0001039889-12-000005.txt : 20120217 0001039889-12-000005.hdr.sgml : 20120217 20120217123735 ACCESSION NUMBER: 0001039889-12-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20120216 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120217 DATE AS OF CHANGE: 20120217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: P F CHANGS CHINA BISTRO INC CENTRAL INDEX KEY: 0001039889 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 860815086 FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25123 FILM NUMBER: 12621724 BUSINESS ADDRESS: STREET 1: 7676 E. PINNACLE PEAK RD. CITY: SCOTTSDALE STATE: AZ ZIP: 85255 BUSINESS PHONE: 480-888-3000 MAIL ADDRESS: STREET 1: 7676 E. PINNACLE PEAK RD. CITY: SCOTTSDALE STATE: AZ ZIP: 85255 8-K 1 q411earningsrelease.htm 8-K Q411 Earnings Release


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 16, 2012


P.F. Chang's China Bistro, Inc.
(Exact name of registrant as specified in its charter)


Delaware
 
0-25123
 
86-0815086
(State or other jurisdiction
 
(Commission File Number)
 
(IRS Employer Identification No.)
of incorporation)
 
 
 
 


7676 E. Pinnacle Peak Road,
Scottsdale, Arizona
 
85255
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code: (480) 888-3000

(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 



















Item 2.02. Results of Operations and Financial Condition.

On February 16, 2012, P.F. Chang's China Bistro, Inc. (the “Company”) issued a press release describing selected financial results of the Company for the quarter and fiscal year ended January 1, 2012. Also, on February 16, 2012 the Company held its Fourth Quarter Earnings Conference Call. The press release and transcript of the Fourth Quarter Earnings Conference Call are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and, in addition to this Report on Form 8-K and pursuant to General Instruction B.2 of Form 8-K, are being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 7.01. Regulation FD Disclosure

On February 16, 2012, the Company issued the press release that is furnished as Exhibit 99.1 to this Current Report on Form 8-K and that is incorporated by reference into this Item announcing that the Company's Board of Directors authorized a quarterly dividend of $0.275 per share payable to shareholders of record at the close of business on February 27, 2012.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.
 
Description
99.1
 
February 16, 2012 Press Release by P.F. Chang's China Bistro, Inc.
99.2
 
Transcript of Fourth Quarter Earnings Conference Call held February 16, 2012










































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 hereunto duly authorized.

 
P.F. Chang's China Bistro, Inc.
 
 
 
 
Date: February 17, 2012
 
 
/s/ Mark D. Mumford
 
Mark D. Mumford
Chief Financial Officer



EX-99.1 2 ex-991xq4x11.htm EX-99.1 EX-99.1 - Q4-11



 
P.F. Chang's China Bistro, Inc.
 

P.F. CHANG'S REPORTS FOURTH QUARTER AND FULL YEAR FISCAL 2011 RESULTS;
PROVIDES GUIDANCE FOR 2012; BOARD OF DIRECTORS INCREASES
SHARE REPURCHASE AUTHORIZATION TO $150 MILLION AND
INCREASES CASH DIVIDEND BY 10%

SCOTTSDALE, ARIZONA, February 16, 2012 - P.F. Chang's China Bistro, Inc. (NASDAQ: PFCB) today reported financial results for the fourth quarter and fiscal year ended January 1, 2012.

Chairman and CEO Rick Federico commented, “While we were not satisfied with our earnings in the fourth quarter, we were pleased with our progress on the top line. We remain confident in the direction of recent initiatives to restore positive sales momentum, which have shown encouraging early signs in the first half of our first fiscal quarter. We believe 2012 will be an inflection point for our business and look forward to delivering on the goals we have articulated to our shareholders over the past several months.”

Fourth Quarter 2011
Total revenues were $309.8 million in the fourth quarter of fiscal 2011 as compared to $311.2 million in the prior year. Net income for the fourth quarter of fiscal 2011 was $4.1 million, as compared to $14.7 million in 2010, and diluted net income per share was $0.19 and $0.64, respectively. Net income per share for the fourth quarter would have been $0.11 higher (or $0.30 per share) when adjusting for:
The unfavorable impact of non-cash asset impairment charges related to two Bistro restaurants ($0.17 per share).
The unfavorable impact of charges related to the closure of three underperforming Pei Wei locations ($0.04 per share). The Company closed these locations at the end of the fourth quarter of fiscal 2011 after recognizing full asset impairment charges during the second and third quarters of fiscal 2011.
The favorable impact of non-cash share-based compensation expense adjustments ($0.05 per share) primarily related to the final value adjustment of Co-CEO performance unit awards.
The favorable impact of lowering the full fiscal year effective tax rate ($0.05 per share).

Comparable store sales decreased 2.4% at the Bistro and 1.9% at Pei Wei in the fourth quarter of 2011 due, in both cases, to declines in guest traffic. Monthly comparable store sales trends improved during the course of the fourth quarter. Specifically, on a monthly basis, comparable store sales for October, November and December decreased 3.2%, 3.1%, and 1.1%, respectively, at the Bistro and decreased 3.2%, 0.9%, and 1.4%, respectively, at Pei Wei.

Fiscal Year 2011
Total revenues were $1,238.8 million in fiscal 2011 as compared to $1,242.8 million in the prior year. Net income was $30.1 million in 2011, as compared to $46.6 million in 2010, and diluted net income per share was $1.36 and $2.02, respectively. Net income per share for fiscal 2011 would have been $0.17 higher (or $1.53 per share) when adjusting for:
The unfavorable impact of non-cash asset impairment and store closure charges related to three Pei Wei restaurants which closed in the fourth quarter and non-cash asset impairment charges related to three Bistro restaurants ($0.39 per share).
The favorable impact non-cash of share-based compensation expense adjustments ($0.25 per share).
The unfavorable impact of charges related to the departure of the Bistro's Chief Operating Officer and one-time costs associated with streamlining of certain organizational support functions ($0.03 per share).

2012 Expectations
The Company anticipates that full year fiscal 2012 consolidated revenues will increase 1% to 2% compared to fiscal 2011. Revenue expectations for 2012 assume flat comparable store sales at both concepts, combined with incremental

1



revenues contributed from 14 to 19 anticipated new domestic restaurant openings and restaurant and retail licensing growth in excess of 60%.

The Company expects fiscal 2012 restaurant operating income to increase by approximately 8% to 9% compared to fiscal 2011 levels. Excluding the impact of $11.8 million in asset impairment and store closure charges recognized during fiscal 2011, the Company expects restaurant operating income to decline 1% to 2% in 2012. The Company anticipates commodities inflation of 4% to 5% during fiscal 2012, a portion of which may be offset with slight menu price increases and menu mix shifts. The Company expects incremental revenues from its licensing businesses to provide greater contribution to restaurant operating income and partially offset these cost pressures.

The Company anticipates consolidated general and administrative expenses to range from $78 to $80 million during 2012, which is in line with consolidated general and administrative expenses for fiscal 2011, when adjusting for the benefit of approximately $7.5 million in share-based compensation expense credits recognized during fiscal 2011.
 
The Company currently expects to open 2 to 3 new Bistro restaurants and 12 to 16 new Pei Wei restaurants during fiscal 2012. As a result, the Company anticipates higher preopening expenses in fiscal 2012 from the increase in Pei Wei new store development compared to fiscal 2011.

In addition, the Company expects its international partners to open 10 to 14 new Bistro restaurants during 2012, an increase of 60% to 80% relative to international Bistros in operation at the end of 2011. The Company also anticipates the opening of 2 to 4 new Pei Wei international restaurants through licensing agreements during fiscal 2012, compared to one international Pei Wei unit in operation at the end of fiscal 2011. Also, through licensing agreements, the Company expects 3 to 5 Pei Wei domestic airport locations to open during fiscal 2012.
 
During 2012, the Company expects cash flows from operations to approximate $105 million to $115 million, an increase compared to cash flows from operations of $103 million in 2011. Capital expenditures are expected to approximate $55 million to $60 million.
 
Overall, the Company expects consolidated diluted earnings per share to range from $1.50 to $1.60 for fiscal 2012. Earnings per share for the first quarter of 2012 is expected to range from $0.34 to $0.36.

Commenting on the 2012 outlook, Federico said, “While we remain cautious about the outlook for consumer spending generally, we are beginning to see early signs of progress. We believe our initiatives, aimed at driving restaurant traffic by enhancing our price/value proposition and elevating the guest experience, are gaining traction at both concepts. As a result, we anticipate that our quarterly earnings per share will be higher in the back half of 2012 than the first half of the year. Additionally, we foresee increased contribution from restaurant and retail licensing opportunities in 2012. We will continue to execute on our strategic plan and expect to build on our successes throughout 2012.”

Share Repurchase Program
On February 8, 2012, the Company's Board of Directors increased the authorized amount of the Company's share repurchase program from $100 million to $150 million. The Company plans to fully utilize the $150.0 million share repurchase authorization during fiscal 2012.

Quarterly Dividend
The Board of Directors authorized an increase to the Company's quarterly cash dividend payment from $0.25 to $0.275 per share on the Company's outstanding common stock, an increase of 10%. The next quarterly dividend is payable on March 12, 2012 to shareholders of record at the close of business on February 27, 2012.

True Food Kitchen
During 2009, the Company extended a loan facility to fund early stage development of the True Food Kitchen restaurant concept with a right to convert its loan into a majority equity ownership position. In February 2012, after receiving authorization from its Board of Directors, the Company and True Food Kitchen's partners mutually agreed to exercise the Company's conversion option, which is expected to be completed during the second quarter of fiscal 2012. Upon

2



completion, P.F. Chang's will own 51% of True Food Kitchen, with potential rights and obligations that would enable the Company to increase its ownership to 90% or more in the future.

Conference Call Information
The Company is hosting a conference call today at 8:30 am Eastern Time during which management will provide further details on the fourth quarter results. A webcast of the call can be accessed through the company's website at www.pfcb.com.

Definitions
The following definitions apply to these terms as used throughout this release:
Net income refers to net income attributable to PFCB common stockholders.
Comparable store sales changes include company-operated restaurants and represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its eighteenth month of operation.

