The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes for the fiscal year ended January 2, 2011 included in our annual report on Form 10-K.

In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the fiscal quarter ended March 27, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2012.

The following table summarizes revenues, income from operations and earnings before interest, taxes, depreciation, amortization and other, which is the measure by which management allocates resources to its segments and which we refer to as Segment Income, for each of our reportable segments.

The following table reconciles Total Segment Income to consolidated income before provision for income taxes.

The denominator in calculating diluted earnings per share for common stock for the first quarter of 2011 does not include 302,240 options to purchase common stock and the denominator used in calculating diluted earnings per share for common stock for the first quarter of 2010 does not include 3,055,272 options to purchase common stock, as the effect of including these options would have been anti-dilutive. The basic and diluted earnings per share amounts calculated, including unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents under the two-class method, are equivalent to the basic and diluted earnings per share amounts above for all periods presented.

The Company made no repurchases of its outstanding fixed rate notes in the first quarter of 2011. During the first quarter of 2010, the Company repurchased and retired $60.0 million in principal amount of its 5.261% Fixed Rate Series 2007-1 Senior Notes, Class A-2 (Class A-2 Notes). The total purchase price was approximately $54.0 million, which included approximately $0.2 million of accrued interest, resulting in pre-tax gains of approximately $6.1 million. These pre-tax gains were recorded in the "Other" line item in the Company's condensed consolidated statements of income. In connection with these transactions, the Company incurred approximately $0.6 million of expenses related to the write-off of deferred financing fees and prepayment of insurance fees during the first quarter of 2010, which were recorded in interest expense in the Company's condensed consolidated statements of income.

During the first quarter of 2011, the Company repurchased and retired 357,605 shares of common stock for a total of approximately $5.8 million under the Company's Board of Directors approved $200.0 million open market share repurchase program. As of March 27, 2011, the Company had approximately $91.5 million remaining for future share repurchases under this program. As of March 27, 2011, the Company had 61,696,272 shares of common stock outstanding.

During the first quarter of 2011, the Company reduced its liability for unrecognized tax benefits related to a state income tax matter by approximately $0.5 million. Approximately $0.3 million of the decrease was related to gross unrecognized tax benefits and approximately $0.2 million was related to interest and penalties. As a result, approximately $0.2 million was recognized as an income tax benefit and reduced the Company's effective tax rate in the first quarter of 2011.

During the first quarter of 2011, the Company sold 26 Company-owned stores to a current franchisee. In connection with the sale of these 26 stores, the Company recognized a pre-tax gain on the sale of the related assets of approximately $1.1 million, which was net of a reduction in goodwill of approximately $0.4 million. The gain was recorded in general and administrative expense in the Company's condensed consolidated statements of income. This transaction will not have a material ongoing impact on the Company's consolidated financial results.

Fair value measurements enable the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The fair values of the Company's cash equivalents and investments in marketable securities are based on quoted prices in active markets for identical assets. The following tables summarize the carrying amounts and fair values of certain assets at March 27, 2011 and January 2, 2011:

At March 27, 2011, management estimates that the approximate $1.31 billion in principal amount of outstanding Class A-2 Notes had a fair value of approximately $1.34 billion and the $76.1 million in principal amount of outstanding fixed rate subordinated notes had a fair value of approximately $78.0 million. The Company determined the estimated fair value amounts by using available market information. The Company obtained broker quotes from three separate brokerage firms that are knowledgeable about the Company's fixed rate notes, and at times, trade these notes. Further, the Company performs its own internal analysis based on the information it gathers from public markets, including information on notes that are similar to that of the Company. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the fair value estimates presented herein are not necessarily indicative of the amount that the Company or the debtholders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value.