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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 July 2, 2008
 Commission file number: 333-116897
 BUFFETS HOLDINGS, INC.
  Delaware
    
    22-3754018(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)1460 Buffet WayEagan, Minnesota
    
    55121(Address of principal
    
    (Zip Code)executive offices)
 (651) 994-8608
   o þ
 þ o
 þ o
 þ
  Large accelerated filer o   
    Accelerated filer o
    Non-accelerated filer þ
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS
 PageItemPART I1. Business
    
    
    31A. Risk Factors/Forward-Looking Statements
    
    
    101B. Unresolved Staff Comments
    
    
    172. Properties
    
    
    173. Legal Proceedings
    
    
    204. Submission of Matters to a Vote of Security Holders
    
    
    20PART II5. Market for the Registrants Common Stock and Related Stockholder Matters
    
    
    216. Selected Financial Data
    
    
    227. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    237A. Quantitative and Qualitative Disclosures About Market Risks
    
    
    448. Financial Statements and Supplementary Data
    
    
    459. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    909A. Controls and Procedures
    
    
    909B. Other Information
    
    
    91PART III10. Directors and Executive Officers of the Registrant
    
    
    9211. Executive Compensation
    
    
    9412. Security Ownership of Certain Beneficial Owners and Management
    
    
    10413. Certain Relationships and Related Transactions
    
    
    10614. Principal Accountant Fees and Services
    
    
    107PART IV15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    108Certification of Principal Executive Officer pursuant to Section 302Certification of Principal Financial Officer pursuant to Section 302
  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
 Appointment of Chief Operating Officer
  12 1/2% Senior Notes
 1 2
 1 2 1 2
 1 2
 4




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Forbearance Agreement
 1 2
  Departure of Directors and Certain Officers
     Voluntary Chapter 11 Filing
  5




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DIP Credit Agreement
  Third Amendment to the Pre-Petition Credit Facility
  Store Closures
  Asset Impairments
  Going Concern
  Lease Modifications
   6




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Restaurant Operations and Controls
     Management Training
    Research and Development, Menu Selection and Purchasing
   7




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Franchising and Joint Ventures
  Advertising and Promotion
    Trademarks
  
    
    Old Country Buffet®
    
    HomeTown Buffet®
    
    Country Buffet®
    
    Grannys Buffet®
    
    Fire Mountain®
    
    Ryans®
    
    Tahoe Joes Famous Steakhouse®
  8




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Competition
  Regulation
      Environmental Matters
  9




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Employees
   
 ITEM 1A. RISK FACTORS/FORWARD-LOOKING STATEMENTS
  Risks Related to Our Chapter 11 Filing
 We filed for reorganization under Chapter 11 of the Bankruptcy Code on January 22, 2008 and are
subject to the risks and uncertainties associated with the Bankruptcy.
   10




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A long period of operating under Chapter 11 may harm our business.
  We may not be able to obtain confirmation of our Chapter 11 plan.
  1 2
 The DIP Credit Agreement includes financial and other covenants that impose substantial
restrictions on the Debtors financial and business operations.
    11




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A plan of reorganization may result in holders of our 121/2% Senior Notes receiving no distribution
on account of their interests and cancellation of their Senior Notes.
 1 2 1 2 1 2 1 2
 Risks Related to Our Business
 Our core steak-buffet restaurants are a maturing restaurant concept and face intense competition.
    12




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We are dependent on attracting and retaining qualified employees while controlling labor costs .
     We are dependent on timely delivery of fresh ingredients by our suppliers. We are also
substantially dependent on a limited number of food distributors.
   13




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Our restaurant sales are subject to seasonality and major world events.
  Our business is affected by changes in consumer preferences and consumer discretionary spending.
   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.
    14




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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.
   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.
  15




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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.
  Complaints or litigation may hurt us.
  We are controlled by a single shareholder and its interests may conflict with yours.
  We may have continued failure of internal controls over financial reporting.
  16




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Our goodwill and intangible assets may become impaired.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Restaurant Locations
   17




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Number ofCompany-
    
    Number of
    
    TotalOperated
    
    Franchised
    
    Number ofState
    
    Restaurants
    
    Restaurants
    
    RestaurantsAlabama
    
    
    18
    
    
    
    
    
    
    
    18Arizona
    
    
    4
    
    
    
    9
    
    
    
    13Arkansas
    
    
    8
    
    
    
    
    
    
    
    8California
    
    
    89
    
    
    
    1
    
    
    
    90Colorado
    
    
    11
    
    
    
    
    
    
    
    11Connecticut
    
    
    5
    
    
    
    
    
    
    
    5Delaware
    
    
    1
    
    
    
    
    
    
    
    1Florida
    
    
    5
    
    
    
    
    
    
    
    5Georgia
    
    
    36
    
    
    
    
    
    
    
    36Idaho
    
    
    1
    
    
    
    
    
    
    
    1Illinois
    
    
    36
    
    
    
    
    
    
    
    36Indiana
    
    
    17
    
    
    
    
    
    
    
    17Iowa
    
    
    5
    
    
    
    
    
    
    
    5Kansas
    
    
    5
    
    
    
    
    
    
    
    5Kentucky
    
    
    13
    
    
    
    
    
    
    
    13Louisiana
    
    
    16
    
    
    
    
    
    
    
    16Maine
    
    
    1
    
    
    
    
    
    
    
    1Maryland
    
    
    7
    
    
    
    
    
    
    
    7Massachusetts
    
    
    9
    
    
    
    
    
    
    
    9Michigan
    
    
    21
    
    
    
    
    
    
    
    21Minnesota
    
    
    15
    
    
    
    
    
    
    
    15Mississippi
    
    
    11
    
    
    
    
    
    
    
    11Missouri
    
    
    23
    
    
    
    
    
    
    
    23Nebraska
    
    
    
    
    
    
    3
    
    
    
    3New Jersey
    
    
    6
    
    
    
    
    
    
    
    6New Mexico
    
    
    
    
    
    
    2
    
    
    
    2New York
    
    
    9
    
    
    
    
    
    
    
    9North Carolina
    
    
    16
    
    
    
    
    
    
    
    16Ohio
    
    
    19
    
    
    
    
    
    
    
    19Oklahoma
    
    
    3
    
    
    
    
    
    
    
    3Oregon
    
    
    8
    
    
    
    
    
    
    
    8Pennsylvania
    
    
    24
    
    
    
    
    
    
    
    24Rhode Island
    
    
    1
    
    
    
    
    
    
    
    1South Carolina
    
    
    30
    
    
    
    
    
    
    
    30Tennessee
    
    
    22
    
    
    
    
    
    
    
    22Texas
    
    
    18
    
    
    
    
    
    
    
    18Utah
    
    
    
    
    
    
    1
    
    
    
    1Virginia
    
    
    12
    
    
    
    
    
    
    
    12Washington
    
    
    15
    
    
    
    
    
    
    
    15West Virginia
    
    
    6
    
    
    
    
    
    
    
    6Wisconsin
    
    
    12
    
    
    
    
    
    
    
    12Wyoming
    
    
    1
    
    
    
    1
    
    
    
    2Total steak-buffet restaurants
    
    
    559
    
    
    
    17
    
    
    
    576Tahoe
Joes restaurants (All California)
    
    
    10
    
    
    
    
    
    
    
    10Total
    
    
    569
    
    
    
    17
    
    
    
    586
 18




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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.Indianapolis, IN*
    
    
    1.03
    
    
    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.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.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.Fairfield, OH
    
    
    1.30
    
    
    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.Greenville, SC*
    
    
    1.30
    
    
    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*
    
    
    2.30
    
    
    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.Lovejoy, GA*
    
    
    3.40
    
    
    Buffet restaurant property owned by Ryan's Restaurant Group, Inc.Tomball, TX
    
    
    1.51
    
    
    Land owned by Ryan's Restaurant Group, Inc.Gulfport, MS
    
    
    3.57
    
    
    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.Niles, OH
    
    
    2.29
    
    
    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, WI
    
    
    5.04
    
    
    Cabinet shop owned by OCB Restaurant Company, LLC.
 
 * Indicates operating restaurant New Restaurant Development
  Improvement of Existing Restaurants
  19




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ITEM 3. LEGAL PROCEEDINGS
       
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  20




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
    Sales of Unregistered Securities
    (c)
    
    On June 30, 2005, we granted options to purchase an aggregate of 81 shares of our common
stock to certain of our employees, each at an exercise price of $0.11 per share.(c)
    
    On September 22, 2005, we granted options to purchase an aggregate of 1,043 shares of our
common stock to certain of our employees, each at an exercise price of $0.11 per share.
  21




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ITEM 6. SELECTED FINANCIAL DATA
 Restated
    
    
    RestatedFiscal Year
    
    
    Fiscal Year
    
    
    Fiscal Year
    
    
    Fiscal Year
    
    
    Fiscal YearEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 29,
    
    
    June 28,
    
    
    June 27,
    
    
    July 2,2004
    
    
    2005
    
    
    2006
    
    
    2007 (3)(4)
    
    
    2008(Dollars in thousands, except average guest check and average weekly sales)Operating Data:Restaurant sales
    
    $
    942,831
    
    
    $
    926,781
    
    
    $
    963,161
    
    
    $
    1,419,108
    
    
    $
    1,588,450Restaurant costs:Food
    
    
    307,807
    
    
    
    307,087
    
    
    
    327,244
    
    
    
    491,027
    
    
    
    552,910Labor
    
    
    287,203
    
    
    
    278,991
    
    
    
    274,652
    
    
    
    425,021
    
    
    
    475,833Direct and occupancy
    
    
    216,567
    
    
    
    219,255
    
    
    
    227,680
    
    
    
    360,886
    
    
    
    415,035Total restaurant costs
    
    
    811,577
    
    
    
    805,333
    
    
    
    829,576
    
    
    
    1,276,934
    
    
    
    1,443,778Advertising expenses
    
    
    25,918
    
    
    
    24,166
    
    
    
    30,637
    
    
    
    33,896
    
    
    
    42,275General and administrative expenses
    
    
    42,658
    
    
    
    43,706
    
    
    
    44,198
    
    
    
    62,408
    
    
    
    71,217Financing-related compensation expenses
    
    
    2,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders rights repurchase
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    
    
    
    
    Closed restaurant costs
    
    
    1,085
    
    
    
    2,909
    
    
    
    6,023
    
    
    
    3,822
    
    
    
    4,928Impairment of assets
    
    
    1,878
    
    
    
    3,609
    
    
    
    5,964
    
    
    
    415
    
    
    
    404,747Loss on sale leaseback transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    Loss on litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,641
    
    
    
    131Merger integration costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,938
    
    
    
    4,472Operating income (loss)
    
    $
    57,475
    
    
    $
    47,058
    
    
    $
    46,006
    
    
    $
    20,556
    
    
    $
    (383,098
    )Net income (loss)
    
    $
    7,970
    
    
    $
    (2,184
    )
    
    $
    (5,973
    )
    
    $
    (116,741
    )
    
    $
    (530,646
    )Cash Flow and Other Financial Data:Capital expenditures
    
    $
    33,007
    
    
    $
    29,131
    
    
    $
    31,346
    
    
    $
    40,875
    
    
    $
    36,735Depreciation and amortization
    
    
    33,807
    
    
    
    32,247
    
    
    
    32,067
    
    
    
    40,836
    
    
    
    44,581Cash flow provided by (used in)
operating activities
    
    
    50,490
    
    
    
    52,675
    
    
    
    49,305
    
    
    
    5,969
    
    
    
    (32,505
    )Cash flow provided by (used in)
investing activities
    
    
    (28,383
    )
    
    
    (28,471
    )
    
    
    (32,722
    )
    
    
    (180,608
    )
    
    
    (13,819
    )Cash flow from (used in) financing
activities
    
    
    (11,890
    )
    
    
    (29,614
    )
    
    
    (17,026
    )
    
    
    159,090
    
    
    
    110,325Balance Sheet Data (at end of period)Total assets
    
    $
    567,531
    
    
    $
    545,023
    
    
    $
    537,295
    
    
    $
    961,069
    
    
    $
    579,767Total debt (1)
    
    
    498,339
    
    
    
    466,194
    
    
    
    462,514
    
    
    
    841,675
    
    
    
    967,514Supplemental Data (2):Number of company-owned steak-buffet
restaurants (at end of period)
    
    
    352
    
    
    
    345
    
    
    
    329
    
    
    
    632
    
    
    
    559Same store average guest check
    
    $
    7.02
    
    
    $
    7.20
    
    
    $
    7.70
    
    
    $
    8.12
    
    
    $
    8.28Average weekly sales
    
    $
    49,412
    
    
    $
    49,597
    
    
    $
    52,838
    
    
    $
    48,914
    
    
    $
    48,773Same store sales change
    
    
    1.2
    %
    
    
    (0.7
    )%
    
    
    4.8
    %
    
    
    (3.2
    )%
    
    
    (3.0
    )%
 
 (1)
    
    Total debt represents the amount of our debt, including short-term borrowings, current
maturities and long-term debt. For fiscal year 2008, approximately $686.6 million of debt is
subject to stays under the Bankruptcy.(2)
    
    Reflects data relating to all of our company-owned steak-buffet restaurants, unless otherwise
stated. Fiscal year 2007 includes both the Buffets and Ryans brands as a result of the
Merger. Same store average guest check, average weekly sales and same store sales change for
the Buffets brands were $7.91, $53,290 and (0.7)%, respectively in fiscal year 2007. Same
store average guest check, average weekly sales and same store sales change for the Ryans
brands were $8.41, $44,458 and (6.3)%, respectively in fiscal year 2007.(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 12  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. 22




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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 27, 2007
    
    
    642For the fiscal year ended July 2, 2008:Restaurants opened
    
    
    5Restaurants closed
    
    
    (78
    )Restaurants operating as of July 2, 2008
    
    
    569
     23




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Recent Developments
 Appointment of Chief Operating Officer
  12 1/2% Senior Notes
 1 2
 1 2 1 2
 1 2
 Forbearance Agreement
 1 2
 24




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Departure of Directors and Certain Officers
     Voluntary Chapter 11 Filing
  DIP Credit Agreement
  25




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Third Amendment to the Pre-Petition Credit Facility
  Store Closures
  Asset Impairments
  Going Concern
  Lease Modifications
   26




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##### Table of Contents



Revenues and Expenses
  
    
    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 when the gift cards are redeemed at our restaurants. Until redemption, the
unearned revenue from the sale of gift cards is included in Accrued Liabilities on our
accompanying consolidated balance sheets.
    