About the Company
P.F. Chang's China Bistro, Inc. owns and operates two restaurant concepts in the Asian niche. P.F. Chang's China Bistro features a blend of high-quality, Chinese-inspired cuisine and attentive service in a high energy contemporary bistro setting. Pei Wei Asian Diner offers a menu of freshly prepared, wok-seared, contemporary pan-Asian cuisine in a relaxed, warm environment with friendly attentive counter service and take-out flexibility. In addition, the Company has extended its brands to international markets, domestic airport locations and retail products, all of which are operated under licensing agreements.

Note with respect to non-GAAP financial measures contained within Supplemental Financial Information

In addition to using GAAP results in evaluating the Company's business, management measures restaurant operating income to assess the performance of its existing restaurant concepts. Restaurant operating income includes all ongoing costs related to operating the Company's restaurants but excludes preopening expenses and partner investment expense. Preopening and partner investment expenses are excluded because they vary in timing and magnitude and are not related to the health of ongoing operations. Additionally, general and administrative expenses are generally not specifically identifiable to individual business units and are only included in the Company's consolidated financial presentation as these costs relate to support of both restaurant concepts and the extension of the Company's brands into international markets, domestic airports and retail products. As the Company's expansion is funded entirely from its ongoing restaurant operations, restaurant operating income is a consideration of management 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. Please see the non-GAAP to GAAP reconciliation at the bottom of pages 5 through 7 of this press release for a reconciliation of restaurant operating income to the most directly comparable GAAP measure, income from operations.
 
Note with respect to forward-looking statements
The statements contained in this press release that are not purely historical, including the Company's 2012 expectations, are forward-looking statements. The accuracy of these forward-looking statements may be affected by certain risks and uncertainties, including, but not limited to, failure of our existing or new restaurants to achieve expected results, intense competition in the restaurant industry, damage to our brands or reputation, our ability to successfully expand our operations and changes in general economic and political conditions that affect consumer spending. More detailed information about the Company and the risk factors that may affect the realization of any forward-looking statements is set forth in the Company's filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and the Company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. This caution is made under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995.


Contact:
 
 
 
Allison Schulder
(480) 888-3000
allison.schulder@pfcb.com
 


3




P.F. Chang's China Bistro, Inc.
 Consolidated Statements of Operations
 (In thousands, except per share amounts)
 (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
13 Weeks Ended
 
52 Weeks Ended
 
 
January 1,
 
January 2,
 
January 1,
 
January 2,
 
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
308,155

 
$
310,260

 
$
1,233,076

 
$
1,239,503

Restaurant licensing
 
968

 
474

 
3,065

 
2,105

Retail licensing
 
632

 
446

 
2,614

 
1,191

   Total revenues
 
309,755

 
311,180

 
1,238,755

 
1,242,799

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales
 
82,453

 
80,621

 
325,771

 
324,731

Labor
 
105,371

 
101,610

 
419,302

 
410,000

Operating
 
53,316

 
51,886

 
214,050

 
208,294

Occupancy
 
20,368

 
18,756

 
75,864

 
73,707

General and administrative (1)
 
17,980

 
19,839

 
70,088

 
81,883

Depreciation and amortization
 
20,462

 
19,832

 
80,355

 
77,486

Asset impairment charges
 
5,056

 

 
10,486

 

Preopening expense
 
808

 
439

 
2,048

 
1,976

Partner investment expense
 

 
(47
)
 
(236
)
 
(318
)
   Total costs and expenses
 
305,814

 
292,936

 
1,197,728

 
1,177,759

Income from operations
 
3,941

 
18,244

 
41,027

 
65,040

Interest and other income (expense), net
 
327

 
333

 
(288
)
 
(572
)
Income from continuing operations before taxes
 
4,268

 
18,577

 
40,739

 
64,468

Provision for income taxes
 
(116
)
 
(3,773
)
 
(10,253
)
 
(17,122
)
Income from continuing operations, net of tax
 
4,152

 
14,804

 
30,486

 
47,346

Income (loss) from discontinued operations, net of tax
 
(44
)
 
40

 
(63
)
 
46

Net income
 
4,108

 
14,844

 
30,423

 
47,392

Less net income attributable to noncontrolling interests
 
30

 
165

 
346

 
784

Net income attributable to PFCB
 
$
4,078

 
$
14,679

 
$
30,077

 
$
46,608

 
 
 
 
 
 
 
 
 
Basic income per share:
 
 
 
 
 
 
 
 
Income from continuing operations attributable to PFCB common stockholders
 
$
0.20

 
$
0.65

 
$
1.38

 
$
2.05

Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders
 
(0.01
)
 
0.00

 
0.00

 
0.00

Net income attributable to PFCB common stockholders
 
$
0.19

 
$
0.65

 
$
1.38

 
$
2.05

 
 
 
 
 
 
 
 
 
Diluted income per share:
 
 
 
 
 
 
 
 
Income from continuing operations attributable to PFCB common stockholders
 
$
0.19

 
$
0.64

 
$
1.36

 
$
2.01

Income (loss) from discontinued operations, net of tax, attributable to PFCB common stockholders
 
0.00

 
0.00

 
0.00

 
0.01

Net income attributable to PFCB common stockholders
 
$
0.19

 
$
0.64

 
$
1.36

 
$
2.02

 
 
 
 
 
 
 
 
 
Weighted average shares used in computation:
 
 
 
 
 
 
 
 
Basic
 
21,071

 
22,599

 
21,831

 
22,689

Diluted
 
21,175

 
23,011

 
22,104

 
23,115

 
 
 
 
 
 
 
 
 
Cash dividends declared per share
 
$
0.28

 
$
0.29

 
$
0.99

 
$
0.92

 
 
 
 
 
 
 
 
 
Amounts attributable to PFCB:
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
 
$
4,122

 
$
14,639

 
$
30,140

 
$
46,562

Income (loss) from discontinued operations, net of tax
 
(44
)
 
40

 
(63
)
 
46

Net income attributable to PFCB
 
$
4,078

 
$
14,679

 
$
30,077

 
$
46,608

(1)
General and administrative includes the benefit of lower incentive accruals of $4.9 million and lower share-based compensation expense of $7.5 million during the year ended January 1, 2012.

4






P.F. Chang's China Bistro, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 1Q10
 2Q10
 3Q10
 4Q10
2010
 
 1Q11
2Q11
 3Q11
 4Q11
YTD 2011
 
 
 
 
 
 
 
 
 
 
 
 
Units
364

366

368

369

369

 
372

374

375

377

377

Sales weeks
4,731

4,736

4,770

4,791

19,028

 
4,819

4,852

4,859

4,885

19,415

AWS
65,576

65,773

64,465

64,759

65,141

 
65,637

63,817

61,530

63,082

63,512

 
 
 
 
 
 
 
 
 
 
 
 
Revenues (1)
 
 
 
 
 
 
 
 
 
 
 
Restaurant sales
310,242

311,502

307,499

310,260

1,239,503

 
316,304

309,641

298,976

308,155

1,233,076

Restaurant licensing
129

1,108

394

474

2,105

 
684

649

764

968

3,065

Retail licensing

228

517

446

1,191

 
381

724

877

632

2,614

 Total revenues
310,371

312,838

308,410

311,180

1,242,799

 
317,369

311,014

300,617

309,755

1,238,755

 
 
 
 
 
 
 
 
 
 
 
 
Operating costs
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
84,013

81,717

78,380

80,621

324,731

 
83,322

82,175

77,821

82,453

325,771

Labor
104,475

102,295

101,620

101,610

410,000

 
106,464

105,321

102,146

105,371

419,302

Operating
52,753

51,597

52,058

51,886

208,294

 
53,807

52,471

54,456

53,316

214,050

Occupancy
17,838

18,609

18,504

18,756

73,707

 
18,425

18,681

18,390

20,368

75,864

Net income attributable to noncontrolling interests
206

241

172

165

784

 
157

120

39

30

346

Depreciation & amortization
19,001

19,335

19,318

19,832

77,486

 
19,698

20,149

20,046

20,462

80,355

Asset impairment charges





 

631

4,799

5,056

10,486

Restaurant operating income
32,085

39,044

38,358

38,310

147,797

 
35,496

31,466

22,920

22,699

112,581

 
 
 
 
 
 
 
 
 
 
 
 
Development costs
 
 
 
 
 
 
 
 
 
 
 
Preopening expense
133

832

572

439

1,976

 
398

213

629

808

2,048

Partner investment expense
11

(135
)
(147
)
(47
)
(318
)
 
(126
)
(50
)
(60
)

(236
)
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses
 
 
 
 
 
 
 
 
 
 
 
General and administrative (2)
19,053

19,765

23,226

19,839

81,883

 
20,280

19,164

12,664

17,980

70,088

Interest and other (income) expense, net
415

665

(175
)
(333
)
572

 
(204
)
(128
)
947

(327
)
288

Provision for income taxes
3,788

5,144

4,417

3,773

17,122

 
4,555

3,143

2,439

116

10,253

Income from continuing operations
8,685

12,773

10,465

14,639

46,562

 
10,593

9,124

6,301

4,122

30,140

Income (loss) from discontinued operations, net of tax
6



40

46

 
3

(32
)
10

(44
)
(63
)
Net income attributable to PFCB
8,691

12,773

10,465

14,679

46,608

 
10,596

9,092

6,311

4,078

30,077

 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations per FDS
$
0.38

$
0.55

$
0.45

$
0.64

$
2.01

 
$
0.46

$
0.40

$
0.29

$
0.19

$
1.36

 
 
 
 
 
 
 
 
 
 
 
 
Fully diluted shares (FDS)
23,104

23,277

23,070

23,011

23,115

 
22,901

22,581

21,758

21,175

22,104

 
 
 
 
 
 
 
 
 
 
 
 
Revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
 
100.0
%
100.0
 %
100.0
 %
100.0
 %
100.0
 %
Cost of sales
27.1
%
26.1
%
25.4
%
25.9
%
26.1
%
 
