##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  þ


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 28, 2008oro


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File
    Number: 0-25123
      P.F. Changs China Bistro,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

86-0815086(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)7676 East Pinnacle Peak Road
    Scottsdale, AZ

85255(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (480) 888-3000
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par Value

NASDAQ Global Select Market   Securities registered pursuant to Section 12(g) of the
    Act:
 NONE
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
    (to the extent indicated herein)




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##### 





TABLE OF
    CONTENTS
   
 Item



PagePART I1.

Business


31A.

Risk Factors


71B.

Unresolved Staff Comments


132.

Properties


143.

Legal Proceedings


154.

Submission of Matters to a Vote of Security
    Holders


15PART II5.

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


166.

Selected Financial Data


177.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


187A.

Quantitative and Qualitative Disclosures About
    Market Risk


388.

Financial Statements and Supplementary Data


399.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


729A.

Controls and Procedures


729B.

Other Information


72PART III10.

Directors, Executive Officers and Corporate
    Governance


7411.

Executive Compensation


7412.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


7413.

Certain Relationships and Related Transactions,
    and Director Independence


7414.

Principal Accounting Fees and Services


74PART IV15.

Exhibits, Financial Statement Schedules


74EX-3.(ii)EX-10.34EX-21.1EX-23.1EX-31.1EX-31.2EX-31.3EX-32.1EX-32.2EX-32.3   2




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##### Table of Contents



PART I  Item 1.
    Business  General
        Concept
    and Strategy
    Menu
  Bistro
  fan tsai, Fan tsai
 3




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##### Table of Contents



Pei
    Wei
      Operations
  Bistro
       4




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##### Table of Contents



Pei
    Wei
        Global
    Brand Development
    Marketing
      Management
    Information Systems
    Supply
    Chain Management
   5




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##### Table of Contents



Competition
      Employees
    Unit
    Economics
  www.pfcb.com.
  Access to
    Information
  www.pfcb.com. Form 10-K, Form 10-Q, Form 8-K,
 6




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##### Table of Contents



Item 1A.
    Risk
    Factors  The
    failure of our existing or new restaurants to achieve expected
    results could have a negative impact on our revenues and
    financial results, including potential impairment of the
    long-lived assets of our restaurants, and could negatively
    impact our stock price.
      
    lower customer traffic or average guest check, which negatively
    impacts comparable store sales, net revenues, operating income,
    operating margins and earnings per share, due to:  
    the impact of initiatives by competitors and increased
    competition generally;
    lack of customer acceptance of new menu items or potential price
    increases necessary to cover higher input costs;
    unfavorable general economic conditions in the markets in which
    we operate, including, but not limited to, downturns in the
    housing market, higher interest rates, higher unemployment
    rates, lower disposable income due to higher energy or other
    consumer costs, lower consumer confidence, and other events or
    factors that adversely affect consumer spending, including the
    ongoing financial crises;
    customers trading down to lower priced items
    and/or
    shifting to competitors with lower priced products; or
    changes in consumer preferences or declines in general consumer
    demand for Asian menu items  
    cost increases that are either wholly or partially beyond our
    control, such as:  
    costs for commodities that we do not or cannot effectively hedge
    labor costs such as increased health care costs, general market
    wage levels and workers compensation insurance costs;
    operating expenses, such as utilities and other expenses that
    are impacted by energy price fluctuations
    litigation against the Company, particularly class action
    litigation;
    construction costs associated with new store openings;
    information technology costs and other logistical resources
    necessary to maintain and support the global growth of our
    business; and
    material interruptions in our supply chain, such as a material
    interruption of ingredient supply due to the failures of
    third-party suppliers, or interruptions in service by common
    carriers that ship goods within the Companys distribution
    channels   7




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Changes
    in general economic and political conditions affect consumer
    spending and may harm our revenues, operating results or
    liquidity.
      Our
    initiatives to improve the operating performance of our Pei Wei
    concept may not be successful and could adversely impact the
    financial results of the Company.
    Changes
    in food costs could negatively impact our revenues and results
    of operations.
   8




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We are
    highly dependent on the financial performance of restaurants
    concentrated in certain geographic areas.
    Litigation
    could have a material adverse effect on our
    business.
      Our
    inability to retain key personnel could negatively impact our
    business.
    Potential
    labor shortages may delay planned openings or damage customer
    relations.
    Changes
    in government legislation may increase our labor costs and have
    a material adverse effect on our business and financial
    results.
   9




