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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K







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



|FOR |  | THE FISCAL YEAR ENDED DECEMBER 30, 2007
|--- |  | ---------------------------------------

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 000-31149

California Pizza Kitchen, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 95-4040623                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

6053 West Century Boulevard, 11th Floor

Los Angeles, California 90045-6438

(Address of principal executive offices, including zip code)

(310) 342-5000

(Registrants telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value (title of class)

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES   ̈    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES   ̈    NO  x

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 disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈                                   
         Accelerated filer  x                                   
         Non-accelerated filer   ̈

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES   ̈    NO  x

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 29, 2007, the last trading day of the second fiscal
quarter, was approximately $305 million based upon the last sales price reported for such date on the Nasdaq National Market. For purposes of this disclosure, shares of Common Stock held by persons who hold more than 5% of the outstanding shares of
Common Stock and shares held by officers and directors of the registrant have been excluded, in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive.

As of March 13, 2008, 25,628,993 shares of the registrants Common Stock, $0.01 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by reference into Part III of this Form 10-K portions of its proxy statement for the registrants 2008 Annual Meeting of Stockholders to be held May 21, 2008.









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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

2007 ANNUAL REPORT ON FORM 10-K

INDEX



|          |  |                                                                                                              |  |         
|--------- |  | ------------------------------------------------------------------------------------------------------------ |  | --------
|          |  |                                                                                                              |  | Page No.
|Part I.  
|          |  |                                                                                                             
|Item 1.   |  | Business                                                                                                     |  | 3       
|          |  |                                                                                                             
|Item 1A.  |  | Risk Factors                                                                                                 |  | 11      
|          |  |                                                                                                             
|Item 1B.  |  | Unresolved Staff Comments                                                                                    |  | 14      
|          |  |                                                                                                             
|Item 2.   |  | Properties                                                                                                   |  | 14      
|          |  |                                                                                                             
|Item 3.   |  | Legal Proceedings                                                                                            |  | 15      
|          |  |                                                                                                             
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 15      
|         
|Part II. 
|          |  |                                                                                                             
|Item 5.   |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 16      
|          |  |                                                                                                             
|Item 6.   |  | Selected Financial Data                                                                                      |  | 18      
|          |  |                                                                                                             
|Item 7.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 20      
|          |  |                                                                                                             
|Item 7A.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 30      
|          |  |                                                                                                             
|Item 8.   |  | Financial Statements and Supplementary Data                                                                  |  | 31      
|          |  |                                                                                                             
|Item 9.   |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 31      
|          |  |                                                                                                             
|Item 9A.  |  | Controls and Procedures                                                                                      |  | 31      
|          |  |                                                                                                             
|Item 9B.  |  | Other Information                                                                                            |  | 31      
|         
|Part III.
|          |  |                                                                                                             
|Item 10.  |  | Directors, Executive Officers and Corporate Governance                                                       |  | 33      
|          |  |                                                                                                             
|Item 11.  |  | Executive Compensation                                                                                       |  | 33      
|          |  |                                                                                                             
|Item 12.  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 33      
|          |  |                                                                                                             
|Item 13.  |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 33      
|          |  |                                                                                                             
|Item 14.  |  | Principal Accounting Fees and Services                                                                       |  | 33      
|         
|Part IV. 
|          |  |                                                                                                             
|Item 15.  |  | Exhibits, Financial Statement Schedules                                                                      |  | 34      



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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve risks and uncertainties. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of words such as expects, anticipates, intends, plans and similar expressions. Our actual results could differ materially from
those discussed in these statements. Factors that could contribute to these differences include those discussed under Risk Factors and elsewhere in this report. The cautionary statements made in this report should be read as being
applicable to all forward-looking statements wherever they appear in this report.

ASSUMPTIONS USED IN THIS REPORT

Throughout this report, our fiscal years ended December 28, 2003, January 2, 2005, January 1, 2006, December 31, 2006 and
December 30, 2007 are referred to as fiscal years 2003, 2004, 2005, 2006 and 2007, respectively. Our fiscal year consists of 52 or 53 weeks and ends on the Sunday closest to December 31 in each year. Our fiscal years typically consist of
52 weeks except for 2004, which was a 53-week year. All prior quarters consisted of 13 weeks except for 2004, which included a final quarter of 14 weeks.

PART I.

Item 1.    Business

Overview and Strategy

California Pizza Kitchen, Inc. (referred to herein as the Company or in the first person notations we, our, and
us) is a leading casual dining restaurant chain with a particular focus on the premium pizza segment. As of March 13, 2008, we own, license or franchise 237 locations in 30 states, the District of Columbia and 8 foreign countries,
of which 198 are company-owned and 39 operate under franchise or license arrangements. During our 23 years of operating history, we have developed a recognized consumer brand and demonstrated the appeal of our concept in a wide variety of geographic
areas.

Our restaurants, which feature an exhibition style kitchen centered around an open flame oven, provide a distinctive, casual dining
experience that is family friendly and has broad consumer appeal. Our menu focuses on imaginative toppings and showcases recipes that capture tastes and flavors that customers readily identify, but do not typically associate with pizza, pasta or
salads. The menu showcases such dishes as The Original BBQ Chicken Pizza, Thai Chicken Pizza, Kung Pao Spaghetti, The Original BBQ Chicken Chopped Salad and the Waldorf Chicken Salad, as well as more recently introduced items such as the Miso Salad,
Mediterranean Salad, Italian Tomato & Basil Pizza, Works Pizza, Cajun Pizza, Blue Crab Cakes and Pan Sautéed Salmon. In addition, our entire menu is trans-fat free. While we do offer traditional menu items, the success of our concept
is due to our ability to interpret food trends on our platform of pizzas, pastas, salads and appetizers, and to offer items that appeal to a variety of tastes.

Our objective is to extend our leadership position in the restaurant and premium pizza market by selling innovative, high quality pizzas and related products and by providing exceptional customer service, thereby
building a high degree of customer loyalty, brand awareness and superior returns for our stockholders. To reach these objectives, we plan to increase our market share by expanding our restaurant base in new and existing markets, leveraging our
partnerships in non-traditional and retail channels and offering innovative menu items on our platform of pizzas.

Our 237 locations
include 9 company-owned and operated California Pizza Kitchen ASAPs (CPK/ASAP). We developed the CPK/ASAP concept to cater to a fast, casual dining experience compared to our full service restaurants. We are currently re-engineering the
concept and have ceased all further development. During



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2007 we assessed real estate sites, evaluated menu items and the results of consumer research. This resulted in ceasing construction on one CPK/ASAP and
negotiating an early termination for $770,000 and booking an additional $8.5 million estimate for impairment and early termination costs on primarily four other CPK/ASAPs. The remaining CPK/ASAP restaurants will benefit
from re-engineering efforts that include menu, marketing and speed of service enhancements.

Menu

Our menu committee, which is led by our co-founders and co-Chief Executive Officers (co-CEOs), Richard Rosenfield and Larry Flax, continuously
experiments with food items and flavor combinations in an attempt to create selections that are innovative and capture distinctive tastes. We first applied our innovative approach to creating and defining a new category of pizzathe premium
pizza. For example, our signature creation, The Original BBQ Chicken Pizza, utilizes barbecue sauce instead of tomato sauce, and adds toppings of barbeque chicken breast, smoked gouda and mozzarella cheeses, sliced red onion and fresh cilantro. Our
Thai Chicken Pizza is created with a base of spicy peanut-ginger and sesame sauce, and topped with marinated chicken breast, mozzarella cheese, roasted peanuts, green onions, bean sprouts, julienne carrots and fresh cilantro. Among our other
innovative pizzas are the California Club, The Works, The Greek, Mango Tandoori Chicken, Carne Asada, Shrimp Scampi and Jamaican Jerk Chicken.

We have broadened our menu beyond pizza to include pastas, salads, sandwiches, soups, appetizers and desserts, and we strive to bring the same level of creativity and innovation involved in developing our pizzas to our entire menu. Among
our other signature menu items are Chicken Tequila Fettuccine, which captures Southwestern flavors in a rich tequila-lime and jalapeño cream sauce, The Original BBQ Chicken Chopped Salad, which uses both barbecue sauce and garden-herb ranch
dressing, the Chinese Chicken Salad with crispy angel hair pasta, and our hearth-baked Tortilla Spring Rolls appetizers, which are sprinkled with herbs and baked in our pizza ovens. We also recently introduced two new specialty entrees to add to the
three chicken entrees introduced in 2006, namely the Cabo Crab Cakes and Pan Sautéed Salmon.

Our menu is also designed to satisfy
customers who seek traditional, American-style, tomato sauce-based pizza or authentic, Italian-style Neapolitan pizza. For the traditionalist, we offer a variety of items such as the Mushroom Pepperoni Sausage Pizza, the Fresh Tomato,
Basil & Garlic Pizza, and the Sweet & Spicy Italian Sausages Pizza that combines sweet Italian sausage and grilled spicy Italian sausage, a tomato sauce base, roasted red and yellow peppers and mild onions. Our Neapolitan pizzas
are prepared on a thin, crisp crust and include our Margherita Pizza with imported Italian tomatoes, fresh mozzarella cheese, fresh basil and parmesan cheese, and our Sicilian Pizza made with spicy marinara sauce, spicy Capicola ham, julienne salami
and fontina, mozzarella and parmesan cheeses. Our menu similarly accommodates traditional tastes in pastas and salads, with a variety of tomato sauce-based pastas and our high-quality versions of popular salads, including the Waldorf Chicken,
Classic Caesar, Thai Crunch and Original Chopped.

All of our menu items are prepared to order in our restaurants. This reinforces our
customers confidence in the freshness and quality of our preparations and allows us to customize any dish to accommodate specific dietary or taste preferences.

Our menu is continuously evolving to track the increasingly discriminating and sophisticated palate of the American public. We regularly review the sales mix of our menu items and replace lower selling items in each
category with new menu items once or twice a year. Because of our ability to quickly adapt our menu, we believe that we are able to meet our customers changing tastes and expectations. Our entrees generally range in price from $6.49 to $18.29
and our average dine-in guest check is approximately $13.37, including alcoholic beverages. We offer a variety of wines by the bottle or glass, bottled and tap beers, as well as mixed drinks, primarily to complement our menu offerings in all
restaurants in which we have liquor licenses.



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Operations

Restaurant Management.    We currently have 33 regional directors who report to four vice presidents of operations. These vice presidents report to our co-CEOs. Each regional director oversees from four to eight
restaurants and supervises the general manager for each restaurant within his or her area of control. The typical full service restaurant management team consists of a general manager, who oversees the entire operation of the restaurant, a kitchen
manager and two to three other managers. Additionally, depending upon the size, location and sales volume of a restaurant, we may also employ another kitchen manager and/or a third manager in the dining area. Most of our full service restaurants
employ approximately 60 to 80 hourly employees, many of whom work part-time. The general manager of each restaurant is responsible for the day-to-day operation of that restaurant, including hiring, training and development of personnel, as well as
operating results. The kitchen manager is responsible for product quality, food costs and kitchen labor costs. Our full service restaurants are generally open Sunday through Thursday from 11:00 a.m. until 10:00 p.m., and on Friday and Saturday from
11:00 a.m. until 11:00 p.m.

Training.    We strive to maintain quality and consistency in each of our
restaurants through the careful training and supervision of personnel and the establishment of, and adherence to, high standards relating to service, food and beverage preparation, maintenance of facilities, quality and safety. We provide all new
employees with complete orientation and training for their positions to ensure they are able to meet our high standards. Each location has certified trainers who provide classroom and on-the-job instruction. Employees are certified for their
positions by passing a series of tests and evaluations. Our management training program lasts for 10 weeks and is completed in one of our 90 certified training restaurants. Management training includes service, kitchen and overall management
responsibilities, with intense focus on food preparation, the essence of the California Pizza Kitchen experience. An extensive series of interactive modules and on-line quizzes are used in conjunction with on-the-job training. After spending the
first eight weeks in their certified training restaurant, new managers spend the last two weeks of training in their home restaurant, working side-by-side with the general manager. We place a high priority on our continuing management development
programs in order to ensure that qualified managers are available for our future growth. In addition, we have detailed written operating procedures, standards and controls, finance modules, food quality assurance systems and safety programs. We hold
either general manager conferences or regional director updates during which all of our general managers receive financial information and additional training on food preparation, hospitality and other relevant topics. This same information is then
communicated to all levels of management through the regional vice presidents and regional directors, ensuring that identical messages are communicated to each manager in our company.

When we open a new restaurant, we provide varying levels of training to each employee as necessary to ensure the smooth and efficient operation of a
California Pizza Kitchen restaurant from the first day it opens to the public. Approximately two weeks prior to opening a new restaurant, our dedicated training/opening team travels to the location to begin intensive training of all new employees
for that restaurant. Our training team remains on site during the first two weeks of operation. We believe this additional investment in our new restaurants is important since it helps us provide our customers with a quality dining experience from
day one. We also make on-site training teams available when our franchisees open new restaurants. After a restaurant has been opened and is operating smoothly, the general manager supervises the training of all new employees. Each region also has
one regional training manager who periodically oversees the training processes in each location to ensure our industry-leading training standards are achieved.

Recruiting and Retention.    We seek to hire experienced managers and staff. We support our employees by offering competitive wages and benefits, including a 401(k) plan and salary deferral
plan, both with a discretionary match, medical insurance for all of our employees, including eligible part-time workers, and discounts on dining. We also have an employee stock purchase plan which allows all employees to participate who have worked
for us for at least 1 year and who work a minimum of 20 hours per week.



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We attempt to motivate and retain our employees by providing them with structured career development
programs for increased responsibilities and advancement opportunities, as well as performance-based bonuses tied to sales, profitability and qualitative measures. Our most successful general managers are eligible for promotion to senior general
manager status and are entitled to receive more lucrative compensation packages based on various performance criteria. We believe we also enjoy the recruiting advantage of offering our general managers restaurants that are easier to manage
because they are generally smaller than those of our competitors and have hours that typically do not extend late into the night. We believe these advantages offer our managers a quality work environment compared to many of our competitors.

Customer Satisfaction.    Customer satisfaction is critically important to us. To that end, we solicit and
analyze our customers opinions through web-based and telephonic surveying of randomly selected guests every month (a minimum of 50 to 60 per restaurant), which is a vital tool in our quality control efforts from both a food quality and
customer service perspective.

Marketing

Our marketing strategy focuses on communicating the California Pizza Kitchen brand through many creative and non-traditional avenues. As one of the pioneers of premium pizza, we continue to benefit from national media attention featuring
our co-founders and co-CEOs Richard Rosenfield and Larry Flax, which we believe provides us with a significant competitive advantage. New restaurant openings, high-profile fundraisers and media events currently serve as the focal point of our public
relations and media outreach efforts.

We entered a sponsorship agreement with the Los Angeles Dodgers, Los Angeles Angels of Anaheim and
the Los Angeles Kings in 2007 to promote California Pizza Kitchen at Dodger Stadium, Angel Stadium and STAPLES Center, respectively. We will be the exclusive pizza provider at these venues for the next three years.

During 2007, our public relations efforts led to coverage on a national level in numerous outlets including the New York Times, Los Angeles
Times, The Today Show, The View, The Big Idea with Donny Deutsch, CNBC Mad Money, CNBC Morning Call, National Public Radio: Corporate Corner, Newsweek Magazine, Priority Magazine and CFO
Magazine. CPK-branded products appeared in several national television shows and films including Bring it On: In It to Win It, King of Queens, The Big Bang Theory and The Bill Engvall Show. In addition, Company representatives were invited to
demonstrate our creative California-style cuisine on local television programs in over 15 major markets and were written about in major daily newspapers from coast to coast.

We employ a variety of marketing techniques in connection with our new restaurant openings, including charitable fundraising events with invitations to
media personalities and community leaders. In addition, we donate 100% of dine-in pizza sales from a designated day immediately following the opening to worthwhile local charities. California Pizza Kitchen managers are also encouraged to host
fundraising events in their restaurants with local charities. During 2007 approximately $200,000 was donated to local communities and childrens charities across the U.S.

Our involvement in the community does not end once we have opened a restaurant. In each of the markets in which we operate, we continuously engage in a
variety of charitable and civic causes through ongoing in-kind donations. We have developed two cookbooks and 100% of the proceeds from the sale of these cookbooks are donated to various charities. These cookbooks are sold at our restaurants,
through national bookstore chains and through on-line retailers. Additionally, a portion of the proceeds from our premium frozen pizza sales sold at retail outlets are also donated to local charities.

We conduct consumer research to monitor our customer satisfaction and we also engage to a limited extent in paid advertising for individual restaurant
locations, including magazines, newspaper inserts, billboards, electronic and direct mail. On-going marketing efforts include business-to-business programs, CPKids programs



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with local schools and childrens organizations, hotel concierges and new resident programs. We utilize a variety of printed materials, including
take-out and catering menus, mall employee pizza passes, take-out bag stuffers, check presenter inserts, Be Our Guest cards and electronic gift cards.

In 2007, we spent an aggregate of 1.0% of restaurant sales on marketing efforts. At this stage of our development, we expect to continue investing approximately 1.0% of restaurant sales in marketing efforts in the
future.

Company-owned Restaurant Expansion Strategy and Site Selection

Our full service restaurants continue to represent the majority of our growth in the near term, and our expansion strategy focuses primarily on further
penetrating existing markets. As a result, we anticipate over the next several years that a majority of our new restaurants will be in existing markets. This clustering approach enables us to increase brand awareness and improve our operating and
marketing efficiencies. For example, clustering enables us to reduce costs associated with regional supervision of restaurant operations and provides us with the opportunity to leverage marketing costs over a greater number of restaurants. We also
believe this approach reduces the risks involved with opening new restaurants given that we better understand the competitive conditions, consumer tastes, demographics and discretionary spending patterns in our existing markets. In addition, our
ability to hire qualified employees is enhanced in markets in which we are well known.

We believe that our site selection strategy is
critical to our success, and we devote substantial effort to evaluating each potential site at the highest levels within our organization. We identify areas within our target markets that meet our demographic requirements, focusing on daytime and
evening populations, shopping patterns, availability of personnel and household income levels. We only consider expanding to new markets which meet our strict demographic criteria. Our site selection criteria are flexible given that we operate
restaurants in all types of regional shopping centers, lifestyle centers, entertainment centers, freestanding street locations in commercial and residential neighborhoods, office buildings and hotels. We have several long-standing relationships with
major mall developers and owners, and are therefore afforded the opportunity to negotiate multiple location deals.

We tested a
new prototype in fiscal 2004. As such, our openings in fiscal years 2004, 2005, 2006 and 2007 included opening 3, 15, 16 and 17 new prototype full service restaurants, respectively. The new prototypes demonstrated encouraging daypart
trends, check averages and alcoholic beverage sales and are the basis for expansion plans in the future. The new prototype full service restaurants are larger than our former units. The new prototype restaurants are approximately 5,800 square feet
and have approximately 200 indoor and outdoor seats and also feature a bar area that has been designed to create a more comfortable experience that will enhance our dinner business. We have the ability to operate a full service restaurant in less
than the new prototype size, particularly if we are able to secure additional patio seating. We believe the size and flexibility of our formats provide us with a competitive advantage in securing sites.

In addition to full service restaurants, we also own nine CPK/ASAP restaurants that compete in the fast casual market.

Our portfolio of restaurants also includes LA Food Show Bar & Grill (LA Food Show), which currently has one location in Manhattan
Beach, California. We expect to open our second LA Food Show location in Beverly Hills, California in fiscal 2008.

Unit Level Economics

Full service restaurants opened in fiscal 2007 are approximately 5,800 square feet with approximately 200 seats. Our average gross investment was
approximately $2.8 million for inline restaurants and $3.2 million for freestanding restaurants, excluding pre-opening costs, which averaged approximately $330,000 to $350,000 per restaurant.



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Restaurant Franchise and Licensing Arrangements

As part of our strategy to expand and leverage the California Pizza Kitchen brand, we introduced and franchised the CPK/ASAP concept in 1996. Our
franchised CPK/ASAP restaurants are designed specifically for the grab and go customer in non-traditional locations and are typically 600 to 1,000 square feet in size with a limited menu and common area seating. Our CPK/ASAP franchisee,
HMSHost Corporation (HMSHost), operates 16 California Pizza Kitchen ASAP restaurants throughout the United States, primarily in airports. In addition to HMSHost, MGM Mirage operates one full service California Pizza Kitchen restaurant in
a high-profile resort in Las Vegas, Nevada.

HMSHost has preferred rights to open new CPK/ASAP restaurants in airports and in travel plazas
along toll-roads in North America. However, any location proposed by HMSHost is subject to our approval at our sole discretion. Once we have agreed to HMSHosts development of a CPK/ASAP restaurant in an airport or travel plaza location, our
right to license or operate a restaurant ourselves at that location is limited. In fiscal 2006, we agreed to extend our relationship with HMSHost until 2012. Upon approval of additional locations, HMSHost pays an initial franchise fee of $20,000 for
each CPK/ASAP restaurant at a new location, $10,000 for each additional CPK/ASAP restaurant at an existing location, and continuing royalties at rates of 5% to 5.5% of gross sales. The HMSHost franchise agreement typically terminates at the same
time as an HMSHost concessionaire agreement to operate at an airport or mall terminates.

As of March 13, 2008, we have five
international franchisees. One international franchisee operates eight full service restaurants with four in Hong Kong, China and one each in Indonesia, Singapore, Malaysia and Shanghai, China. Another international franchisee operates six full
service restaurants in the Philippines. The third international franchisee operates two full service restaurants in Japan. Our fourth international franchisee operates two full service restaurants in Mexico and a fifth international franchisee
operates one full service restaurant in South Korea.

Our territorial development agreements with our other international franchisees grant
them the right to operate restaurants in an identified territory subject to meeting development obligations and excluding certain types of locations. Our basic franchise agreement with these franchisees generally requires payment of an initial fee
of between $50,000 and $75,000 for a full service restaurant, as well as continuing royalties at a rate of 5% of gross revenue. Most of our franchise agreements contain a 10- or 20-year term.

