10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

Form 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended July 3, 2011

or

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

For the transition period from to .

Commission file number: 0-25123

P.F. Chang’s China Bistro, Inc.

(Exact name of registrant as specified in its charter)

Delaware	86-0815086
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
7676 East Pinnacle Peak Road	85255
Scottsdale, Arizona	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code:

(480) 888-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

As of July 3, 2011, there were 22,340,166 outstanding shares of the registrant’s Common Stock.

EXPLANATORY NOTE

P.F. Chang's China Bistro, Inc. is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the period ended July 3, 2011, filed with the Securities and Exchange Commission on July 27, 2011 (the “Form 10-Q”), for the sole purpose to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

No other changes have been made to the Form 10-Q. This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the Form 10-Q.

In accordance with Rule 406T of Regulation S-T, the interactive data files includes Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Item 6.Exhibits

Exhibit
Number	Description Document
3(i)(1)*	Amended and Restated Certificate of Incorporation.
3(ii)(2)*	Amended and Restated Bylaws.
4.1(3)*	Specimen Common Stock Certificate.
4.2(3)*	Amended and Restated Registration Rights Agreement dated May 1, 1997.
†10.25(4)*	Amended and Restated 2006 Equity Incentive Plan.
†10.39(4)*	Executive Employment Agreement between the Company and Lane Cardwell, dated April 20, 2011.
†10.40(4)*	Executive Employment Agreement between the Company and Kevin Charles (KC) Moylan, dated April 20, 2011.
31.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Richard L. Federico.
31.2*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford.
32.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Richard L. Federico.
32.2*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Mark D. Mumford.
101	The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets at July 3, 2011 and January 2, 2011, (ii) Consolidated Statements of Income for the three and six months ended July 3, 2011 and July 4, 2010, (iii) Consolidated Statements of Equity for the six months ended July 3, 2011 and July 4, 2010, (iv) Consolidated Statements of Cash Flows for the six months ended July 3, 2011 and July 4, 2010; and (v) Notes to Unaudited Consolidated Financial Statements, tagged as blocks of text. The information in Exhibit 101 is “furnished” and not “filed,” as provided in Rule 402 of Regulation S-T.
*	These exhibits were previously included in the Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2011, filed with the Securities and Exchange Commission on July 27, 2011.

SIGNATURES

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, on August 22, 2011.

P.F. CHANG’S CHINA BISTRO, INC.
By:	/s/ RICHARD L. FEDERICO
	Richard L. Federico
	Chairman and Co-Chief Executive Officer
By:	/s/ MARK D. MUMFORD
	Mark D. Mumford
	Chief Financial Officer

Date: August 22, 2011

XML



Consolidated Balance Sheets (Parenthetical) (USD $)	Jul. 03, 2011	Jan. 02, 2011
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued and outstanding	22,340,166	22,833,165
Treasury stock, shares	6,530,763	5,973,623

XML



Consolidated Statements of Income (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jul. 03, 2011	Jul. 04, 2010	Jul. 03, 2011	Jul. 04, 2010
Revenues:
Restaurant sales	$ 309,641	$ 311,502	$ 625,945	$ 621,744
Restaurant licensing	649	1,108	1,333	1,237
Retail licensing	724	228	1,105	228
Total revenues	311,014	312,838	628,383	623,209
Costs and expenses:
Cost of sales	82,175	81,717	165,497	165,730
Labor	105,321	102,295	211,785	206,770
Operating	52,471	51,597	106,278	104,350
Occupancy	18,681	18,609	37,106	36,447
General and administrative	19,164	19,765	39,444	38,818
Depreciation and amortization	20,780	19,335	40,478	38,336
Preopening expense	213	832	611	965
Partner investment expense	(50)	(135)	(176)	(124)
Total costs and expenses	298,755	294,015	601,023	591,292
Income from operations	12,259	18,823	27,360	31,917
Interest and other income (expense), net	128	(665)	332	(1,080)
Income from continuing operations before taxes	12,387	18,158	27,692	30,837
Provision for income taxes	(3,143)	(5,144)	(7,698)	(8,932)
Income from continuing operations, net of tax	9,244	13,014	19,994	21,905
Income (loss) from discontinued operations, net of tax	(32)	0	(29)	6
Net income	9,212	13,014	19,965	21,911
Less net income attributable to noncontrolling interests	120	241	277	447
Net income attributable to PFCB	9,092	12,773	19,688	21,464
Basic income per share:
Income from continuing operations attributable to PFCB common stockholders	$ 0.41	$ 0.56	$ 0.88	$ 0.94
Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net income attributable to PFCB common stockholders	$ 0.41	$ 0.56	$ 0.88	$ 0.94
Diluted income per share:
Income from continuing operations attributable to PFCB common stockholders	$ 0.4	$ 0.55	$ 0.87	$ 0.93
Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net income attributable to PFCB common stockholders	$ 0.4	$ 0.55	$ 0.87	$ 0.93
Weighted average shares used in computation:
Basic	22,249	22,828	22,386	22,730
Diluted	22,581	23,277	22,741	23,190
Cash dividends declared per share	$ 0.25	$ 0.25	$ 0.46	$ 0.42
Amounts attributable to PFCB:
Income from continuing operations, net of tax	9,124	12,773	19,717	21,458
Income (loss) from discontinued operations, net of tax	(32)	0	(29)	6
Net income attributable to PFCB	$ 9,092	$ 12,773	$ 19,688	$ 21,464

