BJ's Restaurants (BJRI) 10-Q 2005 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the thirteen weeks ended July 3, 2005

OR

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

For the transition period from                    to                    

Commission file number 0-21423

BJ’S RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

California	33-0485615
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

16162 Beach Boulevard

Suite 100

Huntington Beach, California 92647

(Address and zip code of principal executive offices)

(714) 848-3747

(Registrant’s telephone number, including area code)

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

Indicate by check mark if the filer is an accelerated filer (as defined in Rule 12B-2 of the Act).  YES x  NO ¨.

As of August 2, 2005, there were 22,607,386 shares of Common Stock of the Registrant outstanding.

BJ’S RESTAURANTS, INC.

Form 10-Q

For the thirteen weeks ended July 3, 2005

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets – July 3, 2005 (Unaudited) and January 2, 2005	1
	Unaudited Consolidated Statements of Income – Thirteen Weeks and Twenty-Six Weeks Ended July 3, 2005 and June 27, 2004	2
	Unaudited Consolidated Statements of Shareholders’ Equity – Twenty-Six Weeks Ended July 3, 2005	3
	Unaudited Consolidated Statements of Cash Flows – Twenty-Six Weeks Ended July 3, 2005 and June 27, 2004	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	15
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	17
Item 6.	Exhibits	17
	SIGNATURES	18
Certifications

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

BJ’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	July 3, 2005 (Unaudited)		January 2, 2005
Assets
Current assets:
Cash and cash equivalents	$	5,890	$	3,766
Investments		44,939		15,775
Accounts and other receivables		2,651		2,299
Inventories		1,487		1,294
Prepaids and other current assets		1,225		3,364
Deferred taxes		1,456		1,822
Total current assets		57,648		28,320
Property and equipment, net		81,168		66,489
Goodwill		4,673		4,673
Notes receivable		888		925
Other assets, net		437		459
Total assets	$	144,814	$	100,866
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	4,882	$	6,196
Accrued expenses		11,695		12,406
Total current liabilities		16,577		18,602
Deferred taxes		2,208		1,742
Other liabilities		2,851		1,742
Total liabilities		21,636		22,086
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 5,000 shares authorized, none issued or outstanding		—		—
Common stock, no par value, 60,000 shares authorized and 22,607 and 19,813 shares issued and outstanding as of July 3, 2005 and January 2, 2005, respectively		103,898		63,380
Capital surplus		2,859		2,706
Retained earnings		16,421		12,694
Total shareholders’ equity		123,178		78,780
Total liabilities and shareholders’ equity	$	144,814	$	100,866

See accompanying notes to unaudited consolidated financial statements.

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BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	For The Thirteen Weeks Ended				For The Twenty-Six Weeks Ended
	July 3, 2005		June 27, 2004		July 3, 2005		June 27, 2004
Revenues	$	43,985	$	29,315	$	81,378	$	58,292
Costs and expenses:
Cost of sales		11,834		7,624		21,669		15,033
Labor and benefits		16,002		10,185		29,392		20,761
Occupancy		2,929		2,226		5,462		4,456
Operating expenses		4,828		3,179		8,892		6,272
General and administrative		2,909		2,213		5,807		4,733
Depreciation and amortization		1,662		1,183		3,067		2,341
Restaurant opening expense		1,138		770		2,104		1,009
Gain from sale of Pietro’s restaurants		—		—		—		(1,658	)
Total costs and expenses		41,302		27,380		76,393		52,947
Income from operations		2,683		1,935		4,985		5,345
Other income:
Interest income, net		292		121		393		224
Other income, net		70		29		117		114
Total other income		362		150		510		338
Income before income taxes		3,045		2,085		5,495		5,683
Income tax expense		984		682		1,768		1,904
Net income	$	2,061	$	1,403	$	3,727	$	3,779
Net income per share:
Basic	$	0.09	$	0.07	$	0.17	$	0.19
Diluted	$	0.09	$	0.07	$	0.16	$	0.18
Weighted average number of shares outstanding:
Basic		22,593		19,452		21,552		19,452
Diluted		23,845		20,535		22,736		20,545

See accompanying notes to unaudited consolidated financial statements.

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BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

	Common Stock			Capital Surplus		Retained Earnings		Total
	Shares	Amount
Balance, January 2, 2005	19,813	$	63,380	$	2,706	$	12,694	$	78,780
Exercise of stock options, net	44		224		—		—		224
Sale of common stock	2,750		40,294		—		—		40,294
Tax benefit from stock option exercises	—		—		153		—		153
Net income	—		—		—		3,727		3,727
Balance, July 3, 2005	22,607	$	103,898	$	2,859	$	16,421	$	123,178

See accompanying notes to unaudited consolidated financial statements.

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BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For The Twenty-Six Weeks Ended
	July 3, 2005			June 27, 2004
Cash flows from operating activities:
Net income	$	3,727		$	3,779
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,067			2,341
Deferred income taxes		832			522
Tax benefit from stock options exercised		153			330
Gain on sale of Pietro’s restaurants		—			(1,658	)
Changes in assets and liabilities:
Accounts and other receivables		(351	)		(125	)
Inventories		(193	)		(107	)
Prepaids and other current assets		2,139			708
Other assets, net		19			15
Accounts payable		(1,314	)		176
Accrued expenses		(711	)		(247	)
Other liabilities		(291	)		(12	)
Landlord contribution for tenant improvements		1,400			—
Net cash provided by operating activities		8,477			5,722
Cash flows from investing activities:
Purchases of property and equipment		(17,744	)		(10,053	)
Purchases of investments		(90,686	)		(7,121	)
Proceeds from investments sold		61,522			8,037
Collection of notes receivable		37			—
Proceeds from sale of Pietro’s restaurants		—			1,250
Net cash used in investing activities		(46,871	)		(7,887	)
Cash flows from financing activities:
Proceeds from sale of common stock		40,294			—
Proceeds from exercise of stock options		224			401
Payments on notes payable to related parties		—			(151	)
Net cash provided by financing activities		40,518			250
Net increase (decrease) in cash and cash equivalents		2,124			(1,915	)
Cash and cash equivalents, beginning of period		3,766			4,899
Cash and cash equivalents, end of period	$	5,890		$	2,984

See accompanying notes to unaudited consolidated financial statements.

