Welcome to the BJ's Restaurants Second Quarter 2009 Results Conference Call. (Operator instructions). This conference is being recorded today for replay. You may access the replay system any time by dialing 1-800-406-7325 or 303-590-3030 and the access code number of 41141111. I would now turn the conference over to our host Mr. Jerry Deitchle, Chairman and Chief Executive Officer. Please go ahead, sir.

Thanks, operator, and hello, everybody. I'm Jerry Deitchle with BJ's Restaurants and welcome to our second quarter 2009 investor conference call, which we're also broadcasting live over the Internet. After the market closed today, we released our financial results for the second quarter for our fiscal year 2009. Our second quarter ended on June 30, 2009 and if you have not seen view our earnings release yet, you can view the full text of our release on our web site at www.bjsrestaurants.com. Joining me on the call today is Greg Levin, our Executive VP and Chief Financial Officer; Greg Lynds, our Executive VP and Chief Development Officer; and Diane Scott, our Director of Corporate Relations. The agenda for our call today will be as follows: First, I'll provide a brief business and operational overview for the second quarter of 2009 and also review the status of some of our current key initiatives and expansion plans. Next, Greg Lynds will comment on the status of our new restaurant development pipeline. After that, Greg Levin will comment on our consolidated income statement, our summary balance sheet, and our liquidity position as of the end of the second quarter, and after that, we will be happy to answer your questions and then we are going to finish up the call with short conclusion comment today. We will get our call started right after Diane provides our standard cautionary disclosure with respect to forward-looking statements. Diane, go ahead.

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 from 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, July 23, 2009. 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. Our leadership team is very pleased to report that in spite of the ongoing difficult environment for consumer discretionary spending in general and for dining allocations in particular, BJ’s has continued its forward momentum during the second quarter, as evidenced by our overall favorable financial performance for the quarter. Most importantly BJ’s has continued to gain additional market share gain in the quarter and the estimated 80 billion causal dining segment of the restaurant industry, which is our principal long-term objective. Obviously in the shorter-term, we have to prudently manage our business in response to the pressures of the current economic recession, and frankly we believe that we have been very effective in balancing both our short and long-term objectives, as evidenced by our recent performance, particularly when compared to that of our similarly situated casual dining competitors in terms of size of operations, available resources and geographical concentration. Moving to our financial results for the second quarter, when compared to the same quarter last year, our total revenues for the quarter increased about 17% to $107.7 million. Our net income and diluted net income per share for the second quarter increased approximately 52% and 45% respective to $4.4 million and $0.16 a share respectively compared to the same quarter last year. Our results for the second quarter benefited from a favorable comparison to restaurant pre-opening cost compared to the same quarter of last year, which impacted the quarterly diluted net income per share comparison by approximately $0.04 a share. We opened just one restaurant during the quarter just ended compared to four openings during the same quarter last year. However, even after adjusting for that comparison we still increased our bottom-line profits when compared to the same quarter last year in spite of the ongoing recession. Additionally,…

Thanks, Jerry. As we noted in our press release today, our 2009 new restaurant development pipeline remains in excellent shape, and we continue to be very pleased with the quality and the size in our new pipeline this year. Our shorter-term new restaurant development plans continues to focus on taking advantage of the softening commercial real estate market so that we can better secure prime size and densely populated more mature trade areas with more favorable lease economics and also with lower construction costs. We've opened three restaurants so far during 2009, including one that we opened at the end of the second quarter on June 29 in Mesquite, Texas which is the suburb of Dallas. As I mentioned in our last call, we have two openings in the first quarter this year, in Henderson, Nevada and Gainesville, Florida. Within the next few weeks, we plan to open our fourth new restaurant of 2009 in Downey, California. This restaurant is located within the successful Stone Oak regional shopping center in a mature, densely populated trade area, like here in home court, Southern California. As we mentioned in our press release today, including Downey, we have seven new restaurants under construction. We currently expect to open all seven before the end of this year. By doing so, we would achieve our previously stated goal for 2009 to increase our total restaurant operating weeks by 15% to 16%. As we said before, it's difficult to precisely predict the actual timing of our new restaurant openings due to many factors that are not under our control. So with that in mind as of today, we currently expect to open two restaurants in the third quarter and five restaurants in the fourth quarter. As I mentioned earlier, the construction cost for our new restaurants…

