UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 11, 2010

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 333-57925

Perkins & Marie Callender’s Inc.

(Exact name of registrant as specified in its charter)

Delaware	62-1254388
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
6075 Poplar Avenue, Suite 800, Memphis, TN	38119
(Address of principal executive offices)	(Zip code)

(901) 766-6400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No 0

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes 0 No 0

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No R

Number of shares of common stock outstanding as of August 25, 2010: 10,820.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION	Page
Item 1. Financial Statements:
Consolidated Statements of Operations (Unaudited) – Quarter and Year-to-Date Periods Ended July 11, 2010 and July 12, 2009	2
Consolidated Balance Sheets – July 11, 2010 (Unaudited) and December 27, 2009	3
Consolidated Statements of Cash Flows (Unaudited) – Year-to-Date Periods Ended July 11, 2010 and July 12, 2009	4
Notes to Consolidated Financial Statements (Unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	41
Item 4. Controls and Procedures	41
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3. Defaults Upon Senior Securities	42
Item 4. Removed and Reserved	42
Item 5. Other Information	42
Item 6. Exhibits	42

SIGNATURE	43

Ex-31.1 Section 302 Certification of the CEO
Ex-31.2 Section 302 Certification of the CFO
Ex-32.1 Section 906 Certification of the CEO
Ex-32.2 Section 906 Certification of the CFO

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PERKINS & MARIE CALLENDER’S INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands)

	Quarter				Quarter			Year-to-Date			Year-to-Date
	Ended				Ended			Ended			Ended
	July 11, 2010				July 12, 2009			July 11, 2010			July 12, 2009
REVENUES:
Food sales		$	107,573			115,061			254,888			275,938
Franchise and other revenue			6,580			6,815			15,070			15,191
Total revenues			114,153			121,876			269,958			291,129
COSTS AND EXPENSES:
Cost of sales (excluding depreciation shown below):
Food cost			27,434			30,301			64,716			73,275
Labor and benefits			38,846			40,904			92,208			96,229
Operating expenses			32,534			32,072			76,269			77,773
General and administrative			10,835			10,129			24,941			24,218
Depreciation and amortization			5,059			5,557			11,965			12,913
Interest, net			10,299			10,130			23,864			23,745
Asset impairments and closed store expenses			440			346			2,105			1,208
Other, net			(140	)		(1,716	)		(358	)		(2,677	)
Total costs and expenses			125,307			127,723			295,710			306,684
Loss before income taxes			(11,154	)		(5,847	)		(25,752	)		(15,555	)
Benefit from (provision for) income taxes			-			-			-			-
Net loss			(11,154	)		(5,847	)		(25,752	)		(15,555	)
Less: net (loss) earnings attributable to
non-controlling interests			(1	)		33			7			79
Net loss attributable to Perkins & Marie
Callender's Inc.		$	(11,153	)		(5,880	)		(25,759	)		(15,634	)

The accompanying notes are an integral part of these consolidated financial statements.

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PERKINS & MARIE CALLENDER’S INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	July 11,			December 27,
	2010			2009
ASSETS	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	2,263			4,288
Restricted cash		7,462			8,110
Receivables, less allowances for doubtful accounts of $859 and $829 in 2010 and 2009, respectively		15,141			18,125
Inventories		10,383			11,062
Prepaid expenses and other current assets		3,676			1,864
Assets held for sale, net		1,304			-
Total current assets		40,229			43,449

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $156,381 and $156,898 in 2010 and 2009, respectively		62,987			75,219
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP		33			50
GOODWILL		23,100			23,100
INTANGIBLE ASSETS, net of accumulated amortization of $21,257 and $20,179 in 2010 and 2009, respectively		145,935			147,013
OTHER ASSETS		14,690			16,074
TOTAL ASSETS	$	286,974			304,905

LIABILITIES AND DEFICIT

CURRENT LIABILITIES:
Accounts payable		14,383			14,657
Accrued expenses		40,886			41,605
Franchise advertising contributions		5,265			4,327
Current maturities of long-term debt and capital lease obligations		379			503
Total current liabilities		60,913			61,092

LONG-TERM DEBT, less current maturities		331,303			326,042
CAPITAL LEASE OBLIGATIONS, less current maturities		10,906			11,054
DEFERRED RENT		18,478			17,092
OTHER LIABILITIES		23,951			22,277
DEFERRED INCOME TAXES		45,457			45,457

DEFICIT:
Common stock, $.01 par value; 100,000 shares authorized;
10,820 issued and outstanding		1			1
Additional paid-in capital		150,870			150,870
Accumulated other comprehensive income		47			45
Accumulated deficit		(355,092	)		(329,333	)
Total PMCI stockholder's deficit		(204,174	)		(178,417	)
Non-controlling interests		140			308
Total deficit		(204,034	)		(178,109	)
TOTAL LIABILITIES AND DEFICIT	$	286,974			304,905

The accompanying notes are an integral part of these consolidated financial statements.

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PERKINS & MARIE CALLENDER’S INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Year-to-Date			Year-to-Date
	Ended			Ended
	July 11, 2010			July 12, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(25,752	)		(15,555	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization		11,965			12,913
Asset impairments		2,273			434
Amortization of debt discount		946			829
Other non-cash income items		(232	)		(2,344	)
(Gain) loss on disposition of assets		(168	)		774
Equity in net loss of unconsolidated partnership		17			8
Net changes in operating assets and liabilities		7,625			(493	)
Total adjustments		22,426			12,121
Net cash used in operating activities		(3,326	)		(3,434	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2,572	)		(4,316	)
Proceeds from sale of assets		5			490
Net cash used in investing activities		(2,567	)		(3,826	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		17,759			18,248
Repayment of revolving credit facilities		(13,444	)		(12,719	)
Repayment of capital lease obligations		(262	)		(223	)
Repayment of other debt		(10	)		(10	)
Debt financing costs		-			(142	)
Distributions to non-controlling interest holders		(175	)		(71	)
Net cash provided by financing activities		3,868			5,083

NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,025	)		(2,177	)

CASH AND CASH EQUIVALENTS:
Balance, beginning of period		4,288			4,613
Balance, end of period	$	2,263			2,436

The accompanying notes are an integral part of these consolidated financial statements.