    Restaurant costs reflect only direct restaurant operating costs, including food, labor
and direct and occupancy costs. Food costs include the cost of food and non-alcoholic
beverages consumed within the restaurants. Labor costs include compensation and benefits
for both hourly and restaurant management employees. Direct and occupancy costs consist
primarily of supplies, maintenance, utilities, rent, real estate taxes, insurance,
depreciation and amortization.
    
    Advertising expenses reflect all advertising and promotional costs, including directly
related general and administrative 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.
    
    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.
    
    Closed restaurant costs represent costs associated with the 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, as well as adjustments to the carrying value of goodwill and other intangible
assets.
    
    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.
    
    Loss on litigation settlements represents the costs associated with the settlement of a
class action lawsuit against HomeTown Buffet, Inc. and OCB Restaurant Company, LLC.
    
    Merger integration costs represent professional fees, performance bonuses and employee
travel and expenses related to integration activities associated with the Ryans
acquisition.
    
    Other income primarily reflects franchise fees earned. 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.
    
    Interest income reflects interest earned on our short-term investments, exclusive of any
excess earnings associated with excess cash from our $85.0 million new money facility.
    
    Interest expense reflects interest costs associated with our debt and amortization of
debt issuance cost. Interest expense in fiscal year 2007 also reflects accretion of original
issuance discount on Buffets 11 1/4% senior subordinated notes and our 13 7/8% senior
discount notes, which were repurchased on November 1, 2006.
    
    Loss related to refinancing for fiscal year 2007 represents transaction costs associated
with amendments to Buffets Amended and Restated Credit Agreement and repurchasing or
redeeming Buffets 11 1/4% senior subordinated notes and our 13 7/8% senior discount notes
on November 1, 2006. Loss related to refinancing for fiscal year 2008 represents
transaction costs associate with amendments to Buffets current
Pre-Petition Credit Facility,
as well as the DIP Credit Agreement.
 27




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##### Table of Contents




    
    Reorganization items are expense or income items that were incurred or realized due to
the Bankruptcy. These items include professional fees and similar types of expenses
incurred directly related to the Bankruptcy, loss accruals or gains or losses resulting from
activities of the reorganization process, costs and claims, which stem from the rejection of
leases and other executory contracts, and interest earned on excess cash accumulated during
the Bankruptcy.
    
    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.
 Critical Accounting Policies
   Long-Lived Assets
    Goodwill and Other Intangible Assets
   28




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##### Table of Contents



Goodwill and Other Intangibles
 Insurance Reserves
  Closed Restaurant Reserve
  Liabilities Subject to Compromise
  29




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##### Table of Contents



Reorganization Items
  Revenue Recognition
    Income Taxes
  Accounting for Income Taxes Accounting for Contingencies
 Share Based Compensation
 Share-based Payment,
   30




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##### Table of Contents



Lease Accounting
  Merger Integration Costs
  Results of Operations
 The following discussion reflects our historical results for the fiscal years ended June 27,
2007 and July 2, 2008. 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 and for all of fiscal year 2008. 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 2008
 Year EndedJune 27,
    
    July 2,2007
    
    2008(Dollars in thousands)Significant items that impacted results of operations:Closed restaurant costs (1)
    
    $
    3,822
    
    
    $
    4,928Impairment of assets (2)
    
    
    415
    
    
    
    404,747Loss on sale leaseback transactions (3)
    
    
    2,498
    
    
    
    Loss on litigation settlement (4)
    
    
    7,641
    
    
    
    131Merger integration costs (5)
    
    
    10,938
    
    
    
    4,472
 
 (1)
    
    Closed restaurant costs were $3.8 million for fiscal year 2007 as compared to $4.9 million
for fiscal year 2008. The increase was due in large part to the closure of eleven
underperforming restaurants in the normal business course for the fiscal year ended June 27,
2007 compared to 24 store closures in the normal business course for the fiscal year ended
July 2, 2008.The Company closed a total of 78 underperforming steak-buffet restaurants during the fiscal year
ended July 2, 2008 and incurred total charges of $13.5 million. These charges were expensed as
incurred pursuant to SFAS 146 and included cash charges of approximately $4.7 million and
non-cash charges of approximately $8.8 million. The $4.7 million of cash charges included
approximately $1.8 million related to lease termination costs and obligations, $1.4 million
related to employee termination costs and approximately $1.5 million related to other associated
costs. The break-down of the 78 closures and the classification of the related charges are
discussed below. 31




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##### Table of Contents



Charges of approximately $4.9 million, included in the $13.5 million of total charges above,
related to the closure of eleven steak-buffet restaurants and additional costs incurred on
previously closed restaurants. These charges are recorded in Closed Restaurant Costs in the
accompanying consolidated statements of operations. Charges of approximately $0.8 million were
related to four Ryans brand restaurants, closed subsequent to the Merger anniversary date, and
are recorded in Merger and Integration Costs in the accompanying consolidated statements of
operations.In addition to the $13.5 million of total charges above, charges of approximately $3.1 million
related to the closure of nine Ryans brand restaurants, closed prior to the Merger anniversary
date, were charged to goodwill pursuant to EITF 95-3, Recognition of Liabilities in Connection
with a Purchase Business Combination.See Note 12  Acquisitions for further discussion of the
merger with Ryans.Subsequent to the Petition Date, the Company rejected the leases and closed 54 underperforming
restaurants as part of its reorganization plan under Chapter 11. In accordance with SOP 90-7,
cash and non-cash charges associated with these closures of approximately $7.8 million are
classified as Reorganization Items, net in the accompanying consolidated statement of
operations. See Note 13  Reorganization Items for further details surrounding these
closures.(2)
    
    We test property and equipment, as well as goodwill and other intangibles, 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. Asset
impairments of $0.4 million were recognized in fiscal year 2007 related to the carrying value
of our long-lived assets for one restaurant. During the 2008 fiscal year, we recognized
losses of approximately $20.7 million related to impairments of the carrying value of our
long-lived assets for 47 restaurants, as the carrying value of these long-lived assets
exceeded their fair value. In addition, we recognized losses of approximately $384.0 million
related to the impairment of goodwill and certain intangible assets.(3)
    
    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.(4)
    
    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 3.
Legal Proceedings elsewhere in this report for further details. The settlement received
preliminary court approval on September 12, 2007, but final court approval was not obtained
prior to the Petition Date. The matter represents a pre-petition unsecured claim subject to
resolution under the bankruptcy proceeding. The Company previously recorded the expected
settlement of $7.2 million in the accrued litigation reserve. This amount is a pre-petition
liability and is classified in Liabilities Subject to Compromise in the accompanying
consolidated balance sheet.(5)
    
    Merger integration costs represent professional fees, performance bonuses and employee travel
and expenses related to integration activities associated with the Ryans acquisition. 32




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##### Table of Contents



Year Ended
    
    
    Year EndedJune 27, 2007
    
    
    July 2, 2008(Dollars in thousands)Restaurant sales
    
    $
    1,419,108
    
    
    
    100.0
    %
    
    $
    1,588,450
    
    
    
    100.0
    %Restaurant costs:Food
    
    
    491,027
    
    
    
    34.6
    
    
    
    552,910
    
    
    
    34.8Labor
    
    
    425,021
    
    
    
    29.9
    
    
    
    475,833
    
    
    
    30.0Direct and occupancy
    
    
    360,886
    
    
    
    25.4
    
    
    
    415,035
    
    
    
    26.1Total restaurant costs
    
    
    1,276,934
    
    
    
    90.0
    
    
    
    1,443,778
    
    
    
    90.9Advertising expenses
    
    
    33,896
    
    
    
    2.4
    
    
    
    42,275
    
    
    
    2.7General and administrative expenses
    
    
    62,408
    
    
    
    4.4
    
    
    
    71,217
    
    
    
    4.5Closed restaurant costs
    
    
    3,822
    
    
    
    0.3
    
    
    
    4,928
    
    
    
    0.3Impairment of assets
    
    
    415
    
    
    
    0.0
    
    
    
    404,747
    
    
    
    25.5Loss on sale leaseback transactions
    
    
    2,498
    
    
    
    0.2
    
    
    
    
    
    
    
    0.0Loss on litigation settlement
    
    
    7,641
    
    
    
    0.5
    
    
    
    131
    
    
    
    0.0Merger integration costs
    
    
    10,938
    
    
    
    0.8
    
    
    
    4,472
    
    
    
    0.3Operating income (loss)
    
    
    20,556
    
    
    
    1.4
    
    
    
    (383,098
    )
    
    
    (24.1
    )Other income
    
    
    (936
    )
    
    
    (0.1
    )
    
    
    (673
    )
    
    
    (0.0
    )Interest income
    
    
    (215
    )
    
    
    (0.0
    )
    
    
    (212
    )
    
    
    (0.0
    )Interest expense
    
    
    79,664
    
    
    
    5.6
    
    
    
    93,371
    
    
    
    5.9Reorganization items, net
    
    
    
    
    
    
    0.0
    
    
    
    59,211
    
    
    
    3.7Loss related to refinancing
    
    
    41,134
    
    
    
    2.9
    
    
    
    1,950
    
    
    
    0.1Loss before income taxes
    
    
    (99,091
    )
    
    
    (7.0
    )
    
    
    (536,745
    )
    
    
    (33.8
    )Income tax (benefit) expense
    
    
    17,650
    
    
    
    1.2
    
    
    
    (6,099
    )
    
    
    (0.4
    )Net loss
    
    $
    (116,741
    )
    
    
    (8.2
    )
    
    $
    (530,646
    )
    
    
    (33.4
    )
  The following narrative should be read in conjunction with the significant items that impacted
results of operations discussed above.
 Restaurant Sales.
  Restaurant
Costs.
  33




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##### Table of Contents



Advertising Expenses.
 General and Administrative Expenses.
 Interest
Expense. 1 2
 Loss Related to Refinancing.
 Reorganization items, net.
 Income Taxes ®
  34




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##### Table of Contents



Fiscal Year 2006 compared to Fiscal Year 2007
 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 on sale leaseback transactions (5)
    
    
    
    
    
    
    2,498Loss on litigation settlement (6)
    
    
    
    
    
    
    7,641Merger integration costs (7)
    
    
    
    
    
    
    10,938
 
 (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 year 2006 as compared to $3.8 million
for the fiscal year 2007. The decrease was in large part due to the closure of nineteen under
performing restaurants in fiscal year 2006 compared with eleven store closures in fiscal year
2007. During fiscal year 2007, we incurred 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 related to changes in reserve estimates related to previously
closed stores, terminations of sublease agreements and other related costs. In addition, we
closed 21 Ryans brand restaurants between November 1, 2006 (acquisition date) and June 27,
2007. Charges related to these 21 closures were charged to goodwill pursuant to EITF 95-3,
Recognition of Liabilities in Connection with a Purchase Business Combination.See Note 12 -
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 years 2006 and 2007, we recognized
losses of approximately $6.0 million and $0.4 million, respectively, related to impairments of
the carrying value of our long-lived assets for 33 and one under performing restaurant(s),
respectively, as the carrying value of these long-lived assets exceeded their fair value.(5)
    
    During the second quarter of fiscal year 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.(6)
    
    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 3.
Legal Proceedings elsewhere in this report for further details. The settlement received
preliminary court approval on September 12, 2007, but final court approval was not obtained
prior to the Petition Date. The matter represents a pre-petition unsecured claim subject to
resolution under the bankruptcy proceeding. The Company previously recorded the expected
settlement of $7.2 million in the accrued litigation reserve. This amount is a pre-petition
liability and is classified in Liabilities Subject to Compromise in the accompanying
consolidated balance sheet.(7)
    
    Merger integration costs represent professional fees, performance bonuses and employee travel
and expenses related to integration activities associated with the Ryans acquisition. 35




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##### Table of Contents



Year Ended
    
    
    Year EndedJune 28, 2006
    
    
    June 27, 2007(Dollars in thousands)Restaurant sales
    
    $
    963,162
    
    
    
    100.0
    %
    
    $
    1,419,108
    
    
    
    100.0
    %Restaurant costs:Food
    
    
    327,245
    
    
    
    34.0
    
    
    
    491,027
    
    
    
    34.6Labor
    
    
    274,652
    
    
    
    28.5
    
    
    
    425,021
    
    
    
    29.9Direct and occupancy
    
    
    227,680
    
    
    
    23.6
    
    
    
    360,886
    
    
    
    25.4Total restaurant costs
    
    
    829,577
    
    
    
    86.1
    
    
    
    1,276,934
    
    
    
    90.0Advertising expenses
    
    
    30,637
    
    
    
    3.2
    
    
    
    33,896
    
    
    
    2.4General and administrative expenses
    
    
    44,198
    
    
    
    4.6
    
    
    
    62,408
    
    
    
    4.4Shareholders rights repurchase
    
    
    757
    
    
    
    0.1
    
    
    
    Closed restaurant costs
    
    
    6,023
    
    
    
    0.6
    
    
    
    3,822
    
    
    
    0.3Impairment of assets
    
    
    5,964
    
    
    
    0.6
    
    
    
    415
    
    
    
    0.0Loss on sale leaseback transactions
    
    
    
    
    
    
    0.0
    
    
    
    2,498
    
    
    
    0.2Loss on litigation settlement
    
    
    
    
    
    
    0.0
    
    
    
    7,641
    
    
    
    0.5Merger integration costs
    
    
    
    
    
    
    0.0
    
    
    
    10,938
    
    
    
    0.8Operating income
    
    
    46,006
    
    
    
    4.8
    
    
    
    20,556
    
    
    
