10-Q/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 26, 2011

Or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number 333-116310

REAL MEX RESTAURANTS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	13-4012902
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

5660 Katella Avenue, Suite 100
Cypress, CA 90630
(Address of principal executive offices)

Registrant’s telephone number, including area code:
(562)-346-1200

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of July 24, 2011, the registrant had outstanding 1,000 shares of Common Stock, par value $0.001 per share.

EXPLANATORY NOTE

This Form 10-Q/A amends the Quarterly Report on Form 10-Q of Real Mex Restaurants, Inc. for the quarter ended June 26, 2011 filed on August 15, 2011 (the “Form 10-Q”) for the sole purpose of furnishing the Interactive Data File as Exhibit 101 in accordance with Rule 405(a)(2) of Regulation S-T. No other changes have been made to the Form 10-Q. This Form 10-Q/A does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

Users of this data are advised that pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

Item 6. Exhibits

Exhibit No.	Description
3.1*	Amendment to Bylaws of RM Restaurant Holding Corp., dated October 26, 2010
3.2*	Amendment to Articles of Incorporation of Real Mex Foods, Inc., dated June 16, 2011
3.3*	Amendment to Articles of Incorporation of ALA Design, Inc., dated June 16, 2011
3.4*	Amendment to Bylaws of Acapulco Restaurant of Ventura, Inc., dated June 16, 2011
3.5*	Amendment to Bylaws of Acapulco Restaurant of Westwood, Inc., dated June 16, 2011
3.6*	Amendment to Bylaws of Murray Pacific, dated June 16, 2011
3.7*	Amendment to Bylaws of TARV, Inc., dated June 16, 2011
3.8*	Amendment to Bylaws of ALA Design, Inc., dated June 16, 2011
3.9*	Amendment to Bylaws of Acapulco Restaurant of Downey, Inc., dated June 16, 2011
3.10*	Amendment to Bylaws of Acapulco Restaurant of Moreno Valley, Inc., dated June 16, 2011
31.1*	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer.
31.2*	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer.
32.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.
32.2*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.
101.INS **	XBRL Instance Document
101.SCH **	XBRL Taxonomy Extension Schema Document
101.CAL **	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB **	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE **	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF **	XBRL Taxonomy Extension Definition Linkbase Document

*	Previously filed or furnished with Real Mex Restaurants, Inc.’s Form 10-Q filed on August 15, 2011.
**	In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

SIGNATURE

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

	REAL MEX RESTAURANTS, INC.
Dated: September 9, 2011	By:	/s/ David Goronkin
		David Goronkin
		President, Chief Executive Officer and Chairman
		(Principal Executive Officer)
Dated: September 9, 2011	By:	/s/ Richard P. Dutkiewicz
		Richard P. Dutkiewicz
		Chief Financial Officer
		(Principal Financial Officer and Accounting Officer)

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Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Jun. 26, 2011	Dec. 26, 2010
Stockholders' equity (deficit):
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,000	1,000
Common stock, shares issued	1,000	1,000
Common stock, shares outstanding	1,000	1,000

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 27, 2010 Predecessor	Jun. 27, 2010 Predecessor	Jun. 26, 2011 Successor	Jun. 26, 2011 Successor
Revenues:
Restaurant revenues	$ 119,282	$ 229,417	$ 116,451	$ 222,565
Manufacturing and distribution revenues	9,428	18,875	9,864	19,248
Franchise and other revenues	927	1,764	865	1,600
Total revenues	129,637	250,056	127,180	243,413
Restaurant costs
Cost of sales	28,854	55,597	27,981	53,878
Labor	41,429	82,153	41,772	79,694
Direct operating and occupancy expense	32,627	64,799	33,234	64,404
Total restaurant costs	102,910	202,549	102,987	197,976
Manufacturing and distribution costs	7,997	14,833	9,353	17,690
General and administrative expense	5,485	11,078	6,322	12,826
Depreciation and amortization	6,401	12,715	5,516	11,037
Impairment of goodwill and intangible assets			71,321	71,321
Total costs and expenses	122,793	241,175	195,499	310,850
Operating (loss) income	6,844	8,881	(68,319)	(67,437)
Other income (expense):
Interest expense	(7,643)	(15,306)	(7,062)	(14,081)
Other (expense) income, net		116	(65)	(116)
Total other expense, net	(7,643)	(15,190)	(7,127)	(14,197)
Loss before income tax (benefit) provision	(799)	(6,309)	(75,446)	(81,634)
Income tax (benefit) provision	(29)	(41)		44
Net loss	$ (770)	$ (6,268)	$ (75,446)	$ (81,678)

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Document and Entity Information	6 Months Ended
	Jun. 26, 2011	Jul. 24, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Real Mex Restaurants, Inc.
Entity Central Index Key	0001289480
Document Type	10-Q
Document Period End Date	Jun. 26, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-25
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		1,000

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Capitalization

6 Months Ended

Jun. 26, 2011

Capitalization [Abstract]

Capitalization

7. Capitalization

Common Stock

The Company is authorized to issue 1,000 shares of common stock. At June 26, 2011 and December 26, 2010, there were 1,000 shares of common stock authorized, issued and outstanding.

