BJ's Restaurants Inc (BJRI) 2011 Q4 法說會逐字稿

Good day ladies and gentlemen, and thank you for standing by. Welcome to BJ's Restaurants Incorporated fourth-quarter and fiscal 2011 results conference call.

All participants will be in a listen-only mode for the duration of the call. After the presentation, the conference will be opened for your questions. (Operator Instructions).

I would now like to turn the conference over to Chief Executive Officer and Chairman, Mr. Jerry Deitchle. Please go ahead sir.

Thanks operator. Hello everybody. I'm Jerry Deitchle with BJ's Restaurants. Welcome to our fourth-quarter 2011 investor conference call which we are also broadcasting live over the Internet.

After the market closed today, we released our financial results for our fourth quarter of fiscal 2011 that ended on Tuesday, January 3, 2012. You can view the full text of our earnings release on our website at www.BJsRestaurants.com.

Joining me on the call today in the order of their prepared remarks are Greg Lynds, our Executive VP and Chief Development Officer, Wayne Jones, our Executive VP and Chief Restaurant Operations Officer, and Greg Levin, our Executive VP and Chief Financial Officer. We are going to begin with our prepared remarks right after Diane Scott, our Director of Corporate Relations, provides our standard cautionary disclosure with respect to forward-looking statements. Diane, go ahead please.

Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different than any future results, performance, or achievements expressed or implied by forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today's date, February 16, 2012. We undertake no obligation to publicly update or revise any forward-looking statements, or to make any other forward-looking statements whether as a result of new information, future events or otherwise unless required to do so by the Securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the Company's filings with the Securities and Exchange Commission.

Thanks Diane.

As we noted in our press release today, our leadership team here at BJ's was very pleased to deliver a very strong financial performance for not only our fiscal fourth quarter of 2011 but also for our full fiscal year of 2011. As we review our results today, please keep in mind that both the fourth quarter and full year of 2011 include one additional operating week compared to the same periods last year. Now, with that in mind, let's quickly summarize our financial results for the fourth quarter compared to the same quarter last year.

First of all, our total revenues were up a strong 29% to $171.8 million. That was driven by both solid increases in our comparable restaurant sales and sales contributions from our new restaurant openings. Next, our comparable restaurant sales were up a strong 5.1% on a 13-week comparison, successfully hurtling a very tough comparison of 5.9% in the same quarter last year. During the quarter, once again our comparable sales increase reflected a favorable hat trick combination of positive benefits from increased menu prices, guest traffic, and items purchased per guest.

Next, our average sales per restaurant operating week on a 13-week basis was also up a solid 5.7%, reflecting both our comparable sales increases and the impact of solid weekly sales volumes from our new restaurant openings. Once again, our new restaurant expansion program continues to be high-quality expansion, not just growth for the sake of growth.

Next, our total productive capacity as we measure in total restaurant operating weeks increased about 12% on a 13-week comparison during the quarter, again reflecting the continuing successful execution of the targeted pace of our restaurant expansion plan.

Next, our estimated four-wall restaurant cash flow margin -- again, which is a non-GAAP measure that also excludes non-cash equity compensation, including restaurant labor. That particular metric increased a solid 80 basis points to 20.8%. Our G&A expenses favorably leveraged another 40 basis points down to 6.3% of revenues. Our consolidated pretax income margin achieved a solid leverage of another 120 basis points, up to 7.7%, which is one of the highest margin levels we have achieved yet. Finally, our net income and diluted net income per share both increased a solid 42% for the fourth quarter.

So I think that, after considering all of our key performance metrics across the board, we believe that BJ's overall performance for both the fourth quarter and the full year of 2011 were quite strong. Not only did we achieve our targeted capacity growth by opening 13 successful new restaurants during the full year of 2011, we also achieved a 6.6% increase in average sales per operating week up to $109,000, which also represents a new record high for BJ's.

Additionally, while some of our casual dining competitors have also recently reported comparable sales increases that either represent some recovery of sales they lost during the past few years due to the slowdown in the economy, or that reflect easier winter weather comparisons, or both, neither has been the case for BJ's. Our strong 6.6% increase in comparable restaurant sales for the full year of 2011 was achieved on top of a very tough 5.6% increase for fiscal 2010. It's been a long time since we've had easy comp sales comparisons at BJ's for any reason, and that motivates us to continually undertake several new sales building initiatives every year. And we've got several more planned for 2012 that we are going to talk about a little bit later today.

Now, achieving solid sales increases is one thing, but productively and efficiently managing those sales increases to the bottom line is just as important. At BJ's, our steadily improving operational execution also enabled us to achieve better leverage to our bottom-line results for both the fourth quarter and the full year of 2011.

It's important to remember that, in our business, as long as you've got the sales, you're going to have the best opportunity to become more efficient in your execution. If you don't have the sales, you really have very few opportunities to do that. We continue to have the sales here at BJ's. Greg Levin will provide his analytical commentary on our income statement for the quarter a little later during our call today.

We've also started off the first quarter at 2012 with continuing solid positive comparable sales comparisons. For the first six weeks of fiscal 2012, our comp sales are up about 4%, successfully hurtling an approximate 7% increase for the same periods last year, one of our toughest comparisons for 2012.

Please keep in mind that, for BJ's, we don't have the easy winter weather sales comparison in the first quarter of 2012 to the extent that many other casual dining companies currently have. Remember that almost 90% of the 98 restaurants in our current comp base are located in California, Nevada, Texas, Arizona, Florida, and other states that really didn't experience sustained severe winter weather conditions during this time last year. So we are really quite pleased with our sales performance as we start fiscal 2012.

While our sales volumes are always difficult to precisely predict in this continuing volatile operating environment, and we always encourage those who are in the business of predicting sales to err on the conservative side, we should note that our sales comparisons do become slightly easier as we continue to move throughout 2012 and our sales building initiatives also begin to gain more traction as they begin to gradually roll out as we move forward throughout the year. Wayne Jones, our Chief Restaurant Operations Officer, is going to comment on our 2012 sales building initiatives in a few minutes, but I'd like to take a minute and comment on three in particular.

First, we're going to continue to aggressively drive our menu and beverage innovation during the upcoming year. During the past two years, we've introduced about 85 new menu and beverage items either on a seasonal basis or on a permanent basis in our restaurants. These introductions now collectively represent almost 20% of our total sales, so they have been extremely well received by our guests.

Our menu and beverage innovations have been solid drivers of incremental sales for us and we've got several new products in our R&D and testing pipelines for potential rollout later this year. In fact, we've already commenced our initial rollouts with our Asian Celebration event that is currently underway. It features our new Kung Pao chicken and orange chicken entrees. We've also recently refreshed our successful lunch special program and we've added some additional new offerings at the $5.95 price point.

Secondly, for the first time in BJ's history, we are going to run a very small test of television advertising in one of our smaller but media efficient markets during the second quarter. Again, this test is only going to involve a handful of our restaurants. Admittedly, we are probably a little early in the life of BJ's with the TV test and having to absorb all of the related TV production and testing costs, but we think it's important to begin our learning as to what benefit, if any, TV advertising can provide BJ's in terms of driving our overall brand awareness. Now, this TV test is a direct result of our semiannual Awareness Trial and Usage, or ATU, market research study that we conducted last year. What our ATU research told us was that BJ's brand awareness is still relatively low, even in our more mature, well-penetrated home-court markets here in California where we enjoy our strongest sales volume. The ATU research also told us that once consumers become aware of the BJ's brand and give us a try, we have one of the strongest rates of conversion from trial to user to brand advocate in the casual dining set. So, we think it's important that we determine if television advertising can accelerate BJ's brand awareness and trial to a higher level to see if it can generate incremental sales that more than cover the incremental cost of the investment that we are going to make in the media. Now, we are going to discuss the results of this very small test on our second-quarter conference call, and that will happen in July.