26.3
%
26.4
 %
25.9
 %
26.6
 %
26.3
 %
Labor
33.7
%
32.7
%
32.9
%
32.7
%
33.0
%
 
33.5
%
33.9
 %
34.0
 %
34.0
 %
33.8
 %
Operating
17.0
%
16.5
%
16.9
%
16.7
%
16.8
%
 
17.0
%
16.9
 %
18.1
 %
17.2
 %
17.3
 %
Occupancy
5.7
%
5.9
%
6.0
%
6.0
%
5.9
%
 
5.8
%
6.0
 %
6.1
 %
6.6
 %
6.1
 %
Net income attributable to noncontrolling interests
0.1
%
0.1
%
0.1
%
0.1
%
0.1
%
 
0.0
%
0.0
 %
0.0
 %
0.0
 %
0.0
 %
Depreciation & amortization
6.1
%
6.2
%
6.3
%
6.4
%
6.2
%
 
6.2
%
6.5
 %
6.7
 %
6.6
 %
6.5
 %
Asset impairment charges
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 
0.0
%
0.2
 %
1.6
 %
1.6
 %
0.8
 %
Restaurant operating income
10.3
%
12.5
%
12.4
%
12.3
%
11.9
%
 
11.2
%
10.1
 %
7.6
 %
7.3
 %
9.1
 %
Preopening expenses
0.0
%
0.3
%
0.2
%
0.1
%
0.2
%
 
0.1
%
0.1
 %
0.2
 %
0.3
 %
0.2
 %
Partner investment expense
0.0
%
(0.0%)

(0.0%)

(0.0%)

(0.0%)

 
0.0
%
0.0
 %
0.0
 %
0.0
 %
0.0
 %
General and administrative (2)
6.1
%
6.3
%
7.5
%
6.4
%
6.6
%
 
6.4
%
6.2
 %
4.2
 %
5.8
 %
5.7
 %
Interest and other (income) expense, net
0.1
%
0.2
%
(0.1%)

(0.1%)

0.0
%
 
(0.1%)

0.0
 %
0.3
 %
(0.1
)%
0.0
 %
Provision for income taxes
1.2
%
1.6
%
1.4
%
1.2
%
1.4
%
 
1.4
%
1.0
 %
0.8
 %
0.0
 %
0.8
 %
Income from continuing operations
2.8
%
4.1
%
3.4
%
4.7
%
3.7
%
 
3.3
%
2.9
 %
2.1
 %
1.3
 %
2.4
 %
Income (loss) from discontinued operations, net of tax
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 
0.0
%
0.0
 %
0.0
 %
0.0
 %
0.0
 %
Net income attributable to PFCB
2.8
%
4.1
%
3.4
%
4.7
%
3.8
%
 
3.3
%
2.9
 %
2.1
 %
1.3
 %
2.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
 
 
 
 
 
 
 
 
 
 
 
Restaurant operating income
32,085

39,044

38,358

38,310

147,797

 
35,496

31,466

22,920

22,699

112,581

Add: Net income attributable to noncontrolling interests
206

241

172

165

784

 
157

120

39

30

346

Less: General and administrative (2)
(19,053
)
(19,765
)
(23,226
)
(19,839
)
(81,883
)
 
(20,280
)
(19,164
)
(12,664
)
(17,980
)
(70,088
)
Less: Preopening expense
(133
)
(832
)
(572
)
(439
)
(1,976
)
 
(398
)
(213
)
(629
)
(808
)
(2,048
)
Less: Partner investment expense
(11
)
135

147

47

318

 
126

50

60


236

Income from operations
13,094

18,823

14,879

18,244

65,040

 
15,101

12,259

9,726

3,941

41,027

 Note: Consolidated results include the impact of Shared Services and Other as well as the Bistro and Pei Wei concepts.
  (1) Consolidated revenues include revenues related to the Bistro and Pei Wei concepts as well as Global Brand Development initiatives.
  (2) Consolidated general and administrative expenses includes the costs of supporting the Company, including all concepts as well as Global Brand Development initiatives.

5



Concept: P.F. Chang's China Bistro
Supplemental Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1Q10
 2Q10
 3Q10
 4Q10
2010
 
 1Q11
 2Q11
 3Q11
 4Q11
YTD 2011
 
 
 
 
 
 
 
 
 
 
 
 
 Units
197

199

200

201

201

 
201

201

202

204

204

 Sales weeks
2,561

2,565

2,593

2,607

10,326

 
2,613

2,613

2,610

2,636

10,472

 AWS
90,077

90,964

89,202

89,726

89,989

 
90,181

88,487

85,494

87,725

87,972

 
 
 
 
 
 
 
 
 
 
 
 
 Total revenues
230,767

233,365

231,309

233,931

929,372

 
235,782

231,226

223,118

231,253

921,379

 
 
 
 
 
 
 
 
 
 
 
 
 Operating costs
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
62,711

60,914

58,135

60,008

241,768

 
61,333

60,759

57,677

61,660

241,429

Labor
78,192

76,769

76,533

76,667

308,161

 
79,792

78,442

76,273

79,120

313,627

Operating
38,546

38,183

38,554

37,804

153,087

 
38,783

38,442

40,602

38,367

156,194

Occupancy
12,640

13,254

13,242

13,368

52,504

 
13,074

13,125

12,955

13,602

52,756

Net income attributable to noncontrolling interests
71

93

62

70

296

 
79

69

20

18

186

Depreciation & amortization
13,854

14,043

14,018

14,519

56,434

 
14,384

14,550

14,455

14,989

58,378

Asset impairment charges





 


3,503

5,056

8,559

 Restaurant operating income
24,753

30,109

30,765

31,495

117,122

 
28,337

25,839

17,633

18,441

90,250

 
 
 
 
 
 
 
 
 
 
 
 
 Total revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
 
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
 Cost of sales
27.2
%
26.1
%
25.1
%
25.7
%
26.0
%
 
26.0
%
26.3
%
25.9
%
26.7
%
26.2
%
 Labor
33.9
%
32.9
%
33.1
%
32.8
%
33.2
%
 
33.8
%
33.9
%
34.2
%
34.2
%
34.0
%
 Operating
16.7
%
16.4
%
16.7
%
16.2
%
16.5
%
 
16.4
%
16.6
%
18.2
%
16.6
%
17.0
%
 Occupancy
5.5
%
5.7
%
5.7
%
5.7
%
5.6
%
 
5.5
%
5.7
%
5.8
%
5.9
%
5.7
%
 Net income attributable to noncontrolling interests
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 Depreciation & amortization
6.0
%
6.0
%
6.1
%
6.2
%
6.1
%
 
6.1
%
6.3
%
6.5
%
6.5
%
6.3
%
 Asset impairment charges
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 
0.0
%
0.0
%
1.6
%
2.2
%
0.9
%
 Restaurant operating income
10.7
%
12.9
%
13.3
%
13.5
%
12.6
%
 
12.0
%
11.2
%
7.9
%
8.0
%
9.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
 
 
 
 
 
 
 
 
 
 
 
Restaurant operating income
24,753

30,109

30,765

31,495

117,122

 
28,337

25,839

17,633

18,441

90,250

Add: Net income attributable to noncontrolling interests
71

93

62

70

296

 
79

69

20

18

186

Less: Preopening expense
(26
)
(765
)
(411
)
(265
)
(1,467
)
 
2

(28
)
(604
)
(721
)
(1,351
)
Less: Partner investment expense





 





Income from operations
24,798

29,437

30,416

31,300

115,951

 
28,418

25,880

17,049

17,738

89,085


Note: General and administrative expenses are reflected in the Company’s consolidated results.


6



Concept: Pei Wei Asian Diner (A)
Supplemental Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1Q10
 2Q10
 3Q10
 4Q10
2010
 
 1Q11
2Q11
 3Q11
 4Q11
YTD 2011
 
 
 
 
 
 
 
 
 
 
 
 
 Units
167

167

168

168

168

 
171

173

173

173

173

 Sales weeks
2,170

2,171

2,177

2,184

8,702

 
2,206

2,239

2,249

2,249

8,943

 AWS
36,597

35,991

34,998

34,950

35,632

 
36,501

35,022

33,730

34,194

34,854

 
 
 
 
 
 
 
 
 
 
 
 
 Total revenues
79,475

78,137

76,190

76,329

310,131

 
80,522

78,415

75,858

76,902

311,697

 
 
 
 
 
 
 
 
 
 
 
 
 Operating costs
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
21,302

20,803

20,245

20,613

82,963

 
21,989

21,416

20,144

20,793

84,342

Labor
26,283

25,526

25,087

24,943

101,839

 
26,672

26,879

25,873

26,251

105,675

Operating
14,207

13,414

13,504

14,082

55,207

 
15,024

14,029

13,854

14,949

57,856

Occupancy
5,198

5,355

5,262

5,388

21,203

 
5,351

5,556

5,435

6,766

23,108

Net income attributable to noncontrolling interests
135

148

110

95

488

 
78

51

19

12

160

Depreciation & amortization
4,647

4,762

4,772

4,761

18,942

 
4,767

4,929

4,910

4,772

19,378

Asset impairment charges





 

631

1,296


1,927

 Restaurant operating income
7,703

8,129

7,210

6,447

29,489

 
6,641

4,924

4,327

3,359

19,251

 
 
 
 
 
 
 
 
 
 
 
 
 Total revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
 
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
 Cost of sales
26.8
%
26.6
%
26.6
%
27.0
%
26.8
%
 
27.3
%
27.3
%
26.6
%
27.0
%
27.1
%
 Labor
33.1
%
32.7
%
32.9
%
32.7
%
32.8
%
 
33.1
%
34.3
%
34.1
%
34.1
%
33.9
%
 Operating
17.9
%
17.2
%
17.7
%
18.4
%
17.8
%
 
18.7
%
17.9
%
18.3
%
19.4
%
18.6
%
 Occupancy
6.5
%
6.9
%
6.9
%
7.1
%
6.8
%
 
6.6
%
7.1
%
7.2
%
8.8
%
7.4
%
 Net income attributable to noncontrolling interests
0.2
%
0.2
%
0.1
%
0.1
%
0.2
%
 
0.1
%
0.1
%
0.0
%
0.0
%
0.1
%
 Depreciation & amortization
5.8
%
6.1
%
6.3
%
6.2
%
6.1
%
 
5.9
%
6.3
%
6.5
%
6.2
%
6.2
%
Asset impairment charges
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
 
0.0
%
0.8
%
1.7
%
0.0
%
0.6
%
 Restaurant operating income
9.7
%
10.4
%
9.5
%
8.4
%
9.5
%
 
8.2
%
6.3
%
5.7
%
4.4
%
6.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Information to GAAP measures:
 
 
 
 
 
 
 
 
 
 
 
Restaurant operating income
7,703

8,129

7,210

6,447

29,489

 
6,641

4,924

4,327

3,359

19,251

Add: Net income attributable to noncontrolling interests
135

148

110

95

488

 
78

51

19

12

160

Less: Preopening expense
(107
)
(67
)
(161
)
(174
)
(509
)
 
(400
)
(185
)
(25
)
(87
)
(697
)
Less: Partner investment expense
(11
)
135

147

47

318

 
126

50

60


236

Income from operations
7,720

8,345

7,306

6,415

29,786

 
6,445

4,840

4,381

3,284

18,950


Note: General and administrative expenses are reflected in the Company’s consolidated results.
(A) All results related to the ten Pei Wei restaurants that closed during 2008 are reflected within discontinued operations for all periods presented.