    1.4Other income
    
    
    (994
    )
    
    
    (0.1
    )
    
    
    (936
    )
    
    
    (0.1
    )Interest income
    
    
    (375
    )
    
    
    (0.0
    )
    
    
    (215
    )
    
    
    (0.0
    )Interest expense
    
    
    52,242
    
    
    
    5.4
    
    
    
    79,664
    
    
    
    5.6Loss related to refinancing
    
    
    647
    
    
    
    0.1
    
    
    
    41,134
    
    
    
    2.9Loss before income taxes
    
    
    (5,514
    )
    
    
    (0.6
    )
    
    
    (99,091
    )
    
    
    (7.0
    )Income tax expense
    
    
    459
    
    
    
    0.0
    
    
    
    17,650
    
    
    
    1.2Net loss
    
    $
    (5,973
    )
    
    
    (0.6
    )
    
    $
    (116,741
    )
    
    
    (8.2
    )
  The following narrative should be read in conjunction with the significant items that impacted
results of operations discussed above.
 Restaurant Sales.
  Restaurant Costs.
  36




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##### Table of Contents



Advertising Expenses.
 General and Administrative Expenses.
 Interest Expense.
 37




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##### Table of Contents



Loss Related to Refinancing.
 Income Taxes.
  Liquidity and Capital Resources
  1 2
 1 2 1 2
 38




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##### Table of Contents



Operating Activities.
 Investing Activities.
 Financing Activities. 1 2 1 4 7 8 1 2
 39




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##### Table of Contents



Future Capital Expenditures.
 §
    
    Spend approximately $20.0 million to $25.0 million on remodeling and improvement costs that will be capitalized. These
capital improvements will depend on the specific needs of the restaurants and cash availability. 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 $1.0 million on miscellaneous corporate and information systems investments.§
    
    Spend approximately $15.0 million to $25.0 million on capital improvements for restaurants throughout our system. These
capital improvements will depend on the specific needs of the restaurants and the availability of liquidity through our
existing credit lines.
  Credit Facilities and Other Long Term Debt
 Post-Petition Financing
 Debtor-in-Possession Credit Agreement
     40




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##### Table of Contents



Pre-Petition Financing
 Credit Facility
   1 2
   41




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##### Table of Contents



121/2% Senior Notes
 1 2 1 2 1 2 1 2
 1 2 1 2
  Contractual Obligations
  Payments Due by Fiscal Year2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total(in thousands)Long-term debt (1)
    
    $
    653,945
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    653,945Interest (2)
    
    
    76,000
    
    
    
    18,750
    
    
    
    37,500
    
    
    
    37,500
    
    
    
    56,250
    
    
    
    50,000
    
    
    
    276,000Operating leases (3)
    
    
    90,606
    
    
    
    95,369
    
    
    
    90,123
    
    
    
    83,962
    
    
    
    79,145
    
    
    
    985,387
    
    
    
    1,424,592Advisory fees (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (5)
    
    
    54,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,483FIN 48 reserves (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    875,034
    
    
    $
    114,119
    
    
    $
    127,623
    
    
    $
    121,462
    
    
    $
    135,395
    
    
    $
    1,035,387
    
    
    $
    2,409,020
 
 (1)
    
    Long-term debt payments for fiscal year 2009 shows the entire principal amount outstanding on
the term loan portion of the Buffets Pre-Petition Credit Facility and the aggregate balance
of Buffets 12 1/2% Senior Notes as currently due as a result of
the Bankruptcy. 42




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##### Table of Contents



(2)
    
    Amounts represent contractual interest payments on Buffets 12 1/2% Senior Notes. It is
expected that this unsecured liability will be settled under the terms of the Bankruptcy
Court. As a result, we ceased accruing interest on these notes as of the Petition Date. See
Note 11  Liabilities Subject to Compromise to our accompanying consolidated financial
statements for details on actual interest amounts recorded. Also included is $1.0 million in
interest expense related to the pending settlement of the interest rate swap. See Note 10 
Debt to our accompanying consolidated financial statements for details. Interest payments
on Buffets variable-rate Pre-Petition Credit Facility and DIP Credit Agreement are excluded.
The borrowings under these facilities bear interest at LIBOR plus a margin of 7.25% and mature
on January 22, 2009. Of these borrowings, only the $85.0 million new money facility is subject
to a 4.0% floor and a 5.0% ceiling. The interest rate at LIBOR plus 7.25% was 9.73% as of
July 2, 2008. See Note 10  Debt to our accompanying consolidated financial statements for
details of our debt obligations.(3)
    
    Operating leases is comprised of minimum rents and contingent rents. Operating leases have
not been reduced by minimum sublease rentals of approximately $3.0 million.
During fiscal year 2008, we renegotiated several of our existing real
property leases to reduce minimum rent payments and/or lease term.
Annual savings from these lease modifications are expected to be
approximately $2.5 million to $3.0 million and are reflected in
the table above. Subsequent to year-end,
the Bankruptcy Court approved several motions requesting the
renegotiation of certain of our existing real property leases, reducing both
minimum rent payments and lease term. Annual savings from these lease
modifications are expected to be approximately $3.0 million to $3.5
million and are not included in the table above.
Throughout the Bankruptcy, our obligations under our lease
arrangements may continue to change significantly.(4)
    
    As a result of the Bankruptcy, we were required
to refrain from making payments under the Caxton-Iseman Party agreement. In January 2008, as a
result of the resignation of David S. Lobel from our Board of Directors, the management
agreement with Sentinel Capital Partners, L.L.C. was terminated. We do not anticipate making
any additional payments under these agreements and no amounts related to these agreements have
been included in the table above. See Note 17  Related
Party Transactions for further details on these agreements.(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 that
we are to purchase future items are included, but only to the extent they include a recourse
provision for our failure to purchase. As a result of the Bankruptcy, our obligations under
our purchase agreements may significantly change in the future.(6)
    
    The Company has determined that all of its liabilities for uncertain tax positions under FIN
48 are long-term in nature. The Company is not able to reasonably estimate the timing of the
long-term payments or the amount by which the liability will increase or decrease over time.
Therefore, the liability for uncertain tax positions of $23.8 million is excluded from the
table above. See Note 16  Income Taxes to our accompanying consolidated financial
statements for further details. Seasonality and Quarterly Fluctuations
  43




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New Accounting Standards
 Business Combinations Non-controlling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51.
 The Fair Value Option for Financial Assets and
Liabilities.
 Fair Value Measurements.
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risks.
 Food Commodity Risks.
 44




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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
    
    
    46Consolidated Balance Sheets as of June 27, 2007 and July 2, 2008
    
    
    47Consolidated Statements of Operations for the Years Ended June 28, 2006, June 27, 2007 and July 2, 2008
    
    
    48Consolidated Statements of Shareholders Equity (Deficit) for the Years Ended June 28, 2006, June 27,
2007 and July 2, 2008
    
    
    49Consolidated Statements of Cash Flows for the Years Ended June 28, 2006, June 27, 2007 and July 2, 2008
    
    
    50Notes to Consolidated Financial Statements
    
    
    52
 45




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
 46




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
 
 CONSOLIDATED BALANCE SHEETS
 June 27,
    
    
    July 2,2007
    
    
    2008(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,670
    
    
    $
    68,671Receivables
    
    
    10,219
    
    
    
    8,064Income tax receivable
    
    
    13,324
    
    
    
    3,680Inventories
    
    
    32,836
    
    
    
    30,400Restricted cash
    
    
    
    
    
    
    2,377Prepaid expenses and other current assets
    
    
    8,789
    
    
    
    40,077Assets held for sale
    
    
    48,145
    
    
    
    2,132Deferred income taxes
    
    
    3,000
    
    
    
    Total current assets
    
    
    120,983
    
    
    
    155,401PROPERTY AND EQUIPMENT, net
    
    
    221,092
    
    
    
    198,612GOODWILL
    
    
    497,492
    
    
    
    136,127OTHER INTANGIBLE ASSETS
    
    
    84,410
    
    
    
    60,648OTHER ASSETS, net
    
    
    37,092
    
    
    
    28,979Total assets
    
    $
    961,069
    
    
    $
    579,767LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIES:Accounts payable
    
    $
    81,090
    
    
    $
    46,323Accrued liabilities
    
    
    133,920
    
    
    
    77,647Income taxes payable
    
    
    24,336
    
    
    
    255Short-term debt
    
    
    13,000
    
    
    
    81,250Current maturities of long-term debt
    
    
    6,625
    
    
    
    199,631Total current liabilities
    
    
    258,971
    
    
    
    405,106LONG-TERM DEBT, net of current maturities
    
    
    822,050
    
    
    
    DEFERRED LEASE OBLIGATIONS
    
    
    38,209
    
    
    
    44,971DEFERRED INCOME TAXES
    
    
    33,456
    
    
    
    22,793LONG-TERM TAXES PAYABLE
    
    
    
    
    
    
    243OTHER LONG-TERM LIABILITIES
    
    
    9,341
    
    
    
    6,745Total liabilities
    
    
    1,162,027
    
    
    
    479,858LIABILITIES SUBJECT TO COMPROMISE
    
    
    
    
    
    
    830,684COMMITMENTS AND CONTINGENCIESSHAREHOLDERS DEFICIT:Preferred stock, $.01 par value; 1,100,000
shares authorized; none issued and
outstanding as of June 27, 2007 and July 2,
2008
    
    
    
    
    
    
    Common stock, $.01 par value; 3,600,000
shares authorized; shares issued and
outstanding of 3,104,510 as of June 27, 2007
and July 2, 2008
    
    
    31
    
    
    
    31Additional paid in capital
    
    
    82
    
    
    
    82Accumulated deficit
    
    
    (201,129
    )
    
    
    (730,888
    )Accumulated other comprehensive income
    
    
    58
    
    
    
    Total shareholders deficit
    
    
    (200,958
    )
    
    
    (730,775
    )Total liabilities and shareholders deficit
    
    $
    961,069
    
    
    $
    579,767
  47




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008(In thousands)RESTAURANT SALES
    
    $
    963,162
    
    
    $
    1,419,108
    
    
    $
    1,588,450RESTAURANT COSTS:Food
    
    
    327,245
    
    
    
    491,027
    
    
    
    552,910Labor
    
    
    274,652
    
    
    
    425,021
    
    
    
    475,833Direct and occupancy
    
    
    227,680
    
    
    
    360,886
    
    
    
    415,035Total restaurant costs
    
    
    829,577
    
    
    
    1,276,934
    
    
    
    1,443,778ADVERTISING EXPENSES
    
    
    30,637
    
    
    
    33,896
    
    
    
    42,275GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    44,198
    
    
    
    62,408
    
    
    
    71,217SHAREHOLDERS RIGHTS REPURCHASE
    
    
    757
    
    
    
    
    
    
    
    CLOSED RESTAURANT COSTS
    
    
    6,023
    
    
    
    3,822
    
    
    
    4,928IMPAIRMENT OF ASSETS
    
    
    5,964
    
    
    
    415
    
    
    
    404,747LOSS ON SALE LEASEBACK TRANSACTIONS
    
    
    
    
    
    
    2,498
    
    
    
    LOSS ON LITIGATION SETTLEMENT
    
    
    
    
    
    
    7,641
    
    
    
    131MERGER INTEGRATION COSTS
    
    
    
    
    
    
    10,938
    
    
    
    4,472OPERATING INCOME (LOSS)
    
    
    46,006
    
    
    
    20,556
    
    
    
    (383,098
    )OTHER INCOME
    
    
    (994
    )
    
    
    (936
    )
    
    
    (673
    )INTEREST INCOME
    
    
    (375
    )
    
    
    (215
    )
    
    
    (212
    )INTEREST EXPENSE
    
    
    52,242
    
    
    
    79,664
    
    
    
    93,371REORGANIZATION ITEMS, net
    
    
    
    
    
    
    
    
    
    
    59,211LOSS RELATED TO REFINANCING
    
    
    647
    
    
    
    41,134
    
    
    
    1,950LOSS BEFORE INCOME TAXES
    
    
    (5,514
    )
    
    
    (99,091
    )
    
    
    (536,745
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    459
    
    
    
    17,650
    
    
    
    (6,099
    )Net loss
    
    $
    (5,973
    )
    
    $
    (116,741
    )
    
    $
    (530,646
    )
  48




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
 
 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 29, 2005
    
    
    
    
    
    
    
    
    
    
    3,175,135
    
    
    $
    32
    
    
    $
    14
    
    
    $
    (78,415
    )
    
    $
    
    
    
    $
    (78,369
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (70,625
    )
    
    
    (1
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,973
    )
    
    
    
    
    
    
    (5,973
    )BALANCE, June 28, 2006
    
    
    
    
    
    
    
    
    
    
    3,104,510
    
    
    
    31
    
    
    
    5
    
    
    
    (84,388
    )
    
    
    
    
    
    
    (84,352
    )Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,741
    )
    
    
    
    
    
    
    (116,741
    )Other comprehensive income:Change in fair value of
derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    58Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,683
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77BALANCE, June 27, 2007
    
    
    
    
    
    
    
    
    
    
    3,104,510
    
    
    
    31
    
    
    
    82
    
    
    
    (201,129
    )
    
    
    58
    
    
    
    (200,958
    )Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (530,646
    )
    
    
    
    
    
    
    (530,646
    )Effect of adopting FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    887
    
    
    
    
    
    
    
    887Other comprehensive loss:Change in fair value of
derivatives, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    (58
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (529,817
    )BALANCE, July 2, 2008
    
    
    
    
    
    
    
    
    
    
    3,104,510
    
    
    $
    31
    
    
    $
    82
    
    
    $
    (730,888
    )
    
    $
    
    
    
    $
    (730,775
    )
  49




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008(In thousands)OPERATING ACTIVITIES:Net loss
    
    $
    (5,973
    )
    
    $
    (116,741
    )
    
    $
    (530,646
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    32,067
    
    
    
    40,836
    
    
    
    44,581Amortization of debt issuance costs
    
    
    1,532
    
    
    
    4,032
    
    
    
    8,234Accretion of original issue discount
    
    
    13,336
    
    
    
