8-K

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): April 23, 2008

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 of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information.

Item 2.02 Results of Operations and Financial Condition.

On April 23, 2008, P.F. Chang’s China Bistro, Inc. (the “Company”) issued a press release describing selected financial results of the Company for the quarter ended March 30, 2008. Also on April 23, 2008, the Company held its Q1 Earnings Conference Call. The press release and transcript of the Q1 Earnings Conference Call are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively.

There are two related corrections to the transcript. During the conference call it was reported that the Company had a benefit from a bonus accrual reversal in the second quarter of 2007 of just over $2 million. The correct amount is approximately $850,000. Additionally, it was reported that if the Company records 100% of its bonus target in the second quarter of 2008, there will be 200 basis points of pressure on general & administrative expenses due to bonus expense. The correct amount is approximately 70 basis points of pressure.

In addition to this Report on Form 8-K and pursuant to General Instruction B.2 of Form 8-K, the Exhibits are being furnished, not filed, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	April 23, 2008 Press Release by P.F. Chang’s China Bistro, Inc.
99.2	Transcript of Earnings Conference Call held April 23, 2008

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: April 24, 2008
	/s/ Mark D. Mumford
	Mark D. Mumford Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	April 23, 2008 Press Release by P.F. Chang’s China Bistro, Inc.
99.2	Transcript of Earnings Conference Call held April 23, 2008

EX-99.1

Exhibit 99.1

P.F. CHANG’S CHINA BISTRO, INC.

P.F. CHANG’S EARNS $0.40 PER SHARE

SCOTTSDALE, ARIZONA, (April 23, 2008) - P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) today reported consolidated net income of $9.6 million for the first quarter ended March 30, 2008 compared to $10.5 million for the first quarter of the prior year. Net income per diluted share for the first quarter of both fiscal 2008 and the prior year was $0.40.

(000 except per share data)	1Q08		1Q07
Revenues	$	308,580	$	263,684
Income from continuing operations	$	9,692	$	10,758
Net income	$	9,649	$	10,465
Income from continuing operations per diluted share	$	0.40	$	0.41
Net income per diluted share	$	0.40	$	0.40
Weighted average shares — diluted		24,295		26,046

Net income for both years includes a loss from discontinued operations related to the Company’s previously announced decision to exit operation of its Taneko business. The Company did not reach a definitive agreement with the anticipated buyer announced in early January 2008 and continues to actively pursue the sale of Taneko’s long-lived assets during 2008.

For the first quarter of 2008, consolidated revenues were $308.6 million compared to $263.7 million for the first quarter of 2007. Sales at company-owned P.F. Chang’s China Bistro restaurants accounted for $236.1 million of consolidated revenues and sales at the Company’s Pei Wei Asian Diner restaurants accounted for $72.5 million of consolidated revenues.

For the 13 weeks ended March 30, 2008, comparable store sales increased 0.1% at the Bistro (including a 5% to 6% increase in the average check reflecting the net impact of price and menu mix changes) and decreased 2.4% at Pei Wei (including a slight increase in average check reflecting the net impact of price and menu mix changes) compared to the 13 weeks ended April 1, 2007. Comparable store sales at the Bistro increased 2.7% in January and decreased 1.5% and 1.2% for February and March, respectively. Comparable store sales at Pei Wei decreased 1.1%, 2.7%, and 3.5% for January, February and March, respectively.

During the first quarter of 2008, the Company opened five new Bistro restaurants and 11 new Pei Wei restaurants.

2008 Expectations

“Although revenues at both concepts for the first quarter surpassed our expectations, we continue to believe that consumers will remain under economic pressure for the rest of the year”, noted Rick Federico, CEO. “We are pleased with our first quarter earnings which reflect better than anticipated operating results, particularly our cost of sales margins and general & administrative costs which were more favorable than expected during the quarter. While we remain optimistic regarding our business, given the level of uncertainty surrounding the macro consumer environment, we are modestly increasing our earnings expectations for the year from a range of $1.32 — $1.38 per share to a range of $1.34 — $1.40 per share.”

Page 1 of 8

The Company plans to open a total of 17 new Bistro restaurants and 25 new Pei Wei restaurants during 2008 and continues to expect full year fiscal 2008 consolidated revenues to increase 13 to 14 percent.

The Company is hosting a conference call today at 1:00 pm ET in which management will provide further details on the first quarter results. A webcast of the call can be accessed through the company’s website at http://www.pfcb.com.

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, traditional Chinese cuisine and American hospitality in a sophisticated, contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared Asian cuisine in a relaxed, warm environment offering attentive counter service and take-out flexibility.

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. Because these costs are solely related to expansion of the Company’s business, they make an accurate assessment of the health of its ongoing operations more difficult and are therefore excluded. Additionally, general and administrative expenses are only included in the Company’s consolidated financial presentation as these costs relate to support of both restaurant concepts and are generally not specifically identifiable to individual restaurant operations. As the Company’s expansion is funded entirely from its ongoing restaurant operations, restaurant operating income is a primary 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 4 through 6 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 estimates of its earnings, revenues and anticipated new restaurants are forward-looking statements. The accuracy of these forward-looking statements may be affected by certain risks and uncertainties, including, but not limited to, the Company’s ability to locate acceptable restaurant sites; open new restaurants and operate its restaurants profitably; the Company’s ability to hire, train and retain skilled management and other personnel; the company’s ability to access sufficient financing on acceptable terms; changes in consumer tastes and trends; customer acceptance of new concepts; national, regional and local economic and weather conditions; changes in costs related to food, utilities and labor; and other risks described in the Company’s recent SEC filings.