Additionally, as most of you know, we've been developing and testing a state-of-the-art technologically [intense] guest loyalty program for several months now and we are now ready to commence a Company-wide rollout that should be fully deployed by the end of the second quarter and we'll turn it on Company-wide and go live at the beginning of the third quarter. Again, we are probably a little early in making the upfront investment in a program of this nature, given the relatively small size of our Company and scope of operations. However, in test, the program generated incremental guest visits and spending per visit that well exceeded our breakeven cost hurdle, so we are confident that the benefits of the program should more than cover its ongoing related expenses.

I'd also like to note that, when we talk about incremental expenses associated with both our TV test and our loyalty program, they are only considered to be expenses from a financial accounting perspective. From a business perspective, these are really investments in the long-term future of the BJ's brand. Frankly, in our view, they are requisite investments that are going to be absolutely necessary to help BJ's to continue to effectively compete for increased market share over the longer run.

Shifting over to our restaurant expansion plan, we successfully opened 13 new restaurants during fiscal 2011, and we remain very pleased with the initial sales volumes of all of our new restaurants. In fact, during each of the past several years, we have consistently done exactly what we said we were going to do with respect to our annual restaurant expansion plans in terms of both quality and quantity, and we're going to keep doing it.

So moving to our 2012 expansion plans, in our press release today, we reiterated our plan to open as many as 15 new restaurants during 2012. We're going to relocate one existing older smaller format Pizza & Grill restaurant in Boulder, Colorado to a new site in Boulder that can support a larger format brew house restaurant. Our entire team is looking forward to executing once again a very robust restaurant expansion plan next year, and we've already got nine restaurants under construction.

So now I'm going to turn the call over to Greg Lynds, our Chief Development Officer, for his update on our new restaurant development pipeline. Greg, go ahead.

Thanks Jerry. Good afternoon everyone.

As Jerry noted earlier, all of our 2011 new restaurant development targets were successfully achieved. During 2011, we opened 13 successful new restaurants and achieved our targeted growth in total restaurant operating weeks for the year. In the fourth quarter, we opened four restaurants. On September 28, we opened in Dublin, Ohio, on a freestanding pad at that Tuttle Crossing regional mall. On October 17, we opened right here in Southern California in the city of Rancho Santa Margarita, and then on October 31, we opened two restaurants, one in Fort Worth, Texas and one in Anaheim Hills, California, which is our experimental BJ's Grill concept.

Geographically, we opened all of our restaurants within our existing 13-state footprint and continue to strengthen our leverageable restaurant base, especially in California, Texas and Florida, where we have 88 of our 115 restaurants are located. We now have a strong base of restaurants from coast to coast and we are well positioned to continue building our brand in our core Western states, the state of Texas, the Ohio Valley, and most likely in other East Coast markets starting in 2013.

We are very pleased with the initial sales volume and performance of our classic 2011 openings. We've worked hard over the last five years to better position BJ's has a higher-quality, more differentiated casual plus dining concept and our new restaurant designs continue to strengthen this positioning. In 2011, we continued to enhance and upgrade the interior and exterior of our new restaurants by improving our music, video and lightning packages. In addition, we are now building larger, more efficient patios. These new patios, combined with our interior seating initiatives, have resulted in improved operating efficiency.

Overall, our new restaurant development pipeline remains in excellent shape and we are pleased with the overall quality of the new sites that we are seeing. As previously announced, the Company expects to open as many as 15 new restaurants during 2012. We also plan to relocate one of our older small-format legacy restaurants in Boulder, Colorado to a new location a few miles away.

As we have stated before, it is difficult to precisely predict the actual timing of our 2012 new restaurant openings due to many factors that are outside of our control. So with that in mind, as of this date, we plan to open one new restaurant in the first quarter. That will be in Clearwater, Florida, as many as five new restaurants in the second quarter, as many as four new restaurants plus the Boulder relocation in the third quarter, and as many as five new restaurants in the fourth quarter. All of our potential 2012 openings have been secured with signed leases, purchase agreement, or letters of intent and nine of those restaurants are already under construction. Again, we will keep everyone advised of any future changes on our quarterly conference calls.

Additionally, our team has made solid progress in firming up our potential 2013 pipeline. Most of the new development opportunities that we are seeing today are primarily within existing shopping centers that are being redeveloped as a result of big box vacancies, or other retail and restaurant closure. With two new (inaudible) shopping centers under construction today, the landlord community is focused on enhancing value by redeveloping and adding leasable space through these existing centers. We are very well-positioned to take advantage of these redevelopment opportunities for 2013 and future years.

In terms of our longer term development plan, we recently engaged a consultant of national standing that provides customer analytics for their restaurant and retail industry to assist us with updating our estimate of domestic capacity for BJ's Restaurants as part of this assignment to [consult] and analyze restaurant sales, customer profiles, psychographic trends, trade area data and competitor information. Based upon this analysis along with the analysis of our internal real estate team, we now believe there is conservatively more room for at least 425 BJ's restaurants domestically that can perform at the current level of our average unit economics. With only 115 restaurants opened in 13 states at present, BJ's has plenty of runway in front of it for longer-term expansion. Having said that, our team will always choose quality over quantity and we will continue to ensure that we execute an expansion plan that is geographically balanced which helps drive additional leverage for the entire business.

In today's environment, our team is more focused than ever on remaining disciplined in our price selection and lease economics so that our new restaurants will be well-positioned to take additional market share. Our team knows that we compete in the largest and most competitive segment in casual dining and the best way to profitably gain market share in this segment is to steadily increase the overall level of quality and points of differentiation and at the same time keep the broad approachability of the BJ's brand to a wide consumer demographic. Our development team is ready for the challenge, and I'm confident that BJ's should have many years of solid new restaurant growth to come.

Jerry, back to you.

Thanks for the update Greg.

We continue to believe that BJ's four-wall economics are very sound and they support a continued steady pace of new restaurant expansion. As Greg mentioned, we're always going to pick quality over quantity when it comes to our new restaurant locations, and we are going to continue to carefully execute our expansion program at the right pace that facilitates the achievement of three outcomes -- quality, predictability, and leverage.

We should also remind our investors that, in contrast to many of our more mature, more fully penetrated casual dining competitors that might rely more on comp sales growth as the key driver of annual growth to total revenues, BJ's will continue to rely more on high-quality new restaurant expansion as the key driver of our total annual revenue growth for the next several years.

You know there is no question that much of America remains wide open for the future development of BJ's restaurants, and we are just as excited about that as many of our investors are. Having said that, our challenge I think is to resist the temptation to expand the business faster than it should be expanded, and thereby take on the risk of outrunning our headlights, so to speak, when it comes to acquiring high-quality sites and enabling high-quality operational execution.

Many concepts that have come before us with their growth plans have suffered from a steady gravitational pull downward in their overall quality and predictability when they became too aggressive in setting the pace of their expansion, even during the better times in the overall economic cycle. Many of those concepts also took on too much new market risk in the execution of their expansion plans, and thereby failed to achieve good leverage in all aspects of their operations as a result of their expansion.

So we're going to avoid those pitfalls as we execute BJ's national expansion plan. We continue to believe it makes sense to be very careful and measured as we steadily develop our national geographical footprint in order to advance the quality, predictability, and leveragability of our business model. For us, expansion is not a strategy in and of itself. Instead, it's the outcome of our strategy that drives quality, differentiation, predictability, and leverage in our operations.

Now, I'm going to turn the call over to Wayne Jones for his operational commentary on the quarter. Wayne, go ahead.

Thanks, Jerry, and good afternoon everyone. We have been very pleased with our execution of our sales building initiatives by our restaurant operations team, in particular the execution of our recent menu-based initiatives which have proven to be solid drivers of incremental sales. We also continued see improved guess traffic and sales per guest as a result of the success of our CapEx related initiatives, particularly our increased seating for parties of two, what we internally call our [two] seating initiative and our expanded beer tap initiative. About 90% of our existing restaurants currently have both of these initiatives in place and we plan to complete the remaining 10% during the first half of 2012. So it continues to be more upside yet to come from these two initiatives. All of our new restaurants have these two programs in place when we open.