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BJ’S RESTAURANTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of BJ’s Restaurants, Inc. and its wholly owned subsidiaries. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

The accompanying unaudited consolidated financial statements include all material adjustments (consisting of normal recurring accruals) which are, in our opinion, necessary for a fair presentation of our financial position, results of operations and cash flows for such periods. However, these results are not necessarily indicative of the results for any other interim period or for our full fiscal year.

Effective with the fiscal third quarter of 2005, we will change our fiscal week-end from Sunday to Tuesday. This change will facilitate operational efficiencies by transferring certain administrative tasks away from the weekends when our restaurants are busiest. Accordingly, our fiscal third quarter of 2005 will contain two additional days and will end on October 4, 2005. Fiscal 2005 will end on Tuesday, January 3, 2006.

Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. generally accepted accounting principles have been omitted pursuant to requirements of the Securities and Exchange Commission (SEC). A description of our accounting policies and other financial information is included in our audited consolidated financial statements as filed with the SEC on Form 10-K for the year ended January 2, 2005. We believe that the disclosures included in our accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K. The accompanying consolidated balance sheet as of January 2, 2005 has been derived from our audited financial statements.

2. INVESTMENTS

All investments are classified as held-to-maturity and are reported at amortized cost and realized gains and losses are reflected in earnings.

Investments consist of the following (in thousands):

	July 3, 2005		January 2, 2005
U.S. and government agency securities	$	22,000	$	204
International corporate bonds		—		1,007
U.S. corporate notes and bonds		20,304		14,564
U.S. municipal bonds		2,635		—
Total investments	$	44,939	$	15,775

Average maturity for our total investment portfolio as of July 3, 2005 and January 2, 2005 was 4 months and 3 months, respectively. All short term investments are investment grade securities.

3. NET INCOME PER SHARE

Basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occurs if stock options issued by us to sell common stock at set prices were exercised. The financial statements present basic and diluted net income per share. Common share equivalents included in the diluted computation represent shares issuable upon assumed exercises of outstanding stock options using the treasury stock method.

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The following table presents a reconciliation of basic and diluted net income per share computations and the number of dilutive securities (stock options) that were included in the dilutive net income per share computation (in thousands).

	For The Thirteen Weeks Ended				For The Twenty-Six Weeks Ended
	July 3, 2005		June 27, 2004		July 3, 2005		June 27, 2004
Numerator:
Net income for basic and diluted net income per share	$	2,061	$	1,403	$	3,727	$	3,779
Denominator:
Weighted-average shares outstanding - basic		22,593		19,452		21,552		19,452
Effect of dilutive common stock options		1,252		1,083		1,184		1,093
Weighted-average shares outstanding - diluted		23,845		20,535		22,736		20,545

For the thirteen weeks ended July 3, 2005, there were 215,380 stock options outstanding whereby the exercise price exceeded the average common stock market value. For the thirteen weeks ended June 27, 2004, there were no stock options outstanding whereby the exercise price exceeded the average common stock market value. For the twenty-six weeks ended July 3, 2005 and June 27, 2004, there were 215,380 and 30,000 stock options outstanding whereby the exercise price exceeded the average common stock market value, respectively. The effects of the shares which would be issued upon the exercise of these options have been excluded from the calculation of diluted net income per share because they are anti-dilutive.

4. RELATED PARTY

Based on the information available to us, we believe that as of July 3, 2005, Jacmar Companies and their affiliates (collectively referred to herein as “Jacmar”) owned approximately 20.6% of our outstanding common stock.

Jacmar, through its specialty wholesale food distributorship, is our largest supplier of food, beverage and paper products. Jacmar supplied us with approximately $12.0 million and $8.1 million of food, beverage and paper products for the twenty-six weeks ended July 3, 2005 and June 27, 2004, respectively, which represent 55.4 % and 53.4%, respectively, of our total costs for these products. We had trade payables related to these products of approximately $2.3 million and $1.4 million at July 3, 2005 and June 27, 2004, respectively.

5. STOCK-BASED COMPENSATION

We account for our employee stock options under the intrinsic value method. The exercise price of employee stock options equals the market price of the underlying stock on the date of the grant. As such, no compensation expense is recorded. We adopted the disclosure-only provisions of SFAS No. 123,Accounting for Stock-Based Compensation(SFAS 123).

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Had compensation cost for our options granted been determined based on the fair value of the option at the grant date for the 1996 Stock Option Plan awards, consistent with the provisions of SFAS 123, our net income and net income per share would have been decreased to the pro forma amounts indicated below (in thousands):

	For the Thirteen Weeks Ended						For the Twenty-Six Weeks Ended
	July 3, 2005			June 27, 2004			July 3, 2005			June 27, 2004
Net income, as reported	$	2,061		$	1,403		$	3,727		$	3,779
Less: Stock-based employee compensation expense, net of related tax effects		(638	)		(110	)		(1,267	)		(225	)
Net income, pro forma	$	1,423		$	1,293		$	2,460		$	3,554
Net income per share, as reported:
Basic	$	0.09		$	0.07		$	0.17		$	0.19
Diluted	$	0.09		$	0.07		$	0.16		$	0.18
Net income per share, pro forma:
Basic	$	0.06		$	0.07		$	0.11		$	0.18
Diluted	$	0.06		$	0.06		$	0.11		$	0.17

The fair value of each option grant issued is estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: (a) no dividend yield on our stock, (b) expected volatility of our stock ranging from 36.7% to 53.0%, (c) a risk-free interest rate ranging from 3.63% to 3.86% and (d) expected option life of five years. The fair value of options granted during the twenty-six weeks ended July 3, 2005 and June 27, 2004 were $6.96 and $5.17 respectively.