Agreement with Kraft Pizza Company

In 1997 we
entered into a trademark license agreement with Kraft Pizza Company (Kraft) pursuant to which we have licensed certain of our trademarks and proprietary recipes to Kraft for its use in manufacturing and distributing a line of California
Pizza Kitchen premium frozen pizzas in the United States and Canada, including: The Original BBQ Recipe Chicken, Five-Cheese & Tomato, Thai Chicken, Garlic Chicken and Mushroom Pepperoni Sausage. In 2005, Kraft introduced the
California Pizza Kitchen Crispy Thin Crust line with three popular California Pizza Kitchen pizzas: Sicilian, Margherita and White, on a Neapolitan-style crust. In 2006, Kraft expanded the California Pizza Kitchen Crispy Thin Crust
line with two new pizzas, the Garlic Chicken and BBQ Recipe Chicken. Our frozen pizzas are currently sold in 50 states in approximately 17,000 points of distribution through select grocers, including major markets such as Los Angeles, San Francisco,
Chicago, Denver, New York, Boston and Atlanta. Distribution and advertising will continue to expand with a continued focus on those markets in which our restaurants are located.

We collect royalties based on a tiered schedule. The royalties are calculated as a percentage of Krafts net sales of our premium frozen pizzas. We
received $4.7 million in royalties in fiscal 2007, an increase of 27% from fiscal 2006. Kraft is also obligated to spend a percentage of net sales on advertising and promotion of California Pizza Kitchens licensed products.



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Management Information Systems

All of our restaurants use computerized information technology systems which are designed to improve operating efficiencies, provide field and corporate management timely access to financial and marketing data, reduce
restaurant and corporate administrative time and expense and facilitate an enjoyable guest experience by allowing our guests to customize menu items, food preparation and payment options as desired. Our restaurant systems include a point-of-sale
system, a labor scheduling and management application and an inventory usage analysis system. The data captured by our restaurant level systems include restaurant sales, cash and credit card receipts, quantities of each menu item sold, customer
counts, daily labor expense and inventory movement. This information drives in-store reporting and analysis systems designed to help our management teams run their restaurants efficiently and profitably. Each week, every restaurant prepares a flash
profit and loss statement that is compared to other relevant measures such as budget and prior year. Additionally, the information is generally transmitted to the corporate office on a daily basis for use by our corporate information systems.

Our corporate information systems provide management with operating reports that show restaurant performance comparisons against items
such as budget, prior years and other company restaurants. Multiple reporting time frames are available, including current week, current accounting period and year-to-date. These systems allow us to closely monitor restaurant sales, cost of sales,
labor expense and other restaurant trends on a daily, weekly, and monthly basis.

We believe these systems enable both restaurant and
corporate management to adequately manage the operation and financial performance of our restaurants as necessary to support our planned expansion. Additionally, we believe the systems are scalable and flexible enough to accommodate or integrate
with any technologies necessary to support new initiatives.

We are also certified as being in compliance with the Payment Card Industry
Data Security Standard requirements for Level 1 merchants.

Purchasing

Our purchasing staff procures all of our food ingredients, products and supplies. We seek to obtain the highest quality ingredients, products and supplies from reliable sources at competitive prices. We continually
research and evaluate various food ingredients, products and supplies for consistency and food safety and compare them to our detailed specifications. Specific, qualified manufacturers and growers are then inspected and approved for use. This
process is repeated at least once a year. To maximize our purchasing efficiencies and obtain the lowest possible prices for our ingredients, products and supplies, while maintaining the highest quality, our centralized purchasing staff generally
negotiates prices based on one of two formats: fixed-price contracts generally with terms of from one month to one year or monthly commodity pricing formulas.

In order to provide the freshest ingredients and products, and to maximize operating efficiencies between purchase and usage, each restaurants kitchen manager determines its daily usage requirements for food
ingredients, products and supplies. The kitchen manager orders accordingly from approved local vendors and our national master distributor. The kitchen managers also inspect all deliveries daily to ensure that the items received meet our quality
specifications and negotiated prices. We have competitively priced, high quality alternative manufacturers, vendors, growers and distributors available should the need arise.

Employees

As of December 30, 2007, we have approximately 14,800 employees, including
approximately 200 employees located at our corporate headquarters. Our employees are not covered by any collective bargaining agreement. We consider our employee relations to be strong.



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Competition

The restaurant industry is intensely competitive. We compete on the basis of the taste, quality and price of food offered, customer service, ambiance, location and overall dining experience. We believe that our concept, attractive
price-value relationship and quality of food and service enable us to differentiate ourselves from our competitors. Although we believe we compete favorably with respect to each of these factors, many of our direct and indirect competitors are
well-established national, regional or local chains, and some have substantially greater financial, marketing and other resources. We also compete with many other restaurant and retail establishments for site locations and restaurant-level
employees. The packaged food industry is also intensely competitive.

Trademarks

Our registered trademarks and service marks include, among others, the word marks California Pizza Kitchen and LA Food Show, as
well as the California Pizza Kitchen and California Pizza Kitchen ASAP logos. We have registered our marks with the United States Patent and Trademark Office. We have registered our most significant trademarks and service marks in many foreign
countries. In order to better protect our brand, we have also registered our ownership of the Internet domain names www.cpk.com and www.californiapizzakitchen.com. We believe that our trademarks, service marks and other
proprietary rights have significant value and are important to our brand-building efforts and the marketing of our restaurant concepts. We have vigorously protected our proprietary rights in the past and expect to continue to do so. We cannot
predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights or the use by others of restaurant features based upon, or otherwise similar to, our concept. It may be
difficult for us to prevent others from copying elements of our concept and any litigation to enforce our rights will likely be costly.

Availability of
Reports

Our Internet address is www.cpk.com. At this internet website we make available, free of charge, our proxy
statement, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably
practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (SEC).

Government
Regulation

Our restaurants are subject to licensing and regulation by state and local health, sanitation, safety, fire and other
authorities, including licensing and regulation requirements for the sale of alcoholic beverages and food. To date, we have not experienced an inability to obtain or maintain any necessary licenses, permits or approvals, including restaurant,
alcoholic beverage and retail licenses. The development and construction of additional restaurants will also be subject to compliance with applicable zoning, land use and environmental regulations. We are also subject to federal and state laws that
regulate the offer and sale of franchises and substantive aspects of a licensor-licensee relationship. Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include minimum wage
requirements, overtime, unemployment tax rates, workers compensation rates, employment eligibility requirements and sales taxes.

We
are subject to federal and state environmental regulations, but these rules have not had a material effect on our operations. Various laws concerning the handling, storage, and disposal of hazardous materials, such as cleaning solvents, and the
operation of restaurants in environmentally sensitive locations, may impact aspects of our operations. During fiscal 2007, there were no material capital expenditures for environmental control devices and no such expenditures are anticipated.



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Our facilities must comply with the applicable requirements of the Americans with Disabilities Act of
1990 (ADA) and related state statutes. The ADA prohibits discrimination on the basis of disability with respect to public accommodations and employment. Under the ADA and related state laws, when constructing new restaurants or
undertaking significant remodeling of existing restaurants, we must make the restaurants readily accessible to disabled persons. We must also make reasonable accommodations for the employment of disabled persons.

We have a significant number of hourly restaurant employees that receive tip income. We have elected to voluntarily participate in a Tip Rate Alternative
Commitment (TRAC) agreement with the Internal Revenue Service. By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only FICA assessments for unreported or
underreported tips.

Item 1A.    Risk Factors

Our growth strategy requires us to open new restaurants at
a measured pace. We may not be able to achieve our planned expansion.

We are pursuing a disciplined growth strategy that to be
successful, depends on our ability and the ability of our franchisees and licensees to open new restaurants and to operate these new restaurants on a profitable basis. The success of our planned expansion will be dependent upon numerous factors,
many of which are beyond our control, including: the hiring, training and retention of qualified operating personnel, especially managers; competition for restaurant sites; negotiation of favorable lease terms; timely development of new restaurants,
including the availability of construction materials and labor; management of construction and development costs of new restaurants; securing required governmental approvals and permits; competition in our markets; and general economic conditions.

Our success depends on our ability to locate a sufficient number of suitable new restaurant sites.

One of our biggest challenges in meeting our growth objectives will be to secure an adequate supply of suitable new restaurant sites. We have experienced
delays in opening some of our restaurants and may experience delays in the future. There can be no assurance that we will be able to find sufficient suitable locations for our planned expansion in any future period. Delays or failures in opening new
restaurants could materially adversely affect our business, financial condition, operating results or cash flows.

We could face labor
shortages, which could slow our growth.

Our success depends, in part, upon our ability to attract, motivate and retain a sufficient
number of qualified employees, including restaurant managers, kitchen staff and servers, necessary to keep pace with our expansion schedule. Qualified individuals of the requisite caliber and number needed to fill these positions are in short supply
in some areas. Although we have not experienced any significant problems in recruiting or retaining employees, any future inability to recruit and retain sufficient individuals may delay the planned openings of new restaurants. Any such delays or
any material increases in employee turnover rates in existing restaurants could have a material adverse effect on our business, financial condition, operating results or cash flows. Additionally, competition for qualified employees could require us
to pay higher wages and/or grant awards of equity, to the extent available, to attract a sufficient number of employees, which could result in higher labor costs. Failure to pay higher wages and/or grant awards of equity may prevent us from
retaining and attracting qualified employees.

Our expansion into new markets may present increased risks due to our unfamiliarity with
the area.

As a part of our expansion strategy, we will be opening restaurants in markets in which we have no prior operating
experience. These new markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our restaurants in our existing markets. In addition, our new restaurants will typically take several months to reach
budgeted operating levels due to problems associated with new restaurants,



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including lack of market awareness, inability to hire sufficient staff and other factors. Although we have attempted to mitigate these factors by paying
careful attention to training and staffing needs, there can be no assurance that we will be successful in operating new restaurants on a profitable basis.

Our expansion may strain our infrastructure, which could slow our restaurant development.

We also
face the risk that our existing systems and procedures, restaurant management systems, financial controls, and information systems will be inadequate to support our planned expansion. We cannot predict whether we will be able to respond on a timely
basis to all of the changing demands that our planned expansion will impose on management and these systems and controls. If we fail to continue to improve our information systems and financial controls or to manage other factors necessary for us to
achieve our expansion objectives, our business, financial condition, operating results or cash flows could be materially adversely affected.

Our restaurant expansion strategy focuses primarily on further penetrating existing markets. This strategy can cause sales in some of our existing restaurants to decline.

In accordance with our expansion strategy, we intend to open new restaurants primarily in our existing markets. Since we typically draw customers from a
relatively small radius around each of our restaurants, the sales performance and customer counts for restaurants near the area in which a new restaurant opens may decline due to cannibalization of the existing restaurants customer base.

Our operations are susceptible to changes in food and supply costs, which could adversely affect our margins.

Our profitability depends, in part, on our ability to anticipate and react to changes in food and supply costs. Our centralized purchasing staff
negotiates prices for all of our ingredients and supplies through either contracts (terms of one month up to one year) or commodity pricing formulas. Our national master distributor delivers goods twice a week at a set, flat fee per case to all of
our restaurants. Our contract with our national master distributor is up for renewal in July 2008. Furthermore, various factors beyond our control, including adverse weather conditions and governmental regulations, could also cause our food and
supply costs to increase. We cannot predict whether we will be able to anticipate and react to changing food and supply costs by adjusting our purchasing practices. A failure to do so could adversely affect our operating results or cash flows.

Changes in consumer preferences or discretionary consumer spending or negative publicity could adversely impact our results.

Our restaurants feature pizzas, pastas, salads and appetizers in an upscale, family-friendly, casual environment. Our continued success
depends, in part, upon the popularity of these foods and this style of informal dining. Shifts in consumer preferences away from this cuisine or dining style could materially adversely affect our future profitability. Also, our success depends to a
significant extent on numerous factors affecting discretionary consumer spending, including economic conditions, disposable consumer income and consumer confidence. Adverse changes in these factors could reduce customer traffic or impose practical
limits on pricing, either of which could materially adversely affect our business, financial condition, operating results or cash flows. Like other restaurant chains, we can also be materially adversely affected by negative publicity concerning food
quality, illness, injury, publication of government or industry findings concerning food products served by us, or other health concerns or operating issues stemming from one restaurant or a limited number of restaurants.

Approximately forty percent of our U.S. based restaurants are located in California. As a result, we are highly sensitive to negative occurrences in
that state.

Together with our franchisees, we currently operate a total of 84 restaurants in California (77 are company-owned and 7 are
owned by franchisees). As a result, we are particularly susceptible to adverse trends and economic conditions in California. In addition, given our geographic concentration, negative publicity regarding



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any of our restaurants in California could have a material adverse effect on our business and operations, as could other regional occurrences such as local
strikes, earthquakes or other natural disasters.

Increases in the minimum wage may have a material adverse effect on our business and
financial results.

A number of our employees are subject to various minimum wage requirements. The federal minimum wage is currently
$5.85 and will be increased in the future. However, approximately 40% of our U.S. based restaurants are located in California where employees receive compensation equal to the California minimum wage, which rose from $6.75 in 2006 to $7.50 per hour
effective January 1, 2007 and $8.00 per hour effective January 1, 2008. During 2007, there were 24 other states that had state minimum wage increases in addition to California. Similar increases may be implemented in other jurisdictions in
which we operate or seek to operate. These minimum wage increases may have a material adverse effect on our business, financial condition, results of operations or cash flows.

Rising insurance costs could negatively impact profitability.

The rising cost of insurance (workers compensation insurance, general liability insurance, health insurance and directors and officers liability insurance) could have a negative impact on our profitability
if we are not able to negate the effect of such increases by continuing to improve our operating efficiencies.

Compliance with changing
regulation of corporate governance and public disclosure may result in additional expense.

Keeping abreast of, and in compliance with,
changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and Nasdaq Stock Market rules, has required an increased amount of management attention
and external resources. We remain committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may
result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

The restaurant industry is affected by litigation and publicity concerning food quality, health and other issues, which can cause customers to avoid our restaurants and result in liabilities.

We are sometimes the subject of complaints or litigation from customers or employees alleging illness, injury or other food quality, health or operational
concerns. Adverse publicity resulting from these allegations may materially adversely affect our restaurants, regardless of whether the allegations are valid or whether California Pizza Kitchen is liable. In fact, we are subject to the same risks of
adverse publicity resulting from these sorts of allegations even if the claim involves one of our franchisees or licensees. Further, employee claims against us based on, among other things, wage discrimination, harassment or wrongful termination may
divert financial and management resources that would otherwise be used to benefit the future performance of our operations. We have been subject to these employee claims before, and a significant increase in the number of these claims or any
increase in the number of successful claims could materially adversely affect our business, financial condition, operating results or cash flows. We also are subject to some states dram shop statutes. These statutes generally
provide a person injured by an intoxicated person with the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

Future changes in financial accounting standards may affect our reported results and/or reported results of operations.

A change in accounting standards can have a significant effect on our reported results and may affect our reporting of transactions before the change is
effective. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the questioning of current accounting practices may adversely affect our reported
financial results.



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Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

Our corporate headquarters are located in Los Angeles,
California. We occupy this facility under a lease, which was renewed effective September 1, 2002 and extends until August 2012. We lease substantially all of our restaurant facilities, although we own our restaurants in: Alpharetta, Georgia;
Grapevine, Texas; Scottsdale, Arizona; Schaumburg, Illinois; and one location in Atlanta, Georgia. A majority of our leases are for 10-year terms and include options to extend the terms. The majority of our leases also include tenant improvement
allowances, rent holidays, rent escalation clauses and/or contingent rent provisions.

Current Locations

As presented in the table below, as of March 13, 2008, we own, license or franchise 237 locations in 30 states, the District of Columbia and 8
foreign countries, of which 198 are company-owned and 39 operate under franchise or license arrangements. We franchise or license our concept to other restaurant operators including: HMSHost, which operates 16 CPK/ASAP restaurants; MGM Mirage, which
operates 1 full service restaurant in a Las Vegas casino; and five international franchisees which currently operate a total of 19 full service restaurants in China, Indonesia, Japan, Malaysia, Mexico, Philippines, Singapore and the South Korea. In
2007 we also introduced California Pizza Kitchen locations at three sports and entertainment venues which operate seasonally.



|                |  |                              |  |                                            |  |                           |  |                               |  |               
|--------------- |  | ---------------------------- |  | ------------------------------------------ |  | ------------------------- |  | ----------------------------- |  | --------------
|                |  | Company-OwnedRestaurants (1) |  | Franchised/LicensedFull ServiceRestaurants |  | FranchisedASAPRestaurants |  | Sports andEntertainmentVenues |  | TotalLocations
|Domestic        |  |                              |  |                                            |  |                           |  |                               |  |               
|Alabama         |  | 2                            |  |                                           |  |                          |  |                              |  | 2             
|Arizona         |  | 6                            |  |                                           |  | 1                         |  |                              |  | 7             
|California      |  | 77                           |  |                                           |  | 7                         |  | 3                             |  | 87            
|Colorado        |  | 6                            |  |                                           |  |                          |  |                              |  | 6             
|Connecticut     |  | 3                            |  |                                           |  |                          |  |                              |  | 3             
|Florida         |  | 13                           |  |                                           |  | 2                         |  |                              |  | 15            
|Georgia         |  | 5                            |  |                                           |  |                          |  |                              |  | 5             
|Hawaii          |  | 5                            |  |                                           |  |                          |  |                              |  | 5             
|Illinois (2)    |  | 11                           |  |                                           |  |                          |  |                              |  | 11            
|Kansas          |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Kentucky        |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Maryland        |  | 5                            |  |                                           |  |                          |  |                              |  | 5             
|Massachusetts   |  | 4                            |  |                                           |  |                          |  |                              |  | 4             
|Michigan        |  | 5                            |  |                                           |  |                          |  |                              |  | 5             
|Minnesota       |  | 3                            |  |                                           |  | 1                         |  |                              |  | 4             
|Missouri        |  | 5                            |  |                                           |  | 2                         |  |                              |  | 7             
|Nebraska        |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Nevada          |  | 2                            |  | 1                                          |  |                          |  |                              |  | 3             
|New Jersey      |  | 3                            |  |                                           |  |                          |  |                              |  | 3             
|New York        |  | 7                            |  |                                           |  |                          |  |                              |  | 7             
|North Carolina  |  | 3                            |  |                                           |  | 2                         |  |                              |  | 5             
|Ohio            |  | 3                            |  |                                           |  |                          |  |                              |  | 3             
|Oregon          |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Pennsylvania    |  | 2                            |  |                                           |  |                          |  |                              |  | 2             
|Tennessee       |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Texas           |  | 10                           |  |                                           |  |                          |  |                              |  | 10            
|Utah            |  | 2                            |  |                                           |  | 1                         |  |                              |  | 3             
|Virginia        |  | 6                            |  |                                           |  |                          |  |                              |  | 6             
|Washington      |  | 3                            |  |                                           |  |                          |  |                              |  | 3             
|Washington, D.C |  | 1                            |  |                                           |  |                          |  |                              |  | 1             
|Wisconsin       |  | 1                            |  |                                           |  |                          |  |                              |  | 1             



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|                            |  |                              |  |                                            |  |                           |  |                               |  |               
|--------------------------- |  | ---------------------------- |  | ------------------------------------------ |  | ------------------------- |  | ----------------------------- |  | --------------
|                            |  | Company-OwnedRestaurants (1) |  | Franchised/LicensedFull ServiceRestaurants |  | FranchisedASAPRestaurants |  | Sports andEntertainmentVenues |  | TotalLocations
|International               |  |                              |  |                                            |  |                           |  |                               |  |               
|Hong Kong, China            |  |                             |  | 4                                          |  |                          |  |                              |  | 4             
|Indonesia                   |  |                             |  | 1                                          |  |                          |  |                              |  | 1             
|Japan                       |  |                             |  | 2                                          |  |                          |  |                              |  | 2             
|Malaysia                    |  |                             |  | 1                                          |  |                          |  |                              |  | 1             
|Mexico                      |  |                             |  | 2                                          |  |                          |  |                              |  | 2             
|Philippines                 |  |                             |  | 6                                          |  |                          |  |                              |  | 6             
|Shanghai, China             |  |                             |  | 1                                          |  |                          |  |                              |  | 1             
|Singapore                   |  |                             |  | 1                                          |  |                          |  |                              |  | 1             
|South Korea                 |  |                             |  | 1                                          |  |                          |  |                              |  | 1             
|                            |  |                              |  |                                            |  |                           |  |                               |  |               
|Totals as of March 13, 2008 |  | 198                          |  | 20                                         |  | 16                        |  | 3                             |  | 237           
|                            |  |                              |  |                                            |  |                           |  |                               |  |               



|(1) | All of our company-owned restaurants are full service, except for 9 CPK/ASAP restaurants.
|--- | -----------------------------------------------------------------------------------------

|(2) | Includes one restaurant in the Chicago area in which a wholly-owned subsidiary is the general partner and owns approximately 70% of the total partnership interest.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3.    Legal Proceedings

On March 21, 2007, a class action lawsuit was filed
in the San Diego Superior Court against California Pizza Kitchen. The lawsuit was filed by a former restaurant server who purported to represent approximately 17,000 current and former non-exempt California employees. The lawsuit alleged violations
of state wage and hour laws involving meal and rest breaks, and sought an unspecified amount in damages. The amount of potential damages, if any, associated with the claim did not exceed 10% of the Companys current assets.

On March 6, 2008, the Company entered into a tentative settlement of all claims in action. The settlement will enable the Company to avoid lengthy,
burdensome litigation as well as substantial continuing legal and other administrative expenses. The Company does not admit any liability in connection with the settlement. The settlement, subject to final court approval, will result in the
dismissal of the lawsuits claims against the Company. Under the proposed settlement, class members can submit claims pursuant to a Court approved process whereby the Company would pay an amount not to exceed $3.2 million to settle claims
asserted on behalf of the class. The purported class representative alleges that there were violations of wage and hour laws related to meal and rest breaks. The Company believes that the actual number of violations, if any, were relatively low in
number and it believes that the relatively low actual number will be reflected in the number of individual claims. The Company believes this will result in a net payment less than the $3.2 million figure, however, the specific net figure cannot
be quantified at this time.