Additionally, we plan to increase the capacity of another 10 existing restaurants by upgrading their patio seating layouts.

Moving on to our menu initiatives, as Jerry mentioned, we have introduced many new menu and beverage items during the past two years that have been well received by our guests and have generated incremental sales. Our teams have done an excellent job of absorbing these additions as our menu continues to diversify with offerings that resonate very well with our guests.

This past November, we rolled out our fall menu in which we introduced our new Fan Burgers with a tie into our Facebook social media network. In addition, we added an incredibly popular new Angus rib eye steak to complement our New York steak, which has provided the guess a great value and a nice option which drives a higher check average.

We also continue to refresh our successful Small Bites snacks category with a few new additions, in addition to new soups and beverages. Next week, we'll begin our Second Annual Seafood Celebration which also will include a new mahi-mahi addition to our Enlightened entree lower-calorie selections. We also have some exciting new menu and beverage additions being ready for rollout this spring and summer. We'll talk more about those when we are ready to roll.

As we all know, the most effective four-wall profit margin protection program is always anchored by an effective sales building program. At BJ's, we are always focused on sales building first and foremost. We have several sales building initiatives planned for the next few quarters. These include, in addition to our ongoing menu innovation program and our upcoming guest loyalty program rollout which Jerry mentioned earlier, a new catering program, a new printed menu format that more effectively merchandises our higher ticket specialty entrees and all of our beverages.

On the productivity and cost savings initiative front, in addition, we have continued [piling] a new labor scheduling and productivity measurement that is based on an item count methodology that we believe will help our restaurant operators to more effectively allocate or balance labor hours on every shift. We're also reconfiguring our automated kitchen display system to improve capacity and throughput in a few of our cooking stations. We continue to aggressively work our cross-training program in our kitchens in order to gradually create greater labor efficiencies over time. In addition to the cross-training, we know we can pick up our productivity by reallocating labor hours throughout the entire restaurant.

Finally, we're working with our supply chain team to complete the testing of certain ingredient and product specification changes that have the opportunity to generate $1 million to $2 million of annualized cost savings without reducing quality. If our tests prove successful, we could begin to see some initial cost savings in the latter half of the second quarter.

Last but not least, we are continuing to make prudent investments to steadily advance the overall quality, capabilities, and bench strength of our restaurant management and field supervision talent base. We have several talent development initiatives underway that are intended to further strengthen our ability to select, recruit, assess, train, develop, reward, and retain the best restaurant management talent available. We can only open new BJ's Restaurants as fast as we can develop highly qualified seasoned restaurant management teams to correctly and consistently execute our restaurants.

Jerry back to you.

Thanks Wayne. Once again, our restaurant operations team certainly has a lot of sales building and productivity initiatives to digest during the upcoming year. We also note that they're as excited as we are to have the opportunity to keep driving our overall quality and our financial results upward.

Now, we're going to turn the call over to Greg Levin, our CFO, for his financial commentary on the quarter. Greg, go ahead.

Thanks Jerry and good afternoon everyone. Let me take a couple of minutes and go through some of the highlights for the fourth quarter, also provide some forward-looking commentary for 2012. I want to remind everyone that all such commentary is subject to the risks and uncertainties regarding forward-looking statements that are included in our SEC filings. Additionally, my commentary may also refer to certain non-GAAP financial measures that we use in our internal review of the business and that we believe will help provide insight into our ongoing operation.

As Jerry previously noted, our total revenues for BJ's fourth quarter increased approximately 29% to approximately $171.8 million from $132.9 million in the prior year's comparable quarter. As we disclosed, this year's fourth quarter was comprised of 14 weeks as compared to last year's 13-week fourth quarter. This extra week accounted for $13.9 million in sales for the fourth quarter of 2011. Therefore, excluding this extra week, sales for the fourth quarter of 2011 increased to $157.9 million, which is an approximate 19% increase compared to last year on the same comparable 13-week period. This 19% increase was comprised of an approximate 12.5% increase in operating weeks and an increase in our average weekly sales of about 5.7%.

While we do not report monthly comparable restaurant sales, each period was solidly positive with September being our softest period during the quarter as we're going up against some of our toughest comparisons from prior year. Additionally, the choppiness in our day-to-day sales comparisons that we discussed during our third-quarter conference call which was this past October continued throughout the quarter. This trend appears to be continuing in the first quarter of 2012.

Our 5.1% comparable sales increase for the fourth quarter consisted of an approximate 3% benefit from menu pricing, an approximate 0.6% increase in guest traffic, and an approximate 1.5% net benefit from mix and increased item purchases by our guests. In aggregate, all of our 13 states in which we operate had positive comparable restaurant sales during the quarter. Consistent with the trends over the last two years, our restaurants outside of California in aggregate had slightly higher comparable restaurant sales compared to our restaurants inside California. So from an overall basis, both our restaurants inside California and our restaurants outside California continue to perform very well for us in regards to comparable restaurant sales.

In the fourth quarter, our weekly sales average increased by 5.7% on a 13-week comparison, which was just slightly ahead of our comparable restaurant sales increase of 5.1%, which is primarily due to the initial strong honeymoon from our newer restaurant. Our newer restaurants are located in AAA mature, densely populated retail trade areas which tend to result in some strong honeymoon periods, especially around that holiday season.

I do want to remind everyone that, as a relatively small restaurant company, our weekly sales average performance as compared to our comparable restaurant sales metric will be a result of many factors, of which one will be the geographic mix of our newer restaurants not yet in the comparable restaurant sales base. I would therefore caution investors to not read too much into the initial sales volumes of many of our new restaurants or changes in our weekly sales averages as compared to our comparable restaurant sales metric because we will always have a diverse geographic mix of newer restaurants as we continue to build our national presence.

As I previously mentioned, during the fourth quarter, our estimated menu pricing factor was approximately 3%.

Before I get into the middle of the P&L, I do want to mention the impact of the 14th week on the quarterly results. Based on our internal estimate estimation, the 14th week impacted our earnings per diluted share by approximately $0.06 for the fourth quarter. Our fixed and semi-fixed occupancy and operating costs received the majority of this extra sales week benefit and its relationship on our margin which I will discuss shortly here as I go through the middle of our P&L.

Our cost of sales of 24.3% of sales was down about 50 basis points as compared to last year's fourth quarter and on a sequential quarter decreased to about 40 basis points. This decrease compared to the same quarter last year is primarily due to the higher commodity costs offset by menu pricing and some favorable mix shift. On a sequential basis, the decrease in cost of sales as a percent of sales is primarily related to our regularly scheduled menu pricing which we took in November and really allowed us to leverage the cost of sales.

As a percent of sales, labor increased 70 basis points to 34.9% as compared to 34.2% last year. The increase in labor was primarily in two areas. First, because of the extra week in fiscal 2011, the fourth quarter ended in the next calendar year 2012. As a result, we incurred about 30 to 40 basis points of higher payroll taxes and benefits as compared to the prior year.

For those of you that follow BJ's, we always anticipate higher labor costs in the first quarter of each year due to the resetting of state unemployment taxes and FICA limits. We generally experience these higher payroll taxes in the first and second quarter of each year, at which time we will have hit many of the state tax caps.

Second, we experienced higher workers compensation as a percent of sales in this year's fourth quarter as compared to last year's fourth quarter as a result of our new workers compensation insurance renewal which began this past November.

In regards to the more direct labor under our daily control, we continue to see higher hourly labor, primarily in the kitchen, due to the intensiveness and complexity of our new menu offerings. However, these new menu items continue to drive sales and, frankly, these new menu items are what the guests want, as evidenced by our continued strong comparable restaurant sales. As such, any increase in hourly labor is being offset entirely by the levers we are getting in management labor by driving those comparable restaurant sales. That being said, we continue to work on labor productivity and labor optimization in our restaurants, as Wayne mentioned.