Stock Option Plans

In December 2006, the Board of Directors of Holdco (the “Board”), adopted a Non-Qualified Stock Option Plan (the “2006 Plan”). The 2006 Plan, as amended, reserves 1,000 shares of Holdco’s non-voting common stock for issuance upon exercise of stock options granted under the 2006 Plan. Options vest 20% per year according to the schedule specified in each option agreement. Accelerated vesting of all outstanding options is triggered upon a change of control of Holdco. The options have a life of 10 years, and can only be exercised upon the earliest of the following dates: (i) the 10 year anniversary of the effective date; (ii) the date of a change in control, as defined in the 2006 Plan; or (iii) date of employment termination, subject to certain exclusions.

When stock-based compensation is awarded, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the consolidated statement of operations over the period during which an employee is required to provide service in exchange for the award — the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee stock options is estimated using the Black-Scholes option pricing model. The Company utilizes comparable companies to estimate its price volatility and the simplified method to calculate option expected time to exercise.

The following table summarizes the stock option activity as of and for the six months ended June 26, 2011:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at December 26, 2010		194		$	8,150
Granted		—			—
Exercised		—			—
Forfeited/expired		(116	)		8,150
Outstanding at June 26, 2011		78		$	8,150
Vested and expected to vest at June 26, 2011		78		$	8,150
Exercisable at June 26, 2011		64		$	8,150

The Company recorded ($15) and $49 of stock-based compensation expense during the Successor six months ended June 26, 2011 and the Predecessor six months ended June 27, 2010, respectively. Stock-based compensation is included in general and administrative expense on the consolidated statements of operations. As of June 26, 2011, $15 of total unrecognized compensation costs related to non-vested stock-based awards is expected to be recognized through fiscal year 2012, and the weighted average remaining vesting period of those awards is approximately 0.9 years. At June 26, 2011, the aggregate intrinsic value of exercisable options was $0.

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Share Purchase - Successor

6 Months Ended

Jun. 26, 2011

Share Purchase - Successor [Abstract]

Share Purchase - Successor

3. Share Purchase — Successor

Effective June 28, 2010, immediately after a supplemental indenture was entered into (see Note 6), Sun Cantinas, LLC (“Sun Cantinas”), an affiliate of Sun Capital Partners (“Sun Capital”) that is an equityholder of Holdco, consummated the acquisition of 43,338 shares of common stock of Holdco (the “Share Purchase”) from Cocina Funding Corp., L.L.C. (“Cocina”), an existing equityholder of Holdco that is managed by Farallon Capital Management, LLC (“Farallon”). As a result, Sun Cantinas and SCSF Cantinas, LLC, another affiliate of Sun Capital, together own approximately 70% of the outstanding common stock of Holdco. Together they are entitled, under the cumulative voting provisions of Holdco’s Certificate of Incorporation, to elect not fewer than five members of the seven-member board of directors of Holdco and the Company, giving them the ability to indirectly control the Company through such shareholdings and board memberships. Following the Share Purchase, Cocina holds approximately 13% of the outstanding common stock of Holdco, and no longer has a representative on the board of directors of either Holdco or the Company.

The Share Purchase was accounted for by Holdco under the purchase method of accounting and push-down accounting was applied to the Company. The Company completed a valuation to determine the value of the assets acquired and the liabilities assumed based on their estimated fair market values at the date of the Share Purchase. The Company attributed the goodwill associated with the Share Purchase to the historical financial performance and the anticipated future performance of the Company’s operations. Since this was a non-cash transaction for the Company, it has been excluded from the consolidated statement of cash flows.

