First Quarter
                                                          2013                          2012
                                                        (in thousands, except per share data)
Earnings from continuing operations before income
taxes                                             $          1,408              $              598
Earnings from continuing operations               $            958              $              460
Diluted EPS from continuing operations            $           0.19              $             0.09
(Loss) from discontinued operations, net of tax   $           (158 )            $           (2,734 )
Diluted EPS from discontinued operations          $          (0.03 )            $            (0.55 )
Net earnings                                      $            800              $           (2,274 )
Diluted net EPS                                   $           0.16              $            (0.46 )

Factors having a notable effect on earnings from continuing operations before income taxes when comparing the First Quarter Fiscal 2013 with the First Quarter Fiscal 2012:
• Consolidated restaurant sales were $60,625,000 in the First Quarter Fiscal 2013 versus $61,361,000 in the First Quarter Fiscal 2012. The decrease is due to the effect of the permanent closure of certain restaurants and a same store sales decrease of 0.2 percent.

• Gross profit increased $629,000, or 12.2 percent, to $5,775,000 in the First Quarter Fiscal 2013 from $5,146,000 in the First Quarter Fiscal 2012.

As a percentage of sales:
- Food and Paper Costs were 33.4 percent in the First Quarter Fiscal 2013, down from 34.0 percent in the First Quarter Fiscal 2012

- Payroll and Related Costs were 35.4 percent in the First Quarter Fiscal 2013, down from 35.7 percent in the First Quarter Fiscal 2012

- Other Operating Costs were 21.6 percent in the First Quarter Fiscal 2013, down from 22.0 percent in the First Quarter Fiscal 2012.

• Share based compensation costs were $239,000 in the First Quarter Fiscal 2013 versus $550,000 in the First Quarter Fiscal 2012.

• Impairment of assets - a charge of $70,000 was recorded in the First Quarter Fiscal 2013. No impairments were recorded during the First Quarter Fiscal 2012.

RESULTS of OPERATIONS
Except as where noted, the discussion of Results of Operations presented in this MD&A excludes the results from discontinued operations. Sales
The Company's sales are primarily generated through the operation of Frisch's Big Boy restaurants. Sales also include wholesale sales from the Company's commissary to Frisch's Big Boy restaurants that are licensed to other operators and the sale of Frisch's signature brand tartar sauce to grocery stores. Same store sales comparisons are a key metric that management uses in the operation of the business. Same store sales are affected by changes in customer counts and menu price increases. Changes in sales also occur as new restaurants are opened and older restaurants are closed. Below is the detail of consolidated restaurant sales:

                                                         First Quarter
                                                       2013        2012
                                                        (in thousands)
Frisch's Big Boy restaurants operated by the Company $ 57,429    $ 58,165
Wholesale sales to licensees                            2,894       2,908
Wholesale sales to groceries                              302         288
Total sales                                          $ 60,625    $ 61,361

Frisch's Big Boy restaurant sales shown in the above table include a same store sales decrease of 0.2 percent in the First Quarter 2013 (on a customer count decrease of 2.6 percent). The same store sales comparison includes the effect of three menu price increases, implemented respectively in September 2011 (1.5 percent), February 2012 (1.2 percent) and September 2012 (0.9 percent). Another menu price increase will likely be implemented in February 2013.
The Company operated 94 Frisch's Big Boy restaurants as of September 18, 2012. The count of 94 includes the following changes since the beginning of Fiscal 2012 (June 2011), when 95 Frisch's Big Boy restaurants were in operation:
• July 2011 - opened restaurant near Cincinnati, Ohio

• October 2011 - opened restaurant in Highland Heights, Kentucky (Cincinnati market)

• October 2011 - closed restaurant in Ft. Thomas, Kentucky (Cincinnati market)

• December 2011 - closed restaurant in Columbus, Ohio

• May 2012 - closed restaurant in Cincinnati, Ohio

• May 2012 - closed restaurant in Elizabethtown, Kentucky (Louisville market)

• August 2012 - opened restaurant near Cincinnati, Ohio

One more new Frisch's Big Boy restaurant is expected to be added in Fiscal Year 2013, which is currently under construction and scheduled to open in February 2013 (Dayton market).