Our operating and occupancy costs decreased about 100 basis points to 20.3% as compared to last year's fourth quarter. As I mentioned, occupancy and other fixed and semi-fixed monthly operating costs benefited the most from the extra week of sales. Based on our internal estimation, our occupancy and operating costs would've been about 80 to 90 basis points higher than the reported 20.3% if we excluded the impact of the extra week of sales. This would put our operating and occupancy costs closer to 21.2%, which is pretty consistent with the third-quarter operating and occupancy costs of 21.1%.

Specifically in the fourth quarter, our marketing related expenses were slightly higher at 1.3% of sales due principally to the timing of our key promotional event calendar for the holiday period. Overall, our restaurant level cash flow margins for the fourth quarter were 20.8% including the extra week. Excluding the extra week, we estimate that our restaurant level cash flow margins would be about 20%, which is in line with last year's fourth-quarter restaurant margins.

Our general and administrative expenses decreased by 40 basis points compared to the same quarter last year to 6.3% sales. Included in G&A is $833,000 and $704,000 of equity compensation for 2011 and 2010 respectively, or 0.5% of sales for both years. G&A came in a little bit higher than I was anticipating, primarily due to the higher payroll taxes related to the quarter ending in the next calendar year. We saw some higher consulting costs related to certain ongoing initiatives and higher training and recruiting costs related to building our restaurant management hires and talent for our 2012 expected openings.

Our restaurant opening expenses were approximately $1.9 million during the fourth quarter of 2011. We did see higher opening costs related to some of our newer restaurants, particularly those that are further away from our home base in California. Specifically, our Pembroke Pines, restaurant which was our first restaurant in Southern Florida, and our Tuttle Crossing restaurant in Ohio required more support during the opening period due to their locations in newer markets for BJ's, as well as each one of these restaurants had higher construction period rent during the buildout time.

Also, our new R&D restaurant in Anaheim [Grill] just by the nature of it being a newer prototype with a different service model and different technology, required additional preopening costs. Excluding these restaurants, our opening costs for 2011 continued to be around $500,000 per restaurant. However, I think it is important to note that our opening costs, while estimated at around $500,000 per restaurant, will vary greatly based on many factors, including the infrastructure we have in place based on the geography of the surrounding restaurant, the construction period, the labor market, and the occupancy costs.

Over the last few years, we have primarily opened new restaurants in our existing market and we have received less tenant improvement allowances, resulting in lower construction period rent. As we continue to build our nationwide presence and take on newer markets, we could experience higher opening costs until we have enough restaurants in the market to provide opening support for new restaurants.

Our tax rate for the fourth quarter was approximately 25.7%, which resulted in a 27.7% tax rate for the full year. The lower tax rate in the fourth quarter compared to prior quarters was primarily due to adjustments that were made to our final tax returns for the previous year and then trued-up on this year's provision, as well as continued utilization of state and federal tax credit.

Gross capital expenditures for 2012 are approximately $95 million and included the purchase of one piece of property underlying the land for a future restaurant which we intend to monetize through a sales leaseback transaction in 2012. Generally, our expansion strategy is predicated on leasing our restaurant locations. However, from time to time, we may decide to purchase the underlying land for a new restaurant, but that is the only way to secure a highly desirable site.

We received approximately $8 million of landlord GI contributions and sales leaseback funds bringing our net CapEx to around $87 million this last year.

Our cash flow from operations was approximately $88 million. We began 2011 with the goal of financing all of our CapEx requirements for the year with cash flow from operations and landlord contributions, and we nicely achieved that goal. We have a similar goal for 2012, which I will comment on later.

Before I turn the call back over to Jerry, let me spend a couple of minutes commenting on our liquidity position and also provide some forward-looking commentary on 2012. Once again, all of this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the Securities and Exchange Commission.

In regards to our liquidity, we ended the quarter with a little over $53 million of cash and investments. Our current line of credit is for $45 million and does not expire until September 2012, of which 0 is outstanding today, other than for standby letters of credit that support our insurance program.

As we begin our execution of our 2012 initiatives, we currently anticipate that our cash flow from operations, coupled with our cash, cash equivalents, and investment balances on hand and our landlord contribution, should be sufficient to fund our expansion plan as well as our other capital initiatives for 2012. Currently, we anticipate that our capital expenditure plan for 2012 will be approximately $100 million to $105 million before any landlord allowances. This capital expenditure plan is based on the construction of as many as 16 new restaurants as well as our maintenance capital expenditure plan and our list of sales quality initiative, our productivity initiative, and our branding and infrastructure initiative. We do anticipate receiving approximately $10 million to $13 million in landlord allowances and proceeds from the sale of land this year.

From a revenue perspective, as Jerry mentioned, our comparable restaurant sales so far in the first quarter of 2012 are trending right around 4%. We are quite pleased that we are positively rolling over our toughest quarterly comparison from last year in which we finished Q1 of 2011 with comp sales up almost 8%, which is one of the strongest in casual dining for this time last year.

Also note that, unlike many other casual dining companies that have an easy Q1 in comparison, due to the severe winter weather in the same quarter last year, we didn't experience that much winter weather due to our mostly Western and Southern footprint.

As we have mentioned in the past, for a restaurant concept like BJ's that is already one of the leading public restaurant companies regarding guess traffic, shooting par for this course is being able to get your menu pricing and maintain your guest count. That being said, each year, we continue to work on additional sales building initiatives and productivity initiatives, as Jerry and Wayne discussed, and we believe, over the long run, there is still opportunity to drive additional guests to our restaurant and improve both the mix shift and incident rate in our restaurants.

For those of you building your models, I would therefore err on the side of conservatism and build your models based more on menu pricing and yearly comparisons. Right now, we have about 2.5% of menu pricing. Our next regularly scheduled new menu is anticipated for early May, at which time approximately actually 0.5% will be rolling off, leaving us with about 2% of carryover pricing. We have not yet determined what additional pricing we may take at that time, but we will likely replace at least what is rolling off.

As we've said before, pricing is the last lever we pull to drive sales. Our goal is to drive sales by offering a higher quality, more differentiated dining experience in a more contemporary facility executed with sincere hospitality and gold standard service. We will not try and price our way to success. Our pricing strategy is about preserving our unit economics and any pricing we take is considered only after contemplating the success of our productivity initiatives on our four-wall margins.

Also please remember that Q1 of 2012 began on a Wednesday, January 4 of this year, compared to Wednesday, December 29 last year. As such, Q1 of fiscal 2012 will not have the benefit of that strong sales week between Christmas and New Year's. In the past, this tended to be one of our strongest sales weeks of the quarter. In fact, our weekly sales average for the 53rd week was almost $121,000 compared to our reported weekly sales average for the entire fourth quarter on a 13-week basis of a little over $106,000. Therefore, for those building your models, I would anticipate our weekly sales average, when compared to the same quarter of last year, to be less than our reported comp sales for the first quarter.

As Greg Lynds mentioned, we currently anticipate opening one new restaurant in the first quarter and as many as five new restaurants in each of the second, third and fourth quarters respectively. One of the planned new restaurant openings in the third quarter will be our planned relocation of our smaller-format Pizza & Grill restaurant in Boulder, Colorado.

As of today, we are anticipating our total weeks for 2012 to increase about 11% from 2011. This increase is on a 52-week to 53-week comparison. If you exclude the 53rd week from last year, we are targeting an increase in operating weeks of approximately 13%. However, as we've said before, the actual number and timing of new restaurant openings for any given period is subject to a number of factors outside of the Company's control, including weather condition and factors under the control of landlords, contractors and regulatory and licensing authorities. For the first quarter, we are anticipating approximately 1500 total restaurant operating weeks.

In regards to cost of sales for 2012 and based on information available and our expectations as of today, we currently estimate the total cost of our food commodity basket to increase approximately 4% during 2012. This current estimate is based on negotiations with suppliers that have been completed to date, coupled with current and expected market conditions for certain fresh and other commodity items that the Company is either unable to or has currently collected not to contract for longer periods of time.

As of today, we have locked in approximately 65% of our commodities for the first quarter and about 40% of our commodities for the full year. The current significant commodities not under contract for the full year are Angus ground beef, cheese, certain seafood items, most produce items, dairy, and some grocery items.