The following table presents the allocation to the assets acquired and liabilities assumed based on their estimated fair values as determined by the valuation of the Company (in thousands):

Cash and cash equivalents	$	8,361
Trade and other accounts receivable		10,248
Inventories		11,719
Other current assets		3,131
Property and equipment		78,990
Other assets		12,182
Trademarks and other intangibles		43,200
Favorable and unfavorable lease asset/liability, net		8,415
Goodwill		113,989
Total assets acquired		290,235
Accounts payable and accrued liabilities		62,532
Long-term debt		160,249
Deferred tax liability		20,045
Other liabilities		2,213
Total liabilities assumed		245,039
Net assets	$	45,196

As a result of the Share Purchase, prior to June 28, 2010, the Company is referred to as the “Predecessor” and after June 27, 2010 is referred to as the “Successor”.

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Fair Value Measurement

6 Months Ended

Jun. 26, 2011

Fair Value of Financial Instruments / Fair Value Measurement [Abstract]

Fair Value Measurement

9. Fair Value Measurement

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1: Quoted prices are available in active markets for identical assets or liabilities.

Level 2: Inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable.

Level 3: Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions that market participants would use in pricing.

As of June 26, 2011, the Company had no assets or liabilities that were measured at fair value on a recurring or non-recurring basis. In conjunction with the Share Purchase, the Company completed a valuation and recorded adjustments to fair value for the following assets and liabilities by level at June 28, 2010:

	Level 1		Level 2		Level 3
Assets:
Property and equipment	$	—	$	78,990	$	—
Liquor licenses		—		5,082		—
Goodwill		—		—		113,989
Trademarks and other intangible assets		—		—		43,200
Favorable lease asset		—		—		16,456
Liabilities:
Senior secured notes due 2013		129,675		—		—
Unfavorable lease liability		—		—		8,041

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Related Party Transactions

6 Months Ended

Jun. 26, 2011

Related Party Transactions [Abstract]

Related Party Transactions

10. Related Party Transactions

Certain funds managed by Farallon are indirect stockholders of Holdco. Certain funds managed by Farallon hold an indirect interest in a shopping center from which the Company leases property for the operation of an Acapulco restaurant.

Total payments in connection with the lease during the Successor six months ended June 26, 2011 and the Predecessor six months ended June 27, 2010, were $127 and $164, respectively, of which up to approximately $32 and $40 are attributable to the Farallon funds’ indirect interest in the shopping center, respectively. Additionally, certain funds managed by Farallon hold approximately $13,000 aggregate principal amounts of the Notes. Effective as of June 28, 2010, Farallon and its affiliates, including Cocina, ceased to be affiliates of the Company as none of Farallon, nor any of its affiliates, including Cocina, directly or indirectly controls or is controlled by or under common control of the Company.

The Company periodically makes payments to (subject to restricted payment covenants under the Indenture governing the Notes), from and on behalf of Holdco. No related party payables or receivables were outstanding at June 26, 2011 or December 26, 2010.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 26, 2011

Fair Value of Financial Instruments / Fair Value Measurement [Abstract]

Fair Value of Financial Instruments

8. Fair Value of Financial Instruments

The Company’s financial instruments are primarily comprised of cash and cash equivalents, receivables, accounts payable, accrued liabilities and long-term debt. For cash and cash equivalents, receivables, accounts payable and accrued liabilities, the carrying amount approximates fair value because of the short maturity of these instruments. The estimated fair value of the Senior Secured Notes due 2013 at June 26, 2011, based on quoted market prices, was $110,175. Management estimates that the carrying values of its other financial instruments approximate their fair values since their realization or satisfaction is expected to occur in the short term or have been renegotiated at a date close to quarter end.

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Basis of Presentation

6 Months Ended

Jun. 26, 2011

Basis of Presentation [Abstract]

Basis of Presentation

1. Basis of Presentation

Real Mex Restaurants, Inc., a Delaware corporation, together with its subsidiaries (the “Company”), is engaged in the business of owning and operating restaurants, primarily through its major subsidiaries El Torito Restaurants, Inc. (“El Torito”), Chevys Restaurants, LLC (“Chevys”) and Acapulco Restaurants, Inc. (“Acapulco”). The Company operated 178 restaurants as of June 26, 2011, of which 149 were located in California and the remainder were located in 11 other states, primarily under the trade names El Torito Restaurant^®, Chevys Fresh Mex^® and Acapulco Mexican Restaurant Y Cantina^®. In addition, the Company franchised or licensed 30 restaurants in 10 states and two foreign countries as of June 26, 2011. The Company’s other major subsidiary, Real Mex Foods, Inc., provides internal production, purchasing and distribution services for the restaurant operations and also provides distribution services and manufactures specialty products for sale to outside customers. The Company is a wholly-owned subsidiary of RM Restaurant Holding Corp. (“Holdco”). The Company’s financial statements include stock options granted by Holdco for which the compensation expense has been pushed down to the Company. Holdco debt is not included in the Company’s financial statements.