Gross Profit
The determination of gross profit is shown with operating percentages in the
following table. The table is intended to supplement the cost of sales
discussion that follows. Cost of sales is comprised of food and paper costs,
payroll and related costs, and other operating costs.
                       First Quarter
                       2013     2012

Sales                 100.0%   100.0%
Food and Paper         33.4%    34.0%
Payroll and Related    35.4%    35.7%
Other Operating Costs  21.6%    22.0%
Gross Profit            9.6%     8.3%

The cost of food moderated slightly during the First Quarter 2013. The decline in food and paper costs as a percentage of sales, as reflected in the above table, was also aided by menu price increases. Looking ahead, rising commodity costs for food can be expected, especially for beef and other proteins, driven primarily by the drought conditions that were experienced in the nation's corn belt during 2012.
Although the Company does not use financial instruments as a hedge against changes in commodity prices, purchase contracts for some commodities may contain provisions that limit the price the Company will pay. In addition, the effect of commodity price increases is actively managed with changes to the menu mix, together with periodic increase in menu prices.

Food safety poses a major risk to the Company. Management rigorously emphasizes and enforces established food safety policies in all of the Company's restaurants and in its commissary and food manufacturing plant. These policies are designed to work cooperatively with programs established by health agencies at all levels of governmental 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 be certified in ServSafe Training and are required to be re-certified every five years.
The decrease in payroll and related costs (as a percentage of sales) shown in the above table was driven primarily by the combination of higher menu prices charged to customers and the continuation of reductions in labor hours commensurate with lower customer counts.

The decrease in payroll and related cost percentages in the above table notwithstanding, payroll and related costs continue to be adversely affected by mandated increases in the minimum wage:
• In Ohio, where roughly two-thirds of the Company's payroll costs are incurred, the minimum wage for non-tipped employees was increased 33 percent from $5.15 per hour to $6.85 per hour beginning January 1, 2007. It was subsequently increased to $7.00 per hour on January 1, 2008, to $7.30 per hour on January 1, 2009 (there was no increase on January 1, 2010), to $7.40 per hour on January 1, 2011 and to $7.70 per hour on January 1, 2012. On January 1, 2013, the rate will increase to $7.85 per hour, which represents a 52 percent increase since 2007.

• The Ohio minimum wage for tipped employees increased 61 percent from $2.13 per hour to $3.43 per hour beginning January 1, 2007. It was subsequently increased to $3.50 per hour on January 1, 2008, to $3.65 per hour on January 1, 2009 (there was no increase on January 1, 2010), to $3.70 per hour on January 1, 2011 and to $3.85 per hour on January 1, 2012. On January 1, 2013, the rate will increase to $3.93 per hour, which represents an 85 percent increase since 2007.

• Federal minimum wage statutes currently apply to substantially all other (non-Ohio) employees. The federal minimum wage for non-tipped employees increased from $5.15 per hour to $5.85 per hour in July 2007. It was subsequently increased to $6.55 per hour in July 2008 and to $7.25 per hour in July 2009. The rate for tipped employees (non-Ohio) was not affected by the federal legislation, remaining at $2.13 per hour.