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PERKINS & MARIE CALLENDER’S INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Organization

Perkins & Marie Callender’s Inc. (together with its consolidated subsidiaries collectively the “Company”, “PMCI”, “we” or “us”), is a wholly-owned subsidiary of:

·	Perkins & Marie Callender’s Holding Inc., which is a wholly-owned subsidiary of

·	P&MC’s Holding Corp, which is a wholly-owned subsidiary of

·	P&MC’s Real Estate Holding LLC, which is a wholly-owned subsidiary of

·	P&MC’s Holding LLC, which is principally owned by affiliates of Castle Harlan, Inc.

The Company is the sole equity holder of Wilshire Restaurant Group, LLC (“WRG”), which owns 100% of the outstanding common stock of Marie Callender Pie Shops, Inc. (“MCPSI”). MCPSI owns and operates restaurants and has granted franchises under the names Marie Callender’s and Marie Callender’s Grill. MCPSI also owns 100% of the outstanding common stock of M.C. Wholesalers, Inc., which operates a commissary that produces bakery goods. MCPSI also owns 100% of the outstanding common stock of FIV Corp., which owns and operates one restaurant under the name East Side Mario’s.

The Company operates two restaurant concepts: (1) full-service family dining restaurants located primarily in the Midwest, Florida and Pennsylvania under the name Perkins Restaurant and Bakery (“Perkins”) and (2) mid-priced, casual-dining restaurants, specializing in the sale of pies and other bakery items, located primarily in the western United States under the name Marie Callender’s Restaurant and Bakery (“Marie Callender’s”).

Through our bakery goods manufacturing segment (“Foxtail”), we also offer pies, muffin batters, cookie doughs, pancake mixes, and other food products for sale to our Perkins and Marie Callender’s Company-operated and franchised restaurants and to unaffiliated customers, such as food service distributors.

(2) Basis of Presentation

The consolidated interim financial statements included in this report have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America and have not been subject to audit. In the opinion of the Company’s management, all adjustments, including all normal recurring items, necessary for a fair presentation of the results of operations are reflected in these consolidated interim financial statements. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The most significant estimates and assumptions underlying these financial statements and accompanying notes generally involve royalty revenue recognition and provisions for related uncollectible accounts, asset impairments, self-insurance accruals and valuation allowances for income taxes.

The results of operations for the interim period ended July 11, 2010 are not necessarily indicative of operating results for the full year. The consolidated interim financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes contained in the Company’s 2009 Form 10-K/A, filed with the Securities and Exchange Commission on June 7, 2010.

(3) Accounting Reporting Period

Our financial reporting is based on thirteen four-week periods ending on the last Sunday in December. The first quarter each year includes four four-week periods, and the second, third and fourth quarters each typically include three four-week periods. The first and second quarters of 2010 ended on April 18 and July 11, respectively, and the first and second quarters of 2009 ended on April 19 and July 12, respectively. The third and fourth quarters of 2010 will end October 3 and December 26, respectively.

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(4) Operations, Financial Position and Liquidity

Our principal sources of liquidity include cash, available borrowings under our $26,000,000 revolving credit facility (the “Revolver”) and cash generated by operations. Our principal uses of liquidity are costs and expenses associated with our restaurant and manufacturing operations, debt service payments and capital expenditures. At July 11, 2010, we had a negative working capital balance of $20,684,000 and total PMCI stockholder’s deficit of $204,174,000. Furthermore, at July 11, 2010, we had $2,263,000 in unrestricted cash and $296,000 of borrowing capacity under our Revolver.

The controlling equity holder of P&MC’s Holding LLC, our indirect parent, is in the process of finalizing the terms of an agreement with a third party, which would be entered into by the Company and guaranteed by one of the equity holder’s affiliates. Under this agreement, the third party will provide a new letter of credit of approximately $8.6 million for the benefit of an insurance company that provides workers’ compensation insurance for the Company. The Company expects the new letter of credit and the related guarantee to be entered into by September 15, 2010. This new letter of credit will be in force through December 9, 2010, and will contain certain renewal provisions for extension beyond that date. The Company currently has an existing letter of credit in place under its Revolver for the benefit of this insurance company. While this new letter of credit agreement is in place, the Company will not need to maintain the letter of credit provided under its Revolver, and will therefore have, under its Revolver, incremental borrowing capacity of approximately $8.6 million to fund its current seasonal liquidity needs. Based on our current expectations, we do not expect that we will need the additional liquidity support provided by the new letter of credit after its expiration date. However, prior to the expiration, we will be reviewing our liquidity position with our controlling equity holder to determine if they will extend the new letter of credit.

The existing letter of credit and the new letter of credit that will replace it are provided to the insurance company and are not drawn down unless the Company fails to pay its workers’ compensation claims in the ordinary course of business. In the event the Company fails to make payments due on its workers’ compensation claims and the new letter of credit is drawn upon, the guarantor of the letter of credit will reimburse the third party letter of credit provider, and the Company has agreed to reimburse the guarantor for such amounts. However, there has never been a draw on the existing letter of credit and the Company does not expect that there will be a draw on the new letter of credit.

We believe that the ongoing weakness in the economy, high unemployment levels, continued depressed residential real estate values, especially in some of our larger markets, and the level of home foreclosures has adversely affected our guest counts and, in turn, our sales and operating results. Over the last three years, we have experienced continued declines in comparable restaurant sales and profitability that have adversely impacted our liquidity position.

Our operations and liquidity needs are seasonal in nature. Historically, we have generated a significant portion of our operating cash flow in the first and fourth quarters, with these two quarters in total contributing 60% and 63% of our annual operating cash flows in 2008 and 2009. The fourth quarter is typically our strongest income generating quarter due to substantial holiday traffic and seasonal pie sales. As we increase personnel and inventories at the end of the third quarter for this seasonal activity, liquidity is normally at its lowest point. In light of this and because we have two significant interest payments due on October 1 and November 30, we intend to continue to reduce our capital expenditures and carefully manage payment of certain operating expenses in the third and fourth quarters.

