FRISCHS RESTAURANTS INC - 10-Q Quarterly Report

Former name, former address and former fiscal year, if changed since last report

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 x NO ¨

The total number of shares outstanding of the issuer’s no par common stock, as of March 26, 2004 was: 5,032,823

A summary of the Company’s significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Frisch’s Restaurants, Inc. (The Company) is a regional company that operates and licenses others to operate full service family-style restaurants under the name “Frisch’s Big Boy”, and operates grill buffet style restaurants under the name “Golden Corral” under certain licensing agreements. All restaurants currently operated by the Company are located in various regions of Ohio, Kentucky and Indiana.

The Company owns the trademark “Frisch’s” and has exclusive, irrevocable ownership of the rights to the “Big Boy” trademark, trade name and service mark in the states of Kentucky and Indiana, and in most of Ohio and Tennessee. Substantially all of the Frisch’s Big Boy restaurants also offer “drive-thru” service. The Company also licenses Big Boy restaurants to other operators, currently in certain parts of Ohio, Kentucky and Indiana. In addition, the Company operates a commissary and food manufacturing plant near its headquarters in Cincinnati, Ohio that services all Big Boy restaurants operated by the Company, and is available to supply restaurants licensed to others.

The accompanying consolidated financial statements include the accounts of Frisch’s Restaurants, Inc. and all of its subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, these interim financial statements include all adjustments (all of which were normal and recurring) necessary for a fair presentation of all periods presented. In addition, certain reclassifications may have been made to prior year information to conform to the current year presentation.

The Company’s fiscal year is the 52 or 53 week period ending on the Sunday nearest to the last day of May. The first quarter of each fiscal year contains sixteen weeks, while the last three quarters each normally contain twelve weeks. Every fifth or sixth year, the additional week needed to make a 53 week year is added to the fourth quarter, resulting in a thirteen week fourth quarter.

The preparation of financial statements requires management to use estimates and assumptions to measure certain items that affect the amounts reported. These judgments are based on knowledge and experience about past and current events, and assumptions about future events. Although management believes its estimates are reasonable and adequate, future events affecting them may differ markedly from current judgment.

Some of the more significant items requiring the use of estimates include liabilities for self insurance and deferred executive compensation, value of intangible assets, and the carrying values of long-lived assets and long-lived assets to be disposed of.

Highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

The Company values its trade notes and accounts receivable on the reserve method. The reserve balance was $30,000 as of March 7, 2004 and June 1, 2003. The reserve is monitored for adequacy based on historical collection patterns and write-offs, and current credit risks.

Inventories, comprised principally of food items, are valued at the lower of cost, determined by the first-in, first-out method, or market.

Cash consideration received from certain food vendors is treated as a reduction of cost of sales and is recognized in the same period the Company sells the food.

Property and equipment are stated at cost. Depreciation is provided principally on the straight-line method over the estimated service lives, which range from 10 to 25 years for buildings or components thereof and 5 to 10 years for equipment. Leasehold improvements are depreciated over 10 to 25 years or the remaining lease term, whichever is shorter. Interest on borrowings is capitalized during active construction periods of major capital projects. Capitalized interest was $240,000 and $112,000 respectively, for the 40 weeks ended March 7, 2004 and March 9, 2003, and was $81,000 and $25,000 respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003. Also capitalized is the value of certain employees’ time spent in connection with the Company’s installation of an enterprise information system. The capitalized value of employees’ time was $423,000 and zero respectively, for the 40 weeks ended March 7, 2004 and March 9, 2003, and was $204,000 and zero respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003.

The cost of land not yet in service is included in “construction in progress” if construction has begun or if construction is likely within the next twelve months. Estimated remaining expenditures for new restaurant construction that was in progress as of March 7, 2004 totaled approximately $3,954,000, consisting of $3,612,000 for two Golden Corral restaurants and $342,000 for one Big Boy restaurant. The cost of land on which construction is not likely within the next twelve months is classified as “Investments in land” in the consolidated balance sheet.

On June 3, 2002, the Company adopted Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 superseded SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” The adoption of SFAS 144 did not cause the Company’s primary indicators of impairment to be materially altered and therefore did not have any material impact on the Company’s balance sheet, operating results or cash flows. Under SFAS 144, the Company considers a history of cash flow losses on a restaurant-by-restaurant basis to be its primary indicator of potential impairment. Carrying values are reviewed for impairment when events or changes in circumstances indicate that the assets’ carrying values may not be recoverable from the estimated future cash flows expected to result from the properties’ use and eventual disposition. When undiscounted expected future cash flows are less than carrying values, an impairment loss is recognized equal to the amount by which the carrying values exceed the net realizable values of the assets. Net realizable values are generally determined by estimates provided by real estate brokers and/or the Company’s past experience in disposing of unprofitable restaurant properties. Management believes that this policy is the Company’s only critical accounting policy because of its potential for significant impact on the financial condition and results of the Company’s operations.

The 40 weeks that ended March 9, 2003 included pretax credits of $811,000 to reverse impairment of assets charges recorded during fiscal 2001 when two Big Boy restaurants were closed because of cash flow losses. The original non-cash pretax charges in fiscal 2001 totaled $1,575,000, which included a write-off of future long-term lease obligations on one of the restaurants. The lease was terminated during the first quarter ended September 22, 2002 at which time $666,000 was credited to impairment of assets. The other restaurant was sold for cash during the third quarter ended March 9, 2003 which resulted in a $145,000 credit to impairment of assets.

Certain surplus property is currently held for sale. All of the surplus property is stated at the lower of cost or market and is classified as “Property held for sale” in the consolidated balance sheet. Market values are generally determined by real estate brokers and/or the Company’s judgment.

Statement of Financial Accounting Standards No. 143 (SFAS 143) “Accounting for Asset Retirement Obligations” is applicable to legal obligations associated with the retirement of certain tangible long-lived assets. The adoption of SFAS 143 on June 2, 2003 did not materially impact the Company’s financial statements.

Statement of Financial Accounting Standards No. 146 (SFAS 146) “Accounting for Obligations Associated with Disposal Activities” addresses the accounting treatment of costs in connection with exit or disposal activities. It requires that liabilities be recognized for exit and disposal costs only when the liabilities are incurred, rather than upon the commitment to an exit or disposal plan. SFAS 146 is effective for any disposal or exit activity initiated after December 31, 2002. Its application is not expected to materially impact the Company’s financial statements.

Acquired goodwill is tested annually for impairment and also whenever an impairment indicator arises. Impairment losses are recorded when impairment is determined to have occurred. As of March 7, 2004 and June 1, 2003, the carrying amount of goodwill acquired in prior years was $741,000, which is net of $308,000 amortized in prior years.

Intangible assets having a finite useful life are subject to amortization, and are tested annually for impairment. The Company’s other intangible assets consist principally of initial franchise fees paid for each new Golden Corral restaurant the Company opens. Amortization of the $40,000 initial fee begins when the restaurant opens and is computed using the straight-line method over the 15-year term of each individual restaurant’s franchise agreement. The fees are ratably amortized at $2,667 per year per restaurant, or approximately $67,000 per year in each of the next five years for the 25 Golden Corral restaurants in operation as of March 7, 2004. Amortization for the 40 weeks ended March 7, 2004 and March 9, 2003 was $46,000 and $36,000 respectively, and was $15,000 and $12,000 respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003. The remaining balance of other intangible assets, including fees paid for future Golden Corral restaurants, is not currently being amortized because these assets have indefinite or as yet to be determined useful lives.

The franchise agreements with Golden Corral Franchising Systems, Inc. also require the Company to pay fees based on defined gross sales. These costs are charged to operations as incurred.

Revenue from restaurant operations is recognized upon receipt of payment from customers. Revenue from the sale of commissary products to Big Boy restaurants licensed to other operators is recognized upon shipment of product. Revenue from franchise fees, based on sales of Big Boy restaurants licensed to other operators, is recorded on the accrual method as earned. Initial franchise fees are recognized as revenue when the fees are deemed fully earned and non-refundable, ordinarily upon the execution of the license agreement, in consideration of the Company’s services to that time.

New store opening costs consist of new employee training costs, the cost of a team to coordinate the opening and the cost of certain replaceable items such as uniforms and china. New store opening costs are charged to expense as incurred. Opening costs for the 40 weeks ended March 7, 2004 and March 9, 2003 were $1,433,000 ($1,134,000 for Golden Corral and $299,000 for Big Boy) and $875,000 ($790,000 for Golden Corral and $85,000 for Big Boy), respectively. For the twelve weeks ended March 7, 2004 and March 9, 2003, opening expenses were $486,000 ($247,000 for Golden Corral and $239,000 for Big Boy) and $240,000 (all of which was for Golden Corral), respectively.

The Company has two qualified defined benefit pension plans covering all of its eligible employees. (Hourly restaurant employees hired after December 31, 1998 are ineligible to enter the qualified defined benefit pension plans. Instead, these employees are offered participation in a 401(k) savings plan with a matching 40% employer cash contribution.) Qualified defined benefit pension plan benefits are based on years-of-service and other factors. The Company’s funding policy is to contribute at least annually amounts sufficient to satisfy legal funding requirements plus such additional tax-deductible amounts deemed advisable under the circumstances. Contributions are intended to provide not only for benefits attributed to service-to-date, but also for those expected to be earned in the future. In addition, the Company has an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) that provides a supplemental retirement benefit to the executive officers of the Company and certain other “highly compensated employees” whose benefits under the qualified plans are reduced when their compensation exceeds Internal Revenue Code imposed limitations or when elective salary deferrals are made to the Company’s non-qualified Executive Savings Plan. Prepaid pension benefit costs (see Note E – Pension Plans) and Executive Savings Plan assets are the principal components of “Other long-term assets” on the balance sheet.