Contact: P.F. Chang’s China Bistro, Inc.			(480) 888-3000
	Media:	Laura Cherry	laura.cherry@pfcb.com
	Investor:	Mark Mumford	mark.mumford@pfcb.com

Page 2 of 8

P.F. Chang’s China Bistro, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

	13 Weeks Ended
	March 30,			April 1,
	2008			2007
Revenues	$	308,580		$	263,684
Costs and expenses:
Cost of sales		84,304			72,632
Labor		104,558			88,863
Operating		48,662			41,066
Occupancy		17,919			14,853
General & administrative		18,521			16,494
Depreciation & amortization		16,652			12,578
Preopening expense		2,824			2,539
Partner investment expense		411			(1,401	)
Total costs and expenses		293,851			247,624
Income from operations		14,729			16,060
Interest and other income (expense), net		(934	)		343
Minority interest		(705	)		(1,647	)
Income from continuing operations before provision for income taxes		13,090			14,756
Provision for income taxes		(3,398	)		(3,998	)
Income from continuing operations		9,692			10,758
Loss from discontinued operations, net of tax		(43	)		(293	)
Net income	$	9,649		$	10,465
Basic income per share:
Income from continuing operations	$	0.40		$	0.42
Loss from discontinued operations, net of tax		(0.00	)		(0.01	)
Net income	$	0.40		$	0.41
Diluted income per share:
Income from continuing operations	$	0.40		$	0.41
Loss from discontinued operations, net of tax		(0.00	)		(0.01	)
Net income	$	0.40		$	0.40
Weighted average shares used in computation — basic		23,972			25,488
Weighted average shares used in computation — diluted		24,295			26,046

Page 3 of 8

P.F. Chang’s China Bistro, Inc.
Supplemental Financial Information

	2006			1Q07			2Q07			3Q07			4Q07			2007			1Q08
Units		259			269			283			299			316			316			332
Sales weeks		11,848			3,425			3,588			3,776			4,060			14,849			4,252
AWS		79,074			76,988			74,365			71,579			71,905			73,589			72,573
Revenues		936,864			263,684			266,823			270,282			291,933			1,092,722			308,580
Operating costs
Cost of sales		256,259			72,632			72,766			73,865			80,450			299,713			84,304
Labor		309,774			88,863			90,307			91,789			97,100			368,059			104,558
Operating		146,247			41,066			42,198			43,816			46,913			173,993			48,662
Occupancy		52,408			14,853			15,561			15,970			16,727			63,111			17,919
Minority interest		8,116			1,647			1,121			808			593			4,169			705
Depreciation & amortization		44,793			12,578			13,500			14,749			16,005			56,832			16,652
Restaurant operating income		119,267			32,045			31,370			29,285			34,145			126,845			35,780
Development costs
Preopening expenses		12,286			2,539			3,296			4,939			4,209			14,983			2,824
Partner investment expense		4,371			(1,401	)		(468	)		(71	)		(72	)		(2,012	)		411
Other expenses
General and administrative (1)		56,030			16,494			15,684			17,186			17,604			66,968			18,521
Interest and other (income) expense, net		(1,315	)		(343	)		(179	)		10			612			100			934
Provision for income taxes		13,712			3,998			3,407			1,618			2,540			11,563			3,398
Income from continuing operations		34,183			10,758			9,630			5,603			9,252			35,243			9,692
Loss from discontinued operations, net of tax		(930	)		(293	)		(353	)		(328	)		(2,206	)		(3,180	)		(43	)
Net income		33,253			10,465			9,277			5,275			7,046			32,063			9,649
Income from continuing operations per FDS	$	1.28		$	0.41		$	0.37		$	0.21		$	0.37		$	1.36		$	0.40
Fully diluted shares (FDS)		26,737			26,046			26,129			26,105			25,257			25,899			24,295
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		27.4	%		27.5	%		27.3	%		27.3	%		27.6	%		27.4	%		27.3	%
Labor		33.1	%		33.7	%		33.8	%		34.0	%		33.3	%		33.7	%		33.9	%
Operating		15.6	%		15.6	%		15.8	%		16.2	%		16.1	%		15.9	%		15.8	%
Occupancy		5.6	%		5.6	%		5.8	%		5.9	%		5.7	%		5.8	%		5.8	%
Minority interest		0.9	%		0.6	%		0.4	%		0.3	%		0.2	%		0.4	%		0.2	%
Depreciation & amortization		4.8	%		4.8	%		5.1	%		5.5	%		5.5	%		5.2	%		5.4	%
Restaurant operating income		12.7	%		12.2	%		11.8	%		10.8	%		11.7	%		11.6	%		11.6	%
Preopening expenses		1.3	%		1.0	%		1.2	%		1.8	%		1.4	%		1.4	%		0.9	%
Partner investment expense		0.5	%		(0.5	%)		(0.2	%)		(0.0	%)		(0.0	%)		(0.2	%)		0.1	%
General and administrative (1)		6.0	%		6.3	%		5.9	%		6.4	%		6.0	%		6.1	%		6.0	%
Interest and other (income) expense, net		(0.1	%)		(0.1	%)		(0.1	%)		0.0	%		0.2	%		0.0	%		0.3	%
Provision for income taxes		1.5	%		1.5	%		1.3	%		0.6	%		0.9	%		1.1	%		1.1	%
Income from continuing operations		3.6	%		4.1	%		3.6	%		2.1	%		3.2	%		3.2	%		3.1	%
Loss from discontinued operations, net of tax		(0.1	%)		(0.1	%)		(0.1	%)		(0.1	%)		(0.8	%)		(0.3	%)		(0.0	%)
Net income		3.5	%		4.0	%		3.5	%		2.0	%		2.4	%		2.9	%		3.1	%
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income		119,267			32,045			31,370			29,285			34,145			126,845			35,780
Add: Minority interest		8,116			1,647			1,121			808			593			4,169			705
Less: General and administrative (1)		(56,030	)		(16,494	)		(15,684	)		(17,186	)		(17,604	)		(66,968	)		(18,521	)
Less: Preopening expenses		(12,286	)		(2,539	)		(3,296	)		(4,939	)		(4,209	)		(14,983	)		(2,824	)
Less: Partner investment expense		(4,371	)		1,401			468			71			72			2,012			(411	)
Income from operations		54,696			16,060			13,979			8,039			12,997			51,075			14,729

Note : Consolidated results include the impact of Shared Services and Other as well as the Bistro and Pei Wei concepts
(1)	Consolidated general and administrative expenses includes the costs of supporting the Company, including all concepts

