UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended July 29, 2012

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¨ 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: 333-173579

LRI Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-5894571
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3011 Armory Drive, Suite 300, Nashville, Tennessee  37204
(Address of principal executive offices) (Zip Code)

(615) 885-9056

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:  None

Securities registered pursuant to Section 12 (g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes    x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes    x No

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 past 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.  x Yes    ¨ No

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) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes    ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

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 the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
	(Do not check if a smaller reporting company)

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

As of October 23, 2012, the registrant has 1 Common Unit, $0.01 par value, outstanding (which is owned by Roadhouse Parent Inc., the registrant’s direct owner), and is not publicly traded.

DOCUMENTS INCORPORATED BY REFERENCE --- NONE.

LRI HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K

FISCAL YEAR ENDED JULY 29, 2012

TABLE OF CONTENTS

	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	21
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39
Item 9A.	Controls and Procedures	40
Item 9B.	Other Information	40
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	40
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	45
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accountant Fees and Services	48
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	49
	Signatures	50

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PART I

EXPLANATORY NOTE

LRI Holdings, Inc. (“LRI Holdings” or the “Company”) qualifies as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act, or the JOBS Act, enacted on April 5, 2012.  For as long as LRI Holdings remains an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other reporting companies that are not “emerging growth companies,” including reduced disclosure obligations regarding executive compensation in this Annual Report on Form 10-K.  Therefore, this Annual Report on Form 10-K does not include certain information regarding executive compensation that may be found in the annual reports of other reporting companies.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. These forward-looking statements include all matters that are not historical facts.  They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies and the markets in which we operate.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, growth strategies and the markets in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report.  In addition, even if our results of operations, financial condition and liquidity, and the markets in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.  A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including those reflected in forward-looking statements relating to our operations and business, the risks and uncertainties discussed in this Annual Report on Form 10-K (See Item 1A Risk Factors) and those described from time to time in our other filings with the Securities and Exchange Commission (“SEC”).  Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:

·   our ability to successfully execute our strategy and open new restaurants that are profitable;

·   macroeconomic conditions;

·   our ability to compete with many other restaurants;

·   potential negative publicity regarding food safety and health concerns;

·   health concerns arising from the outbreak of viruses or food-borne illness;

·   the effects of seasonality and weather conditions on sales;

·   changes in food and supply costs;

·   our reliance on certain vendors, suppliers and distributors;

·   impairment charges on certain long-lived or intangible assets;

·   our ability to attract and retain qualified executive officers and employees while also controlling labor costs;

·   our ability to adapt to escalating labor costs;

·   our ability to maintain insurance that provides adequate levels of coverage against claims;

·   legal complaints or litigation;

·   our ability to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations;

·   the reliability of our information systems;

·   costs resulting from breaches of security of confidential information;

·   our ability to protect and enforce our intellectual property rights;

·   our franchisees’ actions;

·   the cost of compliance with federal, state and local laws;

·   any potential strategic transactions;

·   our ability to maintain effective internal controls over financial reporting and the resources and management oversight required to comply with the requirements of the Sarbanes-Oxley Act of 2002;

·   our reduced disclosure due to our status as an emerging growth company;

·   our substantial indebtedness; and

·   our ability to incur additional debt.

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ITEM 1—BUSINESS

Unless the context otherwise requires, references to “LRI Holdings,” the “Company,” “we,” “us,” and “our” in this Annual Report on Form 10-K (the “Report”) are references to LRI Holdings, Inc., its subsidiaries and predecessor companies.  LRI Holdings is the corporate parent of Logan’s Roadhouse, Inc.

General

Logan’s Roadhouse is a family-friendly, casual dining restaurant chain that recreates a traditional American roadhouse atmosphere offering customers value-oriented, high quality, craveable meals.  Our restaurants, which are open for lunch and dinner seven days a week, serve a broad and diverse customer base.  As of July 29, 2012, our restaurants operate in 23 states and are comprised of 220 company-owned restaurants and 26 franchise-owned restaurants.  Our company-owned restaurants and franchise restaurants provide similar products to similar customers, possess similar pricing structures and have similar long-term expected financial performance characteristics, as such, we have aggregated our restaurant and franchising operations into one single reporting segment.

The first Logan’s Roadhouse restaurant opened in Lexington, Kentucky in 1991.  Logan’s Roadhouse, Inc. was incorporated in 1995 in the state of Tennessee and operated as a public company from July 1995 through the acquisition by Cracker Barrel Old Country Store, Inc. (“Cracker Barrel”) in February 1999.  From February 1999 to December 2006, we were a wholly owned subsidiary of Cracker Barrel.  In December 2006, Bruckman, Rosser, Sherrill & Co. (“BRS”), Canyon Capital Advisors LLC (“Canyon Capital”), Black Canyon Capital LLC (“Black Canyon”) and their co-investors, together with our executive officers and other members of management, through LRI Holdings, a Delaware corporation, acquired Logan’s Roadhouse, Inc. (“Predecessor”).  On October 4, 2010, LRI Holdings (“Successor”) was acquired by certain wholly owned subsidiaries of Roadhouse Holding Inc. (“RHI”), a newly formed Delaware corporation, owned by affiliates of Kelso & Company, L.P. (the “Kelso Affiliates”) and certain members of management (the “Management Investors”).  Upon completion of the acquisition transactions (the “Transactions”), the Kelso Affiliates owned 97% and the Management Investors owned 3% of the outstanding capital stock of RHI.  Although the Company is a wholly owned subsidiary of an indirect wholly owned subsidiary of RHI, RHI is the ultimate parent of the Company.  Prior to October 4, 2010, RHI and its subsidiaries had no assets, liabilities or operations.  See Note 3 to our consolidated financial statements for further discussion of the Transactions.

Description of Indebtedness

In connection with the Transactions, the Company terminated the Predecessor’s credit facility and Logan’s Roadhouse, Inc., a wholly owned subsidiary of LRI Holdings, entered into a senior secured revolving credit facility (the “Senior Secured Revolving Credit Facility”) that provides a $30.0 million revolving credit facility with a maturity date of October 4, 2015. The Senior Secured Revolving Credit Facility includes a $12.0 million letter of credit sub-facility and a $5.0 million swingline sub-facility. The Senior Secured Revolving Credit Facility is collateralized on a first-priority basis by a security agreement, which includes the tangible and intangible assets of the borrower and those of LRI Holdings and all subsidiaries, and is guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc.

Also in connection with the Transactions, on October 4, 2010, Logan’s Roadhouse, Inc. issued $355.0 million aggregate principal amount of senior secured notes in a private placement to qualified institutional buyers.  In July 2011, the Company completed an exchange offering which allowed the holders of those notes to exchange them for notes identical in all material respects except they are registered with the SEC and are not subject to transfer restrictions (“Notes”).  The Notes bear interest at a rate of 10.75% per annum, payable semi−annually in arrears on April 15 and October 15.  The Notes mature on October 15, 2017. The Notes are secured on a second-priority basis by the collateral securing the Senior Secured Revolving Credit Facility and are guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc.

The Senior Secured Revolving Credit Facility and the Notes are discussed in greater detail in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources and in Note 9 to our consolidated financial statements within Item 15 of this Annual Report on Form 10-K.

Our Concept and Strategy

Our restaurants are branded as The Real American Roadhouse, drawing their inspiration from the hospitable tradition and distinctive atmosphere of a Historic Route 66 style roadhouse.  Timeless elements of our roadhouse design include rough-hewn cedar siding, concrete floors and exposed ceilings.  The roadhouse décor includes neon signs, branded murals, replica concert posters and a centrally located jukebox which allows customers to select their favorite music.  Our restaurants provide a kickin’, upbeat atmosphere combined with friendly personal service from our welcoming staff.  As part of our relaxed and inviting atmosphere, our customers are encouraged to enjoy “bottomless buckets” of roasted in-shell peanuts and to toss the shells on the floor.  We are committed to serving a variety of fresh food from specially seasoned aged steaks to farm-fresh salads to our made-from-scratch yeast rolls.  We believe our restaurants are recognized by consumers for offering a strong value.  Our menu provides for generous entrée portions, inclusive sides, and a variety of combination meals.  We believe the freshness and distinctive flavor profiles of our signature dishes, coupled with the variety of our menu, differentiates us from our competitors.

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Our vision is based on opening successful new restaurants and delivering great experiences to our customers, which leads to sustainable, continually improving operating and financial results.  We strive to create a unique experience that is so great and so affordable that customers will eat out with us more often.  Our plan to accomplish this is built around the following strategies and initiatives:

·   Disciplined Restaurant Growth:  We believe differentiated, moderately priced roadhouse concepts have broad customer appeal and remain under-penetrated relative to the bar & grill and steakhouse segments.  We are primarily focused on maintaining disciplined growth of our brand by strategically opening additional company-owned restaurants to backfill existing states.  We also believe the broad appeal of The Real American Roadhouse concept enhances the portability of our restaurants, which will allow us to pursue company-owned restaurant openings in adjacent states and grow our footprint over time.  We opened 19 company-owned restaurants in fiscal year 2012, and currently plan to open approximately 15 company-owned restaurants in fiscal year 2013.

·   Achieve Revenue Growth in Existing Restaurants:  We plan to drive revenue growth in our existing restaurants by advertising to strengthen our brand image, improve brand awareness, attract new customers and increase the frequency of existing customer visits. We also expect to increase return customer visits by consistently providing friendly, attentive service and delivering a superior customer experience.  In addition, we intend to grow our average check through pricing, product offerings and increased alcoholic beverage sales.  During fiscal year 2012, we undertook a Company-wide initiative to enhance the bar area and upgrade the audio visual package at all of our existing restaurants.  We believe this bar refreshing creates a more welcoming atmosphere, providing our customers more occasions to visit and we have implemented initiatives, such as new happy hour programs, to support increased alcoholic beverage sales.

·   Menu Innovation and Operational Excellence:  The Real American Roadhouse concept provides a broad platform from which to expand our menu and develop craveable food using signature ingredients and cross utilization of products.  We believe the introduction of new or improved menu items promotes return visits from our customers.  We intend to continue to improve upon our customer satisfaction by focusing on in-restaurant execution of great steaks and service.  We also plan to regularly monitor customer feedback and address opportunities to improve the customer experience.  During fiscal year 2012, we reorganized our operations leadership structure to gain improved oversight and focus on consistent execution.

The Logan’s Roadhouse Menu

Our restaurants are designed to appeal to a broad range of customers by offering a wide variety of high quality meals at affordable prices. Our menu features an assortment of aged beef that is primarily hand-cut on premises, specially seasoned, and grilled to order over mesquite wood. Our chicken breast entrées are made from always-fresh, never-frozen poultry. Our made-from-scratch yeast rolls are freshly baked on premises throughout the day and our salads are made from fresh lettuce cut daily.  Our signature steak burgers are freshly ground on premises and made with a blend of sirloin, chuck, ribeye and filet.

Our current dinner menu offers a selection of over 60 entrées and a wide variety of appetizers. Most dinner entrées include a choice of two side items, which may include a dinner salad, sweet potato, baked potato, mashed potatoes, grilled vegetables, fries or other side items.   Approximately 40% of our entrées sold are steak items and, in addition to our traditional sirloin steak offerings, we also serve a wide variety of premium steak cuts, including ribeye, prime rib, filet, T-bone and porterhouse.  Additionally, we offer a wide selection of seafood, ribs, and chicken entrées and our menu features a wide variety of combination meals.  We are open for lunch and dinner seven days a week and offer our customers an all-you-can-eat supply of our yeast rolls and peanuts.  Most of our restaurants feature a full bar that offers a selection of draft and bottled beer and also serves a selection of major brands of liquor and wine, as well as frozen margaritas and specialty drinks.  We emphasize responsible alcohol consumption, which we reinforce with our employees through training and operational standards.

We regularly review our menu to consider enhancements to existing menu items or the introduction of new items. We typically revise our menu one or two times each year allowing for the introduction of new menu items.  Market testing allows us to gain customer, operational and financial insight prior to finalizing any changes to the existing menu.

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Existing Restaurant Locations

As of July 29, 2012, we have 220 company-owned restaurants and 26 franchised restaurants in 23 states, as shown in the chart below:

	Number of restaurants
	Company-owned		Franchised		Total
	restaurants		restaurants		restaurants
Alabama		20		-		20
Arizona		4		-		4
Arkansas		5		-		5
California		-		8		8
Florida		12		-		12
Georgia		12		1		13
Illinois		3		-		3
Indiana		12		-		12
Kansas		5		-		5
Kentucky		11		-		11
Louisiana		8		-		8
Michigan		16		-		16
Mississippi		10		-		10
Missouri		4		-		4
North Carolina		-		11		11
Ohio		8		-		8
Oklahoma		6		-		6
Pennsylvania		4		-		4
South Carolina		-		6		6
Tennessee		26		-		26
Texas		41		-		41
Virginia		8		-		8
West Virginia		5		-		5
Total		220		26		246

Franchised Restaurants

As of July 29, 2012, we have two franchisees.  Both franchisees had development agreements that prohibited us from developing, owning, operating or granting a license to anyone else to operate a Logan’s Roadhouse restaurant in their respective territories; however, these agreements have expired.  Therefore, we are no longer prohibited from developing new restaurants within our franchisees’ respective territories, except that we are generally prohibited from developing new restaurants within five miles of existing franchisee operated restaurants.

Our existing franchisees operate under a form of franchise agreement that has an initial term of 20 years and contains either one or two five-year renewal options, exercisable upon the satisfaction of certain conditions. Our franchise agreements require our franchisees to pay a royalty fee ranging from 3.0% to 3.5% of restaurant sales and pay annually up to 1.0% of restaurant sales into an advertising fund. We also have the right to require our franchisees to make certain advertising expenditures in their local markets.

We do not offer financing, financial guarantees or other financial assistance to either of our franchisees and do not have an ownership interest in their properties or assets. We do not currently expect to establish any new franchises and our existing franchisees are not expected to open new restaurants as their development agreements have expired.

Site Selection

Our site selection process is critical to our growth strategy.  Therefore, we devote significant time and resources toward analyzing each prospective site.  Our restaurants principally rely on visit frequency and loyalty of customers who work, reside or shop in each of our trade areas.  In addition to carefully evaluating demographic information, market conditions and site characteristics for each prospective location, we consider many other qualitative and quantitative factors to assess the suitability of each site.  The site selection process also includes a thorough review and evaluation of the competitive dynamics of each site and senior management is involved in all aspects of the process, including site visits.  Final approval by our board of directors is required for each company-owned site.

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We remain focused on markets that allow us to backfill existing states as this provides us efficiencies in supply chain, marketing, and management supervision, while increasing brand awareness.  We target freestanding restaurant locations primarily using both ground leases and ground and building leases, which are commonly used to finance freestanding locations in the restaurant industry.

New Restaurant Prototype and Unit Economics

Our current prototypical restaurant consists of a freestanding building with approximately 6,500 square feet of space seating 237 customers.  Our investment for a new restaurant will vary significantly depending on a number of factors, including geographical location, required site work, type of construction labor and permitting and licensing requirements.  Our average investment costs for fiscal year 2012 openings, excluding land, consisted of $0.5 million for restaurant equipment, $0.2 million for pre-opening costs (excluding rent) and $1.4 million for buildings and site work, excluding $0.1 million of capitalized interest and overhead.  We plan to lease substantially all of our locations in the future through a mix of ground leases and ground and building leases.

In opening new restaurants, returns are not meaningfully measured until a restaurant reaches a mature run rate level of sales and profitability.  Our new restaurants historically open with initial sales volumes in excess of their sustainable run-rate levels, which we refer to as a “honeymoon” period.  During the three to six-month period following the opening of a new restaurant, customer traffic generally settles into more normalized, sustainable levels.  Increased “honeymoon” sales help to offset start up inefficiencies commonly associated with new restaurant openings, which allows our new restaurants to generate positive cash flows soon after opening.  Our average unit volumes for any given fiscal year may be impacted by a number of factors including site influences, competition, regional and local economic conditions, consumer eating habits and changes in our menu, including pricing.

Quality Assurance

Our philosophy is to proactively make food safety an integral part of our brand.  Training is a key component of ensuring proper food handling for all managers and hourly employees. In addition, we include food safety standards and procedures in recipes for our kitchen staff as part of the training process.  We have designed food safety and quality assurance programs to ensure that our restaurant team members and managers are properly trained on food safety. To help our restaurants meet our standards for clean and healthy restaurants, we also retain an independent consultant to conduct a comprehensive health and safety inspection of each restaurant throughout the year.

Food safety is also an important consideration in our supplier selection. Our key suppliers are inspected by reputable, independent, qualified inspection services, which helps ensure they are compliant with FDA and USDA guidelines.

Restaurant Operations

The complexity of operating our restaurants requires an effective management team at the restaurant level. Each restaurant is led by a general manager who typically oversees a kitchen manager and two assistant managers.  Restaurant general managers report to regional managers who are on average responsible for ten individual restaurants.

At the end of fiscal year 2012, we had fully implemented a new operational leadership structure and added an incremental level of operations supervision between our regional managers and senior management.  These new director of operations positions report to the senior vice president of operations and are each responsible for five to six regional managers.  We believe this change will help strengthen our execution by increasing restaurant visits across the regional manager and director of operations levels which will improve oversight and accountability among our restaurants.  Through regular visits to our company-owned restaurants, regional managers and directors of operations ensure that our standards of quality and operating procedures are being followed.  Increased oversight should improve consistency of execution and a better customer experience which we believe will result in a higher rate of return customer visits.

All new restaurant managers are generally required to complete six to seven weeks of training at a Logan’s Roadhouse restaurant. In addition, we have ongoing training modules throughout the year to further develop our restaurant managers and hourly service employees with training on current initiatives and areas of business focus.  We also have a specialized training and testing program required for restaurant managers and hourly service employees regarding responsible alcohol service and all restaurant managers receive training and testing on safety and security standards. We are committed to providing our customers prompt, friendly and efficient service, keeping table-to-server ratios low and staffing each restaurant with an experienced management team to maintain attentive customer service and consistent food quality. We receive valuable customer feedback through regular in-restaurant customer interaction as well as a detailed customer satisfaction survey program and contact with our guest relations department.  This feedback allows us to identify and focus on key drivers of customer satisfaction and monitor long-term trends in customer satisfaction and perception.

As motivation for restaurant managers to increase revenues and improve operational performance, we maintain an incentive bonus plan that rewards restaurant managers for achieving sales and profit targets, as well as key operating cost measures.  Each general manager also participates in a profit sharing bonus where they are rewarded by sharing in a percentage of earnings for their individual restaurants.

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Purchasing and Distribution

Our purchasing strategy is to develop long-term relationships with a core group of reputable and dependable supply sources. In general, we have adopted procurement strategies for all product categories that include contingency plans for key products, ingredients and supplies. These plans, in some instances, include the approval of secondary suppliers and alternative products.  We negotiate directly with food suppliers to ensure consistent quality, freshness, cost and overall compliance with our product specifications.  Our goal is to sign fixed price and supply contracts, when appropriate, to minimize the volatility associated with certain commodity items.  We invite our key suppliers to spend time in our kitchens and, conversely, our suppliers invite us to visit and develop products in their production facilities. As a result, we believe that our suppliers understand our brand, our direction, our systems and our needs, and we are able to better understand our suppliers’ capabilities. We believe that we have established excellent long-term relationships with key vendors.  If any items become unavailable from our current suppliers, we believe that we can obtain these items from other qualified suppliers at competitive prices.  Additionally, our management team continually monitors commodity trends to stay abreast of market pricing as well as new product sources.

We purchase the majority of our food products and restaurant supplies through a contracted national foodservice distributor.  The distributor is responsible for warehousing and delivering these food products and supplies to our restaurants. Certain perishable food items are purchased locally.

Advertising and Marketing

Our advertising and marketing strategy is designed to increase customer traffic and promote the Logan’s Roadhouse brand. Our goal is to attract new customers and increase the frequency with which existing customers visit our restaurants. We use a combination of broadcast advertising, print advertising and in-restaurant marketing throughout the year to communicate our marketing message. We also implement periodic targeted promotions to maintain relevancy, remain competitive and drive increased sales.

·   Broadcast Advertising — We use local broadcast media to advertise new product offerings and promotions, increase our brand identity and awareness, showcase our mouthwatering food and highlight our value.  We selectively focus on more highly penetrated markets to use our resources most efficiently.

·   Print Advertising — Our print media advertising includes free-standing newspaper inserts and inserts in coupon mailings. Our print media advertising is designed to communicate new products, promotions and value and is an efficient method to target our price sensitive customers.

·   In-Restaurant Marketing — We use in-restaurant marketing efforts to announce special events and to promote brand building initiatives such as happy hours, gift cards and our on-line loyalty club. We use our in-restaurant marketing to drive word of mouth advertising and repeat customers.

Team Members

As of July 29, 2012, we employed approximately 15,000 people, of whom 132 employees were either based out of our home office or field support management positions, 875 were restaurant management and the remainder were primarily part-time hourly restaurant personnel.  None of our employees are covered by a collective bargaining agreement. We believe working conditions and compensation packages are competitive with those offered by our peers and consider our relations with our employees to be good.

Information Systems and Restaurant Reporting

We utilize standard point-of-sale and back-office systems in our company-owned restaurants which are integrated to our central offices through a secure, high-speed connection.  These systems are designed to make our restaurants operate more efficiently and provide visibility to sales, cost of sales, labor, and other operating metrics. We provide various operating reports to our restaurant managers, our operating team and members of our executive staff.  We also distribute ranking reports to these same individuals that compare performance across restaurants.  Our back-office restaurant systems are integrated with our financial and human resources systems to support our financial reporting processes and controls.

We maintain a comprehensive security platform and we have a strong focus on the protection of our customers’ credit card information.  Our systems have been carefully designed and configured to protect against data loss and our practices and systems have been certified annually by an independent third party.

Competition

The restaurant industry is intensely competitive with respect to food and beverage offerings, price, service, restaurant location, personnel, brand, attractiveness of facilities, and effectiveness of advertising and marketing.  The restaurant business is often affected by changes in consumer tastes; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants; and consumers’ discretionary purchasing power.  We compete with national and regional chains and locally-owned restaurants for customers, management and hourly personnel and suitable real estate sites.  For information regarding the risks associated with competition, see Risk Factors in Item 1A of this Report.

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Trademarks and Service Marks

Our registered trademarks and service marks include among others, the marks Logan’s Roadhouse® and the design, Logan’s® and the design, The Logan® and The Real American Roadhouse®, as well as the trade dress element consisting of the “bucket” used in connection with our restaurant services.

We have used all of the foregoing marks in connection with our restaurants or items offered through our restaurants. We believe that our trademarks and service marks have significant value and are important to our identity, brand-building efforts and the marketing of our restaurant concept.  Our policy is to pursue registration of our important service marks and trademarks and vigorously enforce our rights against any infringers.

Seasonality

Our business is subject to minor seasonal fluctuations.  Historically, sales are typically lowest in the fall.  Holidays, severe weather and similar conditions may impact sales volumes seasonally in some operating regions.  Because of these factors, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Government Regulation

We are subject to a variety of federal, state and local laws. Each of our restaurants is subject to regulation by a number of government authorities which may include alcoholic beverage control, nutritional information disclosure, health, sanitation, environmental, zoning and public safety agencies in the state or municipality in which the restaurant is located.  Difficulties in obtaining or failure to obtain required licenses, permits or approvals could delay, prevent or increase the cost of the development of a new restaurant in a particular area.

Regulations governing the sale of alcoholic beverages require licensure by each site (in most cases, on an annual basis), and licenses may be revoked or suspended for cause at any time.  These regulations relate to many aspects of restaurant operation, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control, handling and storage and dispensing of alcoholic beverages.  We also are subject in certain states to “dram-shop” statutes, which generally provide an injured party with recourse against an establishment that serves alcoholic beverages to an intoxicated person who then causes injury to himself or a third party.  We carry liquor liability coverage as part of our comprehensive general liability insurance program.

We are subject to federal and state minimum wage laws and other labor laws governing such matters as overtime, tip credits, working conditions, citizenship or work authorization requirements, safety standards, and hiring and employment practices.

Our facilities must comply with the applicable requirements of the Americans with Disabilities Act of 1990 (“ADA”) and related state accessibility statutes.  Under the ADA and related state laws, we must provide equivalent service to disabled persons and make reasonable accommodation for their employment, and when constructing or undertaking significant remodeling of our restaurants, we must make those facilities accessible.

We are continuing to review the health care reform law enacted by Congress in March of 2010 (“Health Care Reform Law”).  As part of that review, we will evaluate the potential impacts of this new law on our business and implement various parts of the law as they take effect.

We are subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling.  We are or may become subject to laws and regulations requiring the disclosure of calorie, fat, trans fat, salt and allergen content.  The Health Care Reform Law requires restaurant companies such as ours to disclose calorie information on their menus.  The Food and Drug Administration has proposed rules to implement this provision that would require restaurants to post the number of calories for most items on menus or menu boards and to make available more detailed nutrition information upon request.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud.  An increasing number of governments and industry groups worldwide have established data privacy laws and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers) and health information.

See Item 1A Risk Factors below for a discussion of risks relating to federal, state and local regulation of our business, including the areas of health care reform and environmental matters.

Available Information

We maintain a link to investor relations information on our website, www.logansroadhouse.com, where we make available, free of charge, our SEC filings, including our annual reports, quarterly reports and current reports on Form 8-K filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC.  In addition, you may view and obtain, free of charge, at our website, copies of our corporate governance materials, including our Code of Business Ethics and Audit Committee Charter.

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ITEM 1A—RISK FACTORS

Various risks and uncertainties could affect our business.  Any of the risks described below or elsewhere in this report or our other filings with the SEC could have a material impact on our business, financial condition or results of operations.  It is not possible to predict or identify all risk factors.  Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations.  Therefore, the following is not intended to be a complete discussion of all potential risks or uncertainties.

Risks Related to Our Business

If we fail to execute our strategy and to open new restaurants that are profitable, our business could suffer.

A key aspect of our strategy is disciplined restaurant growth. In fiscal year 2012, we opened 19 restaurants and in fiscal year 2013, we plan to open approximately 15 new restaurants. We expect to open substantially all of our new restaurants in, or adjacent to, states where we have existing restaurants. Delays or failures in opening new restaurants, or achieving lower than expected sales in new restaurants, could materially adversely affect us. Our ability to open new restaurants successfully will also depend on numerous other factors, some of which are beyond our control, including, among other items, the following:

·   our ability to secure attractive new restaurant sites;

·   consumer acceptance of our new restaurants;

·   our ability to control construction and development costs of new restaurants;

·   our ability to hire, train and retain skilled management and restaurant employees;

·   our ability to obtain, for acceptable cost, required permits and approvals including liquor licenses; and

·   the cost and availability of capital to fund construction costs and pre-opening expenses.

Some of our new restaurants will be located in areas where we have existing restaurants. Increasing the number of locations in these markets may cause us to over-saturate markets and temporarily or permanently divert customers and sales from our existing restaurants, thereby adversely affecting our overall profitability.

Some of our new restaurants will be located in areas where we have little or no experience. Those markets may have different competitive conditions, market conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause our new restaurants in these markets to be less successful than restaurants in existing markets.  An additional risk of expanding into new markets is the lack of market awareness of the Logan’s Roadhouse brand.

We may not be able to respond timely to all of the changing demands that our planned expansion will impose on management and on our existing infrastructure nor be able to hire or retain the necessary additional management and operating personnel. Our existing restaurant management systems, financial and management controls and information systems may not be adequate to support our planned expansion. Our ability to manage our growth effectively will require us to continue to enhance these systems, procedures and controls.

Restaurants we open may not be profitable or achieve operating results similar to those of our existing restaurants. The actual performance of our new restaurants may also differ from their originally targeted performance, which difference may be material. Such performance can vary significantly depending on a number of factors, including site selection, average unit volumes, restaurant-level profitability and associated investment costs and these variances may be material.