XML



Document and Entity Information	6 Months Ended
	Jul. 03, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	P F CHANGS CHINA BISTRO INC
Entity Central Index Key	0001039889
Current Fiscal Year End Date	--01-01
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jul. 03, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding	22,340,166

XML



Accrued Expenses

6 Months Ended

Jul. 03, 2011

Accrued Expenses [Abstract]

Accrued Expenses

6. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	July 3, 2011		January 2, 2011
Accrued insurance	$	19,532	$	17,909
Accrued payroll	16,937		24,748
Performance units(1)	5,534		—
Sales and use tax payable	5,086		7,138
Property tax payable	3,608		3,739
Accrued rent	2,676		3,749
Other accrued expenses	14,479		14,431
Total accrued expenses	$	67,852	$	71,714

(1) Performance units were classified in other liabilities at January 2, 2011. See Note 10 for additional discussion.

XML



Segment Reporting

6 Months Ended

Jul. 03, 2011

Segment Reporting [Abstract]

Segment Reporting

11. Segment Reporting

The Company operates primarily in the United States food-service industry and has determined that its reportable segments are those that are based on the Company's methods of internal reporting and management structure. The Company's reportable segments are Bistro and Pei Wei. Additionally, revenues related to Bistro restaurants operated by business partners pursuant to development and licensing agreements and licensing fees related to a premium line of frozen entrées operated under a licensing agreement are both reported within Shared Services and Other. There were no material transactions among reportable segments.

The following table presents information about reportable segments (in thousands):

	Total		Shared Services and Other		Bistro		Pei Wei
For the Three Months Ended July 3, 2011:
Revenues	$	311,014	$	1,373	$	231,226	$	78,415
Segment profit	31,466		703		25,839		4,924
Capital expenditures	9,982		258		7,349		2,375
Depreciation and amortization	20,780		670		14,550		5,560
For the Three Months Ended July 4, 2010:
Revenues	$	312,838	$	1,336	$	233,365	$	78,137
Segment profit	39,044		806		30,109		8,129
Capital expenditures	11,564		1,193		8,397		1,974
Depreciation and amortization	19,335		530		14,043		4,762
For the Six Months Ended July 3, 2011:
Revenues	$	628,383	$	2,438	$	467,008	$	158,937
Segment profit	66,962		1,221		54,176		11,565
Capital expenditures	16,615		874		10,503		5,238
Depreciation and amortization	40,478		1,217		28,934		10,327
For the Six Months Ended July 4, 2010:
Revenues	$	623,209	$	1,465	$	464,132	$	157,612
Segment profit	71,129		435		54,862		15,832
Capital expenditures	18,305		1,642		13,660		3,003
Depreciation and amortization	38,336		1,030		27,897		9,409
As of July 3, 2011:
Total assets	$	594,551	$	23,327	$	478,984	$	92,240
Goodwill	6,819		—		6,566		253
As of January 2, 2011:
Total assets	$	634,689	$	21,195	$	515,927	$	97,567
Goodwill	6,819		—		6,566		253

In addition to using consolidated results in evaluating the Company's financial results, a primary measure used by executive management in assessing the performance of existing restaurant concepts is segment profitability (sometimes referred to as restaurant operating income). Segment profitability is defined as income from operations before general and administrative, preopening and partner investment expenses, but including a deduction for net income attributable to noncontrolling interests. Because preopening and partner investment expenses are associated with expansion of the Company's business and vary in timing and magnitude, they make an accurate assessment of ongoing operations more difficult and are therefore excluded. Additionally, general and administrative expenses are only included in the Company's consolidated financial results as they are generally not specifically identifiable to individual business units as these costs relate to support of both restaurant businesses and the extension of the Company's brands into international markets and retail products. As the Company's expansion is funded entirely from its ongoing restaurant operations, segment profitability is one consideration when determining whether and when to open additional restaurants.The non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the table below for a reconciliation of segment profit to the most directly comparable GAAP measure, income from continuing operations before taxes.