Commencing in the year 2000, the executive officers of the Company and certain other “highly compensated employees” began receiving comparable pension benefits through a non-qualified Non Deferred Cash Balance Plan instead of accruing additional benefits under the qualified defined benefit pension plans and the SERP. (Also see Note E – Pension Plans.)

The Company self-insures its Ohio workers’ compensation claims up to $250,000 per claim. Initial self insurance liabilities are accrued based on prior claims history. An annual review of claims experience is performed during the first quarter of ensuing fiscal years and adjustments are made to the self insurance liabilities to more closely reflect annual claims experience. Favorable claims experience allowed reserves to be lowered by $710,000 and $334,000 respectively, during the first quarters of fiscal years 2004 and 2003.

As of March 7, 2004, the Company had two outstanding letters of credit totaling $175,000 in support of its self-insurance program.

The carrying value of the Company’s financial instruments approximates fair value.

Taxes are provided on all items included in the statement of earnings regardless of when such items are reported for tax purposes. The provision for income taxes in all periods has been computed based on management’s estimate of the effective tax rate for the entire year.

The Company accounts for stock options using the intrinsic value method of measuring compensation expense prescribed by Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock Based Compensation.” No stock based employee compensation cost is included in net income, as all options granted during the periods presented herein had an exercise price equal to the market value of the stock on the date of the grant. In accordance with Statement of Financial Standards No. 148 (SFAS 148), “Accounting for Stock Based Compensation – Transition and Disclosure,” the following table presents the effect on net income and earnings per share if the Company had accounted for stock options using the fair value recognition provisions of SFAS 123:

The estimated total stock-based employee compensation expense was determined using the modified Black-Scholes option pricing model with the following weighted average assumptions:

The Company reviewed all significant newly issued accounting pronouncements and concluded that, other than those disclosed herein, no material impact is anticipated on the financial statements as a result of future adoption.

The Construction Draw Facility is an unsecured draw credit line that provides for borrowing of up to $55,000,000 to construct and open Golden Corral restaurants. As of March 7, 2004, $10,000,000 remained available to be borrowed before the Facility expires on September 1, 2005. It is subject to a ¹/4 percent unused commitment fee.

Under the terms of the Facility, funds borrowed are initially governed as a Construction Phase Loan. Of the $45,000,000 cumulatively borrowed under the Facility through March 7, 2004, $2,000,000 remained in the Construction Phase. Interest is determined by a pricing matrix that uses changeable basis points, determined by certain of the Company’s financial ratios. The basis points are added to or subtracted from one of various indices chosen by the Company. The rate in effect as of March 7, 2004 was 3.15 percent. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly.

Within six months of the completion and opening of each restaurant, the balance outstanding under each Construction Phase Loan must be converted to a Term Loan amortized over a period not to exceed seven years. Upon conversion, the Company may select a fixed interest rate over the chosen term or may choose among various adjustable rate options. Fixed interest rates have been chosen for all of the Term Loans ($43,000,000 in original notes), the weighted average of which is 6.50 percent, and all of the Term Loans are being repaid in 84 equal monthly installments of principal and interest aggregating $645,000, expiring in various periods ranging from May

2006 through March 2011. Any outstanding Construction Phase Loan that has not been converted into a Term Loan shall mature and be payable in full on September 1, 2005.

The Bullet Loan was added in December 2002 to refinance, on a long term basis, the $10,000,000 that had been outstanding as of June 2, 2002 on a Revolving Credit Loan. The Bullet Loan is secured by mortgages on the real property of six Golden Corral restaurants. It matures and is payable in one installment on December 31, 2007. Variable rated interest, currently ranging from 3.12 to 3.17 percent, is determined by adding 200 basis points to the London Interbank Offered Rate (LIBOR). At any time during the term of the loan, the Company has the option of designating that the loan bear interest for the remainder of the term at a fixed rate equal to the lender’s cost of funds plus 200 basis points. Variable LIBOR based interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly. Fixed cost of funds based interest shall be payable monthly in arrears.

A $5,000,000 unsecured Revolving Credit Loan is in place that is intended to fund temporary working capital needs. The loan, none of which was outstanding as of March 7, 2004, is subject to a 30 consecutive day out-of-debt period each year. It matures on September 1, 2005. Interest is determined by the same pricing matrix used for Construction Phase Loans under the Construction Draw Facility, the basis points from which are added to or subtracted from one of various indices chosen by the Company. The loan is subject to a ¹/4 percent unused commitment fee. Interest is payable at the end of each specific rate period selected by the Company, which may be monthly, bi-monthly or quarterly.

These loan agreements contain covenants relating to tangible net worth, interest expense, cash flow, debt levels, capitalization changes, asset dispositions, investments and restrictions on pledging certain restaurant operating assets. The Company was in compliance with all loan covenants as of March 7, 2004. Compensating balances are not required by these loan agreements.

The Company occupies certain of its restaurants pursuant to lease agreements. The majority of the leases are for fifteen or twenty years and contain renewal options for ten to fifteen years, and/or have favorable purchase options. As of March 7, 2004, eleven of the Company’s 30 leased restaurant locations have been capitalized. Delivery equipment is also held under capitalized leases expiring during periods through 2009. Amortization of capitalized lease assets is computed on the straight-line method over the primary terms of the leases. An analysis of the capitalized leased property follows:

As of March 7, 2004, nineteen of the Company’s restaurant properties are occupied pursuant to operating leases, including four ground leases for Golden Corral restaurants. Another Golden Corral ground lease has been entered into for a restaurant to open in calendar year 2005. The operating lease table below includes scheduled payments for this lease, even though payments will not begin until the restaurant opens. The Company also occupies office space under an operating lease that expires during 2013, with renewal options available through 2023. Total rental expense of operating leases was $1,117,000 and $1,167,000 respectively, for the 40 weeks ended March 7, 2004 and March 9, 2003, and was $343,000 and $353,000 respectively, during the twelve weeks ended March 7, 2004 and March 9, 2003.

Future minimum lease payments under capitalized leases and operating leases, including residual value guarantees on certain of the capitalized leases, having an initial or remaining term of one year or more follow:

Not included in the above table are certain leases of former operating properties that the Company has assigned or sub-let to third parties. The average annual obligations of these leases approximate $51,000 over the next five years. The Company remains contingently liable for the performance of these leases. In the event of default by the assignees or sub-lessees, the Company generally retains the right to re-assign or sub-let the properties.

Shareholders approved the 2003 Stock Option and Incentive Plan (the “2003 Incentive Plan” or “Plan”) on October 6, 2003. The 2003 Incentive Plan provides for several forms of awards including stock options, stock appreciation rights, stock awards including restricted and unrestricted awards of stock, and performance awards. The Plan will continue in effect until terminated by the Board of Directors. Subject to adjustment for changes in capitalization, the maximum number of shares of common stock that the Plan may issue is 800,000. The Plan provides that the total number of shares of common stock covered by options plus the number of stock appreciation rights granted to any one individual may not exceed 80,000 during any fiscal year. Additionally, no more than 80,000 shares of common stock may be issued in payment of performance awards denominated in shares, and no more than $1,000,000 in cash (or fair market value, if paid in shares) may be paid pursuant to performance awards denominated in dollars, granted to any one individual during any fiscal year if the awards are intended to qualify as performance based compensation. Employees of the Company and non-employee directors of the Company are eligible to be selected to participate in the Plan. Participation is based on selection by the Compensation Committee (the Committee) of the Board of Directors. Although there is no limit to the number of participants in the Plan, there are approximately 40 persons currently participating in the Plan.

Options to purchase shares of the Company’s common stock permit the holder to purchase a fixed number of shares at a fixed price. When options are granted, the Committee determines the number of shares subject to the option, the term of the option which may not exceed ten years, the time or times when the option will become exercisable and the price per share that a participant must pay to exercise the option. No option will be granted with an exercise price that is less than 100 percent of fair market value on the date of the grant.

Stock appreciation rights (SAR’s) are rights to receive payment, in cash, shares of common stock or a combination of the two, equal to the excess of (1) the fair market value of a share of common stock on the date of exercise over (2) the price per share of common stock established in connection with the grant of the SAR (the reference price). The reference price must be at least 100 percent of the common stock’s fair market value on the date the SAR is

granted. SAR’s may be granted by the Committee in its discretion to any participant, and may have terms no longer than ten years.

Stock awards are grants of shares of common stock that may be restricted (subject to a holding period or other conditions) or unrestricted. The Committee determines the amounts, vesting, if any, terms and conditions of the awards, including the price to be paid, if any, for restricted awards and any contingencies related to the attainment of specified performance goals or continued employment or service. The Committee may also grant performance awards to participants. Performance awards are the right to receive cash, common stock or both, at the end of a specified performance period, subject to satisfaction of the performance criteria and any vesting conditions established for the award.

As of March 7, 2004, no awards (meaning any form of stock option, stock appreciation right, restricted stock award, unrestricted stock award or performance award) had been granted under the 2003 Stock Option and Incentive Plan.