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Intense
    competition in the restaurant industry could prevent us from
    increasing or sustaining our revenues and
    profitability.
      Our
    federal, state and local tax returns may, from time to time, be
    selected for audit by the taxing authorities, which may result
    in tax assessments or penalties that could have a material
    adverse impact on our results of operations and financial
    position.
    Fluctuating
    insurance requirements and costs could negatively impact our
    profitability and projections.
      The
    inability to develop and construct our restaurants within
    projected budgets and time periods will adversely affect our
    business and financial condition.
   10




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##### Table of Contents




    landlord delays;
    labor disputes;
    shortages of materials and skilled labor;
    weather interference;
    unforeseen engineering problems;
    environmental problems;
    construction or zoning problems;
    local government regulations;
    modifications in design to the size and scope of the
    projects; and
    other unanticipated increases in costs, any of which could give
    rise to delays or cost overruns.    Development
    is critical to our long-term success.
    
    identification and availability of suitable locations;
    competition for restaurant sites;
    negotiation of favorable lease arrangements;
    timely development of commercial, residential, street or highway
    construction near our restaurants;
    management of the costs of construction and development of new
    restaurants;
    securing required governmental approvals and permits;
    recruitment of qualified operating personnel, particularly
    managers and chefs;


    weather conditions;
    competition in new markets; and
    general economic conditions, including those arising from the
    current economic crisis described above.   11




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Our
    failure to comply with governmental regulations could harm our
    business and our reputation.
    
    the environment;
    building construction;
    zoning requirements;
    the preparation and sale of food and alcoholic
    beverages; and
    employment.            Our
    financial results may also fluctuate significantly as a result
    of our accounting for certain aspects of our partnership
    program.
   12




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The
    implementation of our new accounting software system could
    impact our ability to timely and/or accurately prepare financial
    reports or impact the effectiveness of our internal controls
    over financial reporting.
    Special
    Note Regarding Forward-Looking Statements
  Form 10-K Form 10-K,
  Item 1B.
    Unresolved
    Staff Comments   13




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Item 2.
    Properties    State

Bistro


Pei Wei


TotalAlabama


2







2Arizona


9



19



28Arkansas


2



1



3California


35



14



49Colorado


7



5



12Connecticut


2







2Florida


14



17



31Georgia


5







5Idaho


1







1Illinois


5







5Indiana


2







2Iowa


1







1Kansas


1



3



4Kentucky


2







2Louisiana


2







2Massachusetts


4







4Maryland


6



2



8Michigan


5



5



10Minnesota


2



3



5Mississippi


1







1Missouri


3



2



5Nebraska


1







1Nevada


5



3



8New Jersey


6



2



8New Mexico


1



2



3New York


4







4North Carolina


6



4



10Ohio


7



3



10Oklahoma


2



6



8Oregon


4







4Pennsylvania


4



2



6South Carolina


2







2Tennessee


5



6



11Texas


17



51



68Utah


2



4



6Virginia


5



5



10Washington


5







5Wisconsin


2







2189



159



348  14




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Expansion
    Strategy and Site Selection
    Form 10-K.
        Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   15




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

High


LowApril 1, 2007

$
47.10


$
36.52July 1, 2007

$
44.57


$
34.69September 30, 2007

$
38.38


$
29.55December 30, 2007

$
30.67


$
22.60March 30, 2008

$
32.48


$
20.41June 29, 2008

$
33.00


$
22.30September 28, 2008

$
30.00


$
21.15December 28, 2008

$
24.14


$
14.51       Issuer
    Purchases of Equity Securities
  Rule 10b5-1
   16




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Item 6.
    Selected
    Financial Data    Fiscal Year(1)2008


2007


2006


2005


2004(In thousands, except per share amounts)Statement of Income Data:Revenues

$
1,198,124


$
1,084,193


$
932,116


$
806,838


$
706,362Costs and expenses:Cost of sales


325,630



297,242



254,923



223,966



200,556Labor


396,911



364,074



307,573



265,274



231,655Operating


198,967



172,147



145,309



121,849



99,138Occupancy


69,809



62,164



51,958



42,586



37,637General and administrative


77,488



66,968



56,030



41,117



36,369Depreciation and amortization


68,711



55,988



44,378



36,782



29,120Preopening expense


8,457



14,310



11,922



9,102



7,793Partner investment expense(2)


(354
)


(2,012
)


4,371



4,800



17,671Total costs and expenses


1,145,619



1,030,881



876,464



745,476



659,939Income from operations


52,505



53,312



55,652



61,362



46,423Interest and other income (expense), net


(3,362
)


(100
)


1,315



1,841



612Minority interest


(1,933
)


(4,169
)


(8,116
)


(8,227
)


(10,078
)Income from continuing operations before provision for income
    taxes


47,210



49,043



48,851



54,976



36,957Provision for income taxes


(12,193
)


(12,420
)


(14,078
)


(17,033
)