In regards to labor, we currently do not anticipate significant pressure for 2012 for both wages and salary. However, separate of wages and salaries, we will see higher insurance costs for our workers compensation program which could impact labor by 10 to 30 basis points. We continue to expect to see some higher state payroll taxes as many states have increased their payroll taxes to help fund their unemployment deficit. Much like last year, the higher unemployment taxes will occur in the first and second quarter of the year, after which time we will have hit many of the state tax caps or limits. Therefore, while I expect our labor on a total year basis to be somewhere in the mid to upper 34% range, I do expect Q1 of 2012 to be higher than our recent trend, which is, frankly, consistent with the last two years in the first quarter. Of course, labor as a percent of sales could be materially different than my current estimate based on the weekly sales average and comparable restaurant sales growth that are actually achieved.

I anticipate that our operating and occupancy costs will be in the low 21% of sales range for the full year 2012. We do plan our normalized run rate level of marketing costs to be about 1.2% of sales this year, which is consistent with our spend for 2011. However, not yet contemplated in our marketing costs for this year will be any start-up costs related to the rollout of our loyalty program scheduled to go live in the beginning of the third quarter. As that number firms up, we'll share that with you on our next conference call.

Specifically, in the first half of this year, we expect our marketing costs to be closer to 1.4% of sales as a result of some increased marketing spend promoting our limited time offering and, as Jerry mentioned, the cost to test television.

Our G&A expenses for the full year of 2012 in absolute dollar terms are currently plan to increase by around 12% to 13% compared to 2011. That's going to include the equity compensation portion of G&A.

As I've already mentioned, we currently expect restaurant opening costs to be about $500,000 per restaurant. However, we will incur pre-opening non-cash rent as much as five or six months before a restaurant opens. Therefore, pre-opening costs for any quarter may not be indicative of the number of restaurants that opened in that quarter.

Additionally, for 2012, we will continue building out South Florida as well as adding new restaurants in New Mexico and Kansas. I would expect that these restaurants may incur greater pre-opening cost than our restaurants in mature trade areas in which we already have our support infrastructure in place. For the first quarter, I anticipate opening costs of approximately $700,000 related to one new opening in the first quarter, plus pre-opening rent for restaurants expected to open over the next several months.

We currently anticipate interest income, net and other income to be around $600,000 for the year. We expect our income tax rate for 2012 to be in the 28% range. Based on our current stock price, we estimate that our diluted shares outstanding for 2012 will be in the low $29 million range.

Finally, for those of you building your models, as we said earlier, I would err on the side of conservatism and build your models based on -- more on our currently expected menu pricing factor, coupled with our expected growth in total restaurant operating weeks. Therefore, in building your models, as we already laid out, we expect our operating weeks to grow around 11% this year and we currently expect our full-year menu pricing to be around 3% for fiscal 2012, although our expectations could change.

Our estimated restaurant level cash flow margins are already quite strong for casual dining companies in general. As we mentioned, our target is to make sure we preserve these margins despite the inflationary pressure as we expand nationally.

We do expect to continue to leverage our G&A costs with additional revenue growth to gradually improve our operating margins over the long-term. Therefore, when you put it all together, and assuming no material change in the current operating environment as it impacts consumer confidence and discretionary spending, we continue to believe we have a good opportunity to drive revenue growth in the mid-teen range and achieve some additional operating leverage to help drive our overall earnings growth.

We do realize that we always have the opportunity to improve our restaurant level margins and get better. We're always acutely aware of this fact, and we will consistently work hard to not only preserve these margins but to grow them. However, in building your models, I believe it is more prudent to err on the side of conservatism.

Please remember that 2011's fourth quarter included an extra week. As we mentioned, this extra week resulted in about $0.06 in diluted earnings per share and contributed about 80 basis points of margin benefit in the fourth quarter.

Jerry, back to you.

Thanks Greg. As usual, a very thorough review. Look, our comments have taken a little bit longer, but we had a lot to talk about today, so let me just quickly summarize our comments for today and then we'll get to your questions.

We were very pleased with our very solid results for both the fourth quarter and the full year of 2011. We are continuing our forward momentum so far this year in the first quarter of 2012, and we are gearing up to execute another year of profitable new restaurant expansion for BJ's.

We're going to do our best to navigate through the current and expected volatile commodity cost environment using a combination of menu-related and merchandising actions achievable and selected menu price increases and the deployment of certain productivity efficiency and cost saving initiatives.

Now, at the same time, we are going to continue to make the right investments for BJ's long-term success, investments in our team members, investments in our guests, investments in our operating and support infrastructure, and investments in the quality and differentiation of our brand. You know, compared to our larger, more mature casual dining competitors, BJ's is still a relative youngster in many respects. We still have our fair share of the typical growing pains to overcome. But we are in this for the long haul. We're going to continue to build a solid foundation to support the continued growth of our concept and our Company in a very productive and leverageable manner. We still believe the best years are ahead of us here at BJ's.

So now that concludes our formal prepared remarks. We are going to finally open up the call for your question. Operator, go ahead.

(Operator Instructions). David Tarantino, Robert W. Baird & Co.

Hi, good afternoon and congratulations on another great year. Greg, just a question about the long-term outlook for the restaurant level margin. 2011 was the third year in a row where you were able to improve that margin. Now that you're at a fairly high level above 20%, just wondering if you could kind of frame up how you're thinking about it as you look out over the next three to five years and your ability to drive improvement and your maybe willingness to drive improvement, or choose to reinvest any upside into initiatives.

I'll take that call, but I'm sure Jerry would like to comment on it as well because it's a very good point in regards to the things that we talked about, that 20% restaurant level cash flow margin and making sure we preserve that. We've mentioned many times on this call that when we are hitting a 20% margin -- and I'm just using that number roughly right now -- that means we have a certain amount of restaurants that are below that. We talk about that all the time. It's a combination of the ramp-up period of our newer restaurants and getting them up to altitude sooner. That will lift the entire margins up for the restaurant company -- or for BJ's. We have many restaurants that today still are farther off on their food variant that are still not as fast as they should be in regards to cook time. We have restaurants that have too many comps and service adjustments and other things that, frankly, go into those margins.

So when I think about the ability long-term for us to expand those margins, I think there's tremendous opportunity within our four walls that is not related to pricing, frankly, and trying to price our way to better margin. So as we think about the expansion of BJ's over the longer term, there is definitely that opportunity to continue to move it up.

Will we see some of the large improvement that we've seen over the last couple of years? That might be more difficult because of the improvement we've seen in comp sales from really 2009 when we were flat, for the last couple of years when we've been in the mid 5% and this last year 6% for the entire year. That gets you your leverage. So if we can continue to drive comp sales from an efficiency standpoint, the ability to move those margins continually upward is there. There's definitely an opportunity for us.

The only thing that I would add to that -- and I think Greg is absolutely correct. If you just do the math in our business, if we could just get our fourth quartile performers to move up to the third quartile of actual performers in terms of restaurant operating margins in our business, that would probably provide a 100 basis point lift to our consolidated four-wall operating margins. So Greg is absolutely right. We have those opportunities and Wayne and his team continually work those. We have several different metrics that we rank every one of our restaurants on -- productivity, efficiency and so forth. That's all built into our incentive plans to get the lower quartile margins up, so just the average margin. It's amazing mathematically what it will do to your consolidated margins.

In terms of our philosophy with respect to margins, I will tell you I've been in this business for almost 40 years now. I've been involved in many restaurant chain expansion programs, both in quick service back in the '70s and '80s, and in highly complex casual dining here for the past 15 years or so. I will tell you when you get to a pure operating, highly complex casual dining concept like BJ's, the biggest challenge as you execute an expansion plan is to preserve your original home-court four-wall operating margins (inaudible) the further you get away from your home-court as you enter new markets, as you bring less tenured restaurant operators in to execute your concept, that's the big challenge in our particular segment of the restaurant industry.