The 1993 Stock Option Plan is not affected by the adoption of the 2003 Stock Option and Incentive Plan. The 1993 Stock Option Plan originally authorized the grant of stock options for up to 562,432 shares (as adjusted for stock dividends paid in earlier years) of the common stock of the Company for a ten year period beginning May 9, 1994. Shareholders approved the Amended and Restated 1993 Stock Option Plan (Amended Plan) in October 1998, which extended the availability of options to be granted to October 4, 2008. As of March 7, 2004, 80,204 shares remained available to be optioned. Of the 482,228 cumulative shares optioned to date, 319,993 remain outstanding as of March 7, 2004. Shares may be optioned to employees at not less than 75 percent of fair market value on the date granted. The Amended Plan added a provision for automatic, annual stock option grants of 1,000 shares to each of the Company’s non-employee directors. The per share exercise price for options granted to non-employee directors must equal 100 percent of fair market value on the date of grant. The Amended Plan also added a Company right to repurchase shares acquired on exercise of options if an optionee chooses to dispose of such shares. Stock appreciation rights are not provided for under the Amended Plan. All outstanding options under the 1993 Plan were granted at fair market value and expire ten years from the date of grant. Outstanding options to the President and Chief Executive Officer generally vest in six months, while options granted to non-employee directors vest after one year. Outstanding options granted to other key employees vest in three equal annual installments.

The 1984 Stock Option Plan expired May 8, 1994. The final 14,090 outstanding options expired in June 2003, ten years from the date originally granted.

The changes in outstanding and exercisable options involving both the 1993 and the 1984 Plans are summarized below:

Stock options outstanding and exercisable as of March 7, 2004 for the 1993 Stock Option Plan:

Shareholders approved the Employee Stock Option Plan (elsewhere referred to as Employee Stock Purchase Plan) in October 1998. The Plan provides employees who have completed 90 days of continuous service with an opportunity to purchase shares of the Company’s common stock through payroll deduction. Immediately following the end of each semi-annual offering period, participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares at the beginning of the offering period or at the end of the offering period. The Plan authorizes a maximum of 1,000,000 shares that may be purchased on the open market or from the Company’s treasury. Through October 31, 2003 (latest available data), 88,110 shares had been purchased through the Plan. Shares purchased through the Plan are held by the Plan’s custodian until withdrawn or distributed. As of October 31, 2003, the custodian held 44,689 shares on behalf of employees.

A total of 58,492 common shares were reserved for issuance under the non-qualified Executive Savings Plan when it was established in 1993. As of March 7, 2004, 49,374 shares remained in the reserve, including 7,462 shares allocated but not issued to participants.

Since September 1998, 1,135,286 shares of the Company’s common stock have been repurchased at a cost of $12,162,000. On October 7, 2002, the Board of Directors authorized the repurchase of up to 500,000 additional shares to replace the previous program that expired on October 2, 2002. Purchases may be made in the open market or through block trades over a period of time not to exceed two years. No shares have been repurchased under these programs since January 2002.

The Company’s treasury holds an additional 1,322,736 shares of the Company’s common stock, including 1,142,966 shares acquired in August 1997 pursuant to the terms of a modified “Dutch Auction” self-tender offer.

Basic earnings per share is based on the weighted average number of outstanding common shares during the period presented. Diluted earnings per share includes the effect of common stock equivalents, which assumes the exercise and conversion of dilutive stock options.

The changes in the benefit obligations for the two qualified defined benefit plans that the Company sponsors (see Note A – Accounting Policies) plus an unfunded non-qualified Supplemental Executive Retirement Plan (SERP) for “highly compensated employees” (collectively, the “Plans”) are computed as follows for the years ended June 1, 2003 and June 2, 2002 (latest available data):

The changes in the Plans’ assets are computed as follows for the years ended June 1, 2003 and June 2, 2002 (latest available data):

The following table sets forth the Plans’ funded status and amounts recognized on the Company’s balance sheet as of June 1, 2003 and June 2, 2002 (latest available data):

Net periodic pension cost for the above described Plans during the 40 weeks ended March 7, 2004 and March 9, 2003 was $1,554,000 and $1,020,000 respectively, and was $479,000 and $297,000 respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003. Minimum contributions to the Plans approximate $2,200,000 for fiscal 2004, some of which may not be paid until fiscal 2005. The Company may contribute as much as $2,900,000.

Compensation expense (not included in the net periodic pension cost described above) relating to the Non Deferred Cash Balance Plan (see Note A – Accounting Policies) was $382,000 and $334,000 respectively, during the 40 weeks ended March 7, 2004 and March 9, 2003, and was $112,000 and $81,000 respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003. A $489,000 contribution to the Non Deferred Cash Balance Plan was made shortly before December 31, 2003.

Other retirement plan costs, principally the 401(k) plans sponsored by the Company, amounted to $132,000 and $131,000 respectively, during the 40 weeks ended March 7, 2004 and March 9, 2003, and was $38,000 and $38,000 respectively, for the twelve weeks ended March 7, 2004 and March 9, 2003.

The Company has two reportable segments within the food service industry: Big Boy restaurants and Golden Corral restaurants. Financial information by operating segment is as follows:

The construction of a Golden Corral restaurant in Canton, Ohio was halted in August 2001 in order to assess structural concerns. In March 2002, a final assessment of the defects resulted in the Company’s decision to construct a new building on another part of the lot. (The restaurant finally opened for business in January 2003.) On July 30, 2002, the general contractor that built the defective building filed a demand for arbitration against the Company seeking $294,000 plus interest, fees, and costs it claims is owed by the Company under the construction contract. The Company denies the claim and has filed a counterclaim against the general contractor alleging defective construction and claiming damages, lost profits, interest and costs in excess of $1,000,000. The Company is vigorously prosecuting this claim and believes that it will ultimately prevail.

On August 29, 2002, the Company filed a separate lawsuit against the architect that designed the defective building alleging negligent design and claiming damages, lost profits, interest and costs in excess of $2,500,000. In July 2003, the Company resolved all claims, counterclaims and cross claims against the trial court defendants, including the architect and the architect’s structural engineering consultant. The defendants agreed to pay the Company the sum of $1,700,000 in full and final settlement of all claims.

Since no assurances can ever be made regarding the outcome of any litigation, only the cost of constructing the defective building (including the cost to raze it), totaling approximately $1,723,000, was carried on the consolidated balance sheet as of June 1, 2003 in “Long-term receivables.” The balance has now been reduced to zero reflecting receipt of the settlement.

A Big Boy licensed restaurant owned by an officer and director of the Company and two Big Boy licensed restaurants owned by children and other family members of an officer and directors of the Company pay to the Company franchise and advertising fees, employee leasing and other fees, and make purchases from the Company’s commissary.

The total paid to the Company by these three restaurants amounted to $3,395,000 and $3,182,000 respectively, during the 40 weeks ended March 7, 2004 and March 9, 2003, and was $980,000 and $914,000 respectively, during the twelve weeks ended March 7, 2004 and March 9, 2003. The amount owed to the Company from these restaurants was $84,000 and $41,000 respectively, as of March 7, 2004 and June 1, 2003. Amounts due are always settled within 28 days of billing.

All related party transactions described herein were effected on substantially similar terms as transactions with persons having no relationship with the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s Third Quarter of Fiscal 2004 consists of the twelve weeks ended March 7, 2004, and compares with the twelve weeks ended March 9, 2003, which constituted the Third Quarter of Fiscal 2003. The First Three Quarters of Fiscal 2004 consist of the 40 weeks ended March 7,2004, and compare with the 40 weeks ended March 9, 2003, which constituted the First Three Quarters of Fiscal 2003.

Total revenue for the Third Quarter of Fiscal 2004 was a record $59,633,000, an increase of $7,690,000, or 14.8 percent higher than the Third Quarter of Fiscal 2003. Net earnings for the Third Quarter of Fiscal 2004 were a record $2,216,000, or diluted earnings per share (EPS) of $.43. Comparable net earnings from the Third Quarter of Fiscal 2003 were $1,587,000, or $.32 diluted EPS.

Total revenue for the First Three Quarters of Fiscal 2004 was a record $197,420,000, an increase of $20,569,000, or 11.6 percent higher than the First Three Quarters of Fiscal 2003. Net earnings for the First Three Quarters of Fiscal 2004 were a record $7,915,000, or $1.54 diluted EPS. Comparable net earnings from the First Three Quarters of Fiscal 2003 were $6,715,000, or $1.34 diluted EPS.

Items in the Third Quarter of Fiscal 2004 having a significant impact on operating results were:

All of these items are discussed in greater detail in the discussion of Results of Operations that follows.

Operations consist of two reportable segments within the restaurant industry: “Big Boy” restaurants and “Golden Corral” restaurants. Revenues consist primarily of retail restaurant sales. Big Boy restaurant sales also include wholesale sales from the Company’s commissary to restaurants licensed to other Big Boy operators, the amounts of which total less than three percent of total revenue in all periods presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operation. Total revenue also includes franchise and other fees, the amounts of which are not material to any of the periods discussed herein. References to sales or revenue in the discussion that follows refer to restaurant sales (including the minimal amounts of wholesale sales discussed above).

Consolidated restaurant sales reached record heights during the Third Quarter of Fiscal 2004 and the First Three Quarters of Fiscal 2004:

During the Third Quarter of Fiscal 2004, same store sales in Big Boy restaurants increased 7.3 percent above the Third Quarter of Fiscal 2003. Considerably higher customer counts were attained compared to the Third Quarter of Fiscal 2003, when severe winter weather resulted in a same store sales decrease. Big Boy same store sales increases have been achieved in 25 of the last 26 quarters. Same store sales for the First Three Quarters of Fiscal 2004 were 5.6 percent higher than the First Three Quarters of Fiscal 2003. The percentage increase in dining room sales exceeded the increase in carryout and drive-thru sales in each of the three quarters of fiscal 2004, continuing a trend that was begun in the latter part of fiscal 2003. The same store sales comparisons include average menu price increases of 1 percent implemented shortly before last year’s first quarter ended, 1.1 percent near the end of last year’s third quarter, 1.1 percent near the end of this year’s first quarter, and a 1.6 percent increase went into effect shortly before the Third Quarter of Fiscal 2004 ended.