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Macroeconomic conditions could adversely affect our ability to increase the sales and profits of existing restaurants or to open new restaurants.

General economic conditions may adversely affect our results of operations.  Recessionary economic cycles, a protracted economic slowdown, a worsening economy, increased unemployment, increased energy prices, rising interest rates or other industry-wide cost pressures could affect consumer behavior and spending for restaurant dining and lead to a decline in sales and earnings.  Job losses, foreclosures, bankruptcies and falling home prices could cause customers to make fewer discretionary purchases, and any significant decrease in our customer traffic or average profit per transaction will negatively impact our financial performance.  In addition, if gasoline, natural gas, electricity and other energy costs increase, and credit card, home mortgage and other borrowing costs increase with rising interest rates, our customers may have lower disposable income and reduce the frequency with which they dine out, may spend less on each dining out occasion, or may choose more inexpensive restaurants.

Furthermore, we cannot predict the effects that actual or threatened armed conflicts, terrorist attacks, efforts to combat terrorism, heightened security requirements, or a failure to protect information systems for critical infrastructure, such as the electrical grid and telecommunications systems, could have on our operations, the economy or consumer confidence generally. Any of these events could affect consumer spending patterns or result in increased costs for us.

In addition, a majority of our company-owned restaurants are located in the Southeast to Southwest United States, and as a result, we are particularly susceptible to adverse trends and economic conditions in those regions, including their labor markets. Given our geographic concentration in these regions, negative publicity regarding any of our restaurants in these regions could have a material adverse effect on our business and operations, as could other occurrences in these regions such as local strikes, energy shortages or increases in energy prices, droughts, hurricanes, fires, floods or other natural disasters.

Unfavorable changes in the above factors or in other business and economic conditions affecting our customers could increase our costs, reduce traffic in some or all of our restaurants or impose practical limits on pricing, any of which could lower our profit margins and have a material adverse effect on our financial condition and results of operations.

We face intense competition, and if we are unable to compete effectively, our business, financial condition, and results of operations could be adversely affected.

The restaurant industry is intensely competitive, and we compete with many well-established restaurant companies on the basis of type and quality of menu offerings, pricing, customer service, atmosphere, location and overall customer experience. We also compete with other restaurant chains and retail businesses for quality site locations and management and hourly employees.  Our competitors include a large and diverse group from independent local operators to well-capitalized national restaurant companies. In addition, we face growing competition from the supermarket industry, with the improvement of their “convenience meals” in the form of improved entrees and side dishes from the deli section.  Many of our competitors are larger and have significantly greater financial resources, a greater number of restaurants, have been in business longer, have greater brand recognition and are better established in the markets where our restaurants are located or are planned to be located.  As a result, they may be able to invest greater resources than we can in attracting customers and succeed in attracting customers who would have otherwise come to our restaurants.  If we are unable to continue to compete effectively, our business, financial condition and results of operations could be adversely affected.

Health concerns and government regulation relating to the consumption of beef, chicken, peanuts or other food products could affect consumer preferences and could negatively impact our results of operations.

Beef and chicken are key ingredients in many of our menu items.  Health concerns about the consumption of beef or chicken or negative publicity concerning food quality, illness and injury in general, could affect our customer preferences.  In recent years, there has been negative publicity concerning e. coli, hepatitis A, “mad cow” disease, “foot-and-mouth” disease, avian influenza, peanut and other food allergies and other public health concerns affecting the food supply. This negative publicity, as well as any other negative publicity concerning food products we serve, may adversely impact demand for our food and could result in a decrease in customer traffic to our restaurants. If we react to the negative publicity by changing our menu, we may lose customers who do not prefer the new menu, and we may not be able to attract sufficient new customers to generate the revenue needed to make our restaurants profitable. These health concerns, negative publicity, or menu changes could result in a decrease in customer traffic or a change in product mix, which could materially harm our business.

Peanuts contribute to the atmosphere of our restaurants, and we offer buckets of peanuts on our tables and throughout our restaurants. Owing to the severe nature of some peanuts allergies, peanuts have recently been identified by the U.S. Food and Drug Administration as a significant allergen, and federal and state regulators have contemplated extending current peanut labeling regulations to the restaurant industry. The introduction of such regulations could cause us to reduce our use of peanuts and modify the atmosphere of our restaurants, which could adversely affect our business and brand differentiation.

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Health concerns arising from outbreaks of viruses or food-borne illness may have an adverse effect on our business.

The United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as avian influenza, SARS and H1N1, or food-borne illness.  Food safety is top priority, and we dedicate substantial resources to ensuring that our customers enjoy safe, quality food products.  However, a widespread health epidemic or food-borne illness, whether or not traced to one of our restaurants, may cause customers to avoid public gathering places or otherwise change their eating behaviors. Even the prospect of a health epidemic could change consumer perceptions of food safety, disrupt our supply chain and impact our ability to supply certain menu items or staff our restaurants.  To the extent that a virus is food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of a product or avoid eating in restaurants. If a virus is transmitted by human contact, our employees or customers could become infected, or could choose, or be advised, to avoid gathering in public places.  In addition, certain jurisdictions in which we have restaurants may impose mandatory closures, seek voluntary closures or impose restrictions on operations.  Any of these events or any related negative publicity would adversely affect our business.

Our business is subject to seasonal fluctuations and past results are not indicative of future results.

Our net sales fluctuate seasonally and are historically lowest in the fall.  Because a significant portion of our restaurant operating costs is fixed or semi-fixed in nature, the loss of sales during these periods adversely impacts our profitability.  Additionally, holidays, severe weather and timing of marketing initiatives may affect sales volumes seasonally in some of our markets.  Our quarterly results have been and will continue to be affected by the timing of new restaurant openings and their associated pre-opening costs, as well as, restaurant closures and exit-related costs and impairments of tangible and intangible assets.  As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.

Changes in food and supply costs could adversely affect our results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Commodity pricing is volatile and can change unpredictably and over short periods. The impact of changes in commodity prices is also affected by the term and duration of our supply contracts, which are typically one-year contracts.  These contracts are negotiated at each renewal and we cannot guarantee that they will be available to us in the future on favorable terms or at all.  Any increase in food prices, particularly for beef, chicken, produce and seafood could adversely affect our operating results.  In addition, we are susceptible to increases in food costs as a result of factors beyond our control, such as weather conditions, food safety concerns, costs of distribution, production problems, delivery difficulties, product recalls and government regulations. We cannot predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices, menu items and prices, and a failure to do so could adversely affect our operating results. In addition, because our menu items are moderately priced, we may not seek to or be able to pass along price increases to our customers. If we adjust pricing there is no assurance that we will realize the full benefit of any adjustment due to changes in our customers’ menu item selections and customer traffic.

We rely heavily on certain vendors, suppliers and distributors which could adversely affect our business.

Our ability to maintain consistent prices and quality throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities. In many cases, we may have only one supplier for a product or supply, including our beef and chicken supply. Our dependence on single source suppliers subjects us to the possible risks of shortages, interruptions and price fluctuations.  In addition, we rely on a contract with one primary distributor to deliver products to our restaurants. If any of these vendors, our other suppliers or our primary distributor is unable to fulfill their obligations, or if we are unable to find replacement providers in the event of a supply or service disruption, we could encounter supply shortages and incur higher costs to secure adequate supplies, which would materially harm our business.

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We may be required to record additional impairment charges in the future.

In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to company-owned restaurant operations. When impairment triggers are deemed to exist for any given company-owned restaurant, the estimated undiscounted future cash flows for the restaurant are compared to its carrying value. If the carrying value exceeds the undiscounted future cash flows, an impairment charge is recorded equal to the difference between the carrying value and the estimated fair value.

We also review the value of our goodwill, tradename and other intangible assets on an annual basis and when events or changes in circumstances indicate that the carrying value may exceed the fair value of such assets. A significant amount of judgment is involved in determining if an indication of impairment exists.  Factors may include, among others:  a significant decline in our expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition and slower growth rates.  Any adverse change in these factors would have a significant impact on the recoverability of these assets and would negatively affect our financial condition and results of operations.  If impairment exists, we compute the amount by comparing the implied fair value to the carrying value and record a non-cash impairment charge for the difference.

As discussed further in notes 6 and 8 to the consolidated financial statements included in Item 15 of this Report, we concluded during the fourth quarter of fiscal year 2012 that our goodwill was impaired and recorded a non-cash impairment charge of $48.5 million.  We also recognized $4.4 million in asset impairment charges during fiscal year 2012 relating to our restaurants.  The estimates of fair value used in these analyses require management judgment, assumptions and estimates of future operating results. If actual results differ from our estimates or assumptions, additional impairment charges may be required in the future. If impairment charges are significant, our results of operations could be adversely affected.

Our inability to develop and recruit effective leaders, the loss of our executive officers or a significant shortage of high-quality restaurant employees could harm our business.

Our future success depends substantially on the contributions and abilities of our key executives and other employees.  The loss of the services of any of our executive officers could have a material adverse effect on our business if we are unable to find suitable individuals to replace such personnel on a timely basis.  Our future growth also depends greatly on our ability to recruit and retain high-quality employees to work in and manage our restaurants.  We must continue to recruit, retain and motivate management and other employees in order to grow our business and avoid higher labor costs associated with turnover.  A failure to maintain leadership excellence and build adequate bench strength, a loss of key employees or a significant shortage of high-quality restaurant employees could harm our business.

We may be subject to escalating labor costs due to federal and state legislation, labor shortages, turnover and competitive pressures.

We are subject to federal and state laws governing such matters as minimum wages, working conditions, overtime and tip credits.  As federal and state minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees but also the wages paid to employees at wage rates that are above minimum wage.  Labor shortages and health care mandates could also increase our labor costs.  In addition, if restaurant management and staff turnover trends increase, we could suffer higher direct costs associated with recruiting, training and retaining replacement personnel. Moreover, we could suffer from significant indirect costs, including restaurant disruptions due to management changeover, potential delays in new restaurant openings or adverse customer reactions to inadequate customer service levels due to staff shortages. Competition for qualified employees exerts upward pressure on wages paid to attract such personnel, resulting in higher labor costs, together with greater recruitment and training expense. This could lead us to increase prices.  However, if we adjust pricing there is no assurance that we will realize the full benefit of any adjustment due to changes in our customers’ menu item selections and customer traffic.  Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline.

Our current insurance may not provide adequate levels of coverage against claims.

We currently maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure.  In addition, we may not be able to obtain adequate insurance in the future and the current premiums that we pay for our insurance may increase over time and such increases may be significant.  Uninsured losses could have a material adverse effect on our business and results of operations. In addition, we self-insure a significant portion of expected losses under our workers’ compensation, general liability, employee health and property insurance programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which could have a material adverse effect on our business, financial condition and results of operations.

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Legal complaints or litigation may adversely affect our business, financial condition and results of operations.

Our business is subject to the risk of litigation by employees, customers, suppliers, note holders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. These actions and proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination; customer discrimination; food safety issues including poor food quality, food−borne illness, food tampering, food contamination, and adverse health effects from consumption of various food products or high−calorie foods (including obesity); other personal injury; trademark infringement; violation of the federal securities laws; or other concerns. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may be significant. There may also be adverse publicity associated with litigation that could decrease customer acceptance of our brand, regardless of whether the allegations are valid or we ultimately are found liable. Litigation could impact our operations in other ways as well. Allegations of illegal, unfair or inconsistent employment practices, for example, could adversely affect employee acquisition and retention. As a result, litigation may adversely affect our business, financial condition and results of operations.

We are also subject to state and local “dram shop” statutes, which may subject us to uninsured liabilities. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.  Because a plaintiff may seek punitive damages, which may not be fully covered by insurance, this type of action could have an adverse impact on our financial condition and results of operations.

Failure to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations could lead to the loss of our liquor and food service licenses and, thereby, harm our business.

The restaurant industry is subject to various federal, state and local government regulations, including those relating to the sale of food and alcoholic beverages. Such regulations are subject to change from time to time. The failure to obtain and maintain the required licenses, permits and approvals could adversely affect our operating results. Each restaurant is subject to licensing and regulation by a number of governmental authorities, which may include alcoholic beverage control, health and safety and fire agencies in the state, county or municipality in which the restaurant is located. Each restaurant is required to obtain a license to sell alcoholic beverages on the premises from a state authority and, in certain locations, county and municipal authorities. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time.  In some states, the loss of a license for cause with respect to one location may lead to the loss of licenses at all locations in that state and could make it more difficult to obtain additional licenses in that state. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of each restaurant, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages.  Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, which would adversely affect our business.

We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

We rely heavily on information systems, including point-of-sale processing in our restaurants, management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures, some of which are licensed from third parties. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in security of these systems could cause delays in customer service and reduce efficiency in our operations, and significant capital investments could be required to remediate the problem.

We may incur costs or liabilities resulting from breaches of security of confidential customer information related to our electronic processing of credit and debit card transactions.

The majority of our restaurant sales are by credit or debit cards. Other retailers have experienced security breaches in which credit and debit card information has been stolen. Though we have mechanisms in place to protect information transmitted by credit or debit card, there is no guarantee that such mechanisms will be effective to prevent such information from being compromised by unscrupulous third parties. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition and results of operations. Further, adverse publicity resulting from these allegations may have a material adverse effect on us and our restaurants.

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Our failure or inability to enforce our intellectual property rights could adversely affect our competitive position or the value of our brand.

We own certain common law trademark rights and a number of federal trademark and service mark registrations, including our trade name and logo and proprietary rights relating to our methods of operation and certain of our core menu offerings. We currently own the exclusive rights to use various domain names containing or relating to our brand. We rely on the trademark, copyright and trade secret laws of the United States, as well as nondisclosure and confidentiality agreements, to protect our intellectual property rights. We believe that our intellectual property rights are important to our success and our competitive position, and, therefore, we devote appropriate resources to their protection. However, we may not be able to prevent unauthorized use, imitation or infringement by others, which could harm our image, brand or competitive position. If we commence litigation to enforce our rights, such proceedings could be burdensome and costly, and we may not prevail.

We cannot assure you that our intellectual property does not and will not infringe the intellectual property rights of others, or that third parties will not claim infringement by us in the future. Any such claim, whether or not it has merit, could be time-consuming and distracting for executive management, result in costly litigation and, should we be found liable, cause changes to existing menu items or delays in introducing new menu items, or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse effect on our business, financial condition and results of operations.

Our franchisees could take actions that could be harmful to our business.

Our franchisees are contractually obligated to operate their restaurants in accordance with our standards and all applicable laws. Although we attempt to properly train and support franchisees, franchisees are independent third parties that we do not control, and the franchisees own, operate and oversee the daily operations of their restaurants. As a result, the ultimate success and quality of any franchised restaurant rests with the franchisee. If franchisees do not successfully operate restaurants in a manner consistent with our standards, our image and reputation could be harmed, which in turn could adversely affect our business and operating results.  Further, the failure of either of our two franchisees or any of their restaurants to remain financially viable could result in their failure to pay royalties owed to us. Finally, regardless of the actual validity of such a claim, we may be named as a party in an action relating to, and/or be held liable for, the conduct of our franchisees if it is shown that we exercise a sufficient level of control over a particular franchisee’s operation.

We are subject to many federal, state and local laws with which compliance is both costly and complex.

The restaurant industry is subject to extensive federal, state and local laws and regulations, including those relating to minimum wage and other labor issues, health care, building and zoning requirements and those relating to the preparation and sale of food. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards and liquor licenses, federal and state laws governing our relationships with employees (including the Fair Labor Standards Act of 1938, the Immigration Reform and Control Act of 1986 and applicable requirements concerning the minimum wage, overtime, family leave, tip credits, working conditions, safety standards, immigration status, unemployment tax rates, workers’ compensation rates and state and local payroll taxes), federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities, such as the Americans With Disabilities Act of 1990, or the ADA.

We are reviewing the Health Care Reform Law. As part of that review, we will evaluate the potential impacts of this new law on our business, and accommodate various parts of the law as they take effect. There are no assurances that a combination of cost management and price increases can accommodate all of the costs associated with compliance.  The Health Care Reform Law also requires restaurant companies such as ours to disclose calorie information on their menus. We do not expect to incur any material costs from compliance with this provision, but cannot anticipate any changes in customer behavior resulting from the implementation of this portion of the law, which could have an adverse effect on our sales or results of operations.

We are subject to a variety of federal, state and local laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials.  There also has been increasing focus by U.S. and overseas governmental authorities on other environmental matters, such as climate change, the reduction of greenhouse gases and water consumption. This increased focus may lead to new initiatives directed at regulating an as yet unspecified array of environmental matters, such as the emission of greenhouse gases, where “cap and trade” initiatives could effectively impose a tax on carbon emissions.  Legislative, regulatory or other efforts to combat climate change or other environmental concerns could result in future increases in the cost of raw materials, taxes, transportation and utilities, which could decrease our operating profits and necessitate future investments in facilities and equipment.

We are subject to laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud. An increasing number of governments and industry groups worldwide have established data privacy laws and standards for the protection of personal information, including social security numbers, financial information (including credit card numbers), and health information. Compliance with these laws and regulations can be costly, and any failure or perceived failure to comply with those laws could harm our reputation or lead to litigation, which could adversely affect our financial condition.

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We are subject to various state laws that govern the offer and sale of franchises, as well as the rules and regulations of the Federal Trade Commission. Additionally, many state laws regulate various aspects of the franchise relationship, including the nature, timing and sufficiency of disclosures to franchisees upon the initiation of the franchisor-potential franchisee relationship, our conduct during the franchisor-franchisee relationship and renewals and terminations of franchises.  Any past or future failures by us to comply with these laws and regulations in any jurisdiction or to obtain required government approvals could result in franchisee-initiated lawsuits, a ban or temporary suspension on future franchise sales, civil and administrative penalties or other fines, or require us to make offers of rescission, disgorgement or restitution, any of which could adversely affect our business and operating results. We could also face lawsuits by our franchisees based upon alleged violations of these laws. In the case of willful violations, criminal sanctions could be brought against us.

The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or an insufficient or ineffective response to significant regulatory or public policy issues, could increase our cost structure, operational efficiencies and talent availability, and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.

Any strategic transactions that we consider in the future may have unanticipated consequences that could harm our business and our financial condition.

From time to time, we evaluate potential transactions, acquisitions of restaurants (including from our franchisees), joint ventures or other strategic initiatives to acquire or develop additional concepts. To successfully execute any acquisition or development strategy, we will need to identify suitable acquisition or development candidates, negotiate acceptable acquisition or development terms and obtain appropriate financing. Any acquisition or future development that we pursue, whether or not successfully completed, may involve risks, including:

·   material adverse effects on our operating results, particularly in the fiscal quarters immediately following the acquisition or development as the restaurants are integrated into our operations;

·   risks associated with entering into new domestic markets or conducting operations where we have no or limited prior experience, including international markets;

·   risks inherent in accurately assessing the value, future growth potential, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates, and our ability to achieve projected economic and operating synergies; and

·   the diversion of management’s attention from other business concerns.

We may need additional capital in the future, and it may not be available on acceptable terms.

The development of our business may require significant additional capital in the future to fund our operations and growth, among other activities. We have historically relied upon cash generated by our operations and lease financing to fund our expansion. In the future, we intend to rely on funds from operations, lease financing and our Senior Secured Revolving Credit Facility. We may also need to access the debt and equity capital markets for additional financing. There can be no assurance, however, that these sources of financing will be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance, investor sentiment and our ability to incur additional debt in compliance with agreements governing our then-outstanding debt. These factors may make the timing, amount, terms or conditions of additional financings unattractive to us. If we are unable to generate sufficient funds from operations or raise additional capital, our growth would be impeded.

We are controlled by the Kelso Affiliates, and their interests as equity holders may conflict with your interests.

The Kelso Affiliates beneficially own a substantial majority of our equity. The Kelso Affiliates control our board of directors, and thus are able to appoint new management and approve any action requiring the vote of our outstanding common stock, including amendments of our certificate of incorporation, transactions and sales of substantially all of our assets. The directors elected by the Kelso Affiliates are able to make decisions affecting our capital structure, including decisions to issue additional capital stock and incur additional debt. The interests of our equity holders may not in all cases be aligned with the interests of our public debt holders. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might conflict with the interests of our note holders.  Our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transaction might involve risks to the note holders.

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Failure of our internal controls over financial reporting and future changes in accounting standards may cause adverse unexpected operating results or otherwise harm our business and financial results.

We are subject to the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), which requires, among other things, SEC reporting companies to maintain disclosure controls and procedures to ensure timely disclosure of material information, and management to attest to the effectiveness of those controls on a quarterly basis.  Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States (“GAAP”).  Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Our growth and acquisition of other restaurant companies with procedures not identical to our own could place significant additional pressure on our system of internal control over financial reporting.  In addition, due to an exemption established by rules of the SEC, we are not required to have and have not had our independent registered public accounting firm perform an evaluation of our internal control over financial reporting as of the end of our fiscal year in accordance with the provisions of the Sarbanes-Oxley Act of 2002. Had our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act of 2002, control deficiencies may have been identified by our independent registered public accounting firm and those control deficiencies could have also represented one or more material weaknesses.  Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence.

A change in accounting standards can have a significant effect on our reported results and may affect our reporting of transactions before the change is effective. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the questioning of current accounting practices may adversely affect our reported financial results. Additionally, our assumptions, estimates and judgments related to complex accounting matters could significantly affect our financial results. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to, revenue recognition, fair value of investments, impairment of long−lived assets, leases and related economic transactions, intangibles, self−insurance, income taxes, property and equipment, unclaimed property laws and litigation, and stock−based compensation are highly complex and involve many subjective assumptions, estimates and judgments by us. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by us could significantly change our reported or expected financial performance.

We are an “emerging growth company” and are able to take advantage of reduced disclosure requirements applicable to emerging growth companies.

Congress enacted the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act,” on April 5, 2012. Pursuant to the provisions of the JOBS Act, we qualify as an “emerging growth company.”  For as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other reporting companies that are not “emerging growth companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports.  Therefore, any such information may not be available to you.  We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

In addition, Sections 102(b) and 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to non-reporting companies. However, we have chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. If other emerging growth companies take advantage of the extended transition period, our financials may no longer be comparable to such companies’ financials, and we may be disadvantaged by any new or revised accounting standard that is unfavorable to us.  Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Risks Related to Our Indebtedness

Our substantial indebtedness and any new indebtedness we incur in the future could adversely affect our financial condition and prevent us from fulfilling our obligations.

We have a significant amount of indebtedness. As of July 29, 2012, our total long-term debt was $355.0 million, representing our Notes.  We have commitments under our Senior Secured Revolving Credit Facility available to us of $30.0 million (less approximately $3.6 million of undrawn outstanding letters of credit), all of which would be secured on a first-priority basis if borrowed.

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Subject to the limits contained in the indenture governing the Notes (the “Indenture”) and the credit agreement governing the Senior Secured Revolving Credit Facility (the “Credit Agreement”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. The additional indebtedness we may incur could be substantial.  In addition, the Indenture and Credit Agreement will not prevent us from incurring obligations that do not constitute indebtedness, including obligations under lease arrangements that are currently recorded as operating leases even if operating leases were to be treated as debt under GAAP.  If we do incur additional debt, the risks related to our high level of debt would intensify. Specifically, our high level of debt could have important consequences, including:

·   making it more difficult for us to satisfy our obligations with respect to the Notes and our other debt;

·   limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

·   requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

·   increasing our vulnerability to general adverse economic and industry conditions;

·   exposing us to the risk of increased interest rates as borrowings under the Senior Secured Revolving Credit Facility will be at variable rates of interest;

·   limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

·   placing us at a disadvantage compared to other, less leveraged competitors; and

·   increasing our cost of borrowing.

In addition, the Indenture and the Credit Agreement contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Credit Agreement and the Indenture restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under our debt.

If we cannot make scheduled payments on our debt, we will be in default and holders of the Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Senior Secured Revolving Credit Facility could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

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The terms of the Credit Agreement and the Indenture restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The Credit Agreement and the Indenture contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:

·   incur or guarantee additional indebtedness;

·   pay dividends on or make other distributions or repurchase or redeem capital stock;

·   prepay, redeem or repurchase certain indebtedness;

·   make loans and investments;

·   sell assets;

·   incur liens;

·   enter into transactions with affiliates;

·   alter the businesses we conduct;

·   enter into agreements restricting our subsidiaries’ ability to pay dividends; and

·   consolidate, merge or sell all or substantially all of our assets.

In addition, the restrictive covenants in the Credit Agreement require us, at any time revolving loans are made or are outstanding or any letter of credit is issued or outstanding, to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control.

A breach of the covenants under the Indenture or the Credit Agreement could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Agreement permits the lenders under the Senior Secured Revolving Credit Facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under the new revolving credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

As a result of restrictions contained in the Indenture and the Credit Agreement, we may be:

·   limited in how we conduct our business;

·   unable to raise additional debt or equity financing to operate during general economic or business downturns; or

·   unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy.

ITEM 1B—UNRESOLVED STAFF COMMENTS

None.

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ITEM 2—PROPERTIES

Our corporate headquarters are located in Nashville, Tennessee.  We occupy our current facility, which is approximately 38,500 square feet, under a lease that expires in February 2015.  We also occupy a 6,000 square feet culinary training center under a lease that expires in February 2015.  Of the 220 company-owned restaurants in operation as of July 29, 2012, we owned nine locations and leased 211 locations as shown in the following table:

	Restaurant Properties
	Owned		Leased		Total
Alabama		1		19		20
Arizona		1		3		4
Arkansas		1		4		5
Florida		-		12		12
Georgia		-		12		12
Illinois		-		3		3
Indiana		-		12		12
Kansas		-		5		5
Kentucky		1		10		11
Louisiana		-		8		8
Michigan		-		16		16
Mississippi		1		9		10
Missouri		-		4		4
Ohio		-		8		8
Oklahoma		1		5		6
Pennsylvania		-		4		4
Tennessee		2		24		26
Texas		1		40		41
Virginia		-		8		8
West Virginia		-		5		5
Total		9		211		220

Of the 211 leased restaurant properties, 122 are land leases and 89 are land and building leases.  All of our leases are recorded as operating leases, and most contain rent escalation clauses and rent holiday periods.  See note 12 to the consolidated financial statements included in Item 15 of this Report for additional details.  We own substantially all of the equipment, furnishings and trade fixtures in our restaurants.

ITEM 3—LEGAL PROCEEDINGS

We are a defendant from time to time in litigation arising in the ordinary course of our business, including claims resulting from “slip and fall” accidents, “dram shop” claims, construction-related disputes, employment-related claims, and claims from customers or employees alleging illness, injury or other food quality, health or operational wrong-doing.  As of the date of this report, we are not a party to any litigation that we believe could have a material adverse effect on our business, financial condition, or results of operations.

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PART II

ITEM 5—MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no public trading market for our common units.

ITEM 6—SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the consolidated financial statements and related notes contained in Item 15 Exhibits and Financial Statement Schedules along with, Item 1A Risk Factors and Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.  We derived the selected financial data from the audited consolidated financial statements and related notes found elsewhere in this Report for the fiscal year ended July 29, 2012, the period from October 4, 2010 to July 31, 2011, the period from August 2, 2010 to October 3, 2010 and the fiscal year ended August 1, 2010.  We derived the selected financial data from our historical audited consolidated financial statements and related notes not included in this Report for the fiscal year ended August 2, 2009 and the fiscal year ended August 3, 2008.  All fiscal years presented comprise 52 weeks except fiscal year 2008 which comprises 53 weeks.