7



 
 
 
 
 
 
 
 
 
 
 
 
P.F. Chang's China Bistro
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Sales Information (Company Owned)
 
 
 
 
 
 
 
 
 
 
 
 
Year of Unit Opening (1)
 
Pre-2003
2003
2004
2005
2006
2007
2008
2009
2010
2011
Total
Units
78
18
18
18
20
20
17
8
4
3
204
 
 
 
 
 
 
 
 
 
 
 
 
Sales (000)
1Q11
101,661
22,626
18,627
18,865
21,852
22,395
17,146
8,169
4,302
235,643
2Q11
99,024
22,227
18,929
18,425
21,522
22,117
16,720
7,955
4,297
231,216
3Q11
94,837
21,456
18,708
17,793
20,618
21,425
16,052
7,847
4,047
355
223,138
4Q11
97,922
21,562
18,437
18,345
21,225
21,426
16,601
7,876
4,070
3,779
231,243
 
 
 
 
 
 
 
 
 
 
 
 
2011
393,444

87,871
74,701
73,428
85,217
87,363
66,519
31,847
16,716
4,134
921,240

 
 
 
 
 
 
 
 
 
 
 
 
Average Weekly Sales (AWS)
1Q11
100,257
96,694
79,602
80,618
84,045
86,133
77,586
78,551
82,724
90,181
2Q11
97,656
94,987
80,896
78,739
82,778
85,066
75,658
76,490
82,627
88,487
3Q11
94,085
91,693
79,948
76,040
79,300
82,404
72,631
75,456
77,824
118,172

85,494
4Q11
97,532
92,145
78,790
78,399
81,637
82,407
75,114
75,730
78,278
114,522

87,725
 
 
 
 
 
 
 
 
 
 
 
 
2011
97,387
93,880
79,809
78,449
81,940
84,003
75,247
76,557
80,363
114,826
87,972
 
 
 
 
 
 
 
 
 
 
 
 
Year-Over-Year Change Comparable Store Sales (2)
Units
78
18
18
18
20
20
17
8
2
199
 
 
 
 
 
 
 
 
 
 
 
 
1Q11
0.8%
0.4%
2.5%
0.1%
0.6%
-0.7%
1.1%
-7.3%
0.5%
2Q11
-2.0%
-2.5%
-0.5%
-3.2%
-1.9%
-3.5%
-4.4%
-7.9%
-2.5%
3Q11
-3.5%
-4.3%
-1.6%
-3.5%
-2.9%
-4.4%
-5.7%
-6.9%
-3.7%
4Q11
-2.4%
-4.1%
-0.6%
-1.6%
-1.8%
-3.2%
-2.7%
-2.8%
-8.0%
-2.4%
 
 
 
 
 
 
 
 
 
 
 
 
2011
-1.8%
-2.6%
-0.1%
-2.1%
-1.5%
-2.9%
-2.9%
-6.1%
-8.0%
-2.1%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes all restaurants opened in the period indicated.
(2) A unit becomes comparable in the eighteenth month of operation.
 
 
 
 
 
 
 
 
 
 
 
 


8



 
 
 
 
 
 
 
 
 
 
 
 
Pei Wei Asian Diner
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental Sales Information (Company Owned)
 
 
 
 
 
 
 
 
 
 
 
 
Year of Unit Opening (1)
 
Pre-2003
2003
2004
2005
2006
2007
2008
2009
2010
2011
Total
Units
16
17
19
23
27
32
25
7
2
5
173
 
 
 
 
 
 
 
 
 
 
 
 
Sales (000)
1Q11
7,956
8,638
10,048
11,243
13,240
14,022
10,515
3,035
892
933
80,522
2Q11
7,587
8,351
9,547
10,882
12,790
13,272
10,174
2,901
807
2,104
78,415
3Q11
7,295
8,033
9,241
10,501
12,427
12,798
9,687
2,812
795
2,269
75,858
4Q11
7,675
8,219
9,281
10,663
12,509
12,854
9,948
2,870
752
2,131
76,902
 
 
 
 
 
 
 
 
 
 
 
 
2011
30,513

33,241
38,117
43,289
50,966
52,946
40,324
11,618
3,246
7,437
311,697

 
 
 
 
 
 
 
 
 
 
 
 
Average Weekly Sales (AWS)
1Q11
38,247
39,085
40,678
37,603
37,721
33,707
32,353
33,350
34,323
42,421
36,501
2Q11
36,477
37,787
38,653
36,393
36,439
31,904
31,304
31,879
31,014
38,242
35,022
3Q11
35,074
36,347
37,414
35,121
35,404
30,764
29,807
30,904
30,587
34,903
33,730
4Q11
36,898
37,191
37,575
35,664
35,639
30,893
30,608
31,541
28,942
32,788
34,194
 
 
 
 
 
 
 
 
 
 
 
 
2011
36,674
37,603
38,580
36,195
36,301
31,817
31,018
31,918
31,216
35,925
34,854
 
 
 
 
 
 
 
 
 
 
 
 
Year-Over-Year Change Comparable Store Sales (2)
Units
16
17
19
23
27
32
25
7
1
167
1Q11
-4.2%
-1.5%
0.3%
0.8%
0.5%
0.5%
1.1%
-0.7%
-0.2%
2Q11
-3.1%
-2.5%
-3.2%
-1.4%
-2.3%
-3.8%
-2.5%
-3.5%
-9.8%
-2.7%
3Q11
-2.9%
-2.7%
-3.6%
-2.9%
-3.7%
-4.6%
-3.9%
-3.0%
-10.3%
-3.6%
4Q11
-1.8%
-1.9%
-2.5%
-1.3%
-1.5%
-2.7%
-1.2%
-2.4%
-11.1%
-1.9%
 
 
 
 
 
 
 
 
 
 
 
 
2011
-3.0%
-2.2%
-2.2%
-1.2%
-1.7%
-2.6%
-1.6%
-2.5%
-10.6%
-2.1%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes all restaurants opened in the period indicated.
(2) A unit becomes comparable in the eighteenth month of operation.
 
 
 
 
 
 
 
 
 
 
 
 


9
EX-99.2 3 ex-992transcriptq411.htm EX-99.2 EX-99.2 Transcript Q411


Exhibit 99.2
Final Transcript


THOMSON REUTERS STREETEVENTS
EDITED TRANSCRIPT
PFCB - Q4 2011 P.F. Chang's China Bistro, Inc. Earnings Conference Call
 
EVENT DATE/TIME: FEBRUARY 16, 2012 / 01:30PM GMT
 
OVERVIEW:
Management discussed initiatives and strategies, as well as 4Q11 financial results and 2012 guidance. 4Q11 EPS were reported at $0.19. Guidance was for 2012 EPS of $1.50-1.60 on consolidated revenue growth of 1-2%, and for 1Q12 EPS of $0.34-0.36.


CORPORATE PARTICIPANTS
Mark Mumford P.F. Chang's China Bistro, Inc. - CFO
Rick Federico P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO

CONFERENCE CALL PARTICIPANTS
Destin Tompkins Morgan, Keegan - Analyst
Sharon Zackfia William Blair - Analyst
Bryan Elliot Raymond James - Analyst
Andy Barish Jefferies & Co. - Analyst
Larry Miller RBC Capital Markets - Analyst
John Ivankoe JPMorgan Chase - Analyst
John Glass Morgan Stanley - Analyst
Howard Penney Hedgeye Risk Management - Analyst

PRESENTATION


Operator
Good morning and welcome to P.F. Chang's China Bistro fourth-quarter 2011 earnings release conference call. Your lines have been placed on listen-only until the question-and-answer session of the conference. (Operator Instructions). Today's call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Mark Mumford, Chief Financial Officer. Please go ahead, sir.

Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Thank you. Good morning, everyone. Thanks for joining us today for P.F. Chang's fourth-quarter 2011 earnings call. With me on the call today is Rick Federico, our CEO. We will start off with Rick's comments on the business and then I will provide a financial update. We will be happy to answer any other questions at the end of the call as time permits.






Please note that any comments we make on the call that are not purely historical are forward-looking statements. Our actual results may differ materially and we advise you to carefully consider the various risks and uncertainties in the Risk Factors section of our Annual Report on Form 10-K, our quarterly filings on Form 10-Q and other filings with the SEC.

I should also note that this cautionary statement qualifies all of our forward-looking statements and we undertake no obligation to revise or update these statements to reflect events or circumstances after the date of this call. We plan to file our 2011 Form 10-K later today. With that, I will turn the call over to Rick to begin.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Thanks, Mark. Good morning and thanks for joining us. At our Investor Day in November and on recent earnings calls, we have outlined a series of focused initiatives designed to increase our sales and importantly begin to grow traffic. I am happy to report we are seeing early signs of success in these initiatives and believe 2012 will be an inflection point for our business. While we'll review the fourth quarter that ended six weeks ago, we will also focus on the important year ahead and discuss why we are encouraged by what we are seeing so far.