From the beginning of fiscal 2003 through the end of the Third Quarter of Fiscal 2004, two new Big Boy restaurants have been opened, while no restaurants have been closed. One of the restaurants that was opened replaced a building upon the same site during fiscal 2003. The other new restaurant opened in January 2004. The Company operated 89 Big Boy restaurants as of March 7, 2004. Another Big Boy restaurant opened for business on March 8, 2004, the first day of the fourth quarter of fiscal 2004. It relocated an existing restaurant to a superior site within the same neighborhood. The Big Boy development schedule calls for two new restaurants to open over the next twelve months. The openings are scheduled for August and September 2004. The latter is a replacement building on its existing site.

The Golden Corral sales increases were primarily the result of more restaurants in operation:

The Golden Corral development schedule calls for five new restaurants to open over the next twelve months. Openings are scheduled in May, July, September and November of 2004. The fifth one should open in January 2005.

During the Third Quarter of Fiscal 2004, Golden Corral same store sales decreased .8 percent below the Third Quarter of Fiscal 2003. This marked the second consecutive quarter of Golden Corral same store sales declines. These declines can be traced to the “sister-store” effect of building additional restaurants in existing markets. Management believes this is a short-term effect that will be far outweighed with long-term benefits. Following general industry practice, these same store sales comparisons include only those restaurants that were open for five full fiscal quarters prior to the start of the comparison periods. This removes possible misleading numbers that can be caused by the great influx of customers during the first several months of operation, sometimes called the “honeymoon” period of a new restaurant. Using this formula, eighteen of the 25 restaurants were included in the Third Quarter of Fiscal 2004 same store sales calculation.

For the First Three Quarters of Fiscal 2004, Golden Corral same store sales increased 1.5 percent above the First Three Quarters of Fiscal 2003. Only fourteen of the 25 restaurants were included in the comparison. The introduction of the “Great Steaks Buffet” in Golden Corral restaurants was completed during the Second Quarter of Fiscal 2003. The conversion of the hot bars allowed the Company to begin charging an extra dollar for the basic buffet, equating to a 7.9 percent average menu price increase. The “Great Steaks Buffet” concept features all-you-

can-eat charbroiled steaks served on the buffet. During the Second Quarter of Fiscal 2004, a 3.3 percent price increase was implemented.

Pre-tax earnings for both operating segments are highlighted below (also see Note F to the consolidated financial statements):

The operating percentages shown in the following table are percentages of restaurant sales (as defined in a previous paragraph) rather than of total revenue. The table supplements the discussion that follows which concerns cost of sales for both the Big Boy and Golden Corral reporting segments, including food cost, payroll and other operating costs.

Higher commodity costs, especially beef, dairy and pork, have driven the food and paper cost percentages higher in all periods presented in the table for both Big Boy and Golden Corral. Beef, in particular, has been at record highs and continues to be a highly volatile market. Import and export restrictions can cause wide fluctuations in cost. Although beef prices have declined slightly since December 2003 when export restrictions were imposed due to the detection of Mad Cow Disease in a single slaughtered cow from the nation’s herd, management believes that appreciably lower prices can not be expected any time soon. Commodity prices are generally expected to continue rising in the near term, but not as rapidly as was experienced through the First Three Quarters of Fiscal 2004. The food and paper cost percentages for the Golden Corral segment are much higher than the Big Boy segment because of the all-you-can-eat nature of the Golden Corral concept, as well as its use of steak as a featured item on the buffet.

Menu price hikes have helped to counter the effects of the higher cost of food to a certain degree, however, menu prices can not be raised high enough at once to offset the significant increases that have been seen on a wide range of products. The effect of commodity price increases can also be managed with changes to the Big Boy menu mix and effective selection of items served on the Golden Corral food bar.

Self insured claims experience is reviewed and adjusted annually during the first quarter. The assumptions used to measure these adjustments can be complex and sometimes require management to exercise considerable judgment. However, management does not consider the adjustments made during the annual review to be critical to the fair presentation of the Company’s financial condition or its results of operations for the fiscal year taken as a whole. Results for the first three quarters of both fiscal years received the benefit of favorable claims experience, as self

insurance liabilities were lowered by $710,000 during the first quarter of fiscal 2004 and by $334,000 in the first quarter of fiscal 2003.

When compared against comparable periods in fiscal 2003, payroll and related cost percentages moved downward in both the Third Quarter and First Three Quarters of Fiscal 2004 for both the Big Boy and Golden Corral operating segments, even when the benefit of the self insurance reserve adjustments (discussed in the preceding paragraph) that were apportioned to payroll and related costs is excluded. The combination of Big Boy’s same store sales increase and average pay rates moving lower during the Third Quarter and First Three Quarters of Fiscal 2004, was more than enough to compensate for the effects of a significant increase in the number of hours worked, plus higher pension and medical costs. Golden Corral’s percentages also moved downward during the Third Quarter and First Three Quarters of Fiscal 2004 despite the decline in same store sales during the Third Quarter of Fiscal 2004 and a lower than expected same store sales increase for the First Three Quarters of Fiscal 2004. The lower Golden Corral percentages were achieved with the combination of a reduction in the number of hours worked along with lower pay rates, offset somewhat by higher costs of variable compensation and medical insurance.

Although federal legislation has once again been introduced in an effort to raise the federal minimum wage, the Company believes that it is unlikely to be signed into law in the near term. If such legislation were to be enacted, the Company would counter the effects with higher menu prices, together with tighter payroll standards and a reduction in hours worked.

The fair value of the assets in the Company’s defined benefit pension plans has been adversely affected by poor returns on equity investments in recent years. The result has increased the Company’s pension expense after many years of steady, low costs. The net periodic pension cost (computed under Statement of Financial Accounting Standards No. 132) was $479,000 and $297,000 respectively, in the Third Quarter of Fiscal 2004 and the Third Quarter of Fiscal 2003. Net periodic pension cost was $1,554,000 and $1,020,000 respectively, for the First Three Quarters of Fiscal 2004 and the First Three Quarters of Fiscal 2003. Net periodic pension cost for fiscal year 2004 is currently projected to be approximately $2,035,000. The weighted average discount rate used in the actuarial assumptions will be reduced from 6.5 percent to 6.0 percent for the fiscal year that will begin on May 31, 2004, causing net periodic pension cost to again move higher. Contributions to these plans were $1,795,000 during Fiscal 2003. Minimum contributions to the plans for fiscal year 2004 approximate $2,200,000, some of which may be deferred and not paid until fiscal year 2005. Through the First Three Quarters of Fiscal 2004, $685,000 has been contributed. The Company may elect to contribute as much as $2,900,000.

Other operating costs include occupancy costs such as maintenance, rent, depreciation, property tax, insurance and utilities; field supervision; accounting and payroll preparation costs; franchise fees for Golden Corral restaurants; opening costs and many other restaurant operating expenses. As most of these expenses tend to be more fixed in nature, same store sales increases cause these costs to be a lower percentage of sales, as reflected in the above table for Big Boy. The Big Boy percentage reduction for the First Three Quarters of Fiscal 2004 was greater than the reduction for the Third Quarter of Fiscal 2004 largely due to certain write-offs recorded in the first quarter of fiscal 2003 for the cost of abandoning design plans for the Big Boy prototype restaurant building that was introduced in Fiscal 2001. Golden Corral same store sales decreases during the Third Quarter of Fiscal 2004 and a lower than expected same store sales increase for the First Three Quarters of Fiscal 2004 caused other operating costs to be a higher percentage of sales for both the Third Quarter of Fiscal 2004 and the First Three Quarters of Fiscal 2004. The increase for the First Three Quarters of Fiscal 2004 was not as great as the increase for the Third Quarter of Fiscal 2004 due to certain equipment write-offs recorded in the first quarter of fiscal 2003. Also included in the other operating cost percentages are higher charges for new store opening costs. During the First Three Quarters of Fiscal 2004, $214,000 more for Big Boy and $344,000 more for Golden Corral was incurred.

Results for the Third Quarter of Fiscal 2003 were favorably affected by a credit to impairment of assets totaling $145,000 that resulted from the sale of a former Big Boy restaurant. The credit reflects the over estimation of the impairment charge that was taken when the restaurant was permanently closed in fiscal 2001. The First Three Quarters of Fiscal 2003 also included a credit to impairment of assets of $666,000 relating to the cancellation of a long-term lease for another former Big Boy restaurant that had ceased operating in fiscal 2001. The credit included the cancellation and reversal of future lease obligations that had been accrued when the restaurant closed. No impairments of assets were recorded in the First Three Quarters of Fiscal 2004.

Interest expense decreased $265,000 during the First Three Quarters of Fiscal 2004, or 12.4 percent lower than the First Three Quarters of Fiscal 2003. Capitalized interest was much higher throughout the First Three Quarters of Fiscal 2004. Also, the weighted average fixed interest rate on the Company’s term loans has moved lower reflecting the mix of loans added during the last twelve months at rates lower than older higher rate loans, the principal of

which is now amortizing much more rapidly. Significant payments against these installment loans should help to counter the effects of additional borrowing in Fiscal 2004. However, interest expense will likely increase during the fourth quarter of fiscal 2004 reflecting the effect of $4,000,000 borrowed during the Third Quarter of Fiscal 2004.