Page 4 of 8

Concept: P.F. Chang’s China Bistro
Supplemental Financial Information

	2006			1Q07			2Q07			3Q07			4Q07			2007			1Q08
Units		152			153			157			162			172			172			177
Sales weeks		7,187			1,979			2,028			2,078			2,204			8,289			2,275
AWS		105,265			104,592			102,615			100,325			102,514			102,486			103,763
Revenues		756,634			207,028			208,174			208,544			225,997			849,743			236,089
Operating costs
Cost of sales		206,567			56,781			56,696			56,943			62,158			232,578			64,410
Labor		247,097			69,312			69,827			69,946			73,834			282,919			79,318
Operating		115,465			31,684			32,194			32,981			35,004			131,863			36,324
Occupancy		40,683			11,217			11,598			11,739			12,505			47,059			12,981
Minority interest		6,993			1,333			837			599			582			3,351			497
Depreciation & amortization		34,451			9,483			10,054			10,861			11,896			42,294			12,265
Restaurant operating income		105,378			27,218			26,968			25,475			30,018			109,679			30,294
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		27.3	%		27.4	%		27.2	%		27.3	%		27.5	%		27.4	%		27.3	%
Labor		32.7	%		33.5	%		33.5	%		33.5	%		32.7	%		33.3	%		33.6	%
Operating		15.3	%		15.3	%		15.5	%		15.8	%		15.5	%		15.5	%		15.4	%
Occupancy		5.4	%		5.4	%		5.6	%		5.6	%		5.5	%		5.5	%		5.5	%
Minority interest		0.9	%		0.6	%		0.4	%		0.3	%		0.3	%		0.4	%		0.2	%
Depreciation & amortization		4.6	%		4.6	%		4.8	%		5.2	%		5.3	%		5.0	%		5.2	%
Restaurant operating income		13.9	%		13.1	%		13.0	%		12.2	%		13.3	%		12.9	%		12.8	%
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income		105,378			27,218			26,968			25,475			30,018			109,679			30,294
Add: Minority interest		6,993			1,333			837			599			582			3,351			497
Less: Preopening expenses		(8,004	)		(1,256	)		(1,790	)		(2,974	)		(2,992	)		(9,012	)		(1,729	)
Less: Partner investment expense		(3,475	)		1,926			753			433			246			3,358			245
Income from operations		100,892			29,221			26,768			23,533			27,854			107,376			29,307

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

Page 5 of 8

Concept: Pei Wei Asian Diner
Supplemental Financial Information

	2006			1Q07			2Q07			3Q07			4Q07			2007			1Q08
Units		107			116			126			137			144			144			155
Sales weeks		4,661			1,446			1,560			1,698			1,856			6,560			1,977
AWS		38,668			39,177			37,592			36,359			35,523			37,037			36,667
Revenues		180,230			56,656			58,649			61,738			65,936			242,979			72,491
Operating costs
Cost of sales		49,692			15,851			16,070			16,922			18,292			67,135			19,894
Labor		62,677			19,551			20,480			21,843			23,266			85,140			25,240
Operating		30,782			9,382			10,004			10,835			11,909			42,130			12,338
Occupancy		11,725			3,636			3,963			4,231			4,222			16,052			4,938
Minority interest		1,123			314			284			209			11			818			208
Depreciation & amortization		9,205			2,823			3,164			3,417			3,718			13,122			4,056
Restaurant operating income		15,026			5,099			4,684			4,281			4,518			18,582			5,817
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		27.6	%		28.0	%		27.4	%		27.4	%		27.7	%		27.6	%		27.4	%
Labor		34.8	%		34.5	%		34.9	%		35.4	%		35.3	%		35.0	%		34.8	%
Operating		17.1	%		16.6	%		17.1	%		17.5	%		18.1	%		17.3	%		17.0	%
Occupancy		6.5	%		6.4	%		6.8	%		6.9	%		6.4	%		6.6	%		6.8	%
Minority interest		0.6	%		0.6	%		0.5	%		0.3	%		0.0	%		0.3	%		0.3	%
Depreciation & amortization		5.1	%		5.0	%		5.4	%		5.5	%		5.6	%		5.4	%		5.6	%
Restaurant operating income		8.3	%		9.0	%		8.0	%		6.9	%		6.9	%		7.6	%		8.0	%
Reconciliation of Non-GAAP Financial Information to GAAP measures:
Restaurant operating income		15,026			5,099			4,684			4,281			4,518			18,582			5,817
Add: Minority interest		1,123			314			284			209			11			818			208
Less: Preopening expenses		(4,283	)		(1,283	)		(1,506	)		(1,965	)		(1,217	)		(5,971	)		(1,095	)
Less: Partner investment expense		(896	)		(525	)		(285	)		(362	)		(174	)		(1,346	)		(656	)
Income from operations		10,970			3,605			3,177			2,163			3,138			12,083			4,274

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

Page 6 of 8

P.F. Chang’s China Bistro

Supplemental Sales Information (Company Owned)

Year of Unit Opening (1)

	Pre-2001			2001			2002			2003			2004			2005			2006			2007			2008		Total
Units		51			13			14			18			18			18			20			20			5		177
Sales (000)
1Q08		77,380			19,067			18,306			25,155			20,281			21,118			23,785			26,976			3,992		236,060
Average Weekly Sales (AWS)
1Q08		116,712			112,823			100,580			107,502			86,670			90,248			91,482			103,752			102,364		103,763
Year-Over-Year Change in AWS (2)
1Q08		-0.4	%		1.4	%		0.6	%		0.8	%		0.6	%		0.2	%		-7.9	%		3.5	%		—		-0.8	%
Year-Over-Year Change Comp Store Sales (3)
Units		51			13			14			18			18			18			14			—			—		146
1Q08		-0.4	%		1.4	%		0.6	%		0.8	%		0.6	%		0.2	%		-2.0	%		—			—		0.1	%

(1)	Includes all restaurants opened in the period indicated.
(2)	A unit is included in the year-over-year change in AWS in the thirteenth month of operation.
(3)	A unit becomes comparable in the eighteenth month of operation.

Page 7 of 8

Pei Wei Asian Diner

Supplemental Sales Information

Year of Unit Opening (1)

	2000			2001			2002			2003			2004			2005			2006			2007			2008		Total
Units		1			4			11			17			20			24			30			37			11		155
Sales (000)
1Q08		730			2,086			5,725			8,942			10,617			11,441			13,494			15,167			4,289		72,491
Average Weekly Sales (AWS)
1Q08		56,165			40,115			40,034			40,460			40,833			36,669			34,599			31,531			40,863		36,667
Year-Over-Year Change in AWS (2)
1Q08		-6.7	%		-8.4	%		-7.6	%		-4.7	%		-0.7	%		-0.5	%		-2.1	%		-18.7	%		—		-3.5	%
Year-Over-Year Change Comp Store Sales (3)
Units		1			4			11			17			20			24			23			—			—		100
1Q08		-6.7	%		-8.4	%		-7.6	%		-4.7	%		-0.7	%		-0.5	%		1.4	%		—			—		-2.4	%

(1)	Includes all restaurants opened in the period indicated.
(2)	A unit is included in the year-over-year change in AWS in the thirteenth month of operation.
(3)	A unit becomes comparable in the eighteenth month of operation.