Our ability to fund our operations and service our debt through 2011 and beyond will depend, in large part, on our ability to improve sales and profitability. We believe we will accomplish this improvement through the successful execution of our recently implemented advertising and promotional programs at both restaurant brands and also through our renewed focus at Foxtail to increase higher profit sales to third-party customers, replacing low profitability contracts terminated in 2009. Management expects these initiatives together with the Company’s cash provided by operations and borrowing capacity under the Revolver (which includes the additional availability as a result of the new letter of credit agreement) to provide sufficient liquidity for at least the next twelve months. However, there can be no assurance as to whether these or other actions will enable us to generate sufficient cash flow to fund our operations and service our debt.

If we are unable to finalize and enter into the agreement for the new letter of credit, there can be no assurance that we will have sufficient liquidity to enable us to fund our operations and service our debt without accessing outside sources of additional liquidity. Alternate sources of liquidity may include additional borrowings or capital contributions. However, the Company currently has no such commitments or plans, and there can be no assurance that the Company will be able to access acceptable alternative financing.

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(5) Gift Cards and Perkins Marketing Fund

The Company issues gift cards and, prior to March 2005, also issued gift certificates (collectively, “gift cards”), both of which contain no expiration dates or inactivity fees. The Company recognizes revenue from gift cards when they are redeemed by the customer. The Company recognizes income from unredeemed gift cards (“gift card breakage”) when there is sufficient historical data to support an estimate, the likelihood of redemption is remote and there is no legal obligation to remit the unredeemed gift card balances to the state tax authorities under applicable escheat regulations. Gift card breakage is determined based on historical redemption patterns and is included in other, net in the consolidated statements of operations. Management concluded in the first quarter of 2009 that it had sufficient evidence to estimate the gift card breakage rate on Perkins gift cards and recorded $865,000 of gift card breakage. Management concluded in the second fiscal quarter of 2009 that it had sufficient evidence to estimate the gift card breakage rate on Marie Callender’s gift cards and recorded $1,576,000 of gift card breakage. These initial recognitions of breakage income in the first and second quarters of 2009 include amounts related to gift cards sold since the inception of our gift card programs in 2005. For the quarter and year-to-date periods ended July 11, 2010, we recorded $143,000 and $335,000, respectively, of breakage income for both our Perkins and Marie Callender’s gift cards. As of July 11, 2010 and December 27, 2009, the Company held approximately $2,197,000 and $3,324,000, respectively, of net gift card proceeds received from Perkins’ Company-owned and franchise locations as restricted cash on its consolidated balance sheets.

The Company maintains a marketing fund (the “Marketing Fund”) to pool the resources of the Company and its franchisees for advertising purposes and to promote the Perkins brand in accordance with the system’s advertising policy. As of July 11, 2010 and December 27, 2009, the Company held approximately $5,265,000 and $4,786,000, respectively, in the Marketing Fund.

Funds related to the gift card program and the Marketing Fund are classified as restricted cash on the consolidated balance sheet. The use of these funds is not contractually limited to specific uses and a portion of these funds has in the past been temporarily used for other corporate purposes. However, it is the Company’s intention to restrict the use of these funds in the future as described above.

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(6) Commitments, Contingencies and Concentrations

We are a party to various legal proceedings in the ordinary course of business. We do not believe it is likely that these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial statements.

The majority of our franchise revenues are generated from franchisees owning individually less than five percent (5%) of total franchised restaurants, and, therefore, the loss of any one of these franchisees would not have a material impact on our results of operations.

As of July 11, 2010, three Perkins franchisees, otherwise unaffiliated with the Company, owned 87, or 27%, of the 319 franchised Perkins restaurants, consisting of 39, 27 and 21 restaurants, respectively. As of July 12, 2009, these same franchisees owned 40, 27 and 21 restaurants, respectively. The following table presents a summary of the royalty and license fees provided by these three franchisees:

# of	Quarter	Year-to-Date	# of	Quarter	Year-to-Date
Restaurants	Ended	Ended	Restaurants	Ended	Ended
(2010)	July 11, 2010	July 11, 2010	(2009)	July 12, 2009	July 12, 2009

39	$430,000	$963,000	40	$449,000	$999,000
27	348,000	787,000	27	337,000	763,000
21	323,000	736,000	21	342,000	777,000

As of July 11, 2010, three Marie Callender’s franchisees otherwise unaffiliated with the Company each owned four, for a total of 12, or 32%, of the 37 franchised Marie Callender’s restaurants. As of July 12, 2009, these same franchisees owned five, four and four restaurants, respectively. The following table presents a summary of the royalty and license fees provided by these three franchisees:

# of	Quarter	Year-to-Date	# of	Quarter	Year-to-Date
Restaurants	Ended	Ended	Restaurants	Ended	Ended
(2010)	July 11, 2010	July 11, 2010	(2009)	July 12, 2009	July 12, 2009

4	$77,000	$187,000	5	$70,000	$220,000
4	74,000	189,000	4	84,000	201,000
4	66,000	148,000	4	57,000	138,000

The Company has three arrangements with different parties to whom territorial rights were granted. The Company makes specified payments to those parties based on a percentage of gross sales from certain Perkins restaurants and for new Perkins restaurants opened within those geographic regions. During the second quarters of 2010 and 2009, we paid an aggregate of $612,000 and $643,000, respectively, and during the year-to-date periods of 2010 and 2009, we paid an aggregate of $1,352,000 and $1,421,000, respectively, under such arrangements. Of these arrangements, one expires in the year 2075, one expires upon the death of the beneficiary and one remains in effect as long as we operate Perkins restaurants in certain states.