As a percentage of pre-tax earnings, the estimated effective tax rate for the entire year remained at 35.5 percent for the Third Quarter of Fiscal 2004 and the First Three Quarters of Fiscal 2004. The comparable rate was estimated at 36 percent for the Third Quarter of Fiscal 2003 and the First Three Quarters of Fiscal 2003. These rates have been kept consistently low through the Company’s use of tax credits, principally the federal credit allowed for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips. To a lesser degree, the Company also uses the federal Work Opportunity Tax Credit (WOTC). Although WOTC expired on December 31, 2003, Congress is expected to soon extend it once again. No significant change in the effective tax rate resulted when WOTC expired.

Two factors are required for an accounting policy to be deemed critical. The policy must be significant to the fair presentation of a company’s financial condition and its results of operations, and the policy must require management’s most difficult, subjective or complex judgments. Management believes that its policy used in accounting for the impairment of long-lived assets is the Company’s only critical accounting policy because of its potential for significant impact on financial condition and results of operations. A discussion of this policy can be found under the “Property and Equipment” caption of Note A to the consolidated financial statements.

Restaurant sales provide the Company’s principal source of cash. The funds are immediately available for the Company’s use, as substantially all restaurant sales are received in cash or credit cards. Net earnings plus depreciation provide the primary source of cash provided by operating activities. Other sources of cash may include borrowing against the Company’s credit lines, proceeds from employees’ exercising of stock options and occasional sales of real estate. In addition to servicing debt, these cash flows are utilized for discretionary objectives, including capital projects (principally restaurant expansion) and dividends.

The Company has historically maintained a strategic negative working capital position, a common practice in the restaurant industry. As significant cash flows are consistently provided by operations, and credit lines are readily available, the use of this practice should not hinder the Company’s ability to satisfactorily retire any of its obligations when due, including the aggregated contractual obligations and commercial commitments as of March 7, 2004 shown in the following table.

The working capital deficit was $18,100,000 as of March 7, 2004. The working capital deficit is likely to increase over the next few years at a modest, manageable pace as construction debt is prudently increased to supplement the use of internally generated cash to finance expansion plans. As of March 7, 2004, $45,000,000 had been cumulatively borrowed against the Company’s $55,000,000 Construction Draw Credit Facility, leaving $10,000,000 available to be drawn upon before the availability of draws is scheduled to expire on September 1, 2005, unless

extended. Additionally, a $5,000,000 working capital revolving line of credit (currently unused) is readily available if needed.

Operating cash flows were $21,034,000 in the First Three Quarters of Fiscal 2004, an increase of $3,868,000 compared with the First Three quarters of Fiscal 2003. The increase is attributable to the combination of higher net earnings, last year’s credit to impairment of assets, an increase in accounts payable and a decrease in income tax payments resulting from federal bonus depreciation rules.

Capital spending is the principal component of investing activities. Capital spending was $22,287,000 during the First Three Quarters of Fiscal 2004, an increase of $7,047,000 from the First Three Quarters of Fiscal 2003. This year’s capital spending includes $13,581,000 for Golden Corral restaurants, principally for new restaurant construction and site acquisitions. Also included in the capital costs was $8,706,000 spent on Big Boy restaurants, consisting of new restaurant construction, a site acquisition, remodeling existing restaurants including kitchen and dining room expansions, routine equipment replacements and other capital outlays.

It is the Company’s policy to own the land on which it builds new restaurants; however, it is sometimes necessary to enter ground leases to obtain desirable land on which to build. Four Golden Corral restaurants have been built on leased land. Another Golden Corral ground lease has been entered into for a restaurant to open in calendar year 2005. In addition, a Big Boy that opened in January 2004 was built upon leased land. All of these leases have been accounted for as operating leases pursuant to Statement of Financial Accounting Standards No. 13 (SFAS 13), “Accounting for Leases” as amended.

Also included in investing activities for the First Three Quarters of Fiscal 2004 is the recovery of $1,700,000 received in settlement of certain litigation relating to defective construction of a Golden Corral restaurant. A Golden Corral restaurant that opened in January 2003 was the replacement of a defective restaurant building in Canton, Ohio. The defective building had originally been expected to be placed in service in September 2001. Its construction was halted in August 2001 when structural defects were discovered. The Company asserted claims against certain firms with which the Company had contracted for the design, engineering and construction of the defective building. Claims against the architect and the architect’s structural engineering consultant were resolved in July 2003. The defendants agreed to pay the Company $1,700,000 as a full settlement. Receipt of the settlement funds was sufficient to recover all construction costs incurred, including the cost to raze the defective building. The Company continues to prosecute its claim exceeding $1,000,000 against the general contractor that built the building.

Financing activities in the First Three Quarters of Fiscal 2004 included $7,500,000 of new debt borrowed against the Company’s credit lines. Scheduled and other payments of long-term debt and capital lease obligations amounted to $4,637,000 during the First Three Quarters of Fiscal 2004. Regular quarterly cash dividends paid to shareholders totaled $1,546,000, including dividends of $.09 per share in July 2003, $.11 in October 2003 and $.11 in January 2004. The 22 percent increase in the dividend rate was the Board of Directors’ recognition of the Company’s stronger results and optimistic outlook. Cash dividends paid per share to the Company’s shareholders have increased in each of the last six years. As the Company expects to continue its 43 year practice of paying regular quarterly cash dividends, the Board of Directors declared another $.11 per share dividend on March 16, 2004.

Also included in financing activities in the First Three Quarters of Fiscal 2004 are proceeds of $923,000 from employees and directors who acquired 78,100 shares of the Company’s common stock through exercise of stock options granted by the Company’s 1993 Stock Option Plan. As of March 7, 2004, 320,000 shares remain outstanding under the 1993 Plan, including 227,000 fully vested shares at a weighted average price per share of $14.94, and 80,000 shares are available to be optioned. Shareholders approved the 2003 Stock Option and Incentive Plan in October 2003. The maximum number of shares that the new Plan may issue is 800,000. As of March 7, 2004, no awards had been granted under the 2003 Stock Option and Incentive Plan.

No shares have been acquired under the Company’s current stock repurchase program, which authorizes the repurchase of up to 500,000 shares of the Company’s common stock through October 2004. The current price at which shares of the Company’s common stock are being traded does not warrant the utilization of the program.

The Company’s development agreements with Golden Corral Franchising Systems, Inc. call for opening 41 Golden Corral restaurants by December 31, 2007. The Company is in compliance with the development agreements, as modified. Twenty-five restaurants were in operation as of March 7,2004, including one that opened in the Third Quarter of Fiscal 2004. Two restaurants were under construction as of March 7, 2004. Costs remaining to complete construction of these two restaurants were estimated at $3,612,000 as of March 7, 2004. Construction of three more

Golden Corrals is scheduled to be completed over the next twelve months. On average, the cost to build and equip each Golden Corral restaurant is approximately $3,000,000, including land.

Construction costs remaining to be paid as of March 7, 2004 for a Big Boy restaurant that opened March 8, 2004 were $342,000. Current plans call for two more Big Boys to be under construction before fiscal 2004 ends on May 30, 2004. The approximate cost to build and equip a new Big Boy restaurant ranges from $2,300,000 to $2,800,000, depending on land cost. Approximately one-fifth of the Company’s Big Boy restaurants are routinely renovated or decoratively updated each year. The cost of the fiscal 2004 remodeling program is estimated at $1,325,000, approximately $450,000 of which remains to be spent over the remainder of fiscal 2004. In addition, certain high-volume Big Boy restaurants are regularly evaluated to determine whether their kitchens should be redesigned for increased efficiencies. A typical kitchen redesign costs approximately $125,000.

The Company is currently executing a plan to replace its headquarters legacy information systems with an integrated enterprise system. The installation of the system is expected to be completed in September 2004. The total cash required to install the system is estimated at $4,300,000. Costs remaining to complete the project are estimated at $1,500,000 as of March 7, 2004.

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) that are not historical facts are forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified in sentences that contain words such as “should”, “could”, “will”, “may”, “plan”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “believe” and similar words that are used to convey the fact that the statement being made is prospective and does not strictly relate to historical or present facts. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results. The Company undertakes no obligation to update any of the forward-looking statements that may be contained in this MD&A.

Food safety is the most significant risk to any company that operates in the restaurant industry. It has become the focus of increased government regulatory initiatives at the local, state and federal levels resulting in higher compliance costs to the Company. To limit the Company’s exposure to the risk of food contamination, management rigorously emphasizes and enforces the Company’s food safety policies in all of the Company’s restaurants, and at the commissary and food manufacturing plant that the Company operates for Big Boy restaurants. These policies are designed to work cooperatively with programs established by health agencies at all levels of government authority, including the federal Hazard Analysis of Critical Control Points (HACCP) program. In addition, the Company makes use of ServSafe Training, a nationally recognized program developed by the National Restaurant Association. The ServSafe program provides accurate, up-to-date science-based information to all levels of restaurant workers on all aspects of food handling, from receiving and storing to preparing and serving. All restaurant managers are required to receive re-certification in ServSafe Training every five years.

In December 2003, the United States Department of Agriculture (USDA) recalled meat products in several western states that were connected to a single slaughtered cow in which Mad Cow Disease had been detected. The Company believes there is no risk to its customers. According to the USDA, the nation’s beef supply remains safe because research shows that Mad Cow Disease infects brain and spinal cord tissue which was removed during the slaughter of the single diseased cow. It is believed that these tissue parts did not enter the human food supply.