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The Transactions resulted in a change in ownership of substantially all of LRI Holdings’ outstanding common stock and was accounted for in accordance with accounting guidance for business combinations and, accordingly, resulted in the recognition of assets acquired and liabilities assumed at fair value as of October 4, 2010.  The purchase price has been “pushed down” to LRI Holdings’ financial statements.  The consolidated financial statements for all periods prior to October 4, 2010 are those of the Company prior to the Transactions (“Predecessor”).  The consolidated financial statements for the period beginning October 4, 2010 are those of the Company subsequent to the Transactions (“Successor”).  As a result of the Transactions, the financial statements after October 4, 2010 are not comparable to those prior to that date.

	Successor						Predecessor
				Period from			Period from
				October 4, 2010			August 2, 2010
	Fiscal year			to			to			Fiscal year
(In thousands, except restaurant data and percentages)	2012			July 31, 2011			October 3, 2010			2010			2009			2008
Statement of operations data:
Revenues:
Net sales	$	629,987		$	497,170		$	93,762		$	555,460		$	533,248		$	529,424
Franchise fees and royalties		2,186			1,793			348			2,068			2,248			2,574
Total revenues		632,173			498,963			94,110			557,528			535,496			531,998
Costs and expenses:
Restaurant operating costs:
Cost of goods sold		207,225			162,805			29,172			174,186			172,836			176,010
Labor and other related expenses		184,310			145,258			28,578			165,877			161,173			164,074
Occupancy costs		48,780			36,817			8,046			42,397			39,923			37,952
Other restaurant operating expenses		100,680			71,708			15,478			81,826			79,263			80,255
Depreciation and amortization		20,309			14,588			3,112			17,040			17,206			16,146
Pre-opening expenses		4,808			2,984			783			2,111			2,137			3,170
General and administrative		25,373			30,460			14,440			24,216			25,126			26,538
Goodwill and intangible asset impairment		48,526			-			-			-			16,781			-
Store impairment and closing charges		4,438			25			-			91			6,406			6,622
Total costs and expenses		644,449			464,645			99,609			507,744			520,851			510,767
Operating (loss) income		(12,276	)		34,318			(5,499	)		49,784			14,645			21,231
Interest expense, net		39,748			33,823			3,147			18,857			20,557			22,618
Other (income) expense, net		-			(15	)		(182	)		(798	)		1,543			2,631
(Loss) income before income taxes		(52,024	)		510			(8,464	)		31,725			(7,455	)		(4,018	)
Income tax (benefit) expense		(5,496	)		(70	)		(8,240	)		11,704			(5,484	)		(3,392	)
Net (loss) income		(46,528	)		580			(224	)		20,021			(1,971	)		(626	)
Undeclared preferred dividend		-			-			(2,270	)		(12,075	)		(10,568	)		(9,605	)
Net (loss) income attributable to common stockholders	$	(46,528	)	$	580		$	(2,494	)	$	7,946		$	(12,539	)	$	(10,231	)
Selected other data:
Restaurants open end of period:
Company-owned		220			201			189			186			177			170
Total		246			227			215			212			203			196
Average unit volumes (in millions)(1)	$	2.9		$	2.5		$	0.5		$	3.0		$	3.0		$	3.2
Operating weeks(1)		11,108			8,478			1,692			9,539			9,092			8,692
Restaurant operating margin(2)		14.1	%		16.2	%		13.3	%		16.4	%		15.0	%		13.4	%
EBITDA(3)	$	8,033		$	48,921		$	(2,205	)	$	67,622		$	30,308		$	34,746
Adjusted EBITDA(3)		75,218			71,816			8,567			75,045			65,117			54,987
Adjusted EBITDAR(3)		111,844			98,693			15,695			107,184			94,949			83,665
Comparable restaurant data:(4)
Change in comparable restaurant sales		-1.2	%		0.1	%		4.2	%		-0.3	%		-2.8	%		0.8	%
Average check	$	13.52		$	13.09		$	12.75		$	12.70		$	12.79		$	13.01
Cash flow data:
Operating activities	$	36,488		$	16,549		$	2,664		$	56,400		$	35,500		$	28,201
Investing activities		(33,859	)		(342,838	)		(5,380	)		(15,100	)		(27,039	)		(18,738	)
Financing activities		-			345,392			-			(2,158	)		(1,580	)		(6,215	)

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	Successor						Predecessor
(In thousands)	July 29, 2012			July 31, 2011			August 1, 2010		August 2, 2009			August 3, 2008
Selected balance sheet data:
Cash and cash equivalents	$	21,732		$	19,103		$	52,211	$	13,069		$	6,188
Working (deficit) capital (5)		(23,891	)		(20,995	)		23,878		(6,164	)		(17,295	)
Total assets		687,826			728,824			443,145		408,256			415,794
Total debt		355,000			355,000			218,683		220,063			220,050

(1)   Represents the average sales for company-owned restaurants over a specified period of time.  It is typically measured on a 52-week basis but may also be applied to a shorter period.  Average unit volume reflects total company restaurant sales divided by total operating weeks, which is the aggregate number of weeks that company-owned restaurants are in operation over a specified period of time.

(2)   Restaurant operating margin represents net sales less (a) cost of goods sold, (b) labor and other related expenses, (c) occupancy costs and (d) other restaurant operating expenses, divided by net sales. Restaurant operating margin is a supplemental measure of operating performance of our company-owned restaurants that does not represent and should not be considered as an alternative to net income or net sales as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies. Restaurant operating margin has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Management believes restaurant operating margin is an important component of financial results because it is a widely used metric within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. Management uses restaurant operating margin as a key metric to evaluate our financial performance compared with our competitors, to evaluate the profitability of incremental sales and to evaluate our performance across periods.

The following table sets forth a reconciliation of net sales to restaurant operating margin:

	Successor						Predecessor
				Period from			Period from
				October 4, 2010			August 2, 2010
	Fiscal year			to			to			Fiscal year
(In thousands)	2012			July 31, 2011			October 3, 2010			2010			2009			2008
Net sales (A)	$	629,987		$	497,170		$	93,762		$	555,460		$	533,248		$	529,424
Restaurant operating costs:
Cost of goods sold		207,225			162,805			29,172			174,186			172,836			176,010
Labor and other related expenses		184,310			145,258			28,578			165,877			161,173			164,074
Occupancy costs		48,780			36,817			8,046			42,397			39,923			37,952
Other restaurant operating expenses		100,680			71,708			15,478			81,826			79,263			80,255
Restaurant operating profit (B)	$	88,992		$	80,582		$	12,488		$	91,174		$	80,053		$	71,133
Restaurant operating margin (B / A)		14.1	%		16.2	%		13.3	%		16.4	%		15.0	%		13.4	%

(3)   EBITDA represents net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization.  Adjusted EBITDA is further adjusted to reflect the additions and eliminations described in the table below. EBITDA and Adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations as determined under GAAP, and our calculations thereof may not be comparable to those reported by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

·   EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for, capital expenditures or contractual commitments;

·   EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

·   EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;

·   EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;

·   although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and

·   other companies in the restaurant industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

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Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. We further believe that our presentation of these non-GAAP financial measures provides information that is useful to analysts and investors because it is an important indicator of the strength of our operations and the performance of our core business.

As noted in the table below, Adjusted EBITDA excludes restaurant impairment charges, pre-opening expenses (excluding rent), sponsor management fees, hedging gain/loss and losses on disposal of property and equipment and property sales, share-based compensation, and non-cash rent, among other items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate partly because the amounts recognized can vary significantly from period to period and complicate comparisons of our internal operating results and operating results of other restaurant companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record, including goodwill and tradename impairments, restructuring costs, transaction costs and expenses recorded pursuant to accounting for business combinations. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help to provide management with a measure of our core operating performance over time by removing items that are not related to day-to-day restaurant level operations.

Management uses Adjusted EBITDA:

·   as a measure of operating performance to assist us in comparing the operating performance of our restaurants on a consistent basis because it removes the impact of items not directly resulting from our core operations;

·   for planning purposes, including the preparation of our internal annual operating budgets and financial projections;

·   to evaluate the performance and effectiveness of our operational strategies; and

·   to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan.

Adjusted EBITDAR further excludes cash rent expense from Adjusted EBITDA. Cash rent expense represents actual cash payments required under our leases.

In addition, EBITDA, Adjusted EBITDA and Adjusted EBITDAR are used by investors as supplemental measures to evaluate the overall operating performance of companies in the restaurant industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as reasonable bases for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations from one period to the next and would ordinarily add back items that are not part of normal day-to-day operations of our business. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

We also present Adjusted EBITDA because it is based on “Consolidated EBITDA,” a defined measure which is used in calculating financial ratios in material debt covenants and other calculations in the Indenture and the Credit Agreement. We believe that presenting Adjusted EBITDA is appropriate to provide additional information to investors about how the covenants in the agreements governing our debt facilities operate. The Credit Agreement and the Indenture may permit us to exclude other non-cash charges and specified non-recurring expenses in calculating Consolidated EBITDA in future periods, which are not reflected in the Adjusted EBITDA data presented in this Report.

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The following table sets forth a reconciliation of net (loss) income, the most directly comparable GAAP financial measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDAR.

	Successor						Predecessor
				Period from			Period from
				October 4, 2010			August 2, 2010
	Fiscal year			to			to			Fiscal year
(In thousands)	2012			July 31, 2011			October 3, 2010			2010			2009			2008
Net (loss) income	$	(46,528	)	$	580		$	(224	)	$	20,021		$	(1,971	)	$	(626	)
Interest expense, net		39,748			33,823			3,147			18,857			20,557			22,618
Income tax (benefit) expense		(5,496	)		(70	)		(8,240	)		11,704			(5,484	)		(3,392	)
Depreciation and amortization		20,309			14,588			3,112			17,040			17,206			16,146
EBITDA		8,033			48,921			(2,205	)		67,622			30,308			34,746
Adjustments
Sponsor management fees(a)		1,000			795			205			1,611			1,486			1,250
Non-cash asset write-offs:
Goodwill and tradename impairment(b)		48,526			-			-			-			16,781			-
Restaurant impairment(c)		4,438			25			-			91			6,252			6,622
Loss on disposal of property and equipment(d)		3,341			741			164			928			877			977
Restructuring costs(e)		442			-			-			-			892			683
Pre-opening expenses (excluding rent)(f)		3,882			2,296			598			1,624			1,443			2,561
Hedging (gain) loss(g)		-			-			(182	)		(798	)		1,543			2,631
Losses on sales of property(h)		125			23			39			-			-			1,206
Non-cash rent adjustment(i)		4,610			4,478			(334	)		3,367			4,505			3,599
Costs related to the Transactions(j)		43			13,671			10,272			111			187			613
Non-cash stock-based compensation(k)		746			821			-			-			-			-
Other adjustments(l)		32			45			10			489			843			99
Adjusted EBITDA		75,218			71,816			8,567			75,045			65,117			54,987
Cash rent expense(m)		36,626			26,877			7,128			32,139			29,832			28,678
Adjusted EBITDAR	$	111,844		$	98,693		$	15,695		$	107,184		$	94,949		$	83,665

(a)   Prior to the completion of the Transactions, sponsor management fees consisted of fees paid to our Predecessor owners under a management and consulting services agreement, which was terminated in connection with the completion of the Transactions. Following the completion of the Transactions, sponsor management fees consist of fees paid to the Kelso Affiliates under an advisory agreement.

(b)   We recorded a goodwill impairment charge in fiscal year 2012.  See note 6 to the consolidated financial statements included in Item 15 of this Report for additional details.  We recorded an impairment charge in fiscal year 2009 related to our Logan’s Roadhouse tradename.

(c)   Restaurant impairment charges were recorded in connection with the determination that the carrying value of certain of our restaurants exceeded their estimated fair value.  See note 8 to the consolidated financial statements included in Item 15 of this Report for additional details.

(d)   Loss on disposal of property and equipment consists of the loss from the disposal or retirement of assets that are not fully depreciated.

(e)   Restructuring costs include severance and other related costs.

(f)   Pre-opening expenses (excluding rent) include expenses directly associated with the opening of a new restaurant. See note 2 to the consolidated financial statements included in Item 15 of this Report for additional details.

(g)   Hedging (gain) loss relates to fair market value changes of an interest rate swap and the related interest. The interest rate swap was terminated in connection with the Transactions.  See note 9 to the consolidated financial statements included in Item 15 of this Report for additional details.

(h)   We recognize losses in connection with the sale and leaseback of restaurants when the fair value of the property being sold is less than the undepreciated cost of the property. See note 12 to the consolidated financial statements included in Item 15 of this Report for additional details.

(i)   Non-cash rent adjustments represent the non-cash rent expense calculated as the difference between GAAP rent expense and amounts payable in cash under the leases during such time period. In measuring our operational performance, we focus on our cash rent payments. See note 2 to the consolidated financial statements included in Item 15 of this Report for additional details.

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(j)   Costs related to the Transactions include: expenses related to business combination accounting recognized in connection with the Transactions, a one-time fee of $7.0 million paid to the Kelso Affiliates and legal, professional, and other fees incurred as a result of the Transactions. For fiscal year 2010 and prior, these costs related to the acquisition of Logan’s Roadhouse, Inc. by our Predecessor owners.

(k)   Non-cash stock-based compensation represents compensation expense recognized for time-based stock options issued by RHI.  See note 18 to the consolidated financial statements included in Item 15 of this Report for additional details.

(l)   Other adjustments include $0.6 million of casualty losses resulting from damages to our restaurants during fiscal year 2009, ongoing expenses of closed restaurants, as well as inventory write-offs, employee termination buyouts and incidental charges related to restaurant closings.

(m)   Cash rent expense represents actual cash payments required under our leases.

(4)   We use a number of key performance indicators in assessing the performance of our restaurants, including change in comparable restaurant sales and average check. These key performance indicators are discussed in more detail in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report.

(5)   Working (deficit) capital is defined as current assets less current liabilities.

ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.  Our MD&A is presented in the following sections:

·   General

·   Overview

·   Key Measurements

·   Matters Affecting Comparability

·   Presentation of Results

·   Results of Operations

·   Other Non-GAAP Financial Measures

·   Liquidity and Capital Resources

·   Capital Expenditures

·   Off Balance Sheet Arrangements

·   Contractual Obligations

·   Seasonality

·   Segment Reporting

·   Impact of Inflation

·   Critical Accounting Policies

·   Recent Accounting Pronouncements

This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes in Item 15 of this Report, the Risk Factors included in Item 1A of this Report and the cautionary statements included throughout this Report.  The inclusion of supplementary analytical and related information herein may require us to make estimates and assumptions in connection with our analysis of trends and expectations with respect to our results of operations and financial position taken as whole.

General

Logan’s Roadhouse is a family-friendly, casual dining restaurant chain that revisits the classic roadhouse from days past and brings it to life in a modern way through our craveable food, abundance and affordability, welcoming hospitality and upbeat atmosphere.  Our restaurants have a relaxed, come-as-you-are environment where we encourage our customers to enjoy “bottomless buckets” of roasted in-shell peanuts and to toss the shells on the floor.  Our entrée portions are generous and generally include a choice of two side items, all at affordable prices.  We are committed to serving a variety of fresh food from specially seasoned aged steaks to farm-fresh salads to our made-from-scratch yeast rolls.  We believe the freshness and distinctive flavor profiles of our signature dishes, coupled with the variety of our menu, differentiates us from our competitors.  Our restaurants, which are open for lunch and dinner seven days a week, serve a broad and diverse customer base.   We opened our first restaurant in Lexington, Kentucky in 1991 and as of July 29, 2012 have grown to a total of 220 company-owned restaurants and 26 franchised restaurants located across 23 states.

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Overview

We are branded as the Real American Roadhouse making us a welcoming destination for a wide range of customers across a broad demographic range.  Our strategy is to grow long-term sales and profits by delivering a unique customer experience that is so great and so affordable that customers will eat out with us more often.  We plan to execute this strategy by driving long-term revenue growth through opening new restaurants and growing sales in existing restaurants.  We expect this revenue growth to lead to sustained long-term profit growth as a result of new restaurant contributions and improved restaurant operating margins from fixed cost leverage.

The following summarizes our performance and provides insight into our fiscal year 2013 outlook.

Growing our restaurant base.  We believe differentiated, moderately priced roadhouse concepts have broad customer appeal and remain underpenetrated relative to the bar and grill and steakhouse segments within casual dining.  We intend to focus on disciplined growth of our brand by strategically opening additional company-owned restaurants in existing and adjacent states to gain operational efficiencies and strengthen our brand presence.  We successfully opened 19 company-owned restaurants in fiscal year 2012 and plan to open approximately 15 company-owned restaurants in fiscal year 2013.  The lower growth rate in fiscal year 2013 reflects our commitment to fund our planned capital expenditures through net cash provided from operations and operating lease financing.

Growing sales in existing restaurants. Growth in restaurant sales can be driven by increased customer traffic as well as an increase in average check which can be driven by menu price increases and changes in menu mix.  In fiscal year 2012, our same stores sales decreased 1.2% driven by a traffic decline of 4.7% and an increase in our average check of 3.7%.  We believe our traffic softness is driven by our value-oriented customer base that remains impacted by high levels of unemployment and lower discretionary income as well as a highly competitive restaurant environment with increased advertising, discounting and promotional activity.  In the early years of the recession, our value message proved to be highly relevant and we outperformed our competitors by emphasizing value and the variety of our menu offerings.  Over time, our competitors have increased their promotional activity and discount offerings which has impacted our competitive value position.

In order to address the challenging economic and competitive environment and drive traffic into our restaurants, we are focused on two key areas:  first, improving the restaurant experience with a focus on great steaks and service to ensure we consistently execute at the level required to build customer loyalty; second, improving the differentiation and effectiveness of our advertising.  We improved our operational oversight by adding an incremental level of field supervision.  We expect the improved oversight and accountability to result in more consistent execution of our food and service standards.  We have undertaken guest and market research to gain feedback and insight to help inform our business decisions and we have recently hired a Chief Marketing Officer to lead our marketing and culinary teams.  We expect to continue to promote a value message which we believe is important to our customers in the current economic environment, but we will also emphasize the quality of our food and the differentiation of our brand.

Growing margins.  In addition to traffic declines and loss of sales leverage, our restaurant operating margins have been negatively impacted by commodity inflation, especially beef which accounts for 32% of our cost of goods sold.  We expect continued commodity inflation in fiscal year 2013 which will continue to pressure our restaurant operating margins.  As a result, we will remain focused on disciplined cost management and look for opportunities to save costs in areas that are not adding value to the customer experience.

In fiscal year 2013, we expect our customers will continue to be impacted by high unemployment levels and other general economic challenges, which will limit their discretionary income.  As a result, we anticipate that the landscape will remain competitive as restaurant operators compete for market share in a challenging environment.  We also expect cost pressures primarily in the form of commodity inflation driven by recent drought conditions and overall tighter supplies.  We plan to continue to focus on protecting restaurant margins while executing our core strategies of disciplined restaurant growth and consistently delivering a great value and unique dining experience to our customers.  Our ability to open new restaurants with strong unit level returns along with revenue and margin growth in existing restaurants will be key drivers to improved operational and financial results.

Key Measurements

The key measures we use to evaluate our performance include:

Average unit volume.  Average unit volume represents the average sales for company-owned restaurants over a specified period of time. It is typically measured on a 52-week basis but may also be applied to a shorter period. Average unit volume reflects total company restaurant sales divided by total operating weeks, which is the aggregate number of weeks that company-owned restaurants are in operation over a specified period of time.

Change in comparable restaurant sales.  Comparable restaurants for a reporting period include company-owned restaurants that have been open for six or more full quarters at the beginning of the later of the two reporting periods being compared.  Change in comparable restaurant sales reflects changes in sales over the prior year for a comparable group of restaurants over a specified period of time.

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Average check.  Average check includes net sales for company-owned restaurants over a specified period of time divided by the total number of customers served during the period. Management uses this indicator to analyze the dollars spent in our restaurants per customer. This measure aids management in identifying trends in customer preferences, as well as the effectiveness of menu price increases and other menu changes.  Unless otherwise noted we report this metric for comparable restaurants.

Customer traffic.  Customer traffic is the total number of customers served over a specified period of time.  Unless otherwise noted we report this metric for comparable restaurants.

Restaurant operating margin and Adjusted EBITDA.  We also evaluate our performance by using non-GAAP financial measures utilized by us and others in the restaurant industry.  In particular, we regularly review our restaurant operating margin and our Adjusted EBITDA, which are both described in more detail in the Selected Financial Data included in Item 6 of this Report.

Matters Affecting Comparability

On October 4, 2010, LRI Holdings was acquired by certain wholly owned subsidiaries of RHI, a newly formed Delaware corporation owned by the Kelso Affiliates and the Management Investors.  The Transactions were funded by an equity investment and the issuance of the Notes and included retirement of all then existing debt.  For additional detail see note 3 to the consolidated financial statements included in Item 15 of this Report.

The Transactions resulted in a change in ownership of substantially all of LRI Holdings’ outstanding common stock and was accounted for in accordance with accounting guidance for business combinations and, accordingly, resulted in the recognition of assets acquired and liabilities assumed at fair value as of October 4, 2010.  The purchase price has been “pushed down” to LRI Holdings’ financial statements.

Allocation of purchase price.  The allocation of purchase price to the assets acquired and liabilities assumed based on their respective fair values resulted in changes in the values of tangible and intangible assets.  The adjustment of property and equipment basis and remaining useful lives affects comparability of depreciation expense between Predecessor and Successor periods.  Allocation of purchase price to intangible assets affects the comparability of cost of goods sold, rent expense and amortization expense between Predecessor and Successor periods.

New debt structure.  In connection with the Transactions, Predecessor debt instruments were retired and replaced with new financings.  This increase in long-term debt and related debt issuance costs affects the comparability of interest expense and cash flows from operations between the Predecessor and Successor periods.

General and administrative expense.  Transaction costs expensed in the Predecessor and Successor periods have a significant impact on results and comparability between periods.

Provision for (benefit from) income taxes.  Non-deductibility of certain of the costs incurred in connection with the Transactions impacted the income tax rates in both the Predecessor and Successor periods.

Presentation of Results

Our fiscal year ends on the Sunday closest to July 31.  All references to fiscal year 2012 relate to the 52-week period ended July 29, 2012 of the Successor.  All references to the “Combined fiscal year 2011” relate to the combined 43-week period ended July 31, 2011 of the Successor and the nine week period ended October 3, 2010 of the Predecessor.  All references to fiscal year 2010 relate to the 52-week period ended August 1, 2010 of the Predecessor.

For purposes of this discussion and analysis, we combined the results of operations of the Predecessor for the nine week period from August 2, 2010 to October 3, 2010 with those of the Successor for the 43-week period from October 4, 2010 to July 31, 2011.  Although the combined presentation does not comply with GAAP, we believe that it provides management and investors with a more meaningful perspective on our financial and operational performance than if we did not combine the results of the Predecessor and Successor in this manner.  The combined results have not been prepared on a pro forma basis and should not be used as a substitute for Predecessor and Successor financial statements prepared in accordance with GAAP.

Results of Operations

Fiscal Year 2012 Summary

·   We opened 19 new restaurants (one owned, eight ground leases and 10 ground and building leases) with a net capital investment of $24.1 million.  These 19 new restaurants added $37.5 million in net sales, $3.9 million to Adjusted EBITDA and had an average restaurant operating margin of 9.3%.

·   Comparable restaurant sales decreased 1.2%, our average check increased by 3.7% and customer traffic decreased by 4.7% for company-owned restaurants compared to the Combined fiscal year 2011.

·   Restaurant operating margin decreased to 14.1% in fiscal year 2012 from 16.2% for the Combined fiscal year 2011, excluding amortization related to the Transactions, due primarily to increased commodity prices and advertising costs.

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·   Net income decreased $46.9 million from the Combined fiscal year 2011 to a loss of $46.5 million in fiscal year 2012 primarily due to a $48.5 million goodwill impairment charge and $4.4 million of restaurant impairment charges.

·   Adjusted EBITDA decreased 6.4%, or $5.2 million from the Combined fiscal year 2011 to $75.2 million in fiscal year 2012.

·   Cash flow from operating activities was $36.5 million, which reflects the payment of $38.0 million of interest, and was primarily used to fund net capital expenditures of $32.4 million.

The following tables and discussion summarize key components of our operating results for the fiscal years ended July 29, 2012, July 31, 2011 and August 1, 2010 expressed as a dollar amount and as a percentage of total revenues or net sales.  We have prepared our discussion of the Combined fiscal year 2011 results of operations by combining the Predecessor and Successor results of operations and cash flows during the year, and comparing the combined data to the results of operations and cash flows for fiscal years ended July 29, 2012 and August 1, 2010, as discussed above.

	Successor										Predecessor					Combined					Predecessor
						Period from					Period from
	Fiscal year					October 4, 2010					August 2, 2010					Fiscal year					Fiscal year
(In thousands)	2012					to July 31, 2011					to October 3, 2010					2011					2010
Statement of operations data:
Revenues:
Net sales	$	629,987		99.7	%	$	497,170		99.6	%	$	93,762		99.6	%	$	590,932		99.6	%	$	555,460		99.6	%
Franchise fees and royalties		2,186		0.3			1,793		0.4			348		0.4			2,141		0.4			2,068		0.4
Total revenues		632,173		100.0			498,963		100.0			94,110		100.0			593,073		100.0			557,528		100.0
Costs and expenses:
(As a percentage of net sales)
Restaurant operating costs:
Cost of goods sold		207,225		32.9			162,805		32.7			29,172		31.1			191,977		32.5			174,186		31.4
Labor and other related expenses		184,310		29.3			145,258		29.2			28,578		30.5			173,836		29.4			165,877		29.9
Occupancy costs		48,780		7.7			36,817		7.4			8,046		8.6			44,863		7.6			42,397		7.6
Other restaurant operating expenses		100,680		16.0			71,708		14.4			15,478		16.5			87,186		14.8			81,826		14.7
(As a percentage of total revenues)
Depreciation and amortization		20,309		3.2			14,588		2.9			3,112		3.3			17,700		3.0			17,040		3.1
Pre-opening expenses		4,808		0.8			2,984		0.6			783		0.8			3,767		0.6			2,111		0.4
General and administrative		25,373		4.0			30,460		6.1			14,440		15.3			44,900		7.6			24,216		4.3
Goodwill and intangible asset impairment		48,526		7.7			-		-			-		-			-		-			-		-
Store impairment and closing charges		4,438		0.7			25		-			-		-			25		-			91		-
Total costs and expenses		644,449		101.9			464,645		93.1			99,609		105.8			564,254		95.1			507,744		91.1
Operating (loss) income		(12,276	)	(1.9	)		34,318		6.9			(5,499	)	(5.8	)		28,819		4.9			49,784		8.9
Interest expense, net		39,748		6.3			33,823		6.8			3,147		3.3			36,970		6.2			18,857		3.4
Other income, net		-		-			(15	)	-			(182	)	(0.2	)		(197	)	-			(798	)	(0.1	)
(Loss) income before income taxes		(52,024	)	(8.2	)		510		0.1			(8,464	)	(9.0	)		(7,954	)	(1.3	)		31,725		5.7
Income tax (benefit) expense		(5,496	)	(0.9	)		(70	)	-			(8,240	)	(8.8	)		(8,310	)	(1.4	)		11,704		2.1
Net (loss) income	$	(46,528	)	(7.4	)	$	580		0.1		$	(224	)	(0.2	)	$	356		0.1		$	20,021		3.6

Restaurant Unit Activity

	Company		Franchise		Total
Balance at August 2, 2009		177		26		203
Openings		9		-		9
Closures		-		-		-
Balance at August 1, 2010		186		26		212
Openings		15		-		15
Closures		-		-		-
Balance at July 31, 2011		201		26		227
Openings		19		-		19
Closures		-		-		-
Balance at July 29, 2012		220		26		246

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TOTAL REVENUES

Net sales consist of food and beverage sales of company-owned restaurants and other miscellaneous income.  Net sales increased by $39.1 million, or 6.6%, to $630.0 million in fiscal year 2012 compared to the Combined fiscal year 2011 which was primarily driven by the opening of 19 new restaurants in fiscal year 2012, partially offset by a decline in comparable restaurant sales of 1.2%.  Net sales increased by $35.5 million or 6.4% to $590.9 million in the Combined fiscal year 2011 compared to fiscal year 2010.  This increase is primarily attributable to the opening of 15 new restaurants and an increase in comparable restaurant sales of 0.8%.