Although there is no seasonal fluctuation in employment levels, the number of hours worked by hourly paid employees has always been managed closely according to sales patterns in individual restaurants. However, the effects of paying the mandated higher hourly rates of pay have been and are continuing to be countered through the combination of reductions in the number of scheduled labor hours and higher menu prices charged to customers. Without the benefit of reductions in labor hours, the Ohio minimum wage increase on January 1, 2012 would have added an estimated $420,000 to annual payroll costs in Ohio restaurant operations. It is estimated that the increase on January 1, 2013 will add $320,000 to annual Ohio payrolls, which will be offset largely with further scheduled reductions in labor hours, as necessary.
Despite the savings that come from reductions in hours worked and higher menu prices charged to customers, other factors add to payroll and related costs. These factors include higher costs associated with benefit programs offered by the Company, including medical insurance premiums and pension related costs. Medical insurance premiums for 2012 calendar plan year are currently projected to be $8,550,000, which is 3.1 percent higher than the previous year. The Company has typically absorbed 80 percent of the cost for medical premiums, with employees contributing the remaining 20 percent. Management continues to analyze and evaluate health care reform legislation (the federal Patient Protection and Affordable Care Act, enacted March 2010) to determine the future short and long term effects upon the Company while developing various strategies to mitigate the expected financial burden of compliance. Among other responses, it is likely that employees will be contributing more than 20 percent of premium cost. Net periodic pension cost was $999,000 and $848,000 respectively, in the First Quarter Fiscal 2013 and the First Quarter Fiscal 2012 (pension cost in the First Quarter Fiscal 2012 included $142,000 charged to discontinued operations). Net periodic pension cost for Fiscal Year 2013 is currently expected to be in the range of $3,200,000 to $3,300,000. Net periodic pension cost for Fiscal Year 2012 was $2,746,000 ($487,000 charged to discontinued operations). Most of the anticipated increase in net periodic pension costs for Fiscal Year 2013 is due to the reduction of 100 basis points in the discount rate. Approximately $135,000 is added to annualized net periodic pension cost for each decrement of 25 basis points in the discount rate.
Other operating costs include occupancy costs such as maintenance, rent, depreciation, abandonment losses, property tax, insurance and utilities, plus costs relating to field supervision, accounting and payroll preparation costs, new restaurant opening costs and many other restaurant operating costs. As expenses charged to other operating costs tend to be more fixed in nature, the percentages shown in the above table can be greatly affected by changes in same store sales levels. In other words, percentages will generally rise when sales decrease and percentages will generally decrease when sales increase. The improved percentage is largely due to lower opening costs, lower costs for utilities and maintenance, together with the effect of closing inefficient, low volume restaurants.
Operating Profit
To arrive at the measure of operating profit, administrative and advertising expense is subtracted from gross profit, while the line item for franchise fees and other revenue is added to it. Gains and losses from the sale of real property (if any) are then respectively added or subtracted. Charges for impairment of assets (if any) are also subtracted from gross profit to arrive at the measure of operating profit.
Administrative and advertising expense decreased $87,000 in the First Quarter Fiscal 2013 when compared with the comparable period a year ago. Stock based compensation expense included in administrative and advertising expense was $239,000 during the First Quarter Fiscal 2013 versus $550,000 during the First Quarter Fiscal 2012. An unrestricted stock award in June 2011 to

the Chief Executive Officer that amounted to $371,000 was included in stock based compensation expense in the First Quarter Fiscal 2012 (see further discussion of stock based compensation expenses in the Financing Activities section of Liquidity and Capital Resources that appears elsewhere in this MD&A). Administrative and advertising expense in the First Quarter Fiscal 2013 also includes higher charges for the cost of employee separations.

Revenue from franchise fees is based upon sales volumes generated by Frisch's Big Boy restaurants that are licensed to other operators. The fees are based principally on percentages of sales and are recorded on the accrual method as earned. As of September 18, 2012, 25 Frisch's Big Boy restaurants were licensed to other operators and paying franchise fees to the Company. No licensed Frisch's Big Boy restaurants opened or closed during any of the periods presented in this MD&A. Other revenue also includes certain other fees earned from Frisch's Big Boy restaurants licensed to others along with minor amounts of rent and investment income.
Gains and losses from the sale of assets consist of transactions involving real property and sometimes may include restaurant equipment that is sold together with real property as a package when closed restaurants are sold. Gains and losses reported on this line do not include abandonment losses that routinely arise when certain equipment is replaced before it reaches the end of its expected life; abandonment losses are instead reported in other operating costs. The loss of $11,000 shown in the consolidated statement of earnings during the First Quarter Fiscal 2013 was from the August 2012 sale of one of the remaining Golden Corral restaurants.
Non-cash pretax impairment charges totaling $70,000 were recorded during the First Quarter Fiscal 2013 to lower previous estimates of the fair values of two former Frisch's Big Boy restaurants. The impairment charges were based on sales contracts that had been accepted by the Company. No impairment charges were recorded during the First Quarter Fiscal 2012. Interest Expense
Interest expense decreased $136,000 in the First Quarter Fiscal 2013 when compared with the comparable year ago period. The decrease is primarily the result of lower debt levels than a year ago. Income Tax Expense
Income tax expense as a percentage of pretax earnings was estimated at 32 percent for the First Quarter Fiscal 2013, up from 23 percent that was estimated for the First Quarter Fiscal 2012. The higher rate in the First Quarter of Fiscal 2013 is primarily due to changes in tax credits and deferred state taxes. The Internal Revenue Service is currently examining the Company's tax return for Fiscal Year 2011, which was filed in February 2012.

DISCONTINUED OPERATIONS
At the beginning of Fiscal Year 2012, the Company operated a second business segment, which consisted of 35 Golden Corral restaurants (Golden Corral) that were licensed to the Company by Golden Corral Corporation (GCC). Six of the Golden Corrals were closed in August 2011 (First Quarter Fiscal 2012) due to under performance, which resulted in a non-cash pretax asset impairment charge of $4,000,000. In May 2012, the remaining 29 Golden Corrals were sold to GCC. Results for Golden Corral for the First Quarter Fiscal 2012 are shown in the following table. Income tax expense as shown in the table in the First Quarter Fiscal 2013 represents adjustments to tax related balance sheet accounts.