Other examples of risks and uncertainties facing the Company include, but are not limited to, the following: intense competition for customers; consumer perceptions of value, food quality and quality of service; changing consumer preferences; changing neighborhood demographics; changes in business strategy and development plans; the rising cost of quality sites on which to build restaurants; poor selection of restaurant sites; the effects of inflationary pressure, including higher energy prices; rolling power outages; shortages of qualified labor; changes in the supply and cost of food; seasonal weather conditions, particularly during the winter months of the third quarter; natural disasters; fires or explosions; criminal acts, including bomb threats, robberies, hostage taking, kidnapping and other violent crimes; acts of terrorists or acts of war; civil disturbances; boycotts; variable interest rates; limitations on borrowing capacity; legal claims; changes in accounting standards; estimates used in preparing financial statements; disruptions to the business during transitions to new computer software; financial stability of technology vendors to support computer software over the long-term; changes in governmental regulations regarding the environment; exposure to penalties for potential violations of numerous governmental regulations in general, and immigration (I-9) and minor labor regulations in particular; any future imposition by OSHA of costly ergonomics regulations on

workplace safety; legislative changes affecting labor law, especially increases in the federal minimum wage; and legislation or court rulings that result in changes to tax codes.

The Company continually takes reasonable preventive measures to reduce its risks and uncertainties. However, the nature of some risks and uncertainties leaves the Company with little control. The materialization of any of the risks and uncertainties identified herein, together with those risks not specifically listed or those that are presently unforeseen, could result in significant adverse effects on the Company’s financial position, results of operations and cash flows, which could include the permanent closure of the affected restaurant(s) with an impairment of assets charge taken against earnings.

The Company has market risk exposure to interest rate changes primarily relating to its $10,000,000 bullet loan. Interest rates are presently determined by adding 200 basis points to the London Interbank Offered Rate (LIBOR). The Company does not currently use derivative financial instruments to manage its exposure to changes in interest rates. The Company does not use foreign currency.

Food supplies for Big Boy restaurants are generally plentiful and may be obtained from any number of suppliers. Quality and price are the principal determinants of source. Centralized purchasing and food preparation through the Company’s commissary ensures uniform product quality and safety, timeliness of distribution to restaurants and results in lower food and supply costs. Certain commodities, principally beef, chicken, pork, dairy products, fish, french fries and coffee, are generally purchased based upon market prices established with vendors. Purchase contracts for some of these items may contain contractual provisions that limit the price to be paid. The Company does not use financial instruments as a hedge against changes in commodity pricing.

For Golden Corral restaurants, the Company currently purchases substantially all food, beverage and other menu items from the same vendor that Golden Corral Franchising Systems, Inc. (the Franchisor) uses for its operations. Deliveries are made two to three times per week. Other vendors are available to provide products that meet the Franchisor’s specifications should the Company wish or need to make a change.

The Company’s chief executive officer (CEO) and chief financial officer (CFO) have reviewed and evaluated the Company’s disclosure controls and procedures within 90 days of the filing of this Quarterly Report on Form 10-Q. Their evaluation concluded that the Company’s disclosure controls and procedures were effective in providing assurance that required information had been identified and disclosed accordingly in this Quarterly Report on Form 10-Q for the quarter ended March 7, 2004.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the evaluation by the CEO and CFO, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.

(a) Frisch’s Restaurants, Inc. (“Company”) is the owner of a Golden Corral Restaurant located in North Canton, Ohio. In 2001, Frisch’s general contractor, Fortney & Weygandt, Inc. (“Fortney”) constructed a Golden Corral Restaurant at the original location on the North Canton site. Complicated geological conditions at the site required that the restaurant be built on a structural slab (platform), which rested upon driven piles. The foundation system for the building had been designed by a Houston, Texas engineering firm, Maverick Engineering, Inc. (“Maverick”). Maverick was a subcontractor to Frisch’s architect of record, LMH&T.

Shortly before the scheduled opening of the restaurant, it was discovered that, due to a combination of design and construction errors, the building had shifted, which caused separation of the building from its underground plumbing system. The Company elected to demolish the original structure, and subsequently built a new building on a different portion of the original parcel. The restaurant’s grand opening was, therefore, delayed until January of 2003.

On July 30, 2002, the Company’s general contractor, Fortney, filed a Demand for Arbitration against the Company with the American Arbitration Association. Fortney sought recovery of its “outstanding contract balance,” in the sum of Two Hundred Ninety-Three Thousand Six Hundred Thirty-Eight Dollars ($293,638), plus interest, fees, and costs. Fortney contends that it is owed this money by the Company under the terms of the General Construction Contract. The Company has denied that it owes these monies to Fortney, and has filed a counterclaim against Fortney alleging defective construction. The Company’s claim against Fortney is for excess cost of construction, loss profit, interest and costs. The claim exceeds One Million Dollars ($1,000,000).

On August 29, 2002, the Company filed a lawsuit in the Stark County (Ohio) Court of Common Pleas against its former architect, LMH&T. LMH&T brought into the lawsuit its structural engineering consultant, Maverick, as well as the Company’s soils consultant, Cowherd Banner Carlson Engineering (“CBC”). The lawsuit alleged negligent design as a causal factor in the demise of the original structure, and sought damages including lost profits, interest, and costs, to exceed Two Million Five Hundred Thousand Dollars ($2,500,000).

In July 2003, the Company resolved all claims, counterclaims, and cross-claims, against and involving the trial court defendants. The trial court defendants, including LMH&T and Maverick, agreed to pay to the Company the sum of One Million Seven Hundred Thousand Dollars ($1,700,000) in full and final settlement of all claims. The Company has received the settlement funds in full.

The resolution between the Company and the trial court defendants (design team) is separate and apart from the dispute between Fortney and the Company, which is before the American Arbitration Association. In that action, Fortney continues to seek recovery of Two Hundred Ninety-Three Thousand Six Hundred Thirty-Eight Dollars ($293,638), plus interest, fees, and costs. The Company continues to seek the balance of its claim from Fortney.

(b) From time to time, the Company is subject to various claims and suits in the ordinary course of business. The Company does not believe that any ultimate liability for such claims will have a material impact on its earnings, cash flows or financial position.

ITEMS 2, 3, 4 and 5, the answers to which are either “none” or “not applicable”, are omitted.

(3) (a) Exhibit (3) (a) to the Registrant’s Form 10-K Annual Report for 1993, being the Third Amended Articles of Incorporation, is incorporated herein by reference.

(3) (b) Exhibit (3) (a) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, being the Code of Regulations, is incorporated herein by reference.

(3) (c) Exhibit (3) (b) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, being Amendments to the Code of Regulations adopted October 1, 1984, is incorporated herein by reference.

(3) (d) Exhibit (3) (c) to the Registrant’s Form 10-Q Quarterly Report for December 15, 1996, being Amendments to the Code of Regulations adopted October 24, 1996, is incorporated herein by reference.

(10) (a) Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, being the Intellectual Property Use and Noncompete Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, is incorporated herein by reference.

(10) (b) Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for March 4, 2001, being the Transfer Agreement between the Registrant and Liggett Restaurant Enterprises LLC (now known as Big Boy Restaurants International, LLC) dated January 8, 2001, is incorporated herein by reference.

(10) (c) Exhibit (10) (a) to the Registrant’s Form 10-K Annual Report for 2000, being the Area Development Agreement and Addendum effective July 25, 2000 between the Registrant and Golden Corral Franchising Systems, Inc., is incorporated herein by reference.

(10) (d) Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for December 14, 1997, being the Area Development Agreement and Addendum between the Registrant and Golden Corral Franchising Systems, Inc. effective January 6, 1998, is incorporated herein by reference.

(10) (e) Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for December 12, 1999, being the Second Amendment dated October 6, 1999 to the Area Development Agreement between the Registrant and Golden Corral Franchising Systems, Inc. effective January 6, 1998, is incorporated herein by reference.

(10) (f) Exhibit (10) (d) to the Registrant’s Form 10-Q Quarterly Report for September 17, 2000, being the Employment Agreement between the Registrant and Jack C. Maier effective May 29, 2000, is incorporated herein by reference. *

(10) (g) Exhibit (10) (h) to the Registrant’s Form 10-K Annual Report for 2003, being the Employment Agreement between the Registrant and Craig F. Maier effective June 2, 2003, is incorporated herein by reference. *

(10) (h) Exhibit (10) (a) to the Registrant’s Form 10-Q Quarterly Report for September 17, 1995, being the Frisch’s Executive Savings Plan effective November 15, 1993, is incorporated herein by reference. *

(10) (i) Exhibit (10) (b) to the Registrant’s Form 10-Q Quarterly Report for September 17, 1995, being the Frisch’s Executive Retirement Plan effective June 1, 1994, is incorporated herein by reference.*

(10) (j) Exhibit (10) (k) to the Registrant’s Form 10-K Annual Report for 2003, being Amendment No. 1 to Frisch’s Executive Retirement Plan effective January 1, 2000, is incorporated herein by reference. *

(10) (k) Appendix A to the Registrant’s Proxy Statement dated August 28, 2003, being the 2003 Stock Option and Incentive Plan, is incorporated herein by reference. *

(10) (l) Exhibit A to the Registrant’s Proxy Statement dated September 9, 1998, being the Amended and Restated 1993 Stock Option Plan, is incorporated herein by reference. *

(10) (m) Exhibit B to the Registrant’s Proxy Statement dated September 9, 1998, being the Employee Stock Option Plan, is incorporated herein by reference. *

(10) (n) Exhibit (10) (g) to the Registrant’s Form 10-K Annual Report for 1990, being the Agreement between the Registrant and Craig F. Maier dated November 21, 1989, is incorporated herein by reference. *

(10) (o) Exhibit (10) (r) to the Registrant’s Form 10-Q Quarterly Report for December 10, 2000, being Frisch’s Nondeferred Cash Balance Plan effective January 1, 2000 is incorporated herein by reference, together with the Trust Agreement established by the Registrant between Firstar Bank, N.A. (Trustee) (now known as US Bank) and Donald H. Walker (Grantor). There are identical Trust Agreements between Firstar Bank, N.A. (Trustee) (now known as US Bank) and Craig F. Maier, Paul F. McFarland, W. Gary King, Karen F. Maier, Ken C. Hull, Michael E. Conner, Todd M. Rion and certain other “highly compensated employees” (Grantors). *

(10) (p) Exhibit (10) (s) to the Registrant’s Form 10-K Annual Report for 2003, being the Registrant’s Senior Executive Bonus Plan effective June 2, 2003, is incorporated herein by reference. *

(31) Rule 13a – 14(a)/15d – 14(a) Certifications adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32) Section 1350 Certifications adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

A Form 8-K was filed January 12, 2004 reporting under Item 12 the Registrant’s press release announcing financial results for the second quarter ended December 14, 2003.