6. COMMON STOCK

On March 11, 2005, we completed a $40.3 million (net of approximately $2.2 million in related fees and expenses) private placement of common stock with three large institutional investors. The transaction involved the sale of 2.75 million shares of common stock at a purchase price of $15.50 per share.

7. DIVIDEND POLICY

We have not paid any cash dividends since our Company’s inception and we have currently not allocated any funds for the payment of cash dividends. Rather, it is our current policy to retain earnings for expansion of our operations, remodeling of existing restaurants and other general corporate purposes and to not pay any cash dividends in the foreseeable future. Should we decide to pay cash dividends in the future, such payments would be at the discretion of the Board of Directors.

8. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123 (revised 2004), (“Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair value. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. We are required to adopt SFAS 123R in the first quarter of fiscal 2006. Under SFAS 123R, we must determine the appropriate fair value model to be used for valuing share-payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition methods include prospective and retroactive adoption options. The prospective method requires that compensation expense be recorded for all unvested stock options at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive method would restate prior periods to record compensation expense for all unvested stock options beginning with the first period restated. We are evaluating the requirements of SFAS 123R and expect that the adoption of SFAS 123R will have a material impact on our consolidated results of operations and earnings per share. We have not yet determined the method of adoption or the effect of adopting SFAS 123R, and we have not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

STATEMENT REGARDING FORWARD LOOKING DISCLOSURE

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward-looking statements that involve known and unknown risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. Our actual results could differ materially from those discussed in forward-looking statements. Factors that could cause or contribute to such differences include, without limitation, those factors discussed herein: our ability to manage an increasing number of new restaurant openings; construction delays; labor shortages; ability to recruit, train and retain enough qualified managerial and hourly workers to correctly operate our restaurants; minimum wage increases; food quality and health concerns; factors that impact California, where 28 of our current 41 restaurants are located; restaurant and brewery industry competition; impact of certain brewery business considerations, including without limitation, dependence upon suppliers and related hazards; consumer trends; potential uninsured losses and liabilities; fluctuating commodity costs including food and energy; trademark and servicemark risks; government regulations; licensing costs; other general economic and regulatory conditions and requirements; beer and liquor regulations; loss of key personnel; success of key strategic and operational initiatives; inability to secure acceptable sites; limitations on insurance coverage; legal proceedings, if any and the amount of, and any changes to, tax rates and the success of various initiatives to minimize taxes; changes in accounting standards or interpretations of existing standards adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission, the Emerging Issues Task Force and the American Institute of Certified Public Accountants that could impact our reported financial results; and other risks and uncertainties referenced in this Form 10-Q or our Annual Report on Form 10-K for the fiscal year ended January 2, 2005.

GENERAL

On August 2, 2005, we owned and operated 41 restaurants located in California, Oregon, Colorado, Arizona, Texas and Nevada. A licensee also operates one licensed restaurant in Lahaina, Maui. Each of our restaurants is operated either as a BJ’s Restaurant & Brewery^® which includes a brewery within the restaurant, a BJ’s Restaurant & Brewhouse^® which receive the beer it sells from one of our breweries, or a BJ’s Pizza & Grill^® which is a smaller format restaurant. Our menu features our BJ’s^® award-winning, signature deep-dish pizza, our own hand-crafted beers as well as a wide selection of appetizers, entrees, pastas, sandwiches, specialty salads and desserts including our unique Pizookie^® cookie. Our eleven BJ’s Restaurant & Brewery restaurants feature in-house brewing facilities where BJ’s hand-crafted beers are produced and sold. All of our restaurants do provide our hand crafted beers.

As is customary for the casual dining segment of the restaurant industry, in calculating comparable sales, we include a restaurant in the comparable base once it has been open for eighteen months.

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RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our unaudited Consolidated Statements of Income expressed as percentages of total revenues. The results of operations for the thirteen weeks and twenty-six weeks ended July 3, 2005 and June 27, 2004 are not necessarily indicative of the results to be expected for the full fiscal year.

	For The Thirteen Weeks Ended				For The Twenty-Six Weeks Ended
	July 3, 2005		June 27, 2004		July 3, 2005		June 27, 2004
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:
Cost of sales	26.9		26.0		26.6		25.8
Labor and benefits	36.4		34.7		36.1		35.6
Occupancy	6.7		7.6		6.7		7.6
Operating expenses	11.0		10.8		10.9		10.8
General and administrative	6.6		7.5		7.1		8.1
Depreciation and amortization	3.8		4.0		3.8		4.0
Restaurant opening expense	2.6		2.6		2.6		1.7
Gain from sale of Pietro’s restaurants	—		—		—		(2.8	)
Total costs and expenses	94.0		93.2		93.8		90.8
Income from operations	6.0		6.8		6.2		9.2
Other income:
Interest income, net	0.7		0.4		0.5		0.4
Other income (expense), net	0.2		0.1		0.1		0.2
Total other income	0.9		0.5		0.6		0.6
Income before income taxes	6.9		7.3		6.8		9.8
Income tax expense	2.2		2.3		2.2		3.3
Net income	4.7	%	5.0	%	4.6	%	6.5	%

Thirteen Weeks Ended July 3, 2005 Compared to Thirteen Weeks Ended June 27, 2004.