Let me begin by briefly reviewing these initiatives. As we have previously discussed, these are focused on enhancements to our price value proposition in four core areas -- menu innovation, improved service, lower-priced dining options and the reimaging of our restaurants.

Prior to implementation, we conducted extensive market research that provided us with specific feedback that was particularly helpful and informative as we developed these initiatives. At the Bistro, these initiatives have led to a number of changes such as the introduction of a specific lunch menu, reopening of our innovation Bistro in Irvine, continued investments in both labor and technology, while testing broader marketing initiatives to support the brand.

At Pei Wei, we adopted a number of changes, including the rollout of new small plates, introducing a lower-priced complete meal offering called Diner Selects, advanced our plans for a new Pei Wei format called Pei Wei Asian Market and launched our most recent LTO Tai Basil Chicken. While it will take time to recognize the full benefits of our initiatives, we are very encouraged by the positive results we are seeing in 2012 in both brands.

Now, as promised, I want to give you an update on our test results, as well as our plans to introduce each initiative across our system. We expect to see visible progress in our 2012 results as our guests are introduced to our new initiatives. However, as we have said before, this is not a one or two-quarter effort. We are currently making investments that carry at cost today, but our plan to generate sustainable sales momentum and help us deliver strong long-term growth for our business.

So let's talk about the specific initiatives at the Bistro and the progress we are making. As a framework, all of our Bistro actions are driven by a four-pronged strategic platform that include efforts to eliminate barriers to more frequent usage, elevate the guest experience, operate with a fanatical focus on guest satisfaction and communicate with our guests in a more meaningful manner. Each of our initiatives are viewed and evaluated through these lenses.

So let's start with an update on our lunch initiative. We have undertaken a series of tests to help provide a more compelling lunch experience through better pricing, a more appropriate portion size, a faster experience and more lunch-specific menu items. This menu has been through several revisions and a testing period. In our current market tests throughout Arizona and two stores in Dallas, we are pleased with the reaction to our new menu, which includes more lunch versions of our classic dishes. This menu now offers guests 20 of our most popular menu items served with a choice of soup or salad each priced under $10. So far, these lunch offerings have been extremely popular and we have seen a steady increase in traffic.

Our recent marketing efforts are moving the needle. Total lunch sales for the test stores have increased dramatically since we began our marketing campaign. Initially, without the benefit of external marketing, we saw guests begin to order from the new lunch menu, but traffic did not increase at a level needed to help offset the impact of lower average ticket.
 
For this initiative to work, we had to increase traffic to offset any margin decline. That meant capturing new guests while at the same time encouraging current guests to come more often. Our comprehensive marketing campaign included television, radio, print ads, billboard and social media, al supporting the message of 20 lunch combo items for under $10.

With this marketing support, we have seen a significant increase in guest traffic, which is up around 20% at lunch since the marketing began. This increase more than offsets an average check decline of about 10%, leaving lunch with positive comps around 10%. Based on these results, we will be introducing our new lunch menu across our system and I'll share more details on this in a minute.






As we worked on elevating the Bistro brand, we made a decision to develop an innovation restaurant at our Irvine location. As one of our original four locations, this restaurant was slated for a significant remodel. As you know, we decided to close this location at the end of last summer as we rebuild all aspects of the restaurant from the ground up. When we reopened Irvine in mid-December, we had completely reimaged this location with a new architectural design, new menu with enhanced small plates, wok cook and grill offering, a separate lunch menu, a complete new wine list, an enhanced craft beer list, new server and bartender uniform and updated music. We kept the name P.F. Chang's and we kept our most popular menu items, but about everything else has changed. This innovation Bistro is now the test and model for what the future of our brand can be.

Guests have responded very favorably to these enhancements. Feedback has been outstanding while sales have been strong since reopening in December. Year-to-date comps are up in the mid-teens and we are seeing a strong two-year comp trend as well. Some of what we introduced in Irvine will roll into the system soon while we continue to evaluate other aspects of our changes.

We continue to elevate the guest experience through the implementation of our call center for phone-in to-go orders. We are really pleased with this initiative. The call center enables us to provide better service to our phone-in guests and increases our average check above the cost of managing the call. And since we no longer have to field the approximately 42,000 to-go calls per week at the restaurant, the use of a call center also provides our in-store teams with more time to elevate the dine-in guest experience.

Given these benefits, we rolled this across our entire system in December. So far, orders handled through the call center have generated an average ticket that is more than 5% higher than other to-go orders net the cost of handling the call. We will continue to focus on elevating our guest experience through innovation and have retained the help of BrandSculpt, a restaurant consulting firm founded by several retired Darden executives. BrandSculpt has deep experience in research-driven concept development and brand evolution. They are working with us with short-term brand alignment, as well as creating a roadmap for Bistro evolution over the next three to five years.

As we strive to communicate with our guests in a more effective manner, we have focused our marketing team on a couple of key initiatives. Going forward, many of our programs will now focus on what the guest perceives when they return on their next visit. One of the best examples of this is the improvement of our new Warrior Card loyalty program, which rolled out in January. Under the new program, we've moved from a straight 10% discount at the time of purchase to a flexible reward program that acknowledges frequency, as well as allowing us to customize rewards based on guest behavior.

Our new loyalty program includes bounceback offers, as well as incentives to register online or through our new mobile app. Our integrated platform with in-store, online and mobile app components provides greater flexibility and better potential for ongoing direct communication with our guests. This will enable us to be more targeted in our rewards and special offers, allowing us to enrich the guest experience at a lower cost.

Another new marketing program currently underway is our Red Envelope bounceback promotion in conjunction with the celebration of the Chinese New Year. From January 23 through February 6, we handed out about 1.8 million red envelopes, each containing an unknown reward for our guest's next visit. When the guest returns, a P.F. Chang's manager or server opens the envelope and reveals our gift. Gifts range from a complimentary appetizer or a desert to 10% to 50% off the guest's total check.

It is too early to speak to final results as the redemption period runs through March 4. However, as a result of this promotion, we saw positive comps at the Bistro for the entire 15-day period that this promotion ran and we continue to see positive comps in the brand post-handing out the red envelopes. We are also looking forward to guests returning for the second visit to discover what reward they received and expect to see some positive traffic during this timeframe.

An additional benefit of our Red Envelope program is the excitement it has generated amongst our employees, as the offer feels more like a gift to the guest rather than a standard discount. Taking the best of what we know, on April 2, we will launch our Bistro Triple Dragon initiative. This blends a number of the key initiatives I have just discussed, including our new lunch menu, some of the best items from our innovation Bistro menu, new music and a new look for our service team. These are all designed to elevate our guest experience and energize our employee teams.

A dinner menu will introduce a variety of new small plate offerings in several of our current Happy Hour products like Flaming Red Wontons and Edamame Dumplings while still retaining all of our most popular dishes. We will also incorporate more salads like our Thai Chicken Noodle Salad and our Vietnamese Crab Salad. But have been very popular in Irvine. We will also add a couple of new wok-cooked items like our Thai Mango Chicken and Crab Fried Rice.

New menus will touch both lunch and dinner and will include both new menu items and also a more varied and competitive pricing structure for each daypart. We are planning significant media support behind the April 2 menu launch to help ensure we effectively communicate our new offerings as broadly as possible and provide the best opportunity for success.






Rather than introduce these tactics individually, we are packaging several together knowing that our guests and employees are more likely to notice and respond. Triple Dragon is one of two planned opportunities to elevate our brand this year; the second will come in the fall. Consumer research tells us the guest is perceptive to expanded menu offerings and we believe this will help us eliminate some of the barriers to usage and increased guest frequency.

The most obvious and most commonly requested addition has been sushi. Another is the expansion of our vegetarian menu offerings. We plan to test both sushi and additional vegetarian items throughout this year. We're looking to incorporate items that test well and can be rolled out quickly into our planned menu updates this fall.

Finally, on the Bistro, we believe that a reasonable reimage and remodel program will both elevate the brand, as well as protect the business we currently enjoy. Irvine is a stunning restaurant and we are currently working on how to take the best elements of that design and incorporate them into our remodel efforts. Where our current remodels give us a fresh look at the Bistro restaurant, the Irvine design provides a brand-new image. With the help of our BrandSculpt team, we are currently evaluating all aspects of the innovation Bistro, including design. The best of all elements will be combined to become the Bistro of the future.

Now turning to Pei Wei. Our initiatives at Pei Wei continue to look at ways to further appeal to consumers in terms of value, speed of service and product diversity. Consumers have told us that entry price was the main barrier to more Pei Wei visits. In an effort to improve our price value proposition, on October 10, we rolled several new lower-priced menu offerings to the entire Pei Wei system.

Diner Selects has a starting price point of $6.25 and features five of our signature entrees in a slightly smaller portion size combined with rice and the guest's choice of a spring roll, soup or an Asian slaw. We also launched three new small plates that are each priced at $3.95. We supported Diner Selects and the small plate rollout with a nationwide marketing campaign in October and November. So far, both the Diner Selects and the additional small plate offerings have been popular with guests and we are seeing a significant number sold each day.

Since the rollout, we have seen an improvement in guest traffic, which sequentially improved over 400 basis points through the end of 2011. And we saw only a negligible decline in average ticket since we introduced the Diner Selects and small plates throughout the system. We continue to see an increase in the number of entrees per check as guests who may have been sharing a single entree in the past each ordered an individual Diner Selects. We are also seeing greater frequency of nonalcoholic drinks being added on by guests who order either the Selects or the small plate.

On the marketing front, we have recently began a focused and comprehensive brand-level marketing for Pei Wei. This platform is designed to enhance perceptions of both value and freshness. Since this new marketing campaign was launched in October, we have seen a lot of positive findings. In our core markets, consumer perception of value and affordability at Pei Wei are at the highest level since 2008. This is primarily due to the popularity of Diner Selects. Additionally, consumer perceptions of ingredient freshness are the highest we've seen in two years.