The Company has accrued a legal settlement reserve of $2.3 million based on an estimate of the maximum costs
that are expected to be incurred in connection with this case. The parties anticipate filing a motion in the Superior Court in the near future requesting approval of the proposed settlement. This is required before the settlement becomes effective
and final. The Company cannot provide any assurances that the Court will approve the proposed settlement.

We are also subject to certain
private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. Such claims typically involve claims from guests, employees and others related to operational issues common to the food service industry. A
number of such claims may exist at any given time. We could be affected by adverse publicity resulting from such allegations, regardless of whether such allegations are valid or whether we are determined to be liable. From time to time, we are also
involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks. We believe that the final disposition of such lawsuits and claims will not have a material adverse effect on our financial position, results of
operations or liquidity.

Item 4.    Submission of Matters to a Vote of Security Holders

None.



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##### Table of Contents

PART II.

Item 5.    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the Nasdaq National Market under the symbol CPKI. The following table sets forth, for the two most recent fiscal
years, the high and low sales prices as reported on the Nasdaq National Market. All prices and share count references reflect the effect of the June 19, 2007 3-for-2 stock split.



|               |  |      |       |     |   |      
|-------------- |  | ---- | ----- | --- | - | -----
|               |  | High |       | Low
|Fiscal 2006:   |  |      |       |     |   |      
|First Quarter  |  | $    | 23.00 |     | $ | 19.17
|Second Quarter |  | $    | 22.83 |     | $ | 17.24
|Third Quarter  |  | $    | 20.66 |     | $ | 16.70
|Fourth Quarter |  | $    | 22.27 |     | $ | 19.64
|Fiscal 2007:   |  |      |       |     |   |      
|First Quarter  |  | $    | 24.40 |     | $ | 20.67
|Second Quarter |  | $    | 25.23 |     | $ | 20.58
|Third Quarter  |  | $    | 22.59 |     | $ | 17.36
|Fourth Quarter |  | $    | 21.00 |     | $ | 14.28

As of March 13, 2008, there were approximately 144 holders of record of our common stock. On
March 13, 2008, the last sale price reported on the Nasdaq National Market for our common stock was $13.14 per share.



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Performance Graph

Set forth below is a line graph comparing the annual percentage change in the cumulative total return of our common stock with the cumulative total return of (a) the Nasdaq National Market Composite and
(b) the S&P Smallcap Restaurant Index for the period commencing August 2, 2000 (the date of our initial public offering) through December 28, 2007, the last trading day before our fiscal year end December 30, 2007.

LOGO

COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE

COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS



|                             |  |                    |  |           |  |            |  |           |  |            |  |          
|---------------------------- |  | ------------------ |  | --------- |  | ---------- |  | --------- |  | ---------- |  | ---------
|                             |  | FISCAL YEAR ENDING
|COMPANY/INDEX/MARKET         |  | 12/27/2002         |  | 6/27/2003 |  | 12/26/2003 |  | 6/25/2004 |  | 12/31/2004 |  | 7/01/2005
|California Pizza Kitchen Inc |  | 100.00             |  | 84.91     |  | 77.45      |  | 76.15     |  | 90.84      |  | 104.86   
|S&P Smallcap 600 Restaurants |  | 100.00             |  | 124.39    |  | 133.56     |  | 139.23    |  | 164.43     |  | 176.57   
|NASDAQ Market Index          |  | 100.00             |  | 74.07     |  | 68.51      |  | 82.20     |  | 101.74     |  | 104.52   
|                             | 
|                             |  | FISCAL YEAR ENDING
|COMPANY/INDEX/MARKET         |  | 12/30/2005         |  | 6/30/2006 |  | 12/29/2006 |  | 6/29/2007 |  | 12/28/2007 |  |          
|California Pizza Kitchen Inc |  | 126.26             |  | 108.53    |  | 131.56     |  | 127.19    |  | 90.95      |  |          
|S&P Smallcap 600 Restaurants |  | 168.57             |  | 169.22    |  | 187.50     |  | 178.08    |  | 136.95     |  |          
|NASDAQ Market Index          |  | 111.49             |  | 106.28    |  | 114.18     |  | 113.04    |  | 121.96     |  |          

Dividend Policy

We currently retain all future earnings for the operation and expansion of our business. In June 2006 we entered into a First Amendment to the Amended and Restated Credit Agreement (the Amendment) with
Bank of America, N.A. to amend the Amended and Restated Credit Agreement dated June 30, 2004. The Amendment increased our revolving line of credit from $20.0 million to $75.0 million and expires on June 30, 2009. Our credit agreement with
Bank of America, N.A. currently prohibits us from declaring or paying any dividends or other distributions on any shares of our capital stock other than dividends payable solely in shares of capital stock or the stock of our subsidiaries unless we
have a minimum liquidity of $10 million. Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions
contained in our credit agreement with Bank of America, N.A., or other agreements, and other factors deemed relevant by our Board.



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Equity Compensation Plan Information

Information about California Pizza Kitchens equity compensation plans at December 30, 2007 was as follows:



|                                                           |  |                                                                                         |  |                                                                          |       |                                                                                           |          
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ----- | ----------------------------------------------------------------------------------------- | ---------
|Plan Category                                              |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights |  | Weighted-averageexercise price ofoutstanding options,warrants and rights |       | Number of securitiesremaining available forfuture issuance underequity compensation plans
|                                                           |  |                                                                                        
|Equity compensation plans approved by security holders (1) |  | 5,546,657                                                                               |  | $                                                                        | 16.37 |                                                                                           | 1,110,850
|Equity compensation plans not approved by security holders |  |                                                                                        |  |                                                                          |      |                                                                                           |         
|                                                           |  |                                                                                         |  |                                                                          |       |                                                                                           |          
|Total                                                      |  | 5,546,657                                                                               |  | $                                                                        | 16.37 |                                                                                           | 1,110,850
|                                                           |  |                                                                                         |  |                                                                          |       |                                                                                           |          



|(1) | Consists of two California Pizza Kitchen stock plans: 1998 Stock-Based Incentive Compensation Plan and 2004 Omnibus Incentive Compensation Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On August 16, 2004, the Board of Directors authorized a stock repurchase program (August 2004 Program) to acquire the Companys common stock from time to time in the open market and through
privately negotiated transactions. Under the August 2004 Program, up to $20.0 million of the Companys common stock could be reacquired from time to time over a 24-month period.

On June 14, 2006, the Board of Directors authorized an additional stock repurchase program (June 2006 Program, and together with the
August 2004 Program, the Programs) to acquire the Companys common stock from time to time in the open market and through privately negotiated transactions. Under the June 2006 Program, up to $30.0 million of the Companys
common stock could be reacquired from time to time over a 24-month period.

During fiscal 2007, 876,613 shares were repurchased under the
Programs for an aggregate purchase price of $16.8 million. The average purchase price per share for fiscal 2007 was $19.13. No shares were repurchased during the fourth quarter of 2007.

Additionally, on August 7, 2007, the Board of Directors authorized a stock repurchase program (August 2007 Program) to acquire the
Companys common stock from time to time in the open market and through privately negotiated transactions. Under the August 2007 Program, up to $50.0 million of the Companys common stock could be reacquired from time to time over a
24-month period. The full $50.0 million remained available under the August 2007 Program for stock repurchases as of December 30, 2007.

Item 6.    Selected Financial Data

The following selected consolidated financial and
operating data for each of the five fiscal years in the period ended December 30, 2007 are derived from our audited consolidated financial statements. This selected consolidated financial and operating data should be read in conjunction with
the consolidated financial statements and accompanying notes, Managements Discussion and Analysis of Financial Condition and Results of Operations and other financial information included elsewhere in this report.



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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

(dollars in thousands, except per share data, operating data and footnotes)



|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------- |  | ----------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                            |  | Fiscal Year |        
|                                                            |  | 2007        |         |   | 2006 |   |         | 2005 |  |   | 2004    |   |  | 2003 |        
|Statement of Operations Data:                               |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Revenues:                                                   |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Restaurant sales                                            |  | $           | 624,324 |   |      | $ | 547,968 |      |  | $ | 474,738 |   |  | $    | 418,799 |   |  | $ | 356,260 |  
|Royalties from Kraft licensing agreement                    |  |             | 4,710   |   |      |   | 3,691   |      |  |   | 2,028   |   |  |      | 1,219   |   |  |   | 1,156   |  
|Domestic franchise revenues                                 |  |             | 2,460   |   |      |   | 2,138   |      |  |   | 2,083   |   |  |      | 1,865   |   |  |   | 1,931   |  
|International franchise revenues                            |  |             | 1,390   |   |      |   | 804     |      |  |   | 750     |   |  |      | 569     |   |  |   | 540     |  
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total revenues                                              |  |             | 632,884 |   |      |   | 554,601 |      |  |   | 479,599 |   |  |      | 422,452 |   |  |   | 359,887 |  
|Costs and expenses:                                         |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Food, beverage and paper supplies                           |  |             | 153,954 |   |      |   | 135,848 |      |  |   | 118,480 |   |  |      | 103,813 |   |  |   | 87,806  |  
|Labor (1)                                                   |  |             | 228,664 |   |      |   | 199,744 |      |  |   | 173,751 |   |  |      | 152,949 |   |  |   | 129,702 |  
|Direct operating and occupancy                              |  |             | 124,476 |   |      |   | 108,558 |      |  |   | 92,827  |   |  |      | 83,054  |   |  |   | 70,273  |  
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cost of sales                                               |  |             | 507,094 |   |      |   | 444,150 |      |  |   | 385,058 |   |  |      | 339,816 |   |  |   | 287,781 |  
|General and administrative (2)                              |  |             | 48,391  |   |      |   | 43,320  |      |  |   | 36,298  |   |  |      | 28,794  |   |  |   | 21,488  |  
|Depreciation and amortization                               |  |             | 37,146  |   |      |   | 29,489  |      |  |   | 25,440  |   |  |      | 23,975  |   |  |   | 20,714  |  
|Pre-opening costs                                           |  |             | 7,167   |   |      |   | 6,964   |      |  |   | 4,051   |   |  |      | 737     |   |  |   | 4,147   |  
|Severance charges (3)                                       |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | 1,221   |  
|Loss on impairment of property and equipment                |  |             |        |   |      |   |        |      |  |   | 1,160   |   |  |      |        |   |  |   | 18,984  |  
|Store closure costs                                         |  |             | 9,269   |   |      |   | 707     |      |  |   | 152     |   |  |      | 2,700   |   |  |   |        |  
|Legal settlement reserve                                    |  |             | 2,300   |   |      |   |        |      |  |   | 600     |   |  |      | 1,333   |   |  |   |        |  
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating income                                            |  |             | 21,517  |   |      |   | 29,971  |      |  |   | 26,840  |   |  |      | 25,097  |   |  |   | 5,552   |  
|Other (expense) income:                                     |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Interest expense                                            |  |             | (362    | ) |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Interest income                                             |  |             | 289     |   |      |   | 718     |      |  |   | 739     |   |  |      | 571     |   |  |   | 317     |  
|Other income                                                |  |             |        |   |      |   |        |      |  |   | 1,105   |   |  |      |        |   |  |   |        |  
|Equity in loss of unconsolidated joint venture              |  |             |        |   |      |   |        |      |  |   | (22     | ) |  |      | (143    | ) |  |   | (349    | )
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total other (expense) income                                |  |             | (73     | ) |      |   | 718     |      |  |   | 1,822   |   |  |      | 428     |   |  |   | (32     | )
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income tax provision                          |  |             | 21,444  |   |      |   | 30,689  |      |  |   | 28,662  |   |  |      | 25,525  |   |  |   | 5,520   |  
|Income tax provision (benefit)                              |  |             | 6,660   |   |      |   | 9,689   |      |  |   | 9,172   |   |  |      | 7,709   |   |  |   | (82     | )
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                  |  | $           | 14,784  |   |      | $ | 21,000  |      |  | $ | 19,490  |   |  | $    | 17,816  |   |  | $ | 5,602   |  
|                                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income per common share (4):                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic                                                       |  | $           | 0.51    |   |      | $ | 0.72    |      |  | $ | 0.67    |   |  | $    | 0.62    |   |  | $ | 0.20    |  
|Diluted                                                     |  | $           | 0.50    |   |      | $ | 0.70    |      |  | $ | 0.66    |   |  | $    | 0.62    |   |  | $ | 0.20    |  
|Shares used in calculating net income per common share (4): |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic                                                       |  |             | 28,843  |   |      |   | 29,118  |      |  |   | 29,068  |   |  |      | 28,687  |   |  |   | 28,300  |  
|Diluted                                                     |  |             | 29,609  |   |      |   | 29,818  |      |  |   | 29,607  |   |  |      | 28,900  |   |  |   | 28,541  |  
|Selected Operating Data:                                    |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Locations open at end of year                               |  |             | 231     |   |      |   | 205     |      |  |   | 188     |   |  |      | 171     |   |  |   | 168     |  
|Company-owned restaurants open at end of year               |  |             | 193     |   |      |   | 176     |      |  |   | 157     |   |  |      | 141     |   |  |   | 137     |  
|Average weekly company-owned full service restaurant sales  |  | $           | 67,461  |   |      | $ | 65,406  |      |  | $ | 62,383  |   |  | $    | 57,509  |   |  | $ | 54,896  |  
|18-month comparable company-owned restaurant sales increase |  |             | 3.8     | % |      |   | 5.9     | %    |  |   | 7.5     | % |  |      | 8.0     | % |  |   | 3.4     | %
|                                                            | 
|                                                            |  | Fiscal Year |        
|                                                            |  | 2007        |         |   | 2006 |   |         | 2005 |  |   | 2004    |   |  | 2003 |        
|Selected Balance Sheet Data:                                |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                                   |  | $           | 10,795  |   |      | $ | 8,187   |      |  | $ | 11,272  |   |  | $    | 17,719  |   |  | $ | 15,877  |  
|Marketable securities                                       |  |             |        |   |      |   |        |      |  |   | 11,408  |   |  |      | 26,415  |   |  |   | 18,904  |  
|Total assets                                                |  |             | 367,128 |   |      |   | 310,513 |      |  |   | 274,254 |   |  |      | 241,804 |   |  |   | 216,175 |  
|Total debt, including current portion                       |  |             | 21,000  |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Stockholders equity                                        |  |             | 218,137 |   |      |   | 208,343 |      |  |   | 197,336 |   |  |      | 167,035 |   |  |   | 144,210 |  



|(1) |  | Labor expense for fiscal years 2007 and 2006 include approximately $849,000 and $917,000 of stock-based compensation, respectively, compared to none in each of the fiscal years
2005, 2004 and 2003.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | General and administrative expense for fiscal years 2007, 2006 and 2005 include approximately $5.8 million, $5.0 million and $3.6 million of stock-based compensation, respectively,
compared to none in each of the fiscal years 2004 and 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Severance charges of $1.2 million represent payments related to the resignations of our former President and Chief Executive Officer and our former Senior Vice President and Chief
Development Officer under the terms of their separation agreements.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | See notes 2 and 8 of notes to audited consolidated financial statements for an explanation of the method used to calculate the net income per common share and shares used in
computing net income per common share, basic and diluted. The Company effected a 3-for-2 stock split on June 19, 2007. All references to shares have been adjusted accordingly.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Item 7.    Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview

As of March 13, 2008, we own, license or franchise 237 locations in 30 states, the District of Columbia and 8
foreign countries, of which 198 are company-owned and operate under the names California Pizza Kitchen, California Pizza Kitchen ASAP, and LA Food Show and the remaining 39 of which operate under franchise or
license arrangements. During our 23 years of operating history, we believe we have developed strong brand awareness and demonstrated the appeal of our concept in a wide variety of geographic areas. Our concept was, and still remains, to take our
customers favorite food cravings and put them on a pizzato figuratively put the world on a pizza.

We opened our
first casual dining restaurant in 1985 in Beverly Hills, California and grew steadily to 25 restaurants by early 1992. Our concept, with its signature line of innovative, premium pizzas, open-flame ovens in exhibition-style kitchens and excellent
guest service, attracted PepsiCo, which bought a controlling interest in our Company in May 1992.

During the approximate five-year period
when PepsiCo was our controlling stockholder, we opened 60 restaurants, 17 of which were subsequently closed. We experimented with different locations and different restaurant sizes, ranging from 3,600 square feet to more than 11,000 square feet.
Our rapid expansion strained our infrastructure, resulted in a variety of management and operational changes, diverted our attention from the execution of our concept and led to disappointing operating results and financial performance, including a
decline in comparable restaurant sales in 1996.

At the end of 1996, PepsiCo concluded that it would sell or otherwise divest all of its
restaurant businesses, including California Pizza Kitchen. In September 1997, we consummated a series of transactions to effect a merger and leveraged recapitalization through which an investor group led by Bruckmann, Rosser, Sherrill &
Co., L.P. acquired PepsiCos interest in our Company.

In 1998, we instituted an accelerated growth plan, focusing largely on further
penetrating our existing markets. Between January 1998 and December 2003, we opened 71 company-owned, full service restaurants and 3 CPK/ASAP restaurants.

Following rapid expansion in underdeveloped markets, the Board of Directors asked Richard Rosenfield and Larry Flax, co-founders and co-Chairmen of the Board, to reassume the responsibilities of co-CEOs. In connection
with this management change, we reviewed our restaurant portfolio, as well as our operations and growth strategy, and decided to slow down our new restaurant opening schedule, emphasizing quality and profitability beginning in fiscal 2004.

We introduced our new prototype full service restaurant in fiscal 2004, which is larger than our former prototype. The new prototype is
approximately 5,800 square feet, has approximately 200 indoor and outdoor seats and has been designed to create a more comfortable experience that will enhance our dinner business. Total cash investment per full service restaurant in 2007 was $2.8
million for inline restaurants and $3.2 million for freestanding restaurants (which has not been reduced by any tenant improvement allowances). Pre-opening expenses for each of these new restaurants was approximately $330,000 to $350,000.

It is common in the restaurant industry for new restaurant locations to initially open with sales volumes well in excess of their
sustainable run-rate levels. This initial honeymoon effect usually results from promotional and other consumer awareness activities that generate abnormally high customer traffic for our restaurants. During the several months following
the opening of a new restaurant, customer traffic generally settles into its normal pattern, resulting in sales volumes that gradually adjust downward to their expected sustained run-rate level. Additionally, our new restaurants usually require a
90- to 120-day period after opening to reach their targeted restaurant-level operating margin due to cost of sales and labor inefficiencies commonly associated with



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##### Table of Contents

new restaurants. As a result, a significant number of restaurant openings in any single fiscal quarter, accompanied with their associated pre-opening costs,
could have a significant impact on our consolidated results of operations for that period. Therefore, our results of operations for any single fiscal quarter are not necessarily indicative of the results to be expected for any other fiscal quarter
or for a full fiscal year.

Our revenues are comprised of restaurant sales, franchise royalties and other income. Our restaurant sales are
comprised almost entirely of food and beverage sales. Our franchise royalties and other revenues consist primarily of monthly royalty income, initial franchise fees and license fees from our trademark license agreement with Kraft.

Cost of sales is comprised of food, beverage and paper supplies, labor, and direct operating and occupancy expenses. The components of food, beverage and
paper supplies are variable and increase with sales volume. Labor costs include direct hourly and management wages, stock-based compensation, bonuses and taxes and benefits for restaurant employees. Direct operating and occupancy costs include
restaurant supplies, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. Direct operating and occupancy costs generally increase
with sales volume but decline as a percentage of restaurant sales.

General and administrative costs include all corporate and
administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include management, supervisory and staff salaries and related employee benefits, stock-based
compensation, travel and relocation costs, information systems, training, corporate rent and professional and consulting fees. Depreciation and amortization principally includes depreciation on capital expenditures for restaurants. Pre-opening
costs, which are expensed as incurred, currently consist of rent from the date construction begins through the restaurant opening date, the costs of hiring and training the initial work force, travel, the cost of food used in training, marketing
costs, the cost of the initial stocking of operating supplies and other direct costs related to the opening of a restaurant.

In
calculating comparable company-owned restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. As of December 30, 2007 we had 160 company-owned restaurants that met this criterion.