Revenues.Total revenues for the thirteen weeks ended July 3, 2005 increased to $44.0 million from $29.3 million during the comparable thirteen week period of 2004, an increase of $14.7 million or 50.2%. The $14.7 million increase in restaurant sales consisted of an approximate $13.6 million increase from the opening of new restaurants, and an approximate increase in our comparable restaurant sales of $1.3 million or approximately 4.8%. The comparable restaurant sales increase was primarily due to increased customer counts and increases in menu pricing. We increased pricing on beverages by approximately 0.5% during May 2004, and increased the price of our handcrafted beers by approximately 0.5% effective in October 2004. Non-alcoholic beverages and handcrafted beers represent approximately 7.0% and 11.2% of our sales, respectively. Additionally, we implemented an approximately 0.7% effective menu price increase on our food offerings at the end of January 2005. These revenue increases were partially offset by approximate $249,000 of revenues related to the closure of our Seal Beach BJ’s Pizza & Grill restaurant on January 3, 2005.

Cost of Sales. Cost of food, beverages and paper for our restaurants increased to $11.8 million during the thirteen weeks ended July 3, 2005 from $7.6 million during the comparable thirteen week period of 2004, an increase of $4.2 million or 55.3%. As a percentage of revenues, cost of sales increased to 26.9% for the current thirteen week period from 26.0% for the prior-year comparable thirteen week period. This increase is primarily a result of increased meat, produce, seafood and general grocery item prices, offset slightly by a reduction in poultry and cheese prices as compared to the comparable period of 2004.

Additionally, in our new restaurants, our cost of sales will typically be higher during the first 90-120 days of operations versus our mature restaurants, as management teams become accustomed to optimally predicting, managing and servicing sales volumes typically experienced in our new restaurants. During the thirteen weeks ended July 3, 2005, we had five restaurants that were operating in the first 90-120 days of service versus only two restaurants in the prior year’s comparable period.

We provide our customers a large variety of menu items which are not dependent on a single group of commodities. We continue to work with our suppliers to control food costs; however, there can be no assurance that future supplies

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and costs for commodities used in our restaurants will not fluctuate due to weather and other market conditions outside of our control.

Labor and Benefits. Labor and benefit costs for our restaurants increased to $16.0 million during the thirteen weeks ended July 3, 2005 from $10.2 million during the comparable thirteen week period of 2004, an increase of $5.8 million or 56.9%. This increase was primarily due to the opening of eleven new restaurants since the end of our second quarter in 2004, partially offset by the closing of our Seal Beach BJ’s Pizza & Grill restaurant on January 3, 2005. As a percentage of revenues, labor and benefit costs increased to 36.4% for the current thirteen week period from 34.7% for the prior-year comparable thirteen week period. This increase is primarily due to the fact that new restaurants experience higher labor costs for the first 90-120 days after opening and we had five new restaurants in 2005 as compared to two restaurants in 2004, partially offset by a $175,000 reduction in workers’ compensation insurance due to better than anticipated claims experience.

Occupancy. Occupancy costs increased to $2.9 million during the thirteen weeks ended July 3, 2005 from $2.2 million during the comparable thirteen week period of 2004, an increase of $700,000 or 31.8%. The increase reflects the eleven additional restaurants we opened since the second quarter of 2004, partially offset by the closure of our Seal Beach BJ’s Pizza & Grill restaurant on January 3, 2005. As a percentage of revenues, occupancy costs decreased to 6.7% for the current thirteen week period from 7.6% for the prior-year comparable thirteen week period. This decrease is primarily due to the fact that four of our fourteen restaurants opened the last two years were built at our cost on properties that were the subject of ground leases and, as a result, have lease payments below our historical rent levels for customary leased facilities.

Operating Expenses. Operating expenses increased to $4.8 million during the thirteen weeks ended July 3, 2005 from $3.2 million during the comparable thirteen week period of 2004, an increase of $1.6 million or 50.0%. As a percentage of revenues, operating expenses increased to 11.0% for the current thirteen week period as compared to 10.8% for the prior-year comparable thirteen week period. This slight increase is primarily due to higher cost of supplies, lodging and merchant credit card fees passed through to us by our transaction processor.

General and Administrative Expenses. General and administrative expenses increased to $2.9 million during the thirteen weeks ended July 3, 2005 from $2.2 million during the comparable thirteen week period of 2004, an increase of $700,000 or 31.8%. This increase was the result of additional expenditures associated with the continued growth of our business. As a percentage of revenues, general and administrative expenses decreased to 6.6% for the current thirteen week period from 7.5% for the prior-year comparable thirteen week period. This decrease is primarily the result of the 50.2% increase in total revenues for 2005. In addition, during the thirteen weeks ended July 3, 2005, officers’ compensation was reduced by approximately $80,000 based on new employment agreements for the Co-Chairmen of the board.

Depreciation and Amortization.Depreciation and amortization increased to $1.7 million during the thirteen weeks ended July 3, 2005 from $1.2 million during the comparable thirteen week period of 2004, an increase of $500,000 or 41.7%. The increase was primarily due to our acquisition of restaurant equipment, furniture, leasehold improvements and brewery equipment related to new restaurant development, including four restaurants opened during the trailing 12 month period that were ground leases resulting in higher capitalized leasehold improvement expenditures.

Restaurant Opening Expense. Restaurant opening expense increased to $1.1 million during the thirteen weeks ended July 3, 2005 from $770,000 during the comparable thirteen week period of 2004, an increase of $330,000. This increase is primarily due to opening costs related to three restaurant openings and two restaurants in-progress during the thirteen weeks ended July 3, 2005, as compared to two restaurant openings during the thirteen weeks ended June 27, 2004.Our opening costs will fluctuate from period to period, depending upon, but not limited to, the number of restaurant openings, the size and concept of the restaurants being opened, the location of the restaurants and the complexity of the staff hiring and training process.

