTANDING
EQUITY AWARDS FOR THE 2007 FISCAL YEAR
 Option Awards
    
    
    
    
    
    
    
    
    
    Stock UnitAwardsNumber of SecuritiesUnderlying
    
    
    
    
    
    
    
    
    
    Number of Units of
    
    Market Value of UnitsUnexercised Options
    
    Option Exercise
    
    Option
    
    Stock That Have
    
    of Stock That Have NotName
    
    (#) Exercisable
    
    Price ($)
    
    Expiration Date
    
    Not Vested
    
    VestedR. Michael Andrews, Jr.
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    26,000
    
    
    $
    407A. Keith Wall
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Karlin A. Linhardt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,000
    
    
    
    407Mario O. Lee
    
    
    500
    
    
    
    10.00
    
    
    
    1/4/2016
    
    
    
    2,000
    
    
    
    311,125
    
    
    
    16.33
    
    
    
    4/8/2019250
    
    
    
    41.07
    
    
    
    4/25/2017625
    
    
    
    23.72
    
    
    
    7/19/20167,500
    
    
    
    9.17
    
    
    
    4/5/2022Fred P. Williams
    
    
    2,500
    
    
    
    0.11
    
    
    
    11/4/2019
    
    
    
    6,000
    
    
    
    94
  OPTION
EXERCISES AND STOCK VESTED TABLE FOR FISCAL YEAR 2007
 Phantom Incentive Unit AwardsName
    
    Number of Units Acquired on Vesting (#)
    
    Value Realized on Vesting ($)R. Michael Andrews, Jr.
    
    
    6,500
    
    
    $
    102A. Keith Wall
    
    
    
    
    
    
    Karlin A. Linhardt
    
    
    6,500
    
    
    
    102Mario O. Lee
    
    
    1,500
    
    
    
    8Fred P. Williams
    
    
    500
    
    
    
    23
  90




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##### Table of Contents



POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL FOR THE 2007 FISCAL
YEAR
  R. Michael
    
    
    
    
    
    
    Fred P.
    
    
    Karlin A.Andrews, Jr.
    
    
    A. Keith Wall
    
    
    Williams
    
    
    Linhardt
    
    
    Mario O. LeeContinued base salary
    
    $
    500,000
    
    
    $
    275,000
    
    
    $
    229,000
    
    
    $
    275,000
    
    
    $
    245,000Continued medical
and/or health benefits
    
    
    9,772
    
    
    
    7,330
    
    
    
    9,772
    
    
    
    9,772
    
    
    
    8,606Continued life
insurance and long-term
disability coverage
    
    
    1,761
    
    
    
    594
    
    
    
    2,795
    
    
    
    1,909
    
    
    
    4,528Cash Incentive Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity Incentive Plan
    
    
    
    
    
    
    
    
    
    
    22,650
    
    
    
    
    
    
    
    Phantom Incentive Unit
Awards
    
    
    58,890
    
    
    
    
    
    
    
    13,590
    
    
    
    58,890
    
    
    
    4,530Total Severance Payments
    
    $
    570,423
    
    
    $
    282,924
    
    
    $
    277,807
    
    
    $
    345,571
    
    
    $
    262,664
 Severance Protection Agreements
  Continued Health and Medical Benefits
  Continued Life Insurance and Long-Term Disability Coverage
  Cash Incentive Bonus
  Equity Incentive Plan
  91




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Phantom Incentive Unit Awards
   DIRECTOR
COMPENSATION FOR THE 2007 FISCAL YEAR
  Fees Earned or
    
    All OtherName
    
    Paid in Cash
    
    Compensation
    
    Total CompensationFrederick J. Iseman (1)
    
    $
    
    
    
    $
    
    
    
    $
    Roe H. Hatlen
    
    
    200,000
    
    
    
    20,721
    
    
    
    220,721Steven M. Lefkowitz (1)
    
    
    
    
    
    
    
    
    
    
    Robert A. Ferris (1)
    
    
    
    
    
    
    
    
    
    
    David S. Lobel (2)
    
    
    
    
    
    
    
    
    
    
    Robert M. Rosenberg
    
    
    25,000
    
    
    
    
    
    
    