    5,623
    
    
    
    Loss related to refinancing:Write-off of debt issuance costs
    
    
    
    
    
    
    8,686
    
    
    
    Refinancing premiums expensed
    
    
    
    
    
    
    31,599
    
    
    
    Loss on disposal of assets
    
    
    1,218
    
    
    
    1,326
    
    
    
    4,470Loss on sale leaseback transactions
    
    
    
    
    
    
    2,498
    
    
    
    Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    59,211Cash reorganization items
    
    
    
    
    
    
    
    
    
    
    (15,874
    )Impairment of assets
    
    
    5,964
    
    
    
    415
    
    
    
    404,747Deferred income taxes
    
    
    (2,078
    )
    
    
    (1,533
    )
    
    
    (116
    )Stock-based compensation
    
    
    
    
    
    
    77
    
    
    
    Changes in assets and liabilities:Receivables
    
    
    1,753
    
    
    
    (891
    )
    
    
    2,156Inventories
    
    
    (703
    )
    
    
    (763
    )
    
    
    (1,938
    )Prepaid expenses and other current assets
    
    
    1,283
    
    
    
    20,294
    
    
    
    (14,963
    )Accounts payable
    
    
    2,189
    
    
    
    15,388
    
    
    
    (5,319
    )Accrued and other liabilities
    
    
    (1,270
    )
    
    
    6,197
    
    
    
    42Income taxes payable
    
    
    (13
    )
    
    
    (11,074
    )
    
    
    12,910Net cash provided by (used in) operating activities
    
    
    49,305
    
    
    
    5,969
    
    
    
    (32,505
    )INVESTING ACTIVITIES:Proceeds from sale leaseback transactions
    
    
    
    
    
    
    8,608
    
    
    
    Proceeds from sale of assets held for sale
    
    
    
    
    
    
    18,113
    
    
    
    14,745Cash reorganization items
    
    
    
    
    
    
    
    
    
    
    7,423Acquisitions, net of liabilities assumed
    
    
    
    
    
    
    (168,848
    )
    
    
    2Purchase of property and equipment
    
    
    (31,346
    )
    
    
    (40,875
    )
    
    
    (36,735
    )Collections on notes receivable
    
    
    1,062
    
    
    
    1,753
    
    
    
    511(Purchase of) proceeds from sale of other assets
    
    
    (2,438
    )
    
    
    641
    
    
    
    235Net cash used in investing activities
    
    
    (32,722
    )
    
    
    (180,608
    )
    
    
    (13,819
    )
 50




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##### Table of Contents



For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008(In thousands)FINANCING ACTIVITIES:Repayment of pre-merger term loan facility
    
    $
    (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 pre-petition term loan funding
    
    
    
    
    
    
    530,000
    
    
    
    Repayment of pre-petition term loan funding
    
    
    
    
    
    
    (1,325
    )
    
    
    (4,647
    )Proceeds from pre-petition revolver facility
    
    
    
    
    
    
    13,000
    
    
    
    49,236Purchase of treasury stock
    
    
    (10
    )
    
    
    
    
    
    
    Proceeds from 12 1/2% senior note issuance
    
    
    
    
    
    
    300,000
    
    
    
    Proceeds from DIP financing
    
    
    
    
    
    
    
    
    
    
    85,000Repayment of DIP financing
    
    
    
    
    
    
    
    
    
    
    (3,750
    )Increase in restricted cash
    
    
    
    
    
    
    
    
    
    
    (2,377
    )Prefunded letters of credit
    
    
    
    
    
    
    
    
    
    
    (8,073
    )Utility deposits
    
    
    
    
    
    
    
    
    
    
    (3,016
    )Cash reorganization items
    
    
    
    
    
    
    
    
    
    
    330Payment of refinancing premiums
    
    
    
    
    
    
    (32,554
    )
    
    
    Debt issuance costs
    
    
    
    
    
    
    (36,894
    )
    
    
    (2,378
    )Net cash (used in) provided by financing activities
    
    
    (17,026
    )
    
    
    159,090
    
    
    
    110,325NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (443
    )
    
    
    (15,549
    )
    
    
    64,001CASH AND CASH EQUIVALENTS, beginning of period
    
    
    20,662
    
    
    
    20,219
    
    
    
    4,670CASH AND CASH EQUIVALENTS, end of period
    
    $
    20,219
    
    
    $
    4,670
    
    
    $
    68,671SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid during the period for:Interest (net of capitalized interest of $330, $402 and $419, respectively)
    
    $
    37,242
    
    
    $
    61,370
    
    
    $
    85,656Income taxes
    
    $
    2,549
    
    
    $
    30,241
    
    
    $
    999
  51




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##### Table of Contents



BUFFETS HOLDINGS, INC. AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Voluntary Chapter 11 Filing
    
    
    Authorization to pay pre-petition and post-petition employee wages and salaries and related
benefits, including workers compensation claims, during the Bankruptcy,
 
    
    Authorization to give administrative priority status to the post-petition claims of certain
critical vendors and subsequent approval to pay undisputed pre-petition claims of those
vendors for goods delivered, received or accepted by the Debtors within the 20 days before
the Petition Date in an amount not to exceed $35.0 million, so long as those vendors continued
to provide goods to the Company, and
 
    
    Authorization for the continued use of the Debtors cash management system
  52




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##### Table of Contents



Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.
 2. Nature of Organization
 Company Background
   53




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##### Table of Contents



Description of Business
 (SM)
 Buffets Franchise Holdings, LLC
  Ryans Restaurant Group, Inc.
  Principles of Consolidation
  Fiscal Year
  3. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
  Receivables
  Inventories
  54




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##### Table of Contents



Property and Equipment
   Assets Held for Sale
 Accounting for
the Impairment or Disposal of Long-Lived Assets.
 ® Accounting for Impairment
or Disposal of Long-Lived Assets
  Debt Issuance Costs
  1 2
 Goodwill and Other Intangible Assets
  55




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##### Table of Contents



Goodwill and Other Intangibles
 Long-Lived Assets
    56




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##### Table of Contents



Insurance Reserves
  Closed Restaurant Reserve
  Pre-opening Costs
 Reporting on the Costs of Start-up Activities.
 Advertising Expenses
  Income Taxes
   57




---



##### Table of Contents



Derivative Instruments and Hedging Activities
   Liabilities Subject to Compromise
  Reorganization Items
  Revenue Recognition
    58




---



##### Table of Contents



Fair Value Disclosure of Financial Instruments
     Segment Reporting
  Stock-Based Compensation
 Share-based
Payment,
   59




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##### Table of Contents



Lease Accounting
  Accounting for Leases.
 Merger Integration Costs
  Use of Estimates
  4. Recent Accounting Pronouncements
 Business Combinations Non-controlling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51.
 The Fair Value Option for Financial Assets and
Liabilities.
 Fair Value Measurements.
 60




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##### Table of Contents



5. Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
      June 27,
    
    July 2,2007
    
    2008Risk-free interest rate
    
    
    4.91
    %
    
    
    Expected volatility
    
    
    45.0
    %
    
    
    Expected dividend yield
    
    
    0.0
    %
    
    
    Expected life in years
    
    
    2.0
    
    
    
    
 61




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##### Table of Contents



6. Property and Equipment
  June 27,
    
    
    July 2,2007
    
    
    2008Land
    
    $
    16,829
    
    
    $
    9,299Buildings
    
    
    16,213
    
    
    
    6,513Equipment
    
    
    221,767
    
    
    
    232,417Leasehold improvements
    
    
    157,150
    
    
    
    165,208Assets to be sold
    
    
    
    
    
    
    14,833Accumulated depreciation and amortization
    
    
    (190,867
    )
    
    
    (229,658
    )$
    221,092
    
    
    $
    198,612
  Accounting for Impairment or Disposal of Long-Lived Assets. ,
  Sale Leaseback Transaction
  Accounting for Leases
  62




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##### Table of Contents



Accounting for Leases: Sale-Leaseback
Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term
and Initial Direct Costs of Direct Financing Leases
  7. Other Intangible Assets
  June 27, 2007
    
    
    July 2, 2008Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized Intangible Assets:Leasehold interests
    
    $
    2,323
    
    
    $
    211
    
    
    $
    1,982
    
    
    $
    438Recipes
    
    
    2,602
    
    
    
    156
    
    
    
    2,602
    
    
    
    442$
    4,925
    
    
    $
    367
    
    
    $
    4,584
    
    
    $
    880Unamortized Intangible Assets:Trademarks
    
    $
    79,440
    
    
    
    
    
    
    $
    56,600Liquor licenses
    
    
    412
    
    
    
    
    
    
    
    344$
    79,852
    
    
    
    
    
    
    $
    56,944
     63




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##### Table of Contents



8. Other Assets
  June 27,
    
    
    July 2,2007
    
    
    2008Debt issuance costs
    
    $
    33,483
    
    
    $
    22,272Deposits
    
    
    3,491
    
    
    
    6,694Other long-term assets
    
    
    118
    
    
    
    13$
    37,092
    
    
    $
    28,979
    9. Accrued Liabilities
  June 27,
    
    
    July 2,2007
    
    
    2008Accrued compensation
    
    $
    32,710
    
    
    $
    25,643Accrued workers compensation
    
    
    21,427
    
    
    
    22,696Accrued interest
    
    
    22,603
    
    
    
    387Accrued insurance
    
    
    17,350
    
    
    
    4,245Accrued litigation reserve
    
    
    9,926
    
    
    
    242Accrued sales, use and property taxes
    
    
    16,856
    
    
    
    16,132Unearned revenue (gift certificates/cards)
    
    
    5,427
    
    
    
    4,811Closed restaurant reserve, current portion
    
    
    1,196
    
    
    
    874Accrued other
    
    
    6,425
    
    
    
    2,617$
    133,920
    
    
    $
    77,647
  Closed Restaurant Reserve
 Accounting for Costs
Associated with Exit or Disposal Activities.
  64




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For the Year EndedJune 27,
    
    
    July 2,2007
    
    
    2008BALANCE, beginning of period (current and non-current in aggregate)
    
    $
    2,776
    
    
    $
    1,654Additions:Lease obligations charged to earnings
    
    
    2,141
    
    
    
    1,825Lease obligations charged to goodwill
    
    
    131
    
    
    
    48Employee termination benefits charged to earnings
    
    
    5
    
    
    
    1,385Employee termination benefits charged to goodwill
    
    
    183
    
    
    
    218Reductions:Cash payments:Lease termination costs and obligations
    
    
    3,394
    
    
    
    1,839Employee severance benefits
    
    
    188
    
    
    
    1,603BALANCE, end of period (current and non-current in aggregate)
    
    $
    1,654
    
    
    $
    1,688
   For the Year EndedJune 27,
    
    
    July 2,2007
    
    
    2008Number of restaurants:Expected to close as of the beginning of the period
    
    
    1
    
    
    
    5Closed during the period
    
    
    32
    
    
    
    78Identified for closure during the period
    
    
    36
    
    
    
    93Expected to close as of the end of the period
    
    
    5
    
    
    
    20
 For the Year EndedJune 27,
    
    
    July 2,2007
    
    
    2008Number of employees:Expected to be terminated as of the beginning of the period
    
    
    35
    
    
    
    175Terminated during the period
    
    
    1,120
    
    
    
    2,730Identified for termination during the period
    
    
    1,260
    
    
    
    3,255Expected to be terminated as of the end of the period
    
    
    175
    
    
    
    700
  2009
    
    $
    8742010
    
    
    2632011
    
    
    592012
    
    
    592013
    
    
    59Thereafter
    
    
    374$
    1,688
  65




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##### Table of Contents



Recognition of Liabilities in Connection with
a Purchase Business Combination.
  10. Debt
  DEBT NOT SUBJECT TO COMPROMISESuper-Secured borrowings consist of the following:DIP facility new money loan, interest at LIBOR, with a 4.0%
floor, plus 7.25%, due January 22, 2009 (interest at 11.25% as
of July 2, 2008)
    
    $
    81,250DIP facility rollover loan, interest at LIBOR plus 7.25%, due
January 22, 2009 (interest at 9.73% as of July 2, 2008)
    
    
    199,631Total debt not subject to compromise
    
    
    280,881DEBT SUBJECT TO COMPROMISESecured borrowings consist of the following:Revolving credit facility, interest at LIBOR plus 7.25%, due
July 31, 2008 (interest at 9.73% as of July 2, 2008)
    
    
    27,402Letter of credit facility, interest at LIBOR plus 7.25%, due
July 31, 2008 (interest at 9.73% as of July 2, 2008)
    
    
    5,286Term loan, interest at LIBOR plus 7.25%, due January 22, 2009
    
    
    353,945Unsecured borrowings consist of the following:Senior notes, interest at 12.50%, due November 1, 2014
    
    
    300,000Total debt subject to compromise
    
    
    686,633Total debt
    
    $
    967,514
 1 2
 66




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##### Table of Contents



Post-Petition Financing
 Debtor-In-Possession Credit Agreement
         67




---



##### Table of Contents



Pre-Petition Financing
 Credit Facility
    1 2
    68




---



##### Table of Contents



121/2% Senior Notes
 1 2 1 2 1 2 1 2
 1 2 1 2
  69




---



##### Table of Contents



11. Liabilities Subject to Compromise
   1 2
  Accounts payable
    
    $
    32,928Accrued liabilities
    
    
    87,405Income taxes payable
    
    
    Short-term debt
    
    
    62,236Current maturities of long-term debt
    
    
    624,397Long-term taxes payable
    
    
    23,565Other long-term liabilities
    
    
    153Total Liabilities Subject to Compromise
    
    $
    830,684
 12. Acquisitions
 Ryans Restaurant Group, Inc.
  70




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##### Table of Contents



November 1,2006(in thousands)Cash
    
    $
    559,406Assets held for sale
    
    
    46,847Deferred tax assets
    
    
    Other current assets
    
    
    42,330Property, plant & equipment
    
    
    99,079Goodwill
    
    
    203,334Other intangible assets (1)
    