The Company’s fiscal year consists of 52 or 53 weeks ending on the last Sunday in December which in 2011 is December 25, 2011 and in 2010 was December 26, 2010. Prior to June 28, 2010, the Company is referred to as the “Predecessor” and after June 27, 2010 is referred to as the “Successor”. The accompanying consolidated balance sheets present the Company’s financial position as of June 26, 2011 and December 26, 2010. The accompanying consolidated statements of operations and cash flows present the Successor six months ended June 26, 2011 and the Predecessor six months ended June 27, 2010. See further description of the Successor and Predecessor periods in Note 3.

The accompanying unaudited consolidated financial statements include the accounts of Real Mex Restaurants, Inc. and its wholly-owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

Certain information and footnote disclosures normally included in consolidated financial statements in accordance with accounting principles generally accepted in the United States have been omitted pursuant to requirements of the Securities and Exchange Commission (“SEC”). A description of accounting policies and other financial information is included in the Company’s audited consolidated financial statements as filed with the SEC in its annual report on Form 10-K for the year ended December 26, 2010. The Company believes that the disclosures included in its accompanying interim consolidated financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with its consolidated financial statements and notes thereto included in its annual report on Form 10-K. The accompanying consolidated balance sheet as of December 26, 2010 has been derived from its audited financial statements.

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

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 26, 2011

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The fair value is determined based upon a combination of two valuation techniques, including an income approach, which utilizes discounted future cash flow projections based upon management forecasts, and a market approach, which is based upon pricing multiples at which similar companies have been sold. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

Factors that could change the result of our goodwill impairment test include, but are not limited to, different assumptions used to forecast future revenues, expenses, capital expenditures and working capital requirements used in our cash flow models. In addition, selection of a risk-adjusted discount rate on the estimated undiscounted cash flows is susceptible to future changes in market conditions, and when unfavorable, can adversely affect our original estimates of fair values. A variance in the discount rate could have a significant impact on the valuation of the goodwill for purposes of the impairment test. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill. Such events include, but are not limited to, strategic decisions made in response to the economic environment on our customer base or a material negative change in relationships with our customers.

Management forecasts for 2011 were revised as a result of current operating results and growth projections. As a result, the Company identified impairment of goodwill of $67,721, impairment of trademarks of $2,000 and impairment of franchise agreements of $1,600. As a result, a non-cash impairment charge of $71,321 was recorded in the Consolidated Statements of Operations for the three months ended June 26, 2011.

Trademarks and other intangibles consist of the following indefinite-lived assets resulting from the Share Purchase:

	June 26,		December 26,
	2011		2010
Trademarks	$	35,000	$	37,000
Franchise agreements		3,500		5,100
	$	38,500	$	42,100

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Self Insurance

6 Months Ended

Jun. 26, 2011

Self Insurance [Abstract]

Self Insurance

5. Self Insurance

The Company is self-insured for most workers’ compensation and general liability losses (collectively “casualty losses”). The Company maintains stop-loss coverage with third party insurers to limit its total exposure. The recorded liability associated with these programs is based on an actuarial estimate of the ultimate costs to be incurred to settle known claims and claims incurred but not reported as of the balance sheet date. The actual ultimate liability for these claims may increase or decrease based on a number of assumptions and factors, such as historical and future trends, economic conditions, safety programs and back to work programs. The estimated liability is not discounted. If actual claims trends, including the severity or frequency of claims, differ from estimates, the financial results could be significantly impacted. During the first quarter of 2011, the Company engaged a new insurance broker with new actuarial specialists. Based upon the actuarial calculation and improvements in the Company’s risk management procedures and loss trends, management determined that an immediate reduction in the reserve in excess of $1,500 was appropriate. The portion of the adjustment related to workers’ compensation was recorded in labor and the portion related to general liability was recorded in direct operating and occupancy expense in the consolidated statements of operations. The accrued self-insurance reserve was $9,962 and $13,212 at June 26, 2011 and December 26, 2010 respectively.