                                                              First Quarter
                                                      2013                     2012
                                                             (in thousands)
Sales                                               $    -                  $ 30,367

Food and paper                                           -                    11,619
Payroll and related                                      -                     8,892
Other operating costs                                    -                     8,234
                                                         -                    28,745

Gross profit                                             -                     1,622

Administrative and advertising                           -                       927
Impairment of long-lived assets                          -                     4,000

Loss from discontinued operations before income tax      -                    (3,305 )

Income tax expense (benefit)                           158                      (571 )

Loss from discontinued operations, net of taxes     $ (158 )                $ (2,734 )

LIQUIDITY and CAPITAL RESOURCES
Sources of Funds
Food sales to restaurant customers provide the Company's principal source of cash. The funds from sales are immediately available for the Company's use, as substantially all sales to restaurant customers are received in currency or are settled by debit or credit cards. The primary source of cash provided by operating activities is net earnings plus depreciation and impairment of assets, if any. Other sources of cash may include borrowing against credit lines, proceeds received when stock options are exercised 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 renovation), capital stock repurchases and dividends. As of May 29, 2012, $42,000,000 of the proceeds from the May 2012 sale of 29 Golden Corral restaurants was invested in commercial paper. These funds were converted to cash on September 14, 2012 to fund a special dividend of $9.50 per share (see Financing Activities below). Also as of May 29, 2012, the sum of $3,118,000 (restricted cash) of the Golden Corral proceeds was being held by a third party intermediary in anticipation of completing qualifying like kind exchanges in order to defer taxable gains pursuant to Section 1031 of the Internal Revenue Code. In July and August 2012, all of the restricted cash was returned to the Company's treasury from the third party intermediary because suitable like kind exchanges could not be identified. Working Capital Practices
The Company has historically maintained a strategic negative working capital position, which is a common practice in the restaurant industry. As significant cash flows are consistently provided by operations and credit lines remain readily available, 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 shown in the following table.

Aggregated Information about Contractual Obligations and Commercial Commitments
September 18, 2012:
                                                        Payments due by period (in thousands)
                                                                                                              more
                                                                                                             than 5
                                   Total        year 1      year 2      year 3      year 4      year 5       years
     Long-Term Debt              $ 18,639     $  5,932     $ 4,466     $ 3,398     $ 2,189     $ 1,631     $  1,023
     Interest on Long-Term Debt
     (estimated)                    1,724          748         476         274         138          68           20
     Rent due under Capital
     Lease Obligations              2,582          276         276         276         276         212        1,266
 1   Rent due under Operating
     Leases                        14,534        1,053       1,063         887         843         855        9,833
 2   Purchase Obligations          13,935       12,855         926         154           -           -            -
 3   Other Long-Term Obligations      572          235         238          99           -           -            -
     Total Contractual Cash
     Obligations                 $ 51,986     $ 21,099     $ 7,445     $ 5,088     $ 3,446     $ 2,766     $ 12,142

1 Operating leases may include option periods yet to be exercised, when exercise is determined to be reasonably assured.

2 Primarily consists of commitments for certain food and beverage items, plus capital projects including commitments to purchase real property, if any. Does not include agreements that can be canceled without penalty.

3 Deferred compensation liability (undiscounted).

The working capital deficit was $9,081,000 as of September 18, 2012. Working capital at May 29, 2012 was $37,753,000, which included $42,000,000 in commercial paper (see Sources of Funds elsewhere in the Liquidity and Capital Resources section of this MD&A).
A financing package of unsecured credit facilities has been in place for many years with the same lending institution, currently styled (since April 2012) as the 2012 Loan Agreement. The following amounts are readily available to be borrowed before the 2012 Loan Agreement expires on October 15, 2013:
• Construction Loan - $15,000,000 currently available

• Revolving Loan - $5,000,000 currently available to fund temporary working capital

The Company is in full compliance with the covenants contained in the 2012 Loan Agreement.
Operating Activities
Net cash provided by continuing operations was $4,467,000 during the First Quarter Fiscal 2013, which compares with $6,178,000 in the First Quarter of Fiscal 2012. Normal changes in assets and liabilities such as prepaid expenses, inventories, accounts payable and accrued, prepaid and deferred income taxes, . . .