The following table summarizes the year over year changes and key net sales drivers at company-owned restaurants for the periods presented:

	Successor			Combined - Successor/Predecessor			Predecessor
	Fiscal year ended
	July 29, 2012			July 31, 2011			August 1, 2010
Company-owned restaurants:
Increase in restaurant operating weeks		9.2	%		6.6	%		4.9	%
Decrease in average unit volume		-2.6	%		-0.2	%		-0.7	%
Total increase in restaurant sales		6.6	%		6.4	%		4.2	%
Comparable restaurants		184			174			164
Change in comparable restaurant sales		-1.2	%		0.8	%		-0.3	%
Restaurant operating weeks		11,108			10,170			9,539
Average check	$	13.52		$	13.03		$	12.70

The increase in restaurant operating weeks for fiscal year 2012 and for the Combined fiscal year 2011 was due to the opening of new restaurants.  The decrease in average unit volume for both fiscal years was primarily driven by customer traffic declines in both our comparable restaurant base and our newer restaurants.  In fiscal year 2012, the decrease in customer traffic for our comparable restaurants was 4.7%, which was offset by a 3.7% increase in average check as a result of increased menu pricing of 2.6% for the year, a favorable shift in product mix and improved alcohol sales.  For the Combined fiscal year 2011, the decrease in customer traffic for our comparable restaurants was 1.8%, which was offset by a 2.6% increase in average check as a result of increased menu pricing of 2.6% for the year.

Franchise fees and royalties for our two franchisees that operate 26 restaurants  have increased slightly in each year from $2.1 million in fiscal year 2010 to $2.2 million in fiscal year 2012.

TOTAL COSTS AND EXPENSES

Total costs and expenses were $644.4 million in fiscal year 2012, $564.3 million in the Combined fiscal year 2011 and $507.7 million in fiscal year 2010.  As a percent of total revenues, total costs and expenses in fiscal year 2012 were 101.9%, which increased from 95.1% in the Combined fiscal year 2011.  Total costs and expenses increased in the Combined fiscal year 2011 from 91.1% in fiscal year 2010.  The primary drivers of the fluctuations in total costs and expenses are as follows:

Costs of goods sold

Cost of goods sold consists of food and beverage costs, along with related purchasing and distribution costs.  Costs of goods sold, as a percentage of net sales, increased to 32.9% in fiscal year 2012 from 32.5% in the Combined fiscal year 2011.  The increase was primarily due to commodity inflation across most categories, partially offset by menu pricing and a favorable comparison to the Combined fiscal year 2011 which included amortization of a favorable contract as a result of the Transactions.

Cost of goods sold, as percentage of net sales, increased to 32.5% in the Combined fiscal year 2011 from 31.4% in fiscal year 2010.  The increase was primarily due to unfavorable menu mix as customers shifted to less profitable menu selections and promotional items along with commodity inflation across most categories, partially offset by menu pricing and the impact of certain cost savings initiatives.  In addition, as a result of the Transactions, $2.5 million, or 0.4% as a percentage of net sales, was due to amortization expense resulting from a favorable contract which was fully amortized as of July 31, 2011.

Labor and other related expenses

Labor and other related expenses consists of all restaurant management and hourly labor costs, including salaries, wages, benefits, bonuses and other indirect labor costs.  Labor and other related expenses, as a percentage of net sales, decreased to 29.3% in fiscal year 2012 from 29.4% in the Combined fiscal year 2011.  The decrease in percentage resulted from improved staffing and wage rate efficiency, partially offset by the non-recurring payroll tax credits realized in the prior year period.

Labor and other related expenses, as a percentage of net sales, decreased to 29.4% in the Combined fiscal year 2011 from 29.9% in fiscal year 2010.  The decrease in percentage resulted from improved labor staffing, wage rate efficiencies, leverage from average check and payroll tax credits relating to an incentive program.

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Occupancy costs

Occupancy costs include rent, common area maintenance, property taxes, licenses and other related fees.  Occupancy costs, as a percentage of net sales, were relatively consistent at 7.7% in fiscal year 2012, 7.6% in the Combined fiscal year 2011 and 7.6% in fiscal year 2010.  Occupancy costs fluctuate based upon the timing and number of new restaurant openings and the mix of owned sites, land leases and land and building leases of our restaurants.

Other restaurant operating expenses

Other restaurant operating expenses include all restaurant-level operating costs, the major components of which are operating supplies, utilities, repairs and maintenance, advertising, general liability and credit card fees.  Other restaurant operating expenses, as a percentage of net sales, increased to 16.0% in fiscal year 2012 from 14.8% in the Combined fiscal year 2011.  The percentage increase in fiscal year 2012 was primarily due to increased advertising costs and increased asset disposals from bar and other enhancements, partially offset by reduced debit card fees resulting from regulation reducing the debit card fees charged to retailers.

Other operating expenses, as a percentage of sales, increased to 14.8% in the Combined fiscal year 2011 from 14.7% in fiscal year 2010.  The percentage increase in the Combined fiscal year 2011 was due to increased advertising costs which were offset by a decline in restaurant operating supplies and maintenance and a decline in general liability insurance reserves.

Depreciation and amortization

Depreciation and amortization includes the depreciation of fixed assets and capitalized leasehold improvements and the amortization of intangible assets.  Depreciation and amortization, as a percentage of total revenues, was relatively consistent at 3.2% in fiscal year 2012, 3.0% in the Combined fiscal year 2011 and 3.1% in fiscal year 2010.  The increase in fiscal year 2012 was primarily due to the additional depreciation from new restaurant openings and lost leverage from declining sales.

Pre-opening expenses

Pre-opening expenses consist of costs related to a new restaurant opening and are made up primarily of manager salaries, employee payroll, travel, non-cash rent expense and other costs related to training and preparing new restaurants for opening.  Pre-opening costs will fluctuate from period to period based on the number and timing of restaurant openings.  Our pre-opening costs (excluding rent) have remained constant at approximately $0.2 million per opening.

General and administrative

General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support restaurant operations and development.  General and administrative expenses, as a percentage of total revenues, decreased to 4.0% in fiscal year 2012 from 7.6% in the Combined fiscal year 2011.  Included in the Combined fiscal year 2011 was $21.4 million of transaction related costs.  Excluding the impact of these costs, general and administrative expenses were 4.0% of total revenues in the Combined fiscal year 2011 which was consistent with fiscal year 2012.

General and administrative expenses, as a percentage of total revenues excluding the impact of transaction related costs described above, decreased to 4.0% in the Combined fiscal year 2011 from 4.3% in fiscal year 2010.  The decrease in the Combined fiscal year 2011 was due to a reduction in home office bonus accruals and a lower management fee paid to our current owners, partially offset by an increase in headcount and restaurant training costs to support increased growth and stock option expense related to the Successor option plans.

Goodwill and intangible asset impairment

Goodwill and intangible asset impairment includes goodwill and intangible asset impairment charges.  During fiscal year 2012, we recorded a goodwill impairment charge of $48.5 million due to changes in projected performance due to lower revenue estimates resulting from recent traffic trends and lower new unit growth assumptions along with the continued negative impact of commodity inflation.  We did not record any goodwill or intangible asset impairment charges in the Combined fiscal year 2011 or fiscal year 2010.

Store impairment and closing charges

Store impairment and closing charges include long-lived asset impairment charges and store closing charges.  During fiscal year 2012, we recorded asset impairment charges of $4.4 million relating to three newly impaired locations and additions to restaurants that had been fully impaired in prior years.

We did not impair or close any restaurants in the Combined fiscal year 2011 or fiscal year 2010.  In both years, we recorded impairment charges for additions to restaurants that had been fully impaired in prior years.

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INTEREST EXPENSE, NET AND OTHER INCOME, NET

Interest expense, net consists primarily of interest expense related to our debt, net of interest income, see the “Liquidity and Capital Resources” section for further detail.  Other income, net consists primarily of expenses associated with interest rate swaps.  Interest expense, net increased to $39.7 million in fiscal year 2012 compared to $37.0 million in the Combined fiscal year 2011, as a result of a full year of interest on the debt incurred in connection with the Transactions.  Net interest expense increased to $37.0 million in the Combined fiscal year 2011 from $18.9 million in fiscal year 2010, primarily due to debt incurred as a result of the Transactions.  In connection with the Transactions, we terminated our interest rate swap agreement related to outstanding borrowings under the prior credit facilities by payment of a termination fee of approximately $1.7 million.

EFFECTIVE INCOME TAX RATE

Our effective tax rate (“ETR”) in fiscal year 2012 was 10.6%, which included the impact of the non-deductible goodwill impairment partially offset by wage credits.  Our ETR was a benefit of 13.7% in the Successor period ended July 31, 2011 and a provision of 97.4% in the Predecessor period ended October 3, 2010.  We filed a separate tax return for each of the short periods in the Combined fiscal year 2011 which prevents a meaningful combined presentation.  The ETR for the Successor period ended July 31, 2011 was impacted unfavorably by certain non-deductible costs paid in connection with the Transactions; offset by the magnified effect of wage credits on low pre-tax income.  The ETR for the Predecessor period ended October 3, 2010 was impacted favorably by the deductibility of certain costs paid in connection with the Transactions that were not included in expense for book purposes.

The ETR in fiscal year 2010 was 36.9%.  In fiscal year 2010, we recognized a one-time charge to adjust the federal tax rate applied to the deferred balances from 34% to 35%, which was offset by wage credits. 

Other Non-GAAP Financial Measures

A reconciliation and discussion of Adjusted EBITDA is included in Item 6 Selected Financial Data.  We consider Adjusted EBITDA to be a non-GAAP financial measure that should be considered in addition to, rather than as a substitute for, net income.  We have included a discussion of this non-GAAP financial measure in our MD&A as we view it to be an important indicator of our creditworthiness.  Adjusted EBITDA is also important for understanding our financial position and providing additional information about our ability to service our long-term debt and meet our debt covenant requirements.  Our Adjusted EBITDA in fiscal year 2012 of $75.2 million was a decrease of $5.2 million, or 6.4%, as compared to Adjusted EBITDA of $80.4 million for the Combined fiscal year 2011.  The decrease in Adjusted EBITDA was primarily driven by a decline in comparable restaurant sales and commodity inflation partially offset by contributions from our new restaurant openings.  For the Combined fiscal year 2011, our Adjusted EBITDA was $80.4 million, an increase of $5.3 million, or 7.1%, over Adjusted EBITDA of $75.0 million in fiscal year 2010.  This increase in Adjusted EBITDA was primarily driven by contributions from new restaurant openings and growth in comparable restaurant sales, along with improvement in labor management and general and administrative expenses, partially offset by commodity inflation.

Liquidity and Capital Resources

Summary

Our primary requirements for liquidity and capital are new restaurant development and debt service requirements.  Historically, our primary sources of liquidity and capital resources have been net cash provided from operating activities and operating lease financing.  Based on our current restaurant development plans, we anticipate that our cash position, our expected cash flows from operations and availability under the Senior Secured Revolving Credit Facility will be sufficient to finance our planned capital expenditures, operating activities and debt service requirements. However, our ability to fund future operating expenses and capital expenditures and our ability to make scheduled payments of interest on, to pay principal of or to refinance our indebtedness and to satisfy any other of our present or future debt obligations will depend on our future operating performance which will be affected by general economic, financial and other factors beyond our control.  As of July 29, 2012, we had $21.7 million in cash and cash equivalents and $26.4 million in available credit under our Senior Secured Revolving Credit Facility.

Consistent with many other restaurant and retail chain store operations, we utilize operating lease arrangements and sale and leaseback arrangements and believe that these financing methods provide a useful source of capital in a financially efficient manner.

Post-Transactions Liquidity

The total sources used to fund the Transactions of $628.6 million included $230.0 million of new capital contribution indirectly from the Kelso Affiliates and the Management Investors; $355.0 million from the proceeds of the Notes; and $43.6 million of cash from our balance sheet. The funds were used to repay existing indebtedness of $224.4 million (comprised of $132.8 million remaining balance on a $138.0 million term loan and accrued interest of $0.3 million; $89.7 million related to mezzanine notes with a face value of $80.0 million, inclusive of paid in kind and accrued interest of $8.0 million and a $1.7 million prepayment penalty; and a termination fee of $1.7 million on an interest rate swap agreement); pay seller expenses of $28.5 million; pay buyer expenses (primarily debt issuance costs) of $20.0 million; with the remainder payable to our stockholders and option holders as consideration for their equity interests.

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As part of the Transactions, we entered into the Senior Secured Revolving Credit Facility, which provides for up to $30.0 million of borrowings. The Senior Secured Revolving Credit Facility is available to fund working capital and for general corporate purposes. As of July 29, 2012, we were not drawn on the Senior Secured Revolving Credit Facility and had $3.6 million of outstanding letters of credit resulting in available credit of $26.4 million.

As part of funding the Transactions, Logan’s Roadhouse, Inc. issued $355.0 million aggregate principal amount of Notes in a private placement to qualified institutional buyers.  In July 2011, the Company completed an exchange offering which allowed the holders of those notes to exchange their notes for notes identical in all material respects except they are registered with the SEC and are not subject to transfer restrictions.  The Notes bear interest at a rate of 10.75% per annum, payable semi−annually in arrears on April 15 and October 15.  The Notes mature on October 15, 2017.

The Senior Secured Revolving Credit Facility and the Indenture that governs the Notes contain financial and operating covenants.  The financial covenants include a maximum consolidated leverage ratio calculated as total debt outstanding divided by Adjusted EBITDA; a minimum consolidated interest coverage ratio calculated as Adjusted EBITDAR divided by the sum of interest expense and cash rent; and a maximum capital expenditure limit.  The non-financial covenants include prohibitions on our and our guarantor subsidiaries’ ability to incur certain additional indebtedness or to pay dividends.  Additionally, we are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, as a non-accelerated filer, even if we are not specifically required to comply with such sections otherwise.  Failure to comply with these covenants constitutes a default and may lead to the acceleration of the principal amount and accrued but not paid interest on the Notes.  As of July 29, 2012, we were in compliance with all required covenants.  In the first quarter of fiscal year 2013, the Company amended its Senior Secured Revolving Credit Facility which adjusted future covenants.  For each fiscal year 2013, 2014, 2015 and 2016, the amendment increased the Company’s maximum consolidated leverage ratio, decreased its minimum consolidated interest coverage ratio and reduced its maximum capital expenditure limits as compared to the original covenants.  The Company expects to remain in compliance with all new covenants throughout fiscal year 2013.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for each of the past three fiscal years:

	Successor			Combined - Successor/ Predecessor			Predecessor
	Fiscal year ended
(in thousands)	July 29, 2012			July 31, 2011			August 1, 2010
Total cash provided by (used in):
Operating activities	$	36,488		$	19,213		$	56,400
Investing activities		(33,859	)		(348,218	)		(15,100	)
Financing activities		-			345,392			(2,158	)
Increase in cash and cash equivalents	$	2,629		$	16,387		$	39,142

Operating activities

Cash provided by operating activities in fiscal year 2012 includes cash flows generated from ongoing operations and is partially offset by $38.0 million of cash paid for interest.  Cash provided by operating activities in the Combined fiscal year 2011 was impacted by transaction related costs and a significant increase in interest expense related to the new debt structure.  Offsetting such impact was a tax benefit related to the exercise of stock options in connection with the Transactions which was recognized in the Predecessor period ended October 3, 2010.

We had negative working capital of $23.9 million as of July 29, 2012, $21.0 million as of July 31, 2011 and positive working capital of $23.9 million as of August 1, 2010.  Like many other restaurant companies, we are able, and expect to generally operate with negative working capital.  Restaurant operations do not require significant inventories and substantially all sales are for cash or paid by third-party credit cards.

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Investing activities

Cash used in investing activities primarily represents capital expenditures for new restaurant growth.  Fiscal year 2012 also includes expenditures related to bar enhancements across our restaurant base and included share repurchases of $1.5 million in conjunction with the departure of two officers of the Company and investors in RHI.  The Combined fiscal year 2011 includes $311.6 million of costs to acquire LRI Holdings, as part of the Transactions.  Excluding these transaction related costs, net capital expenditures were $32.4 million in fiscal year 2012, $36.6 million in the Combined fiscal year 2011 and $15.1 million in fiscal year 2010.  During each year, gross capital expenditures were offset by sale and leaseback transactions ($16.2 million in fiscal year 2012, $3.4 million in the Combined fiscal year 2011 and $10.1 million in fiscal year 2010).  Period-over-period variances in capital expenditures were due to the number and timing of new restaurants under construction and the mix of owned versus leased properties for new restaurants.

Financing activities

Cash used in financing activities in fiscal year 2012 included draws on the Senior Secured Revolving Credit Facility of $18.4 million which were fully repaid.  Cash provided by financing activities in the Combined fiscal year 2011 included proceeds from debt issuance and equity contributions required to fund the Transactions, offset by the repayment of prior credit facilities and new debt issuance costs.  Cash financing activity in fiscal year 2010 included borrowings and repayments on the revolving debt portion of the Prior Credit Facility of $3.0 million, mandatory principal repayments on the Prior Credit Facilities of $1.4 million and deferred offering costs of $0.8 million.

Capital Expenditures

A main component of our long-term strategy is growth by new restaurant openings.  We continually evaluate our new restaurant opening plan to determine how many restaurants we will target for opening in each year and how many will be owned, land leases or land and building leases.  Our capital expenditures for new restaurants will fluctuate by the number and structure of these openings.  Additionally, we evaluate the maintenance needed to keep our restaurants and equipment in good condition, suitable for their purposes and adequate for our current needs.  During fiscal year 2012, we invested $48.6 million in capital expenditures, including 19 new restaurant openings, bar enhancements at all restaurants and maintenance capital expenditures for our restaurant, home office and information technology needs.  The 21.4% increase in our capital expenditures in fiscal year 2012 was primarily due to the initiative to enhance the bar area in all restaurants.  During the Combined fiscal year 2011, we invested $40.0 million in capital expenditures, including 15 new restaurant openings and maintenance capital expenditures for our restaurant, home office and information technology needs.  The 51.8% increase in capital expenditures for the Combined 2011 fiscal year compared to the fiscal year 2010 was due primarily to the increased number of new restaurants and the financing structure of those openings.

	Successor		Combined - Successor/ Predecessor		Predecessor
	Fiscal year ended
(in thousands)	July 29, 2012		July 31, 2011		August 1, 2010
New restaurants	$	35,418	$	34,325	$	21,459
Existing restaurants and home office (1)		13,191		5,709		4,908
Total capital expenditures	$	48,609	$	40,034	$	26,367

(1)   Our existing restaurants and home office capital expenditures for fiscal year 2012 includes $8.0 million in bar enhancements.

Off Balance Sheet Arrangements

Other than operating leases, we do not have any off-balance sheet arrangements.  A summary of our operating lease obligations by fiscal year is included in the “Contractual Obligations” table below.  Additional information regarding our operating leases is available in Item 2 Properties and note 12 of the notes to the consolidated financial statements, included in Item 15 of this Report.

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Contractual Obligations

A summary of our contractual obligations and commercial commitments at July 29, 2012, is as follows:

	Payments due by period
(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt obligations (1)	$	355,000	$	-	$	-	$	-	$	355,000
Interest (2)		203,052		38,967		78,684		77,239		8,162
Operating leases (3)		801,617		38,705		78,220		78,614		606,078
Purchase obligations (4)		12,538		12,538		-		-		-
Total	$	1,372,207	$	90,210	$	156,904	$	155,853	$	969,240

(1)   Our long-term debt obligations include $355.0 million of Notes and our $30.0 million Senior Secured Revolving Credit Facility.  As of July 29, 2012, we had no borrowings drawn on the Senior Secured Revolving Credit Facility and $3.6 million of outstanding letters of credit.

(2)   Represents estimated interest payments on the Notes and costs relating to letters of credit and commitment fees under the Senior Secured Revolving Credit Facility.

(3)   Includes base lease terms and certain optional renewal periods that are included in the lease term in accordance with accounting guidance relating to leases.

(4)   Purchase obligations include commitments for the construction of new restaurants and other capital improvement projects.  Excluded are any agreements that are cancelable without significant penalty. While we have fixed price agreements relating to food costs, we do not have any material contracts in place committing us to a minimum or fixed level of purchases.

Seasonality

Our business is subject to minor seasonal fluctuations.  Historically, sales are typically lowest in the fall.  Holidays, severe weather and similar conditions may impact sales volumes seasonally in some operating regions.  Because of these factors, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Segment Reporting

We aggregate our operations into a single reportable segment within the restaurant industry, providing similar products to similar customers, exclusively in the United States. The restaurants also possess similar pricing structures, resulting in similar long-term expected financial performance characteristics. Accordingly, no further segment reporting beyond the consolidated financial statements is presented.

Impact of Inflation

Our operating margins depend on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant customers. While we have taken steps to qualify multiple suppliers and enter into fixed price agreements for many of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather and other market conditions outside of our control. Certain of our commodities are not contracted and remain subject to fluctuating market prices.  Consequently, these commodities can be subject to unforeseen supply and cost fluctuations.

Our staff members are subject to various minimum wage requirements.  There have been and may be additional minimum wage increases in excess of federal minimum wage implemented in various jurisdictions in which we operate or seek to operate.  Minimum wage increases may have a material adverse effect on our labor costs. Certain operating costs, such as taxes, insurance and other outside services continue to increase and may also be subject to other cost and supply fluctuations outside of our control.  While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices for our menu items, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future.  From time to time, competitive conditions could limit our menu pricing ability.  In addition, macroeconomic conditions could make additional menu price increases imprudent.  There can be no assurance that all future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns.  There can be no assurance that we will be able to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.

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Critical Accounting Policies

We prepare our consolidated financial statements in conformity with GAAP.  The preparation of these financial statements requires us to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures.  We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared.  However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are more fully described in note 2 of the notes to the consolidated financial statements, included in Item 15 of this Report.  However, certain of our accounting policies are considered critical as management believes they are most important to the portrayal of our financial condition and operating results and require our most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Business Combinations

We allocate the purchase price of business combinations to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.  The excess, if any, of the purchase price over these fair values is recorded as goodwill.  Management is required to make certain estimates and assumptions in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets.  The significant purchased intangible assets recorded by us in connection with the Transactions include the tradename, menu, franchise agreements, favorable contracts, favorable leases, and liquor licenses.

Critical estimates in valuing certain tangible and intangible assets for business combinations include:

·   Future expected cash flows related to our tradename and franchise agreements;

·   Market value of lease arrangements and expected term, including available option periods, of such leasing arrangements;

·   Assumptions likely to be used by market participants in valuing in-service restaurant-level assets;

·   Discount rates used in valuing such assets.

Impairment of Goodwill and Intangible Assets

We perform an impairment test of goodwill and the indefinite-lived tradename asset annually in the fourth quarter of each fiscal year, or more frequently if indications of impairment exist.  A significant amount of judgment is involved in determining if an indicator of impairment has occurred.  Such indicators may include:  a significant decline in our expected future cash flows; a significant decline in Adjusted EBITDA; a significant adverse change in legalities or in the business climate or significant reductions in our expected growth rates. Any adverse changes in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

The goodwill impairment test involves a two-step process.  The first step is a comparison of the fair value of the reporting unit to its carrying value.  We primarily use the income approach method of valuation that includes the discounted cash flow method and the market approach method, which estimates fair value by applying cash flow and sales multiples to the company’s operating performance, as well as other generally accepted valuation methodologies to determine the fair value.  The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the company.  Significant assumptions in the valuation include new unit growth, future trends in sales, profitability, changes in working capital along with an appropriate discount rate.

If the fair value of the reporting unit is higher than its carrying value, goodwill is deemed not to be impaired, and no further testing is required.  If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss.  The amount of impairment is determined by comparing the implied fair value of the goodwill to the carrying value of the goodwill in the same manner as if the company was being acquired in a business combination.  Thus we would allocate the fair value to all of the assets and liabilities of the Company, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill.  If the implied fair value of goodwill is less than the recorded goodwill, we would record an impairment loss for the difference.

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During the testing completed in the fourth quarter of fiscal year 2012, the Company determined that its carrying value was in excess of its fair value and step two of the goodwill impairment test was completed.  Based on the second step of the analysis, we recorded a non-cash goodwill impairment charge of $48.5 million (which included $26.2 million due to the step one reporting unit valuation and $22.3 million due to the increase in the fair value of other net assets).  Factors culminating in the impairment included changes in projected performance due to lower revenue estimates resulting from recent traffic trends and lower new unit growth assumptions along with the continued negative impact of commodity inflation.  As noted above, assessing the fair value of goodwill includes making assumptions for estimating future cash flows and appropriate industry market multiples for both EBITDA and revenue.  These assumptions are subject to a high degree of complexity and judgment.  We make every effort to estimate future cash flows as accurately as possible with the information available at the time the forecast is developed.  However, changes in the assumptions and estimates may affect the estimated fair value of the reporting unit and could result in additional impairment charges in the future.  We believe the key assumptions included in the step one analysis to be the long-term revenue growth rate and the weighted average cost of capital.  We used a long-term revenue growth rate inclusive of existing restaurant growth and new restaurant openings which averaged approximately 10%  (excluding the perpetuity assumption) and the weighted average cost of capital used was approximately 14%.  If we were to assume the following 100 basis point movements for these key assumptions in our fiscal year 2012 step one analysis holding all other factors constant, the incremental goodwill impairment would have been:

 100 basis point decrease in long-term revenue growth                                      $31.9 million

 100 basis point increase in the weighted average cost of capital                     $25.2 million

In the annual impairment test of the indefinite-lived tradename intangible asset, we primarily use the relief from royalty method under the income approach method of valuation. Significant assumptions include growth assumptions, future trends in sales, a royalty rate and appropriate discount rate.  The testing completed during the fourth quarter of fiscal year 2012 used a discount rate of 15% which resulted in the estimated fair value of the tradename exceeding its carrying value by approximately 13%, indicating no impairment of the tradename asset. However, future changes in assumptions used may require us to record material impairment charges for the tradename.

Our definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events or circumstances indicate the carrying value may be impaired.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset or group of assets to the estimated undiscounted future identifiable cash flows expected to be generated by those assets. Identifiable cash flows are measured at the lowest level where they are essentially independent of cash flows of other groups of assets and liabilities, generally at the restaurant level. If the carrying amount of an asset or group of assets exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Fair value is determined based on an assessment of individual site characteristics and local real estate market conditions along with estimates of future cash flows.

The Company performs long-lived asset impairment analyses throughout the year.  During the fourth quarter of fiscal year 2012, the Company determined that three restaurants had carrying amounts in excess of their fair values, and also wrote-off additions related to previously impaired restaurants throughout fiscal year 2012, for a total impairment charge of $4.4 million.

Restaurant sites and certain other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell. Restaurant sites and certain other assets to be disposed of are included in assets held for sale within prepaid expenses and other current assets in our consolidated balance sheets when certain criteria are met. These criteria include the requirement that the likelihood of disposing of these assets within one year is probable.  Assets whose disposal is not probable within one year remain in land, buildings and equipment until their disposal within one year is probable.

Insurance Reserves

We self-insure a significant portion of expected losses under our workers’ compensation, general liability, employee health and property insurance programs. We have purchased insurance for individual claims that exceed certain deductible limits as well as aggregate limits above certain risk thresholds. We record a liability for our estimated exposure for aggregate incurred but unpaid losses below these limits.

When estimating our self-insured liabilities, we consider a number of factors, including historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries.  Periodically, we review our assumptions and the valuations provided by independent third-party actuaries to determine the adequacy of our self-insured liabilities.  Unanticipated changes in these factors may produce materially different amounts of reported expense under these programs.