Page 8 of 8

EX-99.2

Exhibit 99.2

Final Transcript

Conference Call Transcript
PFCB - Q1 2008 P.F. Chang’s China Bistro, Inc. Earnings Conference Call
Event Date/Time: Apr. 23. 2008 / 1:00PM ET

CORPORATE PARTICIPANTS

Mark Mumford
P.F. Chang’s China Bistro, Inc. - CFO

Rick Federico
P.F. Chang’s China Bistro, Inc. - CEO

Russell Owens
P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Bert Vivian
P.F. Chang’s China Bistro, Inc. - President

CONFERENCE CALL PARTICIPANTS

David Tarantino
Robert W. Baird. - Analyst

Destin Tompkins
Morgan Keegan. - Analyst

John Glass
CIBC World Markets - Analyst

Jeffrey Bernstein
Lehman Brothers - Analyst

Sharon Zackfia
William Blair & Company - Analyst

Larry Miller
RBC Capital Markets. - Analyst

PRESENTATION

Operator

Good afternoon, and welcome to P.F. Chang’s China Bistro first quarter 2008 earnings release conference call. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Mr. Mark Mumford, Chief Financial Officer of P.F. Chang’s China Bistro. Please go ahead, sir.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Thank you. Hello, and welcome to P.F. Chang’s first quarter 2008 earnings call. During our management comments and in our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning’s press release and the Company’s filings with the SEC. With that, I’ll turn the call over to Rick to begin.

Rick Federico - P.F. Chang’s China Bistro, Inc. - CEO

Thanks, Mark. Good morning. Joining me today are Bert Vivian, President of P.F. Chang’s, Russell Owens, President of Pei Wei, Mike Welborn, our Chief Administrative Officer, and Mark Mumford, our Chief Financial Officer. I’ll have some brief opening remarks, followed by Russell and Bert’s update, and then Mark will wrap it up for us. It’s nice to start the call by saying our first quarter results were better than we had internally forecast. The combination of better-than-expected sales, favorable operating results, and gaining some leverage in our G&A, all contributed to our solid performance. As I mentioned, Mark, Russell and Bert will all provide details in their reports.

At the same time, we remain very cautious about the balance of the year. Since our last call, the pressure on discretionary spending has increased. We all read the same newspapers and understand that our guests are paying more for their gas, their home mortgage payments, and their food. Many traditional household expenses are as high as we’ve ever seen them. We continue to believe we have not seen the bottom of this cycle and that it will be with us into next year. That makes predicting the future very challenging. We continue to feel the pressure of increased costs to operate. The upward tick in labor and operating expenses will continue to be an issue. Even though our commodity contracts provide stabilization for the balance of this year, we do have concerns looking into 2009.

The ongoing operating initiatives in both of our contests and our focus on gaining leverage from our shared services, all reflect our belief that there is more consumer pressure in front of us. Directionally, I’m encouraged by the early results of our Pei Wei evolution test. The Pei Wei team’s efforts toward increasing the tenure of our management, enriching the role of our management positions, developing key employees to support our business, and improving operating margins has been positive. We will continue to watch the impact of these initiatives on the sales line and continue to look to the middle of this year for more clarity on our results. Again, Russell will provide more color on the evolution process. While sales at our new Pei Wei restaurants open in the first quarter were very strong, I do think it’s important to note that while we are working through the evolution process, we are being cautious on signing new leases for 2009. We will remain focused on markets where we currently operate, but do not — but do want to more fully understand the impact of evolution’s initiative before making additional capital commitments.

During the quarter, both of our concept teams worked on refining their marketing messages. Our focus was on creative design and market planning. We do expect the bulk of our marketing spend to happen in the second and third quarters of this year for both brands, and we will update you on results over the next couple of quarters. One other noteworthy comment before I turn the call to Russell, on our last call, we discussed the signing of a memorandum of understanding to sell our Taneko business. Unfortunately, we were not able to complete the transaction as we intended. We have initiated new conversations and hope to come to a definitive agreement soon. With that, I’ll turn the call to Russell.

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Thanks, Rick. Good morning, everyone. Brief recap of the first quarter, and then I’ll update you on the progress of the key initiatives Rick talked about. For the quarter, our comp sales were negative 2.4%, about where we expected them to be. We continue to see weakness out West, specifically Phoenix, Las Vegas, southern California, and to a lesser extent, Dallas. Those four markets make up 41% of our comp unit base, and were more than 6% negative for the quarter.

The balance of our system had positive comp sales for the quarter. We implemented menu changes in late January, a few weeks earlier than we originally planned. These changes were a deletion of scallops as a protein choice, elimination of one bowl and two entree styles, the addition of one entree style and one bowl, the addition of our fresh baked chocolate cookie, and menu price changes of approximately 2.5%. The effective price increase realized for the first quarter was 1.8%, less than the full menu increase due to it not being in place for the entire quarter, as well as the affects of mix shifts. We were very busy with opening 11 new restaurants this quarter, nine in January alone. We’re pleased with the early results. Average weekly sales were just under $41,000 for the quarter.

These new locations were in several existing markets, including two in Miami, two in Detroit, and one in Oklahoma City, Salt Lake City, Memphis, Philadelphia, southern California, D.C., and Wichita, Kansas. We will open four locations this current quarter, two in Florida, one in Dallas, and our third location in Columbus, Ohio. Three of these restaurants have already opened this quarter. The balance of our 25 openings for 2008 will be fairly evenly spread between the third and fourth quarters. For the quarter, our overall revenues were slightly better than expected, due to the performance of our new locations, again, averaging just under $41,000 per week in sales. Our cost of sales improved due to the menu price increase, the elimination of scallops from our menu, and favorable mix shifts, offset by commodity price increases, the biggest being chicken prices.

Labor costs in total were up versus prior year, due to wage rate increases and the effect of the new restaurant opening. Labor costs in our mature restaurants actually improved versus last year first quarter. We did not have much in the way of restaurant-level marketing initiatives active during the first quarter, as we were working on consumer research, messaging, and production. Our sales and awareness-building programs will begin in May and be concentrated in the second and third quarters this year. We still anticipate spending approximately $3 million for the year.