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##### Table of Contents

Results of Operations

Operating results for fiscal years 2007, 2006 and 2005 are expressed as a percentage of revenues below, except for cost of sales, which is expressed as a percentage of restaurant sales:



|                                             |  |       |   |  |       |   |  |       |  
|-------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                             |  | 2007  |   |  | 2006  |   |  | 2005  |  
|Statement of Operations Data:                |  |       |   |  |       |   |  |       |  
|Revenues:                                    |  |       |   |  |       |   |  |       |  
|Restaurant sales                             |  | 98.6  | % |  | 98.8  | % |  | 99.0  | %
|Royalties from Kraft licensing agreement     |  | 0.8   |   |  | 0.7   |   |  | 0.4   |  
|Domestic franchise revenues                  |  | 0.4   |   |  | 0.4   |   |  | 0.4   |  
|International franchise revenues             |  | 0.2   |   |  | 0.1   |   |  | 0.2   |  
|                                             |  |       |   |  |       |   |  |       |  
|Total revenues                               |  | 100.0 |   |  | 100.0 |   |  | 100.0 |  
|Costs and expenses:                          |  |       |   |  |       |   |  |       |  
|Food, beverage and paper supplies            |  | 24.7  |   |  | 24.8  |   |  | 25.0  |  
|Labor (1)                                    |  | 36.6  |   |  | 36.5  |   |  | 36.6  |  
|Direct operating and occupancy               |  | 19.9  |   |  | 19.8  |   |  | 19.5  |  
|                                             |  |       |   |  |       |   |  |       |  
|Cost of sales                                |  | 81.2  |   |  | 81.1  |   |  | 81.1  |  
|General and administrative (2)               |  | 7.6   |   |  | 7.8   |   |  | 7.6   |  
|Depreciation and amortization                |  | 5.9   |   |  | 5.3   |   |  | 5.3   |  
|Pre-opening costs                            |  | 1.1   |   |  | 1.3   |   |  | 0.8   |  
|Loss on impairment of property and equipment |  |      |   |  |      |   |  | 0.2   |  
|Store closure costs                          |  | 1.5   |   |  | 0.1   |   |  |      |  
|Legal settlement reserve                     |  | 0.4   |   |  |      |   |  | 0.1   |  
|                                             |  |       |   |  |       |   |  |       |  
|Operating income                             |  | 3.4   |   |  | 5.4   |   |  | 5.6   |  
|Other (expense) income:                      |  |       |   |  |       |   |  |       |  
|Interest expense                             |  |      |   |  |      |   |  |      |  
|Interest income                              |  |      |   |  | 0.1   |   |  | 0.2   |  
|Other income                                 |  |      |   |  |      |   |  | 0.2   |  
|                                             |  |       |   |  |       |   |  |       |  
|Total other income                           |  |      |   |  | 0.1   |   |  | 0.4   |  
|                                             |  |       |   |  |       |   |  |       |  
|Income before income tax provision           |  | 3.4   |   |  | 5.5   |   |  | 6.0   |  
|Income tax provision                         |  | 1.1   |   |  | 1.7   |   |  | 1.9   |  
|                                             |  |       |   |  |       |   |  |       |  
|Net income                                   |  | 2.3   | % |  | 3.8   | % |  | 4.1   | %
|                                             |  |       |   |  |       |   |  |       |  



|(1) | Labor percentage includes approximately 10 and 20 basis points of stock-based compensation in fiscal years 2007 and 2006, respectively, compared to none in fiscal year 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | General and administrative percentage includes approximately 90 basis points of stock-based compensation in each of fiscal years 2007 and 2006 and 80 basis points of stock-based
compensation in fiscal year 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2007 Compared to 2006

Total Revenues.    Total revenues increased by $78.3 million, or 14.1%, to $632.9 million in 2007 from $554.6 million in 2006 due to a $76.3 million increase in restaurant sales and a $2.0
million increase in franchise and other revenues. The increase in restaurant sales was due to a 3.1% increase in weekly sales averages from our full service restaurants, $16.8 million in sales derived from our CPK/ASAP restaurants and $4.3 million
in sales derived from LA Food Show. The 18-month comparable base restaurant increase was 3.8%, which was driven by a 4.2% increase in pricing, 0.2% increase in mix and a 0.6% decrease in guest counts. The increase in franchise and other revenues was
primarily due to increased royalties from Krafts distribution of our frozen pizza. Royalties from our Kraft licensing agreement increased 27.0% to $4.7 million in 2007 from $3.7 million in 2006. Domestic franchise revenues increased 19.0% to
$2.5 million in 2007 from $2.1 million and international franchise revenues increased 75.0% to $1.4 million in 2007 from $0.8 million in 2006.



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Food, beverage and paper supplies.    Food, beverage and paper supplies
increased by $18.2 million, or 13.4%, to $154.0 million in 2007 from $135.8 million in 2006. Food, beverage and paper supplies as a percentage of restaurant sales decreased to 24.7% in 2007 from 24.8% in the prior year. The decrease was primarily
due to lower meat, grocery and produce costs partially offset by higher dairy costs and fuel surcharges.

Labor.    Labor increased by $29.0 million, or 14.5%, to $228.7 million in 2007 from $199.7 million in 2006. As a percentage of restaurant sales, labor increased to 36.6% in 2007 from 36.5% in the prior year. The
increase in labor as a percentage of restaurant sales was primarily due to minimum wage increases across our hourly labor base from over 25 states. Labor costs in 2007 also included $0.8 million of stock-based compensation expense in accordance with
Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment (SFAS 123R) compared to $0.9 million in 2006.

Direct operating and occupancy.    Direct operating and occupancy increased by $15.9 million, or 14.6%, to $124.5 million in 2007 from $108.6 million in 2006. Direct operating and occupancy
as a percentage of restaurant sales increased to 19.9% in 2007 from 19.8% in the prior year. The dollar increase in direct operating and occupancy expenses was primarily due to increased rent expense, common area maintenance charges, utilities,
credit card charges and distribution fees associated with gift card sales through non-store channels.

General and
administrative.    General and administrative costs increased by $5.1 million, or 11.8%, to $48.4 million in 2007 from $43.3 million in 2006. General and administrative costs as a percentage of total revenue decreased to 7.6%
in 2007 from 7.8% in the prior year. The dollar increase in general and administrative expenses was primarily a result of additional compensation expense, including stock-based compensation, additional travel expenses to support restaurant
operations and increased consulting fees. General and administrative expenses in 2007 also included $5.8 million of stock-based compensation expense in accordance with SFAS 123R compared to $5.0 million of stock-based compensation expense in 2006.

Depreciation and amortization.    Depreciation and amortization increased by $7.6 million, or 25.8%, to $37.1
million in 2007 from $29.5 million in 2006. The increase in 2007 was primarily due to the addition of 17 full service restaurants and 1 CPK/ASAP in the fiscal year. We added 16 full service restaurants and four CPK/ASAPs in 2006.

Pre-opening costs.    Pre-opening costs increased by $0.2 million to $7.2 million in 2007 from $7.0 million in 2006. The
increase was primarily due to the 17 full service restaurants and 1 CPK/ASAPs that opened in 2007 compared to the 16 full service restaurants and 4 CPK/ASAP restaurants that opened in 2006.

Store closure costs.    We incurred store closure costs of $9.3 million in 2007 compared to $707,000 in 2006. Store closure
costs in 2007 related to early termination costs that included lease buyouts and construction write-offs for five CPK/ASAPs. Store closure costs in 2006 related to costs incurred to close one full service restaurant in the last period of 2006.

Legal settlement reserve.We incurred legal settlement reserve expenses of $2.3 million in 2007 compared to
none in 2006. The $2.3 million incurred in 2007 relates to anticipated costs associated with a meal break class-action lawsuit filed against us in March 2007.

Interest expense.    Interest expense was $362,000 in 2007 compared to none in 2006. Interest expense primarily relates to short-term borrowings against our line of credit. We did not borrow
against our line of credit in fiscal 2006.

Interest income.    Interest income decreased by $429,000 to
$289,000 in 2007 from $718,000 in 2006. The decrease was a result of lower cash balances in 2007 from 2006.



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##### Table of Contents

Income tax provision.    The effective income tax rate was 31.1% for 2007
compared to 31.6% for 2006. The tax rate of 31.1% for fiscal year 2007 resulted primarily from an increase in business tax credits offset by the effects of stock-based compensation expense and other operating activity.

Net income.    Net income decreased by $6.2 million to $14.8 million in 2007 from $21.0 million in 2006. Net income as a
percentage of revenues decreased to 2.3% in 2007 from 3.8% in 2006. The decrease as a percentage of revenues was primarily due to increased store closure costs and depreciation and amortization.

2006 Compared to 2005

Total
Revenues.    Total revenues increased by $75.0 million, or 15.6%, to $554.6 million in 2006 from $479.6 million in 2005 due to a $73.3 million increase in restaurant sales and a $1.7 million increase in franchise and other
revenues. The increase in restaurant sales was due to a 4.8% increase in weekly sales averages from our full service restaurants, $11.4 million in sales derived from our CPK/ASAP restaurants and $4.0 million in sales derived from LA Food Show. The
18-month comparable base restaurant increase was 5.9%, which was driven by a 2.2% increase in positive mix and customer counts and a 3.7% increase in pricing. The increase in franchise and other revenues was primarily due to increased royalties from
Krafts distribution of our frozen pizza.

Food, beverage and paper supplies.    Food, beverage and paper
supplies increased by $17.3 million, or 14.6%, to $135.8 million in 2006 from $118.5 million in 2005. Food, beverage and paper supplies as a percentage of restaurant sales decreased to 24.8% in 2006 from 25.0% in the prior year. The decrease was
primarily due to lower dairy prices offset by higher produce costs.

Labor.    Labor increased by $25.9 million,
or 14.9%, to $199.7 million in 2006 from $173.8 million in 2005. As a percentage of restaurant sales, labor decreased to 36.5% in 2006 from 36.6% in the prior year. The decrease in labor as a percentage of restaurant sales was primarily due to lower
hourly labor costs offset by increased management labor costs. 2006 labor costs also included $0.9 million of stock-based compensation expense in accordance with SFAS 123R compared to none in 2005.

Direct operating and occupancy.    Direct operating and occupancy increased by $15.8 million, or 17.0%, to $108.6 million in
2006 from $92.8 million in 2005. Direct operating and occupancy as a percentage of restaurant sales increased to 19.8% in 2006 from 19.5% in the prior year. The increase in direct operating and occupancy expenses as a percentage of restaurant sales
was primarily due to increased utility, repair and maintenance charges, common area maintenance charges and percentage rent.

General
and administrative.    General and administrative costs increased by $7.0 million, or 19.3%, to $43.3 million in 2006 from $36.3 million in 2005. General and administrative costs as a percentage of total revenue increased to
7.8% in 2006 from 7.6% in the prior year. The dollar increase in general and administrative expenses was primarily a result of $5.0 million of stock-based compensation expense in accordance with SFAS 123R and additional personnel to support
restaurant operations.

Depreciation and amortization.    Depreciation and amortization increased by $4.1
million, or 16.1%, to $29.5 million in 2006 from $25.4 million in 2005. The increase in 2006 was primarily due to the addition of 16 full service restaurants and four CPK/ASAPs in the fiscal year.

Pre-opening costs.    Pre-opening costs increased by $2.9 million to $7.0 million in 2006 from $4.1 million in 2005. The
increase was due to the 16 full service restaurants and four CPK/ASAP restaurants that opened in 2006 compared to the 15 full service restaurants and two CPK/ASAP restaurants that opened in 2005. Pre-opening costs also increased by $1.5 million due
to the impact of Staff Position No. FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period (FSP 13-1).



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Loss on impairment of property and equipment.    We had no loss on impairment
of property and equipment in 2006 compared to $1.2 million in 2005. Loss on impairment of property and equipment of $1.2 million in 2005 primarily represents the impairment charge for one company-owned restaurant, in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).

Store closure
costs.    We incurred store closure costs of $707,000 in 2006 compared to $152,000 in 2005. Store closure costs in 2006 related to costs incurred to close one store in the last period of 2006. Store closure costs incurred in
2005 related to estimated costs to close one restaurant in the last period of 2005.

Legal settlement
reserve.    We had no legal settlement reserve expenses in 2006 compared to $600,000 in 2005. The $600,000 incurred in 2005 related to a potential class-action lawsuit filed in November 2005.

Interest income.    Interest income decreased by $21,000 to $718,000 in 2006 from $739,000 in 2005. The decrease was a result
of lower cash balances in 2006 offset by higher interest rates.

Other income.    We did not have other income
in 2006 compared to $1.1 million in 2005. Other income of $1.1 million in 2005 consisted of income realized on unredeemed gift certificates.

Income tax provision.    The effective income tax rate was 31.6% for 2006 compared to 32.0% for 2005. The tax rate of 31.6% for fiscal year 2006 resulted primarily from an increase in general business tax credits
related to restaurant openings in 2006.

Net income.    Net income increased by $1.5 million, or 7.7%, to $21.0
million in 2006 from $19.5 million in 2005. Net income as a percentage of revenues decreased to 3.8% in 2006 from 4.1% in 2005. The decrease as a percentage of revenues was primarily due to $5.9 million of stock-based compensation charges in 2006
and increased pre-opening expenses.

Potential Fluctuations in Quarterly Results and Seasonality

Our quarterly operating results may fluctuate significantly as a result of a variety of factors, including the timing of new restaurant openings and
related expenses, profitability of new restaurants, increases or decreases in comparable restaurant sales, general economic conditions, consumer confidence in the economy, changes in consumer preferences, competitive factors, changes in food costs,
changes in labor costs, war and weather conditions. In the past we have experienced significant variability in pre-opening costs from quarter to quarter. These fluctuations are primarily a function of the timing of restaurant openings. We typically
incur the most significant portion of pre-opening costs associated with a given restaurant in the month of opening. In addition, our experience to date has been that labor and direct operating and occupancy costs associated with a newly opened
restaurant during the first three to four months of operation are often materially greater than what will be expected after that time, both in aggregate dollars and as a percentage of restaurant sales. Accordingly, the number and timing of new
restaurant openings in any quarter has had, and is expected to continue to have, a significant impact on quarterly pre-opening costs, labor and direct operating and occupancy costs.

Our business is also subject to seasonal fluctuations. Historically, sales in most of our restaurants have been higher during the summer months and
winter holiday season. As a result, we expect our highest earnings to occur in those periods. As a result of all of these factors, results for any one quarter are not necessarily indicative of the results to be expected for any other quarter or for
any full year.

Liquidity and Capital Resources

Prior to 2007, we funded our capital requirements primarily through cash flow from operations. In 2007, we supplemented this utilizing our line of credit. In 2007, net cash flow provided by operating activities was $77.1 million compared to
$65.5 million in 2006 and $41.9 million in 2005.



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Net cash flow provided by operating activities exceeded net income for 2007 primarily due to the effects
of depreciation and amortization, non-cash compensation charges, store closure costs and deferred rent credits partially offset by net changes in operating assets and liabilities and net changes in net deferred tax assets. The net change in
operating assets and liabilities in 2007 was primarily due to increases in accrued and other liabilities partially offset by a decrease in other receivables and amortization of deferred rent credits.

We use working capital to fund the development and construction of new restaurants and remodel our existing restaurants. Net cash used in investing
activities was $83.4 million in 2007. We opened 17 full service restaurants and 1 CPK/ASAP restaurant in 2007. Investing activities consisted of capital expenditures of $83.4 million in 2007, which primarily resulted from $68.5 million spent on new
restaurants and $14.9 million spent on capitalized costs and remodels.

Net cash provided by financing activities was $8.9 million in 2007
and consisted of short term borrowings, employee common stock option exercises purchases under our employee stock purchase plan and stock repurchases.

On August 16, 2004, the Board of Directors authorized a stock repurchase program (August 2004 Program) to acquire the Companys common stock from time to time in the open market and through
privately negotiated transactions. Under the August 2004 Program, up to $20.0 million of the Companys common stock could be reacquired from time to time over a 24-month period.

On June 14, 2006, the Board of Directors authorized an additional stock repurchase program (June 2006 Program, and together with the
August 2004 Program, the Programs) to acquire the Companys common stock from time to time in the open market and through privately negotiated transactions. Under the June 2006 Program, up to $30.0 million of the Companys
common stock could be reacquired from time to time over a 24-month period.

During fiscal 2007, 876,613 shares were repurchased under the
Programs for an aggregate purchase price of $16.8 million. The average purchase price per share for fiscal 2007 was $19.13.

Additionally, on August 7, 2007, the Board of Directors authorized a stock repurchase program (August 2007 Program) to acquire the Companys common stock from time to time in the open market and through privately
negotiated transactions. Under the August 2007 Program, up to $50.0 million of the Companys common stock could be reacquired from time to time over a 24-month period. The full $50.0 million remained available under the August 2007 Program for
stock repurchases as of December 30, 2007.

As of December 30, 2007 we have a $75.0 million revolving line of credit. The line of
credit expires on June 30, 2009 and bears interest at either the bank base rate minus 0.75% or LIBOR plus 0.80%. As of December 30, 2007, we had borrowings outstanding under the credit facility totaling $21.0 million with an average
interest rate of 5.76%. Availability under the credit facility is also reduced by outstanding letters of credit, which totaled $6.1 million as of December 30, 2007. Available borrowings under the line of credit were $47.9 million as of
December 30, 2007. In addition, the credit facility includes financial and non-financial covenants, with which we were in full compliance as of December 30, 2007 and as of the date of this report.

Our capital requirements, including costs related to opening additional restaurants, have been and will continue to be significant. We anticipate total
capital expenditures of approximately $62.0 million in 2008, with the majority of expenditures associated with 12 to 13 full service restaurant openings. We expect to fund all capital requirements during 2008 using operating cash flow and funds from
our revolving line of credit. Additionally, we anticipate pre-opening costs per restaurant to approximate $330,000 to $350,000 for a full service restaurant. Pre-opening costs include rent expense incurred from the time the restaurant build-out
period is complete, and the restaurant is ready for its intended use, through the restaurant opening date. Any unexpected delays in construction, labor shortages or other factors could result in higher than anticipated pre-opening costs. 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 arrangements negotiated with landlords.



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We believe that our current cash balances, together with anticipated cash flows from operations and funds anticipated to be available from our credit
facility, will be sufficient to satisfy our working capital and capital expenditure requirements for 2008. Changes in our operating plans, acceleration of our expansion plans, lower than anticipated sales, increased expenses or other events may
cause us to seek additional financing sooner than anticipated. Additional financing may not be available on acceptable terms, or at all. Failure to obtain additional financing as needed could have a material adverse effect on our business and
results of operations.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or
variable interest entities (VIEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 30, 2007, we are not involved in
any VIE transactions and do not otherwise have any off-balance sheet arrangements.

Contractual Commitments

The following table summarizes our contractual commitments as of December 30, 2007 (in millions):



|                                |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |      
|------------------------------- |  | ----- | ----- | ---------------------- | - | --------- |  | --------- | ---- | ---------------- | - | ---- |  | - | -----
|                                |  |       |       | Payments Due by Period
|                                |  | Total |       | Less than1 Year        |   | 1-3 Years |  | 3-5 Years |      | More than5 Years
|Operating Lease Obligations (1) |  | $     | 287.2 |                        | $ | 38.0      |  | $         | 73.4 |                  | $ | 65.5 |  | $ | 110.3
|Short-term borrowings           |  |       | 21.0  |                        |   | 21.0      |  |           |     |                  |   |     |  |   |     
|Purchase obligations (2)        |  |       | 6.6   |                        |   | 6.6       |  |           |     |                  |   |     |  |   |     
|FIN 48 liability                |  |       | 0.7   |                        |   | 0.3       |  |           | 0.4  |                  |   |     |  |   |     
|                                |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |      
|                                |  | $     | 315.5 |                        | $ | 65.9      |  | $         | 73.8 |                  | $ | 65.5 |  | $ | 110.3
|                                |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |      

|(1) | Represents aggregate minimum lease payments. Most of the leases also require contingent rent in addition to the minimum rent based on a percentage of sales and require expenses
incidental to the use of the property.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Purchase obligations represents estimated construction commitments and excludes agreements that are cancelable without significant penalty.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

Critical accounting
policies are those that we believe are most important to portraying our financial condition and results of operations and also require the greatest amount of subjective or complex judgments by management. 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

Property and equipment is recorded at cost. Property and equipment is depreciated over the assets estimated useful lives using the straight-line
method. Leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the term of the related lease, whichever is shorter. The lives for furniture, fixtures and equipment are five or 10 years. The
lives for buildings and leasehold improvements are the shorter of 20 years or the term of the related operating lease. The cost of repairs and maintenance is expensed when incurred, while expenditures for refurbishments and improvements that extend
the useful life of an asset are capitalized. A reduction in the useful life of our property and equipment could increase annual depreciation expense for the related assets.

Operating Leases

We recognize rent over a lease term that begins from the date of possession and
includes the build-out period, which represents the period from construction start date through the completion of construction. Rent from the date the premises were ready for their intended use through the restaurant opening date was included as



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rent expense in pre-opening expenses. However, in accordance with FSP 13-1, we expensed straight-line rent from the construction start date through
construction completion beginning January 2, 2006.

Tenant improvement allowances are now recognized as deferred rent credits and
amortized over the lease term as a reduction of rent expense on the consolidated statements of income and as a component of operating activities on the consolidated statements of cash flows.

Goodwill and Intangible Assets

Goodwill represents
the residual purchase price after allocation of the purchase price of net assets acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. Intangible assets deemed to have
definite lives are amortized over their estimated useful lives.

We test for impairment of goodwill and indefinite-lived intangible assets
at a minimum on an annual basis. Impairment tests are performed with respect to goodwill at the segment level of reporting. The recoverability of goodwill is reviewed based primarily on a multiple of earnings analysis comparing the fair value of the
reporting segment to the carrying value. An annual assessment for impairment is performed during the fourth quarter of its fiscal year and the analysis is performed more frequently if there are any impairment indicators identified during the year.
As of December 30, 2007, management determined there was no impairment of goodwill. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

Long-Lived Asset Impairments and Store Closure Costs

We assess the impairment of long-lived assets, including restaurant sites and other assets, when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable. The asset
impairment review process assesses the recovery of an asset based on estimated future cash flows. Management has determined that restaurants with operating cash flows of less than a defined amount should be regularly monitored to determine if
impairment charges should be taken. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from the disposition of the asset (if any) are less than the
related assets carrying amount. Impairment losses are measured as the amount by which the carrying amounts of the assets exceed their fair values. The net proceeds expected from the disposition of the asset are determined by independent quotes
or expected sales prices developed by internal specialists. Estimates of future cash flows and expected sales are judgments based on our experience and knowledge of local operations. These estimates can be significantly impacted by changes in real
estate market conditions, the economic environment, capital spending decisions and inflation.

For any properties that are planned to be
closed and are under long-term lease agreements, the present value of any remaining liability under the lease, discounted using risk-free rates and net of expected sublease rental that could be reasonably obtained for the property is recognized as a
liability and expensed when the criteria for SFAS No. 144 have been met. The value of any equipment and leasehold improvements related to a closed store is reduced to reflect net recoverable values. Internal specialists estimate the subtenant
income, future cash flows and asset recovery values based on their historical experience and knowledge of (1) the market in which the store to be closed is located, (2) the results of our previous efforts to dispose of similar assets and
(3) the current economic conditions. Specific real estate markets, the economic environment and inflation affect the actual cost of disposition for these leases and related assets.

Self-Insurance

Our business is primarily self-insured for workers compensation, automobile,
employee health benefits and general liability costs. We record our self-insurance liability, which is determined actuarially, based on claims filed, an estimate of claims incurred but not yet reported, statistical analyses of historical industry
data, as well as our own estimates based on historical trends. We maintain stop-loss coverage with third party insurers to limit our total exposure for each of these programs. Any actuarial projection of ultimate losses is subject to a high



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degree of variability. Sources of this variability are numerous and include, but are not limited to, future economic conditions, court decisions and
legislative actions. Our future funding estimates anticipate no change in the benefit structure. Statutory changes could have a significant impact on future claim costs.