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(7) Supplemental Cash Flow Information

Cash and cash equivalents were impacted by the following changes (in thousands) in operating assets and liabilities in the statements of cash flows for the year-to-date periods ended July 11, 2010 and July 12, 2009:

	Year-to-Date			Year-to-Date
	Ended			Ended
	July 11, 2010			July 12, 2009
Decrease (increase) in:
Restricted cash	$	648			2,100
Receivables		2,885			4,874
Inventories		679			(138	)
Prepaid expenses and other current assets		(1,812	)		(2,189	)
Other assets		1,694			854

Increase (decrease) in:
Accounts payable		(274	)		(5,287	)
Accrued expenses and other current liabilities		745			(3,181	)
Other liabilities		3,060			2,474
Net changes in operating assets and liabilities	$	7,625			(493	)

(8) Goodwill and Intangible Assets

Goodwill

Goodwill of $23,100,000 at both July 11, 2010 and December 27, 2009 was attributable solely to the restaurant operations segment.

Intangible Assets

The components of our identifiable intangible assets are as follows (in thousands):

	July 11,			December 27,
	2010			2009
Amortizing intangible assets:
Franchise agreements	$	35,000			35,000
Customer relationships		10,000			10,000
Acquired franchise rights		10,758			10,758
Design prototype		834			834
Subtotal		56,592			56,592
Less — accumulated amortization		(21,257	)		(20,179	)
Net amortizing intangible assets		35,335			36,413
Non-amortizing intangible asset:
Tradenames		110,600			110,600
Total intangible assets	$	145,935			147,013

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(9) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	July 11,		December 27,
	2010		2009

Payroll and related benefits	$	14,376		15,423
Interest		7,505		6,065
Gift cards and gift certificates		3,004		5,090
Property, real estate and sales taxes		5,294		4,267
Insurance		2,383		2,219
Advertising		1,042		792
Other		7,282		7,749
Total accrued expenses	$	40,886		41,605

(10) Segment Reporting

We have three reportable segments: restaurant operations, franchise operations and Foxtail. The restaurant operations include the operating results of Company-operated Perkins and Marie Callender’s restaurants. The franchise operations include revenues and expenses directly attributable to franchised Perkins and Marie Callender’s restaurants. Foxtail’s operations consist of three manufacturing plants: one in Corona, California and two in Cincinnati, Ohio.

Our restaurants operate principally in the U.S. within the family dining and casual dining industries, providing similar products to similar customers. Revenues from restaurant operations are derived principally from food and beverage sales to external customers. Revenues from franchise operations consist primarily of royalty income earned on the revenues generated at franchisees’ restaurants and initial franchise fees. Revenues from Foxtail are generated by the sale of food products to both Company-operated and franchised Perkins and Marie Callender’s restaurants as well as to unaffiliated customers. Foxtail’s sales to Company-operated restaurants are eliminated for reporting purposes. The revenues in the “other” segment are primarily licensing revenues.

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The following table presents revenues and other financial information by business segment (in thousands):

	Quarter			Quarter			Year-to-Date			Year-to-Date
	Ended			Ended			Ended			Ended
Revenues	July 11, 2010			July 12, 2009			July 11, 2010			July 12, 2009

Restaurant operations	$	100,961			106,495			240,566			255,723
Franchise operations		5,288			5,305			11,959			12,249
Foxtail		10,901			12,942			24,366			30,504
Intersegment revenue		(4,289	)		(4,376	)		(10,044	)		(10,289	)
Other		1,292			1,510			3,111			2,942
Total	$	114,153			121,876			269,958			291,129

Segment income (loss) attributable to PMCI

Restaurant operations		3,259			5,335			8,829			14,411
Franchise operations		4,742			4,840			10,867			11,269
Foxtail		933			1,164			1,574			1,323
Other		(20,087	)		(17,219	)		(47,029	)		(42,637	)
Total	$	(11,153	)		(5,880	)		(25,759	)		(15,634	)

Segment assets							July 11, 2010			December 27, 2009

Restaurant operations								122,740			132,611
Franchise operations								101,359			101,672
Foxtail								29,175			31,754
Other								33,700			38,868
Total							$	286,974			304,905

The components of other segment loss are as follows (in thousands):

	Quarter			Quarter			Year-to-Date			Year-to-Date
	Ended			Ended			Ended			Ended
	July 11, 2010			July 12, 2009			July 11, 2010			July 12, 2009

General and administrative expenses	$	9,993			9,079			22,674			21,229
Depreciation and amortization expenses		721			784			1,677			1,821
Interest expense, net		10,299			10,130			23,864			23,745
Loss (gain) on disposition of assets, net		(102	)		114			(168	)		774
Asset impairments		542			232			2,273			434
Net earnings attributable to non-controlling interests		(1	)		33			7			79
Licensing revenue		(1,258	)		(1,448	)		(2,990	)		(2,808	)
Other		(107	)		(1,705	)		(308	)		(2,637	)
Total other segment loss	$	20,087			17,219			47,029			42,637

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(11) Long-Term Debt

Secured Notes and 10% Senior Notes

On September 24, 2008, the Company issued $132,000,000 of 14% senior secured notes (the "Secured Notes"). The Secured Notes were issued at a discount of $7,537,200, which is being accreted using the interest method over the term of the Secured Notes. The Secured Notes will mature on May 31, 2013, and interest is payable semi-annually on May 31 and November 30 of each year.

In September 2005, the Company issued $190,000,000 of 10% senior unsecured notes (the “10% Senior Notes”). The 10% Senior Notes were issued at a discount of $2,570,700, which is being accreted using the interest method over the term of the 10% Senior Notes. The 10% Senior Notes will mature on October 1, 2013, and interest is payable semi-annually on April 1 and October 1 of each year. All consolidated subsidiaries of the Company that are 100% owned provide joint and several, full and unconditional guarantees of the 10% Senior Notes. There are no significant restrictions on the Company’s ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or a loan. Additionally, there are no significant restrictions on a guarantor subsidiary’s ability to obtain funds from the Company or its direct or indirect subsidiaries.