Leases

We lease a substantial number of our restaurant properties.  We have ground leases, ground plus building leases and office space leases that are recorded as operating leases, most of which contain rent escalation clauses and rent holiday periods.  In accordance with applicable accounting guidance, rent expense under our operating leases is recognized on a straight-line basis over the shorter of the useful life, or the related lease life including probable renewal periods. The difference in the straight-line expense in any year and amounts payable under the leases during that year is recorded as deferred rent liability. We use a lease life that begins on the date that we become legally obligated under the lease and extends through renewal periods that can be exercised at our option, when it is probable at the inception of the lease that we will exercise the renewal option.

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Our judgments related to the probable term for each restaurant affect the classification and accounting for leases as capital versus operating, the rent holidays and escalation in payments that are included in the calculated straight-line rent and the term over which leasehold improvements for each restaurant facility are amortized.  These judgments may produce materially different amounts of depreciation, amortization and rent expense than would be reported if different assumed lease terms were used.

Some of our leases provide for contingent rent, which is determined as a percentage of sales in excess of specified minimum sales levels. We recognize contingent rent expense prior to the achievement of the specified sales target that triggers the contingent rent, provided achievement of the sales target is considered probable.

Occasionally, we are responsible for the construction of leased restaurant locations and for paying project costs that may be in excess of an agreed upon amount with the landlord. Applicable accounting guidance requires us to be considered the owner of these types of projects during the construction period.

Share-based compensation

Stock options are granted with an exercise price equal to or greater than the fair market value of the underlying stock on the date of grant. Because there is no public market for LRI Holdings or RHI shares, fair market value is set based on the good-faith determination of the board of directors. The grant date fair values have been determined utilizing the Black-Scholes option pricing model.  We recognize expense on time-based options but not performance-based options, because they are contingent on a change in control which is not considered probable.  Stock option compensation expense has been calculated following applicable accounting guidance.

Income Taxes

We estimate certain components of our provision for income taxes.  These estimates include, among other items, depreciation and amortization expense allowable for tax purposes, allowable tax credits for items such as taxes paid on reported employee tip income, effective rates for state and local income taxes and the tax deductibility of certain other items.  We adjust our annual effective income tax rate as additional information on outcomes or events become available.

We account for income taxes pursuant to applicable accounting guidance which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in our financial statements. Under this method, deferred tax assets and liabilities are determined based on the tax affected differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by valuation allowances, which represent the estimated amount of deferred tax assets that may not be realized based upon estimated future taxable income. Future taxable income, reversals of temporary differences, available carry back periods, and changes in tax laws could affect these estimates. Employer tax credits for FICA taxes paid on employee tip income are accounted for by the flow-through method.

We recognize a tax position in our financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.

Unredeemed Gift Cards

Gift card revenue generally is recognized as the cards are redeemed, or estimated never to be redeemed, over the historical redemption period as described below. Unredeemed gift cards represent a liability related to unearned income and are recorded at their expected redemption value.  We make estimates of the ultimate unredeemed gift cards in the period of the original sale and reduce our liability and record revenue accordingly. These estimates are determined based on our redemption history and trends and are amortized over the historical redemption period based upon our monthly redemption rates. Changes in redemption behavior or management’s judgments regarding redemption trends in the future may produce materially different amounts of deferred revenue to be reported. If gift cards that have been removed from the liability are later redeemed, we recognize revenue and reduce the liability as we would with any redemption.  We update our estimate of our redemption rates periodically.

Recent Accounting Pronouncements

In September 2011, the FASB updated its guidance on the annual testing of goodwill to allow companies to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. The updated guidance is applicable to goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not expect the adoption of this updated guidance to have a material impact on our consolidated financial statements.

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In June 2011 and as updated in December 2011, the FASB updated its guidance regarding comprehensive income to require companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This updated guidance is applicable for fiscal years beginning after December 15, 2011.  We do not expect the adoption of this updated guidance to have a material impact on our consolidated financial statements.

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks inherent in our operations, we are exposed to certain market risks, including adverse changes in commodity prices and interest rates.

Commodity price risk

Many of the ingredients used in the products sold in our restaurants are commodities subject to price volatility caused by limited supply, weather, production problems, delivery difficulties, economic factors, and other conditions which are outside our control and may be unpredictable.  In order to minimize risk, we employ various purchasing and pricing techniques including negotiating fixed price contracts with vendors, generally over one year periods, and securing supply contracts with vendors that remain subject to fluctuating market prices.  We do not currently utilize financial instruments to hedge commodity prices, but we will continue to evaluate their effectiveness.

Four food categories (beef, produce, seafood and chicken) account for the largest share of our cost of goods sold (at 32%, 10%, 10% and 8%, respectively in fiscal year 2012).  Other categories affected by commodity price fluctuations, such as pork, cheese and dairy, may each account for 4-6%, individually, of our purchases.  We will continue to monitor the commodity markets and may enter into additional fixed price contracts depending on market conditions.

We recognize that commodity pricing may be extremely volatile and can change unpredictably and over short periods.  Changes in commodity prices would generally affect us and our competitors similarly, depending upon the terms and duration of supply contracts.  In many cases, or over the longer term, we believe we will be able to pass through some or all of the increased commodity costs by adjusting menu pricing.  However, competitive circumstances or judgments about consumer acceptance of price increases, may limit price flexibility and, in those circumstances, increases in commodity prices may have an adverse affect on restaurant operating margins. 

We are subject to additional risk due to our reliance on single suppliers for many of our commodity purchases, including beef.  However, our menu items are based on generally available products, and if any existing suppliers fail, or are unable, to deliver in quantities we require, we believe that there are sufficient alternative suppliers in the marketplace so that our sources of supply can be replaced as necessary.  Although, we believe the supply could be replaced by alternative suppliers, we may encounter temporary supply shortages or incur higher supply costs which could have an adverse affect on our results of operations.

Our restaurants are also impacted by changes in fuel prices.  Our third party distributor charges us for the diesel fuel used to deliver inventory to our restaurants.  During the fourth quarter of fiscal year 2012, we entered into a forward contract to procure certain amounts of diesel fuel from our third party distributor at set prices in order to mitigate our exposure to unpredictable fuel prices.  The effect of the fuel derivative instrument was immaterial to our consolidated financial statements for fiscal year 2012 and this contract terminates on July 31, 2013.

Interest rate risk

We are subject to interest rate risk in connection with borrowings under the Senior Secured Revolving Credit Facility, which bears interest at variable rates.  As of July 29, 2012, we were not drawn on our Senior Secured Revolving Credit Facility.  There is no interest rate risk associated with our Senior Secured Notes, as the interest rate is fixed at 10.75% per annum.

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial statements, together with the related notes and the report of independent registered accounting firm, are set forth in Item 15 of this Report.

ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A—CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of July 29, 2012.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a−15(f), internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of July 29, 2012 based on the Internal Control − Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, our management concluded that our internal control over financial reporting was effective as of July 29, 2012.

This Annual Report does not include an attestation report of our Independent Registered Certified Public Accounting Firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Independent Registered Certified Public Accounting Firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B—OTHER INFORMATION

None.

PART III

ITEM 10—DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth information regarding our directors and executive officers as of October 23, 2012:

Name	Age		Title(s)
G. Thomas Vogel		48	President, Chief Executive Officer and Director
Amy L. Bertauski		43	Chief Financial Officer and Treasurer
Robert R. Effner		47	Chief Development Officer and Secretary
V. Todd Townsend		48	Chief Marketing Officer
James B. Kuehnhold		50	Senior Vice President of Operations
Scott E. Dever		44	Senior Vice President of Information Systems
Lynne D. Wildman		43	Vice President of Supply Chain Management
David Cavallin		45	Vice President of Finance
Nicole A. Williams		38	Vice President and Controller
Philip E. Berney		48	Director
Stephen C. Dutton		30	Director
J. David Karam		54	Director
Michael P. O’Donnell		56	Director
Stanley de J. Osborne		42	Director

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Executive Officers

G. Thomas Vogel has served as our President and Chief Executive Officer since July 2006 and as a member of our board of directors since December 2006 and chairman of the board since December 2010. Mr. Vogel joined Logan’s Roadhouse in August 2003 as President and Chief Operating Officer. Before joining Logan’s Roadhouse, he spent 12 years at Darden Restaurants, Inc., where he held positions in operations, concept development, food and beverage and marketing. While with Darden Restaurants, Mr. Vogel served as the Senior Vice President of Operations for the Southeast Division of Red Lobster. He has 24 years of experience in the restaurant industry and has earned awards for innovation and sales excellence. Mr. Vogel holds a B.B.A. in Hotel and Restaurant Management from the University of Central Florida and an M.B.A. from the University of Florida. Mr. Vogel’s qualifications to serve on our board of directors include his knowledge of our Company and the restaurant industry and his years of leadership at our Company.

Amy L. Bertauski has served as our Chief Financial Officer since December 2006. Ms. Bertauski has responsibility for all aspects of finance, accounting, treasury, supply chain management, information technology, benefits and risk management. She joined Logan’s Roadhouse in May 2000 as the Director of Accounting. Ms. Bertauski was promoted to Vice President and Controller in August 2003 and to Senior Vice President of Accounting & Finance and Principal Accounting Officer in August 2006. Prior to joining Logan’s Roadhouse, Ms. Bertauski worked for two years with Applebee’s International as the Manager of Corporate Accounting and for three years at Rio Bravo as an Accounting Manager. In addition to 17 years of restaurant industry experience, Ms. Bertauski also worked for four years with Arthur Andersen in their audit practice. Ms. Bertauski holds a B.S. in Accounting from the University of Illinois.

Robert R. Effner has served as our Chief Development Officer since December 2010. He is responsible for real estate, design and construction, human resources, facilities, franchise relations, and new restaurant operations. He joined Logan’s Roadhouse in December 2003 as our Vice President of Concept Development and was promoted to Senior Vice President of Development and Operations Innovation in August 2005. Prior to joining Logan’s Roadhouse, he spent 20 years at Darden Restaurants, Inc., where he held positions at Red Lobster in operations, training, strategic planning, operations development, prototype development, and concept development. His work has received the Brand Reinvention Award from Chain Store Age and the Successful Settings Award from Nations Restaurant News.

V. Todd Townsend has served as our Chief Marketing Officer since September 2012.  He is responsible for product development, marketing and communications for the Logan’s brand.  Prior to joining Logan’s Roadhouse, he was employed by Time Warner Cable, Qwest Communications, Sonic Drive In, Yahoo! and Sprint in marketing, sales and e-commerce leadership positions.  Townsend served as Chief Marketing Officer for Sonic Drive In from 2005 to 2008, during which time his teams delivered positive same store sales performance for three consecutive years.  Townsend has agency experience with the Leo Burnett Company and over 25 years of business and marketing experience with both consumer and business-to-business focused brands across a range of industries.  He received his Bachelors degree from Oklahoma State University and his Masters degree from Northwestern University.

James B. Kuehnhold is our Senior Vice President of Operations and is responsible for all aspects of day-to-day restaurant operations. Mr. Kuehnhold joined Logan’s Roadhouse in July 2001 and has over 30 years experience in the restaurant industry. Prior to joining Logan’s Roadhouse, Mr. Kuehnhold was with Romano’s Macaroni Grill as a Regional Manager. In addition, Mr. Kuehnhold was with Olive Garden for five years where he served as Regional Manager. He also worked with Chevy’s/Rio Bravo for five years as a Director of Operations, overseeing both concepts.

Scott E. Dever has served as the Senior Vice President of Information Systems since July 2011.  He is responsible for all technology areas including:  point of sale systems, networking and infrastructure, development and telecommunications.  He joined Logan’s Roadhouse in March of 1998 as MIS Manager and was promoted to Director of Information Systems in April 2000 before being named Vice President of Information Systems in August 2003.  Prior to joining Logan’s Roadhouse, he was employed by Restaurant Management Group, Inc. and has over 20 years of restaurant industry experience including positions in operations and IT consulting.  His work helped Logan’s Roadhouse win the Nation’s Restaurant News Technology Innovation award for the casual dining segment in 2001 and again in 2006.

Lynne D. Wildman is Vice President of Supply Chain Management and is responsible for all aspects of purchasing and management of our supply chain. Ms. Wildman joined Logan’s Roadhouse in November 2005. She has over 18 years of commodity, restaurant purchasing and distribution experience. Prior to joining Logan’s Roadhouse, Ms. Wildman was Vice President of Purchasing for ARCOP, where she was a key player in all aspects of purchasing for Arby’s Purchasing Cooperative. Before ARCOP, she served in key management and leadership roles with Darden Restaurants, Inc. for almost eight years. She has also held strategic purchasing and development positions with YUM! Brands as well as Cargill. Ms. Wildman holds a B.A. and M.A. in Agricultural Economics from the University of Illinois.

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David Cavallin is Vice President of Finance and is responsible for Logan’s financial planning and analysis and operations analysis functions.  Mr. Cavallin joined Logan’s Roadhouse in June 2004 and has over 20 years of restaurant finance experience. Prior to joining Logan’s Roadhouse, Mr. Cavallin held various finance positions at Darden Restaurants starting from 1992 to 2004, most recently as Director of Planning and Analysis.  Prior to his restaurant industry experience, Mr. Cavallin was a Chartered Accountant and worked with Ernst & Young in their audit practice.  Mr. Cavallin holds a Bachelor of Commerce degree and Graduate Diploma in Public Accountancy, both from McGill University in Montreal, Canada.

Nicole A. Williams is our Vice President and Controller and also serves as our Principal Accounting Officer.  She is responsible for all financial reporting and audit requirements, as well as overseeing the company’s accounting and tax functions.  Ms. Williams joined Logan’s Roadhouse in 2005 and was quickly promoted to Director of Accounting in 2006.  In 2009, she was promoted to Controller, and she has served as an officer of the Company since November 2011.  In addition to her seven years of restaurant experience, Ms. Williams has worked in various accounting roles of increasing responsibility throughout her 19 year accounting career.  Ms. Williams holds a B.S. in Business Administration and a Master of Accountancy in Tax from the University of Tennessee and is a Certified Public Accountant.

Our executive officers are appointed by our board of directors and serve until their successors have been duly elected and qualified or their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Board of Directors

Our board of directors is comprised of six members, including Mr. Vogel and the individuals named below.

Philip E. Berney has served as a member of the board of directors since the consummation of the Transactions and is a Managing Director at Kelso & Company, L.P. Prior to joining Kelso in 1999, he was a Senior Managing Director and Head of the High Yield Capital Markets group at Bear, Stearns & Co. Inc. Previously, he worked in High Yield Finance at The First Boston Corporation. Mr. Berney received a B.S. in Business Administration from the University of North Carolina at Chapel Hill, where he was a Morehead Scholar. He is a director of Audio Visual Services Corporation, Tervita Corporation, Cronos Ltd, Custom Building Products, Inc., iGPS Company LLC and Wilton Re Holdings Limited. Mr. Berney was a director of Cambridge Display Technology, Inc., Del Laboratories, Inc. and Eagle Bulk Shipping, Inc. Mr. Berney brings to our board of directors extensive experience in corporate strategy and business development and his knowledge gained from service on the boards of various public and private companies.

Stephen C. Dutton has served as a member of the board of directors since the consummation of the Transactions and is a Vice President at Kelso & Company, L.P. Prior to joining Kelso in 2006, he worked in the investment banking division of Bear, Stearns & Co. Inc. Mr. Dutton received a B.S. in Commerce with distinction from the McIntire School of Commerce at the University of Virginia. He is a director of iGPS Company LLC. Mr. Dutton’s qualifications to serve on our board of directors include his extensive experience in finance and management.

J. David Karam has served as a member of our board of directors since September 2012. Mr. Karam has served as the Chairman of the Board of Sbarro, Inc., a leading Italian quick service restaurant company since February 2012 and is owner of Cedar Enterprises, a Wendy’s franchisee with 150 Wendy’s restaurants in five states.   Mr. Karam was most recently the President of Wendy’s International from 2008 to 2011.  Prior to joining Wendy’s in 2008, Mr. Karam was president of Cedar Enterprises.  He joined Cedar Enterprises in 1986 as Vice President of Finance before being promoted to President in 1989.  Mr. Karam previously served as senior auditor for Touche & Ross from 1982 to 1986. Mr. Karam has a bachelor’s degree in accounting from The Ohio State University and is a graduate of the Owner President Management program at the Harvard University Graduate School of Business Administration.  Mr. Karam’s qualifications to serve on our board include his financial background, his extensive restaurant experience and leadership skills that come from his executive and board level positions in the industry.

Michael P. O’Donnell has served as a member of our board of directors since June 2007. Mr. O’Donnell is currently President and CEO of Ruth’s Hospitality Group, a publicly traded restaurant group where he is responsible for the overall strategic and operational direction of the company. In addition to the board of Ruth’s Hospitality Group, Inc., Mr. O’Donnell is also a Director of Cosi, Inc. Mr. O’Donnell has previously served as the Chief Executive Officer, President and Chairman of the Board of Champps Entertainment, Inc. from March 2005 to November 2007 and as Chief Executive Officer and Director of Sbarro, Inc. from September 2003 to March 2005. Prior to that, Mr. O’Donnell held the position of President and Chief Executive Officer of New Business at Outback Steakhouse, Inc. As a result of these and other professional experiences, Mr. O’Donnell brings to the board the knowledge, qualifications and leadership skills that come from 30 years of experience in the restaurant industry, including significant experience at the senior executive and board level in both the bar & grill and steakhouse segments. Mr. O’Donnell received his B.A. in English from Rollins College.

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Stanley de J. Osborne has served as a member of the board of directors since the consummation of the Transactions and is a Managing Director at Kelso & Company, L.P. Prior to joining Kelso in 1998, Mr. Osborne was an Associate at Summit Partners. Previously, Mr. Osborne was an Associate in the Private Equity Group and an Analyst in the Financial Institutions Group at J.P. Morgan & Co. He received a B.A. in Government from Dartmouth College. Mr. Osborne is a director of Custom Building Products, Inc., Global Geophysical Services, Inc., Hunt Marcellus, LLC and Traxys S.a.r.l. Mr. Osborne was a director of CVR Partners, L.P., CVR Energy, Inc. and Shelter Bay Energy, Inc. Mr. Osborne’s qualifications to serve on our board of directors include his extensive experience in corporate finance, business strategy and corporate development and his knowledge gained from service on the boards of various public and private companies.

Corporate Governance

Board Composition

Our board of directors currently consists of six members, all of whom were elected as directors in accordance with the board composition provisions of the Stockholders Agreement. The Stockholders Agreement entitles the Kelso Affiliates to nominate all members of the board of directors of Roadhouse Holding which, in turn, nominates each of the boards of directors of LRI Holdings and Logan’s Roadhouse, Inc. The Stockholders Agreement also provides that our Chief Executive Officer will be a member of the board of directors of Roadhouse Holding.  Thus the board of directors has determined that it is not necessary for us to have a nominating committee or committee performing similar functions.  The board of directors does not have a policy with regard to the consideration of any director candidates recommended by our debt holders or other parties.

Under our amended and restated certificate of incorporation, our boards of directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of directors then in office, subject to approval by the board of directors of Roadhouse Holding.  The term of office for each director will be until the earlier of the election and qualification of his or her successor, or his or her death, resignation or removal.

Committees of the Board of Directors

LRI Holdings has established a compensation committee and an audit committee which both report to its board of directors as they deem appropriate, and as the board requests.

Our compensation committee is responsible for, among other matters: (a) reviewing and approving the compensation and benefits of our officers, directors and consultants; (b) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (c) authorizing, ratifying and administering our employee benefit plans, including our stock option plans and other incentive compensation plans. The members of our compensation committee are Philip E. Berney, Stanley de J. Osborne and G. Thomas Vogel, chairperson, none of whom are “independent” as such term is defined by corporate governance standards.

Our audit committee operates under a written charter adopted by the board of directors and  is responsible for, among its other duties and responsibilities: (a) overseeing our accounting and financial reporting processes; (b) assisting with our legal and regulatory compliance; (c) the audits of our financial statements; (d) the qualifications and independence of our independent registered public accounting firm; and (e) the performance of our independent registered public accounting firm. The members of our audit committee are Stanley de J. Osborne, chairperson, and Stephen C. Dutton, neither of whom is “independent” as such term is defined by corporate governance standards.  The board of directors has determined that no member of the audit committee is a “financial expert” within the meaning of applicable SEC rules.

Compensation Committee Interlocks and Insider Participation

G. Thomas Vogel is a member of LRI Holdings’ compensation committee and serves as our President and Chief Executive Officer. No other member of LRI Holdings’ compensation committee was an officer or employee during the last fiscal year, a former officer of LRI Holdings or Logan’s Roadhouse, Inc. or had any relationship requiring disclosure under Item 404 of Regulation S-K.

Code of Ethics

We have adopted a written code of ethics that applies to our senior financial officers, including our chief executive officer and chief financial officer of LRI Holdings and its subsidiaries.  The code of ethics is included as an exhibit to this Report as required by Item 406(b) of Regulation S-K.  We will satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, any applicable provision (relating to elements listed under Item 406(b) of Regulations S-K) of the code of ethics by posting such information on our website at www.logansroadhouse.com.

Section 16(a) Beneficial Ownership Reporting Compliance

As the Company does not have a class of equity securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), none of its directors, officers or stockholders were subject to reporting requirements of Section 16(a) of the Exchange Act during the fiscal year ended July 29, 2012.

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ITEM 11—EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth certain information with respect to compensation for fiscal years 2012 and 2011 earned by, awarded to or paid to our named executive officers.

		Salary		Bonus		Option awards		Non-equity incentive plan compensation		All other compensation		Total
	Year	($)		($)(1)		($)(2)		($)(3)		($)(4)		($)
G. Thomas Vogel	2012		648,077		-		-		-		4,098		652,175
President and Chief Executive Officer	2011		550,000		500,000		2,261,777		275,000		3,993		3,590,770
Amy L. Bertauski	2012		335,000		-		-		-		3,199		338,199
Chief Financial Officer	2011		310,000		500,000		1,098,575		93,000		4,392		2,005,967
Robert R. Effner	2012		276,000		-		-		-		-		276,000
Chief Development Officer	2011		254,826		350,000		775,468		76,448		-		1,456,742

(1)   Represents discretionary bonuses paid in recognition of outstanding performance with respect to the completed Transactions.

(2)   The amounts set forth reflect the aggregate grant date fair value calculated in accordance with applicable accounting guidance.  See Note 18 of our consolidated financial statements presented in Item 15 of this Report for additional information.  These amounts may not correspond to the actual value eventually realized by each named executive officer because the value realized will depend on the extent to which performance conditions are ultimately met.  The grant date fair value for the performance-based stock option grants was calculated based on the probable outcome of the performance condition.

(3)   Represents amounts earned for each fiscal year under our annual cash incentive program.

(4)   Represents the following for fiscal year 2012:

	Savings plan		Disability insurance
Name	($)		($)
G. Thomas Vogel		-		4,098
Amy L. Bertauski		3,199		-
Robert R. Effner		-		-

Outstanding Equity Awards at Fiscal Year End 2012

The following table sets forth the number of stock options held by the named executive officers on July 29, 2012.  No other stock awards have been granted to the named executive officers.

	Number of securities underlying unexercised options (#) (1)				Number of securities underlying unexercised		Option		Option
Name	Exercisable		Unexercisable		unearned options (#) (2)		exercise  price($/Sh)		expiration  date
G. Thomas Vogel		6,709		20,124		-		100.00	3/1/2021
		-		-		53,667		100.00	3/1/2021
Amy L. Bertauski		3,259		9,774		-		100.00	3/1/2021
		-		-		26,067		100.00	3/1/2021
Robert R. Effner		2,300		6,900		-		100.00	3/1/2021
		-		-		18,400		100.00	3/1/2021

(1)   These options represent time-based options granted under the 2011 Plan.  Such options vest ratably over a four-year period on each of the first four anniversaries of October 4, 2010.

(2)   These options are performance-based options granted under the 2011 Plan and do not become exercisable unless and until the Kelso Affiliates, in connection with certain change of control transactions (i) receive proceeds equal to or in excess of 1.75 times their initial investment and (ii) achieve an internal rate of return, or IRR, on their initial investment, compounded annually, of at least 10%.

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Director Compensation

Members of our board of directors who are also our employees or who are affiliated with Kelso do not receive cash or equity compensation for service on our board of directors.  Michael P. O’Donnell, who as of July 29, 2012 was our only non-employee director not affiliated with Kelso, received the following compensation for the fiscal year ended July 29, 2012.

	Fees earned or paid in cash (1)		Option awards		All other compensation		Total
Name	($)		($)		($)		($)
Michael P. O'Donnell		25,000		-		-		25,000

(1)   Includes the fee paid for service on the board of directors during 2012.  Board members are also reimbursed for out-of-pocket expenses incurred in connection with their board service.  Such reimbursements are not included in this table.  There are no other fees earned for service on the board of directors.

ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

Roadhouse Holding owns, through Roadhouse Intermediate Inc., Roadhouse Midco Inc. and Parent, 100% of our common stock. The Kelso Affiliates and the Management Investors own all of the common stock of Roadhouse Holding.

The following table sets forth information as of October 23, 2012 with respect to the ownership of the common stock of Roadhouse Holding by:

·   each person known to own beneficially more than five percent of the common stock of Roadhouse Holding,

·   each of our directors,

·   each of the executive officers named in the Summary Compensation Table appearing under Item 11—Executive Compensation, and

·   all of our executive officers and directors as a group.

The amounts and percentages of shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

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Except as otherwise indicated in the footnotes to the table, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.

Name of beneficial owner	Number of shares of common stock beneficially owned as of October 23, 2012		Percent of class (7)
Kelso Investment Associates VIII, L.P.(1)(2)		2,231,000		97.62
KEP VI, LLC(1)(2)		2,231,000		97.62
Frank T. Nickell(1)(2)		2,231,000		97.62
Thomas R. Wall, IV(1)(2)		2,231,000		97.62
George E. Matelich(1)(2)		2,231,000		97.62
Michael B. Goldberg(1)(2)		2,231,000		97.62
David I. Wahrhaftig(1)(2)		2,231,000		97.62
Frank K. Bynum, Jr.(1)(2)		2,231,000		97.62
Philip E. Berney(1)(2)(3)		2,231,000		97.62
Frank J. Loverro(1)(2)		2,231,000		97.62
James J. Connors, II(1)(2)		2,231,000		97.62
Church M. Moore(1)(2)		2,231,000		97.62
Stanley de J. Osborne(1)(2)(3)		2,231,000		97.62
Christopher L. Collins(1)(2)		2,231,000		97.62
Lynn Alexander(1)(2)		2,231,000		97.62
Stephen C. Dutton(2)(3)		-		-
J. David Karam(3)(5)		-		-
Michael P. O’Donnell(3)(5)		-		-
G. Thomas Vogel(3)(4)(5)(6)		21,000		*
Amy L. Bertauski(4)(5)		10,000		*
Robert R. Effner(4)(5)		5,000		*
All executive officers and directors, as a group (14 persons)(1)		2,285,500		100.00
* Less than one percent

(1)   Kelso Investment Associates VIII, L.P. (“KIA VIII”) owns 1,922,505 shares of common stock and is controlled by its general partner, Kelso GP VIII, L.P. Kelso GP VIII, L.P. is in turn controlled by its general partner, Kelso GP VIII, LLC. KEP VI, LLC (“KEP VI” and, together with KIA VIII, the “Kelso Funds”) owns 308,495 shares of common stock.  Both Kelso GP VIII, LLC and KEP VI are managed and controlled by the following thirteen managing members: Frank T. Nickell, Thomas R. Wall, IV, George E. Matelich, Michael B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr., Philip E. Berney, Frank J. Loverro, James J. Connors, II, Church M. Moore, Stanley de J. Osborne, Christopher L. Collins and Lynn Alexander (the “Kelso Individuals”). The Kelso Funds, due to their common control by the Kelso Individuals, could be deemed to beneficially own each of the other’s shares of common stock but each disclaims such beneficial ownership. The Kelso Individuals may be deemed to share beneficial ownership of shares of common stock owned of record or beneficially by the Kelso Funds by virtue of their status as managing members of each of the Kelso Funds. Each of the Kelso Individuals share investment and voting power with respect to the shares of common stock owned by KIA VIII and KEP VI but disclaims beneficial ownership of such shares.