A Form 8-K was filed April 6, 2004 reporting under Item 12 the Registrant’s press release announcing financial results for the third quarter ended March 7, 2004.

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


BY		/s/ Donald H. Walker
		Donald H. Walker
Vice President – Finance, Treasurer and Principal Financial and Accounting Officer


2800 GILBERT AVENUE, CINCINNATI, OHIO		45206
(Address of principal executive offices)		(Zip Code)


			PAGE
PART I - FINANCIAL INFORMATION

	ITEM 1.	FINANCIAL STATEMENTS

		CONSOLIDATED STATEMENT OF EARNINGS	3

		CONSOLIDATED BALANCE SHEET	4 - 5

		CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY	6

		CONSOLIDATED STATEMENT OF CASH FLOWS	7

		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8 - 21

	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22 - 29

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29

	ITEM 4.	CONTROLS AND PROCEDURES	29

PART II - OTHER INFORMATION

	ITEM 1.	LEGAL PROCEEDINGS	30

	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	31 - 32

SIGNATURE			33


	Forty weeks ended					Twelve weeks ended
	March 7, 2004		March 9, 2003			March 7, 2004		March 9, 2003
Revenue
Sales	$	196,490,742	$	175,884,770		$	59,361,972	$	51,672,036
Other		929,468		966,119			271,333		270,787

Total revenue		197,420,210		176,850,889			59,633,305		51,942,823

Costs and expenses
Cost of sales
Food and paper		66,907,572		57,138,324			20,411,884		17,077,569
Payroll and related		66,516,495		61,258,659			20,171,018		18,161,978
Other operating costs		40,074,590		37,337,941			12,195,421		10,901,043

		173,498,657		155,734,924			52,778,323		46,140,590

Administrative and advertising		9,775,955		9,295,524			2,861,270		2,808,930
Impairment of long lived assets		—		(810,586	)		—		(144,857	)
Interest		1,874,515		2,139,123			558,220		658,912

Total costs and expenses		185,149,127		166,358,985			56,197,813		49,463,575

Earnings before income taxes		12,271,083		10,491,904			3,435,492		2,479,248

Income taxes		4,356,000		3,777,000			1,219,000		892,000

NET EARNINGS	$	7,915,083	$	6,714,904		$	2,216,492	$	1,587,248

Earnings per share (EPS) of common stock:
Basic net earnings per share	$	1.59	$	1.36		$	.44	$	.32

Diluted net earnings per share	$	1.54	$	1.34		$	.43	$	.32


	March 7, 2004		June 1, 2003
	(unaudited)
Current Assets
Cash	$	3,324,466	$	1,133,443
Receivables
Trade		1,288,450		955,282
Other		344,361		321,474
Inventories		4,115,031		3,825,259
Prepaid expenses and sundry deposits		1,856,254		2,619,424
Prepaid and deferred income taxes		954,102		954,102

Total current assets		11,882,664		9,808,984

Property and Equipment
Land and improvements		47,487,081		44,015,900
Buildings		73,566,394		66,715,480
Equipment and fixtures		75,718,973		69,671,202
Leasehold improvements and buildings on leased land		19,634,009		17,346,463
Capitalized leases		7,388,580		7,388,580
Construction in progress		6,932,916		6,184,653

		230,727,953		211,322,278
Less accumulated depreciation and amortization		100,259,997		94,554,520

Net property and equipment		130,467,956		116,767,758

Other Assets
Goodwill		740,644		740,644
Other intangible assets		1,149,124		1,087,691
Investments in land		1,359,551		1,400,905
Property held for sale		1,365,523		1,401,021
Long-term receivables		218,918		2,135,233
Net cash surrender value-life insurance policies		4,410,022		3,884,230
Other		2,389,569		1,409,929

Total other assets		11,633,351		12,059,653

	$	153,983,971	$	138,636,395


	March 7, 2004		June 1, 2003
	(unaudited)
Current Liabilities
Long-term obligations due within one year
Long-term debt	$	5,914,669	$	4,929,631
Obligations under capitalized leases		515,376		515,599
Self insurance		1,254,546		1,064,289
Accounts payable		13,078,094		9,473,827
Accrued expenses		7,652,088		7,407,432
Income taxes		1,567,989		355,682

Total current liabilities		29,982,762		23,746,460

Long-Term Obligations
Long-term debt		36,520,359		34,260,347
Obligations under capitalized leases		3,348,352		3,729,904
Self insurance		2,227,027		2,816,843
Deferred income taxes		1,900,234		1,900,234
Deferred compensation and other		2,560,600		2,416,881

Total long-term obligations		46,556,572		45,124,209

Commitments		—		—

Shareholders’ Equity
Capital stock
Preferred stock - authorized, 3,000,000 shares without par value; none issued		—		—
Common stock - authorized, 12,000,000 shares without par value; issued, 7,490,845 and 7,420,763 shares - stated value - $1		7,490,845		7,420,763
Additional contributed capital		62,014,418		60,926,377

		69,505,263		68,347,140
Retained earnings		40,859,929		34,490,774

		110,365,192		102,837,914
Less cost of treasury stock (2,458,022 and 2,469,345 shares)		32,920,555		33,072,188

Total shareholders’ equity		77,444,637		69,765,726

	$	153,983,971	$	138,636,395

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FOR QUARTER ENDED MARCH 7, 2004		COMMISSION FILE NUMBER 1-7323


	Common stock at $1 per share - Shares and amount		Additional contributed capital			Retained earnings			Treasury shares			Total
Balance at June 2, 2002		7,385,107		60,496,396			26,487,596			(33,139,171	)		61,229,928
Net earnings for forty weeks		—		—			6,714,904			—			6,714,904
Stock options exercised - new shares issued		33,240		331,013			—			—			364,253
Tax benefit from stock options exercised		—		98,487			—			—			98,487
Other treasury shares re-issued		—		19,038			—			40,197			59,235
Employee stock purchase plan		—		(23,572	)		—			—			(23,572	)
Cash dividends - $.27 per share		—		—			(1,329,191	)		—			(1,329,191	)

Balance at March 9, 2003		7,418,347		60,921,362			31,873,309			(33,098,974	)		67,114,044
Net earnings for twelve weeks		—		—			3,062,691			—			3,062,691
Stock options exercised - new shares issued		2,416		25,348			—			—			27,764
Stock options exercised - treasury shares re-issued		—		(6,351	)		—			26,786			20,435
Tax benefit from stock options exercised		—		10,891			—			—			10,891
Employee stock purchase plan		—		(24,873	)		—			—			(24,873	)
Cash dividends - $.09 per share		—		—			(445,226	)		—			(445,226	)

Balance at June 1, 2003		7,420,763		60,926,377			34,490,774			(33,072,188	)		69,765,726
Net earnings for forty weeks		—		—			7,915,083			—			7,915,083
Stock options exercised - new shares issued		70,082		754,384			—			—			824,466
Stock options exercised - treasury shares re-issued		—		(9,103	)		—			107,138			98,035
Tax benefit from stock options exercised		—		366,464			—			—			366,464
Other treasury shares re-issued		—		18,180			—			44,495			62,675
Employee stock purchase plan		—		(41,884	)		—			—			(41,884	)
Cash dividends - $.31 per share		—		—			(1,545,928	)		—			(1,545,928	)

Balance at March 7, 2004	$	7,490,845	$	62,014,418		$	40,859,929		$	(32,920,555	)	$	77,444,637


	2004			2003
Cash flows provided by (used in) operating activities:
Net earnings	$	7,915,083		$	6,714,904
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization		8,332,901			8,388,730
Impairment gain of long lived assets		—			(810,586	)
Loss on disposition of assets		352,160			729,726

		16,600,144			15,022,774

Changes in assets and liabilities:
Accounts receivable		(356,055	)		33,944
Inventories		(289,772	)		(441,967	)
Prepaid expenses and sundry deposits		763,170			(1,299,990	)
Accounts payable		3,604,267			749,916
Accrued expenses		244,656			508,165
Accrued income taxes		1,212,307			894,974
Tax benefit from stock options exercised		366,464			98,488
Other assets		(855,350	)		1,324,068
Self insured obligations		(399,559	)		54,206
Other liabilities		143,719			221,287

		4,433,847			2,143,091

Net cash provided by operating activities		21,033,991			17,165,865

Cash flows provided by (used in) investing activities:
Additions to property and equipment		(22,287,192	)		(15,239,561	)
Proceeds from disposition of property		24,529			1,253,152
Proceeds from disposition of franchise rights		156,464			144,874
Proceeds from surrender of life insurance policies		—			379,484
Change in other assets		1,002,592			(164,380	)

Net cash (used in) investing activities		(21,103,607	)		(13,626,431	)