Reconciliation of Segment profit to Income from continuing operations before taxes (in thousands):

	For the Three Months Ended						For the Six Months Ended
	July 3, 2011			July 4, 2010			July 3, 2011			July 4, 2010
Segment profit	$	31,466		$	39,044		$	66,962		$	71,129
Less general and administrative	(19,164		)	(19,765		)	(39,444		)	(38,818		)
Less preopening expense	(213		)	(832		)	(611		)	(965		)
Less partner investment expense	50			135			176			124
Less interest and other income (expense), net	128			(665		)	332			(1,080		)
Add net income attributable to noncontrolling interests	120			241			277			447
Income from continuing operations before taxes	$	12,387		$	18,158		$	27,692		$	30,837

XML



Discontinued Operations

6 Months Ended

Jul. 03, 2011

Discontinued Operations [Abstract]

Discontinued Operations

2. Discontinued Operations

Income (loss) from discontinued operations, net of tax is comprised of the following (in thousands):

	Three Months Ended					Six Months Ended
	July 3, 2011			July 4, 2010		July 3, 2011			July 4, 2010
Income (loss) from discontinued operations before income taxes	$	(52	)	$	—	$	(47	)	$	10
Income tax (expense) benefit	20			—		18			(4		)
Income (loss) from discontinued operations, net of tax	$	(32	)	$	—	$	(29	)	$	6

As of the date of this 10-Q, lease termination agreements for seven and sublease agreements for two of the ten closed locations have been executed. The Company continues to pursue a potential sub-tenant agreement for the remaining closed location.

XML



Other Liabilities

6 Months Ended

Jul. 03, 2011

Other Liabilities [Abstract]

Other Liabilities

8. Other Liabilities

Other liabilities consist of the following (in thousands):

	July 3, 2011		January 2, 2011
Restoration Plan liabilities	$	6,984	$	5,517
Cash-settled awards	5,271		4,562
Deferred income tax liability	1,119		6,378
Performance units(1)	—		5,763
Other	2,420		2,533
Total other liabilities	$	15,794	$	24,753

(1) Performance units were classified in accrued expenses at July 3, 2011.

XML



Subsequent Events

6 Months Ended

Jul. 03, 2011

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

Cash Dividends

Based on the Board of Directors' authorization, on July 27, 2011 the Company announced a cash dividend of $0.25 per share which will be paid August 22, 2011 to all shareholders of record at the close of business on August 8, 2011. Based on shares outstanding at July 3, 2011, the total dividend payment will approximate $5.6 million during the third quarter of fiscal 2011.

Beginning with the second quarter of fiscal 2011, the Company's Board of Directors approved a quarterly fixed cash dividend which is currently set at $0.25 per share. In prior quarters, cash dividends were variable and calculated based on 45% of the Company's quarterly net income.

XML



Fair Value Measurements

6 Months Ended

Jul. 03, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

9. Fair Value Measurements

The Company's financial assets and financial liabilities measured at fair value at July 3, 2011 and January 2, 2011 are summarized below (in thousands):

	July 3,			Quoted Prices in Active Markets for Identical Assets/Liabilities		Significant Other Observable Inputs			Significant Unobservable Inputs		Valuation
	2011			(Level 1)		(Level 2)			(Level 3)		Technique
Money markets	$	59,330		$	—	$	59,330		$	—	market approach
Restoration Plan investments	6,393			—		6,393			—		market approach
Restoration Plan liabilities	(6,984		)	—		(6,984		)	—		market approach
Total	$	58,739		$	—	$	58,739		$	—

	January 2,			Quoted Prices in Active Markets for Identical Assets/Liabilities		Significant Other Observable Inputs			Significant Unobservable Inputs		Valuation
	2011			(Level 1)		(Level 2)			(Level 3)		Technique
Money markets	$	63,990		$	—	$	63,990		$	—	market approach
Restoration Plan investments	5,087			—		5,087			—		market approach
Restoration Plan liabilities	(5,517		)	—		(5,517		)	—		market approach
Total	$	63,560		$	—	$	63,560		$	—

The Company invests excess cash in money market funds and reflects these amounts within cash and cash equivalents in the consolidated balance sheets at a net value of 1:1 for each dollar invested. Money market investments held by the Company were invested primarily in government-backed securities at July 3, 2011.