    
    66,735Other assets
    
    
    3,740Total assets acquired
    
    
    1,021,471Accounts payable
    
    
    15,735Current portion of long-term debt
    
    
    33,036Income taxes payable
    
    
    12,614Accrued liabilities
    
    
    71,875Deferred tax liability
    
    
    49,554Long-term debt
    
    
    111,964Other long-term liabilities
    
    
    1,859Total liabilities assumed
    
    
    296,637Net assets acquired
    
    
    724,834Less cash acquired
    
    
    559,406Net cash paid
    
    $
    165,428
 
 (1)
    
    In connection with the Merger, the
Company approximately $63.4 million in trademarks, $2.5
million in recipes and $0.8 million in leasehold interests. Recognition of Liabilities
in Connection with a Purchase Business Combination.
 Business Combinations.
  Twelve Weeks Ended
    
    Fifty-two Weeks EndedJune 27, 2007
    
    June 27, 2007Revenue
    
    $
    383,346
    
    
    $
    1,680,649Net loss
    
    
    (66,268
    ) (1)
    
    
    (127,984
    ) (2)
 
 (1)
    
    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 million. 71




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##### Table of Contents



(2)
    
    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.
 13. Reorganization Items
  Professional fees
    
    $
    14,698Lease rejection costs
    
    
    31,163Closed store costs
    
    
    7,815Executory contract rejection costs
    
    
    6,872Severance
    
    
    594Interest income
    
    
    (330
    )Gain on extinguishment
    
    
    (1,888
    )Gain on asset sales
    
    
    (251
    )Other
    
    
    538Total reorganization items, net
    
    $
    59,211
   14. Shareholders Deficit
 Stock Shares
  72




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##### Table of Contents



Stock Warrants
  Call Rights and Put Rights
  Equity Participation Plan
   For the Year EndedJune 28, 2006
    
    June 27, 2007
    
    July 2, 2008Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Avg
    
    
    
    
    
    Avg
    
    
    
    
    
    AvgExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning
of year
    
    
    97,029
    
    
    $
    14.51
    
    
    
    77,823
    
    
    $
    14.34
    
    
    
    102,700
    
    
    $
    12.70Granted
    
    
    1,124
    
    
    
    0.11
    
    
    
    29,232
    
    
    
    9.17
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    20,330
    
    
    
    14.36
    
    
    
    4,355
    
    
    
    18.33
    
    
    
    19,042
    
    
    
    10.56Outstanding at end of year
    
    
    77,823
    
    
    $
    14.34
    
    
    
    102,700
    
    
    $
    12.70
    
    
    
    83,658
    
    
    $
    13.19
 73




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##### Table of Contents



Options OutstandingWeighted-AvgRemainingNumber
    
    Option Term
    
    Weighted-AvgRange of Exercise Price
    
    Outstanding
    
    (in years)
    
    Exercise Price$  0 - $10
    
    
    21,565
    
    
    
    9.00
    
    
    $
    6.56$11 - $20
    
    
    50,894
    
    
    
    12.19
    
    
    
    11.60$21 - $30
    
    
    5,374
    
    
    
    8.30
    
    
    
    25.19$31 - $40
    
    
    375
    
    
    
    8.51
    
    
    
    32.09$41 - $50
    
    
    5,450
    
    
    
    8.82
    
    
    
    41.07$  0 - $50
    
    
    83,658
    
    
    
    10.88
    
    
    $
    13.19
 Cash and Phantom Incentive Unit Award Agreements
     Restrictions on Dividend Payments
  15. Retirement Plan
  74




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##### Table of Contents



16. Income Taxes
  For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008Federal:Current
    
    $
    1,776
    
    
    $
    (5,107
    )
    
    $
    (3,021
    )Deferred
    
    
    (1,543
    )
    
    
    21,893
    
    
    
    (3,241
    )233
    
    
    
    16,786
    
    
    
    (6,262
    )State:Current
    
    
    761
    
    
    
    182
    
    
    
    1,198Deferred
    
    
    (535
    )
    
    
    682
    
    
    
    (1,035
    )226
    
    
    
    864
    
    
    
    163Income tax (benefit) expense
    
    $
    459
    
    
    $
    17,650
    
    
    $
    (6,099
    )
  June 27, 2007
    
    
    July 2, 2008Non-
    
    
    
    
    
    
    Non-Current
    
    
    current
    
    
    Current
    
    
    currentAsset
    
    
    Asset
    
    
    Asset
    
    
    LiabilityProperty and equipment
    
    $
    
    
    
    $
    (20,510
    )
    
    $
    
    
    
    $
    (2,083
    )Deferred rent
    
    
    
    
    
    
    12,278
    
    
    
    
    
    
    
    15,480Self-insurance reserve
    
    
    4,998
    
    
    
    
    
    
    
    5,232
    
    
    
    Accrued workers compensation
    
    
    8,355
    
    
    
    
    
    
    
    6,728
    
    
    
    Accrued payroll and related benefits
    
    
    2,961
    
    
    
    
    
    
    
    3,329
    
    
    
    Accrued store closing costs
    
    
    638
    
    
    
    
    
    
    
    666
    
    
    
    Net operating loss and tax credit carryforwards
    
    
    
    
    
    
    36,012
    
    
    
    
    
    
    
    73,003Deferred gain on sale leaseback transaction
    
    
    
    
    
    
    2,486
    
    
    
    
    
    
    
    2,360Merger transaction costs
    
    
    
    
    
    
    2,260
    
    
    
    
    
    
    
    Intangible assets
    
    
    
    
    
    
    (33,279
    )
    
    
    
    
    
    
    (22,735
    )Federal deduction for FIN 48 reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,507Reorganization items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,622Other
    
    
    788
    
    
    
    (1,937
    )
    
    
    (2,304
    )
    
    
    948Total deferred tax assets (liabilities)
    
    
    17,740
    
    
    
    (2,690
    )
    
    
    13,651
    
    
    
    77,102Valuation allowance for deferred tax assets
    
    
    (14,740
    )
    
    
    (30,766
    )
    
    
    (13,651
    )
    
    
    (99,895
    )Net deferred tax assets (liabilities)
    
    $
    3,000
    
    
    $
    (33,456
    )
    
    $
    
    
    
    $
    (22,793
    )
 75




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##### Table of Contents



For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008Federal income tax benefit at statutory rate of 35%
    
    $
    (1,930
    )
    
    $
    (34,682
    )
    
    $
    (187,813
    )State income taxes, net of federal benefit
    
    
    57
    
    
    
    (1,317
    )
    
    
    358General business credits
    
    
    (1,546
    )
    
    
    (2,566
    )
    
    
    (3,678
    )Non-deductible interest on high-yield notes
    
    
    1,497
    
    
    
    635
    
    
    
    Change in deferred tax rate
    
    
    337
    
    
    
    1,268
    
    
    
    Valuation allowance for deferred tax assets
    
    
    
    
    
    
    45,506
    
    
    
    68,040Goodwill and intangible impairment
    
    
    
    
    
    
    
    
    
    
    125,579Gross up of tax reserves
    
    
    
    
    
    
    7,865
    
    
    
    Prior period deferred tax adjustment
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    2,044
    
    
    
    941
    
    
    
    (8,585
    )Income tax (benefit) expense
    
    $
    459
    
    
    $
    17,650
    
    
    $
    (6,099
    )
  Accounting for
Uncertainty in Income Taxes, Uncertainties Related to Income Taxes in a
Business Combination.
  July 2,2008Unrecognized tax benefit  beginning balance
    
    $
    16,122Decrease related to prior year tax positions
    
    
    (590
    )Increase related to current year tax positions
    
    
    369Settlements with taxing authorities
    
    
    Lapse of statute of limitations
    
    
    (90
    )Unrecognized tax benefit  ending balance
    
    $
    15,811
 76




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##### Table of Contents



17. Related-Party Transactions
       77




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##### Table of Contents



18. Commitments and Contingencies
 Litigation
       78




---



##### Table of Contents



Operating Leases
   2009
    
    $
    90,6062010
    
    
    95,3692011
    
    
    90,1232012
    
    
    83,9622013
    
    
    79,145Thereafter
    
    
    985,387Total future minimum lease payments
    
    $
    1,424,592
    For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008Minimum rents
    
    $
    50,192
    
    
    $
    89,066
    
    
    $
    106,554Contingent rents
    
    
    3,708
    
    
    
    3,251
    
    
    
    2,286Less: Sublease rents
    
    
    (2,357
    )
    
    
    (2,082
    )
    
    
    (1,346
    )Deferred rents
    
    
    1,123
    
    
    
    8,862
    
    
    
    11,367Percentage rents
    
    
    2,296
    
    
    
    1,958
    
    
    
    1,806$
    54,962
    
    
    $
    101,055
    
    
    $
    120,667
 79




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##### Table of Contents



19. Condensed Consolidating Financial Statements
   80




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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
    )
    
    $
    6,485
    
    
    $
    
    
    
    $
    4,670Receivables
    
    
    (312
    )
    
    
    1,944
    
    
    
    13,141
    
    
    
    (4,554
    )
    
    
    10,219Income tax receivable
    
    
    
    
    
    
    13,324
    
    
    
    
    
    
    
    
    
    
    
    13,324Inventories
    
    
    
    
    
    
    858
    
    
    
    31,978
    
    
    
    
    
    
    
    32,836Prepaid expenses and other current assets
    
    
    
    
    
    
    6,383
    
    
    
    2,406
    
    
    
    
    
    
    
    8,789Assets held for sale
    
    
    
    
    
    
    
    
    
    
    48,145
    
    
    
    
    
    
    
    48,145Deferred income taxes
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Total current assets
    
    
    (275
    )
    
    
    23,657
    
    
    
    102,155
    
    
    
    (4,554
    )
    
    
    120,983PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    7,577
    
    
    
    213,515
    
    
    
    
    
    
    
    221,092GOODWILL, net
    
    
    
    
    
    
    294,758
    
    
    
    202,734
    
    
    
    
    
    
    
    497,492OTHER INTANGIBLE ASSETS
    
    
    
    
    
    
    
    
    
    
    84,410
    
    
    
    
    
    
    
    84,410INVESTMENT IN SUBSIDIARIES
    
    
    (428,872
    )
    
    
    105,050
    
    
    
    
    
    
    
    323,822
    
    
    
    OTHER ASSETS, net
    
    
    38
    
    
    
    183,407
    
    
    
    36,160
    
    
    
    (182,513
    )
    
    
    37,092Total assets
    
    $
    (429,109
    )
    
    $
    614,449
    
    
    $
    638,974
    
    
    $
    136,755
    
    
    $
    961,069LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    74,046
    
    
    
    (612,916
    )
    
    
    619,960
    
    
    
    81,090Accrued liabilities
    
    
    
    
    
    
    70,912
    
    
    
    63,008
    
    
    
    
    
    
    
    133,920Income taxes payable
    
    
    6,274
    
    
    
    18,062
    
    
    
    
    
    
    
    
    
    
    
    24,336Short-term debt
    
    
    
    
    
    
    13,000
    
    
    
    12,701
    
    
    
    (12,701
    )
    
    
    13,000Current maturities of long-term debt
    
    
    
    
    
    
    6,625
    
    
    
    6,473
    
    
    
    (6,473
    )
    
    
    6,625Total current liabilities
    
    
    6,274
    
    
    
    182,645
    
    
    
    (530,734
    )
    
    
    600,786
    
    
    
    258,971LONG-TERM DEBT, net of current maturities
    
    
    
    
    
    
    822,050
    
    
    
    952,943
    
    
    
    (952,943
    )
    
    
    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
    
    
    
    1,043,321
    
    
    
    464,589
    
    
    
    (352,157
    )
    
    
    1,162,027SHAREHOLDERS EQUITY (DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82Retained earnings (accumulated deficit)
    
    
    (435,554
    )
    
    
    (428,930
    )
    
    
    174,385
    
    
    
    488,970
    
    
    
    (201,129
    )Accumulated other comprehensive income
    
    
    58
    
    
    
    58
    
    
    
    
    
    
    
    (58
    )
    
    
    58Total shareholders equity (deficit)
    
    
    (435,383
    )
    
    
    (428,872
    )
    
    
    174,385
    
    
    
    488,912
    
    
    
    (200,958
    )Total liabilities and shareholders equity (deficit)
    
    $
    (429,109
    )
    
    $
    614,449
    
    
    $
    638,974
    
    
    $
    136,755
    
    
    $
    961,069
 81




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##### Table of Contents



Condensed Consolidating Balance Sheet
As of July 2, 2008
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    36
    
    
    $
    60,330
    
    
    $
    8,305
    
    
    $
    
    
    
    $
    68,671Receivables
    
    
    (6,585
    )
    
    
    943
    
    
    
    35,206
    
    
    
    (21,500
    )
    
    
    8,064Income tax receivable
    
    
    
    
    
    
    3,680
    
    
    
    
    
    
    
    
    
    
    
    3,680Inventories
    
    
    
    
    
    
    868
    
    
    
    29,532
    
    
    
    
    
    
    
    30,400Restricted cash
    
    
    
    
    
    
    2,377
    
    
    
    
    
    
    
    
    
    
    
    2,377Prepaid expenses and other current assets
    
    
    
    
    
    
    30,639
    
    
    
    9,438
    
    
    
    
    
    
    
    40,077Assets held for sale
    
    
    
    
    
    
    
    
    
    
    2,132
    
    
    
    
    
    
    
    2,132Total current assets
    
    
    (6,549
    )
    
    
    98,837
    
    
    
    84,613
    
    
    
    (21,500
    )
    
    
    155,401PROPERTY AND EQUIPMENT, net
    
    
    
    
    
    
    5,980
    
    
    
    192,632
    
    
    
    
    
    
    
    198,612GOODWILL, net
    
    
    
    
    
    
    94,644
    
    
    
    41,483
    
    
    
    
    
    
    
    136,127OTHER INTANGIBLE ASSETS
    
    
    
    
    
    
    
    
    
    
    60,648
    
    
    
    
    
    
    
    60,648INVESTMENT IN SUBSIDIARIES
    
    
    (538,443
    )
    
    
    281,221
    
    
    