Interest Income, Net.Net interest income increased to $292,000 during the thirteen weeks ended July 3, 2005 from $121,000 during the comparable thirteen week period of 2004, an increase of $171,000. This increase is primarily due to increased investments after the completion of our private placement on March 11, 2005 coupled with higher interest rates.

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Other Income, Net.Net other income increased to $70,000 during the thirteen weeks ended July 3, 2005 from $29,000 in the comparable thirteen week period of 2004, an increase of $41,000. This increase is primarily due to the sale of our Pizookie cookie desert in selected Southern California Costco Wholesale stores commencing March 2004.

Income Tax Expense. Income tax expense increased to $984,000 during the thirteen weeks ended July 3, 2005 from $682,000 during the comparable thirteen week period of 2004, an increase of $302,000. This increase is primarily due to increased income before taxes for the current thirteen week period when compared to the comparable prior year thirteen week period. Our effective income tax rate for the thirteen weeks ended July 3, 2005 was 32.3% compared to 32.7% for the comparable thirteen week period of 2004. The effective income tax rate for the thirteen weeks ended July 3, 2005 differs from the statutory income tax rate primarily due to FICA tip credits.

Twenty-Six Weeks Ended July 3, 2005 Compared to Twenty-Six Weeks Ended June 27, 2004.

Revenues.Total revenues for the twenty-six weeks ended July 3, 2005 increased to $81.4 million from $58.3 million during the comparable twenty-six week period of 2004, an increase of $23.1 million or 39.6%. The $23.1 million increase in restaurant sales consisted of an approximate $22.5 million increase from the opening of new restaurants, and an approximate increase in our comparable restaurant sales of $2.0 million or approximately 3.8%. The comparable restaurant sales increase was primarily due to increased customer counts and increases in menu pricing. We increased pricing on beverages by approximately 0.5% during May 2004, and increased the price of our handcrafted beers by approximately 0.5% effective in October 2004. Non-alcoholic beverages and handcrafted beers represent approximately 7.0% and 11.2% of our sales, respectively. Additionally, we implemented an approximately 0.7% effective menu price increase on our food offerings at the end of January 2005. These revenue increases were partially offset by approximate $1.1 million of revenues related to the sale of our three Pietro’s restaurants on March 15, 2004, and our Seal Beach BJ’s Pizza & Grill restaurant, which was closed on January 3, 2005.

Cost of Sales. Cost of food, beverages and paper for our restaurants increased to $21.7 million during the twenty-six weeks ended July 3, 2005 from $15.0 million during the comparable twenty-six week period of 2004, an increase of $6.7 million or 44.7%. As a percentage of revenues, cost of sales increased to 26.6% for the current twenty-six week period from 25.8% for the prior-year comparable twenty-six week period. This increase is primarily a result of increased meat, produce, seafood and general grocery item prices, partially offset by a reduction in poultry and cheese prices as compared to the comparable period of 2004.

Additionally, in our new restaurants, our cost of sales will typically be higher during the first 90-120 days of operations versus our mature restaurants, as management teams become accustomed to optimally predicting, managing and servicing sales volumes typically experienced in our new restaurants. During the twenty-six weeks ended July 3, 2005, we had seven restaurants that were operating in the first 90-120 days of service versus only two restaurants in the prior year’s comparable period.

We provide our customers a large variety of menu items which are not dependent on a single group of commodities. We continue to work with our suppliers to control food costs; however, there can be no assurance that future supplies and costs for commodities used in our restaurants will not fluctuate due to weather and other market conditions outside of our control.

Labor and Benefits. Labor and benefit costs for our restaurants increased to $29.4 million during the twenty-six weeks ended July 3, 2005 from $20.8 million during the comparable twenty-six week period of 2004, an increase of $8.6 million or 41.3%. This increase was primarily due to the opening of eleven new restaurants since the end of our second quarter in 2004, partially offset by the closing of our Pietro’s and Seal Beach restaurants. As a percentage of revenues, labor and benefit costs increased to 36.1% for the current twenty-six week period from 35.6% for the prior-year comparable twenty-six week period. This increase is primarily due to the fact that new restaurants experience higher labor cost for the first 90-120 days after opening and we had seven new restaurants in 2005 as compared to two restaurants in 2004, partially offset by a $175,000 reduction in workers’ compensation expense due to better than anticipated claims experience.

Occupancy. Occupancy costs increased to $5.5 million during the twenty-six weeks ended July 3, 2005 from $4.5 million during the comparable twenty-six week period of 2004, an increase of $1.0 million or 22.2%. The increase reflects the eleven additional restaurants we opened since the second quarter of 2004, partially offset by the decrease in occupancy costs associated with our three Pietro’s restaurants that were sold on March 15, 2004 and the closure of our Seal Beach BJ’s Pizza & Grill restaurant on January 3, 2005. As a percentage of revenues, occupancy costs

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decreased to 6.7% for the current twenty-six week period from 7.6% for the prior-year comparable twenty-six week period. This decrease is primarily due to the fact that four of our fourteen restaurants opened the last two years were built at our cost on properties that were the subject of ground leases and, as a result have lease payments below our historical rent levels for customary leased facilities.

Operating Expenses. Operating expenses increased to $8.9 million during the twenty-six weeks ended July 3, 2005 from $6.3 million during the comparable twenty-six week period of 2004, an increase of $2.6 million or 41.3%. As a percentage of revenues, operating expenses increased to 10.9% for the current twenty-six week period as compared to 10.8% for the prior-year comparable twenty-six week period. This slight increase is primarily due to higher cost of supplies, lodging and merchant credit card fees passed through to us by our transaction processor.