The Company's Restoration Plan investments are considered trading securities and are reported at fair value based on third-party broker statements. Such amounts are reflected within other assets in the consolidated balance sheets. The realized and unrealized holding gains and losses related to these investments are recorded in interest and other income (expense), net in the consolidated statements of income.

The Company's Restoration Plan liabilities reflect Plan participants' contributions to the Plan invested in trading securities and reported at fair value based on third-party broker statements. Such amounts are reflected within other liabilities in the consolidated balance sheets. The Plan participants' realized and unrealized holding gains and losses on their Restoration Plan investments are considered compensation expense and are recorded in general and administrative expense in the consolidated statements of income.

There were no transfers between Level 1 and Level 2 measurements in the fair value hierarchy during the three and six months ended July 3, 2011.

XML



Long-Term Debt

6 Months Ended

Jul. 03, 2011

Long-term Debt, Unclassified [Abstract]

Long-Term Debt

7. Long-Term Debt

Credit Facility

The senior credit facility (“Credit Facility”) allows for borrowings of up to $75.0 million and expires on August 30, 2013. The Credit Facility contains customary representations, warranties, negative and affirmative covenants, including a requirement to maintain a maximum leverage ratio, as defined, of 2.5:1 and a minimum fixed charge coverage ratio, as defined, of 1.25:1, as well as customary events of default and certain default provisions that could result in acceleration of the Credit Facility.

The Credit Facility is guaranteed by the Company's material existing and future domestic subsidiaries. As of July 3, 2011, the Company had $17.2 million committed for the issuance of letters of credit, which are required by insurance companies for the Company's workers' compensation and general liability insurance programs. Available borrowings under the Credit Facility were $57.8 million at July 3, 2011.

XML



Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jul. 03, 2011	Jul. 04, 2010
Net income	$ 19,965	$ 21,911
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,478	38,336
Share-based compensation	2,564	5,610
Partner investment expense	(176)	(124)
Partner bonus expense, imputed	112	213
Deferred income taxes	(5,330)	(4,555)
Tax benefit from share-based compensation	(197)	(1,870)
Other	62	170
Changes in operating assets and liabilities:
Inventories	(589)	(206)
Other current assets	9,138	2,907
Other assets	(1,520)	(484)
Accounts payable	(2,441)	(1,122)
Accrued expenses	(9,398)	(14,801)
Unearned revenue	(9,855)	(9,320)
Lease obligations	(3,274)	293
Other liabilities	1,052	821
Net cash provided by operating activities	40,591	37,779
Investing Activities:
Capital expenditures	(16,615)	(18,305)
Receivable under loan facility (Note 12)	(1,157)	(1,814)
Capitalized interest	(35)	(53)
Net cash used in investing activities	(17,807)	(20,172)
Financing Activities:
Payments of cash dividends	(11,364)	(3,945)
Purchases of treasury stock	(23,659)	(11,141)
Proceeds from net share issuances	2,273	12,813
Purchases of noncontrolling interests, net of tax benefit	(1,953)	(590)
Distributions to noncontrolling interest partners	(434)	(726)
Tax benefit from share-based compensation	197	1,870
Payments of capital lease obligations	(105)	(97)
Repayments of long-term debt	0	(41,042)
Contributions from noncontrolling interest partners	0	10
Net cash used in financing activities	(35,045)	(42,848)
Net decrease in cash and cash equivalents	(12,261)	(25,241)
Cash and cash equivalents at the beginning of the period	71,452	63,499
Cash and cash equivalents at the end of the period	59,191	38,258
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes, net of refunds	10,357	16,909
Cash paid for interest	$ 343	$ 1,353

XML



Income from Continuing Operations Attributable to PFCB per Share

6 Months Ended

Jul. 03, 2011

Income from Continuing Operations Attributable to PFCB per Share [Abstract]

Income from Continuing Operations Attributable to PFCB per Share

3. Income from Continuing Operations Attributable to PFCB per Share

Basic income from continuing operations attributable to PFCB per share is computed based on the weighted average number of common shares outstanding during the period. Diluted income from continuing operations attributable to PFCB per share is computed based on the weighted average number of shares of common stock and potentially dilutive securities, which includes options, restricted stock and restricted stock units (“RSUs”) outstanding under the Company's equity plans and employee stock purchase plan. For both the three months ended July 3, 2011 and July 4, 2010, 1.0 million of the Company's options were excluded from the calculation due to their anti-dilutive effect. For the six months ended July 3, 2011 and July 4, 2010, 1.0 million and 1.2 million, respectively, of the Company's shares were excluded from the calculation due to their anti-dilutive effect.