(10,751
)Income from continuing operations


35,017



36,623



34,773



37,943



26,206Loss from discontinued operations, net of tax(3)(4)


(7,591
)


(4,560
)


(1,520
)


(147
)


(152
)Net Income

$
27,426


$
32,063


$
33,253


$
37,796


$
26,054Income from continuing operations per share:Basic

$
1.47


$
1.44


$
1.33


$
1.44


$
1.02Diluted

$
1.45


$
1.41


$
1.30


$
1.41


$
0.99Weighted average shares used in computation:Basic


23,776



25,473



26,075



26,271



25,727Diluted


24,080



25,899



26,737



27,000



26,575   17




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As of


As of


As of


As of


As ofDecember 28,


December 30,


December 31,


January 1,


January 2,2008


2007


2006


2006


2005(In thousands)Balance Sheet Data:Cash and cash equivalents

$
40,951


$
24,055


$
31,589


$
31,948


$
66,409Short-term investments (including restricted short-term
    investments)














42,410



5,000Total assets


667,363



622,630



514,045



474,859



390,492Long-term debt


82,496



90,828



13,723



5,360



545Common stockholders equity


320,826



293,887



289,525



293,898



244,957     (1)
    
    We operate on a 52/53-week year, with the fiscal year ending on
    the Sunday closest to December 31. Fiscal years 2008, 2007,
    2006, and 2005 each were comprised of 52 weeks. Fiscal year
    2004 was comprised of 53 weeks.(2)
    
    Partner investment expense increased during 2004 as a result of
    a $12.5 million modification of certain partnership
    agreements.(3)
    
    As a result of our decision to exit operations of Taneko, the
    results of Taneko (including a related asset impairment charge
    recognized during fiscal 2007) were classified as a
    discontinued operation for all periods presented as discussed
    further in Note 2 to our consolidated financial statements.(4)
    
    As a result of our decision to close 10 Pei Wei stores in fiscal
    2008, the results of those 10 Pei Wei stores (including related
    asset impairment, lease termination and severance charges
    recognized during the third and fourth quarters of fiscal
    2008) were classified as discontinued operations for all
    periods presented as discussed further in Note 2 to our
    consolidated financial statements.    Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
    Our
    restaurants
    Bistro
    Pei
    Wei
   18




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Our
    strategy
      Our
    challenges
       19




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Our
    2008 Financial Results
      
    Consolidated revenue growth of 10.5 percent to
    $1.2 billion, driven primarily by new restaurant openings,
    partially offset by a decline in comparable store sales at both
    concepts;
    A decrease in income from continuing operations decrease of
    4.4 percent to $35.0 million;
    An increase in diluted income per share from continuing
    operations increase of 2.8 percent to $1.45 partially due
    to the full year benefit of lower diluted shares outstanding
    principally resulting from prior share repurchases;
    A loss from discontinued operations (net of tax) of
    $7.6 million, including the impact of a $7.5 million
    pretax asset impairment charge and $2.7 million of lease
    termination and severance charges in connection with 10 Pei
    Wei store closures;
    17 new Bistro openings and 25 new Pei Wei openings.    2009
    Outlook
          2009
    Development
  Bistro
   20




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Pei
    Wei
    Global
    Brand Development
    Operating
    Statistics
    
    Average weekly sales represents an average sales amount per
    restaurant and helps gauge the changes in traffic, pricing and
    brand development. New restaurants are included in our average
    weekly sales comparison at the start of their thirteenth month
    of operation. It is not uncommon in the casual dining industry
    for new restaurant locations to open with an initial honeymoon
    period of higher than normal sales volumes and then experience a
    drop-off in sales after initial customer trials.
    Total revenues by class year helps assess the sales performance
    of our new and existing restaurants as well as the growth of
    each concept as we continue our expansion strategy.
    Return on invested capital is a key profitability measure that
    provides an indication of the long-term health of our concepts.
    This metric is based on a comparison of operating profit to the
    average capital invested in our restaurants. We believe return
    on invested capital is a critical indicator in evaluating our
    ability to create long-term value for our shareholders. 21