Cash flows provided by (used in) financing activities:
Proceeds from borrowings		7,500,000			4,000,000
Payment of long-term debt and capital lease obligations		(4,636,724	)		(4,371,627	)
Cash dividends paid		(1,545,928	)		(1,329,191	)
Proceeds from stock options exercised - new shares issued		824,465			364,252
Proceeds from stock options exercised - treasury shares re-issued		98,035			—
Other treasury shares re-issued		62,675			59,235
Employee stock purchase plan		(41,884	)		(23,572	)

Net cash provided by (used in) financing activities		2,260,639			(1,300,903	)

Net increase in cash and equivalents		2,191,023			2,238,531
Cash and equivalents at beginning of year		1,133,443			670,726

Cash and equivalents at end of quarter	$	3,324,466		$	2,909,257

Supplemental disclosures:
Interest paid	$	2,065,167		$	2,283,300
Income taxes paid (net of refunds, if any)		2,777,232			2,787,523


	March 7, 2004			June 1, 2003
	(in thousands)
Golden Corral initial franchise fees subject to amortization	$	1,000		$	800
Less accumulated amortization		(158	)		(113	)

Carrying amount of Golden Corral initial franchise fees subject to amortization		842			687
Current portion of Golden Corral initial franchise fees subject to amortization		(67	)		(53	)
Golden Corral fees not yet subject to amortization		205			285
Total other intangible assets		169			169

	$	1,149		$	1,088


	40 weeks ended				12 weeks ended
	March 7, 2004		March 9, 2003		March 7, 2004		March 9, 2003
	(in thousands, except per share data)
Net Income, as reported	$	7,915	$	6,715	$	2,216	$	1,587
Deduct: total stock-based employee compensation expense determined under fair value based method for all grants (a), net of tax effects		216		222		36		30

Pro forma net income	$	7,699	$	6,493	$	2,180	$	1,557

Earnings per share

Basic – as reported	$	1.59	$	1.36	$	.44	$	.32
Basic – pro forma	$	1.54	$	1.32	$	.43	$	.32

Diluted – as reported	$	1.54	$	1.34	$	.43	$	.32
Diluted – pro forma	$	1.50	$	1.30	$	.42	$	.31


	March 7, 2004				June 1, 2003
	Payable within one year		Payable after one year		Payable within one year		Payable after one year
	(in thousands)
Construction Draw Facility -
Construction Phase Loans	$	—	$	2,000	$	—	$	—
Term Loans		5,915		24,520		4,930		24,260
Bullet Loan		—		10,000		—		10,000
Revolving Credit Loan		—		—		—		—

	$	5,915	$	36,520	$	4,930	$	34,260


	Asset balances at
	March 7, 2004			June 1, 2003
	(in thousands)
Restaurant facilities	$	6,306		$	6,306
Equipment		1,083			1,083

		7,389			7,389
Less accumulated amortization		(6,000	)		(5,653	)

	$	1,389		$	1,736


Period ending March 7,	Capitalized leases			Operating leases
	(in thousands)
2005	$	900		$	1,438
2006		841			1,269
2007		619			1,109
2008		2,608			934
2009		72			794
2010 to 2025		25			9,376

Total		5,065		$	14,920

Amount representing interest		(1,201	)

Present value of obligations		3,864
Portion due within one-year		(515	)

Long-term obligations	$	3,349


	40 weeks ended
	March 7, 2004			March 9, 2003
	No. of shares	Weighted avg. price per share		No. of shares	Weighted avg. price per share
Outstanding at beginning of year	321,665	$	13.96	284,220	$	12.08
Granted during the 40 weeks	91,000	$	19.28	90,500	$	19.16
Exercised during the 40 weeks	78,082	$	11.73	33,240	$	11.08
Expired during the 40 weeks	14,090	$	14.38	14,398	$	17.05
Forfeited during the 40 weeks	500	$	17.17	1,001	$	15.65

Outstanding at end of quarter	319,993	$	15.97	326,081	$	13.92

Exercisable at beginning of year	233,156	$	13.21	209,131	$	12.14

Exercisable at end of quarter	227,314	$	14.94	237,572	$	13.16


Range of Exercise Prices per Share	No. of shares	Weighted average price per share		Weighted average remaining life in years
Outstanding:
$ 8.31 to $13.00	76,232	$	10.57	6.09 years
$13.01 to $18.00	73,424	$	13.77	7.33 years
$18.01 to $24.20	170,337	$	19.34	8.79 years

$ 8.31 to $24.20	319,993	$	15.97	7.81 years

Exercisable:
$ 8.31 to $13.00	76,232	$	10.57	—
$13.01 to $18.00	60,082	$	13.85	—
$18.01 to $24.20	91,000	$	19.33	—

$ 8.31 to $24.20	227,314	$	14.94	—


	40 weeks ended		12 weeks ended
	March 7, 2004	March 9, 2003	March 7, 2004	March 9, 2003
Dividend yield	1.87%	1.87%	1.87%	1.87%
Expected volatility	27%	28%	27%	28%
Risk free interest rate	2.57%	3.67%	2.57%	3.67%
Expected lives	5 years	5 years	5 years	5 years
Weighted average fair value of options granted	$4.32	$4.95	$4.32	$4.95


	(in thousands)
	2003			2002
Projected benefit obligation at beginning of year	$	16,510		$	14,380
Service cost		1,408			1,275
Interest cost		1,165			1,012
Actuarial loss		2,385			1,013
Benefits paid		(743	)		(1,170	)

Projected benefit obligation at end of year	$	20,725		$	16,510


	40 weeks ended						12 weeks ended
	March 7, 2004			March 9, 2003			March 7, 2004			March 9, 2003
	(in thousands)
Sales
Big Boy	$	135,905		$	127,567		$	40,476		$	36,727
Golden Corral		60,586			48,318			18,886			14,945

	$	196,491		$	175,885		$	59,362		$	51,672

Earnings from operations before income taxes
Big Boy	$	16,618		$	14,197		$	4,697		$	3,707
Impairment of assets		—			811			—			144
Opening expense		(299	)		(85	)		(239	)		(000	)

Total Big Boy		16,319			14,923			4,458			3,851

Golden Corral		3,190			2,779			976			883
Opening expense		(1,134	)		(790	)		(247	)		(240	)

Total Golden Corral		2,056			1,989			729			643

Administrative expense		(5,158	)		(5,247	)		(1,465	)		(1,627	)
Interest expense		(1,875	)		(2,139	)		(558	)		(659	)
Other – net		929			966			271			271

Total Corporate Items		(6,104	)		(6,420	)		(1,752	)		(2,015	)

	$	12,271		$	10,492		$	3,435		$	2,479

Depreciation and amortization
Big Boy	$	5,525		$	6,218		$	1,662		$	1,827
Golden Corral		2,808			2,171			935			715

	$	8,333		$	8,389		$	2,597		$	2,542

Capital expenditures
Big Boy	$	8,706		$	5,018		$	3,369		$	1,050
Golden Corral		13,581			10,222			3,773			2,365


	12 weeks 03/07/04			12 weeks 03/09/03			40 weeks 03/07/04			40 weeks 03/09/03
	Total	Big Boy	GC	Total	Big Boy	GC	Total	Big Boy	GC	Total	Big Boy	GC
Food and Paper	34.4	32.4	38.6	33.0	30.8	38.5	34.1	31.9	38.9	32.5	30.4	38.1
Payroll and Related	34.0	35.4	30.9	35.1	36.6	31.6	33.9	35.0	31.2	34.8	36.0	31.9
Other Operating Costs (including opening costs)	20.5	18.7	24.5	21.1	20.1	23.7	20.4	18.6	24.4	21.2	20.2	24.0


	Basic earnings per share			Stock equivalents	Diluted earnings per share
	Weighted average shares outstanding	EPS			Weighted average shares outstanding	EPS
40 weeks ended:

March 7, 2004	4,988,618	$	1.59	135,358	5,123,976	$	1.54
March 9, 2003	4,924,680	$	1.36	87,714	5,012,394	$	1.34

12 weeks ended:

March 7, 2004	5,020,434	$	.44	154,751	5,175,185	$	.43
March 9, 2003	4,939,391	$	.32	95,524	5,034,915	$	.32


	As of
	June 1, 2003		June 2, 2002
Weighted average discount rate	6.50	%	7.25	%
Weighted average rate of compensation increase	5.00	%	5.00	%
Weighted average expected long-term rate of return on plan assets	8.50	%	8.50	%


	3rd Quarter				First Three Quarters
	March 7, 2004		March 9, 2003		March 7, 2004		March 9, 2003
	(in thousands)
Big Boy sales	$	40,476	$	36,727	$	135,905	$	127,567
Golden Corral sales		18,886		14,945		60,586		48,318

Consolidated restaurant sales	$	59,362	$	51,672	$	196,491	$	175,885


	Third Qtr.		First Three Qtrs.
	2004	2003	2004	2003
In operation at beginning of period	24	19	20	16
Opened during the period	1	1	5	4
In operation at end of period	25	20	25	20
Total sales weeks during period	294	234	901	735


	Payments due by period (in thousands)
	Total	1 year	year 2	year 3	year 4	year 5	more than 5 years
Long-Term Debt	42,435	5,915	8,333	6,279	15,539	4,064	2,305
Rent due under Capital Lease Obligations	5,065	900	841	619	2,608	72	25
1 Rent due under Operating Leases	14,920	1,438	1,269	1,109	934	794	9,376
Unconditional Purchase Obligations	7,540	7,165	375
Other Long-Term Obligations	None
Total Contractual Cash Obligations	69,960	15,418	10,818	8,007	19,081	4,930	11,706