Now, an update on the key operational initiatives. As you recall, we started a test in a few locations late last year, designed to improve our overall profitability at current sales levels by simplifying our menu, reducing prep labor, redefining our manager roles, more effective use of key employees, and how we staff restaurants. Our goal is to improve profitability in order to consistently hit our internal return-on-investment target at average sales rates of $36,000 per week. This means improving our current margins by 200 to 250 basis points without a significant impact on sales or our ability to increase sales. Results in these six locations have been encouraging thus far, and the goal looks achievable. We have recently modified the test to add back a couple of menu items that our guests were fairly vocal about missing and expanded the test to five additional locations. We will monitor the results with these adjustments for a couple of months. If our current results continue along the first quarter’s trends and we successfully replicate the results in the five new test locations, we will begin to roll out these changes system-wide in the back half of this year.

We’ve also been pleased with our recent trends in management retention as a result of improved development programs, enhancements in recruiting, and the emphasis on job satisfaction, we have implemented over the last six to nine months. Phase two of our leadership development initiatives, along with the improvements targeted with our staffing structural changes, should continue to favorably impact our management retention, increasing our overall experience level in our restaurants, and ultimately improving execution, sales, and productivity system-wide. Overall, I’m pleased with the first quarter results, especially given the environment we operate in and the head winds we all are challenged with in our industry. I’m encouraged by the results thus far of our key initiatives designed to improve retention and profitability. As I said earlier, barring some unexpected change or difficulty in implementing these changes in the new test locations, we will begin concept-wide rollout this summer and should see meaningful improvements in the latter part of this year. With that, I’ll turn it over to Bert.

Bert Vivian - P.F. Chang’s China Bistro, Inc. - President

Thanks, Russell. Good morning, everyone. Thank you for joining us today. I’m going to touch on a few operational points from the first quarter and then talk broadly about what lies in front of us for the remainder of the year. At the Bistro, from an operational standpoint, we performed a little bit better than we anticipated in the first quarter. Revenues grew by approximately 14% as our comps turned just slightly positive. The good news is that the sequential improvement in comps was widespread. Of the 36 states in which we have comp stores operating, 29 showed sequential improvement from the fourth quarter to the first quarter of this year. That list does include California, Nevada, and Arizona. Furthermore, six additional states turned comp-positive in the first quarter versus the fourth quarter of last year.

The bad news is that our traffic remains negative and as long as this continues to be the case, we’ll be swimming upstream. With the help of our earnings — excuse me — with the help of our revenue performance, we were able to manage our operating expenses without too much duress. Office salse, plus labor expense, totaled 60.9% for the quarter, flat with our performance last year. Excluding pre-opening costs, our cash margins improved 30 basis points year-over-year to 18%. In the first quarter, we introduced our lunch bowls and our menu desserts. Both items have proven to be popular with our guests. In the last couple of weeks of the quarter, we began advertising our grill product in the Los Angeles area. This marketing effort will continue for the first five weeks or so in the second quarter.

As we mentioned in our February call, we intend to roughly double our marketing spend this year to a total of approximately $9 million. The first quarter was underweighted in spend. The second quarter will be overweighted. At this juncture, we have not made any adjustments either up or down, to our total marketing commitment for the year. We expect to modify our menu again in late July, early August timeframe. The additions to our menu will primarily be grill-related. Customer feedback has been positive and we will continue to leverage our investment in that area.

Development is on track. We opened five restaurants in the first quarter, with another five slated for the second, two in the third, and five in the fourth. All in all, we performed better in the first quarter than we originally anticipated. Part of the outperformance was driven by revenue. The other was due to the operational focus of our team. About nine months ago, we asked Rick Kazman to assume leadership of our bistro operational team. Our first quarter results are a reflection of their collective efforts and I remain confident that the quality methods we employ at our restaurants will continue to render quality results over time. With that, I’ll turn it over to Mark.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Thanks, Bert. Before we talk about our results, you may have noticed a slight change to our reporting format. We have combined all of our G&A expenses at the consolidated level. Over the last year or so, we’ve been moving some of the concept expenses into a shared service support group. An example of that is our marketing department. The head count-related expenses for the marketing folks used to be in the concepts. Today, they have rolled up in the shared services support group. There are still dedicated head counts reporting both brands, but they are managed at a corporate level. These changes have made periodic comparisons difficult and less relevant. Therefore, we have decided to report on these expenses at a corporate level.

Now, let’s take a look at the numbers. Total revenue grew over 17% to $309 million, primarily driven by the increase in new stores over the last year. Bistro revenue grew 14% and as Bert mentioned, had slightly positive comps. Sales for the bistro increased 15% for the quarter. Since Q1 of 2007, we have added 24 new Bistros, 5 of which we opened in Q1 of this year. Pei Wei sales increased 28%, primarily as a result of new store openings. Since Q1 of 2007, we have opened 39 new locations, a 34% increase. Comp sales for the quarter were down 2.4%.

Cost of sales at both concepts came in favorable compared to the previous year, as operational focus, menu changes, and price increases all helped offset increases in commodities. The bistro picked up 10 basis points while Pei Wei saw a 60-basis point improvement, primarily driven by a price increase of approximately 2 to 2.5%, as well as removing some lower margin items from the menu, and the anniversary said that act of God produce pricing that we saw in Q1, 2007. We had originally anticipated the price increase of Pei Wei to be effective sometime in February. As Russell mentioned, the operations team did a nice job of getting new menus out closer to the beginning of the quarter, giving us some additional benefit during Q1. As most of you are aware, our proteins which represent over half of our cost of sales, are contracted through the remainder of this year and we feel good about our pricing. Where we begin to have some uncertainty and concern is what effect rising grain costs and global protein demand will have on our 2009 contract pricing. We are proactively exploring ways to leverage our size and current pricing position in order to optimize our pricing over a longer period of time.

We continue to see pressure on the labor lines in both concepts, as hourly wage rates were up between 2.5 and 3% at both concepts. In addition, Q1 of 2007 labor was positively effected by lower workers’ comp expense due to adjustments related to prior claim years. We did not have a similar adjustment in Q1 of this year. Q1 of 2008 consolidated G&A expenses were 30 basis points favorable to prior year, as the Company is focused on controlling administrative expenses. The corporate bonus is booked in the G&A line. The increase in bonus expense quarter-over-quarter is more than 25 basis points which makes the favorable comparison even more impressive. I will talk more about G&A expense and bonus in a minute.