    25,000Ankur A. Vora (1)
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    These individuals are representatives of and are compensated by Caxton-Iseman Capital for
their director positions. Caxton-Iseman Capital receives amounts from us under an advisory
services agreement described in Item 13 of this filing.(2)
    
    Mr. Lobel is a representative of and is compensated by Sentinel Capital Partners, L.L.C. for
his director position. Sentinel Capital Partners, L.L.C. receives amounts from us under am
advisory agreement described in Item 13 of this filing. 92




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  Name of Beneficial Owner
    
    Shares
    
    PercentageCaxton-Iseman Investments L.P.(1)
    
    
    2,403,316
    
    
    
    77.4Sentinel Capital Partners II, L.P.(2)
    
    
    216,276
    
    
    
    7.0Frederick J. Iseman(1)
    
    
    2,403,316
    
    
    
    77.4David S. Lobel (2)
    
    
    216,276
    
    
    
    7.0Roe H. Hatlen(3)
    
    
    187,785
    
    
    
    6.0R. Michael Andrews, Jr. (4)
    
    
    101,482
    
    
    
    3.3A. Keith Wall
    
    
    31,225
    
    
    
    1.0Fred P. Williams (5)
    
    
    19,215
    
    
    
    0.6Mario O. Lee (6)
    
    
    7,206
    
    
    
    0.2Robert M. Rosenberg (7)
    
    
    4,429
    
    
    
    0.1Karlin A. Linhardt (8)
    
    
    
    
    
    
    Steven M. Lefkowitz
    
    
    
    
    
    
    Ankur A. Vora
    
    
    
    
    
    
    Robert A. Ferris
    
    
    
    
    
    
    All executive officers and directors as a group (16 persons)
    
    
    3,036,386
    
    
    
    97.8
 
 (1)
    
    By virtue of Mr. Isemans indirect control of Caxton-Iseman Investments L.P., he is deemed
to beneficially own the 2,501,438 shares of common stock of Buffets Restaurant Holdings held
by that entity. The address of Caxton-Iseman Investments L.P. and Mr. Iseman is c/o
Caxton-Iseman Capital, LLC, 500 Park Avenue, New York, New York, 10022. By virtue of Mr.
Isemans direct and beneficial ownership interests in Buffets Restaurants Holdings, Mr. Iseman
is deemed to beneficially own 2,403,316 shares of Buffets
Holdings.(2)
    
    By virtue of Mr. Lobels indirect control of Sentinel Capital Partners II, L.P., he is deemed
to beneficially own the 225,106 shares of common stock of Buffets Restaurant Holdings held by
that entity. The address of Sentinel Capital Partners II, L.P. is 777 Third Avenue, 32nd
Floor, New York, New York, 10017. By virtue of Mr. Lobels direct and beneficial ownership
interests in Buffets Restaurants Holdings, Mr. Lobel is deemed to beneficially own 216,276
shares of Buffets Holdings.(3)
    
    Mr. Hatlen has sole voting and dispositive power over 65,012 shares of common stock of
Buffets Restaurants Holdings. Mr. Hatlen may be deemed to be the beneficial owner of 33,340
shares of common stock of Buffets Restaurants Holdings held by Kari E. Hatlen, 33,339 shares
of common stock of Buffets Restaurants Holdings held by Erik R. Hatlen, 22,506 shares of
common stock of Buffets Restaurants Holdings owned by Lars C. Hatlen Trust and 10,833 shares
of common stock of Buffets Restaurants Holdings owned by Lars C. Hatlen. By virtue of Mr.
Hatlens control over Eventyr Investments Limited Partnership, he is deemed to beneficially
own the 30,422 shares of common stock of Buffets Restaurants Holdings held by that entity. By
virtue of Mr. Hatlens direct and beneficial ownership interests in Buffets Restaurants
Holdings, Mr. Hatlen is deemed to beneficially own 187,785
shares of Buffets Holdings.(4)
    
    Mr. Andrews also holds 32,500 phantom stock units of Buffets Holdings.(5)
    
    Mr. Williams also owned options to purchase 2,500 shares of common stock of Buffets Holdings
and holds 7,500 phantom stock units of Buffets Holdings.(6)
    
    Mr. Lee also owned options to purchase 10,000 shares of common stock of Buffets Holdings and
holds 2,500 phantom stock units of Buffets Holdings.(7)
    