The indentures for the Secured Notes and the 10% Senior Notes contain various customary events of default, including, without limitation: (i) nonpayment of principal or interest; (ii) cross-defaults with certain other indebtedness; (iii) certain bankruptcy related events; (iv) invalidity of guarantees; (v) monetary judgment defaults; and (vi) certain change of control events. In addition, any impairment of the security interest in the Secured Notes collateral will constitute an event of default under the indenture for the Secured Notes.

Revolver

On September 24, 2008, the Company entered into the Revolver. The Revolver, which matures on February 28, 2013, is guaranteed by Perkins & Marie Callender's Holding Inc. and certain of the Company's existing and future subsidiaries. The Revolver is secured by a first priority perfected security interest in all of the Company's property and assets and the property and assets of each guarantor. Subject to the satisfaction of the conditions contained therein, up to $26,000,000 may be borrowed under the Revolver from time to time. The Revolver includes a sub-facility for letters of credit in an amount not to exceed $15,000,000.

Amounts outstanding under the Revolver bear interest, at the Company’s option, at a rate per annum equal to either: (i) the base rate, as defined in the Revolver, plus an applicable margin or (ii) a LIBOR-based equivalent, plus an applicable margin. For the foreseeable future, margins are expected to be 325 basis points for base rate loans and 425 basis points for LIBOR loans. As of July 11, 2010, the average annual interest rate on aggregate borrowings under the Revolver was 7.8%, and the Revolver permitted additional borrowings of approximately $296,000 (after giving effect to $15,485,000 in borrowings and $10,219,000 in letters of credit outstanding). The letters of credit are primarily utilized in conjunction with our workers’ compensation programs.

The Revolver contains various affirmative and negative covenants, including, but not limited to a financial covenant for the Company to maintain at least $30,000,000 of trailing 13-period EBITDA, as defined in the Revolver, and limits the Company’s ability to make capital expenditures.

The average interest rate on aggregate borrowings of the Company’s long-term debt for the year-to-date period through July 11, 2010 was 11.6% compared to the average interest rate on aggregate borrowings for the year-to-date period through July 12, 2009 of 11.5%.

Our debt agreements place restrictions on the Company’s ability and the ability of its subsidiaries to: (i) incur additional indebtedness or issue certain preferred stock; (ii) repay certain indebtedness prior to stated maturities; (iii) pay dividends or make other distributions on, redeem or repurchase capital stock or subordinated indebtedness; (iv) make certain investments or other restricted payments; (v) enter into transactions with affiliates; (vi) issue stock of subsidiaries; (vii) transfer, sell or consummate a merger or consolidation of all, or substantially all, of the Company's assets; (viii) change lines of business; (ix) incur dividend or other payment restrictions with regard to restricted subsidiaries; (x) create or incur liens on assets to secure debt; (xi) dispose of assets; (xii) restrict distributions from subsidiaries; (xiii) make certain acquisitions; (xiv) make capital expenditures; or (xv) amend the terms of the Secured Notes and the 10% Senior Notes. As of July 11, 2010 we were in compliance with the covenants contained in our debt agreements.

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(12) Income Taxes

The effective income tax rates for the second quarters ended July 11, 2010 and July 12, 2009 were 0.0%. Our rates differ from the statutory rate primarily due to a valuation allowance against deferred tax deductions, losses and credits.

A reconciliation of the change in the gross unrecognized tax benefits from December 28, 2009 to July 11, 2010 is as follows (in thousands):

	2010

Unrecognized tax benefit - beginning of fiscal year	$	1,153
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		-
Additions for tax positions of current year		-
Reductions due to settlements		-
Reductions for lapse of statute of limitations		-
Unrecognized tax benefit - as of July 11, 2010	$	1,153

As of July 11, 2010 and December 27, 2009 the Company had approximately $943,000 of unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate, except for approximately $160,000 which is subject to tax indemnification from the predecessor owner. As of July 11, 2010 and December 27, 2009 the Company had $805,000 of unrecognized tax benefits reducing Federal and state net operating loss carry forwards and Federal credit carry forwards that, if recognized, would be subject to a valuation allowance. The Company expects that the total amount of its gross unrecognized tax benefits will decrease between $32,000 and $432,000 within the next 12 months due to Federal and state settlements and expiration of statutes.

(13) P&MC’s Holding LLC Equity Plan and Other Related Party Transactions

Equity Plan

Effective April 1, 2007, P&MC’s Holding LLC established a management equity incentive plan (the “Equity Plan”) for the benefit of key Company employees. The Equity Plan provides the following two types of equity ownership in P&MC’s Holding LLC: (i) Strip Subscription Units, which consist of Class A Units and Class C Units and (ii) Incentive Units, which consist of time vesting Class C Units.

Stock-based compensation expense for the quarterly and year-to-date periods ended July 11, 2010 and July 12, 2009 was not material.

If an employee is employed as of the date of the occurrence of certain change in control events, as defined in the Equity Plan, the employee’s outstanding but unvested Incentive Units vest simultaneously with the consummation of the change in control event. Upon termination of employment, unvested Incentive Units are forfeited and vested Incentive Units and Strip Subscription Units are subject to repurchase, at a price not to exceed fair value, pursuant to the terms of P&MC’s Holding LLC’s unitholders agreement.

Other Related Party Transactions

In September 2009, P&MC’s Real Estate Holding LLC, the indirect parent of the Company, purchased a building in California that was being leased by the Company for the operation of a Marie Callender’s restaurant and assumed the Company’s obligations under the related ground lease. In connection with the purchase of the building, the Company’s existing building lease was terminated. P&MC’s Real Estate Holding LLC has agreed to allow the Company to use the building and defer collection of building rent at this time. The Company will continue to operate the Marie Callender’s restaurant in the building and will pay the underlying ground lease. As a result of these transactions, the Company has imputed rent of $18,500 per period, based on the fair value of the building and local rental rate, and is accruing this amount in deferred rent on its consolidated balance sheets.

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(14) Recent Accounting Developments

Subsequent Events

In May 2009, the FASB issued ASC 855, “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance was effective for interim and annual periods ending after June 15, 2009.

In February 2010, the FASB issued ASU 2010-09, which amends ASC 855 to address certain implementation issues related to performing and disclosing subsequent events procedures. The Company included the requirements of this guidance in the preparation of the accompanying financial statements.