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##### Table of Contents



Revenues


Average Weekly SalesYear of Unit Opening

Units


2008


2007


2006


2008


2007


2006BistroPre-2001


51


$
294,147


$
306,150


$
310,896


$
111,377


$
115,441


$
117,4972001


13



71,430



72,863



74,457



105,666



107,786



110,1432002


14



68,872



69,390



71,201



94,603



95,316



97,8032003


18



95,740



98,101



98,844



102,287



104,809



105,6022004


18



78,853



81,263



81,705



84,245



86,817



87,2922005


18



79,875



83,259



86,164



85,337



88,953



92,0562006


20



90,702



96,792



33,272



87,214



93,069



101,1322007


20



98,756



41,687







94,958



108,279



2008


17



41,369











94,019







Total Bistro


189


$
919,744


$
849,505


$
756,539


$
98,127


$
102,486


$
105,265Pei Wei(1)2000


1


$
2,760


$
2,902


$
3,089


$
53,084


$
55,803


$
59,4062001


4



7,769



8,307



8,701



37,350



39,938



41,8302002


11



21,475



23,168



24,081



37,543



40,503



42,0992003


17



33,982



36,021



36,049



38,440



40,748



40,7802004


19



39,357



40,525



40,002



39,836



41,017



40,4882005


23



42,598



43,458



42,080



35,618



36,337



35,1842006


27



49,197



50,383



21,480



35,041



35,885



38,4952007


32



52,792



29,673







31,726



34,909



2008


25



28,231











34,053







Total Pei Wei


159


$
278,161


$
234,437


$
175,482


$
35,675


$
38,095


$
39,363     (1)
    
    Reflects revenues and average weekly sales for Pei Wei
    continuing operations only.    Critical
    Accounting Policies
    Partnership
    Structure
   22




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Lease
    Obligations
        and/or
 23




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Share-Based
    Compensation
  Share-Based Payment
  Impairment
    of Long-Lived Assets
    Self
    Insurance
    Income
    Taxes
       24




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##### Table of Contents



Results
    of Operations
    Fiscal
    2008 compared to Fiscal 2007
    Fiscal Year2008


% of Revenues


2007


% of Revenues


Change


% ChangeRevenues

$
1,198,124



100.0
%

$
1,084,193



100.0
%

$
113,931



10.5
%Costs and expenses:Cost of sales


325,630



27.2
%


297,242



27.4
%


28,388



9.6
%Labor


396,911



33.1
%


364,074



33.6
%


32,837



9.0
%Operating


198,967



16.6
%


172,147



15.9
%


26,820



15.6
%Occupancy


69,809



5.8
%


62,164



5.7
%


7,645



12.3
%General and administrative


77,488



6.5
%


66,968



6.2
%


10,520



15.7
%Depreciation and amortization


68,711



5.7
%


55,988



5.2
%


12,723



22.7
%Preopening expense


8,457



0.7
%


14,310



1.3
%


(5,853
)


(40.9
)%Partner investment expense


(354
)


0.0
%


(2,012
)


(0.2
)%


1,658



(82.4
)%Total costs and expenses


1,145,619



95.6
%


1,030,881



95.1
%


114,738



11.1
%Income from operations


52,505



4.4
%


53,312



4.9
%


(807
)


(1.5
)%Interest and other income (expense), net


(3,362
)


(0.3
)%


(100
)


0.0
%


(3,262
)


Minority interest


(1,933
)


(0.2
)%


(4,169
)


(0.4
)%


2,236



(53.6
)%Income from continuing operations before provision for income
    taxes


47,210



3.9
%


49,043



4.5
%


(1,833
)


(3.7
)%Provision for income taxes


(12,193
)


(1.0
)%


(12,420
)


(1.1
)%


227



(1.8
)%Income from continuing operations


35,017



2.9
%


36,623



3.4
%


(1,606
)


(4.4
)%Loss from discontinued operations, net of tax


(7,591
)


(0.6
)%


(4,560
)


(0.4
)%


(3,031
)


66.5
%Net Income

$
27,426



2.3
%

$
32,063



3.0
%

$
(4,637
)


(14.5
)%    25




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##### Table of Contents



Fiscal Year% of





% of2008


Revenues


2007


Revenues


Change


% ChangeRevenues

$
919,963



100.0
%

$
849,743



100.0
%

$
70,220



8.3
%Costs and expenses:Cost of sales


249,911



27.2
%


232,578



27.4
%


17,333



7.5
%Labor


301,967



32.8
%


282,919



33.3
%


19,048



6.7
%Operating


149,083



16.2
%


131,863



15.5
%


17,220



13.1
%Occupancy


50,670



5.5
%


47,059



5.5
%


3,611



7.7
%Minority interest


1,361



0.1
%


3,351



0.4
%


(1,990
)


(59.4
)%Depreciation and amortization


51,091



5.6
%


42,294



5.0
%


8,797



20.8
%Preopening expense


5,677



0.6
%


9,012



1.1
%


(3,335
)


(37.0
)%Partner investment expense


(1,066
)


(0.1
)%


(3,358
)