General and Administrative Expenses. General and administrative expenses increased to $5.8 million during the twenty-six weeks ended July 3, 2005 from $4.7 million during the comparable twenty-six week period of 2004, an increase of $1.1 million or 23.4%. The increase was the result of additional expenditures associated with continued growth of our business. As a percentage of revenues, general and administrative expenses decreased to 7.1% for the current twenty-six week period from 8.1% for the prior-year comparable twenty-six week period. This decrease is primarily the result of the 39.6% increase in total revenues for 2005 and the absence of severance payments to two corporate employees which were expensed during the first quarter of 2004. In addition, during the twenty-six weeks ended July 3, 2005, officers’ compensation was reduced by approximately $80,000 based on new employment agreements for the Co-Chairmen of the board.

Depreciation and Amortization.Depreciation and amortization increased to $3.1 million during the twenty-six weeks ended July 3, 2005 from $2.3 million during the comparable twenty-six week period of 2004, an increase of $800,000 or 34.8%. The increase was primarily due to our acquisition of restaurant equipment, furniture, leasehold improvements and brewery equipment related to new restaurant development, including four restaurants opened during the trailing 12 month period that were ground leases resulting in higher capitalized leasehold improvement expenditures.

Restaurant Opening Expense. Restaurant opening expense increased to $2.1 million during the twenty-six weeks ended July 3, 2005 from $1.0 million during the comparable twenty-six week period of 2004, an increase of $1.1 million. This increase is primarily due to opening costs related to five restaurant openings and two restaurants in-progress during the twenty-six weeks ended July 3, 2005, as compared to three restaurant openings during the twenty-six weeks ended June 27, 2004.Our opening costs will fluctuate from period to period, depending upon, but not limited to, the number of restaurant openings, the size and concept of the restaurants being opened, the location of the restaurants and the complexity of the staff hiring and training process.

Interest Income, Net.Net interest income increased to $393,000 during the twenty-six weeks ended July 3, 2005 from $224,000 during the comparable twenty-six week period of 2004, an increase of $169,000. This increase is primarily due to increased investments after the completion of our private placement on March 11, 2005 coupled with higher interest rates. The effective income tax rate for the twenty-six weeks ended July 3, 2005 differs from the statutory income tax rate primarily due to FICA tip credits.

Other Income, Net.Net other income increased to $117,000 during the twenty-six weeks ended July 3, 2005 from $114,000 in the comparable twenty-six week period of 2004, an increase of $3,000. This increase is primarily due to the sale of our Pizookie cookie desert in selected Southern California Costco Wholesale stores commencing March 2004 which was offset by the loss of gaming income from our Pietro’s restaurants, which we sold on March 15, 2004.

Income Tax Expense. Income tax expense decreased to $1.8 million during the twenty-six weeks ended July 3, 2005 from $1.9 million during the comparable twenty-six week period of 2004, a decrease of $100,000. This decrease is primarily due to increased income before taxes in the prior year resulting from the sale of our Pietro’s restaurants at a higher effective income tax rate. Our effective income tax rate for the twenty-six weeks ended July 3, 2005 was 32.2% compared to 33.5% for the comparable twenty-six week period of 2004.

LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements are principally related to restaurant growth plans. Similar to many restaurant chains, we utilize operating lease arrangements for substantially all of our restaurant locations. We believe that our operating lease

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arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner. However, we are not limited to the use of lease arrangements as our only method of opening new restaurants. While our operating lease obligations are not required to be reflected as indebtedness on our consolidated balance sheets, the minimum rents and related fixed asset obligations under our lease agreements must be satisfied by cash flows from our ongoing operations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure. We also require capital resources to maintain our existing base of restaurants and to further expand and strengthen the capabilities of our corporate and information technology infrastructures. Our requirement for working capital is not significant, since our restaurant guests pay for their food and beverage purchases in cash or credit cards at the time of the sale. Thus, we are able to sell many of our inventory items before we have to pay our suppliers of such items.

Our cash flows from operating activities, as detailed in the consolidated statements of cash flows, provided $8.5 million of net cash during the twenty-six weeks ended July 3, 2005, a $2.8 million increase from the $5.7 million generated during the comparable twenty-six week period of 2004. The increase in cash from operating activities for the comparable twenty-six week period of 2004 is primarily due to the gain on sale of Pietro’s restaurants; timing of payments to landlords included in prepaids and other assets, landlord tenant improvement contributions, and increased depreciation expense partially offset by payments to suppliers included in accounts payable and accrued expenses.

Total capital expenditures for the acquisition of our restaurant and brewery equipment and leasehold improvements to construct new restaurants were $16.2 million for the twenty-six weeks ended July 3, 2005. These expenditures were primarily related to the development of our new restaurants in Moreno Valley, Corona, Roseville and Rancho Cucamonga California, and Tucson, Arizona and the construction of our San Bruno, and San Mateo California, our Mesa, Arizona and our Sugarland, Texas locations. In addition, for the twenty-six weeks ended July 3, 2005, total capital expenditures related to the maintenance of existing restaurants were $1.2 million.

We have signed leases for, and plan to open restaurants in San Bruno and San Mateo California, and Sugarland, Texas, in 2005 and Vacaville, California, Desert Ridge, Arizona, Westminster, Colorado and Orlando, Florida in 2006. Mesa, Arizona opened on July 26, 2005, which was subsequent to our quarter end.

On March 11, 2005, we completed a $40.3 million (net of approximately $2.2 million in related fees and expenses) private placement of common stock with three large institutional investors. The transaction involved the sale of 2.75 million shares of common stock at a purchase price of $15.50 per share.