We continue to believe that BJ's four wall economics were very sound, and they currently support a continued steady pace of new restaurant expansion. As Greg mentioned, there are certainly not any lack of sites in general to support our longer-term expansion plan, but currently as a result of the recent slowdown in retail project development, there are less visibility of high quality sites available in the trade areas where we want to develop that will best leverage our supply chain, our field supervision infrastructure and our overall brand awareness with consumers. Overall, it's going to affect the quality over quantity when it comes to our new restaurant locations. So we will keep you informed as to the status of our potential 2010 new restaurant development pipeline as the rest of this year unfolds. One benefit of our reduced pace of plan expansion this year is that we should be able to finance our new restaurant expansion this year, primarily with internally generated cash from operations than our committed landlord construction contribution. So we believe that’s a pretty favorable position to be in. Before I turn the call over to Greg Levin, I'd just like to reemphasize that here at BJ's, we have a sales building mentality, first and foremost. It’s clear that while the current recessions presents some definite challenges in retaining sales as much as building sales, our fundamental operational mindset in BJ's is to work hard, to try to overwhelm the events instead of letting the events overwhelm us. By doing so, we believe that BJ's can be a high quality early recovery opportunity for even more consumers and more investors when the current recession abate. Until then, we have to be very, very careful to maintain a very balanced focus on the achievement of both our short-term and long-term key initiatives and expansion plans, as we continue to do our best to navigate our business through the current recession. Now, I’m going to turn the call over to Greg Levin, our CFO for his comments. Greg, go ahead.

For those of you that have been following BJ’s over the last year, we have mentioned that our softness in the comparable restaurant sales metric primarily began in the Sacramento, Central California region, the Inland Empire areas of California, and the Phoenix, Arizona market. These were regions of high growth over the last several years and the housing meltdown and related slowdown and overall construction activity has taken their toll on these local economies. As we stated before, we have 10 restaurants in the Sacramento, Central California region and the Inland Empire areas of California and three restaurants in the Phoenix, Arizona market that were in our comparable restaurant base since the beginning of 2008. These 13 restaurants had comparable restaurant sales decreases in the 6% to 8% range beginning in the first quarter of 2008, and then gradually improved through all of last year. In the first quarter of 2009, these same 13 restaurants were only down approximately 6/10th of a 1%. In the second these, 13 restaurants had flat comparable restaurant sales, and therefore, they actually exceeded the company's comparable restaurant sales for the second quarter. However, as I mentioned before and as we expected, we continue to see pressure on our comparable restaurant sales from our newer restaurants as they come into the comparable restaurant sales base. These restaurants were opened in 2007 in the pre-recessionary environment, and are just now becoming part of the comparable restaurant base after their first 18 months of operations. If we exclude these 13 restaurants that obviously came into our comparable sales base that opened really in this pre-recessionary period, our overall comparable sales metric for our other 55 comparable restaurants would have been negative 0.6%. I do want to be clear on this, even though the costs of 2007 restaurants…

Thanks, Greg, for a very detailed review. Now, what we are going to do is open up the call for our question-and-answer session, and then after that, we will have a concluding comment for everybody. So operator, we are ready for some questions.

(Operator Instructions). Our first question comes from Matt Difrisco with Oppenheimer. Please go ahead.

Hi. This is (inaudible) for Matt Difrisco. Just a quick question. Has the percentage of takeout sales increased at all with the delivery and growth side initiative that you rolled out, and in terms of same-store sales like day part, specifically launch, have you seen any change as a result of your marketing trend?

In regards to the takeout and delivery side of our business, we have continued to see that number grow, specifically the takeout is grown probably about 1% or so since we started the initiatives really in the end of the first half of 2008. Second part, in regards to the marketing, have we seen any major changes in our day part? We really haven't. Lot of our marketing last year and earlier this year was to talk about our lunch menu, the value portion side of thing. We've seen people gravitate to that. It's now about a third of our lunch menu overall. So when we look at the overall shift, overall part of our business between lunch and dinner, it remained pretty consistent from period-to-period.

Our next question comes from the line of Tony Brenner with Roth Capital Partners. Please go ahead, sir.

As I recall, a major reason that your new store expansion rate slowed from 20% plus to about 15% for this year was the lack of new commercial development in the tour market areas. Given the current state of the commercial real estate profit, is it reasonable to conclude that your expansion rates will remain at 15% or less for a while?