(0.4
)%


2,292



(68.3
)%       Fiscal Year% of





% of2008


Revenues


2007


Revenues


Change


% ChangeRevenues

$
278,161



100.0
%

$
234,450



100.0
%

$
43,711



18.6
%Costs and expenses:Cost of sales


75,719



27.2
%


64,664



27.6
%


11,055



17.1
%Labor


94,944



34.1
%


81,155



34.6
%


13,789



17.0
%Operating


49,884



17.9
%


40,284



17.2
%


9,600



23.8
%Occupancy


19,139



6.9
%


15,105



6.4
%


4,034



26.7
%Minority interest


572



0.2
%


818



0.3
%


(246
)


(30.1
)%Depreciation and amortization


16,158



5.8
%


12,278



5.2
%


3,880



31.6
%Preopening expense


2,780



1.0
%


5,298



2.3
%


(2,518
)


(47.5
)%Partner investment expense


712



0.3
%


1,346



0.6
%


(634
)


(47.1
)%     Revenues
    Bistro:
  Pei Wei:
 26




---



##### Table of Contents



Costs and
    Expenses
  Cost of
    Sales
    Labor
    Bistro:
  Pei Wei:
  Operating
    Bistro:
  Pei Wei:
  Occupancy
    Bistro:
 27




---



##### Table of Contents



Pei Wei:
  General
    and Administrative
      Depreciation
    and Amortization
    Bistro:
  Pei Wei:
  Preopening
    Expense
    Bistro:
  Pei Wei:
  Partner
    Investment Expense
   28




---



##### Table of Contents



Bistro:
  Pei Wei:
  Interest
    and Other Income (Expense), Net
      Minority
    Interest
    Bistro:
  Pei Wei:
  Provision
    for Income Taxes
      Loss on
    Discontinued Operations, Net of Tax
   29




---



##### Table of Contents



Fiscal
    2007 compared to Fiscal 2006
    Fiscal Year% of





% of2007


Revenues


2006


Revenues


$ Change


% ChangeRevenues

$
1,084,193



100.0
%

$
932,116



100.0
%

$
152,077



16.3
%Costs and expenses:Cost of sales


297,242



27.4
%


254,923



27.3
%


42,319



16.6
%Labor


364,074



33.6
%


307,573



33.0
%


56,501



18.4
%Operating


172,147



15.9
%


145,309



15.6
%


26,838



18.5
%Occupancy


62,164



5.7
%


51,958



5.6
%


10,206



19.6
%General and administrative


66,968



6.2
%


56,030



6.0
%


10,938



19.5
%Depreciation and amortization


55,988



5.2
%


44,378



4.8
%


11,610



26.2
%Preopening expense


14,310



1.3
%


11,922



1.3
%


2,388



20.0
%Partner investment expense


(2,012
)


(0.2
)%


4,371



0.5
%


(6,383
)


Total costs and expenses


1,030,881



95.1
%


876,464



94.0
%


154,417



17.6
%Income from operations


53,312



4.9
%


55,652



6.0
%


(2,340
)


(4.2
)%Interest and other income (expense), net


(100
)


0.0
%


1,315



0.1
%


(1,415
)


Minority interest


(4,169
)


(0.4
)%


(8,116
)


(0.9
)%


3,947



(48.6
)%Income from continuing operations before provision for income
    taxes


49,043



4.5
%


48,851



5.2
%


192



0.4
%Provision for income taxes


(12,420
)


(1.1
)%


(14,078
)


(1.5
)%


1,658



(11.8
)%Income from continuing operations


36,623



3.4
%


34,773



3.7
%


1,850



5.3
%Loss from discontinued operations, net of tax


(4,560
)


(0.4
)%


(1,520
)


(0.2
)%


(3,040
)


Net Income

$
32,063



3.0
%

$
33,253



3.6
%

$
(1,190
)


(3.6
)%    30




---



##### Table of Contents



Fiscal Year% of





% of2007


Revenues


2006


Revenues


Change


% ChangeRevenues

$
849,743



100.0
%

$
756,634



100.0
%

$
93,109



12.3
%Costs and expenses:Cost of sales


232,578



27.4
%


206,567



27.3
%


26,011



12.6
%Labor


282,919



33.3
%


247,097



32.7
%


35,822



14.5
%Operating


131,863



15.5
%


115,465



15.3
%


16,398



14.2
%Occupancy


47,059



5.5
%


40,683



5.4
%


6,376



15.7
%Minority interest


3,351



0.4
%


6,993



0.9
%


(3,642
)


(52.1
)%Depreciation and amortization


42,294



5.0
%


34,451



4.6
%


7,843



22.8
%Preopening expense


9,012



1.1
%


8,004



1.1
%


1,008



12.6
%Partner investment expense


(3,358
)


(0.4
)%


3,475



0.5
%


(6,833
)