Depreciation expense at both concepts is up as a percentage of sales. The Bistro is up 60 basis points, primarily due to depreciation on the grill and acceleration of depreciation of replaced assets. Percentage run rate for depreciation at the Bistro is similar to what we saw in Q3 and Q4 of last year. Pei Wei is up 60 basis points, primarily due to deleverage on the top line and slightly higher depreciation expense for 2007 stores due to open in more expensive markets, i.e., a higher percentage in California and the Northeast versus less expensive markets like Arizona and Texas. Interest expense for the quarter was $934,000 which compares to net interest and other income in Q1, 2007 of $343,000. We ended the quarter with $80 million borrowed on the revolving line of credit versus $12 million in Q1 of 2007. Our tax rate came in at 26% versus 27% in the prior year quarter as tip credits continued to trend favorably for us. To encourage tip reporting, the IRS allows restaurants to claim a credit for FICA taxes paid on the certain employees tips. The credit equals the amount of employer FICA taxes paid by the employer on tips received by the employee above a minimum-rate hurdle.

So in total, EPS for the quarter came in at $0.40 which is equal to Q1 of 2007. To summarize the performance, as you’ve heard from Bert and Russell, we did have quite a few things going for us in the quarter. Bistro comp sales were slightly positive. Average weekly sales for the 11 Pei Weis and 5 Bistros opened during the quarter were strong. The 11 new Pei Weis averaged $40,800 a week, well above the system average of $36,700 while the five Bistros opened during the quarter averaged $102,400, just slightly below system average. These strong sales numbers helped reduce the new store inefficiency drag that we typically experience. As we mentioned previously, cost-of-sales was favorable in both concepts, due to price increases, menu adjustments, and the anniversary effect of that act of God produce pricing in Q1 of 2007.

As we think about the remaining quarters, we still believe that we will see some pressure on the cost-of-sales line for the remaining three quarters. We did a nice job managing G&A expenses during the quarter. We will continue to keep a keen eye on this line for the remainder of the year. As you recall over the last couple of years, we have made infrastructure investments in such areas as IT, supply chain, legal, et cetera, that has cost us to see some deleverage on this line in the past. We have said previously that we expect to see G&A start to leverage in 2009. We are ahead of that schedule, but expect to see comparison for the remaining quarters this year get a little tougher due to bonus expense. In Q1 of 2007, we booked 65% of the bonus potential. We reversed that accrual in Q2 of 2007 and did not book any bonus for the remainder of ‘07.

As you are thinking about Q2 on a comparison basis, we had a benefit from the bonus accrual reversal in 2007 of just over $2 million. From an optics perspective, if we book 100% of our bonus target in Q2 of 2008, G&A expense will have 200 basis points of pressure, simply due to bonus expense. Overall, we are pleased with the results for the quarter, but it is still early in the year, with the price of oil recently hitting $119 a barrel, and multiple predictions that gas prices at $4 this summer, combined with price inflation in grocery and hard goods, we are not certain that we have seen the bottom of economic pressure plaguing the consumer. As you know, sales drives our business and gives us the flexibility to manage our cost structure. Until we see consistent upticks in traffic, we will remain cautious about the near term. Consequently, we are only modestly increasing our earnings expectations for the year from $1.32 to $1.38, up to $1.34 to $1.40.

Now, let’s switch gears and turn to the balance sheet. We ended the quarter with $12 million in cash versus $24 million at the end of fiscal 2007. Borrowings on our credit line totaled $80 million versus $85 million at the end of last year, and $12 million in Q1 of 2007. We generated cash from operations of $27.8 million, an increase of 32% over the $21 million we saw in Q1 of 2007. We use $26.7 million in CapEx which was down slightly from the $28.7 million in Q1 of 2007. We spent another $3.7 million in the repurchase of minority interest, down from $5.8 million in Q1 of 2007, and another $8 million paying down long-term debt, $5 million on the revolver and $3 million in notes to partners. These amounts net to about $11 million which approximates the decrease in cash of $12 million from year-end. This applies to our CapEx number a little deeper, we see that the 26.7 is a gross number. We collected about $6.7 million in TI allowances, given the net number of $20 million.

We continue to project CapEx spend for 2008 to be between 125 and $135 million which will equate to between 105 and $115 million net of tentative allowances. We are projecting cash from operations of between 140 and $145 million which means we should generate between 10 and $15 million of free cash flow. Our fully-diluted share count for the quarter was $24.295 million, down 6.7% from Q1 of $26.046 million for Q1 2007. That was due to our share repurchase in Q4 2007. We did not repurchase any shares during Q1 and continue to have $50 million under our current authorization. We will continue to look at our buyback program through an opportunistic lens.

And lastly, our next earnings call will be on July 23, when we discuss the results of our second quarter. We will file our first quarter 10-Q later today. With that, let me open up the call for questions. Operator?

QUESTION AND ANSWER

Operator

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from David Tarantino with Robert W. Baird. Your line is open.

David Tarantino - Robert W. Baird. - Analyst

Hi. Good afternoon, and congratulations on a good quarter in a tough environment. Mark, just wanted to understand the factors that are at play in the full-year guidance. Looks to me as if you’re assuming slower EPS growth in the balance of the year if you factor out the impact from the partnership investment credits. Am I reading that correctly, and if so, what are the factors that would cause EPS growth to slow?

Rick Federico - P.F. Chang’s China Bistro, Inc. - CEO

David, you’re breaking up really bad on us. We can—

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Yes. I think I got the first of it, so let me take a shot. I think you were asking on the — if we look at Q1 and then we look at the back half of the year, Q2, Q4, what are some of the factors that are affecting our forecast? Let me briefly just kind of walk through some of the highlights of Q1 and some of the things that we’re experiencing. In Q1, we obviously had some tailwind from a comparable standpoint due to higher produce costs that we had in Q1 of 2007. If you take out that effect that we had in Q1, we expect to see some cost of sales pressure as we move through Q2 to Q4. That’s going to be a change from where we are trending in Q1.

Also in Q1 of 2007, as I mentioned in my prepared remarks, we booked 65% or roughly $2 million of bonus that we reversed in Q2. From a comparable standpoint, we’re going to have additional pressure in Q2 on the G&A line. And remember, we didn’t have anything in Q3 and Q4, bonus expense in ‘07, so that’s going to give us, from a comparable standpoint, a little bit of difficulty. Marketing spend is lightweight in Q1, so we’re going to be spending a big chunk of the marketing dollars in Q2 and Q3. Typically, we don’t spend a whole lot of that in Q4. Pei Wei comparisons, when you’re looking at how we did last year, it’s going to get a little easier from average-week sales perspective. Q1 of 2007, we were at 39. Then we continued to slide during the year down to 37.6, 36.4 and 35.5.