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Long-Term Debt

6 Months Ended

Jun. 26, 2011

Long-Term Debt [Abstract]

Long-Term Debt

6. Long-Term Debt

Long-term debt consists of the following:

	June 26,			December 26,
	2011			2010
Senior Secured Notes due 2013	$	130,000		$	130,000
Senior Secured Notes unamortized debt discount		(195	)		(260	)
Senior Secured Revolving Credit Facility		5,200			—
Senior Unsecured Credit Facility		33,205			30,599
Mortgage		398			440
Other		933			421
		169,541			161,200
Less current portion		(169,234	)		(507	)
	$	307		$	160,693

Senior Secured Notes due 2013. On July 7, 2009 (the “Closing Date”), the Company completed an offering of $130,000 aggregate principal amount of 14.0% Senior Secured Notes due January 1, 2013 (the “Notes”), which are guaranteed (the “Guarantees”) by Holdco and all of the Company’s existing and future domestic restricted subsidiaries (together with Holdco, the “Guarantors”). The Notes were offered and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), a limited number of institutional accredited investors in the United States, and outside the United States in reliance on Regulation S under the Securities Act. The Notes were issued pursuant to an indenture, dated July 7, 2009 (the “Indenture”), by and among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee. The net proceeds from the issuance of the Notes were used to refinance a portion of the existing indebtedness, including repayment of the Company’s $105,000 senior secured notes due 2010 and to pay fees and expenses in connection therewith. Deferred debt fees of $6,596 were recorded related to the issuance of the Notes.

Effective June 28, 2010, the Company entered into a Supplemental Indenture, which amended the Indenture to permit affiliates of Sun Capital to acquire a majority of the stock of Holdco without requiring the Company to make a change of control offer to repurchase the Notes that would otherwise have been required under the Indenture.

Effective July 27, 2011, the Company entered into a Second Supplemental Indenture which provides for amendments to the existing Indenture. The Second Supplemental Indenture includes waivers and an amendment relating to a breach of the Consolidated Cash Flow covenant, as defined in the Indenture, for the period ended June 26, 2011, an amendment to provide that through October 31, 2011, the consent of the holders of at least 35% in aggregate principal amount of the then outstanding Notes will be required to declare all of the Notes to be due and payable upon an event of default, an amendment to provide that through October 31, 2011, in order for any noteholder to pursue a remedy with respect to the Indenture or the Notes, holders of at least 35% in aggregate principal amount of the then outstanding Notes will be required to make a written request to the trustee under the Indenture, waivers of certain breaches of the Indenture in connection with the Company’s failure to provide certain notices and timely set a special record date and payment date for the interest payment made on the Notes on July 28, 2011, and waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements.

Prior to July 1, 2012, the Company may redeem some or all of the Notes at a premium ranging from 1-2% of the aggregate principal amount of the Notes redeemed. On or after July 1, 2012, the Company may redeem some or all of the Notes at 100% of the Notes’ principal amount, plus accrued and unpaid interest up to the date of redemption. Within 90 days of the end of each four fiscal quarter period ending on or near December 31, beginning in 2009, the Company must, subject to certain exceptions, offer to repay the Notes with 75% of the Excess Cash Flow (as defined in the Indenture) from the period, at 100% of the principal amount, plus any accrued and unpaid interest and liquidated damages. If the excess cash flow offer is prohibited by the terms of the Company’s GECC Credit Agreement, as amended, governing the Company’s Senior Secured Revolving Credit Facilities, the Company will deposit the amount that would have been used to fund the excess cash flow offer into an escrow account. Funds from the escrow account will be released to the Company only to repay borrowings under the Senior Secured Revolving Credit Facilities or to make an excess cash flow offer. No Excess Cash Flow Offer was required for 2010.

If the Company undergoes a change of control, the Company will be required to make an offer to each holder to repurchase all or a portion of their Notes at 101% of their principal amount, plus accrued and unpaid interest up to the date of purchase. If the Company sells assets outside the ordinary course of business and the Company does not use the net proceeds for specified purposes, the Company may be required to use such net proceeds to repurchase the Notes at 100% of their principal amount, together with accrued and unpaid interest up to the date of repurchase.

The terms of the Indenture generally limit the Company’s ability and the ability of the Company’s restricted subsidiaries to, among other things: (i) make certain investments or other restricted payments; (ii) incur additional debt and issue preferred stock; (iii) create or incur liens on assets to secure debt; (iv) incur dividends and other payment restrictions with regard to restricted subsidiaries; (v) transfer, sell or consummate a merger or consolidation of all, or substantially all, of the Company’s assets; (vi) enter into transactions with affiliates; (vii) change the Company’s line of business; (viii) repay certain indebtedness prior to stated maturities; (ix) pay dividends or make other distributions on, redeem or repurchase, capital stock or subordinated indebtedness; (x) engage in sale and leaseback transactions; or (xi) issue stock of subsidiaries.