(15) Deficit

A summary of the changes in deficit for the year-to-date periods ended July 11, 2010 and July 12, 2009 is provided below (in thousands):

	Year-to-Date Ended July 11, 2010
								Accumulated
			Additional					Other			Total PMCI
	Common		Paid-in		Accumulated			Comprehensive			Stockholder's			Non-controlling			Total
	Stock		Capital		Deficit			Income			Deficit			Interests			Deficit

Balance, December 27, 2009	$	1		150,870		(329,333	)		45			(178,417	)		308			(178,109	)

Distributions to non-controlling interest holders		-		-		-			-			-			(175	)		(175	)

Net (loss) earnings		-		-		(25,759	)		-			(25,759	)		7			(25,752	)
Currency translation adjustment		-		-		-			2			2			-			2
Total comprehensive loss																		(25,750	)

Balance, July 11, 2010	$	1		150,870		(355,092	)		47			(204,174	)		140			(204,034	)


	Year-to-Date Ended July 12, 2009
								Accumulated
			Additional					Other			Total PMCI
	Common		Paid-in		Accumulated			Comprehensive			Stockholder's			Non-controlling			Total
	Stock		Capital		Deficit			Income (Loss)			Deficit			Interests			Deficit

Balance, December 28, 2008	$	1		149,851		(293,114	)		(4	)		(143,266	)		215			(143,051	)

Distributions to non-controlling interest holders		-		-		-			-			-			(71	)		(71	)

Net (loss) earnings		-		-		(15,634	)		-			(15,634	)		79			(15,555	)
Currency translation adjustment		-		-		-			24			24			-			24
Total comprehensive loss																		(15,531	)

Balance, July 12, 2009	$	1		149,851		(308,748	)		20			(158,876	)		223			(158,653	)

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(16) Condensed Consolidated Financial Information

The 10% Senior Notes and Secured Notes were issued subject to a joint and several, full and unconditional guarantee by all of the Company’s 100% owned domestic subsidiaries. There are no significant restrictions on the Company’s ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on the guarantor subsidiaries’ ability to obtain funds from the Company or its direct or indirect subsidiaries.

The following consolidating statements of operations, balance sheets and statements of cash flows are provided for the parent company and all subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.

Consolidating Statement of Operations for the Quarter ended July 11, 2010 (unaudited; in thousands):

							Non-					Consolidated
	Issuer			Guarantor			Guarantors			Eliminations		PMCI

REVENUES:
Food sales	$	66,759			35,379			5,435			-		107,573
Franchise and other revenue		4,571			2,009			-			-		6,580
Total revenues		71,330			37,388			5,435			-		114,153

COSTS AND EXPENSES:
Cost of sales (excluding depreciation shown below):
Food cost		16,378			9,604			1,452			-		27,434
Labor and benefits		23,276			13,573			1,997			-		38,846
Operating expenses		18,709			11,692			2,133			-		32,534
General and administrative		9,569			1,266			-			-		10,835
Depreciation and amortization		3,739			1,150			170			-		5,059
Interest, net		10,221			78			-			-		10,299
Asset impairments and closed store expenses		51			389			-			-		440
Other, net		(235	)		95			-			-		(140	)
Total costs and expenses		81,708			37,847			5,752			-		125,307
Loss before income taxes		(10,378	)		(459	)		(317	)		-		(11,154	)
Benefit from (provision for) income taxes		-			-			-			-		-
Net loss		(10,378	)		(459	)		(317	)		-		(11,154	)
Less: net loss attributable to non-controlling interests		-			-			(1	)		-		(1	)
Equity in earnings (loss) of subsidiaries		(776	)		-			-			776		-
Net (loss) income attributable to Perkins & Marie Callender's Inc.	$	(11,154	)		(459	)		(316	)		776		(11,153	)

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Consolidating Statement of Operations for the Quarter ended July 12, 2009 (unaudited; in thousands):

							Non-						Consolidated
	Issuer			Guarantor			Guarantors			Eliminations			PMCI

REVENUES:
Food sales	$	71,865			37,443			5,753			-			115,061
Franchise and other revenue		4,608			2,207			-			-			6,815
Total revenues		76,473			39,650			5,753			-			121,876

COSTS AND EXPENSES:
Cost of sales (excluding depreciation shown below):
Food cost		18,918			9,265			2,118			-			30,301
Labor and benefits		24,278			15,136			1,490			-			40,904
Operating expenses		18,407			11,511			2,154			-			32,072
General and administrative		8,732			1,397			-			-			10,129
Depreciation and amortization		4,018			1,402			137			-			5,557
Interest, net		9,915			215			-			-			10,130
Asset impairments and closed store expenses		63			274			9			-			346
Other, net		(139	)		(1,577	)		-			-			(1,716	)
Total costs and expenses		84,192			37,623			5,908			-			127,723
Profit (loss) before income taxes		(7,719	)		2,027			(155	)		-			(5,847	)
Benefit from (provision for) income taxes		-			-			-			-			-
Net profit (loss)		(7,719	)		2,027			(155	)		-			(5,847	)
Less: net earnings attributable to non-controlling interests		-			-			33			-			33
Equity in earnings (loss) of subsidiaries		1,872			-			-			(1,872	)		-
Net (loss) income attributable to Perkins & Marie Callender's Inc.	$	(5,847	)		2,027			(188	)		(1,872	)		(5,880	)

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Consolidating Statement of Operations for the Year-to-Date Period ended July 11, 2010 (unaudited; in thousands):

							Non-					Consolidated
	Issuer			Guarantor			Guarantors			Eliminations		PMCI

REVENUES:
Food sales	$	159,118			82,915			12,855			-		254,888
Franchise and other revenue		10,212			4,857			1			-		15,070
Total revenues		169,330			87,772			12,856			-		269,958