The Company began paying quarterly cash dividends to its shareholders during the second quarter of fiscal 2010. The Company's restricted stock awards are considered participating securities as the awards include non-forfeitable rights to dividends with respect to unvested shares and, as such, must be included in the computation of earnings per share pursuant to the two-class method.  Under the two-class method, a portion of net income is allocated to participating securities, and therefore is excluded from the calculation of earnings per share allocated to common shares. For the three and six months ended July 3, 2011 and July 4, 2010, the calculation of basic and diluted earnings per share pursuant to the two-class method resulted in an immaterial difference from the amounts displayed in the consolidated statements of income.

XML



Other Current Assets

6 Months Ended

Jul. 03, 2011

4. Other Current Assets [Abstract]

Other Current Assets

4. Other Current Assets

Other current assets consist of the following (in thousands):

	July 3, 2011		January 2, 2011
Current portion of deferred tax asset	$	11,819	$	11,774
Income taxes receivable	8,009		10,427
Prepaid rent	5,873		5,730
Receivables	5,527		14,300
Other	6,489		4,382
Total other current assets	$	37,717	$	46,613

XML



Commitments and Contingencies

6 Months Ended

Jul. 03, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Litigation and Other

In addition to commitments and obligations in the ordinary course of business, the Company is subject to various claims and legal actions arising out of the normal conduct of business, including commercial and employment matters. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures.  The amount of ultimate loss may differ from these estimates.  The Company is also currently under examination by various taxing authorities for years not closed by the statute of limitations. Although the Company currently believes that the ultimate outcome of these matters will not have a material adverse effect on the results of operations, liquidity or financial position of the Company, it is possible that the results of operations, liquidity, or financial position of the Company could be materially affected in any particular future reporting period by the unfavorable resolution of one or more of these contingencies.

Loan Facility

During 2009, the Company entered into an agreement with FRC Balance LLC ("FRC"), d/b/a True Food Kitchen, to provide debt capital for the early-stage development of True Food Kitchen restaurants. The agreement provides for a $10.0 million loan facility to develop True Food Kitchen restaurants and can, under certain conditions, be converted by the Company into a majority equity position in FRC. As of July 3, 2011, the Company had advanced $6.4 million under the loan facility to fund construction of three new restaurants which opened during fiscal 2011 and 2010.

XML



Other Assets

6 Months Ended

Jul. 03, 2011

Other Assets [Abstract]

Other Assets

5. Other Assets

Other assets consist of the following (in thousands):

	July 3, 2011		January 2, 2011
Liquor licenses, net	$	6,622	$	6,707
Restoration Plan investments	6,393		5,087
Receivable under loan facility(1)	6,350		5,193
Software, net	6,025		6,007
Deposits	1,789		1,305
Other assets, net	533		538
Total other assets	$	27,712	$	24,837

(1) See Note 12 for further details on the receivable under the loan facility.