(2)   The business address for these persons is c/o Kelso & Company, L.P., 320 Park Avenue, 24th Floor, New York, New York 10022.

(3)   Members of our board of directors.

(4)   Named executive officers.

(5)   The business address for these persons is c/o LRI Holdings, Inc., 3011 Armory Drive, Suite 300, Nashville, Tennessee 37204.

(6)   Includes 18,645 shares of common stock owned directly by George Thomas Vogel Family 2010 Grantor Retained Annuity Trust, with respect to which G. Thomas Vogel disclaims beneficial ownership.

(7)   This percentage is based on the number of outstanding shares of common stock as of July 29, 2012 (2,285,500 shares).

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Equity Compensation Plan Information

The following table sets forth information concerning the shares of common stock that may be issued upon exercise of options under the 2011 Plan as of July 29, 2012:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders		298,250	$	100.00		46,750
Equity compensation plans not approved by security holders		-		-		-
Total		298,250	$	100.00		46,750

ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Stockholders’ Agreement

The Kelso Affiliates and the Management Investors own all of the outstanding capital stock of our ultimate parent company, Roadhouse Holding. Roadhouse Holding entered into a stockholders’ agreement, dated October 4, 2010, between the Kelso Affiliates and the Management Investors (the “Stockholders Agreement”) that contains, among other things, provisions relating to Roadhouse Holding’s governance, transfer restrictions, call rights, tag-along rights and drag-along rights. The Stockholders Agreement provides that the Kelso Affiliates are entitled to elect (or cause to be elected) all of Roadhouse Holding’s directors. The Stockholders Agreement also provides that our Chief Executive Officer will be a member of the board of directors of Roadhouse Holding.

Stockholders Registration Rights Agreement

Roadhouse Holding and its stockholders entered into a registration rights agreement substantially simultaneously with the consummation of the Transactions, which grants such stockholders certain registration rights (the “Stockholders Registration Rights Agreement”). The Kelso Affiliates have demand registration rights and all of the other parties to the Stockholders Registration Rights Agreement have the right to participate in any demand registration on a pro rata basis, subject to certain conditions. In addition, if Roadhouse Holding proposes to register any of its shares (other than registrations related to exchange offers, benefit plans and certain other exceptions), all of the other parties to the Stockholders Registration Rights Agreement have the right to include their shares in such registration, subject to certain conditions.

Management Subscription Agreements

Simultaneously with the consummation of the Transactions, certain executive officers entered into management subscription agreements with Roadhouse Holding pursuant to which they agreed to subscribe for and purchase an aggregate of approximately 3% of our common stock for an aggregate purchase price of $6.9 million.  The purchase price per share was equal to the purchase price per share paid by the Kelso Affiliates in connection with the Transactions. See Item 12—Security Ownership of Certain Beneficial Owners and Management.

Advisory Agreement

In connection with the Transactions, Logan’s Roadhouse, Inc. entered into an advisory agreement with Kelso pursuant to which:

·   we paid to Kelso a one-time advisory fee of $7 million and reimbursed Kelso for Kelso’s out-of-pocket costs and expenses incurred in connection with the Transactions;

·   Kelso provides us with ongoing financial advisory and management consulting services in return for annual fees in an aggregate amount of $1 million to be paid in quarterly installments, in addition to reimbursement for Kelso’s out of pocket costs and expenses;

·   we will pay to Kelso a transaction services fee upon the completion of certain types of transactions that directly or indirectly involve us; and

·   we will indemnify Kelso and certain of Kelso’s officers, directors, partners, employees, agents and control persons (as such term is used in the Securities Act) in connection with the Transactions, Kelso’s investment in Roadhouse Holding, Kelso’s control of Roadhouse Holding or any of its subsidiaries (including us) and the services rendered to us under the advisory agreement.

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Review, Approval or Ratification of Related Party Transactions

In accordance with its charter, our Audit Committee is responsible for reviewing and approving all related party transactions.   A report is made to our Audit Committee annually by our management and our independent auditor disclosing any known related party transactions. 

Director Independence

Though not formally considered by our board of directors because our common stock is not listed on a national securities exchange, our board of directors has determined that Mr. Karam and Mr. O’Donnell are “independent” as such term is defined by The NASDAQ Stock Market corporate governance standards.  Those directors serving as members of the audit committee and compensation committee are not required to, and do not, meet the independence requirements of any national securities exchange.  Similarly they are not required to, and do not, meet the independence requirements set forth in the SEC’s rules and regulations, to the extent such requirements are applicable to them.  We do not maintain a nominating and corporate governance committee.

ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accountants

Deloitte & Touche, LLP (“Deloitte”) served as our independent registered public accounting firm for the fiscal years ended July 29, 2012 and July 31, 2011.  The following table sets forth (in thousands) fees billed or estimated to be billed to us by Deloitte for fiscal year 2012 and fiscal year 2011:

	Fiscal 2012		Fiscal 2011
Audit fees	$	560	$	504
Audit-related fees		-		602
Tax fees		-		226
All other fees		2		2
Total	$	562	$	1,334

Audit fees include fees for the annual audit of our consolidated financial statements and reviews of our interim financial statements and services normally provided by our accountants in connection with statutory and regulatory filings or engagements.

Audit-related fees include fees for work performed in connection with registration statements and due diligence procedures performed in connection with the Transactions.

Tax fees consist of fees for professional services and special tax projects related to the Transactions.

All other fees consist of fees other than the services reported above.  The services provided consisted of a subscription to an accounting research website.

Audit Committee Pre-Approval Policy

Pursuant to our Audit Committee Charter, all permissible non-audit services to be performed by Deloitte must be pre-approved by the Audit Committee.

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PART IV

ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

		Page
(a)(1)	Index to Consolidated Financial Statements:
	Report of Independent Registered Public Accounting Firm	51
	Consolidated Balance Sheets	52
	Consolidated Statements of Operations	53
	Consolidated Statements of Stockholders' Equity	54
	Consolidated Statements of Cash Flows	55
	Notes to Consolidated Financial Statements	56
(a)(2)	Financial Statement Schedules:
	All schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted as not required or not applicable, or the information required has been included elsewhere by reference in the financial statements and related notes.
(a)(3)	Exhibits:
	An "Exhibit Index" has been filed as part of this Annual Report on Form 10-K beginning on page 76 hereof and is incorporated herein by reference.

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 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	LRI Holdings, Inc.
Date:  October 23, 2012	By:	/s/ G. Thomas Vogel
		G. Thomas Vogel
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ G. Thomas Vogel	President, Chief Executive Officer and Director	October 23, 2012
G. Thomas Vogel	(Principal Executive Officer)
/s/ Amy L. Bertauski	Chief Financial Officer and Treasurer	October 23, 2012
Amy L. Bertauski	(Principal Financial Officer)
/s/ Nicole A. Williams	Vice President - Controller	October 23, 2012
Nicole A. Williams	(Principal Accounting Officer)
/s/ Philip E. Berney	Director	October 23, 2012
Philip E. Berney
/s/ Stephen C. Dutton	Director	October 23, 2012
Stephen C. Dutton
/s/ J. David Karam	Director	October 23, 2012
J. David Karam
/s/ Michael P. O'Donnell	Director	October 23, 2012
Michael P. O'Donnell
/s/ Stanley de J. Osborne	Director	October 23, 2012
Stanley de J. Osborne

- 50 -

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of LRI Holdings, Inc.

Nashville, Tennessee

We have audited the accompanying consolidated balance sheets of LRI Holdings, Inc. and subsidiaries (the “Company”, the “Predecessor Company”, or the “Successor Company”), a wholly-owned subsidiary of Roadhouse Holding Inc., (Successor Company) as of July 29, 2012 and July 31, 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the fiscal year ended July 29, 2012 (Successor Company), the period from October 4, 2010 to July 31, 2011 (Successor Company), the period from August 2, 2010 to October 3, 2010 (Predecessor Company), and for the fiscal year ended August 1, 2010 (Predecessor Company). These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 29, 2012 and July 31, 2011, and the results of its operations and its cash flows for the year ended July 29, 2012 (Successor Company), the period from October 4, 2010 to July 31, 2011 (Successor Company), the period from August 2, 2010 to October 3, 2010 (Predecessor Company), and for the fiscal year ended August 1, 2010 (Predecessor Company),  in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company was acquired on October 4, 2010.

/s/ Deloitte & Touche LLP

October 23, 2012

Nashville, Tennessee

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LRI Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except share data)	July 29, 2012 (Successor)			July 31, 2011 (Successor)
ASSETS
Current assets:
Cash and cash equivalents	$	21,732		$	19,103
Receivables		8,288			9,960
Inventories		12,349			11,370
Prepaid expenses and other current assets		4,294			3,367
Income taxes receivable		3,911			3,688
Deferred income taxes		2,046			2,207
Total current assets		52,620			49,695
Property and equipment, net		239,553			232,940
Other assets		18,527			19,492
Goodwill		284,078			331,788
Tradename		71,694			71,694
Other intangible assets, net		21,354			23,215
Total assets	$	687,826		$	728,824
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	21,193		$	17,573
Payable to RHI		50			802
Other current liabilities and accrued expenses		55,268			52,315
Total current liabilities		76,511			70,690
Long-term debt		355,000			355,000
Deferred income taxes		32,561			37,746
Other long-term obligations		39,702			34,808
Total liabilities		503,774			498,244
Commitments and contingencies (Note 13)		-			-
Stockholder’s equity:
Common stock ($0.01 par value; 100 shares authorized; 1 share issued and outstanding)		-			-
Additional paid-in capital		230,000			230,000
Retained (deficit) earnings		(45,948	)		580
Total stockholder’s equity		184,052			230,580
Total liabilities and stockholder’s equity	$	687,826		$	728,824

See accompanying notes to consolidated financial statements.

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LRI Holdings, Inc.

Consolidated Statements of Operations

(In thousands)	Fiscal year 2012 (Successor)			Period from October 4, 2010 to July 31, 2011 (Successor)			Period from August 2, 2010 to October 3, 2010 (Predecessor)			Fiscal year 2010 (Predecessor)
Revenues:
Net sales	$	629,987		$	497,170		$	93,762		$	555,460
Franchise fees and royalties		2,186			1,793			348			2,068
Total revenues		632,173			498,963			94,110			557,528
Costs and expenses:
Restaurant operating costs:
Cost of goods sold		207,225			162,805			29,172			174,186
Labor and other related expenses		184,310			145,258			28,578			165,877
Occupancy costs		48,780			36,817			8,046			42,397
Other restaurant operating expenses		100,680			71,708			15,478			81,826
Depreciation and amortization		20,309			14,588			3,112			17,040
Pre-opening expenses		4,808			2,984			783			2,111
General and administrative		25,373			30,460			14,440			24,216
Goodwill and intangible asset impairment		48,526			-			-			-
Store impairment and closing charges		4,438			25			-			91
Total costs and expenses		644,449			464,645			99,609			507,744
Operating (loss) income		(12,276	)		34,318			(5,499	)		49,784
Interest expense, net		39,748			33,823			3,147			18,857
Other income, net		-			(15	)		(182	)		(798	)
(Loss) income before income taxes		(52,024	)		510			(8,464	)		31,725
Income tax (benefit) expense		(5,496	)		(70	)		(8,240	)		11,704
Net (loss) income		(46,528	)		580			(224	)		20,021
Undeclared preferred dividend		-			-			(2,270	)		(12,075	)
Net (loss) income attributable to common stockholders	$	(46,528	)	$	580		$	(2,494	)	$	7,946

See accompanying notes to consolidated financial statements.

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LRI Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

							Accumulated						Total
					Additional		other						stockholders’			Preferred
	Common				paid-in		comprehensive			Retained			equity			Shares		Amount
(In thousands, except share data)	Shares		Amount		capital		(loss)/income			earnings			(Permanent)			(Temporary)		(Temporary)
Balances at August 2, 2009 (Predecessor)		992,427	$	10	$	12,831	$	(44	)	$	751		$	13,548			64,508	$	60,170
Net income		-		-		-		-			20,021			20,021			-		-
Change in fair value of interest rate swap, net of tax provision of $26		-		-		-		44			-			44			-		-
Total comprehensive income														20,065
Balances at August 1, 2010 (Predecessor)		992,427	$	10	$	12,831	$	-		$	20,772		$	33,613			64,508	$	60,170
Net loss		-		-		-		-			(224	)		(224	)		-		-
Balances at October 3, 2010 (Predecessor)		992,427	$	10	$	12,831	$	-		$	20,548		$	33,389			64,508	$	60,170
Balances at October 4, 2010 (Date of Transactions)		-	$	-	$	-	$	-		$	-		$	-			-	$	-
Capital contribution		1		-		230,000		-			-			230,000			-		-
Net income		-		-		-		-			580			580			-		-
Balances at July 31, 2011 (Successor)		1	$	-	$	230,000	$	-		$	580		$	230,580			-	$	-
Net loss		-		-		-		-			(46,528	)		(46,528	)		-		-
Balances at July 29, 2012 (Successor)		1	$	-	$	230,000	$	-		$	(45,948	)	$	184,052			-	$	-

See accompanying notes to consolidated financial statements.

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LRI Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)	Fiscal year 2012 (Successor)			Period from October 4, 2010 to July 31, 2011 (Successor)			Period from August 2, 2010 to October 3, 2010 (Predecessor)			Fiscal year 2010 (Predecessor)
Cash flows from operating activities:
Net (loss) income	$	(46,528	)	$	580		$	(224	)	$	20,021
Adjustments to reconcile net (loss) income to net cash   provided by operating activities:
Depreciation and amortization		20,309			14,588			3,112			17,040
Other amortization		1,289			4,502			241			1,331
Unrealized gain on interest rate swap		-			-			(182	)		(798	)
Loss on sale/disposal of property and equipment		3,467			765			203			928
Amortization of deferred gain on sale and leaseback transactions		(23	)		(3	)		(18	)		(79	)
Impairment charges for long-lived assets		4,438			25			-			72
Goodwill impairment		48,526			-			-			-
Share-based compensation expense		746			821			-			-
Tax benefit upon cancellation/exercise of Predecessor stock options		-			-			6,431			-
Deferred income taxes		(5,024	)		(1,103	)		(10,701	)		6,199
Changes in operating assets and liabilities:
Receivables		1,672			(113	)		126			(351	)
Inventories		(979	)		(1,114	)		(205	)		(414	)
Prepaid expenses and other current assets		(927	)		5,158			1,668			93
Other non-current assets and intangibles		(2,009	)		(651	)		(179	)		(330	)
Accounts payable		3,459			238			413			2,582
Payable to RHI		(48	)		(19	)		-			-
Income taxes payable/receivable		(223	)		849			(3,985	)		2,561
Other current liabilities and accrued expenses		2,898			(12,389	)		4,942			4,930
Other long-term obligations		5,445			4,415			1,022			2,615
Net cash provided by operating activities		36,488			16,549			2,664			56,400
Cash flows from investing activities:
Acquisition of LRI Holdings, net of cash acquired		-			(311,633	)		-			-
Loan to parent to repurchase shares		(1,450	)		-			-			-
Purchase of property and equipment		(48,609	)		(32,998	)		(7,036	)		(26,367	)
Proceeds from sale of assets held for sale		-			-			-			1,184
Proceeds from sale and leaseback transactions, net of expenses		16,200			1,793			1,656			10,083
Net cash used in investing activities		(33,859	)		(342,838	)		(5,380	)		(15,100	)
Cash flows from financing activities:
Proceeds from issuance of Senior Secured Notes		-			355,000			-			-
Payments for debt issuance costs		-			(19,207	)		-			-
Contribution from parent		-			230,000			-			-
Repayment of Predecessor’s senior secured credit facility		-			(132,825	)		-			-
Repayment of Predecessor’s senior subordinated unsecured mezzanine   term notes, including prepayment premium		-			(87,576	)		-			-
Payments on term loan facility		-			-			-			(1,380	)
Payments on revolving credit facility		(18,400	)		-			-			(3,000	)
Borrowings on revolving credit facility		18,400			-			-			3,000
Payments for deferred offering costs		-			-			-			(778	)
Net cash (used in) provided by financing activities		-			345,392			-			(2,158	)
Increase (decrease) in cash and cash equivalents		2,629			19,103			(2,716	)		39,142
Cash and cash equivalents, beginning of period		19,103			-			52,211			13,069
Cash and cash equivalents, end of period	$	21,732		$	19,103		$	49,495		$	52,211

See accompanying notes to consolidated financial statements.

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LRI Holdings, Inc.

Notes to Consolidated Financial Statements

(in thousands, except share data)

1.   Description of the Business

LRI Holdings and subsidiaries (collectively the “Company”) is engaged in the operation and development of the Logan’s Roadhouse restaurant chain.  As of July 29, 2012, our restaurants operate in 23 states and are comprised of 220 company-owned restaurants and 26 franchise-owned restaurants.

On October 4, 2010, LRI Holdings was acquired by certain wholly owned subsidiaries of Roadhouse Holding Inc. (“RHI”), a newly-formed Delaware corporation owned by affiliates of Kelso & Company, L.P. (the “Kelso Affiliates”) and certain members of management (the “Management Investors”).  Upon completion of the acquisition transactions (the “Transactions”), the Kelso Affiliates owned 97% and the Management Investors owned 3% of the outstanding capital stock of RHI.  Although the Company is a wholly owned subsidiary of an indirect wholly owned subsidiary of RHI, RHI is the ultimate parent of the Company.  Prior to October 4, 2010, RHI and its subsidiaries had no assets, liabilities or operations.  See Note 3 for further discussion of the Transactions.

The Transactions resulted in a change in ownership of substantially all of LRI Holdings’ outstanding common stock and was accounted for in accordance with accounting guidance for business combinations and, accordingly, resulted in the recognition of assets acquired and liabilities assumed at fair value as of October 4, 2010.  The purchase price has been “pushed down” to LRI Holdings’ financial statements.  The consolidated financial statements for all periods prior to October 4, 2010 are those of the Company prior to the Transactions (“Predecessor”).  The consolidated financial statements for the period beginning October 4, 2010 are those of the Company subsequent to the Transactions (“Successor”).  As a result of the Transactions, the financial statements after October 4, 2010 are not comparable to those prior to that date.

Basis of presentation

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), and all intercompany balances and transactions have been eliminated during consolidation.

Fiscal year

The Company operates on a 52 or 53-week fiscal year ending on the Sunday nearest to July 31.  The fiscal years ended July 29, 2012 (“fiscal year 2012”) and August 1, 2010 (“fiscal year 2010”) each consist of 52 weeks. The fiscal year ended July 31, 2011 consists of 52 weeks, but as a result of the Transactions is shown separately as the nine week Predecessor period from August 2, 2010 to October 3, 2010 and the 43-week Successor period from October 4, 2010 to July 31, 2011.

2.   Summary of Significant Accounting Policies

Use of estimates

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period.  The Company has prepared these estimates in accordance with GAAP.  Significant items subject to estimates and assumptions include the carrying amount of property and equipment, goodwill, tradename and other intangible assets, obligations related to insurance reserves, share-based compensation expense and income taxes.  Actual results could differ from those estimates.

Segment reporting

The Company aggregates its operations into a single reportable segment within the casual dining industry, providing similar products to similar customers, exclusively in the United States. The restaurants also possess similar pricing structures, resulting in similar long-term expected financial performance characteristics. Accordingly, no further segment reporting beyond the consolidated financial statements is presented.

Fair value of financial instruments

The Company measures certain financial assets and liabilities at fair value in accordance with the applicable accounting guidance. These assets and liabilities are measured at each reporting period and certain of these are revalued as required (see Note 10).

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Receivables

Receivables consist primarily of bank credit card receivables, which are short in duration and considered collectible. The Company, therefore, does not provide for an allowance for doubtful accounts.

- 56 -

Inventories

Inventories consist of food, beverages and supplies and are valued at the lower of cost (first-in, first out method) or market.  Supplies, consisting mainly of dishes, utensils and small equipment, represented $7,924 and $7,238 of the total inventory balance at July 29, 2012 and July 31, 2011, respectively.

Property and equipment

Property and equipment is recorded at cost. Expenditures for improvements and major remodels are capitalized and minor replacement, maintenance and repairs are charged to expense. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives or the terms of the underlying leases of the related assets.

Useful lives for property and equipment is established for each asset class as follows:

Land	Indefinite
Buildings	6 - 35 years
Restaurant equipment	3 - 15 years
Leasehold improvements	6 - 35 years

Other assets

Other assets consist primarily of unamortized debt issuance costs, deposits and assets related to the Company’s non-qualified employee deferred compensation plan. Debt issuance costs are amortized to interest expense over the term of the related debt.

Goodwill and tradename

Goodwill represents the excess of cost over the fair value of net assets acquired in a purchase business combination. Goodwill and the Company’s indefinite-lived tradename asset are not amortized, but are subject to annual impairment testing during the fourth quarter of each fiscal year, or more frequently, if indications of impairment exist.

As discussed further in Note 6, we determined during the fourth quarter of fiscal year 2012 that our goodwill was impaired and recognized an impairment charge of $48,526.  In the annual impairment test of goodwill, the Company uses a combination of the income and market methods of valuation to determine the fair value. The estimated fair value of the Company is compared to the carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the implied fair value of the Company’s goodwill is determined by allocating the estimated fair value to the Company’s assets and liabilities (including any unrecognized intangible assets) as if the Company had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of the carrying value over the implied fair value.

For the annual impairment test of the indefinite-lived tradename asset, the Company primarily uses the relief from royalty method under the income approach method of valuation. The amount of impairment, if any, is measured as the excess of the carrying value over the implied fair value (see Note 6).

Other intangible assets

Acquired intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. If determined to have a definite life, intangible assets are recorded at cost and amortized over their estimated useful lives.

Useful lives for other intangible assets are as follows:

Franchise agreements	19 years
Liquor licenses	Life of lease/building or indefinite
Favorable leases	Life of lease
Favorable contract	Life of contract
Menu	5 years

Store impairment and closing charges

The Company assesses the impairment of long-lived assets whenever changes in circumstances indicate that the carrying value may not be recoverable.  Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or group of assets to the estimated undiscounted future identifiable cash flows expected to be generated by those assets.  Identifiable cash flows are measured at the lowest level where they are essentially independent of cash flows of other groups of assets and liabilities, generally at the restaurant level. If the carrying amount of an asset or group of assets exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset (see Note 8).

- 57 -

Insurance reserves

The Company self-insures a significant portion of expected losses under the Company’s workers’ compensation, employee health, general liability and property insurance programs. The Company has purchased insurance for individual claims for certain coverage that exceeds certain deductible limits, as well as aggregate limits above certain risk thresholds.  The Company records a liability, within other current liabilities and accrued expenses, for the estimated exposure for aggregate incurred but unpaid losses below those limits.

Summarized activity for the insurance reserves includes:

	Fiscal year 2012			Period from October 4, 2010 to July 31, 2011			Period from August 2, 2010 to October 3, 2010			Fiscal year 2010
	(Successor)			(Successor)			(Predecessor)			(Predecessor)
Reserve balance- beginning of period	$	5,643		$	5,496		$	5,371		$	4,652
Add: provision		10,113			7,590			1,824			8,623
Less: payments		(8,737	)		(7,443	)		(1,699	)		(7,904	)
Reserve balance- end of period	$	7,019		$	5,643		$	5,496		$	5,371

Revenue recognition

The Company records revenue from the sale of food and beverage products as they are sold, net of sales tax.  Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as income when the gift card is redeemed by the holder or the likelihood of redemption, based upon historical redemption patterns, becomes remote.

Franchise fees received are recognized as income when the Company has performed all required obligations to assist the franchisee in opening a new franchise restaurant.  Franchise royalties are a percentage of net sales of franchised restaurants and are recognized as income when earned.

Cost of goods sold

Cost of goods sold is primarily food and beverage costs for inventory and related purchasing and distribution costs.  Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned.

Leases

The Company has ground leases, ground plus building leases and office space leases that are recorded as operating leases, most of which contain rent escalation clauses and rent holiday periods. In accordance with applicable accounting guidance, rent expense under these leases is recognized on a straight-line basis over the shorter of the useful life, or the related lease life including probable renewal periods.  The difference in the straight-line expense in any year and amounts payable under the leases during that year is recorded as deferred rent liability.  The Company uses a lease life that begins on the date that the Company becomes legally obligated under the lease and extends through renewal periods that can be exercised at the Company’s option, when it is probable at the inception of the lease that the Company will exercise those renewal options.

Certain leases provide for contingent rent, which is determined as a percentage of sales in excess of specified minimum sales levels.  The Company recognizes contingent rent expense prior to the achievement of the specified sales target that triggers the contingent rent, provided achievement of the sales target is considered probable.

Occasionally, the Company is responsible for the construction of leased restaurant locations and for paying project costs that may be in excess of an agreed upon amount with the landlord. Applicable accounting guidance requires the Company to be considered the owner of these types of projects during the construction period. At July 29, 2012 and July 31, 2011, the following costs are included within property and equipment, net as construction in progress:

	July 29, 2012		July 31, 2011
Project costs for leased restaurants  included in construction in progress	$	4,691	$	5,249

Sale and leaseback transactions

The Company accounts for the sale and leaseback of real estate assets in accordance with applicable accounting guidance. Losses on sale and leaseback transactions are recognized at the time of sale if the fair value of the property sold is less than the undepreciated cost.  Gains on sale and leaseback transactions are deferred and amortized over the related lease life.

Pre-opening expenses

Pre-opening expenses incurred with the opening of a new restaurant are expensed when incurred. These costs primarily include manager salaries, employee payroll, rent and supplies.

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Advertising

The Company expenses production costs of commercials in the fiscal period the advertising is first aired.  Other advertising costs of the Company are expensed in the fiscal period incurred.  The Company receives 0.5% of franchisee net sales as a marketing contribution which is recorded as an offset to the Company’s advertising costs. Net advertising expense, which is recorded in other restaurant operating expenses, for each fiscal period is listed below:

	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
	(Successor)		(Successor)		(Predecessor)		(Predecessor)
Advertising expense, net	$	21,204	$	13,108	$	2,632	$	12,698

Share-based compensation

Stock options are granted with an exercise price equal to or greater than the fair market value of the underlying stock on the date of grant. Because there is no public market for LRI Holdings or RHI shares, fair market value is set based on the good-faith determination of the board of directors. The grant date fair values have been determined utilizing the Black-Scholes option pricing model.  The Company recognizes expense on time-based options but not performance-based options, because they are contingent on a change in control which is not considered probable.  Stock option compensation expense has been calculated and recognized in general and administrative expenses, following applicable accounting guidance.  The Company’s share-based compensation expense is further described in Note 17.

Income taxes

Income taxes are accounted for pursuant to applicable accounting guidance, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the tax affected differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by valuation allowances which represent the estimated amount of deferred tax assets that may not be realized based upon estimated future taxable income. Future taxable income, reversals of temporary differences, available carry back periods and changes in tax laws could affect these estimates. Employer tax credits for FICA taxes paid on employee tip income are accounted for by the flow-through method.

The Company recognizes a tax position in the consolidated financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information.

Comprehensive income (loss)

Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income. Other comprehensive income (loss) as presented in the consolidated statements of stockholders’ equity for the Predecessor period ended August 1, 2010 consisted of the removal of the previously recorded unrealized losses of $44, net of tax , relating to an interest rate swap which expired in fiscal year 2010.