I'm happy to say that if you go back to 2004 and look at the consolidated four-wall margins of our business back then, and now you look at them today with 115 restaurants versus, say, 30 or 35 back then, we've been able to preserve our consolidated four-wall operating margins despite all of the pushes and pulls of the economy. So that is our fundamental philosophical approach to it. We have achieved, clearly, some leverage over the past several years as we've driven our comp sales, but we chose to reinvest the majority of the benefit of that leverage back into the quality and differentiation of the concept. It gives us that ability to take market share from the mass-market chains that are not high quality or differentiated anymore. It gives us additional pricing power which you absolutely have to have in an inflationary environment, particularly that we are living through now with higher-than-normal inflation and certain commodity costs, almost all commodity costs across the board. So we believe that's the appropriate strategy. Again, I'd love to see the overall consolidated margins lift another 100 basis points, but that's in the hands of our operators to execute better.

Thank you very much.

Andy Barish, Jefferies & Company.

Hey guys, good afternoon. A little confused just on the two biggest expense lines, food and labor, food getting some leverage and labor going the other way even with the high volumes and the extra week. More on the labor line, is there something that -- I understand some of the items that you mentioned, but is there something going on just with all the additional menu items and the complexity that you've actually had to add sort of a layer of staff, and at what -- if that is the case, at what point do you sort of lap some of those actual body or labor hour increases?

There's a couple of things. I thought I -- I wouldn't say I thought I was crystal clear obviously, but I think we did mention in the call that we are seeing the extra labor in the kitchen, but frankly it's driving the sales. When it's driving the sales, it's having a better impact on overall gross margins from that standpoint.

In regards to the extra week -- and I get your point a little bit, but the labor is 100% variable the way we have it set up there. So vacation gets accrued for that extra week in that regards. Payroll taxes get paid for that extra week from that standpoint. Managers get paid for that extra week. So there's not any really true leverage that you get what you see an operating in occupancy costs. I think, if you go back and you look specifically at our last couple of quarters, you're going to see, in Q1 of each year, you're going to see higher labor. That's due to that higher payroll taxes from that standpoint. So that impacted that.

In regards to the complexity of our menu and other things, we are always going to be rolling out new menu items, and so we're always going to have a certain amount of training labor and other things that come in place on it, but we continue to work on optimizing it. We are looking at a new labor type metric this year that will help us rebalance the line and the way we staff it. I think, as we continue to work our business, we'll continue to get leverage there.

The only other thing that I would add to it, Andy, a couple of things. First of all, Wayne mentioned we are continuing to work on the cross-training of our line cooks so that they can run multiple stations versus just a single station, which will certainly help in our productivity, particularly when one station needs a little bit of help and cross-train somebody to come in and temporarily pitch in versus scheduling another body to help a station. So we are working on that.

The other factor in our labor is that, in our management complements, we typically run anywhere from, say, 97% fully staffed to 102% or 103% staffed. Again, it depends on turnover. We recruit management to support openings. So sometimes we run at the 102%, 103% level. Other times we run it at 97% of our pars, and we've been running at about 102% for the last couple of months as we are preparing for a lot of our increased openings here in the upcoming years. So, that will gradually get disseminated into our normal operating results as time goes on. So those are a couple of other factors that I think impacted the fourth quarter.

Just one other quick one. On the new Anaheim Hills Grille, a great-looking restaurant. I know it's early. Any initial impressions or learnings or what sort of -- what should we look for out of that sort of test restaurant in 2012?

There are a couple of things that we've learned in just the 90 or so days that it's been opened. The centralized beverage station for non-alcoholic beverages has been a significant productivity enhancement in that restaurant. It improves overall speed of service for non-alcoholic beverages to get to the table, and it also ensures that, frankly, they all get rung up, which is always a problem in a lot of casual dining companies. So that's one immediate benefit that we have seen that we are going to begin to test in our larger brew house restaurants here to see if we can adopt that here over time.

I think the other benefit that we've seen is, frankly, the handheld technology that we are testing in that particular restaurant for ordertaking has also clearly improved the overall speed of service of the entire dining experience. We are going to evaluate that this year for a potential application next year in all of our brew house restaurants, replacing our current fixed point-of-sale system with something that's a little more mobile and handheld driven. So those are a couple of things that we've learned immediately.

In terms of the overall look and feel and consumer reaction to the concept, it has been very well received, very favorably received. In fact, we probably could've opened a full brew house there in that particular trade area. This restaurant has only got 4500 interior square feet, and our big brew houses have 8500 interior square feet. But I think, so far, we've gotten a lot of great learning from it, and we will be applying that to the big brew houses.

We also have introduced -- the only new product that we really introduced at the opening in the Grille was a hand-tossed pizza. Of course, we are known for our bakery crust deep dish pizza here, and that's our signature product, so we wanted to experiment with adding a hand-tossed pizza to the grill concept. And that has also been well received. It has not cannibalized the sales of our deep dish pizza, so we are selling, in the aggregate, more pizza, which is a higher-margin item for us. So as we continue to work through the recipe and the dough quality and consistency and so forth, we intend to test that in the big brew houses as a potential new product rollout in the next 12 months if not earlier. So, those are some initial learnings I think we've gotten from the concept.

Thank you.

You're welcome.

Matt DiFrisco, Lazard Capital Markets.

A couple of clarifications. In discussing the future, it looks like you're talking about a 4% commodity inflation, and you went back and forth between 2.5% and 3% price. Does it start off the year at 2.5% and you're going to average 3%?

That's correct. The way our menu pricing rolls off right now, we are at about 2.5%. Last year, we rolled out a new menu actually in the kind of January/February time frame with California labeling laws, and that rolled off. So as a result of that, it's put us down to about 2.5%, got about 0.5% that rolls off in the kind of May time frame. It will at least replace that 0.5% there, which will probably keep us at around the 2.5% at that time and then as we get to the second half of the year when we roll out our fall menu, we'll determine what we are replacing it with. But overall, I would expect us to be somewhere around 3%.

Again, as we mentioned in our prepared comments, we still haven't made our final decisions as to what our effective price increase will be in our main menu. I think we do have some flexibility there to react to competitive conditions. If we need to consider a little bit more, I believe we have the ability to do it.

The other factor too that we also mentioned in our prepared remarks is that we have some cost savings tests underway that could potentially yield on an annualized basis about $1 million to $2 million of annualized cost savings with respect to certain ingredients and product specification changes. We are testing those right now. Depending on how successful they are, and we at this time feel very, very confident that the vast majority of those are going to be successful, that will also enter into our menu pricing thoughts for the main menu as well.

Okay. Then I guess just to look at how would the cadence of the commodity 4% inflation -- would that be pretty steady throughout 2012, and is that something similar that you saw in 4Q?

I think when we are looking at that throughout the year, it tends to increase a little bit towards the second quarter. It will start to drop off towards the end of the year. The reason I say that is there's certain items already in inventory at the beginning of this year, and it gives us a little bit of a benefit in the first quarter. Even if you look at last year, and we talked about the freeze happening in Mexico and Florida, that produce market really didn't start to hit us until kind of the March timeframe and then went into the second quarter even though the freeze was in the January time frame. So we'll get a little bit of the benefit here in the first quarter of our current menu pricing, and we'll start to see a little bit more pressure on cost of sales I would think as we move into Q2. As we layer on our menu pricing throughout the year, that will bring down cost of sales a little bit, similar to this year a little bit.

Excellent. Then looking out as far as you made some comments on how the back half of the year gets easier with year-ago compares, but specifically looking at this quarter, I think you said this time a year ago the comp was 5% to 6%. So I would assume then the back half of 1Q, the next seven weeks left for the first quarter, are going to be pretty challenging compares. Close to 9% would be my math.

That's probably (multiple speakers). That's good algebra.

I always liked algebra.

I'm just pulling up the weekly comp, in the past, and we kind of made the comment already on the call. Q1 is a challenging quarter for us. We did a 7.8% comp there. Looking across the board, we had some tremendous weeks last year that we're going to go up against this year. I think, if you look at the two-year average, frankly, we did about a 4% or a little over 4% comp in Q1 of 2010. We did the 7% last year, or 8% last year, putting as your two-year average somewheres in that 11% range. Frankly, we're kind of right on, so we feel pretty pleased with how we are starting off.