COSTS AND EXPENSES:
Cost of sales (excluding depreciation shown below):
Food cost		39,176			22,121			3,419			-		64,716
Labor and benefits		55,705			31,864			4,639			-		92,208
Operating expenses		44,532			26,810			4,927			-		76,269
General and administrative		22,109			2,832			-			-		24,941
Depreciation and amortization		8,813			2,759			393			-		11,965
Interest, net		23,703			161			-			-		23,864
Asset impairments and closed store expenses		876			1,223			6			-		2,105
Other, net		(361	)		3			-			-		(358	)
Total costs and expenses		194,553			87,773			13,384			-		295,710
Loss before income taxes		(25,223	)		(1	)		(528	)		-		(25,752	)
Benefit from (provision for) income taxes		-			-			-			-		-
Net loss		(25,223	)		(1	)		(528	)		-		(25,752	)
Less: net earnings attributable to non-controlling interests		-			-			7			-		7
Equity in earnings (loss) of subsidiaries		(529	)		-			-			529		-
Net (loss) income attributable to Perkins & Marie Callender's Inc.	$	(25,752	)		(1	)		(535	)		529		(25,759	)

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Consolidating Statement of Operations for the Year-to-Date Period ended July 12, 2009 (unaudited; in thousands):

							Non-						Consolidated
	Issuer			Guarantor			Guarantors			Eliminations			PMCI

REVENUES:
Food sales	$	173,591			88,582			13,765			-			275,938
Franchise and other revenue		10,391			4,800			-			-			15,191
Total revenues		183,982			93,382			13,765			-			291,129

COSTS AND EXPENSES:
Cost of sales (excluding depreciation shown below):
Food cost		45,763			23,884			3,628			-			73,275
Labor and benefits		57,745			33,494			4,990			-			96,229
Operating expenses		45,778			26,977			5,018			-			77,773
General and administrative		21,080			3,138			-			-			24,218
Depreciation and amortization		9,454			3,130			329			-			12,913
Interest, net		23,296			449			-			-			23,745
Asset impairments and closed store expenses		824			295			89			-			1,208
Other, net		(1,101	)		(1,576	)		-			-			(2,677	)
Total costs and expenses		202,839			89,791			14,054			-			306,684
Profit (loss) before income taxes		(18,857	)		3,591			(289	)		-			(15,555	)
Benefit from (provision for) income taxes		-			-			-			-			-
Net profit (loss)		(18,857	)		3,591			(289	)		-			(15,555	)
Less: net earnings attributable to non-controlling interests		-			-			79			-			79
Equity in earnings (loss) of subsidiaries		3,302			-			-			(3,302	)		-
Net (loss) income attributable to Perkins & Marie Callender's Inc.	$	(15,555	)		3,591			(368	)		(3,302	)		(15,634	)

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Consolidating Balance Sheet as of July 11, 2010 (unaudited; in thousands):

							Non-						Consolidated
	Issuer			Guarantor			Guarantors			Eliminations			PMCI
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,458			204			601			-			2,263
Restricted cash		7,462			-			-			-			7,462
Receivables, less allowances for doubtful accounts		9,940			5,196			5			-			15,141
Inventories		7,446			2,749			188			-			10,383
Prepaid expenses and other current assets		2,909			761			6			-			3,676
Assets held for sale, net		1,304			-			-			-			1,304
Total current assets		30,519			8,910			800			-			40,229

PROPERTY AND EQUIPMENT, net		43,549			17,280			2,158			-			62,987
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP		-			24			9			-			33
GOODWILL		23,100			-			-			-			23,100
INTANGIBLE ASSETS, net		145,841			94			-			-			145,935
INVESTMENTS IN SUBSIDIARIES		(79,517	)		-			-			79,517			-
DUE FROM SUBSIDIARIES		79,204			-			-			(79,204	)		-
OTHER ASSETS		13,354			1,126			210			-			14,690
TOTAL ASSETS	$	256,050			27,434			3,177			313			286,974

LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable		9,202			4,742			439			-			14,383
Accrued expenses		31,844			7,898			1,144			-			40,886
Franchise advertising contributions		5,265			-			-			-			5,265
Current maturities of long-term debt and capital lease obligations		162			217			-			-			379
Total current liabilities		46,473			12,857			1,583			-			60,913

LONG-TERM DEBT, less current maturities		331,303			-			-			-			331,303
CAPITAL LEASE OBLIGATIONS, less current maturities		8,026			2,880			-			-			10,906
DEFERRED RENT		13,749			4,671			58			-			18,478
OTHER LIABILITIES		15,216			8,735			-			-			23,951
DEFERRED INCOME TAXES		45,457			-			-			-			45,457
DUE TO PARENT		-			77,764			1,440			(79,204	)		-

EQUITY (DEFICIT):
Common stock		1			-			-			-			1
Preferred stock		-			64,296			-			(64,296	)		-
Capital in excess of par		-			9,338			-			(9,338	)		-
Additional paid-in capital		150,870			-			-			-			150,870
Treasury stock		-			(137	)		-			137			-
Accumulated other comprehensive income		47			-			-			-			47
Accumulated (deficit) earnings		(355,092	)		(152,970	)		(44	)		153,014			(355,092	)
Total PMCI stockholder's (deficit) investment		(204,174	)		(79,473	)		(44	)		79,517			(204,174	)
Non-controlling interests		-			-			140			-			140
Total equity (deficit)		(204,174	)		(79,473	)		96			79,517			(204,034	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	256,050			27,434			3,177			313			286,974

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Consolidating Balance Sheet as of December 27, 2009 (in thousands):

							Non-					Consolidated
	Issuer			Guarantor			Guarantors		Eliminations			PMCI
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,013			1,293			982		-			4,288
Restricted cash		8,110			-			-		-			8,110
Receivables, less allowances for doubtful accounts		11,070			7,048			7		-			18,125
Inventories		8,038			2,793			231		-			11,062
Prepaid expenses and other current assets		1,613			248			3		-			1,864
Total current assets		30,844			11,382			1,223		-			43,449