We're in the process of putting together our pipeline for next year. I think we previously mentioned on our last conference call, and perhaps some other investor meetings that we've had over the last quarter, that we have as many as 50 to 55 different sites that are in various stages of evaluation in our real estate pipeline today. All of these sites meet our general requirements for new restaurant development in terms of demographics, income levels, co-tenancies and so for. The real challenge is, is to get the various developers that we are in conversations with on a lot of these particular sites that really come up with firm commitments as to when these sites could be made available to us for our development. That’s really been the big change over the past year or two. As we've been trying to really get our developers to be much more specific with their timing of the delivery to us so that we can properly sequence all of the available sites and get them into large development plan and line up all other resources that we have been lined up on our side from construction and pre-opening side of it. So what we are trying to do is to take all of these particular sites that were in various stages of negotiation with. We are trying to really focus on filling in our established trade areas this year to really work on leverage in our overall business model. So we are trying to stay very disciplined within our 13-state footprint. As the pipeline becomes more and more definitive, and we get more and more specific landlord commitment over the next three or four months, then I think we'll be in a position to announce a very definitive new restaurant development plan for 2010. We've just been very, very careful about trying to get ahead of it before it's really finalized, Tony, because one thing in the five years, almost five years that I've been involved with BJ's and Greg Lynds just had sixth anniversary with our company yesterday. One thing that we have been very, very proud of is that we consistently delivered and set and then done what we said we were going to do with respect to the number of new restaurants and the number of operating weeks that we were committing to at the beginning of each year. We are not going to start breaking that record anytime soon. Greg, do you want to add any comments to that?

I think you caught it pretty well, Jerry. I mean as the landlords and the institutional investors start to take back some of the vacancies, vacant restaurants and large big boxes, we believe there would be more available high quality sites available for us.

As you move closer to 100 restaurants and over a 100 restaurants, does scale become a factor in your ability to sustain 20% to 25% increases in operating weeks?

In terms of our infrastructure, we opened 15 restaurants in 2008 with a very solid infrastructure that frankly was capable of opening even more restaurants. During this year, we made some slight adjustments at that infrastructure, but frankly the vast majority of that new restaurant opening infrastructure that we have is still in place, still intact. We have not significantly reduced it. So I think our infrastructure is in pretty good shape to flex back up to 15 or 16 restaurants, given where it currently stands today. I think beyond that, you would see a normal scaling of additional investment, if we were going to commit to opening even greater numbers of restaurants in the future.

Our next question comes from the line of with Brad Ludington with KeyBanc Capital Markets. Please go ahead.

This is (inaudible) for Brad Ludington actually. I had a question on the new distribution agreement, are you able to comment now? Were you able to bring down fuel surcharges? Or were there any other material changes that we should be aware of?

There really aren’t any really material changes to the agreement. It does give us an increasing ability to leverage as we begin to cluster within certain trade areas and within certain distribution houses within the network services of restaurants over time. The fuel surcharge formulas have been adjusted. We believe that they will certainly benefit us going forward, but when you look at the overall economics of the new distribution agreement, the major advantage it provides BJ's is the ability to leverage as we continue to cluster and really add more velocity in terms of purchases from certain distribution houses as time goes on as we continue our development.

Could you give us little more color on marketing costs and the timing of when we can expect that to hit in the second half?

I think our overall goal is to run our overall media expenses at roughly 1% of sales. Again as I mentioned in our conference call comments, it could be a little more or little less than any given quarter. We are not anticipating any material changes for the second half of the year. So I think probably sticking with the 1% overall is the best that we could advise at this time.

Our next question comes from (inaudible) Robert W. Baird. Please go ahead.

This is (inaudible) for David Tarantino. It looks like the spread between average weekly sales and the comps narrowed a bit this quarter compared to the recent trend. I wondered if you could just talk about what's driving that shift and if you expect that to continue in the back half?

In regards to thinking about how that shift or why that spread is narrowing, most of that really has to do with our development strategy, frankly. Back in 2007, we started making those decisions to move nationally. We opened up new markets and did not have brand awareness in those markets. Over the last year, we continued to cluster as Jerry and want to sell in existing markets. As a result, we got more restaurants in our development pipeline that are going to be in California and Texas. Those are areas that end up having a little bit higher weekly sales average again because of that branding, and I think as we continue to sell in, in certain areas, that will help us again with those weekly sales averages versus sometime going into brand new markets.