Our latest LTO, Thai Basil chicken, launched just last week. Special offers for Thai Basil are tied in with our new interactive Pei Wei Passport program through our website. This is designed to increase both initial trial and ongoing participation from guests. For the first time, our LTO is being offered as both a signature entree and as a Diner Selects. This allows us to introduce a new flavor profile, but also helps us promote our new lower price points. We have been incorporating various media, including billboards, radio and online marketing, into our overall platform.

Another key initiative at Pei Wei is the introduction of the Pei Wei Asian Market, which is a variation of our current Pei Wei format. The market was developed based on direct consumer research and addresses both price point and speed-of-service issues that were identified as main barriers to greater frequency at Pei Wei. The market provides us with greater real estate flexibility and carries a smaller store footprint of about 2,500 square feet versus our current 3,200 square feet in the Diner format.

The design will be more urban, yet with a comfortable feel. We will also have the flexibility to provide more seating for single and individual diners. The Market will maintain the same level of product quality and freshness that the guests have grown to expect from Pei Wei while also introducing more menu items at lower price points, including smaller portions and more portable options.

The Market will be more affordable with small plates starting at $1.95 and featuring some of Pei Wei's current favorite menu items for $5.95. The Market will eliminate those elements of the Diner that the guest has not placed a high value on. With these adjustments, we expect the market to carry higher operating margins, as well as a lower sales hurdle requirement than our existing store base.






Again, this is a test that will be reviewed over the next year or so. We are currently converting an existing Pei Wei Asian Diner location in Phoenix, which we expect to reopen in April under the new Asian Market logo. Three or four of our planned new stores for 2012 will be included in this test.

As we look at new store development, we remain confident Pei Wei will be a successful concept and continue to be a long-term growth vehicle for us. During 2009 and 2010, Pei Wei achieved target margins in about the 16% range. For a variety of reasons that we have discussed over time, we fell below those target levels in 2011. We are confident that our plans will return the business to our 2010 levels or above, but we will exercise appropriate caution on the selection of new real estate. With that in mind, we have adjusted our expectations for 2012 development to 12 to 16 new Pei Wei locations.

Now let's turn to our Global Brand business. Global Brand is becoming an increasingly important part of our business as we work with partners to bring our brands to foreign markets, alternative domestic venues and consumers in the grocery stores. Overall, Global Brand had a great year in 2011 with results that were ahead of our expectations. Our international partners have seen strong performance and our retail productline has shown ongoing popularity.

Our businesses have solid momentum and we are planning for continued acceleration of growth in 2012. In fact, we expect total Global Brands revenue to increase over 60% in 2012. Our Home Menu retail productline continues to perform well and we are pleased with the success of this business. Our chefs continue to work with Unilever on future product offerings and we look forward to introducing new SKUs later this year.

On the international license front, we ended 2011 with a total of 17 Bistro locations -- nine in Mexico, five in the Middle East, two in Hawaii, as well as our first location in Puerto Rico. The Puerto Rico location is now one of the highest volume Bistros in the world. In January, we opened our first Bistro in the Philippines. This is our first location in Asia and should give us some insights as to how we play in that part of the world.

Our partner in Mexico, Alsea, opened the first Pei Wei international location in Mexico City during December. This is part of a three-store 18-month development deal. Based on the performance of the initial units, the agreement provides an option for a long-term contract to open 50 additional Pei Wei restaurants throughout Mexico over a 10-year period.

In February, we signed a similar deal with our Middle East partner, Alshaya, to open three Pei Wei locations in the Middle East. The first door is scheduled to open in Kuwait during the first quarter. This agreement also provides an option for a long-term contract to open 55 Pei Wei locations throughout the Middle East. Since both Alsea and Alshaya have already shown great success in developing and operating Bistro restaurants, we are optimistic about these partnerships and Pei Wei's international prospects. This will set the Company up for meaningful growth in profitable revenues in the medium to long term.

In addition, our first two Pei Wei airport locations opened during the fourth quarter -- one in Minneapolis-St. Paul and one in John Wayne, Orange County.

Finally, I want to provide an update on our thoughts and decisions regarding our options for True Food Kitchen. As you know, we have been a lender to True Food Kitchen, a restaurant concept that serves a healthier menu inspired by Dr. Andrew Weil and local restaurant entrepreneur, Sam Fox. There are currently four locations -- two in Arizona and two in California. And the unit economics have been extremely strong. Current average unit volumes are close to $6 million with industry-leading cash margins. In fact, they are as good or better than the early performance of the Bistro.

We are currently a lender only. However, our Board has approved conversion of our debt into a majority equity position. We have mutually agreed with our True Food Kitchen partners to exercise our conversion option and expect to complete this during the second quarter of this year. After completed, we will own 51% of True Food Kitchen with the balance of ownership remaining with Sam and his team.

It is important to note that this is really just a balance sheet transaction for 2012 as we will be required to consolidate True Food Kitchen into our financials once we convert our interest. We don't expect any significant accretion or dilution to earnings this year.

I would also like to remind everyone that we will not see any dilution of our management time or attention. We will continue to focus exclusively on driving growth at the Bistro, Pei Wei and our Global Brands. Our True Food Kitchen will leave all operational and development activities with Sam and his team. Future unit development will be funded through a combination of cash flow from the existing True Food Kitchen restaurant and our cash.

We are extremely excited about this opportunity. True Food Kitchen is enormously popular and has established a dedicated consumer following. It is aligned with the rising demand for healthier menu options while providing a fun and innovative dining experience.





And it provides us with an additional future growth vehicle where we can employ capital. Currently, Sam is planning on opening two additional True Food Kitchens in 2012.

Before I turn it to Mark, I just want to leave you with a couple final thoughts. We remain confident in our plans and initiatives at our two core brands and all early signs support our belief that we are on the right track. As I said earlier, this is not a one or two-quarter exercise. That said, our entire team is focused on restoring positive momentum to the business and the signs are pointing in the right direction.

We are confident in our ability to generate long-term value for our shareholders and during 2012, we are making investments in a growth platform that will benefit us for years to come. We believe the work we are doing today will drive significant and accelerating growth in 2013 and beyond. With that, I am going to turn it to Mark for the financial update.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Thanks, Rick. For the fourth quarter of 2011, we earned $0.19 per share compared to $0.64 last year. We had a handful of adjustments this quarter, so I want to spend a few minutes discussing them before I move on to our operating results. Excluding adjustments, fourth-quarter net income would have been $0.11 higher, or $0.30 a share. The first adjustment was a charge of $5 million, or $0.17 a share, to impair two Bistro locations -- one in Cambridge, Massachusetts and one in Chevy Chase, Maryland. Accounting rules require us to do an impairment assessment and as part of our quarterly analysis, we reviewed locations with negative restaurant-level cash flows over a trailing 12-month period.

As a result of our fourth-quarter review, we wrote off the asset balances for these two locations. These restaurants continue to operate and we are working on improvements that will help these locations generate positive cash flow.

The second adjustment was a charge of $1.3 million, or $0.04 a share, for lease termination and other charges related to the closure of three underperforming Pei Wei restaurants. We had previously recognized full asset impairments for these locations during the second and third quarters, after which they still continued to operate. After further reviewing the operating results for these stores, we made the decision to close them, which occurred at the end of the fourth quarter.

We also recognized a benefit of $1.5 million, or $0.05 a share, from lower share-based compensation, primarily resulting from the final value adjustment for the Co-CEO performance units, which vested at the end of the year. The final value of these awards was $0.29 per unit or a total expense of $350,000 based on our stock performance relative to the Russell 2000 over an approximate three-year period.

Finally, a lower effective tax rate for the full year resulted in a true-up benefit of approximately $0.05 a share that was recognized in the fourth quarter. The reduced rate was primarily due to lower 2011 net income, as well as higher [WATSI] and higher [at] credits. So, as I mentioned earlier, excluding all these adjustments, net income would have been $0.11 higher, or $0.30 a share during the fourth quarter.

Now, let's talk about the changes in these normalized results versus last year, starting with sales. While our top-line results remained soft, we are pleased with the progress we have made, particularly towards the end of the year. Bistro revenues were down 1.1% in the fourth quarter with comp sales coming in at negative 2.4%. Importantly though, comps sequentially improved during the quarter with December down only 1.1%. This is the best monthly comp sales performance we have seen at the Bistro since March of 2011.

Weekdays continue to perform better than weekends. That is likely a reflection of the ongoing strength of our business guests, as well as some favorable holiday shifts compared to last year. Dinner, once again, outperformed lunch with weekday dinner the strongest daypart overall. Additionally, we continue to see positive comps in our large dollar ticket bucket, which we define as all tickets over $45. This bucket was up 1% in the fourth quarter. The decline in our under $45 ticket bucket continued to drag down our overall comps, though we did see sequential improvement in the fourth quarter. These trends have gotten even better so far this year. The over $45 bucket comps are up over 4% and the under $45 bucket comps are down just under 3%.

From a geographic perspective, we saw negative comps in most states with sequential comp declines in some of our largest revenue states like Texas, Florida and Arizona. The good news is that we saw sequential comp trends improve in large states like California and New Jersey.

At Pei Wei, our fourth-quarter revenues increased 0.5% with comp sales down 1.9%. Pei Wei experienced negative comps in Texas, Arizona, Florida and California, which collectively represents two-thirds of our business. On a positive note, all of these states, except Arizona, had solid sequential comp improvement versus last quarter.






We also saw ongoing expense pressures across many parts of the business. As expected, commodity costs were higher for most of our product basket with cost of sales increasing about 70 basis points versus last year. For the fourth quarter, prices climbed for many of our key commodities compared to the prior year, including wok oil, Asian imports, seafood, produce and beef. However, with the benefit of a contractual price rebate on poultry, we were able to partially offset these increases. Without the poultry rebate, cost of sales would have been up more than 100 basis points, consistent with our expectations of 4% to 5% commodities cost pressure this quarter.