XML



Consolidated Statements of Equity (USD $) In Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss	Retained Earnings [Member]	Noncontrolling Interest [Member]
Balances at Jan. 03, 2010	$ 340,310	$ 28	$ 217,181	$ (146,022)	$ (294)	$ 264,456	$ 4,961
Balances, shares at Jan. 03, 2010		22,911
Issuance of common stock under stock option plans, shares		436
Issuance of common stock under stock option plans	11,284	0	11,284	0	0	0	0
Issuance of common stock under employee stock purchase plan, shares		41
Issuance of common stock under employee stock purchase plan	1,586	0	1,586	0	0	0	0
Shares withheld for taxes on restricted stock, net of forfeitures, shares		(23)
Shares withheld for taxes on restricted stock, net of forfeitures	(57)	0	(57)	0	0	0	0
Purchases of treasury stock, shares		(252)
Purchases of treasury stock	(11,141)	(5)	0	(11,136)	0	0	0
Share-based compensation expense	2,684	0	2,684	0	0	0	0
Tax benefit from share-based compensation, net	1,784	0	1,784	0	0	0	0
Unrealized gain on derivatives	294	0	0	0	294	0	0
Distributions to noncontrolling interest partners	(726)	0	0	0	0	0	(726)
Contributions from noncontrolling interest partners	10	0	0	0	0	0	10
Purchases of noncontrolling interests, net of tax benefit	(590)	0	(259)	0	0	0	(331)
Partner investment expense	(124)	0	0	0	0	0	(124)
Partner bonus expense, imputed	213	0	0	0	0	0	213
Cash dividends paid	(3,945)		6	0	0	(3,951)	0
Net income	21,911		0	0	0	21,464	447
Balances at Jul. 04, 2010	363,493	23	234,209	(157,158)	0	281,969	4,450
Balances, shares at Jul. 04, 2010		23,113
Balances at Jan. 02, 2011	362,443	23	250,019	(187,112)	0	296,564	2,949
Balances, shares at Jan. 02, 2011		22,833
Issuance of common stock under stock option plans, shares		30
Issuance of common stock under stock option plans	734	0	734	0	0	0	0
Issuance of common stock under employee stock purchase plan, shares		38
Issuance of common stock under employee stock purchase plan	1,553	0	1,553	0	0	0	0
Shares withheld for taxes on restricted stock, net of forfeitures, shares		(4)
Shares withheld for taxes on restricted stock, net of forfeitures	(14)		(14)
Purchases of treasury stock, shares		(557)
Purchases of treasury stock	(23,659)	(1)	0	(23,658)	0	0	0
Share-based compensation expense	2,086	0	2,086	0	0	0	0
Tax benefit from share-based compensation, net	171	0	171	0	0	0	0
Distributions to noncontrolling interest partners	(434)	0	0	0	0	0	(434)
Purchases of noncontrolling interests, net of tax benefit	(1,953)	0	(1,219)	0	0	0	(734)
Partner investment expense	(176)	0	0	0	0	0	(176)
Partner bonus expense, imputed	112	0	0	0	0	0	112
Cash dividends paid	(11,364)		18	0	0	(11,382)	0
Net income	19,965		0	0	0	19,688	277
Balances at Jul. 03, 2011	$ 349,464	$ 22	$ 253,348	$ (210,770)	$ 0	$ 304,870	$ 1,994
Balances, shares at Jul. 03, 2011		22,340

XML



Business and Basis of Presentation

6 Months Ended

Jul. 03, 2011

Business and Basis of Presentation [Abstract]

Business and Basis of Presentation

1. Business and Basis of Presentation

As of July 3, 2011, P.F. Chang's China Bistro, Inc. (the “Company” or “PFCB”) owned and operated 201 full service restaurants under the name P.F. Chang's China Bistro (the “Bistro”) and 173 quick casual restaurants under the name Pei Wei Asian Diner (“Pei Wei”) throughout the United States. There are also ten Bistro restaurants in Mexico and the Middle East, all operated under development and licensing agreements, and two Bistro locations in Hawaii which are operated under a joint venture arrangement in which the Company owns a noncontrolling interest. Through an exclusive licensing agreement with Unilever, a premium line of P.F Chang's branded frozen Asian-style entrées is available in numerous retail outlets throughout the U.S.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended July 3, 2011 are not necessarily indicative of the results that may be expected for the year ending January 1, 2012.

The consolidated balance sheet at January 2, 2011 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2011.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Principles of Consolidation and Presentation

The Company's consolidated financial statements include the accounts and operations of the Company and its majority-owned subsidiaries. All material balances and transactions between the consolidated entities have been eliminated. Noncontrolling interests are reported below net income under the heading “Net income attributable to noncontrolling interests” in the consolidated statements of income and shown as a component of equity in the consolidated balance sheets.

Revenues

Revenues consist of restaurant sales, restaurant licensing revenues and retail licensing revenues. Restaurant sales represent food, beverage and alcohol sales at the Company's owned restaurants. Restaurant licensing revenues include initial territory fees, store opening fees and ongoing royalty fees based on a percentage of restaurant sales from all licensed restaurants and two restaurants operated under a joint venture arrangement. Retail licensing revenues include ongoing royalty fees based on a percentage of licensed retail product sales.