The Notes and the Guarantees are secured by a second-priority security interest in substantially all of the assets of the Company and the Guarantors, including the pledge of 100% of all outstanding equity interests of each of the Company’s domestic subsidiaries. On the Closing Date, the Company and the Guarantors entered into a registration rights agreement, pursuant to which the Company and the Guarantors agreed for the benefit of the holders of the Notes to file with the SEC and cause to become effective a registration statement with respect to a registered offer to exchange the Notes for an issue of the Company’s senior secured notes with terms identical to the Notes in all material respects. The registration statement was declared effective on October 8, 2009. A shelf registration statement covering resales of the Notes was declared effective by the SEC on December 1, 2009.

Senior Secured Revolving Credit Facilities. The Second Amended and Restated Revolving Credit Agreement with General Electric Capital Corporation, as amended, (the “GECC Credit Agreement”) provides for a $15,000 revolving credit facility and $25,000 letter of credit facility, maturing on July 1, 2012 (collectively, the “Senior Secured Revolving Credit Facilities”). Under the Senior Secured Revolving Credit Facilities, the lenders agreed to make loans and issue letters of credit to and on behalf of the Company and its subsidiaries. Interest on the outstanding borrowings under the Senior Secured Revolving Credit Facilities is based on either prime rate plus Applicable Margin or ninety-day LIBOR plus Applicable Margin, as defined in and subject to certain restrictions in the 2009 amendment, which extended the due date and modified certain covenants and fees on the letters of credit issued thereunder accrue at a rate of 4.5% per annum. Deferred debt fees of $1,562 were recorded in 2009 related to the amendment.

Obligations under the Senior Secured Revolving Credit Facilities are guaranteed by all of the Company’s subsidiaries as well as by Holdco, which wholly owns the Company and has made a first priority pledge of all of its equity interests in the Company as security for the obligations. The Senior Secured Revolving Credit Facilities are secured by, among other things, first priority pledges of all of the equity interests of the Company’s direct and indirect subsidiaries, and first priority security interests (subject to customary exceptions) in substantially all of the current and future property and assets of the Company and its direct and indirect subsidiaries, with certain limited exceptions. As of June 26, 2011, the Company had $5,893 available under the letter of credit facility and $9,800 available under the revolving credit facility that may also be utilized for the letters of credit.

On April 2, 2010, the Company entered into an amendment to the GECC Credit Agreement which modified certain definitions in order to allow the transfer of shares in Holdco within current stockholders of Holdco. No such amendment was required related to the Notes as a result of such transfer.

On July 27, 2011, the Company entered into a Limited Waiver and Amendment No. 6 (“Amendment No. 6”) to the GECC Credit Agreement including waivers of certain breaches of the Leverage Ratio, Adjusted Leverage Ratio, Interest Coverage Ratio and Consolidated Cash Flow financial covenants for the period ended June 26, 2011, as defined in the GECC Credit Agreement, an amendment which provides that no default will be deemed to have occurred prior to November 15, 2011 solely by reason of any breach or violation of the financial covenants in the GECC Credit Agreement for the period ending September 25, 2011, and waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements. In connection with Amendment No. 6, Sun Cantinas Finance, LLC, an entity affiliated with Sun Cantinas by common ownership (“Sun Finance”), purchased a $5,000 participation interest in the $15,000 revolving credit facility under the GECC Credit Agreement. Sun Finance has an option to purchase up to an additional $2,500 participation interest in the revolving credit facility. To the extent Sun Finance exercises its option to purchase such additional participation interest, the maximum amount the Company may borrow under the revolving credit facility will increase, and the maximum amount the Company may borrow under the letter of credit facility will decrease, each by an amount equal to the additional participation by Sun Finance. As a result of the Sun Finance participation in the GECC Credit Agreement, the Senior Secured Revolving Credit Facilities are held by related parties to the Company effective July 27, 2011.

The GECC Credit Agreement, as amended, contains various affirmative and negative covenants and restrictions, which among other things, require the Company to meet certain financial tests (including certain leverage and cash flow ratios), and limits the Company and its subsidiaries’ ability to incur or guarantee additional indebtedness, make certain capital expenditures, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, engage in transactions with affiliates and effect a consolidation or merger. The agreement contains a cross-default provision wherein if the Company is in default on any other credit facilities, default on this facility is automatic. At June 26, 2011, the Company was in compliance with all specified financial and other covenants under the GECC Credit Agreement, as amended.