Our workers compensation liabilities are from claims occurring in various states. Individual state workers compensation regulations have received a tremendous amount of attention from state politicians,
insurers, employers and providers, as well as the public in general. Recent years have seen an escalation in the number of legislative reforms, judicial rulings and social phenomena affecting our business. The changes in state political and economic
environments increase the variability in unpaid claim liabilities.

Income Taxes

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments. Realizing our deferred tax assets principally
depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change.

For information regarding our provision for income taxes as well as information regarding differences between our effective tax rate and
statutory rates, see Note 5 of the Notes to Consolidated Financial Statements. Our tax rate may be affected by future acquisitions, changes in the geographic composition of our income from operations, changes in our estimates of credits or
deductions including those that may result from the American Jobs Creation Act of 2004, and the resolution of issues arising from tax audits with various tax authorities.

We adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN
48) on January 1, 2007. FIN 48 prescribes recognition and measurement criteria in addition to classification, interim period accounting and significantly expanded disclosure provisions for uncertain tax positions that are expected to be
taken in our corporate tax return.

Restaurant, Franchise Revenues and Other Revenues

Revenues from the operation of company-owned restaurants are recognized when sales occur. All fees from franchised operations are included in revenue as
earned. Royalty fees are based on franchised restaurants revenues and we record these fees in the period the related franchised restaurants revenues are earned. Royalty fees from our licensing agreement with Kraft are recognized on a
quarterly basis and are based on a percentage of Krafts sales of our premium frozen pizzas. Revenues from the sale of electronic gift cards are recognized when the electronic gift cards are redeemed.

Pre-opening Costs

We follow Statement of Position
(SOP) 98-5, Reporting on the Costs of Start-up Activities, which was issued by the Accounting Standards Executive Committee and provides guidance on the financial reporting of start-up costs and organization costs. The SOP
requires costs of start-up activities and organization costs to be expensed as incurred as a charge against operations.

Stock-Based Compensation

Effective January 2, 2006 we adopted SFAS 123R, which requires the measurement and recognition of compensation cost at fair value for
all share-based payments, including stock options and restricted stock awards. We adopted SFAS 123R using the modified prospective transition method and, as a result, did not retroactively adjust results from prior periods. Under this
transition method, stock-based compensation is recognized for: 1) expense related to the remaining nonvested portion of all stock awards granted prior to



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January 2, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and 2) expense related to all
stock awards granted on or subsequent to January 2, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. The Black-Scholes valuation model is applied in determining the fair value of
option awards, which is then amortized on a straight-line basis over the requisite service period. See Note 7 of the Notes to Consolidated Financial Statements in this Form 10-K for further discussion of stock-based compensation.

New Accounting Standards

The FASB recently issued
several new accounting standards. The statements relevant to our line of business and the impact on us are as follows:

In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (SFAS No. 159). This Statement permits entities to choose
to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The Company has not yet
determined the impact the adoption of SFAS No. 159 will have on the consolidated financial statements.

In September 2006, the FASB
issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. This
Statement becomes effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company has not yet determined the impact the adoption of SFAS No. 157 will have on the consolidated
financial statements.

Inflation

The
primary inflationary factors affecting our operations are food and labor costs. A large number of our restaurant personnel are paid at rates based on the applicable minimum wage, and increases in the minimum wage directly affect our labor costs.
Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. We believe inflation has not had a material impact on our results of operations in recent years.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

Our market
risk exposures are related to our cash and cash equivalents and marketable securities when held. Cash and cash equivalents are invested in highly liquid short-term investments with maturities of less than three months as of the date of purchase. We
are exposed to market risk from changes in market prices related to our investments in marketable securities. As of December 30, 2007 we had $10.8 million in cash and no marketable securities. Changes in interest rates affect the investment
income we earn on our investments and therefore, impact our cash flows and results of operations.

In addition, we have a $75.0 million
line of credit agreement with Bank of America, N.A. that expires on June 30, 2009. Interest on the line of credit is calculated on either the bank base rate minus 0.75% or LIBOR plus 0.80%. As of December 30, 2007, we had borrowings under
the credit facility totaling $21.0 million with an average interest rate of 5.76%. Changes in interest rates could affect the interest expense on these loans and, therefore, impact our prospective cash flows and results of operations.

Many of the food products purchased by us are affected by changes in weather, production, availability, seasonality and other factors outside our
control. In an effort to control some of this risk, we have entered into some fixed price purchase commitments with terms of no more than one year. In addition, we believe that almost all of our food and supplies are available from several sources,
which helps to control food commodity risks.



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Item 8.    Financial Statements and Supplementary Data

The Consolidated Financial
Statements we are required to file hereunder are set forth on pages 35 through 55 of this report.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

Disclosure Controls and ProceduresWe
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to management, including our co-CEOs and Chief Financial Officer (CFO), as appropriate, to allow
timely decisions regarding required disclosure.

In designing and evaluating these disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and our management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of
this Annual Report on Form 10-K, as of December 30, 2007, an evaluation was performed under the supervision and with the participation of our management, including the co-CEOs and CFO, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our Companys co-CEOs and CFO concluded that our disclosure controls and procedures are effective as of December 30,
2007.

Managements Annual Report on Internal Control over Financial ReportingWe are responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the
preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation.

We have assessed the effectiveness of our internal control over
financial reporting as of December 30, 2007. In making our assessment of internal control over financial reporting, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal ControlIntegrated Framework. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 30, 2007.

The effectiveness of our internal control over financial reporting as of December 30, 2007 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which is included herein.

Change in Internal Control Over
Financial ReportingThere were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B.    Other Information

None.



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of California Pizza Kitchen, Inc.

We have audited California Pizza Kitchen, Inc. and Subsidiaries internal control over financial reporting as of December 30, 2007, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). California Pizza Kitchen, Inc. and Subsidiaries management is responsible for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the consolidated financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, California Pizza Kitchen, Inc. and Subsidiaries maintained, in all material respects, effective internal control over
financial reporting as of December 30, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of California Pizza Kitchen, Inc. as of December 30, 2007 and December 31, 2006, and the related consolidated statements of income,
shareholders equity, and cash flows for each of the three years in the period ended December 30, 2007 and our report dated March 14, 2008 expressed an unqualified opinion thereon.

/s/    ERNST & YOUNG LLP

Los Angeles, California

March 14, 2008



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PART III.

Item 10.    Directors, Executive Officers and Corporate Governance

Item 11.    Executive Compensation

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.    Certain Relationships and Related Transactions, and Director Independence

Item 14.    Principal Accounting Fees and Services

The information required by Items
10, 11, 12, 13 and 14 is hereby incorporated by reference from the Registrants definitive proxy statement for the Annual Meeting of Stockholders which will be filed with the SEC within 120 days after the close of our fiscal year.



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PART IV.

Item 15.    Exhibits, Financial Statement Schedules

(a)  The following
documents are filed as a part of this Report:

1.    Financial Statements

The following financial statements, as indexed below, are incorporated by reference in Part II, Item 8 of this Annual Report on Form 10-K:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                             |  |         
|---------------------------------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                                             |  | Page No.
|Report of Independent Registered Public Accounting Firm                                                                      |  | 35      
|Consolidated Financial Statements:                                                                                           |  |         
|Consolidated Balance Sheets at December 30, 2007 and December 31, 2006                                                       |  | 36      
|Consolidated Statements of Income for the Years Ended December 30, 2007, December 31, 2006 and January 1, 2006               |  | 37      
|Consolidated Statements of Stockholders Equity for the Years Ended December 30, 2007, December 31, 2006 and January 1, 2006 |  | 38      
|Consolidated Statements of Cash Flows for the Years Ended December 30, 2007, December 31, 2006 and January 1, 2006           |  | 39      
|Notes to Consolidated Financial Statements                                                                                   |  | 40      

2.    Financial Statements Schedules

All financial statement schedules are omitted because they are not required or are not applicable or the required information is included in the
Companys Consolidated Financial Statements and Notes thereto, described in Item 15(a)(1) above.

3.    Exhibits

The Exhibits listed in the Index to Exhibits, which appears immediately following the signature
page and is incorporated herein by reference, are filed as part of this Annual Report on Form 10-K.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of California Pizza Kitchen,
Inc.

We have audited the accompanying consolidated balance sheets of California Pizza Kitchen, Inc. and Subsidiaries as of
December 30, 2007 and December 31, 2006, and the related consolidated statements of income, shareholders equity, and cash flows for each of the three years in the period ended December 30, 2007. These financial statements are
the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of California Pizza Kitchen, Inc. and Subsidiaries at
December 30, 2007 and December 31, 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 30, 2007, in conformity with U.S. generally accepted accounting
principles.

As discussed in Note 2 to the consolidated financial statements, California Pizza Kitchen, Inc. and Subsidiaries changed its
method of accounting for Share-Based Payments in accordance with Statement of Accounting Standards No. 123 (revised 2004), Share-Based Payment and adopted Financial Accounting Standards Board Staff Position No. FAS 13-1,
Accounting for Rental Costs Incurred During a Construction Period on January 2, 2006.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), California Pizza Kitchen, Inc. and Subsidiaries internal control over financial reporting as of December 30, 2007, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2008 expressed an unqualified opinion thereon.

/s/     ERNST & YOUNG LLP

Los Angeles, California

March 14, 2008



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##### Table of Contents

CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 30, 2007 and December 31, 2006

(in thousands, except for share data)



|                                                                                                                                                                             |  |      |         |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                                                                                                                             |  | 2007 |         | 2006 |  
|Assets                                                                                                                                                                       |  |      |         |      |   |         |  
|Current assets:                                                                                                                                                              |  |      |         |      |   |         |  
|Cash and cash equivalents                                                                                                                                                    |  | $    | 10,795  |      | $ | 8,187   |  
|Other receivables                                                                                                                                                            |  |      | 12,351  |      |   | 7,876   |  
|Inventories                                                                                                                                                                  |  |      | 5,194   |      |   | 4,745   |  
|Current deferred tax asset, net                                                                                                                                              |  |      | 14,323  |      |   | 11,721  |  
|Prepaid rent                                                                                                                                                                 |  |      | 4,289   |      |   | 3,733   |  
|Other prepaid expenses and other current assets                                                                                                                              |  |      | 2,419   |      |   | 1,655   |  
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Total current assets                                                                                                                                                         |  |      | 49,371  |      |   | 37,917  |  
|Property and equipment, net                                                                                                                                                  |  |      | 297,856 |      |   | 255,382 |  
|Noncurrent deferred tax asset, net                                                                                                                                           |  |      | 6,444   |      |   | 5,867   |  
|Goodwill and other intangibles                                                                                                                                               |  |      | 8,777   |      |   | 7,754   |  
|Other assets                                                                                                                                                                 |  |      | 4,680   |      |   | 3,593   |  
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Total assets                                                                                                                                                                 |  | $    | 367,128 |      | $ | 310,513 |  
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                         |  |      |         |      |   |         |  
|                                                                                                                                                                             |  |     
|Current liabilities:                                                                                                                                                         |  |      |         |      |   |         |  
|Short-term borrowings                                                                                                                                                        |  | $    | 21,000  |      | $ |        |  
|Accounts payable                                                                                                                                                             |  |      | 18,236  |      |   | 15,044  |  
|Accrued compensation and benefits                                                                                                                                            |  |      | 16,892  |      |   | 15,042  |  
|Accrued rent                                                                                                                                                                 |  |      | 15,620  |      |   | 14,532  |  
|Deferred rent credits                                                                                                                                                        |  |      | 5,598   |      |   | 4,494   |  
|Other accrued liabilities                                                                                                                                                    |  |      | 19,418  |      |   | 13,275  |  
|Store closure reserve                                                                                                                                                        |  |      | 3,596   |      |   | 47      |  
|Accrued income tax                                                                                                                                                           |  |      | 971     |      |   | 3,614   |  
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Total current liabilities                                                                                                                                                    |  |      | 101,331 |      |   | 66,048  |  
|Other liabilities                                                                                                                                                            |  |      | 12,724  |      |   | 8,636   |  
|                                                                                                                                                                             |  |     
|Deferred rent credits, net of current portion                                                                                                                                |  |      | 34,936  |      |   | 27,486  |  
|                                                                                                                                                                             |  |     
|Stockholders equity:                                                                                                                                                        |  |      |         |      |   |         |  
|Common Stock$0.01 par value, 80,000,000 shares authorized, 28,357,582 and 28,944,952 shares issued and outstanding at December 30,
2007 and December 31, 2006, respectively |  |      | 283     |      |   | 289     |  
|Additional paid-in capital                                                                                                                                                   |  |      | 216,038 |      |   | 221,067 |  
|Retained earnings (accumulated deficit)                                                                                                                                      |  |      | 1,816   |      |   | (13,013 | )
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Total stockholders equity                                                                                                                                                   |  |      | 218,137 |      |   | 208,343 |  
|                                                                                                                                                                             |  |      |         |      |   |         |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $    | 367,128 |      | $ | 310,513 |  
|                                                                                                                                                                             |  |      |         |      |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 30, 2007, December 31, 2006 and January 1, 2006

(in thousands, except for share data and footnotes)



|                                                            |  |      |         |   |      |   |         |  |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- |  | - | ------- | -
|                                                            |  | 2007 |         |   | 2006 |   | 2005    | 
|Revenues:                                                   |  |      |         |   |      |   |         |  |   |         |  
|Restaurant sales                                            |  | $    | 624,324 |   |      | $ | 547,968 |  | $ | 474,738 |  
|Royalties from Kraft licensing agreement                    |  |      | 4,710   |   |      |   | 3,691   |  |   | 2,028   |  
|Domestic franchise revenues                                 |  |      | 2,460   |   |      |   | 2,138   |  |   | 2,083   |  
|International franchise revenues                            |  |      | 1,390   |   |      |   | 804     |  |   | 750     |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Total revenues                                              |  |      | 632,884 |   |      |   | 554,601 |  |   | 479,599 |  
|Costs and expenses:                                         |  |      |         |   |      |   |         |  |   |         |  
|Food, beverage and paper supplies                           |  |      | 153,954 |   |      |   | 135,848 |  |   | 118,480 |  
|Labor (1)                                                   |  |      | 228,664 |   |      |   | 199,744 |  |   | 173,751 |  
|Direct operating and occupancy                              |  |      | 124,476 |   |      |   | 108,558 |  |   | 92,827  |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Cost of sales                                               |  |      | 507,094 |   |      |   | 444,150 |  |   | 385,058 |  
|General and administrative (2)                              |  |      | 48,391  |   |      |   | 43,320  |  |   | 36,298  |  
|Depreciation and amortization                               |  |      | 37,146  |   |      |   | 29,489  |  |   | 25,440  |  
|Pre-opening costs                                           |  |      | 7,167   |   |      |   | 6,964   |  |   | 4,051   |  
|Loss on impairment of property and equipment                |  |      |        |   |      |   |        |  |   | 1,160   |  
|Store closure costs                                         |  |      | 9,269   |   |      |   | 707     |  |   | 152     |  
|Legal settlement reserve                                    |  |      | 2,300   |   |      |   |        |  |   | 600     |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Operating income                                            |  |      | 21,517  |   |      |   | 29,971  |  |   | 26,840  |  
|Other (expense) income:                                     |  |      |         |   |      |   |         |  |   |         |  
|Interest expense                                            |  |      | (362    | ) |      |   |        |  |   |        |  
|Interest income                                             |  |      | 289     |   |      |   | 718     |  |   | 739     |  
|Other income                                                |  |      |        |   |      |   |        |  |   | 1,105   |  
|Equity in loss of unconsolidated joint venture              |  |      |        |   |      |   |        |  |   | (22     | )
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Total other (expense) income                                |  |      | (73     | ) |      |   | 718     |  |   | 1,822   |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Income before income tax provision                          |  |      | 21,444  |   |      |   | 30,689  |  |   | 28,662  |  
|Income tax provision                                        |  |      | 6,660   |   |      |   | 9,689   |  |   | 9,172   |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Net income                                                  |  | $    | 14,784  |   |      | $ | 21,000  |  | $ | 19,490  |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Net income per common share:                                |  |      |         |   |      |   |         |  |   |         |  
|Basic                                                       |  | $    | 0.51    |   |      | $ | 0.72    |  | $ | 0.67    |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Diluted                                                     |  | $    | 0.50    |   |      | $ | 0.70    |  | $ | 0.66    |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Shares used in calculating net income per common share (3): |  |      |         |   |      |   |         |  |   |         |  
|Basic                                                       |  |      | 28,843  |   |      |   | 29,118  |  |   | 29,068  |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  
|Diluted                                                     |  |      | 29,609  |   |      |   | 29,818  |  |   | 29,607  |  
|                                                            |  |      |         |   |      |   |         |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



37



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##### Table of Contents

CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years ended December 30, 2007, December 31, 2006 and January 1, 2006

(in thousands, except for share data)



|                                                                                                             |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  |    |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ------------ | - |  | ------------------------ | --- | - | ------------------------------------- | - | ------- | ------------------------------ |  | - | ------- | - |  | -- | - |  | - | ------- | -
|                                                                                                             |  | Common Stock |   |  | AdditionalPaid-inCapital |     |   | (AccumulatedDeficit)/RetainedEarnings |   |         | AccumulatedComprehensiveIncome |  |   | Total   |  
|                                                                                                             |  | Shares       |   |  | Amount                   |     |   |                                       |   |        
|Balances at January 2, 2005                                                                                  |  | 28,849,275   |   |  | $                        | 288 |   |                                       | $ | 220,250 |                                |  | $ | (53,503 | ) |  |   |   |  | $ | 167,035 |  
|Exercise of employee stock options                                                                           |  | 885,217      |   |  |                          | 9   |   |                                       |   | 10,426  |                                |  |   |        |   |  |   |   |  |   | 10,435  |  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 74,791       |   |  |                          | 1   |   |                                       |   | 818     |                                |  |   |        |   |  |   |   |  |   | 819     |  
|Shares repurchased through stock repurchase program                                                          |  | (312,658     | ) |  |                          | (3  | ) |                                       |   | (5,665  | )                              |  |   |        |   |  |   |   |  |   | (5,668  | )
|Issuance of restricted stock                                                                                 |  | 1,908        |   |  |                          |    |   |                                       |   | 33      |                                |  |   |        |   |  |   |   |  |   | 33      |  
|Remeasurement of employee stock options                                                                      |  |             |   |  |                          |    |   |                                       |   | 3,602   |                                |  |   |        |   |  |   |   |  |   | 3,602   |  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |  |                          |    |   |                                       |   | 1,597   |                                |  |   |        |   |  |   |   |  |   | 1,597   |  
|Unrealized loss on marketable securities                                                                     |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  | (7 | ) |  |   | (7      | )
|Net income                                                                                                   |  |             |   |  |                          |    |   |                                       |   |         |                                |  |   | 19,490  |   |  |   |   |  |   | 19,490  |  
|                                                                                                             |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  |    |   |  |   |         |  
|Balances at January 1, 2006                                                                                  |  | 29,498,533   |   |  |                          | 295 |   |                                       |   | 231,061 |                                |  |   | (34,013 | ) |  | (7 | ) |  |   | 197,336 |  
|Exercise of employee stock options                                                                           |  | 481,516      |   |  |                          | 5   |   |                                       |   | 6,659   |                                |  |   |        |   |  |   |   |  |   | 6,664   |  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 65,175       |   |  |                          |    |   |                                       |   | 838     |                                |  |   |        |   |  |   |   |  |   | 838     |  
|Shares repurchased through stock repurchase program                                                          |  | (1,310,272   | ) |  |                          | (13 | ) |                                       |   | (24,670 | )                              |  |   |        |   |  |   |   |  |   | (24,683 | )
|Issuance of restricted stock                                                                                 |  | 210,000      |   |  |                          | 2   |   |                                       |   | 783     |                                |  |   |        |   |  |   |   |  |   | 785     |  
|Compensation expense                                                                                         |  |             |   |  |                          |    |   |                                       |   | 5,478   |                                |  |   |        |   |  |   |   |  |   | 5,478   |  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |  |                          |    |   |                                       |   | 918     |                                |  |   |        |   |  |   |   |  |   | 918     |  
|Unrealized loss on marketable securities                                                                     |  |             |   |  |                          |    |   |                                       |   |        |                                |  |   |        |   |  | 7  |   |  |   | 7       |  
|Net income                                                                                                   |  |             |   |  |                          |    |   |                                       |   |        |                                |  |   | 21,000  |   |  |   |   |  |   | 21,000  |  
|                                                                                                             |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  |    |   |  |   |         |  
|Balances at December 31, 2006                                                                                |  | 28,944,952   |   |  |                          | 289 |   |                                       |   | 221,067 |                                |  |   | (13,013 | ) |  |   |   |  |   | 208,343 |  
|Exercise of employee stock options                                                                           |  | 227,614      |   |  |                          | 2   |   |                                       |   | 3,388   |                                |  |   |        |   |  |   |   |  |   | 3,390   |  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 61,629       |   |  |                          | 1   |   |                                       |   | 941     |                                |  |   |        |   |  |   |   |  |   | 942     |  
|Shares repurchased through stock repurchase program                                                          |  | (876,613     | ) |  |                          | (9  | ) |                                       |   | (16,760 | )                              |  |   |        |   |  |   |   |  |   | (16,769 | )
|Issuance of restricted stock                                                                                 |  |             |   |  |                          |    |   |                                       |   | 1,607   |                                |  |   |        |   |  |   |   |  |   | 1,607   |  
|Compensation expense                                                                                         |  |             |   |  |                          |    |   |                                       |   | 5,390   |                                |  |   |        |   |  |   |   |  |   | 5,390   |  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |  |                          |    |   |                                       |   | 405     |                                |  |   |        |   |  |   |   |  |   | 405     |  
|Cumulative effect related to the adoption of FIN 48                                                          |  |             |   |  |                          |    |   |                                       |   |        |                                |  |   | 45      |   |  |   |   |  |   | 45      |  
|Net income                                                                                                   |  |             |   |  |                          |    |   |                                       |   |        |                                |  |   | 14,784  |   |  |   |   |  |   | 14,784  |  
|                                                                                                             |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  |    |   |  |   |         |  
|Balances at December 30, 2007                                                                                |  | 28,357,582   |   |  | $                        | 283 |   |                                       | $ | 216,038 |                                |  | $ | 1,816   |   |  |   |   |  | $ | 218,137 |  
|                                                                                                             |  |              |   |  |                          |     |   |                                       |   |         |                                |  |   |         |   |  |    |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