Recent Accounting Literature

Improving Disclosures about Fair Value Measurements (Accounting Standards Update ("ASU") No. 2010-06)

(Included in ASC 820 “Fair Value Measurement”)

ASU No. 2010-06 requires new disclosures regarding recurring or nonrecurring fair value measurements. Entities are required to separately disclose significant transfers into and out of Level 1 and Level 2 measurements in the fair value hierarchy and describe the reasons for the transfers. Entities are required to provide information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. In addition, entities must provide fair value measurement disclosures for each class of assets and liabilities, and disclosures about the valuation techniques used in determining fair value for Level 2 or Level 3 measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the gross basis reconciliation for the Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU No. 2010-06 did not have a material impact on the Company's consolidated financial statements.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU No. 2011-04)

(Included in ASC 820 “Fair Value Measurement”)

ASU No. 2011-04 amends existing guidance to provide common fair value measurements and related disclosure requirements between GAAP and International Financial Reporting Standards (“IFRS”). Additional disclosure requirements in the amendment include: (1) for Level 3 fair value measurements, a description of the valuation processes used by the entity and a discussion of the sensitivity of the fair value measurements to changes in unobservable inputs; (2) discussion of the use of a nonfinancial asset that differs from the asset's highest and best use; and (3) the level of the fair value hierarchy of financial instruments for items that are not measured at fair value but disclosure of fair value is required. ASU No. 2011-04 is effective for interim and annual periods beginning after December 15, 2011 with early adoption not permitted. The Company will adopt ASU No. 2011-04 in fiscal 2012. The Company is currently evaluating the impact ASU No. 2011-04 will have on its consolidated financial statements.

Presentation of Comprehensive Income (ASU No. 2011-05)

(Included in ASC 220 “Comprehensive Income”)

ASU No. 2011-05 amends existing guidance to allow only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous statement of comprehensive income or (2) in two separate but consecutive financial statements consisting of an income statement followed by a statement of other comprehensive income. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with early adoption permitted. The Company will adopt ASU No. 2011-05 in fiscal 2012 and does not anticipate any material impact on the Company's consolidated financial statements.

XML



Share-Based Compensation

6 Months Ended

Jul. 03, 2011

Share-based Compensation [Abstract]

Share-Based Compensation

10. Share-Based Compensation

The Company has granted equity-classified awards in the form of stock options, restricted stock and restricted stock units (“RSUs”) and liability-classified awards in the form of performance units, cash-settled stock appreciation rights (“SARs”) and cash-settled stock-based awards (restricted cash units or “RCUs”) to certain employees and directors.

Equity-Classified Awards

Stock options were granted for a fixed number of shares with an exercise price equal to or greater than the fair value of the shares at the date of grant. Restricted stock and RSUs were granted with the fair value determined based on the Company's closing stock price on the date of grant. Share-based compensation expense for equity-classified awards is amortized to expense over the vesting period. During the first half of fiscal 2011, the Company issued RSUs to members of its Board of Directors.

Liability-Classified Awards

Performance Units

During fiscal 2009, the Company awarded 600,000 performance units to each of the Company’s Co-Chief Executive Officers pursuant to the Company’s 2006 Equity Incentive Plan. Each award will vest on January 1, 2012, at which time the value of such awards, if any, will be determined and paid in cash.

The cash value of the performance units will be equal to the amount, if any, by which the Company's final average stock price as defined in the agreements, exceeds the strike price. The total value of the performance units was originally subject to a maximum value of $12.50 per unit. During December 2010, the outstanding performance unit award associated with one of the Co-Chief Executive Officers was modified such that the maximum value per unit was reduced to $9.00 per unit. All other terms remain the same as specified in the original award agreement. The fair value of the performance units is remeasured at each reporting period until the awards are settled. At July 3, 2011 and January 2, 2011, the fair value of the performance units with a maximum value of $12.50 per unit was $6.11 and $8.30 per unit, respectively. At July 3, 2011 and January 2, 2011, the fair value of the performance units with a maximum value of $9.00 per unit was $5.05 and $6.41 per unit, respectively. The fair value is calculated using a Monte-Carlo simulation model which incorporates the historical performance, volatility and correlation of the Company's stock price and the Russell 2000 Index. At July 3, 2011 and January 2, 2011, the performance unit liability was reflected in the consolidated balance sheets as $5.5 million of accrued expenses and $5.8 million of other liabilities, respectively.

Total cumulative expense recognized for the performance units from date of grant through July 3, 2011 was $5.5 million based on the current estimated fair values of $6.11 and $5.05 per unit. The amount and timing of the recognition of additional expense or benefit, if any, will be dependent on the estimated fair value at each quarterly reporting date. Any changes in fair value may not occur ratably over the remaining two quarters of the award term; therefore, share-based compensation expense related to the performance units could vary significantly in future periods.