    
    
    
    
    257,222
    
    
    
    OTHER ASSETS, net
    
    
    38
    
    
    
    172,308
    
    
    
    33,342
    
    
    
    (176,709
    )
    
    
    28,979Total assets
    
    $
    (544,954
    )
    
    $
    652,990
    
    
    $
    412,718
    
    
    $
    59,013
    
    
    $
    579,767LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    
    59,728
    
    
    
    (753,124
    )
    
    
    739,719
    
    
    
    46,323Accrued liabilities
    
    
    
    
    
    
    39,967
    
    
    
    37,680
    
    
    
    
    
    
    
    77,647Income taxes payable
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    255Short-term debt
    
    
    
    
    
    
    81,250
    
    
    
    79,138
    
    
    
    (79,138
    )
    
    
    81,250Current maturities of long-term debt
    
    
    
    
    
    
    199,631
    
    
    
    194,441
    
    
    
    (194,441
    )
    
    
    199,631Total current liabilities
    
    
    
    
    
    
    380,831
    
    
    
    (441,865
    )
    
    
    466,140
    
    
    
    405,106LONG-TERM DEBT, net of current maturities
    
    
    
    
    
    
    
    
    
    
    149,800
    
    
    
    (149,800
    )
    
    
    DEFERRED LEASE OBLIGATIONS
    
    
    
    
    
    
    2,643
    
    
    
    42,328
    
    
    
    
    
    
    
    44,971DEFERRED INCOME TAXES
    
    
    
    
    
    
    22,793
    
    
    
    
    
    
    
    
    
    
    
    22,793LONG-TERM TAXES PAYABLE
    
    
    
    
    
    
    243
    
    
    
    
    
    
    
    
    
    
    
    243OTHER LONG-TERM LIABILITIES
    
    
    
    
    
    
    2,560
    
    
    
    4,185
    
    
    
    
    
    
    
    6,745Total liabilities
    
    
    
    
    
    
    409,070
    
    
    
    (245,552
    )
    
    
    316,340
    
    
    
    479,858LIABILITIES SUBJECT TO COMPROMISE
    
    
    
    
    
    
    782,363
    
    
    
    656,484
    
    
    
    (608,163
    )
    
    
    830,684SHAREHOLDERS EQUITY (DEFICIT)Common stock
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Additional paid in capital
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82Retained earnings (accumulated deficit)
    
    
    (545,067
    )
    
    
    (538,443
    )
    
    
    1,786
    
    
    
    350,836
    
    
    
    (730,888
    )Accumulated other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareholders equity (deficit)
    
    
    (544,954
    )
    
    
    (538,443
    )
    
    
    1,786
    
    
    
    350,836
    
    
    
    (730,775
    )Total liabilities and shareholders equity (deficit)
    
    $
    (544,954
    )
    
    $
    652,990
    
    
    $
    412,718
    
    
    $
    59,013
    
    
    $
    579,767
 82




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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
    
    
    $
    918,875
    
    
    $
    
    
    
    $
    963,162RESTAURANT COSTS:Food
    
    
    
    
    
    
    15,788
    
    
    
    311,457
    
    
    
    
    
    
    
    327,245Labor
    
    
    
    
    
    
    13,194
    
    
    
    261,458
    
    
    
    
    
    
    
    274,652Direct and occupancy
    
    
    
    
    
    
    6,335
    
    
    
    221,345
    
    
    
    
    
    
    
    227,680Total restaurant costs
    
    
    
    
    
    
    35,317
    
    
    
    794,260
    
    
    
    
    
    
    
    829,577ADVERTISING EXPENSES
    
    
    
    
    
    
    29,774
    
    
    
    863
    
    
    
    
    
    
    
    30,637GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    6
    
    
    
    (20,503
    )
    
    
    64,695
    
    
    
    
    
    
    
    44,198SHAREHOLDERS RIGHTS REPURCHASE
    
    
    757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    757CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    6,023
    
    
    
    
    
    
    
    6,023IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    5,964
    
    
    
    
    
    
    
    5,964OPERATING INCOME (LOSS)
    
    
    (763
    )
    
    
    (301
    )
    
    
    47,070
    
    
    
    
    
    
    
    46,006OTHER INCOME
    
    
    
    
    
    
    (326
    )
    
    
    (668
    )
    
    
    
    
    
    
    (994
    )INTEREST INCOME
    
    
    
    
    
    
    (1,053
    )
    
    
    678
    
    
    
    
    
    
    
    (375
    )INTEREST EXPENSE
    
    
    12,907
    
    
    
    39,335
    
    
    
    36,975
    
    
    
    (36,975
    )
    
    
    52,242LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    647
    
    
    
    
    
    
    
    
    
    
    
    647INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (13,670
    )
    
    
    (38,904
    )
    
    
    10,085
    
    
    
    36,975
    
    
    
    (5,514
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    (3,261
    )
    
    
    2,671
    
    
    
    1,049
    
    
    
    
    
    
    
    459Net income (loss) before equity in net loss of subsidiaries
    
    
    (10,409
    )
    
    
    (41,575
    )
    
    
    9,036
    
    
    
    36,975
    
    
    
    (5,973
    )Equity in net loss from subsidiaries
    
    
    (4,436
    )
    
    
    9,036
    
    
    
    
    
    
    
    (4,600
    )
    
    
    Net income (loss)
    
    $
    (5,973
    )
    
    $
    (50,611
    )
    
    $
    9,036
    
    
    $
    41,575
    
    
    $
    (5,973
    )
 83




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##### 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
    
    
    $
    1,375,866
    
    
    $
    
    
    
    $
    1,419,108RESTAURANT COSTS:Food
    
    
    
    
    
    
    15,617
    
    
    
    475,410
    
    
    
    
    
    
    
    491,027Labor
    
    
    
    
    
    
    13,075
    
    
    
    411,946
    
    
    
    
    
    
    
    425,021Direct and occupancy
    
    
    
    
    
    
    3,631
    
    
    
    359,786
    
    
    
    (2,531
    )
    
    
    360,886Total restaurant costs
    
    
    
    
    
    
    32,323
    
    
    
    1,247,142
    
    
    
    (2,531
    )
    
    
    1,276,934ADVERTISING EXPENSES
    
    
    
    
    
    
    32,975
    
    
    
    921
    
    
    
    
    
    
    
    33,896GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    434
    
    
    
    (25,539
    )
    
    
    88,170
    
    
    
    (657
    )
    
    
    62,408CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    3,822
    
    
    
    
    
    
    
    3,822IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    
    
    
    
    415
    
    
    
    
    
    
    
    415LOSS ON SALE LEASEBACK TRANSACTIONS
    
    
    
    
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    2,498LOSS ON LITIGATION SETTLEMENT
    
    
    
    
    
    
    7,641
    
    
    
    
    
    
    
    
    
    
    
    7,641MERGER INTEGRATION COSTS
    
    
    
    
    
    
    7,304
    
    
    
    3,634
    
    
    
    
    
    
    
    10,938OPERATING INCOME (LOSS)
    
    
    (434
    )
    
    
    (11,462
    )
    
    
    29,264
    
    
    
    3,188
    
    
    
    20,556OTHER INCOME
    
    
    
    
    
    
    (905
    )
    
    
    (688
    )
    
    
    657
    
    
    
    (936
    )INTEREST INCOME
    
    
    
    
    
    
    (704
    )
    
    
    1,050
    
    
    
    (561
    )
    
    
    (215
    )INTEREST EXPENSE
    
    
    5,455
    
    
    
    74,174
    
    
    
    71,976
    
    
    
    (71,941
    )
    
    
    79,664LOSS RELATED TO REFINANCING
    
    
    18,044
    
    
    
    23,090
    
    
    
    
    
    
    
    
    
    
    
    41,134INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (23,933
    )
    
    
    (107,117
    )
    
    
    (43,074
    )
    
    
    75,033
    
    
    
    (99,091
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    6,275
    
    
    
    11,498
    
    
    
    (123
    )
    
    
    
    
    
    
    17,650Net income (loss) before equity in net loss of subsidiaries
    
    
    (30,208
    )
    
    
    (118,615
    )
    
    
    (42,951
    )
    
    
    75,033
    
    
    
    (116,741
    )Equity in net loss from subsidiaries
    
    
    (86,533
    )
    
    
    (42,951
    )
    
    
    
    
    
    
    129,484
    
    
    
    Net income (loss)
    
    $
    (116,741
    )
    
    $
    (161,566
    )
    
    $
    (42,951
    )
    
    $
    204,517
    
    
    $
    (116,741
    )
 84




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the Year Ended July 2, 2008
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)RESTAURANT SALES
    
    $
    
    
    
    $
    42,667
    
    
    $
    1,545,783
    
    
    $
    
    
    
    $
    1,588,450RESTAURANT COSTS:Food
    
    
    
    
    
    
    15,554
    
    
    
    537,356
    
    
    
    
    
    
    
    552,910Labor
    
    
    
    
    
    
    12,586
    
    
    
    463,247
    
    
    
    
    
    
    
    475,833Direct and occupancy
    
    
    
    
    
    
    6,693
    
    
    
    408,342
    
    
    
    
    
    
    
    415,035Total restaurant costs
    
    
    
    
    
    
    34,833
    
    
    
    1,408,945
    
    
    
    
    
    
    
    1,443,778ADVERTISING EXPENSES
    
    
    
    
    
    
    41,786
    
    
    
    489
    
    
    
    
    
    
    
    42,275GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    
    
    
    
    (67,512
    )
    
    
    139,385
    
    
    
    (656
    )
    
    
    71,217CLOSED RESTAURANT COSTS
    
    
    
    
    
    
    
    
    
    
    4,928
    
    
    
    
    
    
    
    4,928IMPAIRMENT OF ASSETS
    
    
    
    
    
    
    200,114
    
    
    
    204,633
    
    
    
    
    
    
    
    404,747LOSS ON LITIGATION SETTLEMENT
    
    
    
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    131MERGER INTEGRATION COSTS
    
    
    
    
    
    
    2,125
    
    
    
    2,347
    
    
    
    
    
    
    
    4,472OPERATING INCOME (LOSS)
    
    
    
    
    
    
    (168,810
    )
    
    
    (214,944
    )
    
    
    656
    
    
    
    (383,098
    )OTHER INCOME
    
    
    
    
    
    
    (674
    )
    
    
    (655
    )
    
    
    656
    
    
    
    (673
    )INTEREST INCOME
    
    
    
    
    
    
    (296
    )
    
    
    84
    
    
    
    
    
    
    
    (212
    )INTEREST EXPENSE
    
    
    
    
    
    
    93,333
    
    
    
    71,514
    
    
    
    (71,476
    )
    
    
    93,371REIORGANIZATION ITEMS, net
    
    
    
    
    
    
    25,827
    
    
    
    33,384
    
    
    
    
    
    
    
    59,211LOSS RELATED TO REFINANCING
    
    
    
    
    
    
    1,950
    
    
    
    
    
    
    
    
    
    
    
    1,950INCOME (LOSS) BEFORE INCOME TAXES
    
    
    
    
    
    
    (288,950
    )
    
    
    (319,271
    )
    
    
    71,476
    
    
    
    (536,745
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    
    
    
    
    (2,393
    )
    
    
    (3,706
    )
    
    
    
    
    
    
    (6,099
    )Net income (loss) before equity in net loss of subsidiaries
    
    
    
    
    
    
    (286,557
    )
    
    
    (315,565
    )
    
    
    71,476
    
    
    
    (530,646
    )Equity in net loss from subsidiaries
    
    
    (530,646
    )
    
    
    (315,565
    )
    
    
    
    
    
    
    846,211
    
    
    
    Net income (loss)
    
    $
    (530,646
    )
    
    $
    (602,122
    )
    
    $
    (315,565
    )
    
    $
    917,687
    
    
    $
    (530,646
    )
 85




---



##### 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)
    
    $
    (5,973
    )
    
    $
    (50,611
    )
    
    $
    9,036
    
    
    $
    41,575
    
    
    $
    (5,973
    )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
    
    
    
    1,178
    
    
    
    1,107
    
    
    
    (1,107
    )
    
    
    1,532Accretion of original issue discount
    
    
    12,552
    
    
    
    784
    
    
    
    737
    
    
    
    (737
    )
    
    
    13,336Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    1,218
    
    
    
    
    
    
    
    1,218Impairment of assets
    
    
    
    
    
    
    
    
    
    
    5,964
    
    
    
    
    
    
    
    5,964Deferred income taxes
    
    
    (3,225
    )
    
    
    1,147
    
    
    
    
    
    
    
    
    
    
    
    (2,078
    )Equity in earnings of subsidiary
    
    
    (4,436
    )
    
    
    9,036
    
    
    
    
    
    
    
    (4,600
    )
    
    
    Changes 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
    )
    
    
    19,706
    
    
    
    (4,105
    )
    
    
    34,475
    
    
    
    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)
    
    
    
    
    
    
    
    
    
    
    50,470
    
    
    
    (50,470
    )
    
    
    Purchase of other assets
    
    
    (1
    )
    
    
    (1,347
    )
    
    
    (1,090
    )
    
    
    
    
    
    
    (2,438
    )Net cash provided by (used in) investing activities
    
    
    (1
    )
    
    
    (2,006
    )
    
    
    19,755
    
    
    
    (50,470
    )
    
    
    (32,722
    )FINANCING ACTIVITIES:Repayment of debt
    
    
    
    
    
    
    (17,016
    )
    
    
    (15,995
    )
    
    
    15,995
    
    
    
    (17,016
    )Repurchase of common stock
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Dividends
    
    
    770
    
    
    
    (770
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    760
    
    
    
    (17,786
    )
    
    
    (15,995
    )
    
    
    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
    
    
    
    6,459
    
    
    
    
    
    
    
    20,662CASH AND CASH EQUIVALENTS, end of period
    
    $
    37
    
    
    $
    14,068
    
    
    $
    6,114
    
    
    $
    
    
    
    $
    20,219
 86




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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)
    
    $
    (116,741
    )
    
    $
    (161,566
    )
    