38



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##### Table of Contents

CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 30, 2007, December 31, 2006 and January 1, 2006

(in thousands)



|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                       |  | 2007 |         |   | 2006 |   |         | 2005 | 
|Operating activities:                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Net income                                                                                             |  | $    | 14,784  |   |      | $ | 21,000  |      |  | $ | 19,490  |  
|Adjustments to reconcile net income to net cash provided by operating activities:                      |  |      |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                                          |  |      | 37,146  |   |      |   | 29,489  |      |  |   | 25,440  |  
|Non-cash compensation expense                                                                          |  |      | 6,997   |   |      |   | 6,263   |      |  |   | 3,624   |  
|Equity in loss of unconsolidated joint venture                                                         |  |      |        |   |      |   |        |      |  |   | 22      |  
|Loss on impairment of property and equipment                                                           |  |      |        |   |      |   |        |      |  |   | 1,160   |  
|Tax benefit from employee stock option exercises                                                       |  |      | (328    | ) |      |   | (918    | )    |  |   | 1,597   |  
|Store closure costs                                                                                    |  |      | 6,959   |   |      |   | 7       |      |  |   | 152     |  
|Change in net deferred tax assets                                                                      |  |      | (3,525  | ) |      |   | (4,638  | )    |  |   | (5,270  | )
|Change in liquor licenses                                                                              |  |      | (272    | ) |      |   | (413    | )    |  |   | (385    | )
|Change in deferred rent credits                                                                        |  |      | 13,976  |   |      |   | 8,033   |      |  |   | 5,332   |  
|Changes in operating assets and liabilities:                                                           |  |      |         |   |      |   |         |      |  |   |         |  
|Other receivables                                                                                      |  |      | (4,475  | ) |      |   | (3,767  | )    |  |   | 105     |  
|Inventories                                                                                            |  |      | (449    | ) |      |   | (969    | )    |  |   | (674    | )
|Amortization of deferred rent credits                                                                  |  |      | (5,422  | ) |      |   | (4,919  | )    |  |   | (3,719  | )
|Prepaid expenses and other assets                                                                      |  |      | (2,407  | ) |      |   | 1,009   |      |  |   | (1,793  | )
|Accounts payable                                                                                       |  |      | 2,519   |   |      |   | 1,299   |      |  |   | (975    | )
|Accrued liabilities                                                                                    |  |      | 6,935   |   |      |   | 10,706  |      |  |   | (2,184  | )
|Other liabilities                                                                                      |  |      | 4,711   |   |      |   | 3,293   |      |  |   | (39     | )
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                                              |  |      | 77,150  |   |      |   | 65,475  |      |  |   | 41,883  |  
|Investing activities:                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Capital expenditures                                                                                   |  |      | (83,433 | ) |      |   | (63,712 | )    |  |   | (63,093 | )
|Change in marketable securities                                                                        |  |      |        |   |      |   | 11,415  |      |  |   | 15,000  |  
|Investment in LA Food Show, Inc.                                                                       |  |      |        |   |      |   |        |      |  |   | (5,834  | )
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                                                  |  |      | (83,433 | ) |      |   | (52,297 | )    |  |   | (53,927 | )
|Financing activities:                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Short-term borrowings                                                                                  |  |      | 21,000  |   |      |   |        |      |  |   |        |  
|Net proceeds from issuance of common stock                                                             |  |      | 4,332   |   |      |   | 7,502   |      |  |   | 11,265  |  
|Stock repurchase                                                                                       |  |      | (16,769 | ) |      |   | (24,683 | )    |  |   | (5,668  | )
|Tax benefit from option exercise                                                                       |  |      | 328     |   |      |   | 918     |      |  |   |        |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                                                    |  |      | 8,891   |   |      |   | (16,263 | )    |  |   | 5,597   |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                   |  |      | 2,608   |   |      |   | (3,085  | )    |  |   | (6,447  | )
|Cash and cash equivalents at beginning of period                                                       |  |      | 8,187   |   |      |   | 11,272  |      |  |   | 17,719  |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                             |  |      | 10,795  |   |      |   | 8,187   |      |  | $ | 11,272  |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Supplemental disclosure of cash flow information:                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Cash paid during the period for income taxes                                                           |  | $    | 16,166  |   |      | $ | 8,381   |      |  | $ | 11,901  |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Cash paid during the period to buy out lease related to store closures                                 |  | $    | 2,310   |   |      | $ | 700     |      |  | $ |        |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Supplemental disclosure of investing activities:                                                       |  |      |         |   |      |   |         |      |  |   |         |  
|Property, plant and equipment purchased and included in accounts payable and other accrued liabilities |  | $    | 7,829   |   |      | $ | 7,751   |      |  | $ | 3,288   |  
|                                                                                                       |  |      |         |   |      |   |         |      |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 30, 2007, December 31, 2006 and January 1, 2006

(in thousands, except for share and per share data)

1.    Description
of Business

Nature of Business

As of December 30, 2007, California Pizza Kitchen, Inc. and its wholly owned subsidiaries (the Company) owns, operates, licenses or franchises 231 restaurants under the names California Pizza Kitchen,
California Pizza Kitchen ASAP and LA Food Show in 30 states and the District of Columbia, and 8 foreign countries, of which 193 are company-owned and 38 operate under franchise or license arrangements.

The Company manages its operations by restaurant. The Company has aggregated its operations into one reportable segment.

2.    Summary of Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of California Pizza
Kitchen, Inc. and its wholly owned subsidiaries CPK Management Company and CPK of Illinois, Inc. All significant intercompany balances and transactions are eliminated in consolidation.

Reclassification

Certain prior year
amounts have been reclassified to conform to the current year presentation.

Fiscal Year End

The Companys fiscal year ends on the Sunday closest to December 31. The Companys fiscal years ended December 30,
2007, December 31, 2006 and January 1, 2006 each covered 52 weeks. For purposes of the accompanying consolidated financial statements, the years ended December 30, 2007, December 31, 2006 and January 1, 2006 may be
referred to as fiscal years 2007, 2006 and 2005, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities revenues and expenses. Actual results may differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when
purchased to be cash equivalents. Cash and cash equivalent balances are not pledged or restricted. The Companys policy is to invest cash in excess of operating requirements in income-producing investments. Cash equivalents at December 30,
2007 consist of money market funds.

Investments

The Company records investments and marketable securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(SFAS No. 115). SFAS No. 115 establishes accounting and reporting requirements for investments in equity securities that have
readily determinable fair values and for all investments in debt securities. When carrying marketable securities, they consist of federal agency securities, auction rate securities and municipal securities, all of which are classified as
available-for-sale securities. These debt securities were reported at their fair value, with unrealized gains and losses excluded from net income and reported as a separate component of stockholders equity until realized. Fair value was
determined by the most recently traded price of each security at the balance sheet date.

Other Receivables

Receivables consist primarily of amounts due from landlords or other parties for the reimbursement of leasehold improvements paid by the Company as well
as royalty amounts due from franchisees and Kraft Pizza Company. Management believes these amounts to be collectible.

Inventories

Inventories consist of food, beverage and paper supplies, uniforms and supplies. Inventories are accounted for at lower of cost or market
using the first-in, first-out method.

Property and Equipment

Property and equipment is recorded at cost. Property and equipment is depreciated over the assets estimated useful lives using the straight-line
method. Leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the term of the related lease, whichever is shorter. The lives for furniture, fixtures and equipment are five or 10 years. The
lives for buildings and leasehold improvements are the shorter of 20 years or the term of the related operating lease. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that
extend the useful life of an asset are capitalized.

Goodwill and Intangible Assets

Goodwill represents the residual purchase price after allocation of the purchase price of net assets acquired. Goodwill and intangible assets deemed to
have indefinite lives are not amortized, but are subject to annual impairment tests. Intangible assets deemed to have definite lives are amortized over their estimated useful lives.

The Company tests for impairment of goodwill and indefinite-lived intangible assets at a minimum on an annual basis in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets. Impairment tests are performed with respect to goodwill at the segment level of reporting. The Company reviews the recoverability of goodwill based primarily on a multiple of earnings analysis
comparing the fair value of the reporting segment to the carrying value. Generally, the Company performs its annual assessment for impairment during the fourth quarter of its fiscal year and will perform the analysis more frequently if there are any
impairment indicators identified during the year. As of December 30, 2007, management determined there was no impairment of goodwill. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an
impairment review include a significant underperformance of a restaurant relative to expected historical or



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



projected future operating results, a significant change in the manner of the use of the asset or a significant negative industry or economic trend. In
evaluating whether an asset has been impaired, the Company compares the expected undiscounted future cash flows to be generated by the asset to the assets carrying value. If the sum of the undiscounted future cash flows is less than the
carrying amount of the asset, an impairment loss is recognized to the extent the carrying value exceeds the fair value of the asset by a charge against current operations.

Electronic Gift Cards

The Company
sells electronic gift cards and recognizes deferred revenue, included in other accrued liabilities, until the electronic gift cards are redeemed, at which time revenue is recognized. Discounts and sales charges from distribution through third
parties are expensed as incurred.

Self-Insurance

The Companys business is primarily self-insured for workers compensation, automobile, employee health benefits and general liability costs. The Company records its self-insurance liability, which is
determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported, statistical analyses of historical industry data, as well as estimates based on historical trends. The Companys workers compensation
liabilities are from claims occurring in various states. The Companys workers compensation future funding estimates anticipate no change in the benefit structure.

Income Taxes

The Company utilizes
the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and the
tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of
realization in future periods.

Restaurant, Franchise Revenues and Other Revenues

Revenues from the operation of company-owned restaurants are recognized when sales occur. All franchise fees from franchised operations are included in
revenue as earned. Royalty fees are based on franchised restaurants revenues and are recorded by the Company in the period the related franchised restaurants revenues are earned. Royalty fees from our licensing agreement with Kraft Pizza
Company (Kraft) are recognized on a quarterly basis and are based on a percentage of Krafts sales of our premium frozen pizzas.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses for 2007, 2006 and 2005 totaled
$5,503, $4,893 and $4,158, respectively.

Operating Leases

The Company accounts for rent expense for its operating leases on the straight-line basis in accordance with SFAS No. 13, Accounting for
Leases. The Company leases restaurant and office facilities that have terms expiring between 2007 and 2023. The initial obligation period is generally 10 years. The term of the lease is



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



considered its initial obligation period, which does not include unexercised option periods. The restaurant facilities primarily have renewal clauses of 10
to 20 years exercisable at the option of the Company.

Most lease agreements contain one or more of the following: tenant improvement
allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. The Company includes scheduled rent escalation clauses for the purposes of recognizing straight-line rent. Certain of these leases require the payment of
contingent rentals based on a percentage of gross revenues, as defined, and certain other rent escalation clauses are based on the Consumer Price Index.

Rent is recognized on the straight-line basis, including the restaurant build-out period. This period is normally prior to the commencement of rent payments and is commonly called the rent holiday period. The
build-out period generally begins when the Company takes possession of the space and begins to make improvements in preparation for its intended use. In line with Staff Position No. FAS 13-1, Accounting for Rental Costs Incurred during a
Construction Period (FSP 13-1), the Company began expensing rental costs incurred during this build-out period beginning January 2, 2006. The Company had previously capitalized rent during the build-out period. Rent incurred
from the date the premises are ready for their intended use, through the restaurant opening date, are included in pre-opening expenses. Tenant improvement allowances are recorded as deferred rent credits on the consolidated balance sheets and
amortized over the terms of the related leases as reductions to rent expense on the consolidated statements of income.

Pre-opening
Costs

The Company follows Statement of Position (SOP) 98-5, Reporting on the Costs of Start-up Activities,
which provides guidance on the financial reporting of the start-up costs and organization costs. The SOP requires costs of start-up activities and organization costs to be expensed as incurred.

Earnings Per Share

The Company
calculates net income per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share (EPS) is computed by dividing net income or loss attributable to common stockholders by the weighted average
of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, warrants to purchase common stock and common stock options
using the treasury stock method) were exercised or converted into common stock. Potential common shares in the diluted EPS computation are excluded where their effect would be antidilutive.

The Company effected a three-for-two stock split on June 19, 2007 in the form of a 50% stock dividend on the Companys common stock by issuing
one additional share for every two shares held by stockholders of record as of June 11, 2007. All references in the Consolidated Financial Statements to shares of common stock, weighted average number of shares, per share amounts and stock
option plan data, including prior period data as appropriate, have been adjusted to reflect the stock split.

Stock-Based Compensation

The Company adopted SFAS No. 123(R), Share-Based Payment (SFAS 123R) on January 2, 2006, which
requires the measurement and recognition of compensation cost at fair value for all share-based payments, including stock options and restricted stock awards. The Company adopted SFAS 123R using the modified prospective transition method and,
as a result, did not retroactively adjust results from prior periods. Under this



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



transition method, stock-based compensation is recognized for: 1) expense related to the remaining nonvested portion of all stock awards granted prior to
January 2, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and 2) expense related to all stock awards granted on or subsequent to January 2, 2006, based on the grant date fair
value estimated in accordance with the provisions of SFAS 123R. The Company applies the Black-Scholes valuation model in determining the fair value of option awards, which is then amortized on the straight-line basis over the requisite
service period. See Note 7 for further discussion of stock-based compensation.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) recently issued several new accounting standards. The statements relevant to the
Companys line of business and its impact are as follows:

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115 (SFAS No. 159). This Statement permits entities to choose to measure many financial instruments and certain
other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The Company has not yet determined the impact the adoption of SFAS No. 159 will
have on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. This Statement becomes effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company has not yet determined the impact the adoption of SFAS No. 157 will have on the consolidated financial statements.

Fair Value of Financial Instruments

The fair values of the Companys cash and cash equivalents, marketable securities, accounts receivable, accounts payable and all other current liabilities approximate their carrying values because of the short maturities of these
instruments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, which may exceed federally insured limits; cash equivalents, which are primarily money market
funds; and marketable securities, when held, which are federal agency securities, auction rate securities and local municipality securities. The Company places its cash, cash equivalents and marketable securities with high quality financial
institutions.

The Company maintains a food distribution contract with its sole national master distributor that potentially subjects the
Company to a concentration of business risk. This contract is up for renewal in July 2008. Management of the Company believes it will be able to negotiate a similarly priced contract with either its current sole master distributor or another
distributor.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.    Property and Equipment

Property and equipment consist of the following:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2007 |          |   | 2006 |  
|Land                                           |  | $    | 5,786    |   |      | $ | 5,786    |  
|Buildings                                      |  |      | 10,055   |   |      |   | 10,055   |  
|Furniture, fixtures and equipment              |  |      | 174,693  |   |      |   | 151,865  |  
|Leasehold improvements                         |  |      | 315,606  |   |      |   | 259,740  |  
|Construction-in-progress                       |  |      | 37,393   |   |      |   | 40,452   |  
|                                               |  |      |          |   |      |   |          |  
|                                               |  |      | 543,533  |   |      |   | 467,898  |  
|Less accumulated depreciation and amortization |  |      | (245,677 | ) |      |   | (212,516 | )
|                                               |  |      |          |   |      |   |          |  
|                                               |  | $    | 297,856  |   |      | $ | 255,382  |  
|                                               |  |      |          |   |      |   |          |  

On a quarterly basis, the Company reviews the carrying value of long-lived assets in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144), on a restaurant-by-restaurant basis. In accordance with SFAS No. 144, the Company recognizes the impairment of
certain property and equipment by reducing the carrying value of the assets to the estimated fair value based on discounted cash flows of each under-performing restaurant. The Company increased accumulated depreciation and amortization and recorded
a loss on impairment of property and equipment of $1,160 in 2005. The Company did not record a loss on impairment of property and equipment in fiscal years 2006 or 2007.

4.    Short-term Borrowings

In June 2006 the Company entered into a First
Amendment to its Amended and Restated Credit Agreement (the Amendment) with Bank of America, N.A. to amend the Amended and Restated Credit Agreement dated June 30, 2004. The Amendment increased the revolving line of credit from
$20.0 million to $75.0 million. The line of credit bears interest at either the bank base rate minus 0.75% or LIBOR plus 0.80% and expires on June 30, 2009, pursuant to 30-60 day Libor contracts. As of December 30, 2007, the Company had
borrowings outstanding under the credit facility totaling $21.0 million with an average interest rate of 5.76%. The Company did not borrow against the credit facility in fiscal 2006.

The credit agreement provides for the issuance of letters of credit, which reduce the availability under the revolving line. Letters of credit
outstanding in connection with various insurance programs totaled $6,139 and $5,639 at December 30, 2007 and December 31, 2006, respectively. Available borrowings under the line of credit were $47.9 million as of December 30, 2007. In
addition, the credit facility includes financial and non-financial covenants, with which we were in full compliance as of December 30, 2007.



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5.    Income Taxes

The details of the provision (benefit) for income taxes are as follows:



|          |  |      |        |   |      |   |        |      |  |   |        |  
|--------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|          |  | 2007 |        |   | 2006 |   |        | 2005 | 
|Current:  |  |      |        |   |      |   |        |      |  |   |        |  
|Federal   |  | $    | 8,690  |   |      | $ | 12,200 |      |  | $ | 11,613 |  
|State     |  |      | 2,042  |   |      |   | 2,118  |      |  |   | 2,222  |  
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  |      | 10,732 |   |      |   | 14,318 |      |  |   | 13,835 |  
|          |  |      |        |   |      |   |        |      |  |   |        |  
|Deferred: |  |      |        |   |      |   |        |      |  |   |        |  
|Federal   |  |      | (3,931 | ) |      |   | (4,427 | )    |  |   | (4,012 | )
|State     |  |      | (141   | ) |      |   | (202   | )    |  |   | (651   | )
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  |      | (4,072 | ) |      |   | (4,629 | )    |  |   | (4,663 | )
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  | $    | 6,660  |   |      | $ | 9,689  |      |  | $ | 9,172  |  
|          |  |      |        |   |      |   |        |      |  |   |        |  

The following is a reconciliation between the U.S. federal statutory rate and the effective tax
rate:



|                                           |  |       |   |  |       |   |  |       |  
|------------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | -
|                                           |  | 2007  |   |  | 2006  |   |  | 2005  |  
|Statutory rate                             |  | 35.0  | % |  | 35.0  | % |  | 35.0  | %
|State income taxes, net of federal benefit |  | 4.9   |   |  | 4.9   |   |  | 4.9   |  
|General business and tip tax credit        |  | (13.7 | ) |  | (12.9 | ) |  | (12.3 | )
|Other                                      |  | 4.9   |   |  | 4.6   |   |  | 4.4   |  
|                                           |  |       |   |  |       |   |  |       |  
|                                           |  | 31.1  | % |  | 31.6  | % |  | 32.0  | %
|                                           |  |       |   |  |       |   |  |       |  

Deferred income taxes reflect the net tax effects of temporary differences between the carrying
value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys net deferred tax asset at December 30, 2007 and December 31, 2006 consist of the
following:



|                                              |  |      |        |   |      |   |        |  
|--------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                              |  | 2007 |        |   | 2006 |  
|Current deferred tax assets:                  |  |      |        |   |      |   |        |  
|Insurance reserves                            |  | $    | 1,564  |   |      | $ | 1,192  |  
|Vacation reserves                             |  |      | 931    |   |      |   | 922    |  
|Other accruals                                |  |      | 4,826  |   |      |   | 3,106  |  
|State taxes                                   |  |      | 695    |   |      |   | 746    |  
|Accrued rent                                  |  |      | 5,531  |   |      |   | 4,411  |  
|Net operating loss carryforwards              |  |      | 675    |   |      |   | 764    |  
|Other, net                                    |  |      | 101    |   |      |   | 580    |  
|                                              |  |      |        |   |      |   |        |  
|Subtotal current                              |  |      | 14,323 |   |      |   | 11,721 |  
|                                              |  |      |        |   |      |   |        |  
|Noncurrent deferred tax assets/(liabilities): |  |      |        |   |      |   |        |  
|Asset impairment reserves                     |  |      | 11,234 |   |      |   | 11,250 |  
|Book depreciation under tax depreciation      |  |      | (8,124 | ) |      |   | (7,312 | )
|Deferred tax assetFAS 123R                   |  |      | 3,169  |   |      |   | 1,929  |  
|Other, net                                    |  |      | 165    |   |      |   |       |  
|                                              |  |      |        |   |      |   |        |  
|Subtotal noncurrent                           |  |      | 6,444  |   |      |   | 5,867  |  
|                                              |  |      |        |   |      |   |        |  
|Net deferred tax assets                       |  | $    | 20,767 |   |      | $ | 17,588 |  
|                                              |  |      |        |   |      |   |        |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 30, 2007, the Company has a federal net operating loss carryforward of $1.8
million, which will begin to expire in 2023, related to the stock acquisition of LA Food Show. Utilization of the net operating loss will be subject to an annual limitation as defined under Section 382 of the Internal Revenue Code.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on
a tax return. The Company adopted FIN 48 beginning January 1, 2007. At the date of adoption, the Company had $723 in unrecognized tax benefits, $206 of which was recorded to retained earnings. As of December 30, 2007, the Company had $717
in unrecognized tax benefits, $466 of which would impact the Companys effective tax rate if recognized.

A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows:



|                                              |  |        |      |  
|--------------------------------------------- |  | ------ | ---- | -
|Liability for unrecognized tax benefits       |  | Amount |     
|Balance at January 1, 2007                    |  | $      | 723  |  
|Reductions for tax positions of prior periods |  |        | (52  | )
|Additions for tax positions of current period |  |        | 258  |  
|Settlements                                   |  |        | (121 | )
|Lapse of statute of limitations               |  |        | (91  | )
|                                              |  |        |      |  
|Balance at December 30, 2007                  |  | $      | 717  |  
|                                              |  |        |      |  

The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. As of January 1, 2007 and December 30, 2007, the Company accrued interest and penalties related to uncertain tax benefits of $220 and $254 respectively.