Absolutely.

Then just clarifying as far as your G&A guidance, when you said 12% as absolute dollars, that's incorporating the incremental G&A associated with extra operating weeks, so just take the base dollars and you're looking at that as far as roughly 12% in 2012?

That's correct.

Then, Jerry, just a longer-term comment or I guess trends, check management has been a big issue as far as other concepts, and they haven't really seen a recovery in that. Could we read into your couple of quarters now here of positive check as maybe your consumer and your brand, you're unwinding some of maybe the check management that maybe the customer was getting a little bit more frugal in tougher times, and they're starting to buy maybe two sodas and maybe going back off of real drinks into some better premium products?

I would answer the question within the context of the BJ's concept and what we have been doing with menu innovation and beverage innovation for the past couple of years and how that's manifested itself in terms of the guest spending behavior. Frankly, we have seen incidents rate increases in appetizer incidences and beverage incidences because, frankly, due directly to the innovation of our Small Bites snacks category, to the innovation particularly on the beverage side of our seasonal beers. We are selling more items per 100 guests today than we ever have in the history of the Company. I don't think it's just due to the consumer kind of feeling good or a little bit better in general, and maybe buying an extra something or other. You've got to give them a reason to spend their money. At BJ's, our guests are not coming to window shop; they are coming in to spend money. Through our menu and beverage innovation, we've given them a lot more opportunities in a very creative way to add to their check with innovative appetizers and the Small Bites and seasonal beers that we've been really driving that have become increasingly popular over time.

We've also been working the barbells of our menu strategy to work not only on the Small Bite snacks appetizer section, which are priced at $2.95 to $4.95 and represent a very easy add-on to a check, but we've also been working the other end of the barbell in our menu. We've been really working on more center of the plate protein dishes, beef, poultry and seafood. Every move that we've made up there with an entree priced in the, say, $11 to $13 range has been extremely well received by our guests, so our guests are actually trading up because we're giving them a higher quality, more innovative dish to purchase than perhaps they could get at one of the mass-market casual dining chains. So, I think it's really been due to things that we have done with the menu that have really driven guest incident rates, and maybe has helped us to avoid some of the issues that some of our competitors have suffered with respect to check management.

That's great. Thank you.

Brad Ludington, KeyBanc Capital Markets.

Thank you. I said a couple of quick questions on -- first off, talking about going into East Coast markets in 2013, on the last call, Jerry, I think you said that you might consider a partnership to enter some of those markets. Is that how we should expect that to be put together in 2013?

Not necessarily. We are certainly willing to consider joint venture opportunities if they come to our attention with well-established, proven casual dining restaurant operators that have great real estate and maybe have good operational infrastructures and solid management talent but maybe don't have the right concept at this time. So we are certainly willing to consider those opportunities. There is nothing that's currently being considered. We do expect to make an entry though on the East Coast markets probably toward the end of this year, early next year. We're probably going to pick the middle Atlantic states, particularly the Washington DC/Northern Virginia area as an initial entry point to begin to build out BJ's Restaurants there. Then again, if we get an opportunity to joint venture something further north and east in America, we would be certainly happy to give that some consideration. Greg Lynds, would you like to add some color to that?

We've been working that market now for probably 18 to 24 months, so we've got a good handle on site availability and timing. I think we're in good shape to enter the East Coast certainly late this year. But by 2013, we'll be in good shape.

Our thinking is that if we do it on our own with respect organic developments starting in the Virginia, Maryland, DC area where, in our past lives with other restaurant concepts that all of us have worked at in our company, the sales volumes have been very, very lucrative and restaurants have done very, very well up there. There is enough capacity there to establish a very strong base of BJ's Restaurants. Then it just gives us the ability to just move north into Pennsylvania and New Jersey where, again, based on our past experience, high-quality casual dining restaurants do extraordinarily well if they have high quality and good differentiation.

Okay. Then just a follow-up maybe for Greg, on your development commentary, you talked about going to a consultant and getting a conservative estimate of 425 potential units. Was that (inaudible) and saying conservative is that implies that there's probably a larger base case and kind of larger stretch goal out there as well?

Without disclosing too much confidential or proprietary information, I can tell you that, like many of these studies, they start kind of with the fundamentals. Who is your customer? Where do they live? How far do they drive to BJ's? What's the trade area for each restaurant. Once that core customer and trade area is identified, the computer model says, hey, what similar customers and trade areas across the United States would BJ's do the best in and how do you optimize that in terms of what's the best MFA to go to, and that what's the total buildout. So our team, along with those consultants, said at least 425 restaurants.

All right, thank you.

Brian Bittner, Oppenheimer & Co.

Thank you. Congrats on a great year guys. I've got two questions if I may. So the first is you talked about the sales pillars in 2012 and you talked specifically about how the initial tests of a loyalty program are driving better than incremental guest incidents and guest spending per visit. So I guess, to the extent that you can, can you try and qualify this impact a little bit, or if not maybe just give a bit more color on what dynamics of this rewards program is really driving these kind of better-than-expected results.

That's a great question. Since all of our competitors are listening in to our call today and they would absolutely love to know exactly what we are doing and what breakeven cost hurdles are, and our expected results are, I don't think we really want to get into all of those details.

But I think we can say that our loyalty program, which is actually out there in test in a couple of markets, so it's really no secret, and we have a number of loyalty program participants, so how it functions is really no secret. But ours is more of an experiential engagement driven loyalty program than some of the others, where I am in Starbucks' loyalty program and I do go every day. Every 15 cups of coffee I buy, I get a little thing in the mail that says I get a free cup of coffee with my Gold Card. Well, that's not exactly what we are doing here at BJ's. It's very, very different. It's based on accumulating points, and then these points can be redeemed to some extent for products that we would sell, but it's more intended for experiential rewards where they can bid on wonderful trips and things that we would offer internally that would be very special other than just additional food offerings, if you will.

But the real key to our loyalty program is, once our participants tell us as much as they care to tell us about themselves, it will be stored in a database, and this is all integrated with our front desk table management system and our POS system so that, when they check in with their handheld device or with a card in our restaurants and they get that scanned, and the little chip that prints out to our host or hostess that will seat them at their table, we're going to have all of the information that they've chosen to share with us right on that little chip. We're going to know exactly what their purchase behaviors have been, what their favorite products are at BJ's, so we can engage them. You know, hello Mr. Deitchle, thank you for coming today. I notice that today is your birthday. Happy birthday. Can I go ahead and get your Jeremiah Red Beer for you, already started for you?

So it's the level of engagement and connection that is just as important as the whole reward structure of this particular program. Again, in test, it did drive increased guest visit frequency of our loyalty participants, and they also spent more than our average guest would spend. So those are some factors that we believe give us confidence to go ahead and roll this out Company-wide.

But on the other hand, I think you have to remember that this is a casual dining loyalty program. This is not a Starbucks or a Panera Bread type of frequency where you're going to have somebody like me that goes to Starbucks every day -- today I went twice -- or someone that goes to Panera Bread several times a week. Our heavy user doesn't have those capabilities, so it's not going to likely have the impact that, say, a Panera Bread's program would have on sales and margins, but it will have a positive impact.

That's extremely interesting and intriguing.

The second question is you talked about the ability to increase capacity at some of your restaurants by constructing a patio. I'm just wondering what type of cash investment is needed for this, and what sort of sales bump could this provide at the individual store level?

We have three types of patios. We have a fair weather patio which we just go ahead and if we get the permits and the ability to do so in our lease; we've got the concrete out there. We'll put up a railing and we'll put out the tables and seat them when the weather is fair and when the weather isn't fair, then we take the seats up and we close it down. So that's type number one. That is a pretty relatively low investment cost for just the furniture and the umbrellas.