    $
    (42,951
    )
    
    $
    204,517
    
    
    $
    (116,741
    )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
    
    
    
    3,892
    
    
    
    3,802
    
    
    
    (3,802
    )
    
    
    4,032Accretion of original issue discount
    
    
    5,315
    
    
    
    308
    
    
    
    301
    
    
    
    (301
    )
    
    
    5,623Loss related to refinancing:Write-off of debt issuance costs
    
    
    1,992
    
    
    
    6,694
    
    
    
    6,540
    
    
    
    (6,540
    )
    
    
    8,686Refinancing premiums expensed
    
    
    16,052
    
    
    
    15,547
    
    
    
    15,189
    
    
    
    (15,189
    )
    
    
    31,599Loss on disposal of assets
    
    
    
    
    
    
    (2,825
    )
    
    
    6,682
    
    
    
    (2,531
    )
    
    
    1,326Loss on sale leaseback transaction
    
    
    
    
    
    
    2,498
    
    
    
    
    
    
    
    
    
    
    
    2,498Impairment of assets
    
    
    
    
    
    
    
    
    
    
    415
    
    
    
    
    
    
    
    415Deferred income taxes
    
    
    6,204
    
    
    
    (7,737
    )
    
    
    
    
    
    
    
    
    
    
    (1,533
    )Stock-based compensation
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77Equity in earnings of subsidiaries
    
    
    86,533
    
    
    
    42,951
    
    
    
    
    
    
    
    (129,484
    )
    
    
    Changes 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
    
    
    
    (32,494
    )
    
    
    15,110
    
    
    
    
    
    
    
    (11,074
    )Net cash provided by (used in) operating activities
    
    
    7,974
    
    
    
    123,445
    
    
    
    (176,107
    )
    
    
    50,657
    
    
    
    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)
    
    
    
    
    
    
    
    
    
    
    (365,006
    )
    
    
    365,006
    
    
    
    Purchase of other assets
    
    
    33
    
    
    
    
    
    
    
    608
    
    
    
    
    
    
    
    641Net cash provided by (used in) investing activities
    
    
    33
    
    
    
    (306,462
    )
    
    
    (388,985
    )
    
    
    514,806
    
    
    
    (180,608
    )FINANCING ACTIVITIES:Repayment of previous term loan facility
    
    
    
    
    
    
    (182,053
    )
    
    
    (177,866
    )
    
    
    177,866
    
    
    
    (182,053
    )Repurchase of 11 1/4% senior subordinated notes
    
    
    
    
    
    
    (180,778
    )
    
    
    (176,620
    )
    
    
    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
    
    
    
    
    
    
    530,000
    
    
    
    517,810
    
    
    
    (517,810
    )
    
    
    530,000Payments on new term loan funding
    
    
    
    
    
    
    (1,325
    )
    
    
    (1,295
    )
    
    
    1,295
    
    
    
    (1,325
    )Proceeds from new revolver facility
    
    
    
    
    
    
    13,000
    
    
    
    12,701
    
    
    
    (12,701
    )
    
    
    13,000Proceeds from 12 1/2% senior note issuance
    
    
    
    
    
    
    300,000
    
    
    
    293,100
    
    
    
    (293,100
    )
    
    
    300,000Debt issuance costs
    
    
    
    
    
    
    (36,894
    )
    
    
    (36,045
    )
    
    
    36,045
    
    
    
    (36,894
    )Payment of refinancing premiums
    
    
    (16,052
    )
    
    
    (16,502
    )
    
    
    (16,122
    )
    
    
    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
    )
    
    
    167,097
    
    
    
    565,463
    
    
    
    (565,463
    )
    
    
    159,090NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    
    
    
    
    (15,920
    )
    
    
    371
    
    
    
    
    
    
    
    (15,549
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    37
    
    
    
    14,068
    
    
    
    6,114
    
    
    
    
    
    
    
    20,219CASH AND CASH EQUIVALENTS, end of period
    
    $
    37
    
    
    $
    (1,852
    )
    
    $
    6,485
    
    
    $
    
    
    
    $
    4,670
 87




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Year Ended July 2, 2008
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Consolidated(In thousands)OPERATING ACTIVITIES:Net income (loss)
    
    $
    (530,646
    )
    
    $
    (602,122
    )
    
    $
    (315,565
    )
    
    $
    917,687
    
    
    $
    (530,646
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    2,466
    
    
    
    42,115
    
    
    
    
    
    
    
    44,581Amortization of debt issuance costs
    
    
    
    
    
    
    8,234
    
    
    
    8,020
    
    
    
    (8,020
    )
    
    
    8,234Loss on disposal of assets
    
    
    
    
    
    
    4
    
    
    
    4,466
    
    
    
    
    
    
    
    4,470Reorganization items, net
    
    
    
    
    
    
    25,453
    
    
    
    33,758
    
    
    
    
    
    
    
    59,211Cash reorganization items
    
    
    
    
    
    
    (13,881
    )
    
    
    (1,993
    )
    
    
    
    
    
    
    (15,874
    )Impairment of assets
    
    
    
    
    
    
    200,114
    
    
    
    204,633
    
    
    
    
    
    
    
    404,747Deferred income taxes
    
    
    
    
    
    
    (116
    )
    
    
    
    
    
    
    
    
    
    
    (116
    )Equity in earnings of subsidiaries
    
    
    530,646
    
    
    
    315,565
    
    
    
    
    
    
    
    (846,211
    )
    
    
    Changes in assets and liabilities:Receivables
    
    
    6,273
    
    
    
    (3,449
    )
    
    
    (668
    )
    
    
    
    
    
    
    2,156Inventories
    
    
    
    
    
    
    (10
    )
    
    
    (1,928
    )
    
    
    
    
    
    
    (1,938
    )Prepaid expenses and other assets
    
    
    
    
    
    
    (15,065
    )
    
    
    102
    
    
    
    
    
    
    
    (14,963
    )Due from parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable
    
    
    
    
    
    
    (8,438
    )
    
    
    3,119
    
    
    
    
    
    
    
    (5,319
    )Accrued and other liabilities
    
    
    
    
    
    
    13,904
    
    
    
    (13,862
    )
    
    
    
    
    
    
    42Income taxes payable/ refundable
    
    
    (6,274
    )
    
    
    19,061
    
    
    
    123
    
    
    
    
    
    
    
    12,910Net cash provided by (used in) operating activities
    
    
    (1
    )
    
    
    (58,280
    )
    
    
    (37,680
    )
    
    
    63,456
    
    
    
    (32,505
    )INVESTING ACTIVITIES:Proceeds from sale of assets held for sale
    
    
    
    
    
    
    
    
    
    
    14,745
    
    
    
    
    
    
    
    14,745Cash reorganization items
    
    
    
    
    
    
    
    
    
    
    7,423
    
    
    
    
    
    
    
    7,423Acquisitions, net of liabilities
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Purchase of property and equipment
    
    
    
    
    
    
    (1,458
    )
    
    
    (35,277
    )
    
    
    
    
    
    
    (36,735
    )Corporate cash advances (payments)
    
    
    
    
    
    
    
    
    
    
    (60,448
    )
    
    
    60,448
    
    
    
    Collection on notes receivable
    
    
    
    
    
    
    511
    
    
    
    
    
    
    
    
    
    
    
    511Proceeds from sale (purchase) of other assets
    
    
    
    
    
    
    (5
    )
    
    
    240
    
    
    
    
    
    
    
    235Net cash provided by (used in) investing activities
    
    
    
    
    
    
    (952
    )
    
    
    (73,315
    )
    
    
    60,448
    
    
    
    (13,819
    )FINANCING ACTIVITIES:Proceeds from, DIP financing
    
    
    
    
    
    
    85,000
    
    
    
    82,790
    
    
    
    (82,790
    )
    
    
    85,000Repayment of DIP financing
    
    
    
    
    
    
    (3,750
    )
    
    
    
    
    
    
    
    
    
    
    (3,750
    )Repayment of post-merger term loan facility
    
    
    
    
    
    
    (4,647
    )
    
    
    (4,526
    )
    
    
    4,526
    
    
    
    (4,647
    )Proceeds from post-merger revolving credit facility
    
    
    
    
    
    
    49,236
    
    
    
    47,956
    
    
    
    (47,956
    )
    
    
    49,236Increase in restricted cash
    
    
    
    
    
    
    (2,377
    )
    
    
    
    
    
    
    
    
    
    
    (2,377
    )Prefunded letters of credit
    
    
    
    
    
    
    
    
    
    
    (8,073
    )
    
    
    
    
    
    
    (8,073
    )Utility deposits
    
    
    
    
    
    
    
    
    
    
    (3,016
    )
    
    
    
    
    
    
    (3,016
    )Cash reorganization items
    
    
    
    
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    330Debt issuance costs
    
    
    
    
    
    
    (2,378
    )
    
    
    (2,316
    )
    
    
    2,316
    
    
    
    (2,378
    )Net cash provided by (used in) investing activities.
    
    
    
    
    
    
    121,414
    
    
    
    112,815
    
    
    
    (123,904
    )
    
    
    110,325NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (1
    )
    
    
    62,182
    
    
    
    1,820
    
    
    
    
    
    
    
    64,001CASH AND CASH EQUIVALENTS, beginning of period
    
    
    37
    
    
    
    (1,852
    )
    
    
    6,485
    
    
    
    
    
    
    
    4,670CASH AND CASH EQUIVALENTS, end of period
    
    $
    36
    
    
    $
    60,330
    
    
    $
    8,305
    
    
    $
    
    
    
    $
    68,671
 88




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##### Table of Contents



20. Interim Financial Results (Unaudited)
  For the Year Ended June 27, 2007First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands)Revenues
    
    $
    221,276
    
    
    $
    297,891
    
    
    $
    509,202
    
    
    $
    390,739Operating income
    
    
    10,406
    
    
    
    639
    
    
    
    5,663
    
    
    
    3,848Loss before income taxes
    
    
    (2,835
    )
    
    
    (56,443
    )
    
    
    (23,303
    )
    
    
    (16,510
    )Net loss
    
    
    (1,140
    )
    
    
    (34,936
    )
    
    
    (14,397
    )
    
    
    (66,268
    )
 For the Year Ended July 2, 2008First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands)Revenues
    
    $
    384,711
    
    
    $
    355,903
    
    
    $
    466,950
    
    
    $
    380,886Operating income (loss)
    
    
    9,595
    
    
    
    (12,860
    )
    
    
    (389,151
    )
    
    
    9,318Loss before income taxes
    
    
    (10,736
    )
    
    
    (34,239
    )
    
    
    (457,960
    )
    
    
    (33,810
    )Net loss
    
    
    (5,776
    )
    
    
    (37,651
    )
    
    
    (461,824
    )
    
    
    (25,395
    )
      89




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##### Table of Contents



21. Subsequent Events
      
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   (i)
    
    the purchase and implementation of tax preparation software;(ii)
    
    the engagement of a third-party tax consultant to review internally prepared tax work
papers;(iii)
    
    the formalization of documentation regarding internal practices and conclusions;
 90




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##### Table of Contents



(iv)
    
    the formalization of communication among both internal and external groups involved in
the process; and(v)
    
    an increase in formalized training opportunities.
 Managements Report on Internal Control Over Financial Reporting
  Internal ControlIntegrated Framework
 Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  91




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionFrederick J. Iseman
    
    55
    
    Chairman of the Board and Director of Buffets HoldingsRoe H. Hatlen
    
    64
    
    Vice Chairman of the Board and Director of Buffets HoldingsR. Michael Andrews, Jr.
    
    44
    
    Chief Executive OfficerSteven R. Layt
    
    35
    
    Chief Operating OfficerA. Keith Wall
    
    56
    
    Executive Vice President and Chief Financial OfficerM. Richard Kirk
    
    51
    
    Executive Vice President of Operations  Ryans DivisionMario O. Lee
    
    48
    
    Executive Vice President of Operations  Buffets DivisionKarlin A. Linhardt
    
    45
    
    Executive Vice President of MarketingFred P. Williams
    
    50
    
    Executive Vice President of Concept Development and Real EstateH. Thomas Mitchell
    
    51
    
    Executive Vice President, General Counsel and SecretaryJane L. Binzak
    
    41
    
    Executive Vice President of Human ResourcesLinda J. Allison
    
    54
    
    Executive Vice President of Operations ServicesSteven M. Lefkowitz
    
    44
    
    Director of Buffets HoldingsRobert A. Ferris
    
    66
    
    Director of Buffets HoldingsDavid S. Lobel
    
    55
    
    Director of Buffets HoldingsRobert M. Rosenberg
    
    70
    
    Director of Buffets HoldingsAnkur A. Vora
    
    31
    
    Director of Buffets Holdings
 Frederick J. Iseman
 Roe H. Hatlen
 R. Michael Andrews, Jr.
 Steven R. Layt
 A. Keith Wall
 92




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##### Table of Contents



M. Richard Kirk
 Mario O. Lee
 Karlin A. Linhardt
 Fred P. Williams
 H. Thomas Mitchell
 Jane L. Binzak
 Linda J. Allison
 Steven M. Lefkowitz
 Robert A. Ferris
 93




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##### Table of Contents



David S. Lobel
 Robert M. Rosenberg
 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 the Company while rewarding excellent performance.
 94




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##### Table of Contents



Compensation Committee
  Material Elements of the Compensation Program
 Base Salary
     2008
    
    2009R. Michael Andrews, Jr., CEO
    
    $
    535,000
    
    
    $
    559,000A. Keith Wall, CFO
    
    
    286,000
    
    
    
    300,000Karlin A. Linhardt, EVP of Marketing
    
    
    286,000
    
    
    
    295,000Fred P. Williams, EVP of Concept Development and Real Estate
    
    
    240,450
    
    
    
    250,000M. Richard Kirk, EVP of Operations
    
    
    245,000
    
    
    
    252,500
 Non-Equity Incentive Compensation
  95




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##### Table of Contents



Enterprise Equity Value Growth Bonus Plan
   
    
    No Funding: If fiscal year 2008 EBITDA is less than $80.3 million, then the plan is not
funded.
    