Cash-Settled Awards

The cash value of SARs will be based on the appreciation, if any, of the Company's stock price on the date of settlement. The cash value of RCUs will be based on the Company's stock price on the date of settlement. The fair value of SARs and RCUs is remeasured at each reporting period until the awards are settled. The fair value of SARs is equal to the value calculated per the Black-Scholes model and the fair value of RCUs is equal to the sum of the value calculated per the Black-Scholes model and the Company's stock price at the reporting date. At July 3, 2011 and January 2, 2011, the recorded liability of cash-settled awards, reflected in other liabilities in the consolidated balance sheets, was $5.3 million and $4.6 million, respectively. There were no SARs or RCUs granted during the six months ended July 3, 2011.

The fair value of the SARs and RCUs was estimated using a Black-Scholes option pricing model with the following weighted average assumptions:

	Three and Six Months Ended July 3, 2011				Three and Six Months Ended July 4, 2010
	RCUs		SARs		RCUs		SARs
Weighted average risk-free interest rate	0.4	%	1.0	%	0.8	%	1.4	%
Expected life of cash-settled awards (years)	1.5		3.1		2.6		4.1
Expected stock volatility	32.6	%	41.8	%	50.6	%	45.2	%
Expected dividend yield(1)	0.0	%	0.0	%	0.0	%	0.0	%

(1) Unvested SARs and RCUs are eligible to receive dividend-equivalents in the form of cash or additional awards during the vesting period, and as such, no expected dividend yield is included in the fair value assumptions for these awards.

Share-based compensation expense for performance units, SARs and RCUs is recognized over the service period with the impact of updated fair values recognized as cumulative adjustments to share-based compensation expense at the end of each reporting period.

Share-Based Compensation Expense

Share-based compensation expense for equity and liability-classified awards is classified as follows (in thousands):

	Three Months Ended						Six Months Ended
	July 3, 2011			July 4, 2010			July 3, 2011			July 4, 2010
Equity-classified awards:
Labor	$	—		$	32		$	—		$	77
General and administrative	1,082			1,504			2,091			2,607
Liability-classified awards:
General and administrative	(123		)	1,140			600			2,957
Total share-based compensation (1)	959			2,676			2,691			5,641
Less tax benefit	(246		)	(768		)	(756		)	(1,658		)
Total share-based compensation, net of tax	$	713		$	1,908		$	1,935		$	3,983

(1) Share-based compensation expense includes expense related to the cash payment of dividend equivalent units on unvested RCUs and expense related to the payment of cash dividends on unvested restricted stock awards that are not expected to ultimately vest.

Unvested Share-Based Compensation Expense

At July 3, 2011, unvested share-based compensation expense for equity-classified awards, net of forfeitures, totaled $0.6 million for stock options and $1.1 million for restricted stock and RSUs. This expense will be recognized over the remaining weighted average vesting period which is approximately 1.0 years for stock options and 0.6 years for restricted stock and RSUs.

At July 3, 2011, unvested share-based compensation expense for liability-classified awards totaled $1.2 million for performance units and $4.7 million for RCUs and SARs. This expense will be recognized over the remaining weighted average vesting period which is approximately 0.5 years for performance units and 1.7 years for RCUs and SARs.

XML



Consolidated Balance Sheets (USD $) In Thousands	Jul. 03, 2011	Jan. 02, 2011
Current assets:
Cash and cash equivalents	$ 59,191	$ 71,452
Inventories	6,131	5,542
Other current assets	37,717	46,613
Total current assets	103,039	123,607
Property and equipment, net	438,173	459,469
Goodwill	6,819	6,819
Intangible assets, net	18,808	19,957
Other assets	27,712	24,837
Total assets	594,551	634,689
Current liabilities:
Accounts payable	18,170	20,611
Construction payable	2,876	1,562
Accrued expenses	67,852	71,714
Unearned revenue	28,516	38,371
Current portion of long-term debt	63	63
Total current liabilities	117,477	132,321
Lease obligations	110,598	113,977
Long-term debt	1,218	1,195
Other liabilities	15,794	24,753
Total liabilities	245,087	272,246
Commitments and contingencies (Note 12)	0	0
PFCB common stockholders’ equity:
Common stock, $0.001 par value, 40,000,000 shares authorized: 22,340,166 shares and 22,833,165 shares issued and outstanding at July 3, 2011 and January 2, 2011, respectively	22	23
Additional paid-in capital	253,348	250,019
Treasury stock, at cost, 6,530,763 shares and 5,973,623 shares at July 3, 2011 and January 2, 2011, respectively	(210,770)	(187,112)
Retained earnings	304,870	296,564
Total PFCB common stockholders’ equity	347,470	359,494
Noncontrolling interests	1,994	2,949
Total equity	349,464	362,443
Total liabilities and equity	$ 594,551	$ 634,689