PROPERTY AND EQUIPMENT, net		52,217			20,530			2,472		-			75,219
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP		-			41			9		-			50
GOODWILL		23,100			-			-		-			23,100
INTANGIBLE ASSETS, net		146,889			124			-		-			147,013
INVESTMENTS IN SUBSIDIARIES		(78,981	)		-			-		78,981			-
DUE FROM SUBSIDIARIES		81,493			-			-		(81,493	)		-
OTHER ASSETS		14,321			1,543			210		-			16,074
TOTAL ASSETS	$	269,883			33,620			3,914		(2,512	)		304,905

LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	7,946			6,074			637		-			14,657
Accrued expenses		30,628			9,635			1,342		-			41,605
Franchise advertising contributions		4,327			-			-		-			4,327
Current maturities of long-term debt and capital lease obligations		186			317			-		-			503
Total current liabilities		43,087			16,026			1,979		-			61,092

LONG-TERM DEBT, less current maturities		326,042			-			-		-			326,042
CAPITAL LEASE OBLIGATIONS, less current maturities		8,085			2,969			-		-			11,054
DEFERRED RENT		12,263			4,765			64		-			17,092
OTHER LIABILITIES		13,366			8,911			-		-			22,277
DEFERRED INCOME TAXES		45,457			-			-		-			45,457
DUE TO PARENT		-			80,421			1,072		(81,493	)		-

EQUITY (DEFICIT):
Common stock		1			-			-		-			1
Preferred stock		-			64,296			-		(64,296	)		-
Capital in excess of par		-			9,338			-		(9,338	)		-
Additional paid-in capital		150,870			-			-		-			150,870
Treasury stock		-			(137	)		-		137			-
Accumulated other comprehensive income		45			-			-		-			45
Accumulated (deficit) earnings		(329,333	)		(152,969	)		491		152,478			(329,333	)
Total PMCI stockholder's (deficit) investment		(178,417	)		(79,472	)		491		78,981			(178,417	)
Non-controlling interests		-			-			308		-			308
Total equity (deficit)		(178,417	)		(79,472	)		799		78,981			(178,109	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	269,883			33,620			3,914		(2,512	)		304,905

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Consolidating Statement of Cash Flows for the Year-to-Date Period ended July 11, 2010 (unaudited; in thousands):

							Non-						Consolidated
	Issuer			Guarantor			Guarantors			Eliminations			PMCI

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(25,752	)		(1	)		(528	)		529			(25,752	)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Equity in earnings (loss) of subsidiaries		529			-			-			(529	)		-
Depreciation and amortization		8,813			2,759			393			-			11,965
Asset impairments		997			1,270			6			-			2,273
Amortization of debt discount		946			-			-			-			946
Other non-cash income items		(144	)		(88	)		-			-			(232	)
Gain on disposition of assets		(121	)		(47	)		-			-			(168	)
Equity in loss of unconsolidated partnership		-			17			-			-			17
Net changes in operating assets and liabilities		9,348			(1,363	)		(360	)		-			7,625
Total adjustments		20,368			2,548			39			(529	)		22,426
Net cash (used in) provided by operating activities		(5,384	)		2,547			(489	)		-			(3,326	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,692	)		(795	)		(85	)		-			(2,572	)
Proceeds from sale of assets		-			5			-			-			5
Net cash used in investing activities		(1,692	)		(790	)		(85	)		-			(2,567	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		17,759			-			-			-			17,759
Repayment of revolving credit facilities		(13,444	)		-			-			-			(13,444	)
Repayment of capital lease obligations		(83	)		(179	)		-			-			(262	)
Repayment of other debt		-			(10	)		-			-			(10	)
Distributions to non-controlling interest holders		-			-			(175	)		-			(175	)
Intercompany financing		2,289			(2,657	)		368			-			-
Net cash provided by (used in) financing activities		6,521			(2,846	)		193			-			3,868

NET DECREASE IN CASH AND CASH EQUIVALENTS		(555)			(1,089	)		(381	)		-			(2,025	)

CASH AND CASH EQUIVALENTS:
Balance, beginning of period		2,013			1,293			982			-			4,288
Balance, end of period	$	1,458			204			601			-			2,263

Table of Contents

Consolidating Statement of Cash Flows for the Year-to-Date Period ended July 12, 2009 (unaudited; in thousands):

							Non-						Consolidated
	Issuer			Guarantor			Guarantors			Eliminations			PMCI

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(15,555	)		3,591			(289	)		(3,302	)		(15,555	)
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Equity in (loss) earnings of subsidiaries		(3,302	)		-			-			3,302			-
Depreciation and amortization		9,454			3,130			329			-			12,913
Asset impairments		131			214			89			-			434
Amortization of debt discount		829			-			-			-			829
Other non-cash income items		(982	)		(1,362	)		-			-			(2,344	)
Loss on disposition of assets		693			81			-			-			774
Equity in net loss of unconsolidated partnership		-			8			-			-			8
Net changes in operating assets and liabilities		941			(1,268	)		(166	)		-			(493	)
Total adjustments		7,764			803			252			3,302			12,121
Net cash (used in) provided by operating activities		(7,791	)		4,394			(37	)		-			(3,434	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2,126	)		(1,628	)		(562	)		-			(4,316	)
Proceeds from sale of assets		483			7			-			-			490
Net cash used in investing activities		(1,643	)		(1,621	)		(562	)		-			(3,826	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities		18,248			-			-			-			18,248
Repayment of revolving credit facilities		(12,719	)		-			-			-			(12,719	)
Repayment of capital lease obligations		(91	)		(132	)		-			-			(223	)
Repayment of other debt		-			(10	)		-			-			(10	)
Debt financing costs		(142	)		-			-			-			(142	)
Distributions to non-controlling interest holders		-			-			(71	)		-			(71	)
Intercompany financing		3,701			(4,244	)		543			-			-
Net cash provided by (used in) financing activities		8,997			(4,386	)		472			-			5,083

NET DECREASE IN CASH AND CASH EQUIVALENTS		(437	)		(1,613	)		(127	)		-			(2,177	)

CASH AND CASH EQUIVALENTS:

PERKINS & MARIE CALLENDER'S INC 10-Q