At Pei Wei restaurants, margins kind of followed suit. We started off at 9 and we dropped down to 6.9. Russell and his team did a good job on a trend line in Q1, bringing that back up to 8% and we expect to see some improvements in the back half of the year. Q2 is going to continue to be somewhat pressured, though, due to the higher marketing spend, as well as some of the new store growth. Net-net, we’re going to continue to do everything we can to deliver the strong results that we saw in this quarter. But the biggest factor, affecting our ability to deliver those results is how many guests venture through our doors each day. We’re rooting for the consumer and we’re certainly banking our ability to woo them in through marketing.

David Tarantino - Robert W. Baird. - Analyst

Great, thanks a lot.

Operator

Our next question comes from Destin Tompkins with Morgan Keegan.

Destin Tompkins - Morgan Keegan. - Analyst

Thanks. Good afternoon. My first question is for Rick. I thought in your prepared remarks, Rick, I may be reading too much into it, but it sounded as though when you talked about the development plan for Pei Wei as it relates beyond 2008 that you were looking at it a little bit more cautiously, indicating there might be a slowdown from where we are today. Am I reading that right?

Rick Federico - P.F. Chang’s China Bistro, Inc. - CEO

I think, I think you are, Destin. The — if you think about this year, we’re going to do 25 restaurants. We’re currently looking into 2009, we’ve got approximately 5 to 7 leases signed in markets where we already have a pretty strong position. We have continued to tee up real estate with, in using that filter, we continue to tee up real estate, but we’re being a little bit more cautious about signing leases in anticipation of gaining greater insight from our project evolution opportunities. We have the opportunity to pull the trigger, as we gain a little more confidence with the evolution process. But in the event that we don’t get what we’re looking for, we will see more modest development in 2009. Playing the ball that lies, it looks like as we gain more confidence around the evolution work, that we would be more back-weighted with additional development in the 2009 class of stores.

Destin Tompkins - Morgan Keegan. - Analyst

Okay. Great. That’s helpful. Then while we’re on Pei Wei, and Russell may be able to help with this, the test that you’re running to improve the margins there, I think you mentioned that the goal is to improve margins 200 to 250 basis points. Can you kind of give us a sense of over what time it would take to reach that goal in those test markets?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

We’ve implemented the plan, the test in those markets in November of last year. We have seen through the first quarter of this year, getting — making nice progress toward those goals. I think it will vary by restaurant and by market, but I think it will take at least three months, and more likely somewhere closer to six months from the time you implement those changes until you get to the high water mark.

Destin Tompkins - Morgan Keegan. - Analyst

Okay. Then Russell, you mentioned the high percentage of restaurants in some of the, excuse me, more subprime and impacted markets. That’s been an issue obviously for a while now. Do you think that it’s decelerating and you’re feeling more of a drag from those markets than we have in previous quarters?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

I would say yes, as a general rule, it’s gotten worse in the first quarter than the fourth quarter. We’ve seen it during the quarter continue to worsen in the market.

Destin Tompkins - Morgan Keegan. - Analyst

Okay. Great. Then Mark, just a quick question on the tax rate. What do you expect for the remainder of the year on the tax rate?

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

The 26% that we booked in Q1. What we do on the tax rate is look at our fiscal projection and then, in the current quarter, book to what we think the annual rate’s going to be. The 26% that you saw in Q1 is what you ought to project.

Destin Tompkins - Morgan Keegan. - Analyst

Great. Thank you.

Operator

Our next question comes from John Glass with Morgan Stanley.

John Glass - CIBC World Markets - Analyst

Thanks. Couple questions on Pei Wei. First, just can you maybe just drill down on why the units you opened this quarter were so much stronger? Was it a market issue. a specific real estate issue, or was there some other factors that you could draw conclusion from?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

John, it’s — we opened two in Miami that were very strong openings for us. It’s a relatively new market and they are pretty evenly spread everywhere else. I would like to think that every time we, historically every time we select a site, we get a little smarter about our site selection. I would like to think the fact that we’re building in markets that aren’t brand new helps us a little bit. But in one quarter snapshot, I can’t take a lot of credit or explain a lot about how we get closer to 41 than the system average.

John Glass - CIBC World Markets - Analyst

Got you. The restaurants, not those restaurants, but older restaurants that are doing about $40,000 a week now, what are their prime costs and maybe what are their restaurant-level margins right now?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

I don’t know that we’ve gone in that level of detail. You’re saying the $40,000-a-week stores?

John Glass - CIBC World Markets - Analyst

I’m talking about — when a Pei Wei is running the way you would like it to run, how profitable, what level of margin is it running at?

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Hey, John, I think that in the return on investment information that we put out on our website, I think you can dial back into those earlier class years and kind of get that information.

John Glass - CIBC World Markets - Analyst

Got you. Okay. Then just finally, in the 250 basis points, 200, 250 basis points of margin improvement you’re expecting, can you just put those in buckets? Is that largely labor? Sounds like maybe some is coming from food cost? Is there any quick way to allocate that?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Yes, it is largely labor costs, and then 50 to 80 basis points probably in cost of sales.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

We saw some of that cost of sales here in Q1, simply from the menu changes that Russell did that was system-wide.

John Glass - CIBC World Markets - Analyst

Got you. Okay. Thank you.

Operator

Our next question comes from Jeffrey Bernstein with Lehman Brothers.

Jeffrey Bernstein - Lehman Brothers - Analyst

Great, thank you. Couple of questions. First, I’m just wondering if you look at the sequential trends you guys provided through the first quarter at both brands, it seemed like for the most part there was a deceleration in terms of comps on both a one and two-year average basis. Just wondering if there was anything to that or whether there was perhaps some timing shifts? Or what you can attribute to the potential slowdown through the quarter?