    Mr. Rosenberg also owned options to purchase 12,600 shares of common stock of Buffets
Holdings.(8)
    
    Mr. Linhardt holds 32,500 phantom stock units of Buffets Holdings. 93




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##### Table of Contents



Equity Compensation Plan InformationNumber of securitiesNumber of
    
    
    Weighted-
    
    
    remaining available forsecurities to be
    
    
    average exercise
    
    
    future issuance underissued upon exercise
    
    
    price of
    
    
    equity compensationof outstanding
    
    
    outstanding
    
    
    plans (excludingoptions, warrants
    
    
    options, warrants
    
    
    securities reflected inPlan Category
    
    and rights
    
    
    and rights
    
    
    column (A))Equity compensation plans approved by security holders
    
    
    102,700
    
    
    $
    12.70
    
    
    
    11,050Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    102,700
    
    
    $
    12.70
    
    
    
    11,050
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 Policies and Procedures Regarding Related Party Transactions
    Founder Advisory Agreements
  Caxton-Iseman Capital Advisory Agreement
  Sentinel Capital Advisory Agreement
  94




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##### Table of Contents



Director Independence
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Year EndedJune 29,
    
    
    June 28,
    
    
    June 27,2005
    
    
    2006
    
    
    2007(In thousands)Audit fees (1)
    
    $
    403
    
    
    $
    265
    
    
    $
    503Audit-related fees (2)
    
    
    10
    
    
    
    18
    
    
    
    807Tax fees (3)
    
    
    67
    
    
    
    61
    
    
    
    254All other fees
    
    
    
    
    
    
    
    
    
    
    Total fees
    
    $
    480
    
    
    $
    344
    
    
    $
    1,564
 
 (1)
    
    Audit fees are comprised of annual audit fees, quarterly review fees, comfort letter fees,
consent fees, fees associated with the review of prospectuses and consultation fees on
accounting issues as well as an increase in Company activity due to
the Ryans Merger.(2)
    
    Audit-related fees for fiscal year 2005, 2006, and 2007 related to the issuance of separate
audit reports on the consolidated financial statements of Buffets and Buffets Holdings, as
well as a separate report for Buffets Franchise Holding, LLC in fiscal 2007. Also included is
due diligence work related to the Ryans Merger and audit work related to the subsequent
refinancing and the filing of a registration statement on form S-4 in connection with the
Exchange Offer for the Buffets 12 1/2% Senior Notes.(3)
    
    Tax fees are comprised of tax compliance and consultation fees as well as to due diligence
work related to the Ryans Merger and the Transaction Cost Study for the Ryans tax return for
the stub period from December 29, 2005 through November 1,
2006, the acquisition date.   95




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
  1.
    
    The following Financial Statements of the Company are included in Part II, Item 8 of this
Annual Report on Form 10-K:Report of Independent Registered Public Accounting Firm.Consolidated Balance Sheets as of June 28, 2006 and June 27, 2007.Consolidated Statements of Operations for the Year Ended June 29, 2005, for the Year Ended June
28, 2006 and for the Year Ended June 27, 2007.Consolidated Statements of Shareholders Equity (Deficit) for the  Year Ended June 29, 2005, for the Year Ended June 28, 2006 and for the Year Ended June
27, 2007.Consolidated Statements of Cash Flows for the Year Ended June 29, 2005, for the Year Ended June
28, 2006, and for the Year Ended June 27, 2007.Notes to Consolidated Financial Statements2.
    
    Schedules to Financial Statements:All financial statement schedules have been omitted because they are either inapplicable or the
information required is provided in the Companys Consolidated Financial Statements and Notes
thereto, included in Part II, Item 8 of this Annual Report on Form 10-K.3.
    
    See Index to Exhibits on page 101 of this report.
 96




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##### Table of Contents



SIGNATURES
  BUFFETS HOLDINGS, INC.Date: September 25, 2007
    
    By:
    
    /s/ R. Michael Andrews, Jr.R. Michael Andrews, Jr.Chief Executive Officer(Principal Executive Officer)By:
    
    /s/ A. Keith WallA. Keith WallChief Financial Officer(Principal Financial andAccounting Officer)
 97




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##### Table of Contents



POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ R. Michael Andrews, Jr.
    
    Chief Executive Officer
    
    September 25, 2007R. Michael Andrews, Jr.
    