Consolidated labor expense increased about 130 basis points versus last year. This included the cost of targeted investments in staffing to support the Bistro guest experience, as well as some labor inefficiencies at Pei Wei due to higher turnover in 2011. We also saw higher payroll taxes, increased health insurance costs and the impact of deleverage on lower sales volumes at both concepts. Lower management incentives helped to partially offset these pressures.

Operating expense increased 50 basis points this quarter, primarily due to sales deleverage at both concepts, as well as higher costs related to repair and maintenance and take-out supplies. Occupancy expense increased 60 basis points this quarter, which includes the impact of the $1.3 million in Pei Wei store closure charges discussed earlier. Excluding these charges, occupancy expense was flat versus prior year.

D&A for the quarter was $18 million versus $20 million last year. The main driver of the decrease was lower share-based compensation expense, which was down almost $2 million compared to last year, including the benefit of the current quarter share-based comp adjustments I mentioned earlier. D&A also included incentive compensation across all concepts and the home office, which reflects our operating performance.

Now let's talk about cash. We ended the year with a cash balance of $50 million and essentially no debt on the balance sheet. Cash flow from operations was $33 million this quarter. That is down about $17 million from the fourth quarter of last year, primarily due to lower net income, as well as the timing of some balance sheet items primarily related to taxes. We spent a total of $11 million in CapEx in the fourth quarter resulting in free cash flow after CapEx and dividends of around $17 million. For the full year, cash flow from operations was $103 million and free cash flow after CapEx and dividends was $43 million.

Returning cash to shareholders continues to be a priority for P.F. Chang's. And we are doing so in the form of share buybacks and quarterly cash dividends. During 2011, we returned more than $82 million back to our shareholders, including over $22 million in the form of cash dividends and almost $60 million through share repurchases. And I am pleased to report that we also announced that our Board of Directors has increased our share buyback authorization from $100 million to $150 million.

Both management and the Board are confident in the Company's long-term strategy and do not believe that our stock price currently reflects that value. And although the buyback authorization runs to the end of 2013, we plan to utilize the entire amount during fiscal 2012. We will be opportunistic in our approach to timing and plan to utilize existing cash balances, excess cash flow and available credit lines to facilitate our repurchases.

Just to remind everyone, we have a $150 million credit facility, which expires in October of 2016. We currently do not have any borrowings against that facility. However, we are using just over $16 million for letters of credit related to our insurance programs. Based on where LIBOR is today and our current leverage position, our borrowing costs would be below 3%.

Now, let's turn to our outlook for 2012. Overall, we anticipate 2012 consolidated revenue growth of 1% to 2%. This is based on our assumption of flat comps at both concepts with expectations of stronger performance in the back half of the year compared to the front half as initiatives that are in tests and underway are expected to begin to drive positive traffic. Consolidated revenue growth also includes incremental revenues from our Global Brands businesses, which are expected to increase more than 60% this year. For the first six weeks of this year, Bistro comps are running up slightly and Pei Wei is down about 1.5%.

Turning to restaurant operating income, we are expecting to see total pressure of about 30 to 40 basis points in 2012. This is on a normalized basis after backing out the impact of the asset impairments and store closure charges in 2011 and reflects the anticipated impact of cost pressures, the majority of which would hit the cost-of-sales line. We expect commodity inflation of 4% to 5% for 2012 with a portion of this pressure likely being offset with a slight menu price increase, as well as the benefit of anticipated product mix shifts.

On the labor line, we anticipate normal inflation in areas like wage rates and health insurance, as well as some new store inefficiencies. We think we now have labor at a level we can maintain and begin to leverage as sales increase. We will also see modest pressure on operating expenses as we invest in incremental marketing in support of various sales-driving initiatives. And the addition of Global Brands' contribution helps offset some of these pressures.






Keep in mind that we would expect to see heavier margin pressure in the front half of the year as we make investments in our initiatives. We also won't lap some of the labor investments we made in 2011 until the back half of this year. So that is a source of additional pressure during the first half of 2012. We will also see an increase of about $1 million to $1.5 million in pre-opening expense due to the increase in planned store openings this year.

Looking at G&A expense, we are anticipating consolidated G&A in the $78 million to $80 million range for 2012. This assumes the absence of any significant share-based comp credits, which gave us a benefit of over $7 million in 2011. So basically flat versus last year. And we expect our effective tax rate to be 27% to 28% depending on our income for the year.

In terms of new unit development, we expect to open two to three new Bistros and 12 to 16 Pei Weis. Under the Global Brands umbrella, we are expecting our partners to open 10 to 14 new international Bistros, a significant increase relative to the 17 international Bistros in operation at the end of 2011. We also anticipate the opening of two to four new international Pei Weis and three to five additional Pei Wei airport locations, all under the licensing agreements. In addition, our Unilever royalty rises for the final time in April.

We expect 2012 EPS to range from $1.50 to $1.60. This is comparable to our 2011 normalized EPS of $1.53, which excludes the asset impairment, store closure and severance charges, as well as the benefit of share-based compensation adjustments, all of which net to an impact of about $0.17 a share in 2011 reported results. We anticipate that our quarterly EPS will be higher in the back half of 2012 than in the first half. This reflects the impact of investments we are making in our initiatives during the early part of the year, combined with the resulting benefit of traction we expect to gain in the latter part of the year. For the first quarter, we expect EPS to range from $0.34 to $0.36.

Finally, we expect cash flow from operations to range between $105 million and $115 million and CapEx of approximately $55 million to $60 million in 2012. And we are pleased to report that our Board has approved a 10% increase in our quarterly cash dividends per share from $0.25 a share to $0.275 a share starting with our next dividend payment on March 12. With that, let's open the call up for questions. Back to you, operator.

QUESTION AND ANSWER
Operator
(Operator Instructions). Destin Tompkins, Morgan, Keegan.
Destin Tompkins - Morgan, Keegan - Analyst
Thank you. I'm not sure exactly where to begin. That was a pretty thorough review. But looking at, I guess, the Bistro launch test, just curious if you could talk about -- as you roll that out, the marketing support. You mentioned, I think, TV, radio, print, billboard. How you will use that kind of across the system. And then also, if you wouldn't mind, kind of sharing what are you seeing at lunch? With traffic up 20% at lunch and I think comps you said are up 10% -- what are you seeing at dinner, excuse me, I don't know if I asked that? But just curious kind of is there an impact on dinner.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Hey, Destin, this is Rick. We actually are seeing a little bit of a halo effect carrying over into dinner, probably about -- what was it, Mark, about 2%?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes, about 2%.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Yes, about 2% sort of incremental lift at dinner as well. Now, that is clouded a little bit by the fact that we also had our Red Envelope Chinese New Year activity going on. So it is not clear how much of it is halo from the marketing impact that we focused on in lunch. We are really encouraged by the lunch results and I think one of the bigger learnings for us has been the impact of a more concentrated and focused media effort behind it.

As I mentioned in the comments, we were finding guests willing to make the change from a regular Bistro entree to a lunch-sized lunch-priced combination with either salad or soup simply by putting the menu in front of them. And we have gone through a wide variety of different iterations of that menu over the last six months, ranging from almost exclusively brand-new items to lunch-sized portions of our most popular items. And what we are finding, and it may not come as any surprise, that we have got -- the balance of the two is really probably the best option for guests today.

As we look forward and we get ready to roll this into the system on April 2, along with a bunch of other initiatives in the Triple Dragon release, the future marketing for the lunch component will focus with -- we will continue to use television because we





found that to be particularly effective here in Phoenix, as well as digital.
Destin Tompkins - Morgan, Keegan - Analyst
Okay. And as you guys talked about the early sales trends in 2012 being improved, do you have a sense on weather benefit? I think there has been a lot of discussion about favorable weather trends in certain areas of the country. As you look at your markets outside of maybe weather-affected areas and weather-affected areas, can you kind of help us understand how much of the trend you think is really driven by the initiatives and how much may be favorable weather?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes, hey, Destin, this is Mark. We are seeing strength across all of our systems. So from markets that had weather last year and markets that didn't, we are seeing strength across the entire system. When we look at how Bistro is running this year, it is important to also note that it is really a two-year basis that we are seeing positive comps. So last year in January were positive and we are seeing it positive as well. So a two-year comp trend.
Destin Tompkins - Morgan, Keegan - Analyst
Okay, great. I will pass it on to someone else. Thanks, guys.

Operator
Sharon Zackfia, William Blair.
Sharon Zackfia - William Blair - Analyst
Hi, good morning. I guess, Mark, I apologize if I missed this, but there is obviously a lot going on at the different concepts and I think it would probably be helpful if we could get the comps for the fourth quarter by concept broken out between traffic and average ticket. And then if you have the average ticket broken out between price versus mix that would probably be helpful as well.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
We had about a 1% price at the Bistro. We quit giving the breakout between traffic and ticket simply because what you mentioned. We have a lot of initiatives that are going on and that really clouds our ability to break that out for you. We don't have a really good proxy for the number of guests that are coming in. And so, therefore, we are giving you comps and really that is what we are going to stick with.
Sharon Zackfia - William Blair - Analyst
Okay, maybe a second question. I mean it was helpful to hear about, at the Bistro, how the marketing around the new lunch program really stimulated traffic and sales. Is there any -- and again, I apologize if I missed this; you guys had a lot to say. Do you have any expectation as to the total marketing spend that you expect at the Bistro this year versus last year?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Sharon, more than likely, we are going to stay pretty close to last year's marketing spend as a percentage of sales. We may just move it around to different times during the year. So my expectation is we will invest more in the first half of the year as we roll the Triple Dragon. The total number at the Bistro is just a little under say $10 million, give or take a little bit.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes, it is a little bit up from this year. We kind of underspent this year as we were trying to figure out what were the initiatives that we wanted to spend on. We just didn't want to spend marketing, so this year was a little bit light. As we look at next year, it is going to be up slightly. It is going to have about 20 basis points of pressure on the operating expense line in 2012.
Sharon Zackfia - William Blair - Analyst
Okay, and then last question and I'll give it to somebody else. Are you seeing a spike in partner turnover as you are implementing all of these changes at Pei Wei and the Bistro? And if you are seeing a spike, is it a good spike or a bad spike? Meaning are you getting rid of people you wouldn't want to have stick around anyway?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Sharon, no, we haven't really seen an unintended spike. If there have been changes, they have been more directed rather than being done to us.
Sharon Zackfia - William Blair - Analyst
Great, thank you.
Operator
Bryan Elliott, Raymond James.
Bryan Elliot - Raymond James - Analyst