The Company estimates that unrecognized tax benefits of $194 will decrease in the next 12 months due to completion of audits in progress or expiration of
statute of limitations. The tax years 2003 to 2006 remain open to examination by major taxing jurisdictions.

6.    Stockholders Equity

The Company effected a three-for-two stock split on June 19, 2007
in the form of a 50% stock dividend on the Companys common stock by issuing one additional share for every two shares held by stockholders of record as of June 11, 2007. In connection with this stock split, $97,000 was transferred to
common stock from additional paid in capital and $1,000 was paid to stockholders for fractional shares. All references in the Consolidated Financial Statements to shares of common stock, weighted average number of shares, per share amounts and
stock option plan data, including prior period data as appropriate, have been adjusted to reflect the stock split.

On January 15,
2007 and July 16, 2007 employees purchased 30,543 and 31,086 shares, respectively, of common stock from the Company under the Companys employee stock purchase plan. The net proceeds to the Company were $464 and $478, respectively.
Additionally, employees exercised options to purchase 227,614 shares of common stock during fiscal 2007, which resulted in net proceeds to the Company of $3,390.

On January 11, 2006, 105,000 shares of restricted stock were granted to each of Richard L. Rosenfield and Larry S. Flax, our co-founders, co-Chairmen of the Board of Directors and co-Chief Executive Officers. Of
the total grant, 47,812 restricted shares vested for each of them in fiscal 2007.



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On January 15, 2006 and July 15, 2006, employees purchased 37,938 and 27,237 shares,
respectively, of common stock from the Company under the Companys employee stock purchase plan. The net proceeds to the Company were $428 and $410 respectively. Additionally, employees exercised options to purchase 481,516 shares of common
stock during fiscal 2006, which resulted in net proceeds to the Company of $6,664.

On August 16, 2004, the Board of Directors
authorized a stock repurchase program (August 2004 Program) to acquire the Companys common stock from time to time in the open market and through privately negotiated transactions. Under the August 2004 Program, up to $20.0 million
of the Companys common stock could be reacquired from time to time over a 24-month period.

On June 14, 2006, the Board of
Directors authorized an additional stock repurchase program (June 2006 Program, and together with the August 2004 Program, the Programs) to acquire the Companys common stock from time to time in the open market and
through privately negotiated transactions. Under the June 2006 Program, up to $30.0 million of the Companys common stock could be reacquired from time to time over a 24-month period.

During fiscal 2006, 1,310,272 shares were repurchased under the Programs for an aggregate purchase price of $24.7 million. The average purchase price per
share for fiscal 2006 was $18.84. During fiscal 2007, 876,613 shares were repurchased under the Programs for an aggregate purchase price of $16.8 million. The average purchase price per share for fiscal 2007 was $19.13.

Additionally, on August 7, 2007, the Board of Directors authorized a stock repurchase program (August 2007 Program) to acquire the
Companys common stock from time to time in the open market and through privately negotiated transactions. Under the August 2007 Program, up to $50.0 million of the Companys common stock could be reacquired from time to time over a
24-month period. The full $50.0 million remains available under the August 2007 Program for stock repurchases as of December 30, 2007.

7.    Stock-Based Compensation

The Company maintains incentive compensation plans under which
restricted stock awards, stock options, stock units and stock appreciation rights may be granted to employees, directors and independent contractors. To date, the Company has granted both stock options and restricted stock awards. Stock options
under the plans provide for either nonqualified stock options or incentive stock options. Stock options are granted at the market price on the date of grant and generally vest at a rate of 25% per year. The stock options generally expire
10 years from the date of grant. The Company issues new shares of common stock upon exercise of stock options.

The Company adopted SFAS
123R, effective January 2, 2006, using the modified prospective transition method, and as a result, did not retroactively adjust results from prior periods. As a result of adopting SFAS 123R, the impact to the Consolidated Statement of
Income for the year ended December 30, 2007 on income before income tax provision and net income was $6.7 million and $4.5 million, respectively, or $0.23 and $0.15 on diluted earnings per share, respectively.

As a result of adopting SFAS 123R, the impact to the Consolidated Statement of Income for the year ended December 31, 2006 on income before income
tax provision and net income was $5.9 million and $4.1 million, respectively, or $0.20 and $0.14 on diluted earnings per share, respectively.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Reported stock-based compensation was classified as follows (in thousands):



|                                           |  |      |        |   |      |   |        |  
|------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | -
|                                           |  | 2007 |        |   | 2006 |  
|Labor                                      |  | $    | 849    |   |      | $ | 917    |  
|General and administrative                 |  |      | 5,838  |   |      |   | 4,971  |  
|                                           |  |      |        |   |      |   |        |  
|Total stock-based compensation             |  |      | 6,687  |   |      |   | 5,888  |  
|Tax benefit                                |  |      | (2,067 | ) |      |   | (1,822 | )
|                                           |  |      |        |   |      |   |        |  
|Total stock-based compensation, net of tax |  | $    | 4,620  |   |      | $ | 4,066  |  
|                                           |  |      |        |   |      |   |        |  

The pro forma table below applies the fair value recognition provisions of SFAS 123 and reflects
net income and basic and diluted net income per share for the year ended January 1, 2006 (in thousands, except per share amounts):



|                                                                                                                     |  |      |        |  
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | -
|                                                                                                                     |  | 2005 |       
|Net income as reported                                                                                               |  | $    | 19,490 |  
|Add:                                                                                                                 |  |      |        |  
|Stock-based compensation expense included in reported net income, net of related tax effects                         |  |      | 2,464  |  
|Deduct:                                                                                                              |  |      |        |  
|Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects |  |      | (8,809 | )
|                                                                                                                     |  |      |        |  
|Pro forma net income                                                                                                 |  | $    | 13,145 |  
|                                                                                                                     |  |      |        |  
|Net income per share:                                                                                                |  |      |        |  
|Basic, as reported                                                                                                   |  | $    | 0.67   |  
|Basic, pro forma                                                                                                     |  | $    | 0.45   |  
|Diluted, as reported                                                                                                 |  | $    | 0.66   |  
|Diluted, pro forma                                                                                                   |  | $    | 0.44   |  
|Weighted average shares used in computation:                                                                         |  |      |        |  
|Basic                                                                                                                |  |      | 29,068 |  
|Diluted                                                                                                              |  |      | 29,607 |  

Pro forma disclosure for fiscal years 2007 and 2006 is not presented because the amounts are
recognized in the consolidated financial statements.

Stock Options

The weighted average fair value at the grant date using the Black-Scholes valuation model for options issued in fiscal years 2007 and 2006 was $5.47 and $7.05 per option, respectively. The fair value of options
at the date of grant was estimated using the following weighted average assumptions for fiscal years 2007 and 2006, respectively: (a) no dividend yield on our common stock, (b) expected stock price volatility of 28.29% and 35.62%,
(c) a risk-free interest rate of 4.49% and 4.65%, and (d) an expected option term of 4.0 years for both years.

The expected term
of the options represents the estimated period of time until exercise and is based on the Companys historical experience of similar option grants, giving consideration to the contractual terms, vesting schedules and expectations of future
employee behavior. For fiscal 2007, expected stock price volatility is based



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury bill rate in effect at the time of grant with an
equivalent expected term or life. The Company has not paid dividends in the past and does not currently plan to pay any dividends in the future.

Information regarding activity for stock options under our plans is as follows:



|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|------------------------------------------- |  | ---------- | - |  | -------------------------------- | ----- | ------------------------------------------------- | ---- | ----------------------- | - | ----------
|                                            |  | Shares (1) |   |  | WeightedAverageExercisePrice (1) |       | WeightedAverageRemainingContractualTerm(in
years) |      | AggregateIntrinsicValue
|Outstanding at January 2, 2005              |  | 4,088,384  |   |  | $                                | 13.59 |                                                   |      |                         |   |           
|Options granted                             |  | 2,103,293  |   |  |                                  | 16.27 |                                                   |      |                         |   |           
|Options exercised                           |  | (885,186   | ) |  |                                  | 11.79 |                                                   |      |                         |   |           
|Options cancelled                           |  | (225,980   | ) |  |                                  | 14.42 |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Outstanding at January 1, 2006              |  | 5,080,511  |   |  |                                  | 14.98 |                                                   | 8.28 |                         | $ | 32,242,014
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Vested and exercisable at January 1, 2006   |  | 2,240,986  |   |  |                                  |       |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Outstanding at January 1, 2006              |  | 5,080,511  |   |  | $                                | 14.98 |                                                   |      |                         |   |           
|Options granted                             |  | 1,241,110  |   |  |                                  | 20.26 |                                                   |      |                         |   |           
|Options exercised                           |  | (481,511   | ) |  |                                  | 13.84 |                                                   |      |                         |   |           
|Options cancelled                           |  | (328,768   | ) |  |                                  | 16.76 |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Outstanding at December 31, 2006            |  | 5,511,342  |   |  |                                  | 16.16 |                                                   | 7.93 |                         | $ | 33,349,709
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Vested and exercisable at December 31, 2006 |  | 2,525,194  |   |  |                                  |       |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Outstanding at December 31, 2006            |  | 5,511,342  |   |  | $                                | 16.16 |                                                   |      |                         |   |           
|Options granted                             |  | 484,475    |   |  |                                  | 18.93 |                                                   |      |                         |   |           
|Options exercised                           |  | (227,621   | ) |  |                                  | 14.90 |                                                   |      |                         |   |           
|Options cancelled                           |  | (221,539   | ) |  |                                  | 18.17 |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Outstanding at December 30, 2007            |  | 5,546,657  |   |  |                                  | 16.37 |                                                   | 7.16 |                         | $ | 2,847,510 
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           
|Vested and exercisable at December 30, 2007 |  | 3,109,686  |   |  |                                  | 15.50 |                                                   |      |                         |   |           
|                                            |  |            |   |  |                                  |       |                                                   |      |                         |   |           



|(1) | Adjusted for stock split effective June 19, 2007.
|--- | -------------------------------------------------

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on December 30, 2007. This amount changes based on the fair market value of our stock. Total intrinsic value of options exercised for the year ended
December 30, 2007 was $1.7 million.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A summary of the status of the Companys nonvested options during fiscal years 2005, 2006 and
2007 is as follows:



|                               |  |                  |   |  |                                         |     
|------------------------------ |  | ---------------- | - |  | --------------------------------------- | ----
|                               |  | Nonvested Shares
|                               |  | Shares (1)       |   |  | WeightedAverageGrant DateFair Value (1)
|Nonvested at January 2, 2005   |  | 2,683,748        |   |  | $                                       | 4.75
|Options granted                |  | 2,103,293        |   |  |                                         | 5.72
|Options vested                 |  | (1,753,587       | ) |  |                                         | 5.07
|Options cancelled              |  | (193,929         | ) |  |                                         | 4.92
|                               |  |                  |   |  |                                         |     
|Nonvested at January 1, 2006   |  | 2,839,525        |   |  |                                         | 5.26
|Options granted                |  | 1,241,110        |   |  |                                         | 7.05
|Options vested                 |  | (868,855         | ) |  |                                         | 5.34
|Options cancelled              |  | (225,632         | ) |  |                                         | 6.22
|                               |  |                  |   |  |                                         |     
|Nonvested at December 31, 2006 |  | 2,986,148        |   |  |                                         | 5.91
|Options granted                |  | 484,475          |   |  |                                         | 5.62
|Options vested                 |  | (856,658         | ) |  |                                         | 5.75
|Options cancelled              |  | (176,994         | ) |  |                                         | 6.25
|                               |  |                  |   |  |                                         |     
|Nonvested at December 30, 2007 |  | 2,436,971        |   |  |                                         | 5.88
|                               |  |                  |   |  |                                         |     



|(1) | Adjusted for stock split effective June 19, 2007.
|--- | -------------------------------------------------

As of December 30, 2007, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $12.0 million, which is expected to be recognized over a weighted average period of approximately 2.2
years. As of December 30, 2007 there were 1.1 million shares of common stock available for issuance pursuant to future stock awards.

Restricted Shares

Information regarding activity for restricted shares under our plans is as follows:



|                                 |  |            |   |  |                                  |      
|-------------------------------- |  | ---------- | - |  | -------------------------------- | -----
|                                 |  | Shares (1) |   |  | WeightedAverageExercisePrice (1)
|Outstanding at January 2, 2005   |  |           |   |  | $                                |     
|Restricted shares granted        |  | 1,907      |   |  |                                  | 16.43
|Restricted shares vested         |  | (1,907     | ) |  |                                  | 16.43
|Restricted shares cancelled      |  |           |   |  |                                  |     
|Outstanding at January 1, 2006   |  |           |   |  | $                                |     
|                                 |  |            |   |  |                                  |      
|Restricted shares granted        |  | 210,000    |   |  |                                  | 21.56
|Restricted shares vested         |  |           |   |  |                                  |     
|Restricted shares cancelled      |  |           |   |  |                                  |     
|                                 |  |            |   |  |                                  |      
|Outstanding at December 31, 2006 |  | 210,000    |   |  | $                                | 21.56
|Restricted shares granted        |  | 19,998     |   |  |                                  | 15.98
|Restricted shares vested         |  | (95,624    | ) |  |                                  | 21.56
|Restricted shares cancelled      |  |           |   |  |                                  |     
|                                 |  |            |   |  |                                  |      
|Outstanding at December 30, 2007 |  | 134,374    |   |  |                                  | 20.73
|                                 |  |            |   |  |                                  |      



|(1) | Adjusted for stock split effective June 19, 2007.
|--- | -------------------------------------------------



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Fair value of our restricted shares is based on our closing stock price on the date of grant. As of
December 30, 2007, total unrecognized stock-based compensation expense related to nonvested restricted shares was $2.3 million, which is expected to be recognized over a weighted average period of 2.4 years.

8.    Net Income Per Common Share

Reconciliation of basic and diluted net income per common share in accordance with SFAS No. 128 for the fiscal years ended December 30, 2007, December 31, 2006 and January 1, 2006 is as follows:



|                                                                                         |  |      |        |      |   |        |  |   |       
|---------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                                                         |  | 2007 |        | 2006 |   | 2005  
|Numerator for basic and diluted net income per share attributable to common stockholders |  | $    | 14,784 |      | $ | 21,000 |  | $ | 19,490
|                                                                                         |  |      |        |      |   |        |  |   |       
|Denominator:                                                                             |  |      |        |      |   |        |  |   |       
|Denominator for basic net income per common shareweighted average shares                |  |      | 28,843 |      |   | 29,118 |  |   | 29,068
|Employee stock options                                                                   |  |      | 766    |      |   | 700    |  |   | 539   
|                                                                                         |  |      |        |      |   |        |  |   |       
|Denominator for diluted net income per common shareweighted average shares              |  |      | 29,609 |      |   | 29,818 |  |   | 29,607
|                                                                                         |  |      |        |      |   |        |  |   |       

There were no shares considered antidilutive for the purposes of this computation. All shares have
been adjusted for the stock split effective June 19, 2007.

9.    Commitments and Contingencies

Commitments

The Company leases
certain restaurant facilities and its corporate headquarters under non-cancelable operating leases with terms ranging from 5 to 20 years. The restaurant leases generally require payment of contingent rents based on a percentage of sales and require
payment of various expenses incidental to the use of property. Rent expense on all operating leases amounted to $31,605, $27,384 and $22,845 for fiscal years 2007, 2006 and 2005, respectively, including contingent rental expense of $4,504, $4,579
and $2,869 for fiscal years 2007, 2006 and 2005, respectively. Most leases contain renewal options and may be subject to periodic adjustments for inflation and scheduled escalations.

The aggregate future minimum annual lease payments under non-cancelable operating leases for the fiscal years succeeding December 30, 2007 are as
follows:



|                    |  |   |        
|------------------- |  | - | -------
|Fiscal Year Ending: |  |   |        
|2008                |  | $ | 38,019 
|2009                |  |   | 37,423 
|2010                |  |   | 35,944 
|2011                |  |   | 34,390 
|2012                |  |   | 31,085 
|Thereafter          |  |   | 110,292
|                    |  |   |        
|                    |  | $ | 287,153
|                    |  |   |        



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Contingencies

Occasionally, the Company is a defendant in litigation arising in the ordinary course of its business, including claims resulting from slip and fall accidents, employment-related claims and claims from
guests or employees alleging illness, injury or other food quality, health or operational concerns. To date, none of these types of litigation, all of which are covered by insurance, has had a material effect on the Company and, as of the date of
this report, the Company is not a party to any material litigation.

10.    Employee Benefit Plans

In January 1994, the Company established a defined contribution plan for certain qualified employees as defined. Participants may contribute from 1% to
15% of pretax compensation, subject to certain limitations. The plan provides for certain discretionary contributions by the Company.

The
Company has also established an Executive Retirement Savings Plan (ERSP). The ERSP is a non-qualified deferred compensation plan for its highly compensated employees as defined in the ERSP and who are otherwise ineligible for
participation in the 401(k) plan. The ERSP allows participating employees to defer up to 100% of the receipt of their base compensation and their eligible bonuses. The plan provides for certain discretionary contributions by the Company. Employee
deferrals and Company discretionary matches are deposited into a rabbi trust established by the Company.

The Company recorded
contribution expenses of $524, $448 and $393 for fiscal 2007, 2006 and 2005, respectively for both the defined contribution plan and ERSP. The contributions are made subsequent to each fiscal year end.

In November 1999, the Company adopted an employee stock purchase plan (Purchase Plan) under Section 423 of the Internal Revenue Code of
1986 which became effective with the initial public offering in August 2000 and reserved 375,000 shares for issuance thereunder. In 2003, the Company increased the aggregate number of shares available for sale under the Purchase Plan to 750,000
shares. The Purchase Plan allows eligible employees to purchase common stock at a discount, but only through payroll deductions, during consecutive 24-month offering periods, subject to automatic reset if favorable to the employees. Each offering
period will be divided into four consecutive six-month purchase periods. The price at which the stock is purchased under the Purchase Plan is equal to 85% of the lower of the fair market value of the common stock on the first day of the offering
period and the fair market value of the common stock on the last day of the purchase period.

11.    Related Party Transactions

Neal Rosenfield, a real estate broker for the Restaurant and Retail Leasing Company and the brother of Richard L. Rosenfield, the
Companys co-Founder, co-Chief Executive Officer and co-President, received commissions paid by a third-party landlord related to our lease of certain restaurant locations of approximately $180 in fiscal year 2007.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12.    Quarterly Financial Data (Unaudited)

The following table presents selected quarterly financial data for the periods ending as indicated (in thousands, except diluted net income per share):



|                             |  |                  |         |                 |   |                    |  |                           |         |  |   |        
|---------------------------- |  | ---------------- | ------- | --------------- | - | ------------------ |  | ------------------------- | ------- |  | - | -------
|                             |  | April 1,2007     |         | July 1,2007     |   | September 30,2007  |  | December 30,2007 (b)     
|Quarter Ended:               |  |                  |         |                 |   |                    |  |                           |         |  |   |        
|Total revenues               |  | $                | 149,366 |                 | $ | 158,581            |  | $                         | 162,004 |  | $ | 162,933
|Operating income             |  |                  | 5,415   |                 |   | 9,622              |  |                           | 2,112   |  |   | 4,368  
|Net income                   |  |                  | 3,597   |                 |   | 6,320              |  |                           | 1,404   |  |   | 3,463  
|Diluted net income per share |  | $                | 0.12    |                 | $ | 0.21               |  | $                         | 0.05    |  | $ | 0.12   
|                             |  |                  |         |                
|                             |  | April 2,2006 (a) |         | July 2,2006 (a) |   | October 1,2006 (a) |  | December 31,2006 (a), (c)
|                             |  |                  |        
|Quarter Ended:               |  |                  |         |                 |   |                    |  |                           |         |  |   |        
|Total revenues               |  | $                | 129,698 |                 | $ | 136,168            |  | $                         | 142,764 |  | $ | 145,971
|Operating income             |  |                  | 6,650   |                 |   | 8,687              |  |                           | 9,769   |  |   | 4,865  
|Net income                   |  |                  | 4,606   |                 |   | 6,013              |  |                           | 6,651   |  |   | 3,731  
|Diluted net income per share |  | $                | 0.15    |                 | $ | 0.20               |  | $                         | 0.23    |  | $ | 0.13   



|(a) | Per share amounts adjusted for stock split effective June 19, 2007.
|--- | -------------------------------------------------------------------

|(b) | Includes legal settlement reserve of $2,300.
|--- | --------------------------------------------

|(c) | Includes store closure costs of $707.
|--- | -------------------------------------

13.    Subsequent Events

The Company amended its existing line of credit with Bank of America, N.A.
(Bank of America) which increased the credit facility from a maximum of $75.0 million to $100.0 million on January 30, 2008. There were no other material changes to the terms of the Amended and Restated Credit Agreement dated
June 30, 2004.

On February 1, 2008, the Company entered into an accelerated share repurchase agreement with Bank of America, an
unrelated third party, under which the Company is repurchasing an aggregate of $46.3 million of common stock. The Company funded this payment from borrowings under their revolving credit facility and available cash balances. The repurchase
is being made under a $50.0 million program authorized by the Board of Directors in August 2007. The collar provision provides for a cap and floor price pursuant to which shares of the Companys common stock will be purchased from Bank of
America.

Bank of America delivered 2,425,000 shares of the Companys common stock for retirement as of March 14, 2008. The
actual per share purchase price and the number of shares to be repurchased will be based on the volume weighted average price, or VWAP, of common stock which will be calculated over a period that began February 27, 2008 and will conclude
anywhere between, and including, May 7, 2008 and July 28, 2008. The number of shares expected to be purchased under the program will range from 2.8 million to 3.4 million.