       Fiscal Year% of





% of2007


Revenues


2006


Revenues


Change


% ChangeRevenues

$
234,450



100.0
%

$
175,482



100.0
%

$
58,968



33.6
%Costs and expenses:Cost of sales


64,664



27.6
%


48,356



27.6
%


16,308



33.7
%Labor


81,155



34.6
%


60,476



34.5
%


20,679



34.2
%Operating


40,284



17.2
%


29,844



17.0
%


10,440



35.0
%Occupancy


15,105



6.4
%


11,275



6.4
%


3,830



34.0
%Minority interest


818



0.3
%


1,123



0.6
%


(305
)


(27.2
)%Depreciation and amortization


12,278



5.2
%


8,790



5.0
%


3,488



39.7
%Preopening expense


5,298



2.3
%


3,919



2.2
%


1,379



35.2
%Partner investment expense


1,346



0.6
%


896



0.5
%


450



50.2
%     Revenues
    Bistro:
  Pei Wei:
 31




---



##### Table of Contents



Costs and
    Expenses
  Cost of
    Sales
    Bistro:
  Pei Wei:
  Labor
    Bistro:
  Pei Wei:
  Operating
    Bistro:
  Pei Wei:
 32




---



##### Table of Contents



Occupancy
    Bistro:
  Pei Wei:
  General
    and Administrative
    Depreciation
    and Amortization
    Bistro:
  Pei Wei:
  Preopening
    Expense
    Bistro:
  Pei Wei:
  Partner
    Investment Expense
    Bistro:
 33




---



##### Table of Contents



Pei Wei:
  Interest
    and Other Income (Expense), Net
    Minority
    Interest
    Bistro:
  Pei Wei:
  Provision
    for Income Taxes
  Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109.
  Loss on
    Discontinued Operations, Net of Tax
  Loss on Discontinued
    Operations, Net of Tax
 34




---



##### Table of Contents



Quarterly
    Results
    Fiscal 2008


Fiscal 2007First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterRevenues, in thousands

$
305,917


$
301,533


$
295,877


$
294,797


$
262,014


$
264,660


$
268,120


$
289,399Costs and expenses:Cost of sales


27.3
%


27.2
%


27.2
%


27.0
%


27.5
%


27.3
%


27.3
%


27.5
%Labor


33.8



33.2



33.1



32.4



33.6



33.7



33.9



33.1Operating


15.7



16.4



17.6



16.7



15.5



15.8



16.2



16.0Occupancy


5.8



5.8



5.8



5.9



5.6



5.8



5.9



5.7General and administrative


6.1



6.3



6.1



7.4



6.3



5.9



6.4



6.1Depreciation and amortization


5.4



5.7



5.8



6.1



4.7



5.0



5.4



5.4Preopening expense


0.9



0.6



0.5



0.8



0.9



1.2



1.8



1.4Partner investment expense


0.1



(0.2
)


0.0



(0.1
)


(0.5
)


(0.2
)


(0.0
)


(0.0
)Total costs and expenses


95.0



95.0



96.3



96.1



93.7



94.5



96.8



95.3Income from operations


5.0



5.0



3.7



3.9



6.3



5.5



3.2



4.7Interest and other income (expense), net


(0.3
)


(0.3
)


(0.3
)


(0.2
)


0.1



0.1



(0.0
)


(0.2
)Minority interest


(0.2
)


(0.2
)


(0.1
)


(0.1
)


(0.6
)


(0.4
)


(0.3
)


(0.2
)Income from continuing operations before provision for income
    taxes


4.4



4.5



3.3



3.5



5.8



5.1



2.9



4.3Provision for income taxes


(1.2
)


(1.2
)


(0.7
)


(1.0
)


(1.6
)


(1.4
)


(0.7
)


(1.0
)Income from continuing operations


3.3
%


3.3
%


2.6
%


2.5
%


4.2
%


3.8
%


2.2
%


3.3
%Loss from discontinued operations, net of tax


(0.1
)


(0.2
)


(1.6
)


(0.7
)


(0.2
)


(0.3
)


(0.3
)


(0.9
)Net Income


3.2
%


3.1
%


1.0
%


1.8
%


4.0
%


3.5
%


2.0
%


2.4
%     Liquidity
    and Capital Resources
      2008


2007


2006Net cash provided by operating activities

$
139,753


$
137,920


$
123,404Net cash used in investing activities


(97,649
)


(166,376
)


(75,065
)Net cash provided by (used in) financing activities


(25,208
)


20,922



(48,698
)Net increase (decrease) in cash and cash equivalents

$
16,896


$
(7,534
)

$
(359
)  35




---



##### Table of Contents



Operating
    Activities
    Investing
    Activities
      Financing
    Activities
    Future
    Capital Requirements
        Credit
    Facility
   36