    (Principal
Executive Officer)/s/ A. Keith Wall
    
    Executive Vice President and
    
    September 25, 2007A. Keith Wall
    
    Chief
Financial Officer(Principal Financial andAccounting Officer)/s/ Frederick J. Iseman
    
    Director (Chairman of the
    
    September 25, 2007Frederick J. Iseman
    
    Board
of Directors)/s/ Roe H. Hatlen
    
    Vice Chairman and Director
    
    September 25, 2007Roe H. Hatlen/s/ David S. Lobel
    
    Director
    
    September 25, 2007David S. Lobel/s/ Robert A. Ferris
    
    Director
    
    September 25, 2007Robert A. Ferris/s/ Robert M. Rosenberg
    
    Director
    
    September 25, 2007Robert M. Rosenberg/s/ Steven M. Lefkowitz
    
    Director
    
    September 25, 2007Steven M. Lefkowitz
 98




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger dated as of July 24, 2006 among Ryans Restaurant
Group, Inc., Buffets, Inc. and Buffets Southeast, Inc. (incorporated by
reference to Exhibit 2.1 to Buffets Holdings, Inc.s Current Report on Form 8-K,
filed with the Commission on July 25, 2006 (SEC file No, 333-116897)).3.1
    
    Amended Certificate of Incorporation of Buffets Holdings, Inc. (incorporated by
reference to Exhibit 3.1 to Buffets Holdings, Inc.s Registration Statement on
Form S-4, filed with the Commission on June 25, 2004 (SEC file No. 333-116897)).3.2
    
    By-Laws of Buffets Holdings, Inc. (incorporated by reference to Exhibit 3.2 to
Buffets Holdings, Inc.s Registration Statement on Form S-4, filed with the
Commission on June 25, 2004 (SEC file No. 333-116897)).4.1
    
    Indenture, dated as of November 1, 2006, by and among Buffets Inc., the
guarantors named therein and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.1 to Buffet Holdings, Inc.s
Registration Statement on Form S-4 filed with the Commission on December 18,
2006 (SEC file no. 333-139436)).4.2
    
    First Supplemental Indenture, dated as of November 1, 2006, by and among
Buffets, Inc., the additional subsidiary guarantors named therein and U.S. Bank
National Association, as trustee (incorporated by reference to Exhibit 4.2 to
Buffet Holdings, Inc.s Registration Statement on Form S-4 filed with the
Commission on December 18, 2006 (SEC file no. 333-139436)).4.3
    
    Second Supplemental Indenture, dated as of November 22 , 2006, by and among
Buffets, Inc., the guarantors named therein and U.S. Bank National Association,
as trustee (incorporated by reference to Exhibit 4.3 to Buffet Holdings, Inc.s
Registration Statement on Form S-4 filed with the Commission on December 18,
2006 (SEC file no. 333-139436)).4.4
    
    Third Supplemental Indenture, dated as of March 14, 2007, by and among Buffets,
Inc., Buffets Franchise Holdings, LLC and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.1 to Buffet Holdings, Inc.s
Quarterly Report on Form 10-Q filed with the Commission on May 21, 2007 (SEC
file no. 333-116897)).4.5
    
    Form of Exchange Note (included as Exhibit A of Exhibit 4.1 of Buffet Holdings,
Inc.s Registration Statement on Form S-4 filed with the Commission on December
18, 2006 (SEC file no. 333-139436)).10.1
    
    Description of Material Terms of Buffets, Inc.s fiscal 2006 Incentive Based
Compensation Program for Executives (incorporated by reference to Exhibit 10.1
to Buffets Holdings, Inc.s Current Report on Form 8-K (SEC file No.
333-116897)).10.2
    
    Form of Buffets Holdings, Inc. Cash and Phantom Incentive Unit Award Agreement
(incorporated by reference to Exhibit 10.2 to Buffets Holdings, Inc.s Current
Report on Form 8-K (SEC file No. 333-116897)).10.3
    
    Form of Buffets Holdings, Inc. Severance Protection Agreement (incorporated by reference to Buffets Holdings, Inc.s Current Report on
Form 8-K (SEC file No. 333-116897)).10.4
    