So is it safe to say that we could expect something similar in the back half of the year?

I think that’s reasonable. Again, I talked about a 2% to 4% average weekly sales, absolute decrease in regards to thinking about modeling. I think the first quarter, we were down 1.5%. This quarter, we were down 2.3%. I remember on the first quarter, everybody going, hey, just finished down 1.5%, why you're paying down 3 to 4? Well, unfortunately, it's still choppy out there. We don't have a great crystal ball and I think honestly, it's probably going to be somewhere within that 2% to 4% reduction on absolute average weekly sales.

Then, if I could just clarify, did I hear you correctly that you are expecting labor in the back half of the year to be low 35% range?

When I say low 35, it's probably that anywhere from 35 to 35.3. We do have five restaurants that are opening up in the fourth quarter. There is going to inefficiencies with that. There is no doubt about it that of course a lot of restaurant companies are getting productivity enhancements in this first half of the year, as the development has slowed down. In our case five restaurants in the fourth quarter will actually be more restaurants than what we opened in last year's fourth quarter and I think you have to take that under advisement.

Our next question comes from the line of Robert Weiler with Piper Jaffray. Please go ahead.

First question, regionally speaking you guys made comments during the call about California and Inland Empire improving since the first half of 2008. If that's the case, is there any regions that you have been all try to identify that are dragging down restaurants, or is it just all your new stores that I know are geographically diverse across the country? Is there any one region I guess that dragging on same-store sales?

Not really. It's really the new restaurants. It's pretty geographically dispersed. We do have areas like the Bay area continues to do well for us. Certain areas of Texas continue to do well for us. I don’t see anything myself that’s specific from a region standpoint. It's really the class of '07 right now coming into the comp base again opening in kind of that pre-recessionary time.

Are you guys able to quantify in anyway the impact of the stimulus on both your EPS or same-store sales in the second quarter?

I don’t think we have any way of knowing what that benefit would have been.

Why do you think you guys are outperforming, the benchmark in Knapp-Track down 6%, and I guess I just want to understand the value message in the marketing, but it's not discounting, it's just the value you are getting for your dollars. Is that what you are campaigning in the marketing what seems to be resonating, is that what it is?

This is Jerry. As I mentioned in our prepared remarks, we have a p shooter compared to our competitor's cannons and when it comes to the ability to market in the mass media, we have a very small limited budget. We're very opportunistic with it. We have the ability to rifle shoot it a little bit, probably a little bit better with specific offers targeted to specific trade areas and specific restaurants versus having to rely on a mass market television or radio campaign. I think that does play to our advantage of being a little bit smaller, a little bit more nimble or a little bit more agile. I think when you look at our overall sales performance versus Knapp-Track, I think you have to look to the strength of the concept itself. We have a higher quality more differentiated casual dining concept. It's probably a little more contemporary, a little more relevant with much more energy and appeal than most of the mass market casual dining concepts out there that have been around for many, many years and that have become a little tired and a little more commoditize, in fact greatly commoditized over the past several years in terms of their overall presentation to the consumer. When you take a look at what we offer, the quality, the differentiation, the variety of the menu items, our signature menu items in the facility that we offer it in, at the price point that we offer and our average check of around $12, that's equal to or even less than some of the average checks to some of mass market competitors. So I really do believe that that's been one of the principal reasons why despite our unfavorable geographical penetration here in California and Arizona and Florida and Nevada and some of the states that felt the recession a little harder and a little bit faster and some of the other states in the country. Plus, we've also been working very, very hard to improve our overall ability to execute the concept within the four walls of our restaurants and we made significant investment over the past two and three years to enable our operators to execute the concept a little more productively and efficiently. So when you combine the basic positioning of the concept and our average check of our ability to execute a little bit better, I think that has helped to carry the day with respect to the vast majority of our competitors, and that’s why we continue to make these prudent investment in the menu and in our operating systems and in our technology and in our facilities to maintain that competitive advantage going forward even through times are tough. So, that would be I think our best explanation.

On G&A, what are your expectations for the second half of the year?

I didn’t give there anything specific on that, but I would tend to say that G&A is going to be pretty much in line with what you saw on Q2. It could bump up a little bit just because the restaurants are being shipped a little bit to the back-end here. We’re going to end up having more travel and lodging costs that are going to come than what you saw in Q2.