    Cut-In Level: If fiscal year 2008 EBITDA is $80.3 million or more, then every dollar
beyond $80.3 million, up to $82.0 million, is funded directly to this plan (maximum of $1.7
million).
    
    Supplement Level: If fiscal year 2008 EBITDA is greater than $82.0 million then 10% of
any fiscal year EBITDA growth above $82.0 million is also funded to this plan.
      2008
    
    2009Cut-In
    
    Supplemental
    
    Cut-In
    
    SupplementalLevel
    
    Level
    
    Level
    
    LevelEnterprise Equity Values
    
    $
    80.3
    
    
    $
    82.0
    
    
    $
    90.3
    
    
    $
    91.7
 96




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##### Table of Contents



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
    %M. Richard Kirk, EVP of Operations
    
    
    70
    %
 Discretionary Bonuses
   Equity Incentive Compensation
       97




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##### Table of Contents



Cash and Phantom Incentive Unit Awards
       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
Companys 401(k) Savings Plan. 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 $1.0 million 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 Layt. During fiscal 2008, the aggregate annual allowance did not exceed $25,000 for any
named executive officer.
 98




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##### Table of Contents




    
    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 Mr. Williams were $44,000 for fiscal year 2008.
    
    Severance protection agreements  Each named executive officer has entered into a
Severance Protection Agreement with the Company. These agreements are uniform for all named
executive officers. Under the agreement, if an executive is terminated for reasons other
than cause (as defined in the agreement), disability or on account of death, he is
entitled to receive the greater of (i) the executives current fiscal year base salary or
(ii) the executives highest rate of base salary in effect at anytime within the one-year
period prior to the date of termination. This amount is paid in equal, bi-weekly
installments for a period of twelve months after the date of termination. Any executive
severance payments during the pendency of the Bankruptcy would require the prior approval of
the Bankruptcy Court.
  COMPENSATION COMMITTEE REPORT
  COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
  99




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##### Table of Contents



SUMMARY COMPENSATION TABLE FOR THE 2008 FISCAL YEAR
  (3)Non-Equity
    
    (4)
    
    (5)
    
    (6)Fiscal
    
    
    
    
    
    (2)
    
    Incentive Plan
    
    Option
    
    Stock
    
    All Other
    
    TotalName and Principal Position
    
    Year
    
    Salary (1)
    
    Bonus
    
    Compensation
    
    Awards
    
    Awards
    
    Compensation
    
    CompensationR. Michael Andrews, Jr.,
    
    
    2008
    
    
    $
    545,288
    
    
    $
    
    
    
    $
    248,000
    
    
    $
    
    
    
    $
    134
    
    
    $
    29,172
    
    
    $
    822,594Chief Executive Officer
and Director
    
    
    2007
    
    
    
    465,385
    
    
    
    350,000
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    29,988
    
    
    
    845,475A. Keith Wall, Executive
    
    
    2008
    
    
    
    291,500
    
    
    
    
    
    
    
    93,000
    
    
    
    
    
    
    
    
    
    
    
    11,898
    
    
    
    396,398Vice President and Chief
Financial Officer
    
    
    2007
    
    
    
    264,615
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,877
    
    
    
    543,492Fred P. Williams, Executive
Vice President of Concept
    
    
    2008
    
    
    
    245,074
    
    
    
    
    
    
    
    80,000
    
    
    
    
    
    
    
    31
    
    
    
    71,071
    (7)
    
    
    396,176Development and Real
Estate
    
    
    2007
    
    
    
    229,000
    
    
    
    114,500
    
    
    
    
    
    
    
    6,578
    
    
    
    23
    
    
    
    62,293
    (8)
    
    
    412,394Karlin A.
Linhardt Executive
    
    
    2008
    
    
    
    291,500
    
    
    
    
    
    
    
    116,000
    
    
    
    
    
    
    
    134
    
    
    
    27,158
    
    
    
    434,792Vice President
of Marketing
    
    
    2007
    
    
    
    266,346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    29,752
    
    
    
    296,200M. Richard
Kirk, Vice President
of Operations 
Ryans
    
    
    2008
    
    
    
    249,715
    
    
    
    
    
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    16,525
    
    
    
    365,240
 
 (1)
    
    This column includes an additional week of salary as a result of the 53rd week
included in the 2008 fiscal year.(2)
    
    This column represents discretionary bonuses awarded during the applicable fiscal year.(3)
    
    This column represents amounts paid out to named executive officers under the Enterprise
Entity Growth Plan subsequent to the applicable year-end.(4)
    
    This column shows, for awards of options under the Equity Participation Plan, the dollar
amount recognized for financial statement reporting purposes with respect to the applicable
fiscal year in accordance with SFAS 123(R). No such awards were granted in fiscal year 2008.
We recognized $77,000 in compensation expense during fiscal year 2007 related to the issuance
of options under this plan. See Note 5  Stock-Based Compensation for details on the
assumptions used to calculate the value.(5)
    
    This column shows the dollar amount associated with the portion of awards related to the
Phantom Incentive Unit Awards, discussed in the Material Elements of the Compensation
Program section above, that vested in the current fiscal year. 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 5  Stock-Based Compensation for details on the
assumptions used to calculate the value.(6)
    
    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 of the Compensation Discussion and Analysis 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.(7)
    
    Amount includes $43,964 in commuting allowance. 100




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(8)
    
    Amount includes $35,489 in commuting allowance. GRANTS OF PLAN-BASED AWARDS FOR THE 2008 FISCAL YEAR
 Estimated PayoutsUnder non-Equity IncentivePlan AwardsName
    
    Threshold ($)
    
    Grant DateR. Michael Andrews, Jr.
    
    $
    248,000
    
    
    
    A. Keith Wall
    
    
    93,000
    
    
    
    Karlin A. Linhardt
    
    
    116,000
    
    
    
    Fred P. Williams
    
    
    80,000
    
    
    
    M. Richard Kirk
    
    
    99,000
    
    
    
    
  OUTSTANDING EQUITY AWARDS FOR THE 2008 FISCAL YEAR
 Option Awards
    
    
    
    
    
    
    
    
    
    Stock UnitNumber of Securities
    
    
    
    
    
    
    
    
    
    AwardsUnderlying
    
    
    
    
    
    
    
    
    
    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.
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    19,500
    
    
    $
    A. Keith Wall
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Karlin A. Linhardt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,500
    
    
    
    Fred P. Williams
    
    
    2,500
    
    
    
    0.11
    
    
    
    11/4/2019
    
    
    
    5,500
    
    
    
    M. Richard Kirk
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  101




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OPTION EXERCISES AND STOCK VESTED TABLE FOR FISCAL YEAR 2008
 Phantom Incentive Unit AwardsNumber of Units Acquired
    
    Value Realized onName
    
    on Vesting (#)
    
    Vesting ($)R. Michael Andrews, Jr.
    
    
    6,500
    
    
    $
    A. Keith Wall
    
    
    
    
    
    
    Karlin A. Linhardt
    
    
    6,500
    
    
    
    Fred P. Williams
    
    
    500
    
    
    
    M. Richard Kirk
    
    
    
    
    
    
    
  POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL FOR THE 2008 FISCAL YEAR
  R. Michael
    
    
    
    
    
    
    Fred P.
    
    
    Karlin A.
    
    
    M. RichardAndrews, Jr.
    
    
    A. Keith Wall
    
    
    Williams
    
    
    Linhardt
    
    
    KirkContinued base salary
    
    $
    559,000
    
    
    $
    300,000
    
    
    $
    250,000
    
    
    $
    295,000
    
    
    $
    252,500Continued medical and/or health benefits
    
    
    10,000
    
    
    
    8,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Continued life insurance and long-term disability coverage
    
    
    1,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    1,000
    
    
    
    1,000Cash Incentive Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity Incentive Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Phantom Incentive Unit Awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Severance Payments
    
    $
    570,000
    
    
    $
    310,000
    
    
    $
    262,000
    
    
    $
    306,000
    
    
    $
    263,500
     102




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103




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DIRECTOR COMPENSATION FOR THE 2008 FISCAL YEAR
  Fees Earned or
    
    All OtherName
    
    Paid in Cash
    
    Compensation
    
    Total CompensationFrederick J. Iseman (1)
    
    $
    
    
    
    $
    
    
    
    $
    Roe H. Hatlen
    
    
    
    
    
    
    
    
    
    
    Steven M. Lefkowitz (1)
    
    
    
    
    
    
    
    
    
    
    Robert A. Ferris (1)
    
    
    
    
    
    
    
    
    
    
    David S. Lobel (2)
    
    
    
    
    
    
    
    
    
    
    Robert M. Rosenberg
    
    
    11,000
    
    
    
    
    
    
    
    11,000Ankur 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. As a result of the Bankruptcy, we do
not expect to make any further payments under this agreement.(2)
    
    Mr. Lobel is a representative of and was compensated by Sentinel Capital Partners, L.L.C. for
his director position, prior to his resignation. Sentinel Capital Partners, L.L.C. received no
payment from us under the advisory agreement described in Item 13 of this filing in the
current fiscal year. This agreement was terminated at the time of Mr. Lobels resignation. 
 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
    
    
    
    0.6Paul Holovnia (6)
    
    
    19,215
    
    
    
    0.6Karlin A. Linhardt (7)
    
    
    
    
    
    
    Steven M. Lefkowitz
    
    
    
    
    
    
    Ankur A. Vora
    
    
    
    
    
    
    Robert A. Ferris
    
    
    
    
    
    
    All officers and directors as a group (13 persons)
    
    
    2,625,734
    
    
    
    84.6
 
 (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. 104




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##### Table of Contents



(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. Holovnia also owned options to purchase 2,000 shares of common stock of Buffets
Holdings.(7)
    
    Mr. Linhardt holds 32,500 phantom stock units of Buffets Holdings.  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
 105




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##### Table of Contents



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
  Director Independence
  106




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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Year EndedJune 28,
    
    
    June 27,
    
    
    July 2,2006
    
    
    2007
    
    
    2008(In thousands)Audit fees (1)
    
    $
    265
    
    
    $
    503
    
    
    $
    547Audit-related fees (2)
    
    
    18
    
    
    
    807
    
    
    
    128Tax fees (3)
    
    
    61
    
    
    
    254
    
    
    
    246All other fees
    
    
    
    
    
    
    
    
    
    
    Total fees
    
    $
    344
    
    
    $
    1,564
    
    
    $
    921
 
 (1)
    
    Audit fees for fiscal years 2006, 2007 and 2008 are comprised of annual audit fees and
quarterly review fees. In addition, for fiscal year 2007, these fees included comfort letter
fees, consent fees, and 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. For
fiscal year 2008, these fees also in included fees associated with completing the purchase
accounting adjustments related to the Ryans merger.(2)
    
    Audit-related fees for fiscal years 2006, 2007, and 2008 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 years 2007 and 2008.
Also included for fiscal year 2007 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. For
fiscal year 2008, these fees also include fees related to a separate audit of the Tahoe Joes
Famous Steakhouse® restaurants related to the potential sale of those units, fees related to
implementation of FIN 48, fees related to goodwill valuation services and fees related to SOX
compliance.(3)
    
    Tax fees for fiscal years 2006, 2007 and 2008 are comprised of tax compliance and
consultation fees. In addition, for fiscal year 2007, these fees also include 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. For
fiscal year 2008, these fees also include fees related to the Ryans Depreciation Method
Study, additional fees related to the Transaction Cost Study and fees related to the review of
our federal taxes.   107




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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 27, 2007 and July 2, 2008.Consolidated Statements of Operations for the Years Ended June 28, 2006, June 27, 2007 and July 2, 2008.Consolidated Statements of Shareholders Equity (Deficit) for the Years Ended June 28, 2006, June 27, 2007 and July
2, 2008.Consolidated Statements of Cash Flows for the Years Ended June 28, 2006, June 27, 2007 and July 2, 2008.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 111 of this report.
 108




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SIGNATURES
  BUFFETS HOLDINGS, INC.Date: September 30, 2008
    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 and Accounting Officer) 109




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POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ R. Michael Andrews, Jr.

R. Michael Andrews, Jr.
    
    Chief Executive Officer
(Principal Executive Officer)
    
    September 30, 2008/s/ A. Keith Wall

A. Keith Wall
    
    Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    September 30, 2008/s/ Frederick J. Iseman

Frederick J. Iseman
    
    Director (Chairman of the
Board of Directors)
    
    September 30, 2008/s/ Robert A. Ferris
    
    Director
    
    September 30, 2008Robert A. Ferris/s/ Steven M. Lefkowitz
    
    Director
    
    September 30, 2008Steven M. Lefkowitz/s/ Ankur A. Vora
    
    Director
    
    September 30, 2008Ankur A. Vora
 110




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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)).10.8
    
    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)).
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ExhibitNumber
    
    Description10.9
    
    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)).10.20
    
    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)).
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##### Table of Contents



ExhibitNumber
    
    Description10.22
    
    Forbearance Agreement and Second Amendment, dated January 10, 2008, to the Credit Agreement, dated
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.10.23
    
    Secured Super-Priority Debtor-In-Possession Credit Agreement, dated as of January 22, 2008, among
Buffets Inc., Buffets Holdings, Inc., the Lenders named therein and Credit Suisse, as Administrative
Agent and Collateral Agent.10.24
    
    Guarantee and Collateral Agreement, dated January 22, 2008, among Buffets, Inc., Buffets Holdings,
Inc., the subsidiaries of Buffets, Inc. from time to time party thereto and Credit Suisse, as
Collateral Agent.10.25
    
    First Amendment, dated as of February 22, 2008, to the Secured Super-Priority Debtor-In-Possession
Credit Agreement, dated as of January 22, 2008, among Buffets, Inc., Buffets Holdings, Inc., the
Lenders named therein and Credit Suisse, as Administrative Agent and Collateral Agent.10.26
    
    Third Amendment, dated as of March 10, 2008, 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 and Collateral Agent.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)).24.0
    
    Powers of Attorney (included on signature pages of this Form 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.
 
 *
    
    Provided within 113