Senior Unsecured Credit Facility. In connection with the offering of the Notes, the Company entered into a Second Amended and Restated Credit Agreement, by and among the Company, Holdco, the lenders party thereto and Credit Suisse, Cayman Islands Branch (the “Senior Unsecured Credit Facility”), pursuant to which the principal balance of the existing unsecured loan owed by the Company under the existing senior unsecured credit facility, as amended, was reduced from $65,000 to $25,000 through (i) the assumption by Holdco of $25,000 of such unsecured debt and (ii) the exchange by a lender under the existing senior unsecured credit facility, as amended, of $15,000 of such unsecured debt for $4,583 aggregate principal amount of Notes (which were issued for $4,125), resulting in a gain on extinguishment of debt of $10,875. Deferred debt fees of $161 were recorded related to the Senior Unsecure Credit Facility. Interest accrues at an annual rate of 16.5% and is payable quarterly, provided that (i) such interest is payable in kind for the first four quarters following the Closing Date and (ii) thereafter will be payable in a combination of cash and in kind. The term of the Company’s credit facility was extended to July 1, 2013 and certain covenants were modified. Certain lenders to the Senior Unsecured Credit Facility are owners of Holdco, and as a result, the Senior Unsecured Credit Facility is held by related parties to the Company.

On July 27, 2011, the Company entered into a Limited Waiver and First Amendment to the Senior Unsecured Credit Facility which includes waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements.

The Senior Unsecured Credit Facility, as amended, contains various affirmative and negative covenants which, among other things, limits the Company’s and its subsidiaries’ ability to incur or guarantee additional indebtedness, grant certain liens, make certain restricted payments, make capital expenditures, engage in transactions with affiliates, make certain investments, sell its assets, make acquisitions, effect a consolidation or merger and amend or modify instruments governing certain indebtedness (including relating to the Company’s Notes and the Senior Secured Revolving Credit Facilities), and includes certain cross-default language related to the Company’s other significant debt agreements. At June 26, 2011, the Company was in compliance with all specified financial and other covenants under the Senior Unsecured Credit Facility.

Senior Unsecured Credit Facility — Holdco In connection with the offering of the Notes and as a result of the assumption by Holdco of $25,000 noted above, Holdco entered into a Credit Agreement governing a $25,000 Holdings Term Loan Facility, (the “Senior Unsecured Credit Facility — Holdco”), with a maturity date of January 1, 2014. Interest accrues at an annual rate of 20% and is payable in kind. The balance at June 26, 2011 is $35,214. The Company has no obligation related to Senior Unsecured Credit Facility — Holdco and as such it is not included in the Consolidated Balance Sheets at June 26, 2011.

Mortgage. In 2005, concurrent with an acquisition, the Company assumed an $816 mortgage secured by the building and improvements of one of the restaurants acquired in the transaction. The mortgage carries a fixed annual interest rate of 9.28% and requires equal monthly payments of principal and interest through April 2015. As of June 26, 2011, the principal amount outstanding on the mortgage was $398.

Interest rates for the Company’s long-term debt are shown in the following table:

	June 26,			December 26,
	2011			2010
Senior Secured Notes due 2013		14.00	%		14.00	%
Senior Secured Revolving Credit Facilities		9.25	%		9.25	%
Senior Unsecured Credit Facility		16.50	%		16.50	%
Mortgage		9.28	%		9.28	%
Other		3.14 to 3.20	%		3.20 to 4.70	%

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 27, 2010 Predecessor	Jun. 26, 2011 Successor
Operating activities
Net loss	$ (6,268)	$ (81,678)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	10,929	10,082
Amortization of:
Favorable lease asset and unfavorable lease liability, net	1,786	955
Debt discount	1,857	65
Deferred financing costs	1,244	1,238
Impairment of goodwill and intangible assets		71,321
Loss on disposal of property and equipment	13	14
Stock-based compensation expense	49	(15)
Changes in operating assets and liabilities:
Trade and other receivables	(154)	(332)
Inventories	(885)	(528)
Prepaid expenses and other current assets	434	(534)
Other assets	66	(100)
Accounts payable and accrued liabilities	205	(4,363)
Other liabilities	814	1,024
Net cash (used in) provided by operating activities	10,090	(2,851)
Investing activities
Purchases of property and equipment	(5,078)	(3,727)
Net proceeds from disposal of property and equipment	2
Net cash used in investing activities	(5,076)	(3,727)
Financing activities
Net borrowings under revolving credit facility		5,200
Borrowing under long-term debt agreements	1,417	1,411
Payments on long-term debt agreements and capital lease obligations	(1,312)	(1,081)
Payments of financing costs	(75)
Net cash provided by financing activities	30	5,530
Net (decrease) increase in cash and cash equivalents	5,044	(1,048)
Cash and cash equivalents at beginning of period	3,317	3,359
Cash and cash equivalents at end of period	8,361	2,311
Supplemental disclosure of cash flow information
Interest paid	9,564	9,997
Income taxes paid (refunded)	(41)	44
Supplemental disclosure of noncash investing and financing activities
In-kind interest on senior unsecured credit facility added to principal	$ 2,212	$ 2,605