In line as far as dollar amount or percentage?

In line as far as dollar amounts and then probably going to bump up a little but from Q2 because of that travel and related housing and lodging costs.

(Operator Instructions). Our next question comes from Greg Ruedy with Stephens Inc. Please go ahead.

California has balanced their budget and it appears that they’ve pushed some of those, they’ve used some accounting tricks to push it down on to the local municipalities, I know it’s early, but is there anything anecdotally you are hearing from market-by-market stores on what that impact could be?

No, Greg. I think the combination of one. It's early as you mentioned. It’s obviously in the news here and people are aware of it, but I still think and I’ve said this before that really California has been dominated really from the housing market and the related industries that came up from the housing market. I still think the housing issues and the foreclosure rates and the unemployment rates in California are more important right now to our overall underlying business than the budget. The budget matters, don't get me wrong, but I think the core is still that unemployment related to housing in the housing market out here in California.

Last year you had an initiative where you began opening early on the weekend, how many (inaudible) placed on, what’s that boost same-store sales been?

I don’t know the number to comp sales, but it’s really what we are hearing on Southern California restaurants. It hasn’t been anything significant in regards to comp sales.

Jerry, you talked about expanding the guest path program. Are there opportunities to maybe look at something like an expansion of import premium bottles?

Not, at this time. I think we already have a very wide selection of imported bottled craft beer. I think our inventory level is manageable given the demand from our guest. Obviously, if our guest were to start pounding the table and start demanding more, we’ve obviously offered to them in greater mass quantities, but the vast majority of our guests consume beer off tap. They love the fresh beer, and that's really what I think we're going to continue to focus on going forward.

Any change for the mix from the alcohol mix from the guest path program today?

No, not really at all. As we put in that expand in guest path program into our established restaurants, we have seen very little if any cannibalization of sales of our own BJ's beer. We've seen incremental consumption by consumers related to our guest beers and obviously, when guests are increasing their consumption of beers at pretty attracted margins to us that has a favorable impact on the average check per guest. So we have seen nothing but favorable comments from our guests in terms of how they love the presentation and obviously from an economic perspective, it's been a win-win for us. It really further solidifies our desire positioning as the leading marketer and merchandiser of high quality craft beers in casual dining. That's very, very important to BJ's positioning as we continued to evolve the concept and so far it's worked very, very nicely for us.

Thank you.

I think that's all of the questions that we have today, and I want to thank everybody for their good questions. You know every restaurant operator in America would like to have better comp sales right now, and so would we and we realized that it's necessary to focus on the shorter-term pressures that we're all currently facing in terms of reduced customer traffic and comp sales. It's also very important to keep an eye on the longer-term opportunity for each restaurant concepted company. You know basically when the economy does turn around, which restaurant concepting companies are going to be the ones that either a, have not damaged their brands and operations by overreacting to the current recession either through excessive cost cutting or differing spending or excessive discounting and b, are the ones that have a more leverage able business model in place that can better capture the benefits of sales increases when they do come. When we look at our company and our competitive positioning, we think that BJ's is a pretty special casual dining company, with an equally special opportunity to gain market share in a very margin fragmented space, that’s absolutely begging for more innovation, for more freshness, for more energy, for more relevance and for more quality and differentiation and it could value for the consumer. These are the strengths of the BJ's restaurant concept and we are going to maintain our unwavering conviction and courage to continue to play to these strengths during doing both good times and tough times. There are three principal drivers of enterprise value in most same-store consumer companies; unit expansion, four wall unit economics and overall leverage of the business model. So how does BJ's match up on each of those three key drivers? Well, we are continuing to open new restaurants with plenty of room for more, but we are doing it with strong discipline. We are also working hard to preserve our unit economics as we grow in spite of the recession, thanks to the investments that we've made and we continue to make in better operational talent and better operational systems. Finally, we worked very hard during the past few years to get our infrastructure established, to get our business models set up or steadily increasing leverage as we go. Sp recession or no recession, we are going to keep moving forward. We believe that BJ's concept and business model is solidly intact, it's getting stronger over time and that’s why we are in this to build enterprise value over the long-haul. So thanks for listening and thanks for being on our call today and operator that will conclude our call.

Thank you, sir. Ladies and gentlemen, that concludes the BJ's Restaurant second quarter 2009 results conference call. We thank you for your participation. You may now disconnect.