---



##### Table of Contents



Share
    Repurchase Program
  Rule 10b5-1
    Partnership
    Activities
      Purchase
    Commitments
    Payments Due by periodLess








GreaterThan


1-3


3-5


ThanTotal


1 Year


Years


Years


5 YearsLong-term debt

$
88,805


$
5,753


$
1,396


$
80,126


$
1,530Operating leases


376,551



48,053



95,481



88,558



144,459Capital leases


3,759



416



832



832



1,679Purchase obligations


146,856



116,233



30,623







Total

$
615,971


$
170,455


$
128,332


$
169,516


$
147,668    37




---



##### Table of Contents



New
    Accounting Standards
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Interest
    Rates
    1-month
      Commodities
    Prices
   38




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  P.F.
    CHANGS CHINA BISTRO, INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageConsolidated Financial Statements:Report of Independent Registered Public
    Accounting Firm


40Consolidated Balance Sheets at December 28,
    2008 and December 30, 2007


41Consolidated Statements of Income for the Years
    Ended December 28, 2008, December 30, 2007 and
    December 31, 2006


42Consolidated Statements of Common
    Stockholders Equity for the Years Ended December 28,
    2008, December 30, 2007 and December 31, 2006


43Consolidated Statements of Cash Flows for the
    Years Ended December 28, 2008, December 30, 2007 and
    December 31, 2006


44Notes to Consolidated Financial Statements


45  39




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                   40




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  CONSOLIDATED
    BALANCE SHEETS
 (In
    thousands)
  December 28,


December 30,2008


2007ASSETSCurrent assets:Cash and cash equivalents

$
40,951


$
24,055Inventories


4,930



4,649Other current assets


51,643



32,552Total current assets


97,524



61,256Property and equipment, net


524,004



520,145Goodwill


6,819



6,819Intangible assets, net


24,270



22,004Other assets


14,746



12,406Total assets

$
667,363


$
622,630LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
15,203


$
17,745Construction payable


4,358



11,319Accrued expenses


71,162



59,259Unearned revenue


31,115



25,346Current portion of long-term debt, including $3,502 and $3,507
    due to related parties at December 28, 2008 and
    December 30, 2007, respectively


5,753



6,932Total current liabilities


127,591



120,601Long-term debt, including $1,073 and $3,002 due to related
    parties at December 28, 2008 and December 30, 2007,
    respectively


82,496



90,828Lease obligations


113,178



93,435Other liabilities


14,691



6,710Minority interests


8,581



17,169Commitments and contingencies (Note 15)






Common stockholders equity:Common stock, $0.001 par value, 40,000,000 shares
    authorized: 24,114,107 shares and 24,151,888 shares
    issued and outstanding at December 28, 2008 and
    December 30, 2007, respectively


27



27Additional paid-in capital


206,667



196,385Treasury stock, at cost, 3,634,979 shares and
    3,240,943 shares at December 28, 2008 and
    December 30, 2007, respectively


(106,372
)


(96,358
)Accumulated other comprehensive loss


(755
)


Retained earnings


221,259



193,833Total common stockholders equity


320,826



293,887Total liabilities and common stockholders equity

$
667,363


$
622,630    41




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
 (In
    thousands, except per share amounts)
  Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Revenues

$
1,198,124


$
1,084,193


$
932,116Costs and expenses:Cost of sales


325,630



297,242



254,923Labor


396,911



364,074



307,573Operating


198,967



172,147



145,309Occupancy


69,809



62,164



51,958General and administrative


77,488



66,968



56,030Depreciation and amortization


68,711



55,988



44,378Preopening expense


8,457



14,310



11,922Partner investment expense


(354
)


(2,012
)


4,371Total costs and expenses


1,145,619



1,030,881



876,464Income from operations


52,505



53,312



55,652Interest and other income (expense), net


(3,362
)


(100
)


1,315Minority interest


(1,933
)


(4,169
)


(8,116
)Income from continuing operations before provision for income
    taxes


47,210



49,043



48,851Provision for income taxes


(12,193
)


(12,420
)


(14,078
)Income from continuing operations


35,017



36,623



34,773Loss from discontinued operations, net of tax


(7,591
)


(4,560
)


(1,520
)Net Income

$
27,426


$
32,063


$
33,253Basic income per share:Income from continuing operations

$
1.47


$
1.44


$
1.33Loss from discontinued operations, net of tax


(0.32
)


(0.18
)


(0.05
)Net Income

$
1.15


$
1.26


$
1.28Diluted income per share:Income from continuing operations

$
1.45


$
1.41


$
1.30Loss from discontinued operations, net of tax


(0.31
)


(0.17
)