Bert Vivian - P.F. Chang’s China Bistro, Inc. - President

Jeff, you were breaking up, in and out of your call. I think we heard the first part. You were simply asking us if we could comment on the sequential nature of the sales trends in the quarter. I don’t know if I can add a whole lot. This is Bert. I don’t know if I can add a whole lot of color to that. There’s certainly, as there always is, there’s weather that goes on during the winter months. Yes, there were some holiday shifting of the Easter timeframe that probably had some impact in March versus April of last year. But I think the fact of the matter is that, certainly at the Bistro, we had a pretty strong January and it weakened up a little bit sequentially through the quarter. Not a great surprise frankly, given the environment that we’re in.

Jeffrey Bernstein - Lehman Brothers - Analyst

Is that similar for Pei Wei?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Yes. We saw it weaken a little bit through the quarter from January. Then, the third period was impacted by Easter for sure.

Jeffrey Bernstein - Lehman Brothers - Analyst

Okay. Then Russell, the evolution test you guys are working on, I know we talked about it the past quarter or two. Perhaps, now it seems like it’s going to be rolled out quicker through the system. If you could just maybe give just maybe two or three of the most promising things you’ve rolled out in those test markets? I know you said, it’s mostly labor benefit, but whatever you’re seeing as the two or three biggest changes that people are going to recognize when they come into Pei Wei now versus in the older stores.

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Jeff, I’m really sorry. You were so broken up there, I couldn’t understand.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

It must be on our side.

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Yes. It’s our system.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Can you try it again?

Jeffrey Bernstein - Lehman Brothers - Analyst

Sure. Just looking for some color on the evolution test in terms of the greatest or most promising changes you’re making. It seems like it’s primarily labor-related.

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

Right. Well, we’re trying to accomplish several things. What’s promising from our perspective is in terms of management retention and productivity, what we will do should enhance their job satisfaction and enhance their ability to run restaurants which should improve our retention, which will improve our overall productivity. It will also elevate the key employees which we believe long-term will be a great avenue for promotion into management by internal folks which tend to have better tenure and retention anyway. It will — it simplifies our operation so we can execute sustainably at a higher level.

It improves — in theory, it should improve our ticket times. It should improve our food costs because we are eliminating some low return-to-net, high-cost, high-prep items. It eliminates a position in the back of the house. The only — the risk is that it impacts sales to the extent that all of your cost savings are negated. We haven’t seen that thus far, but we’re very sensitive to that. That’s why we continue to tweak it and continue to test it.

Jeffrey Bernstein - Lehman Brothers - Analyst

Okay. Then just lastly, I know you mentioned the Taneko deal, breaking down. Just wanted to know if that (inaudible). It seems I heard that from a couple of your competitors in terms of the credit markets impacting actions you guys are taking.

Rick Federico - P.F. Chang’s China Bistro, Inc. - CEO

Jeff, this is Rick. I think you were asking whether the Taneko deal was impacted by the current credit market. I don’t think that that was a consideration in this particular deal.

Jeffrey Bernstein - Lehman Brothers - Analyst

Great. Thank you very much.

Operator

Our next question comes from Sharon Zackfia with William Blair. Your line is open.

Sharon Zackfia - William Blair & Company - Analyst

Hi. Can you hear me okay?

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

So far, but it seems to break up the longer you talk.

Sharon Zackfia - William Blair & Company - Analyst

Okay. I’ll try to keep it brief. I’m just curious, since the Pei Wei initiatives are still in test, is it fair to think that any improvement in margins is then not in guidance at this point?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

It is minimally in guidance towards the end of the year.

Sharon Zackfia - William Blair & Company - Analyst

Okay. Then curious on both Pei Wei and the Bistro, are you starting to see more favorable lease terms at all in this environment yet?

Russell Owens - P.F. Chang’s China Bistro, Inc. - President, Pei Wei Asian Diner

From Pei Wei’s perspective, no, we’re not seeing any change in sort of the underlying real estate prices and lease terms. We are seeing a little bit of favorable bidding on contracts in certain markets. Not nationwide, but in certain markets, we have seen bids coming back to us a little bit.

Bert Vivian - P.F. Chang’s China Bistro, Inc. - President

Sharon, this is Bert. There hasn’t been a significant movement on our landlords or potential landlords’ part with respect to the value of their properties. We keep hoping that there will be, though.

Sharon Zackfia - William Blair & Company - Analyst

I’ll cross my fingers for you. Thanks.

Operator

Our next question comes from Leroy Miller with RBC Capital Markets.

Larry Miller - RBC Capital Markets. - Analyst

Yes. Thanks. It’s Larry Miller. Just quickly following up on that comment you made about the Easter shift, wouldn’t that necessarily be a positive for April as it shifts into year-over-year comparison? And do you guys want to comment at all on the April trend?

Bert Vivian - P.F. Chang’s China Bistro, Inc. - President

Larry, this is Bert. Unfortunately, we heard about three words. Easter, Easter, spring shift.

Larry Miller - RBC Capital Markets. - Analyst

Okay. Let me try again and I’ll say it slower. Hopefully it will come through to you guys. With Easter shifting out of April into March, it should benefit April of 2008. Did you guys — you guys seeing any improved trend in April? What’s the trend like?

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

Okay. We got about two more words, unfortunately, and we really apologize. I’m guessing you’re asking if March was negatively impacted, what’s going on in April. We’ll give you a little more insight into that in a couple of months when we report in July as to what’s going on in April.

Larry Miller - RBC Capital Markets. - Analyst

Okay. Let me try one more question, and then otherwise we’ll follow up later. But Bert, maybe you can help me with the grill mix, because it seemed like it might have slowed down a bit in the quarter. You had something like a 7 to 8% mix in December on the check average and presumably pricing hasn’t changed much. Is that what we saw, despite the marketing in California?

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

We’ll have to do this offline.

Rick Federico - P.F. Chang’s China Bistro, Inc. - CEO

Larry, I’m really sorry. We must be having some serious problems on this end. All I can say is if you wouldn’t mind, give Mark a call after the call, because we didn’t pick up a word of that.

Larry Miller - RBC Capital Markets. - Analyst

Okay. Thank you.

Mark Mumford - P.F. Chang’s China Bistro, Inc. - CFO

I think we’re probably going to have to do that. Because it seems like it’s on our side, not on you guys’ side. I think what we’re going to ask is take your questions. I’m going to go to my office and if you could just call me, I’ll be there and I’ll handle all the calls, and make sure we get you called back. I think with that, we’re probably going to have to wrap it up. We appreciate you guys being on the call. We certainly apologize for this technical issue that we seem to be having. Thank you.

Operator

Thank you. Thank you for joining today’s conference. That does conclude the call at this time. You may disconnect.

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