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Liquidity

6 Months Ended

Jun. 26, 2011

Liquidity [Abstract]

Liquidity

2. Liquidity

The Company’s principal liquidity requirements are to service debt and meet capital expenditure and working capital needs. The Company’s ability to make principal and interest payments, fund planned capital expenditures and meet financial covenants will depend on the ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the control of the Company.

The Company’s debt agreements require compliance with specified financial covenants. These covenants could adversely affect the Company’s ability to finance future operations or capital needs and pursue available business opportunities. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that indebtedness. Acceleration of other indebtedness could result in a default under the terms of the Indenture governing the Notes. In such an event, the Company may be required to refinance all or part of the then-existing debt (including the Notes), sell assets or borrow more money. The Company may not be able to accomplish any of the alternatives on acceptable terms, or at all. The failure to generate sufficient cash flow or to achieve any of these alternatives could significantly adversely affect the Company.

The Company was in violation of various covenants as of June 26, 2011. On July 27, 2011, the Company entered into a series of Limited Waivers and Amendments with the Company’s various lenders and noteholders that waived a series of defaults on financial covenants. These agreements require the Company to submit a reasonably detailed proposal to restructure the Company’s material debt agreements on or prior to September 15, 2011 and negotiate and execute a binding restructuring term sheet, plan support agreement, lock-up agreement or similar agreement containing the substance of such proposal or another restructuring plan with respect to the Company’s material debt arrangements on or prior to October 31, 2011. The process of providing a reasonably detailed proposal by September 15, 2011 involves the use of several professional firms including financial, real estate and legal advisors. While management believes these various resources and their efforts will provide the Company a viable capital structure by October 31, 2011, there can be no assurance that these efforts will be successful or that all parties will agree with the proposed solutions.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, if the restructuring efforts noted above are not successful, it would raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. In addition, because the waivers noted above do not extend for a full year, and because management projections indicate that the Company will not meet certain covenants absent the completion of such a restructuring, the Company is required to reclassify related long term debt balances as current liabilities in accordance with FASB Accounting Standards Codification 470, “Debt”. As a result, the Notes and Senior Unsecured Credit Facility have been reclassified to current portion of long-term debt in the Consolidated Balance Sheets at June 26, 2011.

See definitions of certain capitalized terms in Note 6.

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands	Jun. 26, 2011	Dec. 26, 2010
Current assets:
Cash and cash equivalents	$ 2,311	$ 3,359
Trade receivables, net	8,671	8,295
Other receivables	577	621
Inventories, net	12,146	11,618
Prepaid expenses	3,430	2,877
Current portion of favorable lease asset, net	3,352	3,357
Other current assets	229	248
Total current assets	30,716	30,375
Property and equipment, net	65,977	72,730
Goodwill	46,000	113,721
Trademarks and other intangible assets	38,500	42,100
Deferred charges	3,472	4,710
Favorable lease asset, less current portion, net	9,982	11,655
Other assets	6,253	6,154
Total assets	200,900	281,445
Current liabilities:
Accounts payable	15,145	18,745
Accrued self-insurance reserves	9,962	13,212
Accrued compensation and benefits	12,139	12,091
Accrued interest	10,362	10,188
Other accrued liabilities	9,417	10,146
Current portion of long-term debt	169,234	507
Current portion of capital lease obligations	257	269
Total current liabilities	226,516	65,158
Long-term debt, less current portion	307	160,693
Capital lease obligations, less current portion	385	514
Deferred tax liabilities	19,522	19,522
Unfavorable lease liability, less current portion, net	5,152	5,870
Other liabilities	3,234	2,211
Total liabilities	255,116	253,968
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 1,000 shares authorized, issued and outstanding at June 26, 2011 and December 26, 2010
Additional paid-in capital	45,245	45,260
Accumulated deficit	(99,461)	(17,783)
Total stockholder's equity (deficit)	(54,216)	27,477
Total liabilities and stockholders' equity (deficit)	$ 200,900	$ 281,445