In recent years, we have funded our capital requirements primarily through cash flows from operations and proceeds received from the exercise of redeemable warrants during 2002. Our capital requirements related to opening additional restaurants will continue to be significant. For the full 52-week fiscal 2005 year, our original estimate at the beginning of the year for capital expenditures was in the range of $25 million to $27 million. That estimate contemplated two sale/leaseback transactions related to new restaurants. Now that we have raised an additional $40 million of proceeds from our equity offering this past March, we have decided not to proceed with those two transactions at this time. As a result, our full year capital expenditure estimate is now in the range of $35 to $38 million. The breakdown is as follows: approximately $27 to $28 million for 2005 new restaurant development, approximately $4 to $5 million for maintenance, image enhancement and growth-related capital expenditures for existing restaurants, and $4 million to $5 million in construction in progress, or to take into account the timing of landlord contributions for restaurants anticipated to open during 2006. Our future cash requirements and the adequacy of available funds will depend on many factors, including the pace of expansion, real estate markets, site locations and the nature of the arrangements negotiated with landlords. We believe that our current cash flow and our cash and investments balances together with anticipated cash flows from operations should be sufficient to satisfy our working capital and capital expenditure requirements through fiscal 2006. We may seek additional funds to finance our future growth and operations. There can be no assurance that such funds will be available when required or available on terms acceptable to us.

IMPACT OF INFLATION

The impact of inflation on food, labor, energy and occupancy costs can significantly affect our operations. Many of our employees are paid hourly rates related to Federal and State minimum wage laws. Minimum wages have been increased numerous times and remain subject to future increases.

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While we have been able to react to inflation and other changes in our costs of key operating expenses by gradually increasing prices for our menu items, combined with reduced purchasing costs, and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. Competitive conditions could limit our menu pricing flexibility. We cannot guarantee that all future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our restaurant guests without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.

SEASONALITY AND ADVERSE WEATHER

Our results of operations have historically been impacted by seasonality, which directly impacts tourism at our coastal California locations. The summer months (June through August) have traditionally been higher volume periods than other periods of the year. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening costs. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies require the greatest amount of subjective or complex judgments by management and are important to portraying our financial condition and results of operations. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Property and Equipment

We record all property and equipment at cost. Property and equipment accounting requires estimates of the useful lives for the assets for depreciation purposes and selection of depreciation methods. We believe the useful lives reflect the actual economic life of the underlying assets. We have elected to use the straight-line method of depreciation over the estimated useful life of an asset or the primary lease term of the respective lease, whichever is shorter. Renewals and betterments that materially extend the useful life of an asset are capitalized while maintenance and repair costs are charged to operations as incurred. Judgment is often required in the decision to distinguish between an asset which qualifies for capitalization versus an expenditure which is for maintenance and repairs.

We review property and equipment (which includes leasehold improvements) and intangible assets with finite lives for impairment when events or circumstances indicate these assets might be impaired. We test impairment using historical cash flows and other relevant facts and circumstances as the primary basis for our estimates of future cash flows. The analysis is performed at the restaurant level for indicators of impairment. If impairment indicators were identified, then assets would be recorded at fair value. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets. As of July 3, 2005, no impairment indicators have been identified.

Self Insurance Liability

We are self-insured for a portion of our workers’ compensation program. We maintain coverage with a third party insurer to limit our total exposure for this program. The accrued liability associated with this program is based on our estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported to us (“IBNR claims”) as of the balance sheet date. Our estimated liability is not discounted and is based on information provided by our insurance broker and insurer, combined with our judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claims trends, including the severity or frequency of claims, differ from our estimates, our financial results could be significantly impacted.

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Income Taxes

We provide for income taxes based on our estimate of federal and state income tax liabilities. Our estimates include, but are not limited to, effective state and local income tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income and estimates related to depreciation expense allowable for tax purposes. We usually file our income tax returns several months after our fiscal year-end. We file our tax returns with the advice and compilation of tax consultants. All tax returns are subject to audit by federal and state governments, usually years after the returns are filed, and could be subject to differing interpretation of the tax laws.

Deferred tax accounting requires that we evaluate net deferred tax assets to determine if these assets will more likely than not be realized in the foreseeable future. This test requires projection of our taxable income into future years to determine if there will be taxable income sufficient to realize the tax assets (future tax deductions and FICA tax credit carryforwards). The preparation of the projections requires considerable judgment and is subject to change to reflect future events and changes in the tax laws.

Leases

We lease all of our restaurant locations. We account for our leases under the provisions of FASB Statement No. 13,Accounting for Leases (SFAS 13) and subsequent amendments, which require that our leases be evaluated and classified as operating or capital leases for financial reporting purposes. All of our restaurant leases are classified as operating leases pursuant to the requirements of SFAS 13. We disburse cash for leasehold improvements and furniture fixtures and equipment to build out and equip our leased premises. We may also expend cash for permanent improvements that we make to leased premises that generally are reimbursed to us by our landlords as construction contributions (also known as tenant improvement allowances) pursuant to agreed-upon terms in our leases. Landlord construction contributions can take the form of up-front cash, full or partial credits against minimum or percentage rents otherwise payable by us, or a combination thereof.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk exposures are related to cash and cash equivalents and investments. We invest our excess cash in highly liquid short-term investments with maturities of less than twelve months as of the date of purchase. These investments are not held for trading or other speculative purposes. Changes in interest rates affect the investment income we earn on our investments and, therefore, impact our cash flows and results of operations. For the twenty-six weeks ended July 3, 2005, the average interest rate earned on cash and cash equivalents and investments was approximately 2.5%.

We purchase food and other commodities for use in our operations, based upon market prices established with our suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control. To manage this risk in part, we attempt to enter into fixed price purchase commitments, with terms typically up to one year, for many of our commodity requirements. Dairy costs can also fluctuate due to government regulation. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have the ability to increase certain menu prices, or vary certain menu items offered, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the Securities and Exchange Commission, or SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of our disclosure controls and procedures, our management, with the participation of the Chief Executive and Chief Financial Officers, has concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were effective to ensure that we are able to record, process, summarize and report the information we are required to disclose in the reports we file with the SEC within the required time periods.