Hey, good morning. Just I guess some of it plays off of Sharon's question. Could you -- you did give us the sequential traffic improvement at Pei Wei during the quarter, I believe, of 400 bps, something along those lines. There was a lot going on there as well here. I think I caught that comment. Could you disaggregate that or help us understand and reconcile that with the still negative comp for the quarter, I guess? What was the magnitude of the check decline?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
So I think what you are talking about is the 400 basis point improvement since we rolled out the Diner Selects.
Bryan Elliot - Raymond James - Analyst
Right, right.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
That is compared back to October. And so October compared to where we are today, we are seeing a 400 basis point traffic improvement.
Bryan Elliot - Raymond James - Analyst
Now is that just sequentially or is that improvement in year-over-year?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
No, that is sequential from where we were in October, so that is probably the confusion.
Bryan Elliot - Raymond James - Analyst
Okay. But we normally -- I guess how much year-over-year since obviously October to December is a huge ramp in traffic for everybody?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Well, we are looking at the 400 basis point -- the comp -- component of that. So the trend October versus December -- where we were trending in October and where we were trending after we rolled it out.
Bryan Elliot - Raymond James - Analyst
So it is a year-over-year, not a pure sequential -- I guess maybe more simply since it is so early, what average check degradation are you seeing after the introduction of these lower ticket items?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Pei Wei, we are really not; it is relatively flat. It is down very, very slightly so far at Pei Wei, like less than half a percent.
Bryan Elliot - Raymond James - Analyst
Okay. So the negative comps in the quarter was traffic-driven?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes.
Bryan Elliot - Raymond James - Analyst
Thank you.
Operator
Andy Barish, Jefferies.
Andy Barish - Jefferies & Co. - Analyst
Yes, just a question on the new Pei Wei stuff, the Asian Market openings and the conversion. What are the goals from a margin perspective in that new business and how does it get there? Is it set up with a higher margin structure initially?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Andy, as we researched the barriers to entry and kind of how we could drive some incremental frequency at Pei Wei, we did a lot of work in terms of how Pei Wei performs in relationship to its competitive set and the various things that we offer at Pei Wei that may or may not be embedded in some of our other competitors.

So as we looked at it, there were a couple of goals. One is how can we improve cash margins at Pei Wei, how can we deliver an experience that is consistent with what would drive increased frequency and visitations, and how can we do it in a way that gave us some more flexible real estate opportunity, both from an economic perspective, as well as from just a pure piece of real estate and size of the facility.

So in that, what we learned was there were several elements that we pay a lot for in the Pei Wei experience that the guest didn't necessarily place the same level of value. So for example, we deliver the food to the guest. We cook it to order and we deliver it





to the guest at the table. Cooking it to order is something that they value highly. Delivering it to the table is not something that they place a great premium on.

So in our efforts to try to reduce some costs in order to get lower price points, which was the primary barrier to entry, we have eliminated some of those service aspects and gone to a more quick version versus a casual version. That all rolls up to a targeted margin of somewhere in say the 18% range and we believe we can achieve that on slightly lower sales volumes.
Andy Barish - Jefferies & Co. - Analyst
And one quick follow-up. Just the labor line, broadly speaking, will you lap the sort of addback or investment back in labor fully in the third quarter? Is that when you kind of get to an apples-to-apples comparison in the Bistro business?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes, Andy, that is a good clarification. We are going to see some labor pressure in the first half of the year until we lap those investments that we made and that was towards the end of Q2, so you are right. Q3 is really the first period where we are going to see a like type of comparison.
Andy Barish - Jefferies & Co. - Analyst
Thank you.
Operator
Larry Miller, RBC.
Larry Miller - RBC Capital Markets - Analyst
Good morning, guys. Thanks. Yes, I just wanted to get your sense on how you are thinking about the Bistro over the longer term, what average unit volumes might look like, what operating margins might look like given all these new initiatives? Can you give us a sense of that? Thanks.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
When you think about operating margins, we believe we have demonstrated in the past the opportunity or at least the history of delivering 16%, 18% operating margins. And given the work that we are doing today to try and drive incremental traffic, we believe that those are the types of targets that we should be shooting for.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
When we look at it, this isn't a one-year -- we're going to get back to the 18% cash operating margin at the Bistro. It is going to take us a few years. But in reality, if you look at it, if we -- let's say that we experience a significant comp. Well, a 3% comp increase should put us back closer to that 18%. The investments -- the nice thing is investments that needed to be made have been made. We made those in 2011 and as we begin to grow our top line, we begin to leverage off of all those investments and bring the cash margin back to that 18%.
Larry Miller - RBC Capital Markets - Analyst
Great, thanks. If I could just follow up on a different question. You did say that you are thinking about taking some pricing or slight pricing at the Bistro in 2012. What is your sense on how much you might take and the pricing power of the concept given kind of your price value repositioning? Thanks.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
We are very cautious right now when it comes to price. We do think there is some items on the menu where we can take a little bit of price and not impact the guest experience or decrease traffic. And so we would be taking that, but that is really going to net out to less than probably 1% at the Bistro. And frankly, if we look at Pei Wei right now, we really don't have any plans to take price at Pei Wei.
Larry Miller - RBC Capital Markets - Analyst
Okay, thanks, guys. Good luck.
Operator
John Ivankoe, JPMC.
John Ivankoe - JPMorgan Chase - Analyst
Great, thank you. A question on advertising, if I may. In Phoenix, over the Super Bowl, I actually happened to see a few different P.F. Chang's adds, specifically regarding your new lunch offering. So I mean if can -- I mean maybe that was just completely opportunistic, maybe it was symbolic, but I can't imagine a better way to reach customers in terms of media.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
John, it was free. No, honestly, we made a substantial investment in marketing here in the Phoenix marketplace and shortly before





the Super Bowl, there were a couple of unbought ads that the TV station contacted us and said, look, if we don't sell it, we will basically roll it into your package. So we were able to take advantage of some pretty good placements right at the beginning of the halftime.

It is interesting, the Monday following the Super Bowl, we saw about a 55% jump in lunch traffic in comps -- or lunch comps. So if anybody is questioning whether or not Super Bowl marketing worked, it worked for us.
John Ivankoe - JPMorgan Chase - Analyst
Agreed. The placement was amazing during the game. I mean not just -- I mean obviously very surprised to see (multiple speakers).
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Yes, and it was limited just to the Phoenix marketplace, but it was kind of fun to watch. We thought more highly of ourselves than we typically would.
John Ivankoe - JPMorgan Chase - Analyst
But what does that mean in terms of like how many markets or how many Bistro stores, however we should think about it, might receive some type of television -- communicating the change at the concept specifically regarding lunch or anything else?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
The television portion of it, we are going to go national. We will do a national cable package and then as I said, the balance of it will be digital media and somebody will correct me if I am wrong, but I think it is about a three-week national television buy.
John Ivankoe - JPMorgan Chase - Analyst
When does that happen?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Yes, it will start around the launch of our Triple Dragon initiative, which would be April 2.
John Ivankoe - JPMorgan Chase - Analyst
Okay, all right, great. That's it for me. Thanks.
Operator
John Glass, Morgan Stanley.
John Glass - Morgan Stanley - Analyst
Thanks very much. The first one is following up on the Triple Dragon. Can you just -- it sounds like it is a package of different initiatives, including lunch, but also some smaller plates. So has that been tested as a bundle before? Are the risks still unintended consequences as a result?
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO
Yes, it's actually a good portion of what we are currently doing in Irvine. And what we are doing is we are taking the better elements of -- and the things that we could evaluate quickly from our Irvine experience and rolling it into our Triple Dragon launch. So separately, we have been testing launch, as you know. When we opened Irvine, we opened with the new lunch menu. We opened with a variety of smaller plates and a slightly more varied pricing structure.

The entree items that are moving onto the dinner menu are the most popular ones from the Irvine experience. So our Caramel Mango Chicken -- rarely have we seen over the last many years a new product entering the top 10 of our product mix. In Irvine, the Caramel Mango Chicken is in -- it's in the top 10. It is probably about or maybe top 15, but it has been a very popular product.

So we have a high level of comfortability that both the lunch menu and the enhancements that we are getting from our Irvine experience can roll into the Triple Dragon and really impact both how the employee feels, particularly around things like uniforms and music, as well as the menu in terms of how the guest has been responding to.
John Glass - Morgan Stanley - Analyst
Okay, thanks. And unrelated, Mark, does the G&A that you quoted for 2012, does that include a new share-based compensation? I think you talked about $0.20 or $0.24 a share in the new program -- or does it not?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Yes, the $78 million to $80 million includes the 2011 equity that will be issued -- or 2012 equity that will be issued, but when you look at G&A on a normalized basis, it is relatively flat once you adjust for the credit set that we had in 2011 related to share-based comp.
Rick Federico - P.F. Chang's China Bistro, Inc. - Chairman & Co-CEO





We are coming up on the bottom of the hour. We have got time for one more question and then we would be happy to take calls here at the office for anybody that we didn't get a chance to get to. So operator, one more question please.
Operator
Howard Penney, Hedgeye Risk Management.
Howard Penney - Hedgeye Risk Management - Analyst
Does your guidance for the year include the full $150 million being repurchased and what you think the timing on that would be?
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
That's a good question. The guidance that we have given you does include that. As far as timing, our intent is we will be opportunistic, but we intend to get it done as rapidly as we can.
Howard Penney - Hedgeye Risk Management - Analyst
Thanks.
Mark Mumford - P.F. Chang's China Bistro, Inc. - CFO
Okay, great. I want to thank everyone for joining us here today and we look forward to updating you on our progress in the quarters ahead. Thank you very much.
Operator
Thank you. This does conclude today's conference. You may disconnect at this time. Thank you.