    Contribution Agreement, dated as of December 29, 2005, among Buffets Holdings, Inc., Caxton-Iseman Investments, L.P., Sentinel Capital
Partners II, L.P., members of Buffets Holdings senior management and Buffets Restaurants Holdings, Inc. (incorporated by reference to
Exhibit 10.1 to Buffets Holdings, Inc.s Current Report on Form 8-K (SEC file No. 333-116897)).10.5
    
    Management and Fee Agreement, dated October 2, 2000, by and between Buffets, Inc. and Sentinel Capital Partners, L.L.C (incorporated by
reference to Exhibit 10.3 to Buffets, Inc.s Registration Statement on Form S-4, filed with the Commission on August 16, 2002 (Commission
file No. 333-98301)).10.6
    
    Advisory Agreement, dated September 28, 2000, by and among Buffets Holdings, Inc., Buffets, Inc. and Roe E. Hatlen (incorporated by
reference to Exhibit 10.4 to Buffets, Inc.s Registration Statement on Form S-4, filed with the Commission on August 16, 2002 (Commission
file No. 333-98301)).10.7
    
    Amendment No. 1, dated as of December 13, 2005, to the Advisory Agreement between Buffets Holdings, Inc. and Roe H. Hatlen, dated as of
September 28, 2000 (incorporated by reference to Exhibit 10.1 to Buffets Holdings, Inc.s Current Report on Form 8-K, filed with the
Commission on December 16, 2005 (Commission file No. 333-116897)).
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##### Table of Contents



ExhibitNumber
    
    Description10.8
    
    Second Amended and Restated Management and Fee Agreement, dated as of November 1, 2006 between Buffets, Inc. and Caxton-Iseman Capital,
Inc. (incorporated by reference to Exhibit 10.8 to Amendment No.1 to Buffet Holdings, Inc.s Registration Statement on Form S-4 filed
with the Commission on December 22, 2006 (SEC file no. 333-139436)).10.9
    
    Credit Agreement, dated as of November 1, 2006, among Buffets, Inc., Buffets Holdings, Inc., the lenders named therein, and Credit Suisse
as Administrative Agent (incorporated by reference to Exhibit 10.9 to Buffet Holdings, Inc.s Registration Statement on Form S-4 filed
with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.10
    
    Amendment Agreement, dated as of March 13, 2007, to the Credit Agreement, dated as of November 1, 2006, among Buffets, Inc., Buffets
Holdings, Inc., Buffets, Inc.s subsidiaries named therein, the lenders named therein, and Credit Suisse as Administrative Agent
(incorporated by reference to Exhibit 10.1 to Buffet Holdings, Inc.s Quarterly Report on Form 10-Q filed with the Commission on May 21,
2007 (SEC file no. 333-116897)).10.11
    
    Guarantee and Collateral Agreement, dated as of November 1, 2006, Buffets, Inc., Buffets Holdings, Inc., Buffets, Inc.s subsidiaries
named therein and Credit Suisse (incorporated by reference to Exhibit 10.10 to Buffet Holdings, Inc.s Registration Statement on Form S-4
filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.12
    
    Supplement No. 1 dated as of November 22, 2006, to the Guarantee and Collateral Agreement dated as of November 1, 2006, among Buffets,
Inc., Buffets Holdings, Inc., Buffets, Inc.s subsidiaries named therein and Credit Suisse (incorporated by reference to Exhibit 10.11 to
Buffet Holdings, Inc.s Registration Statement on Form S-4 filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.13
    
    Supplement No. 2 dated as of March 13, 2007, to the Guarantee and Collateral Agreement dated as of November 1, 2006, among Buffets, Inc.,
Buffets Holdings, Inc., Buffets, Inc.s subsidiaries named therein and Credit Suisse (incorporated by reference to Exhibit 10.2 to Buffet
Holdings, Inc.s Quarterly Report on Form 10-Q filed with the Commission on May 21, 2007 (SEC file no. 333-116897)).10.14
    
    Agreement Regarding Leasehold Mortgages and Landlords Purchase Option dated as of November 1, 2006 among the certain landlords named
therein, Credit Suisse, Ryans Restaurant Group, Inc., Fire Mountain Restaurants, LLC, OCB Restaurant Company, LLC, HomeTown Buffet, Inc.
and German American Capital Corporation (incorporated by reference to Exhibit 10.12 to Buffet Holdings, Inc.s Registration Statement on
Form S-4 filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.15
    