Then we have another version of a patio where we do have it -- where we do have a roof on it, but it's not fully enclosed. Then we have a third version where you have a completely enclosed patio that has doors that can either open or close again depending on the weather. I think the cost of those patios ranges anywhere from $50,000 on the low side to maybe $150,000 grand on the high side, so you've got $50,000, $100,000, and a $150,000, give or take a few grand in there. So we have 10 additions that we're going to be working on this year. I can't remember exactly how the mix of three types is going to fall out, but it does give us the ability to drive increased productivity, particularly when the weather is good.

Great. Thanks very much.

Nicole Miller, Piper Jaffray.

I was hoping to get an update on initiatives around to-go online and catering please.

I'm going to let Wayne Jones comment on the catering one since he's right in the middle of it.

We're currently working our catering menu to really evolve our offerings that will most resonate with the guests, to provide a consistent structure in which to provide the offerings, whether it be on-premise or off-premise. We're even working a potential delivery set up and work a party type of an event for a guest. So we anticipate that being rolled out here probably towards the end of the second quarter. We have it in tests currently and so far it's been very well received, and it's been very clarifying. Our guests have enjoyed quite a bit the (inaudible) selections that have been provided.

In terms of to-go and online, we rolled out online ordering probably three years ago or so. Our to-go, we rolled out our curbside cashiering programs probably three or four years ago. Our overall off-premise sales I think have kind of stabilized at 5.5% to 6% of sales. We know they can be better. We're taking another look at our online ordering process and current provider that we use where we believe we can be more productive and more accurate with that whole system, so we have a complete program underway to revise that.

The other thing that we're going to be testing very shortly is a call center approach to takeout orders where the takeout orders will be technologically routed to a call center where we can get those automatically then interfaced into our POS systems in our restaurants, much like the pizza guys do for their to-go orders. We believe that we can capture more orders and capture their accuracy a little bit better than letting the phone rings at our restaurants, although we think we do a pretty good job of capturing the takeout orders that get called in. I'm sure that we miss some because we put guests on hold or we can't service them in the manner that they'd like to be serviced. So we have that test underway, and depending on the results of that test, we'll see where we get with it.

Excellent. Thank you very much.

Conrad Lyon, B. Riley & Co.

I am intrigued by the comment about TV. I just want to see if you could speak to what market you want to test that in.

We are still making our final decision as to where we are going to go on that. It's kind of down to two markets. One is a California market and one is a non-California market. So, we'll make our decision here because we have to get the media bought, and then we'll let you know here on our next conference call because, by then, the media will likely have begun.

And hopefully I'll see it out here.

I don't think you're going to see it in Los Angeles.

Yes, that's what I thought, okay. A question regarding growth. What -- is there an absolute number of units you feel comfortable opening with your current expectations of efficiency and so forth, or is it just a belief that you can constantly incubate and grow talented managers?

The pace of our development program has always been dependent on our key pipelines for growth, how strong they are, how prime they are. It's a function of capital, real estate availability, management talent, the availability to leverage our infrastructure and so forth. I think that, right now, we're running at optimal pace of expansion that really maximizes the availability of all of those necessary growth pipelines.

Capital clearly has not been an issue for us. The availability of AAA real estate clearly is a little bit tougher to get these days because of the fact that there are no new major retail projects under development in America today as a result of the recession. So, that's a constraint that, while we have certainly plenty of high-quality sites to take care of our projected double-digit operating week growth for the next couple of years, I think we're going to probably have to see some new retail project development begin to manifest itself before I think we can consider dramatically increasing the rate of our planned expansion.

But we've said many, many times the most critical factor that governs our restaurant expansion is the availability of qualified, seasoned restaurant management talent. That is always a challenge for us, particularly in our kitchens. We're running at the right pace that I think optimizes that pipeline. If we, again, are feeling better about the overall availability and the seasoning of that talent, that would certainly play a factor into our decision to increase the pace of our expansion. But I think, for the next couple of years, we're going to stick with our low double-digit rate of operating week growth.

The important thing to think about it, and I can't underscore this more, and that is our growth is high-quality growth, not just growth for the sake of growth. The last thing that our investors want to see three years from now is a press release coming out saying, well, we grew at a 20% level, but we ran our train right off the tracks, we took on too much new market risk, we hired too many underqualified restaurant managers, we took restaurant locations that were at Main and 2nd instead of Main and Main, and now our overall average economics have turned south and we might have to close some of these or take impairment charges on them. We don't want to be in that position, and so we are going to stick with our very steady, predictable, leverageable rate of growth.

Got you. One last question. I think it might've been Greg Lynds and Greg, I don't want to misstate it here, but I think there was talk about going into some reinvigorated big-box centers. I'm curious if that's perceived as being more challenging or is there an opportunity to get, say, more favorable rents? I just want to make sure I understand that properly.

I don't think I commented on that today, but just overall in terms of state of the industry today, with no new development, you are seeing landlords spending a lot of time on figuring out how to reinvigorate their centers, what to do with these big boxes, and where restaurants will fit in. Restaurants drive a lot of traffic and they are well-liked by the developers because they bring percentage rent from other tenants. So, we are seeing a lot of that and we're pretty -- we are well suited and well-positioned to capitalize on it.

Okay, got you. Thanks.

I think we have time for two more questions.

Sharon Zackfia, William Blair & Co.

Good afternoon. I think this has been a very comprehensive conference call, so I just had really one question which, as I look forward, Greg, on your guidance, you had I think indicated operating and occupancy expenses back in the low 21% range this year. I guess curious as to what would cause that to go up again as a percent of sales, if there's some new initiatives there. It sounded like marketing would be similar as a percent of sales year-over-year.

Yes, I think that one is going to come due to where, frankly, you guys put through your weekly sales averages and your comps versus where I think about it from our internal forecasting.

The other side of it is I think, from the beginning of the year growth, thinking about it a little bit more with marketing being a little bit heavier towards the first half with the TV, that's going to drive that up a little bit. Then it starts to leverage on a weekly sales average from that perspective.

In the first half of the year, are the year-ago comparison similar to that 1.1% for the full year for '11? So you have a 20 basis point hit for marketing in the first half?

It was heavier in the second half of '11 for marketing, especially this last fourth quarter.

Okay. Great, thank you.

One more question please.

Nick Setyan, Wedbush securities.

Thanks. It sounds like you plan to enter a couple of new states this year. I was hoping you'd tell us in which quarters the Kansas and New Mexico openings are expected.

Greg?

Yes, Kansas is the second or third quarter, and Albuquerque is third or fourth quarter.

Got it. Then you mentioned (inaudible) sales have stabilized around 5.5%. Can you remind us what the average check of a catering transaction is now and how overall (inaudible) have trended as a percent of sales over last few years, and what the near-term and longer-term goals of off-premise are?

So I think -- I don't have all of the trends from the past, so just looking at kind of our channels here over the last couple of years, they used to be kind of in the upper 3s% to the 4% range, and then they have been slowly moving over the last couple of years into that 5% to 5.5%. I believe it was -- and I wouldn't hold me to this, but I believe it was 2008 when we rolled out an entire new take-out program, new packaging marketed around it, etc., from that standpoint. We saw take-out, frankly, or off-premise sales really drop in the heart of the recession because a lot of that lunchtime business that you do. Since then, it has slowly recovered, but it hasn't recovered as much as I would say the dine-in and the dinner has in that regard. When we think about it as an initiative for this year, it's really around that online ordering. We put that in place a few years back and, frankly, we just don't do it as good as it should be done. I think, if you go on and you look at the way probably the pizza guys do it, I know we are not a pizza concept in that regard, they have a much better interface for their consumers using both better applications for smart phones as well as the interface on the computer. That's something that actually our IT team is working on this year to put a better interface on there to help drive that. Once that's ready to roll, I'm sure you'll see more marketing behind it from us.

Great, thank you.

Thank you and thanks, everybody, for being on our call today. We'll be at our offices here in California working late as usual, so if you have any further questions, please give us a call.

Thank you.

Ladies and gentlemen, that concludes our call for today. Thank you very much for your participation. You may now disconnect.