There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in the paragraph above.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Restaurants such as those operated by us are subject to litigation in the ordinary course of business, most of which we expect to be covered by our general liability insurance, subject to certain deductibles and coverage limits. Punitive damages awards and employee unfair practice claims, however, are not covered by our general liability insurance. To date, we have not paid punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims, employee unfair practice claims or any other actions. We could be affected by the adverse publicity resulting from allegations, regardless of whether or not such allegations are valid or whether we are determined to be liable. We believe that the final disposition of any such lawsuits and claims will not have a material adverse effect on our financial positions, results of operations or liquidity.

The following paragraphs describe certain legal actions recently settled or pending:

Labor Related Matters

On March 10, 2003, a former employee of ours, on behalf of himself and other employees and former employees of ours similarly situated and working in California, filed a class action complaint in the Superior Court of California for the County of Orange against us. The complaint alleges that we violated provisions of the California Labor Code covering meal and rest beaks for employees, along with associated acts of unfair competition and seeks payment of wages for all meal and rest breaks allegedly denied to our California employees for the period from October 1, 2000 to the present. We have reached an agreement with the class counsel to settle the meal and rest break class action case pending in California, and the settlement has been approved by the court. The amount of the settlement was developed from mediation, which was concluded in December of 2003. Accordingly, we recorded $950,000 in other expense during the fourth quarter of 2003 to reflect this liability at December 28, 2003. The amount of the settlement was reduced to $900,000 based upon subsequent court determination and the $50,000 reversal was reflected in the second quarter ended June 27, 2004. On January 3, 2005, the settlement was paid in full.

On February 5, 2004, another former employee of ours, on behalf of herself, and all others similarly situated, filed a class action complaint in Los Angeles County Superior Court, alleging causes of action for: (1) failure to pay reporting time minimum pay; (2) failure to allow meal breaks; (3) failure to allow rest breaks; (4) waiting time penalties; (5) civil penalties; (6) reimbursement for fraud and deceit; (7) punitive damages for fraud and deceit; and (8) disgorgement of illicit profits. On June 28, 2004, the Plaintiff stipulated to dismiss her second, third, fourth, and fifth causes of action. During September 2004, the Plaintiff stipulated to arbitration of the action. No further court action has been taken since that date. The outcome of this matter cannot be ascertained at this time.

On June 10, 2005, a former employee filed a complaint against us in Los Angeles Superior Court. In the complaint, the plaintiff alleges various wage claims, including failure to pay overtime wages and failure to provide meal and rest breaks. The plaintiff also alleges causes of action for contract rescission and negligence based upon our alleged failure to properly classify certain employees as “non-exempt” under California’s overtime laws. Finally, the plaintiff alleges a cause of action for unfair business practices under California Business & Professions Code Section 17200 et seq. The plaintiff purported to bring the causes of action in the complaint on behalf of a class of current and former employees comprised of all individuals who worked as salaried kitchen managers in our California restaurants at any time from June 2001 to the present. The outcome of this matter cannot be ascertained at this time.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 14, 2005, we held our Annual Meeting of Shareholders. Shareholders voted upon the election of directors, the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 3, 2006, and ratification and approval of our 2005 Equity Incentive Plan.

Paul A. Motenko, Jeremiah J. Hennessy, Gerald W. Deitchle, James A. Dal Pozzo, Shann M. Brassfield, John F. Grundhofer, J. Roger King, Peter A. Bassi, and Larry D. Bouts all of whom were directors prior to the Annual Meeting and were nominated for re-election, were re-elected at the meeting. The following votes were cast for each of the nominees:

Name	For	Authority Withheld
Paul A. Motenko	15,596,190	437,323
Jeremiah J. Hennessy	15,566,890	466,623
Gerald W. Deitchle	15,661,970	371,543
James A. Dal Pozzo	14,985,195	1,048,318
Shann M. Brassfield	15,552,266	481,247
John F. Grundhofer	15,131,024	902,489
J. Roger King	15,552,366	481,147
Peter A. Bassi	15,555,096	478,417
Larry D. Bouts	15,716,149	317,364

There were no abstentions or broker non-votes with respect to the election of directors.

The shareholders also approved the ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 3, 2006. The following votes were cast on the ratification: 16,015,759 For; 14,889 Against; 2,865 Abstain. There were no broker non-votes.

Additionally, the shareholders ratified and approved our 2005 Equity Incentive Plan. The following votes were cast on the approval of the amendment: 11,846,485 For; 4,161,717 Against; 25,311 Abstain. There were no broker non-votes.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

Exhibits

10.1	BJ’s Restaurants, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10. of the Form 8-K filed June 17, 2005).
10.2	Amended and Restated Employment Agreement of Paul Motenko (incorporated by reference to Exhibit 10.1 of the Form 8-K filed July 1, 2005)
10.3	Amended and Restated Employment Agreement of Jeremiah Hennessy (incorporated by reference to Exhibit 10.2 of the Form 8-K filed July 1, 2005)
10.4	Form of Stock Option Agreement for Executive Officers under the 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Form 8-K filed July 1, 2005)
10.5	Form of Grant Notice under the 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Form 8-K filed July 1, 2005)
31	Section 302 Certifications of Chief Executive Officers and Chief Financial Officer.
32	Section 906 Certification of Chief Executive Officers and Chief Financial Officer.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BJ’S RESTAURANTS, INC.
	(Registrant)
August 2, 2005	By:	/s/ GERALD W. DEITCHLE
		Gerald W. Deitchle
		Chief Executive Officer, President and Director
	By:	/s/ LOUIS M. MUCCI
		Louis M. Mucci
		Chief Financial Officer

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