    The Trademark Security Agreement, dated as of November 1, 2006, among Buffets, Inc., Buffets Holdings, Inc., Buffets, Inc.s subsidiaries
named therein and Credit Suisse, as Collateral Agent (incorporated by reference to Exhibit 10.13 to Buffet Holdings, Inc.s Registration
Statement on Form S-4 filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.16
    
    Master Land and Building Lease, dated as of November 1, 2006, by and between FIGRYANF LLC, as landlord, and Fire Mountain Restaurants,
LLC, as tenant ( Fortress Set 1 Lease) (incorporated by reference to Exhibit 10.14 to Buffet Holdings, Inc.s Registration Statement on
Form S-4 filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).10.17
    
    Master Land and Building Lease, dated as of November 1, 2006, by and among (x) FIGRYANH LLC, FIGRYANH-1 LLC, FIGRYANH-2 LLC, FIGRYANH-3
LLC, FIGRYANH-4 LLC, FIGRYANH-5 LLC, FIGRYANH-6 LLC, FIGRYANH-7 LLC, FIGRYANH-8 LLC, FIGRYANH-9 LLC, FIGRYANH-10 LLC, FIGRYANH-11 LLC,
FIGRYANH-12 LLC, FIGRYANH-13 LLC, FIGRYANH-14 LLC, FIGRYANH-15 LLC, and FIGRYANH-16 LLC (the FIGRYANH Group), as landlord, and (y) Fire
Mountain Restaurants, LLC, OCB Restaurant Company, LLC, and HomeTown Buffet, Inc., as tenant (Fortress Set 2 Lease) (incorporated by
reference to Exhibit 10.15 to Buffet Holdings, Inc.s Registration Statement on Form S-4 filed with the Commission on December 18, 2006
(SEC file no. 333-139436)).10.18
    
    Guaranty by Buffets, Inc., dated as of November 1, 2006, for the benefit of FIGRYANF LLC, relating to the tenants obligations under the
Fortress Set 1 Lease (incorporated by reference to Exhibit 10.16 to Buffet Holdings, Inc.s Registration Statement on Form S-4 filed with
the Commission on December 18, 2006 (SEC file no. 333-139436)).10.19
    
    Guaranty by Buffets, Inc., dated as of November 1, 2006, for the benefit of the FIGRYANH Group, relating to the tenants obligations under
the Fortress Set 2 Lease (incorporated by reference to Exhibit 10.17 to Buffet Holdings, Inc.s Registration Statement on Form S-4 filed
with the Commission on December 18, 2006 (SEC file no. 333-139436)).
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##### Table of Contents



ExhibitNumber
    
    Description10.20
    
    Purchase and Sale Agreement, dated as of November 1, 2006, by and among Fire Mountain Restaurants, LLC, Ryans Restaurant Group, Inc.,
HomeTown Buffet, Inc., OCB Restaurant Company, LLC, FIGRYANF LLC, and the FIGRYANH Group (incorporated by reference to Exhibit 10.18 to
Buffet Holdings, Inc.s Registration Statement on Form S-4
filed with the Commission on December 18, 2006 (SEC file no.
333-139436)).10.21
    
    Agreement Regarding Leasehold Mortgages and Landlords Purchase Option dated as of November 1, 2006 among the certain landlords named
therein, Credit Suisse, Ryans Restaurant Group, Inc., Fire Mountain Restaurants, LLC, OCB Restaurant Company, LLC, HomeTown Buffet, Inc.
and German American Capital Corporation (incorporated by reference to Exhibit 10.21 to Buffet Holdings, Inc.s Registration Statement on
Form S-4 filed with the Commission on December 18, 2006 (SEC file no. 333-139436)).14.1
    
    Code of Ethics (incorporated by reference to Exhibit 14.1 to Buffets Holdings, Inc.s Annual Report on Form 10-K for the year ended June
30, 2004 (SEC File No. 333-116897)).21.1
    
    List of Subsidiaries of Buffets Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Buffets Holdings, Inc.s Current Report on
Form 8-K (SEC File No. 333-116897)).24
    
    Powers of Attorney (included on signature pages of this 10-K).31.1*
    
    Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Provided within 101