The agreement contains other terms and conditions governing the accelerated share repurchase, including the circumstances under which Bank of America is
permitted to terminate the program early or extend the repurchase period and the circumstances under which we may be required to purchase shares at a price in excess of the cap price or accept a number of shares less than dictated by the floor price
set in the agreement.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On March 21, 2007, a class action lawsuit was filed in the San Diego Superior Court against the
Company. The lawsuit alleged violations of state wage and hour laws involving meal and rest breaks, and sought an unspecified amount in damages. On March 6, 2008, the Company entered into a settlement of all claims, subject only to court approval.
Under the settlement, class members can submit claims pursuant to a court approved process whereby the Company would pay an amount not to exceed $3.2 million to settle claims asserted on behalf of the class. Since the Company had not yet issued its
financial statements prior to the March 6, 2008 settlement date and the lawsuit was filed prior to December 30, 2007, the Company was required to accrue a legal settlement reserve in its 2007 financial statements. The Company recorded approximately
72%, or $2.3 million, of the entire $3.2 million potential liability as a legal settlement reserve, which is an estimate of the anticipated costs and claims that are expected to be incurred in connection with this case based on previous
claims-made case history.



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EXHIBIT INDEX



|          |  |                                                                                                                                                                                                                                       
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|3.1(K)    |  | Certificate of Incorporation                                                                                                                                                                                                          
|          | 
|3.2(K)    |  | Bylaws                                                                                                                                                                                                                                
|          | 
|4.1(K)    |  | Specimen Common Stock Certificate                                                                                                                                                                                                     
|          | 
|10.1(A)   |  | Memorandum of Understanding Regarding Form of Agreement between Host Marriott Services and California Pizza Kitchen, Inc. dated May 12, 1998                                                                                          
|          | 
|10.2(K)*  |  | California Pizza Kitchen, Inc. Employee Stock Purchase Plan adopted on November 2, 1999, as amended through December 22, 2004                                                                                                         
|          | 
|10.3(A)*  |  | California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan adopted February 5, 1998, as amended on July 21, 1998 and November 2, 1999 and forms of stock option agreement
thereunder                                 
|          | 
|10.4(A)*  |  | California Pizza Kitchen, Inc. Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Frederick R. Hipp dated March 31, 1998                                                                                 
|          | 
|10.5(B)   |  | Master Subsidiary Guaranty issued from Bank of America, N.A. by CPK Management Company and California Pizza Kitchen of Illinois, Inc. dated December 15, 2000                                                                         
|          | 
|10.6(C)*  |  | Third and Fourth Amendments to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan dated as of July 28, 2000 and May 1, 2001, respectively                                                                    
|          | 
|10.7(D)   |  | Stockholders Agreement among LA Food Show, Inc., Richard L. Rosenfield and Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen,
Inc., dated March 6, 2003                
|          | 
|10.8(D)   |  | Subscription Agreement among Richard L. Rosenfield, Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen, Inc., dated March 6, 2003                                        
|          | 
|10.9(D)   |  | Certificate of Determination of Series A 8% Convertible Preferred Stock of LA Food Show, Inc. filed with the California Secretary of State on March 4, 2003                                                                           
|          | 
|10.10(D)  |  | Amendment No. 1 to Stockholders Agreement among LA Food Show, Inc., Richard L. Rosenfield, Larry S. Flax as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California
Pizza Kitchen, Inc., dated March 11, 2003
|          | 
|10.11(E)  |  | Agreement for Purchase and Sale of Assets between CAH Restaurants of California, LLC and California Pizza Kitchen, Inc. dated as of December 29, 2003, and exhibits thereto                                                           
|          | 
|10.12(F)* |  | Fifth Amendment to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan, dated as of May 7, 2003                                                                                                               
|          | 
|10.13(F)* |  | Second Amendment to California Pizza Kitchen, Inc. Employee Stock Purchase Plan, dated as of May 7, 2003                                                                                                                              
|          | 
|10.14(G)* |  | Executive Retirement Savings Plans and Amendments thereto                                                                                                                                                                             
|          | 
|10.15(H)* |  | Employment Agreement, between H.G. Carrington, Jr. and California Pizza Kitchen, Inc., dated July 24, 2003                                                                                                                            
|          | 
|10.16(H)* |  | Separation Agreement, between Frederick R. Hipp and California Pizza Kitchen, Inc., dated July 15, 2003                                                                                                                               
|          | 
|10.17(I)* |  | Separation Agreement, between Tom Jenneman and California Pizza Kitchen, Inc., dated August 2, 2003                                                                                                                                   



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|          |  |                                                                                                                                                                                                                                                                                                                           
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|10.18(J)  |  | Amended and Restated Credit Agreement dated as of June 30, 2004 between California Pizza Kitchen, Inc. and Bank of America, N.A.                                                                                                                                                                                          
|          | 
|10.19(J)  |  | Form of Note issued from Bank of America, N.A. by California Pizza Kitchen, Inc. dated June 30, 2004                                                                                                                                                                                                                      
|          | 
|10.20(L)* |  | California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                                                                   
|          | 
|10.21(M)* |  | Form of option agreement under the California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                                
|          | 
|10.22(N)* |  | Form of restricted stock agreement under the California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                      
|          | 
|10.23(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated April 11, 2005                                                                                                                                                                                                               
|          | 
|10.24(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated April 11, 2005                                                                                                                                                                                                                       
|          | 
|10.25(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Susan M. Collyns, dated April 21, 2005                                                                                                                                                                                                                    
|          | 
|10.26(N)* |  | Stock Purchase Agreement among California Pizza Kitchen, Inc., a Delaware corporation, and Richard L. Rosenfield, Larry S. Flax, or his successors in trust, as trustee of the Larry S. Flax
Revocable Trust dated 6-18-02, as may be amended from time to time, Clint B. Coleman and Geraldine Wise, dated April 25, 2005
|          | 
|10.27(O)* |  | The California Pizza Kitchen Executive Bonus Plan                                                                                                                                                                                                                                                                         
|          | 
|10.28(P)* |  | Time Sharing Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated as of May 18, 2005                                                                                                                                                                                                         
|          | 
|10.29(P)* |  | Time Sharing Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated as of May 18, 2005                                                                                                                                                                                                                 
|          | 
|10.30(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated November 23, 2005                                                                                                                                                                                 
|          | 
|10.31(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated November 23, 2005                                                                                                                                                                         
|          | 
|10.32(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Karen M. Settlemyer dated, November 18, 2005                                                                                                                                                                           
|          | 
|10.33(R)* |  | Summary of Changes to Annual Compensation of Certain Executive Officers                                                                                                                                                                                                                                                   
|          | 
|10.34(S)  |  | Form of Indemnification Agreement                                                                                                                                                                                                                                                                                         
|          | 
|10.35(S)  |  | First Amendment to Amended and Restated Credit Agreement, dated June 19,2006                                                                                                                                                                                                                                              
|          | 
|10.36(S)  |  | Promissory Note payable to Bank of America, N.A. by the Company, dated June 19, 2006                                                                                                                                                                                                                                      
|          | 
|10.37(S)  |  | Consent and Reaffirmation of Guaranty by CPK Management Company, dated June 19, 2006                                                                                                                                                                                                                                      
|          | 
|10.38(T)  |  | Second Amendment to Amended and Restated Credit Agreement, dated January 30, 2008                                                                                                                                                                                                                                         
|          | 
|10.39(T)  |  | Promissory Note payable to Bank of America, N.A. by the Company, dated January 30, 2008                                                                                                                                                                                                                                   
|          | 
|10.40(T)  |  | Consent and Reaffirmation of Guaranty by CPK Management, dated January 30, 2008                                                                                                                                                                                                                                           
|          | 
|10.41(T)  |  | Accelerated Stock Repurchase Agreement, dated January 31, 2008, by and between the Company and Bank of America, N.A.                                                                                                                                                                                                      



57



---

##### Table of Contents

|     |  |                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|21   |  | List of Subsidiaries                                                                                                                                                             
|     | 
|23   |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                                                                      
|     | 
|31.1 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.2 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.3 |  | Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|32.1 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            
|     | 
|32.2 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            
|     | 
|32.3 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            



|* | Management contract or compensatory plan
|- | ----------------------------------------



|(A) | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-37778).
|--- | ----------------------------------------------------------------------------------------------------------



|(B) | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-53088).
|--- | ----------------------------------------------------------------------------------------------------------



|(C) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 14, 2001.
|--- | -----------------------------------------------------------------------------------------------



|(D) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 14, 2003.
|--- | ----------------------------------------------------------------------------------------------



|(E) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 12, 2004.
|--- | ----------------------------------------------------------------------------------------------



|(F) | Incorporated by reference to the registrants Registration Statement on Form S-8 (Registration 333-112365).
|--- | -----------------------------------------------------------------------------------------------------------



|(G) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 2, 2003.
|--- | ----------------------------------------------------------------------------------------------



|(H) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 6, 2003.
|--- | -------------------------------------------------------------------------------------------------



|(I) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed November 6, 2003.
|--- | ---------------------------------------------------------------------------------------------------



|(J) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 6, 2004.
|--- | -------------------------------------------------------------------------------------------------



|(K) | Incorporated by reference to the registrants current report on Form 8-K filed December 22, 2004.
|--- | -------------------------------------------------------------------------------------------------



|(L) | Incorporated by reference to the registrants Registration Statement of Form S-8 (Registration 333-121539).
|--- | -----------------------------------------------------------------------------------------------------------



|(M) | Incorporated by reference to the registrants Annual Report on Form 10-K filed April 4, 2005.
|--- | ---------------------------------------------------------------------------------------------



|(N) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 13, 2005.
|--- | -----------------------------------------------------------------------------------------------



|(O) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 12, 2005.
|--- | --------------------------------------------------------------------------------------------------



|(P) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed November 14, 2005.
|--- | ----------------------------------------------------------------------------------------------------



|(Q) | Incorporated by reference to the registrants Current Report on Form 8-K filed November 25, 2005.
|--- | -------------------------------------------------------------------------------------------------



|(R) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 17, 2006.
|--- | ----------------------------------------------------------------------------------------------



|(S) | Incorporated by reference to the registrants current report on Form 8-K filed June 20, 2006.
|--- | ---------------------------------------------------------------------------------------------



|(T) | Incorporated by reference to the registrants current report on Form 8-K filed February 1, 2008.
|--- | ------------------------------------------------------------------------------------------------



58



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



|Dated: March 14, 2008 | CALIFORNIA PIZZA KITCHEN, INC.
|--------------------- | ------------------------------

By:

/s/    LARRY S.
FLAXLarry S. Flax Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive Officer)By:

/s/    RICHARD L.
ROSENFIELDRichard L. Rosenfield Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive Officer)By:

/s/    SUSAN M.
COLLYNSSusan M. Collyns Chief Financial Officer, Chief Accounting Officer and Senior Vice President of Finance (Principal Financial and Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                   |  |                                                                                                                                     |  |               
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                          |  | Title                                                                                                                               |  | Date          
|                                                   |  |                                                                                                                                    
|/s/    LARRY S.
FLAX Larry S. Flax                 |  | Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive
Officer)                       |  | March 14, 2008
|                                                   |  |                                                                                                                                    
|/s/    RICHARD L.
ROSENFIELD Richard L. Rosenfield |  | Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive
Officer)                       |  | March 14, 2008
|                                                   |  |                                                                                                                                    
|/s/    SUSAN M.
COLLYNS Susan M. Collyns           |  | Chief Financial Officer, Chief Accounting Officer and Senior Vice President of Finance (Principal
Financial and Accounting Officer) |  | March 14, 2008
|                                                   |  |                                                                                                                                    
|/s/    WILLIAM C.
BAKER William C. Baker           |  | Director                                                                                                                            |  | March 14, 2008
|                                                   |  |                                                                                                                                    
|/s/    HENRY
GLUCK Henry Gluck                     |  | Director                                                                                                                            |  | March 14, 2008



59



---

##### Table of Contents

|                                               |  |          |  |               
|---------------------------------------------- |  | -------- |  | --------------
|Signature                                      |  | Title    |  | Date          
|                                               |  |         
|/s/    STEVEN C.
GOOD Steven C. Good           |  | Director |  | March 14, 2008
|                                               |  |         
|/s/    CHARLES G.
PHILLIPS Charles G. Phillips |  | Director |  | March 14, 2008
|                                               |  |         
|/s/    AVEDICK B.
POLADIAN Avedick B. Poladian |  | Director |  | March 14, 2008
|                                               |  |         
|/s/    ALAN I.
ROTHENBERG Alan I. Rothenberg   |  | Director |  | March 14, 2008



60



---

##### Table of Contents

EXHIBIT INDEX



|          |  |                                                                                                                                                                                                                                       
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|3.1(K)    |  | Certificate of Incorporation                                                                                                                                                                                                          
|          | 
|3.2(K)    |  | Bylaws                                                                                                                                                                                                                                
|          | 
|4.1(K)    |  | Specimen Common Stock Certificate                                                                                                                                                                                                     
|          | 
|10.1(A)   |  | Memorandum of Understanding Regarding Form of Agreement between Host Marriott Services and California Pizza Kitchen, Inc. dated May 12, 1998                                                                                          
|          | 
|10.2(K)*  |  | California Pizza Kitchen, Inc. Employee Stock Purchase Plan adopted on November 2, 1999, as amended through December 22, 2004                                                                                                         
|          | 
|10.3(A)*  |  | California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan adopted February 5, 1998, as amended on July 21, 1998 and November 2, 1999 and forms of stock option agreement
thereunder                                 
|          | 
|10.4(A)*  |  | California Pizza Kitchen, Inc. Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Frederick R. Hipp dated March 31, 1998                                                                                 
|          | 
|10.5(B)   |  | Master Subsidiary Guaranty issued from Bank of America, N.A. by CPK Management Company and California Pizza Kitchen of Illinois, Inc. dated December 15, 2000                                                                         
|          | 
|10.6(C)*  |  | Third and Fourth Amendments to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan dated as of July 28, 2000 and May 1, 2001, respectively                                                                    
|          | 
|10.7(D)   |  | Stockholders Agreement among LA Food Show, Inc., Richard L. Rosenfield and Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen,
Inc., dated March 6, 2003                
|          | 
|10.8(D)   |  | Subscription Agreement among Richard L. Rosenfield, Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen, Inc., dated March 6, 2003                                        
|          | 
|10.9(D)   |  | Certificate of Determination of Series A 8% Convertible Preferred Stock of LA Food Show, Inc. filed with the California Secretary of State on March 4, 2003                                                                           
|          | 
|10.10(D)  |  | Amendment No. 1 to Stockholders Agreement among LA Food Show, Inc., Richard L. Rosenfield, Larry S. Flax as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California
Pizza Kitchen, Inc., dated March 11, 2003
|          | 
|10.11(E)  |  | Agreement for Purchase and Sale of Assets between CAH Restaurants of California, LLC and California Pizza Kitchen, Inc. dated as of December 29, 2003, and exhibits thereto                                                           
|          | 
|10.12(F)* |  | Fifth Amendment to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan, dated as of May 7, 2003                                                                                                               
|          | 
|10.13(F)* |  | Second Amendment to California Pizza Kitchen, Inc. Employee Stock Purchase Plan, dated as of May 7, 2003                                                                                                                              
|          | 
|10.14(G)* |  | Executive Retirement Savings Plans and Amendments thereto                                                                                                                                                                             
|          | 
|10.15(H)* |  | Employment Agreement, between H.G. Carrington, Jr. and California Pizza Kitchen, Inc., dated July 24, 2003                                                                                                                            
|          | 
|10.16(H)* |  | Separation Agreement, between Frederick R. Hipp and California Pizza Kitchen, Inc., dated July 15, 2003                                                                                                                               
|          | 
|10.17(I)* |  | Separation Agreement, between Tom Jenneman and California Pizza Kitchen, Inc., dated August 2, 2003                                                                                                                                   



61



---

##### Table of Contents

|          |  |                                                                                                                                                                                                                                                                                                                           
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          | 
|10.18(J)  |  | Amended and Restated Credit Agreement dated as of June 30, 2004 between California Pizza Kitchen, Inc. and Bank of America, N.A.                                                                                                                                                                                          
|          | 
|10.19(J)  |  | Form of Note issued from Bank of America, N.A. by California Pizza Kitchen, Inc. dated June 30, 2004                                                                                                                                                                                                                      
|          | 
|10.20(L)* |  | California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                                                                   
|          | 
|10.21(M)* |  | Form of option agreement under the California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                                
|          | 
|10.22(N)* |  | Form of restricted stock agreement under the California Pizza Kitchen, Inc. 2004 Omnibus Incentive Compensation Plan                                                                                                                                                                                                      
|          | 
|10.23(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated April 11, 2005                                                                                                                                                                                                               
|          | 
|10.24(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated April 11, 2005                                                                                                                                                                                                                       
|          | 
|10.25(N)* |  | Employment Agreement between California Pizza Kitchen, Inc. and Susan M. Collyns, dated April 21, 2005                                                                                                                                                                                                                    
|          | 
|10.26(N)* |  | Stock Purchase Agreement among California Pizza Kitchen, Inc., a Delaware corporation, and Richard L. Rosenfield, Larry S. Flax, or his successors in trust, as trustee of the Larry S. Flax
Revocable Trust dated 6-18-02, as may be amended from time to time, Clint B. Coleman and Geraldine Wise, dated April 25, 2005
|          | 
|10.27(O)* |  | The California Pizza Kitchen Executive Bonus Plan                                                                                                                                                                                                                                                                         
|          | 
|10.28(P)* |  | Time Sharing Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated as of May 18, 2005                                                                                                                                                                                                         
|          | 
|10.29(P)* |  | Time Sharing Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated as of May 18, 2005                                                                                                                                                                                                                 
|          | 
|10.30(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Larry S. Flax, dated November 23, 2005                                                                                                                                                                                 
|          | 
|10.31(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Richard L. Rosenfield, dated November 23, 2005                                                                                                                                                                         
|          | 
|10.32(Q)* |  | Amendment No. 1 to Non-Qualified Stock Option Agreement between California Pizza Kitchen, Inc. and Karen M. Settlemyer dated, November 18, 2005                                                                                                                                                                           
|          | 
|10.33(R)* |  | Summary of Changes to Annual Compensation of Certain Executive Officers                                                                                                                                                                                                                                                   
|          | 
|10.34(S)  |  | Form of Indemnification Agreement                                                                                                                                                                                                                                                                                         
|          | 
|10.35(S)  |  | First Amendment to Amended and Restated Credit Agreement, dated June 19,2006                                                                                                                                                                                                                                              
|          | 
|10.36(S)  |  | Promissory Note payable to Bank of America, N.A. by the Company, dated June 19, 2006                                                                                                                                                                                                                                      
|          | 
|10.37(S)  |  | Consent and Reaffirmation of Guaranty by CPK Management Company, dated June 19, 2006                                                                                                                                                                                                                                      
|          | 
|10.38(T)  |  | Second Amendment to Amended and Restated Credit Agreement, dated January 30, 2008                                                                                                                                                                                                                                         
|          | 
|10.39(T)  |  | Promissory Note payable to Bank of America, N.A. by the Company, dated January 30, 2008                                                                                                                                                                                                                                   
|          | 
|10.40(T)  |  | Consent and Reaffirmation of Guaranty by CPK Management, dated January 30, 2008                                                                                                                                                                                                                                           
|          | 
|10.41(T)  |  | Accelerated Stock Repurchase Agreement, dated January 31, 2008, by and between the Company and Bank of America, N.A.                                                                                                                                                                                                      



62



---

##### Table of Contents

|     |  |                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|21   |  | List of Subsidiaries                                                                                                                                                             
|     | 
|23   |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                                                                      
|     | 
|31.1 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.2 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.3 |  | Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|32.1 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            
|     | 
|32.2 |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            
|     | 
|32.3 |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            



|* | Management contract or compensatory plan
|- | ----------------------------------------



|(A) | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-37778).
|--- | ----------------------------------------------------------------------------------------------------------



|(B) | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-53088).
|--- | ----------------------------------------------------------------------------------------------------------



|(C) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 14, 2001.
|--- | -----------------------------------------------------------------------------------------------



|(D) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 14, 2003.
|--- | ----------------------------------------------------------------------------------------------



|(E) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 12, 2004.
|--- | ----------------------------------------------------------------------------------------------



|(F) | Incorporated by reference to the registrants Registration Statement on Form S-8 (Registration 333-112365).
|--- | -----------------------------------------------------------------------------------------------------------



|(G) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 2, 2003.
|--- | ----------------------------------------------------------------------------------------------



|(H) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 6, 2003.
|--- | -------------------------------------------------------------------------------------------------



|(I) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed November 6, 2003.
|--- | ---------------------------------------------------------------------------------------------------



|(J) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 6, 2004.
|--- | -------------------------------------------------------------------------------------------------



|(K) | Incorporated by reference to the registrants current report on Form 8-K filed December 22, 2004.
|--- | -------------------------------------------------------------------------------------------------



|(L) | Incorporated by reference to the registrants Registration Statement of Form S-8 (Registration 333-121539).
|--- | -----------------------------------------------------------------------------------------------------------



|(M) | Incorporated by reference to the registrants Annual Report on Form 10-K filed April 4, 2005.
|--- | ---------------------------------------------------------------------------------------------



|(N) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed May 13, 2005.
|--- | -----------------------------------------------------------------------------------------------



|(O) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed August 12, 2005.
|--- | --------------------------------------------------------------------------------------------------



|(P) | Incorporated by reference to the registrants Quarterly Report on Form 10-Q filed November 14, 2005.
|--- | ----------------------------------------------------------------------------------------------------



|(Q) | Incorporated by reference to the registrants Current Report on Form 8-K filed November 25, 2005.
|--- | -------------------------------------------------------------------------------------------------



|(R) | Incorporated by reference to the registrants Annual Report on Form 10-K filed March 17, 2006.
|--- | ----------------------------------------------------------------------------------------------



|(S) | Incorporated by reference to the registrants current report on Form 8-K filed June 20, 2006.
|--- | ---------------------------------------------------------------------------------------------



|(T) | Incorporated by reference to the registrants current report on Form 8-K filed February 1, 2008.
|--- | ------------------------------------------------------------------------------------------------



63