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.