Derivative instruments

The Company does not use derivative instruments for trading purposes.  During the fourth quarter of fiscal year 2012, the Company entered into a forward contract to procure certain amounts of diesel fuel from the Company’s third party distributor at set prices in order to mitigate exposure to unpredictable fuel prices.  The effect of the fuel derivative instrument was immaterial to the consolidated financial statements for fiscal year 2012, and this contract terminates on July 31, 2013.  For periods prior to the Transactions, the Company had interest rate swap agreements.

The Company recognizes all derivative instruments at fair value as either assets or liabilities on the balance sheet.  The fair value of the derivative financial instrument is determined using valuation models that are based on the net present value of estimated future cash flows and incorporates market data inputs.  The Company’s interest rate swap associated with the Predecessor’s senior secured credit facility was terminated by payment of a termination fee on the date of closing of the Transactions.  See Note 9 for a discussion of the use of interest rate swap agreements.

Application of new accounting standards

In September 2011, the FASB updated its guidance on the annual testing of goodwill to allow companies to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. The updated guidance is applicable to goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not expect the adoption of this updated guidance to have a material impact on our consolidated financial statements.

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In June 2011 and as updated in December 2011, the FASB updated its guidance regarding comprehensive income to require companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This updated guidance is applicable for fiscal years beginning after December 15, 2011.  We do not expect the adoption of this updated guidance to have a material impact on our consolidated financial statements.

3.   The Transactions

On the closing date of the Transactions discussed in Note 1, the following events occurred:

·   All issued and outstanding shares of LRI Holdings’ common stock and preferred stock and all vested and unvested options to purchase LRI Holdings’ common stock (all holders of such stock and options are defined as “Sellers”) were converted into, or canceled in exchange for, the right to receive an aggregate of $353,943 in cash;

·   New equity contributions of $230,000 were made by the Kelso Affiliates and Management Investors to purchase shares of RHI;

·   All outstanding debt and accrued interest related to the Predecessor’s senior secured credit facility was retired. The amount of principal and accrued interest paid on the date of closing was $133,097.  Additionally, the interest rate swap agreement related to outstanding borrowings under such senior secured credit facility was terminated by payment of a termination fee on the date of closing of $1,658;

·   All outstanding borrowings, accrued interest and a prepayment premium related to the Predecessor’s senior subordinated unsecured mezzanine term notes were repaid. The amount paid at closing to retire these notes including the prepayment premium was $89,661;

·   Logan’s Roadhouse, Inc., a wholly owned subsidiary of LRI Holdings, issued $355,000 of 10.75% senior secured notes due 2017 (“Senior Secured Notes”), guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc.; and

·   Logan’s Roadhouse, Inc. entered into a senior secured revolving credit facility, guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc., which provides for senior secured revolving credit borrowings of up to $30,000 (“Senior Secured Revolving Credit Facility”), including a $12,000 letter of credit sub-facility and a $5,000 swingline sub-facility with a maturity date of October 4, 2015.

The Transactions resulted in a change in ownership of substantially all of the Company’s outstanding common stock and was accounted for in accordance with accounting guidance for business combinations and, accordingly resulted in the recognition of assets acquired and liabilities assumed at fair value as of October 4, 2010. The purchase price paid in the Transactions was “pushed down” to the Company’s financial statements.  The goodwill arising from the Transactions was largely attributable to the growth potential of the Company. No intangibles, including goodwill, are deductible for tax purposes.

Costs incurred in connection with the Transactions resulted in general and administrative expense of $11,138 in the Successor period ended July 31, 2011; $10,272 in the Predecessor period ended October 3, 2010 and $19,207 of debt issuance costs recorded in other assets to be amortized over the lives of the related debt instruments.

4.   Property and Equipment, net

Property and equipment, net, as of July 29, 2012 and July 31, 2011, consists of the following:

	July 29, 2012			July 31, 2011
Land	$	6,746		$	6,746
Buildings		13,066			11,499
Restaurant equipment		56,317			41,736
Leasehold improvements		182,207			169,660
Construction in progress		12,058			16,580
		270,394			246,221
Accumulated depreciation and amortization		(30,841	)		(13,281	)
Property and equipment, net	$	239,553		$	232,940

Depreciation and amortization expense, excluding amortization of intangible assets, and interest capitalized into the cost of property and equipment, was as follows:

	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
	(Successor)		(Successor)		(Predecessor)		(Predecessor)
Depreciation and amortization expense	$	18,980	$	13,503	$	2,818	$	15,465
Interest capitalized		631		588		119		253

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The Company had property and equipment purchases accrued in accounts payable and other current liabilities and accrued expenses in the accompanying consolidated balance sheets of $4,184 and $4,019 at July 29, 2012 and July 31, 2011, respectively.

5.   Other Assets

Other assets, as of July 29, 2012 and July 31, 2011, consist of the following:

	July 29, 2012		July 31, 2011
Debt issuance costs, net	$	15,192	$	16,849
Deposits		1,182		1,069
Non-qualified savings plan assets		1,923		1,574
Other		230		-
Total	$	18,527	$	19,492

6.   Goodwill and Intangible Assets

Goodwill and tradename are indefinite-lived assets and are not subject to amortization, but are subject to annual impairment testing, or more frequently, if indications of impairment exist.  Other intangible assets and the related useful lives are as follows (all definite-lived intangible assets are amortized straight-line over the amortization period):

			July 29, 2012							July 31, 2011
	Weighted Average Life (Years)		Gross carrying amount		Accumulated Amortization			Net carrying amount		Gross carrying amount		Accumulated Amortization			Net carrying amount
Liquor licenses	Indefinite		$	1,862	$	-		$	1,862	$	1,641	$	-		$	1,641
Favorable contracts		0.8		2,533		(2,533	)		-		2,533		(2,533	)		-
Menu		5.0		5,356		(1,946	)		3,410		5,356		(875	)		4,481
Favorable leases		17.8		12,960		(1,368	)		11,592		12,960		(615	)		12,345
Franchise agreements		19.2		2,588		(245	)		2,343		2,588		(110	)		2,478
Liquor licenses		21.2		2,370		(223	)		2,147		2,370		(100	)		2,270
			$	27,669	$	(6,315	)	$	21,354	$	27,448	$	(4,233	)	$	23,215

Estimated future amortization of intangible assets to amortization expense and favorable leases to rent expense is as follows:

	Amortization expense		Rent expense
Fiscal year 2013	$	1,329	$	753
Fiscal year 2014		1,329		753
Fiscal year 2015		1,329		753
Fiscal year 2016		454		753
Fiscal year 2017		257		753
Thereafter		3,202		7,827
Total	$	7,900	$	11,592

The goodwill impairment test involves a two-step process.  The first step is a comparison of the fair value of the reporting unit to its carrying value.  The Company primarily uses the income approach method of valuation which includes discounted cash flows and the market approach method, which estimates fair value by applying cash flow and sales multiples to the company’s operating performance to determine the fair value.  The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the company.  Significant assumptions in the valuation include new unit growth, future trends in sales, profitability, changes in working capital along with an appropriate discount rate.

If the fair value of the reporting unit is higher than its carrying value, goodwill is deemed not to be impaired, and no further testing is required.  If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss.  The amount of impairment is determined by comparing the implied fair value of goodwill to the carrying value of goodwill in the same manner as if the company was being acquired in a business combination.  This includes allocating the fair value to all of the assets and liabilities of the Company, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill.  If the implied fair value of goodwill is less than the recorded goodwill, an impairment loss would be recorded for the difference.

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Following the completion of the Transactions, the Company performs its annual impairment test of goodwill and the indefinite-lived tradename during the fourth quarter of each fiscal year.  During the testing completed in the fourth quarter of 2012, the Company determined that its carrying value was in excess of its fair value and step two of the goodwill impairment test was completed.  Based on the second step of the analysis, we recorded a non-cash impairment charge of $48,526.  Factors culminating in the impairment included changes in projected performance due to lower revenue estimates based on recent traffic trends, adjustments to new unit growth assumptions and the continued negative impact of commodity inflation.

The changes in the carrying amount of goodwill are as follows:

Goodwill, as of July 31, 2011	$	331,788
Tax related adjustments		816
Impairment		(48,526	)
Goodwill, as of July 29, 2012	$	284,078

In fiscal year 2012, the Company performed the annual impairment test of the indefinite-lived tradename and no indication of impairment existed.  The fair value calculation is dependent on a number of factors, including estimates of future growth and trends, discount rates and other variables.

The Company evaluated goodwill and the indefinite-lived tradename in the Successor period ended July 31, 2011 and the Predecessor fiscal year 2010 and determined that no indicators of impairment existed.

7.   Other Current Liabilities and Accrued Expenses and Other Long-Term Obligations

Other current liabilities and accrued expenses, as of July 29, 2012 and July 31, 2011, consist of the following:

	July 29, 2012		July 31, 2011
Accrued expenses	$	1,757	$	690
Accrued interest		10,978		11,189
Bonus and incentive awards		2,160		3,103
Accrued vacation		975		923
Deferred revenue		4,624		4,017
Insurance reserves		7,019		5,643
Payable to Seller (see Note 14)		5,250		6,974
Payroll related accruals		13,605		11,697
Taxes payable		8,900		8,079
Total	$	55,268	$	52,315

Other long-term obligations, as of July 29, 2012 and July 31, 2011, consist of the following:

	July 29, 2012		July 31, 2011
Deferred rent liability	$	9,354	$	4,078
Asset retirement obligation		1,949		1,690
Non-qualified savings plan liability		1,923		1,574
Unfavorable leases		25,234		26,635
Deferred gain on sale and leaseback transactions		704		112
Other		538		719
Total	$	39,702	$	34,808

8.   Store Impairment and Closing Charges

Impairment charges

The Company performs long-lived asset impairment analyses throughout the year.  During the fourth quarter of fiscal year 2012, the Company determined that three additional restaurants had carrying amounts in excess of their fair values and also wrote-off additions related to previously impaired restaurants.  The same analysis was performed during the Successor period ended July 31, 2011, and the Predecessor periods ended October 3, 2010 and fiscal year 2010 and the Company determined that no additional restaurants had carrying amounts in excess of their fair value; however, the Company did write-off additions related to previously impaired restaurants.  The assessments compared the carrying amounts of each restaurant to the estimated future undiscounted net cash flows of that restaurant and an impairment charge was recorded based on the amount by which the carrying amount of the assets exceeded their fair value. Fair value was determined based on an assessment of individual site characteristics and local real estate market conditions along with estimates of future cash flows. Impairment charges were recorded as follows:

	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
	(Successor)		(Successor)		(Predecessor)		(Predecessor)
Impairment charges	$	4,438	$	25	$	-	$	89

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9.   Long-Term Debt

Long-term debt obligations at July 29, 2012 and July 31, 2011, consist of the following:

	July 29, 2012		July 31, 2011
Senior Secured Notes, bearing interest at 10.75%	$	355,000	$	355,000
Senior secured revolving credit facility		-		-
		355,000		355,000
Less: current maturities		-		-
Long-term debt, less current maturities	$	355,000	$	355,000

Senior Secured Revolving Credit Facility

In connection with the Transactions, the Company terminated the Predecessor’s senior secured credit facility and Logan’s Roadhouse Inc. entered into the Senior Secured Revolving Credit Facility that provides a $30,000 revolving credit facility with a maturity date of October 4, 2015. The Senior Secured Revolving Credit Facility includes a $12,000 letter of credit sub-facility and a $5,000 swingline sub-facility. As of July 29, 2012, the Company had no borrowings drawn on the Senior Secured Revolving Credit Facility and $3,563 of undrawn outstanding letters of credit resulting in available credit of $26,437.

The Senior Secured Revolving Credit Facility is collateralized on a first-priority basis by a security agreement, which includes the tangible and intangible assets of the borrower and those of LRI Holdings and all subsidiaries, and is guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc.  In the first quarter of fiscal year 2013, the Company amended its Senior Secured Revolving Credit Facility, which adjusted future covenant requirements.  For each fiscal year 2013, 2014, 2015 and 2016, the amendment increased the Company’s maximum consolidated leverage ratio, decreased its minimum consolidated interest coverage ratio and reduced its maximum capital expenditure limits.

Senior Secured Notes

In connection with the Transactions, Logan’s Roadhouse, Inc. issued $355,000 aggregate principal amount of Senior Secured Notes in a private placement to qualified institutional buyers.  In July 2011, the Company completed an exchange offering which allowed the holders of those notes to exchange their notes for notes identical in all material respects except they are registered with the Securities and Exchange Commission (“SEC”) and are not subject to transfer restrictions.  The Senior Secured Notes bear interest at a rate of 10.75% per annum, payable semi−annually in arrears on April 15 and October 15.  The Senior Secured Notes mature on October 15, 2017.

The Senior Secured Notes are secured on a second-priority basis by the collateral securing the Senior Secured Revolving Credit Facility and are guaranteed by LRI Holdings and the subsidiaries of Logan’s Roadhouse, Inc.

On or after October 15, 2013, Logan’s Roadhouse, Inc. may redeem all or part of the Senior Secured Notes at redemption prices (expressed as a percentage of principal amount) ranging from 108.1% to 100.0%, plus accrued and unpaid interest. Prior to October 15, 2013, Logan’s Roadhouse, Inc. may on one or more occasions redeem up to 35% of the original principal amount of the notes using the proceeds of certain equity offerings at a redemption price of 110.8%, plus any accrued and unpaid interest. At any time during the 12-month periods commencing on October 15, in each of 2010, 2011 and 2012, Logan’s Roadhouse, Inc. may redeem up to 10% of the original principal amount at a redemption price equal to 103.0%, plus any accrued and unpaid interest. As of July 29, 2012, no portion of the Senior Secured Notes has been redeemed.

The Senior Secured Revolving Credit Facility and the Indenture that governs the Senior Secured Notes contain significant financial and operating covenants.  The financial covenants include a maximum consolidated leverage ratio, a minimum consolidated interest coverage ratio and a maximum capital expenditure limit and are specific to the Senior Secured Revolving Credit Facility.  The non-financial covenants include prohibitions on the Company and the Company’s guarantor subsidiaries’ ability to incur certain additional indebtedness or to pay dividends.  Additionally, the Indenture subjects the Company to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as a non−accelerated filer, even if the Company is not specifically required to comply with such sections of the Exchange Act. Failure to comply with these covenants constitutes a default and may lead to the acceleration of the principal amount and accrued but unpaid interest on the Senior Secured Notes.  As of July 29, 2012, the Company was in compliance with all required covenants.

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Debt issuance costs

The Company incurred $19,207 of debt issuance costs in connection with obtaining new financing.  These costs were capitalized and will be amortized to interest expense over the lives of the respective debt instruments. Amortization of debt issuance costs related to Successor debt in the Successor periods ended July 29, 2012 and July 31, 2011 and Predecessor debt in the prior periods was as follows:

	Successor debt				Predecessor debt
	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
Amortization of debt issuance costs	$	1,937	$	2,499	$	269	$	1,484

Repayment of Predecessor debt and interest rate swap agreements

Prior to the Transactions, the Company had a senior secured credit facility which included (a) a term loan facility with an original principal balance of $138,000, maturing on December 6, 2012 and requiring quarterly principal payments of $345, and (b) a revolving credit facility of up to $30,000.  The senior secured credit facility was terminated as part of the Transactions with payment of the outstanding principal balance on the term loan facility of $132,825, payment of accrued and unpaid interest of $272 and cancellation of undrawn outstanding letters of credit of $3,854.

In addition the Company had senior subordinated unsecured mezzanine term notes, originally issued at $80,000 and due June 6, 2014.  Since issuance the Company had elected to add $5,858 in accrued interest to the outstanding principal, resulting in a total outstanding principal balance prior to the Transactions of $85,858.  The notes were repaid as part of the Transactions with total payment of $89,661, which included principal of $85,858, accrued and unpaid interest of $2,086 and a prepayment premium of $1,717.

Unamortized debt issuance costs of $4,425 related to Predecessor financing were removed in accordance with accounting guidance for business combinations.

Prior to the Transactions, the Company had an interest rate swap agreement related to $75,000 of the term loan facility which effectively converted this portion of the principal from a variable to a fixed rate.  This agreement was terminated in connection with the Transactions by payment of a termination fee of $1,658.  During the Predecessor period, the Company recognized gains and losses, within other expense, net, related to the $75,000 interest rate swap as follows:

	Predecessor
	Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
Gain recognized in other income, net	$	182	$	798

The Company also had a $15,000 interest rate swap agreement that expired during fiscal year 2010 which resulted in removal of the previously recorded unrealized losses to accumulated other comprehensive income of $44, net of tax.

10.   Fair Value Measurements

Fair value measurements are made under a three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair value:

Level 1:  Observable inputs such as quoted prices in active markets;

Level 2:  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:  Unobservable inputs in which there is little or no market data, requiring the reporting entity to develop its own assumptions.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of July 29, 2012 and July 31, 2011:

	Level		July 29, 2012		July 31, 2011
Deferred compensation plan assets(1)		1	$	1,923	$	1,574

(1)   Represents plan assets established under a Rabbi Trust for the Company’s non-qualified savings plan.  The assets of the Rabbi Trust are invested in mutual funds and are reported at fair value based on active market quotes.

The fair values of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their carrying amounts because of their short-term nature.

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The carrying value of long-term debt as of July 29, 2012 and July 31, 2011 was $355,000.  The fair value of long-term debt as of July 29, 2012 and July 31, 2011 was $344,350 and $370,088, respectively.  The fair value of the Company’s publicly traded debt is based on quoted market prices.  The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

During fiscal year 2012, the Company recorded a goodwill impairment charge of $48,526.  The fair value of goodwill was determined to be $284,078, using assumptions of projected new unit growth, future trends in sales, profitability, changes in working capital along with an appropriate discount rate.  The majority of the inputs are unobservable and thus are considered to be Level 3 inputs.  See Note 6 for further information regarding the impairment of goodwill.  Additionally, during fiscal year 2012, the Company determined that three restaurants required impairment.  Fair value of the restaurants was calculated using a cash flow model which included estimates for projected annual revenue growth rates and projected cash flows.  The Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs, and thus, are considered Level 3 inputs.  See Note 8 for further information on the impairment of these long-lived assets.

11.   Income Taxes

Significant components of the Company’s net deferred tax liability consist of the following:

	July 29, 2012			July 31, 2011
Deferred tax assets:
Accrued compensation and related costs	$	1,019		$	1,005
Insurance reserves		2,628			2,049
Other reserves		121			173
Share-based compensation		604			1,262
Deferred rent		3,606			1,580
Unredeemed gift cards		213			434
Unfavorable leases		9,728			10,320
General business and other tax credits		19,566			15,386
Net operating loss carryforwards		2,273			1,052
Transaction costs		3,009			3,652
Total deferred tax assets		42,767			36,913
Deferred tax liabilities:
Intangibles		35,295			36,280
Property and equipment		33,776			32,513
Supplies inventory		3,055			2,804
Prepaid expenses		1,156			855
Total deferred tax liabilities		73,282			72,452
Net deferred tax liability	$	30,515		$	35,539
Current deferred tax asset	$	2,046		$	2,207
Non-current deferred tax liability		(32,561	)		(37,746	)
Net deferred tax liability	$	(30,515	)	$	(35,539	)

The Company routinely assesses whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon the Company’s assessment at July 29, 2012 and July 31, 2011, it was determined that it is more likely than not that the deferred tax assets will be realized, through the reversal of deferred tax liabilities and the generation of future taxable income. Therefore, the Company did not provide for a valuation allowance.  The Company has general business and other tax credits totaling $19,566 available to offset future taxes which begin to expire in fiscal year 2027.  Federal and State net operating loss carryforwards totaling $2,273 begin to expire in fiscal year 2016.

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The components of the (benefit from) provision for income taxes were as follows:

	Fiscal year 2012 (Successor)			Period from October 4, 2010 to July 31, 2011 (Successor)			Period from August 2, 2010 to October 3, 2010 (Predecessor)			Fiscal year 2010 (Predecessor)
Current:
Federal	$	(165	)	$	512		$	2,321		$	4,097
State and local		(306	)		521			140			1,382
Deferred:
Federal		(4,684	)		(1,101	)		(10,975	)		5,989
State and local		(341	)		(2	)		274			236
Total (benefit from) provision for income taxes	$	(5,496	)	$	(70	)	$	(8,240	)	$	11,704

The following table includes a reconciliation of the federal statutory rate to our effective tax rate:

	Fiscal year 2012 (Successor)			Period from October 4, 2010 to July 31, 2011 (Successor)			Period from August 2, 2010 to October 3, 2010 (Predecessor)			Fiscal year 2010 (Predecessor)
Tax at federal statutory rate		35.0	%		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal benefit		0.8	%		101.7	%		-2.6	%		4.9	%
General business and other tax credits		7.2	%		-374.9	%		5.3	%		-6.7	%
Transaction-related costs		0.0	%		213.3	%		61.4	%		0.0	%
Goodwill impairment		-32.7	%		0.0	%		0.0	%		0.0	%
Effect of rate change and other, net		0.3	%		11.2	%		-1.7	%		3.7	%
Effective tax rate		10.6	%		-13.7	%		97.4	%		36.9	%

The effective tax rate for fiscal year 2012 was impacted by the non-deductible goodwill impairment partially offset by wage credits.  The effective tax rate for the Successor period ended July 31, 2011 was impacted unfavorably by certain non-deductible costs paid in connection with the Transactions partially offset by the magnified effect of wage credits on low pre-tax income.  The effective tax rate for the Predecessor period ended October 3, 2010 was impacted favorably by the deductibility of certain costs paid in connection with the Transactions that were not included in book net income.  The effective tax rate for fiscal year 2010 was impacted by a one-time charge to adjust the federal tax rate applied to the deferred balances from 34% to 35%, offset by wage credits.

For the Successor periods after October 4, 2010, the Company is included in the consolidated tax return of RHI.  For the Predecessor periods, the Company’s consolidated tax return was filed by LRI Holdings.  For all periods presented, the Company’s income tax provision has been prepared as if the Company filed a federal tax return at the LRI Holdings consolidated level.

As of July 29, 2012, the Company did not have material unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. For the presented periods, no interest or penalties have been recorded in the consolidated financial statements.

During fiscal year 2010, the Internal Revenue Service (“IRS”) examined the Company’s consolidated federal income tax returns for the years ended July 29, 2007 and August 3, 2008.  The Company reached a settlement with the IRS for those periods which did not have a material impact on the consolidated financial statements.

12.   Leases

As of July 29, 2012, the Company leases 211 restaurant facilities as well as office facilities and equipment under non-cancelable lease agreements. These leases have all been classified as operating leases. A majority of the Company’s lease agreements provide for renewal options and contain escalation clauses. Additionally, certain restaurant leases provide for contingent rent payments based upon sales volume in excess of specified minimum levels.

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The following is a schedule by year of the future minimum rental payments required under operating leases as of July 29, 2012. The amounts include optional renewal periods when it is probable that the Company will exercise the options.

Year	Total
Fiscal year 2013	$	38,705
Fiscal year 2014		39,050
Fiscal year 2015		39,170
Fiscal year 2016		39,126
Fiscal year 2017		39,488
Thereafter		606,078
Total	$	801,617

Rent expense included the following:

	Fiscal year 2012 (Successor)		Period from October 4, 2010 to July 31, 2011 (Successor)		Period from August 2, 2010 to October 3, 2010 (Predecessor)		Fiscal year 2010 (Predecessor)
Minimum	$	41,819	$	31,807	$	6,829	$	35,632
Contingent		88		81		11		107
Total	$	41,907	$	31,888	$	6,840	$	35,739

The Company uses sale and leaseback transactions as a financing mechanism.  The sale and leaseback transactions may include land and building or building only.  The leases generally have initial terms of 20 years and have all been classified as operating leases.  The Company recognizes losses in the period of sale and defers gains to be amortized over the related lease life.

During fiscal year 2012, the Company sold and leased back ten buildings constructed on leased land.  The transactions resulted in deferred gains of $618 and a realized loss of $116.  The Company sold and subsequently leased back one building on leased land in each of the Successor period ended July 31, 2011 and the Predecessor period ended October 3, 2010.  These transactions resulted in a deferred gain of $115 and a realized loss of $33, respectively.  During fiscal year 2010, the Company sold and leased back six buildings constructed on leased land.  The transactions resulted in deferred gains of $658 and a realized loss of $30.

13.   Commitments and Contingencies

Litigation

Based upon information currently available, the Company is not a party to any litigation that management believes could have a material effect on the Company’s business or the Company’s consolidated financial statements.

Guarantees

LRI Holdings has fully and unconditionally guaranteed both the Senior Secured Revolving Credit Facility and the Senior Secured Notes.

Indemnifications

The Company is party to certain indemnifications to third parties in the ordinary course of business. The probability of incurring an actual liability under such indemnifications is sufficiently remote that no liability has been recorded.

14.   Related Party Transactions

Related Party Transactions Relating to Successor Relationships

At the time of the Transactions, seller proceeds of $17,800 were deposited into an escrow account to serve as security for and as a sole source of payment of sellers’ obligations relating to Predecessor periods. Final escrow funds were managed in accordance with the terms of an escrow agreement with final distribution of all remaining escrow amounts paid to the sellers in the second quarter of fiscal year 2012.

In accordance with the terms of the Transactions, the sellers are entitled to any actual refunds of income taxes relating to Predecessor periods which will be paid after filing of the Predecessor income tax returns and receipt of those tax refunds by the Company. The deductibility of stock options and transaction costs resulted in an income tax receivable of $5,250 and an offsetting payable to sellers, included in other current liabilities and accrued expenses, of the same amount at July 29, 2012.  In the first quarter of fiscal year 2013, following the receipt of the income tax refund by the Company, the remaining payable was paid to the sellers and removed from the balance sheet.

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Stockholders’ agreement

The Kelso Affiliates and the Management Investors own all of the outstanding capital stock of our ultimate parent company, RHI.  RHI entered into a stockholders’ agreement, dated October 4, 2010, between the Kelso Affiliates and the Management Investors (the “Successor Stockholders Agreement”) that contains, among other things, provisions relating to RHI’s governance, transfer restrictions, call rights, tag-along rights and drag-along rights. The Successor Stockholders Agreement provides that the Kelso Affiliates are entitled to elect (or cause to be elected) all of RHI’s directors.  The Company’s Chief Executive Officer is currently and will continue to be a member of the Board as long as he remains employed in this capacity and is duly appointed.

Stockholders registration rights agreement

RHI and its stockholders entered into a registration rights agreement substantially simultaneously with the consummation of the Transactions, which grants such stockholders certain registration rights (the “Stockholders Registration Rights Agreement”). The Kelso Affiliates have demand registration rights and all of the other parties to the Stockholders Registration Rights Agreement have the right to participate in any demand registration on a pro rata basis, subject to certain conditions. In addition, if RHI proposes to register any of its shares (other than registrations related to exchange offers, benefit plans and certain other exceptions), all of the other parties to the Stockholders Registration Rights Agreement have the right to include their shares in such registration, subject to certain conditions.

Management subscription agreements

Simultaneously with the consummation of the Transactions, the Management Investors entered into management subscription agreements with RHI pursuant to which they agreed to subscribe for and purchase an aggregate of 3% of the common stock of RHI for an aggregate purchase price of $6,900. The purchase price per share was equal to the purchase price per share paid by the Kelso Affiliates in connection with the Transactions.

Advisory agreement

In connection with the Transactions, Logan’s Roadhouse, Inc. entered into an advisory agreement with Kelso (the “Advisory Agreement”) pursuant to which the Company paid Kelso a one-time advisory fee of $7,000 and reimbursed Kelso for out-of-pocket costs and expenses incurred in connection with the Transactions.  In addition, pursuant to the Advisory Agreement, Kelso will provide the Company with financial advisory and management consulting services in return for annual fees of $1,000 to be paid quarterly.  The Company will pay Kelso transaction service fees upon the completion of certain types of transactions that directly or indirectly involve the Company and will indemnify Kelso and certain of Kelso’s officers, directors, partners, employees, agents and control persons for any losses and liabilities arising out of the Advisory Agreement.  For the fiscal year ended July 29, 2012, the Company recognized $1,000 of management advisory fees.  As of July 29, 2012, the Company had prepaid management advisory fees of $154.

Related Party Transactions Relating to Predecessor Relationships

Stockholders’ agreement

On December 6, 2006, the Company entered into a stockholders’ agreement (the “Predecessor Stockholders Agreement”) with all of the Company’s stockholders, which included certain of the Company’s management. The Predecessor Stockholders Agreement placed certain restrictions on the sale or transfer of shares of the Company’s Class A common stock to third parties and required first offer rights to the Company and then to the major stockholders. In addition, subject to certain exceptions, including issuances pursuant to an initial public offering, the Predecessor Stockholders Agreement granted holders of the Company’s Class A common stock preemptive rights with respect to issuances of additional Class A common stock.  The Predecessor Stockholders Agreement was terminated in connection with the Transactions.

Management agreement and acquisition fees

On December 6, 2006, the Company entered into a management and consulting services agreement (the “Management Agreement”), as amended and restated on June 7, 2007, with BRS, Canyon Capital and Black Canyon, owners of LRI Holdings (collectively, the “Service Providers”). The Management Agreement had a 10-year initial term.  The Company could terminate the Management Agreement upon consummation of an approved sale, as defined, or an initial public offering, subject to a buyout fee, as defined in the Management Agreement.  The buyout fee paid on October 4, 2010 to terminate the agreement was $8,031.

Under the terms of the Management Agreement, the Service Providers received an aggregate annual fee equal to 2% of the Company’s fiscal year Adjusted EBITDA (the “Management Fee”) as defined in the Management Agreement, plus reasonable out-of-pocket expenses. The Management Agreement also entitled the Service Providers to transaction fees in an amount equal to 2% of the aggregate value of an occurring transaction, as defined, plus reasonable out-of-pocket fees and expenses.  The Company agreed to indemnify the Service Providers for any losses and liabilities arising out of the Management Agreement.  The Company incurred $172 and $1,501 in Management Fees for the Predecessor period ended October 3, 2010 and fiscal year 2010, respectively.  In connection with the Transactions, a transaction fee of $11,200 was paid and the agreement was terminated.

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15.   Restructuring

In connection with a restructuring of the Company’s marketing group and certain positions within the operations group, the Company incurred a one-time charge of $404 related to termination benefits for two former employees, repurchased shares of common stock of RHI held by the former employees for $1,450, and recorded an adjustment of $175 for the forfeiture of options to purchase stock.  The expense associated with this restructuring was included in general and administrative expenses.

16.   Employee Retirement Plans

Employee savings plan

The Logan’s Roadhouse, Inc. Employee Savings Plan, is a defined contribution plan that complies with Section 401(k) of the Internal Revenue Code of 1986, as amended, (the “IRC”). Employees may voluntarily contribute between 1% and 100% of their annual pay into the plan, subject to IRC limitations. The Company currently matches 25% of employee’s deferral not to exceed a deferral of 6% of the eligible employee’s total cash compensation. The Company’s matching contributions are funded concurrent with each payroll, and the expense of the matching program was as follows:

	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
	(Successor)		(Successor)		(Predecessor)		(Predecessor)
401k matching contribution	$	247	$	142	$	51	$	174

Non-qualified savings plan

The Company established the Logan’s Roadhouse, Inc. Non-Qualified Savings Plan for the benefit of a select group of management. Eligible employees can defer between 1% and 50% of their base compensation and/or between 1% and 100% of performance based compensation, as defined. The Company currently matches 25% of the employee’s deferral not to exceed a deferral of 3% of the eligible employee’s total cash compensation.  In accordance with applicable accounting guidance, the amounts held in the rabbi trust are included in the Company’s consolidated financial statements. The amounts included in other assets and the offsetting liability in other long-term obligations for the plan were $1,923 and $1,574 at July 29, 2012 and July 31, 2011, respectively. The Company’s matching contributions are funded concurrent with each payroll, and the expense of the matching program was as follows:

	Fiscal year 2012		Period from October 4, 2010 to July 31, 2011		Period from August 2, 2010 to October 3, 2010		Fiscal year 2010
	(Successor)		(Successor)		(Predecessor)		(Predecessor)
Non-qualified savings plan matching contribution	$	39	$	29	$	15	$	31

17.   Capitalization

Successor

As a result of the Transactions, and the cancellation of all previously outstanding equity, LRI Holdings authorized 100 shares of $0.01 par value per share common stock.  As of July 29, 2012, there is only one share issued and outstanding which is owned by Roadhouse Parent Inc., a wholly owned subsidiary of RHI.  RHI has 5,000,000 shares of $0.01 par value per share common stock authorized.  As of July 29, 2012, 2,285,500 shares were issued and outstanding,  following the departure of two of the Company's officers and subsequent repurchase of their outstanding RHI shares.  The shares are owned by the Kelso Affiliates (98%) and the Management Investors (2%).  RHI has made an indirect capital contribution through its subsidiaries to LRI Holdings in the amount of $230,000.

Predecessor

Preferred stock

The Predecessor Company’s board of directors was authorized to issue a maximum of 100,000 shares of preferred stock, with a $0.01 par value per share of which 75,000 shares were further designated as Series A preferred stock. The number of authorized shares of Series A preferred stock could not be increased without the written consent of at least 66 2/3% of the aggregate liquidation value of the holders of the Series A preferred stock.

Each holder of Series A preferred stock was entitled to receive cash dividends, when declared or otherwise payable, on each share, calculated on a daily basis to equal a rate of 13.0% per annum (compounded semi-annually) of the $1,000 per share liquidation preference plus all accumulated and unpaid dividends whether or not declared (i.e. cumulative compounding preferred stock). The liquidation value and accumulated dividends were entitled to be paid before any distribution or payment was made to any other junior securities.

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In fiscal year 2007, members of management were given the option of investing certain fixed cash awards assumed by the Predecessor Company. The Predecessor Company accounted for the equity associated with the invested management awards pursuant to applicable accounting guidance. At August 1, 2010, there were 1,231 shares of Series A preferred stock, related to invested management awards, issued and outstanding; however, due to certain restrictions and resale limitations, $1,178 related to these shares is excluded from the equity section and treated as deferred management compensation. Certain members of management also invested personal cash. At August 1, 2010, there were 357 shares of Series A preferred stock issued and outstanding related to these cash investments by management. The value associated with these shares, $340, is reflected within additional paid-in capital.

The holders of Series A preferred stock were not entitled or permitted to vote on any matter except as required by law. At August 1, 2010, 64,508 shares of Series A preferred stock, including all management shares discussed above, were issued and outstanding.  On the closing date of the Transactions, the holders of the Series A preferred stock received aggregate proceeds of $104,578, which included the liquidation preference of $64,508 and accumulated dividends of $40,070, in exchange for their stock.

Common stock

The Predecessor Company’s board of directors was authorized to issue a maximum of 1,900,000 shares of common stock, with a $0.01 par value per share.

Subject to any preferences for preferred shares then outstanding, each share of the Predecessor Company’s common stock was entitled to participate equally in dividends as and when declared by the Company’s board of directors as the Company’s funds are legally available therefore. The holders of the Company’s common stock did not have any preemptive or preferential rights to purchase or to subscribe for any additional shares of common stock or any other securities that may have been issued by the Predecessor Company. There was no provision for redemption or conversion of the Predecessor Company’s common stock.

In the event of liquidation, dissolution or winding up of the Company’s business, whether voluntarily or involuntarily, the holders of the Company’s common stock were entitled to share ratably in any of the net assets or funds available for distribution to stockholders, after the satisfaction of all liabilities or after adequate provision is made therefore and after distribution to holders of any class of stock having preference over the Predecessor Company’s common stock in the case of liquidation.

As discussed above, members of management were given the option of investing certain fixed cash awards, which were accounted for pursuant to applicable accounting guidance. At August 1, 2010, there were 18,949 shares of common stock, related to invested management awards, issued and outstanding, and $243 related to these shares is excluded from the equity section and treated as deferred management compensation. At August 1, 2010, there were 5,478 shares of common stock issued and outstanding related to personal cash investments by management. The value associated with these shares at August 1, 2010, $70, is reflected within additional paid-in capital.

At August 1, 2010, 992,427 shares of common stock, including all management shares discussed above, were issued and outstanding.  On the closing date of the Transactions, the holders of the common stock received aggregate proceeds of $214,634, subject to final release of amounts held in escrow in exchange for their stock.

18.    Share-Based Awards and Compensation Plans

Successor plan

On January 18, 2011, RHI adopted the Roadhouse Holding Inc. Stock Incentive Plan (the “2011 Plan”), pursuant to which options to purchase approximately 13%, or 345,000 shares, of the common stock of RHI on a fully diluted basis are available for grant to our officers and key employees. Approximately 95% of the total option pool was awarded on March 1, 2011.  As of July 29, 2012, due to forfeitures and subsequent grants, approximately 14% of the option pool is available for future grants.  Options granted under the 2011 Plan expire on the ten-year anniversary of the grant date.

A portion of the stock options under the 2011 Plan are subject to time-based vesting and a portion are performance-based. Time-based options granted vest ratably on the first four anniversaries of the date of grant.  Compensation expense for these options is recognized over the requisite service period for the award.  Upon a change in control of RHI, all time-based options will fully vest.  Performance-based options do not become exercisable unless and until the Kelso Affiliates, in connection with certain change of control transactions (i) receive proceeds equal to or in excess of 1.75 times their initial investment and (ii) achieve an internal rate of return, or IRR, on their initial investment, compounded annually, of at least 10%. Pursuant to each option grant, provided the conditions described above are satisfied, all or a portion of the options will vest in the same proportion as the proceeds received by the Kelso Affiliates range from 1.75 to 4.25 times their initial investment. The Company recognizes compensation expense for performance-based options when the achievement of the performance goals is deemed to be probable.

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Because there is no public market for RHI shares, fair market value is set based on the good faith determination of the board of directors.  The grant date fair values of the options granted have been determined utilizing the Black-Scholes option pricing model.  Since the Company does not have publicly traded equity securities, the expected volatilities are based on historical volatility of comparable public companies.  The expected term of the options granted represents the period of time that the options are expected to be outstanding.  The significant assumptions used in determining the underlying fair value of the options granted in fiscal year 2012, are as follows:

	Time-based options			Performance-based options
Valuation model	Black-Scholes			Black-Scholes
Expected volatility		65.0	%		70.0	%
Risk-free interest rate		1.6	%		0.9	%
Dividend yield		0.0	%		0.0	%
Expected term	6.25 years			5.0 years
Fair value of options granted	$	52.90		$	38.92

The following table summarizes stock option activity under the 2011 Plan for the Successor period ended July 29, 2012:

	Time-based options					Performance-based options
	Number			Weighted average exercise price		Number			Weighted average exercise price
Options outstanding as of July 31, 2011		109,855		$	100.00		219,735		$	100.00
Granted		5,266			100.00		10,544			100.00
Exercised		-			-		-			-
Forfeited		(15,716	)		100.00		(31,434	)		100.00
Options outstanding as of July 29, 2012		99,405		$	100.00		198,845		$	100.00
As of July 29, 2012
Options vested		23,535					-
Options exercisable		23,535					-

The Company recorded share-based compensation expense of $746 and $821 related to the time-based options in fiscal year 2012 and the Successor period ended July 31, 2011, respectively, within general and administrative expenses.  The Company did not record share-based compensation expense related to the performance options as the likelihood of a change in control is not probable.  The average remaining life for all options outstanding at July 29, 2012 is approximately 8.7 years.  As of July 29, 2012 the share-based compensation expense, unrecognized compensation expense, and weighted average values for the service-based and performance options under the 2011 Plan are as follows:

	Time-based options		Performance-based options
Share-based compensation expense	$	746	$	-
Unrecognized compensation expense		2,147		n/a
Weighted-average years for unrecognized compensation expense	2.3 years			n/a
Weighted-average grant date fair value per option	$	37.36	$	24.70

Predecessor plan

The Company adopted the LRI Holdings, Inc. Option Plan (the “2007 Plan”) effective March 1, 2007. Under the 2007 Plan, the Company was authorized to grant options for up to 176,471 shares of LRI Holdings Class A common stock.  All options granted under the 2007 Plan were subject to performance and service conditions and became exercisable only upon the Predecessor Company’s achieving certain milestones for two of the majority stockholders.

At the date of the Transactions, all 168,376 outstanding options vested and were canceled in exchange for aggregate proceeds of $34,731 (or $206.27 per share), subject to release of final amounts held in escrow.  In addition, the 2007 Plan was terminated and no further grants will be made.

All options granted under the 2007 Plan had a grant date fair value of $4.05 per share and no compensation expense had been recognized since the likelihood at all reporting periods of the performance conditions being met was not considered probable.

19.   Condensed Consolidating Financial Information

The Senior Secured Notes (described in Note 9) were issued by Logan’s Roadhouse, Inc. and guaranteed on a senior basis by its parent company, LRI Holdings, and each of its subsidiaries.  The guarantees are full and unconditional and joint and several.  The Company is providing condensed consolidating financial statements pursuant to SEC Regulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

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The condensed consolidating financial information of Logan’s Roadhouse, Inc. and the guarantors is presented below:

Condensed Consolidated Balance Sheets

July 29, 2012:	LRI Holdings, Inc.		Issuer and subsidiary guarantors		Consolidating adjustments			Consolidated
ASSETS
Current assets	$	-	$	52,620	$	-		$	52,620
Property and equipment, net		-		239,553		-			239,553
Other assets		1,680		135,577		(118,730	)		18,527
Investment in subsidiary		330,503		-		(330,503	)		-
Goodwill		-		284,078		-			284,078
Tradename		-		71,694		-			71,694
Other intangible assets, net		-		21,354		-			21,354
Total assets	$	332,183	$	804,876	$	(449,233	)	$	687,826
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities	$	-	$	76,511	$	-		$	76,511
Long-term debt		-		355,000		-			355,000
Deferred income taxes		-		32,561		-			32,561
Other long-term obligations		118,730		39,702		(118,730	)		39,702
Stockholder’s equity		213,453		301,102		(330,503	)		184,052
Total liabilities and stockholder’s equity	$	332,183	$	804,876	$	(449,233	)	$	687,826
July 31, 2011:	LRI Holdings, Inc.		Issuer and subsidiary guarantors		Consolidating adjustments			Consolidated
ASSETS
Current assets	$	5,895	$	43,800	$	-		$	49,695
Property and equipment, net		-		232,940		-			232,940
Other assets		-		136,179		(116,687	)		19,492
Investment in subsidiary		379,118		-		(379,118	)		-
Goodwill		-		331,788		-			331,788
Tradename		-		71,694		-			71,694
Other intangible assets, net		-		23,215		-			23,215
Total assets	$	385,013	$	839,616	$	(495,805	)	$	728,824
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities	$	-	$	70,690	$	-		$	70,690
Long-term debt		-		355,000		-			355,000
Deferred income taxes		37,746		-		-			37,746
Other long-term obligations		116,687		34,808		(116,687	)		34,808
Stockholder’s equity		230,580		379,118		(379,118	)		230,580
Total liabilities and stockholder’s equity	$	385,013	$	839,616	$	(495,805	)	$	728,824

In the above guarantor financial statements, the income tax related balance sheet amounts as of July 31, 2011 have been presented on LRI Holdings, as LRI Holdings is the entity that files the consolidated tax return for the Predecessor period and RHI, the indirect parent of LRI Holdings, is the entity that files the consolidated tax return for the Successor period.  However, the Company presented the income tax related balance sheet amounts as of July 29, 2012 on the Issuer and subsidiary guarantors, as primarily all of the activities resulting in the income tax receivable and deferred tax balances relate to the activities of Logan’s Roadhouse, Inc.

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Condensed Consolidated Statements of Operations

Fiscal year 2012 (Successor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Total revenues	$	-		$	632,173		$	-	$	632,173
Total costs and expenses		134			644,315			-		644,449
Operating loss		(134	)		(12,142	)		-		(12,276	)
Interest expense, net and other income, net		2,041			37,707			-		39,748
Loss before income taxes		(2,175	)		(49,849	)		-		(52,024	)
Income tax benefit		(230	)		(5,266	)		-		(5,496	)
Net Loss		(1,945	)		(44,583	)		-		(46,528	)
Undeclared preferred dividend		-			-			-		-
Net Loss attributable to common stockholders	$	(1,945	)	$	(44,583	)	$	-	$	(46,528	)
Period from October 4, 2010 to July 31, 2011 (Successor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Total revenues	$	-		$	498,963		$	-	$	498,963
Total costs and expenses		11,185			453,460			-		464,645
Operating (loss) income		(11,185	)		45,503			-		34,318
Interest expense, net and other income, net		1,658			32,150			-		33,808
(Loss) income before income taxes		(12,843	)		13,353			-		510
Income tax expense (benefit)		1,763			(1,833	)		-		(70	)
Net (loss) income		(14,606	)		15,186			-		580
Undeclared preferred dividend		-			-			-		-
Net (loss) income attributable to common stockholders	$	(14,606	)	$	15,186		$	-	$	580
Period from August 2, 2010 to October 3, 2010 (Predecessor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Total revenues	$	-		$	94,110		$	-	$	94,110
Total costs and expenses		10,305			89,304			-		99,609
Operating (loss) income		(10,305	)		4,806			-		(5,499	)
Interest expense, net and other income, net		-			2,965			-		2,965
(Loss) income before income taxes		(10,305	)		1,841			-		(8,464	)
Income tax (benefit) expense		(10,032	)		1,792			-		(8,240	)
Net (loss) income		(273	)		49			-		(224	)
Undeclared preferred dividend		(2,270	)		-			-		(2,270	)
Net (loss) income attributable to common stockholders	$	(2,543	)	$	49		$	-	$	(2,494	)
Fiscal year 2010 (Predecessor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Total revenues	$	-		$	557,528		$	-	$	557,528
Total costs and expenses		595			507,149			-		507,744
Operating (loss) income		(595	)		50,379			-		49,784
Interest expense, net and other income, net		-			18,059			-		18,059
(Loss) income before income taxes		(595	)		32,320			-		31,725
Income tax (benefit) expense		(220	)		11,924			-		11,704
Net (loss) income		(375	)		20,396			-		20,021
Undeclared preferred dividend		(12,075	)		-			-		(12,075	)
Net (loss) income attributable to common stockholders	$	(12,450	)	$	20,396		$	-	$	7,946

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Condensed Consolidated Statements of Cash Flows

Fiscal year 2012 (Successor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Net cash provided by operating activities	$	96		$	36,392		$	-	$	36,488
Net cash used in investing activities		(96	)		(33,763	)		-		(33,859	)
Net cash used in financing activities		-			-			-		-
Increase in cash and cash equivalents		-			2,629			-		2,629
Cash and cash equivalents, beginning of period		-			19,103			-		19,103
Cash and cash equivalents, end of period	$	-		$	21,732		$	-	$	21,732
Period from October 4, 2010 to July 31, 2011 (Successor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Net cash provided by (used in) operating activities	$	101,219		$	(84,670	)	$	-	$	16,549
Net cash used in investing activities		(331,219	)		(11,619	)		-		(342,838	)
Net cash provided by financing activities		230,000			115,392			-		345,392
Increase in cash and cash equivalents		-			19,103			-		19,103
Cash and cash equivalents, beginning of period		-			-			-		-
Cash and cash equivalents, end of period	$	-		$	19,103		$	-	$	19,103
Period from August 2, 2010 to October 3, 2010 (Predecessor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Net cash provided by operating activities	$	-		$	2,664		$	-	$	2,664
Net cash used in investing activities		-			(5,380	)		-		(5,380	)
Net cash provided by financing activities		-			-			-		-
Decrease in cash and cash equivalents		-			(2,716	)		-		(2,716	)
Cash and cash equivalents, beginning of period		-			52,211			-		52,211
Cash and cash equivalents, end of period	$	-		$	49,495		$	-	$	49,495
Fiscal year 2010 (Predecessor)	LRI Holdings, Inc.			Issuer and subsidiary guarantors			Consolidating adjustments		Consolidated
Net cash provided by operating activities	$	-		$	56,400		$	-	$	56,400
Net cash used in investing activities		-			(15,100	)		-		(15,100	)
Net cash used in financing activities		-			(2,158	)		-		(2,158	)
Increase in cash and cash equivalents		-			39,142			-		39,142
Cash and cash equivalents, beginning of period		-			13,069			-		13,069
Cash and cash equivalents, end of period	$	-		$	52,211		$	-	$	52,211

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20.   Supplemental Cash Flow Information

The following table presents supplemental cash flow information:

	Fiscal year 2012 (Successor)		Period from October 4, 2010 to July 31, 2011 (Successor)		Period from August 2, 2010 to October 3, 2010 (Predecessor)		Fiscal year 2010 (Predecessor)
Cash paid for:
Interest, excluding amounts capitalized	$	37,979	$	19,966	$	3,493	$	17,191
Income taxes		715		276		22		3,573
Non-cash investing and financing activities:
Property accrued in accounts payable and accrued expenses		4,184		4,019		3,040		2,968
Asset retirement obligation additions		97		37		10		52
Deferred gain on sale and leaseback transactions		616		115		-		628
Interest rate derivative instrument		-		-		-		(70	)

21.   Selected Quarterly Financial Data (Unaudited)

Quarterly operating results are not necessarily representative of operations for a full year for various reasons, including the seasonal nature of our business and unpredictable weather conditions which may affect sales volume and food costs.  The following table presents our summarized quarterly results:

				Successor
Fiscal year 2012:				1st Quarter			2nd Quarter		3rd Quarter		4th Quarter
Total revenues				$	144,280		$	157,406	$	170,169	$	160,318
Operating income					5,296			10,905		17,058		(45,535	)
Net (loss) income					(3,284	)		555		8,297		(52,096	)
	Predecessor			Successor
Fiscal year 2011:	Period from August 2, 2010 to October 3, 2010			Period from October 4, 2010 to October 31, 2010			2nd Quarter		3rd Quarter		4th Quarter
Total revenues	$	94,110		$	41,980		$	145,996	$	159,451	$	151,536
Operating (loss) income		(5,499	)		(6,469	)		12,205		16,183		12,399
Net (loss) income		(224	)		(6,048	)		1,090		3,864		1,674

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of LRI Holdings, Inc.*
3.2	Amended and Restated By-Laws of LRI Holdings, Inc.*
4.1	Credit Agreement, dated as of October 4, 2010, among LRI Holdings, Inc. and Logan’s Roadhouse, Inc., as Borrower, the Several Lenders from Time to Time Parties thereto, JPMorgan Chase Bank, N.A., Credit Suisse AG, as Co-Documentation Agents, Credit Suisse AG, as Syndication Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent, together with the Joinder to the Credit Agreement, dated as of October 4, 2010, made by LRI Holdings, Inc. and Logan’s Roadhouse, Inc. for the benefit of the Lenders under the Credit Agreement.*
4.2	First Lien Guarantee and Collateral Agreement, dated as of October 4, 2010, made by LRI Holdings, Inc. and Logan’s Roadhouse, Inc. and the Guarantors Identified Therein, in favor of JPMorgan Chase Bank, N.A., as Administrative Agent, together with the Assumption Agreement to the First lien Guarantee and the Collateral Agreement, dated October 4, 2010, made by LRI Holdings, Inc., Logan’s Roadhouse, Inc., Logan’s Roadhouse of Texas, Inc. and Logan’s Roadhouse of Kansas, Inc. in favor of JPMorgan Chase Bank N.A., as Administrative Agent under the Credit Agreement.*
4.3	Security Agreement, dated as of October 4, 2010, made by LRI Holdings, Inc. and Logan’s Roadhouse, Inc., in favor of Wells Fargo Bank, National Association, as Collateral Agent, together with the Joinder Agreement to Security Agreement dated as of October 4, 2010 made by LRI Holdings, Inc., Logan’s Roadhouse, Inc., Logan’s Roadhouse of Texas, Inc., Logan’s Roadhouse of Kansas, Inc., in favor of Wells Fargo Bank, National Association, as Collateral Agent under the Security Agreement.*
4.4	Intercreditor Agreement, dated as of October 4, 2010, among JPMorgan Chase Bank, N.A., as Administrative Agent, Wells Fargo Bank, National Association, as Collateral Agent, Logan’s Roadhouse, Inc., and each of the other Loan Parties party thereto, together with the Joinder to Intercreditor Agreement dated as of October 4, 2010 by LRI Holdings, Inc., Logan’s Roadhouse, Inc., Logan’s Roadhouse of Texas, Inc., Logan’s Roadhouse of Kansas, Inc., in favor of JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association.*
4.5	Indenture, dated as of October 4, 2010, among Logan’s Roadhouse, Inc., LRI Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee and Wells Fargo Bank, National Association, as Collateral Agent, relating to the 10.75% Senior Secured Notes due 2017, together with the Supplemental Indenture for Merger entered into as of October 4, 2010 by and among Logan’s Roadhouse, Inc., LRI Holdings, Inc., Logan’s Roadhouse of Texas, Inc., Logan’s Roadhouse of Kansas, Inc., Wells Fargo Bank, National Association, as Trustee and Wells Fargo Bank, National Association, as Collateral Agent under the Indenture.*
4.6	Form of 10.75% Senior Secured Note due 2017 (included in Exhibit 4.5 hereto).*
10.1†	Employment agreement with G. Thomas Vogel, effective as of March 23, 2011.*
10.2†	Roadhouse Holding Inc. Stock Incentive Plan.*
10.3†	Stockholders’ Agreement, dated November 19, 2010, among Roadhouse Holding Inc., Kelso Investment Associates VIII, L.P., Stephen R. Anderson, Amy L. Bertauski, David Cavallin, Scott Dever, Robert R. Effner, James B. Kuehnhold, Paul S. Pendleton, Lynne D. Wildman and George T. Vogel.*
10.4†	Advisory Agreement, dated October 4, 2010, between Logan’s Roadhouse, Inc. and Kelso & Company, L.P.*
10.5†	Stockholder’s Registration Rights Agreement, dated as of November 19, 2010, among Roadhouse Holding Inc., Kelso Investment Associates VIII, L.P., KEP VI, LLC, Stephen R. Anderson, Amy L. Bertauski, David Cavallin, Scott Dever, Robert R. Effner, James B. Kuehnhold, Paul S. Pendleton, Lynne D. Wildman and George T. Vogel.*
10.6†	Form of Stock Option Agreement.*
10.7†	Logan’s Roadhouse, Inc. Non-Qualified Savings Plan.*
10.8†	Logan’s Roadhouse, Inc. Non-Qualified Savings Plan, Rabbi Trust Agreement.*
10.9†	Logan’s Roadhouse, Inc. 2007 Stock Option Plan.*
10.10†	Separation Agreement by and among Logan’s Roadhouse, Inc., Roadhouse Holding, Inc. and Stephen R. Anderson dated March 19, 2012.**
10.11	Amendment No. 1 to Credit Agreement, dated as of September 4, 2012, among Logan’s Roadhouse, Inc., LRI Holdings, Inc., JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders a party thereto.***
21.1	List of Subsidiaries.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended July 29, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.****

____________

†	Denotes management contract or compensatory plan or arrangement.
*	Filed previously by the Company as an exhibit to Registration Statement on Form S-4 (File No. 333-173579) filed on April 18, 2011 and incorporated herein by reference.
**	Filed previously by the Company as an exhibit to its Quarterly Report on Form 10-Q for the quarter ended April 29, 2012 (File No. 333-173579) filed on June 11, 2012 and incorporated herein by reference.
***	Filed previously by the Company as an exhibit to its Current Report on Form 8-K (File No. 333-173579) filed on September 6, 2012.
****	Furnished electronically herewith.

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