(0.06
)Net Income

$
1.14


$
1.24


$
1.24Weighted average shares used in computation:Basic


23,776



25,473



26,075Diluted


24,080



25,899



26,737    42




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  CONSOLIDATED
    STATEMENTS OF COMMON STOCKHOLDERS EQUITY
 (In
    thousands)
  AccumulatedAdditional





OtherCommon Stock


Paid-In


Treasury


Comprehensive


RetainedShares


Amount


Capital


Stock


Loss


Earnings


TotalBalances, January 1, 2006


26,397


$
26


$
165,355


$



$



$
128,517


$
293,898Issuance of common stock under stock option plans


210



1



3,071















3,072Issuance of common stock under employee stock purchase plan


67







2,142















2,142Issuance of restricted shares under incentive plans, net of
    forfeitures


96























Purchase of treasury stock


(1,397
)










(46,373
)










(46,373
)Purchase of subsidiary stock










(7,345
)














(7,345
)Share-based compensation expense










8,941















8,941Tax benefit from share-based compensation










1,937















1,937Net income






















33,253



33,253Balances, December 31, 2006


25,373



27



174,101



(46,373
)






161,770



289,525Issuance of common stock under stock option plans


439







5,617















5,617Issuance of common stock under employee stock purchase plan


83







2,174















2,174Issuance of restricted shares under incentive plans, net of
    forfeitures


101























Purchase of treasury stock


(1,844
)










(49,985
)










(49,985
)Share-based compensation expense










10,512















10,512Tax benefit from share-based compensation










3,981















3,981Net income






















32,063



32,063Balances, December 30, 2007


24,152



27



196,385



(96,358
)






193,833



293,887Issuance of common stock under stock option plans


31







284















284Issuance of common stock under employee stock purchase plan


31







774















774Issuance of restricted shares under incentive plans, net of
    forfeitures


294























Purchase of treasury stock


(394
)










(10,014
)










(10,014
)Share-based compensation expense










9,715















9,715Income tax shortfall from share-based compensation










(491
)














(491
)Unrealized loss on derivatives


















(755
)






(755
)Net income






















27,426



27,426Balances, December 28, 2008


24,114


$
27


$
206,667


$
(106,372
)

$
(755
)

$
221,259


$
320,826    43




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (In
    thousands)
   Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Operating Activities:Net income

$
27,426


$
32,063


$
33,253Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


69,661



57,251



44,863Share-based compensation


9,715



10,512



8,941Non-cash asset impairment and lease termination charges in
    discontinued operations


9,889



3,125



Deferred income taxes


5,381



4,767



(6,175
)Minority interest


1,933



4,169



8,116Partner bonus expense, imputed


913



1,374



1,999Other


143



167



294Partner investment expense


(354
)


(2,012
)


4,371Excess tax (benefit) shortfall from share-based compensation


491



(3,981
)


(1,937
)Changes in operating assets and liabilities:Inventories


(281
)


(417
)


(771
)Other current assets


(18,406
)


(786
)


(2,257
)Other assets


(434
)


(3,937
)


(2,464
)Accounts payable


(2,542
)


2,490



1,405Accrued expenses


9,524



3,411



14,984Lease obligations


19,914



21,911



15,837Unearned revenue


5,769



7,120



2,945Other liabilities


1,011



693



Net cash provided by operating activities


139,753



137,920



123,404Investing Activities:Capital expenditures


(87,178
)


(151,553
)


(114,330
)Purchase of minority interests


(9,763
)


(13,032
)


(2,142
)Capitalized interest


(708
)


(1,791
)


(1,003
)Purchase of short-term investments










(12,660
)Sale of short-term investments










55,070Net cash used in investing activities


(97,649
)


(166,376
)


(75,065
)Financing Activities:Repayments of long-term debt


(12,512
)


(30,475
)


(5,110
)Purchases of treasury stock


(10,014
)


(49,985
)


(46,373
)Distributions to minority members and partners


(3,323
)


(6,365
)


(10,080
)Payments of capital lease obligation


(171
)


(158
)


(146
)Borrowings on credit facility






96,000



12,000Debt issuance costs






(254
)


Purchase of subsidiary common stock










(7,345
)Proceeds from minority investors contributions


245



387



1,205Excess tax benefit (shortfall) from share-based compensation


(491
)


3,981



1,937Proceeds from stock options exercised and employee stock
    purchases


1,058



7,791



5,214Net cash provided by (used in) financing activities


(25,208
)


20,922



(48,698
)Net increase (decrease) in cash and cash equivalents


16,896



(7,534
)


(359
)Cash and cash equivalents at the beginning of the period


24,055



31,589



31,948Cash and cash equivalents at the end of the period

$
40,951


$
24,055


$
31,589Supplemental Disclosure of Cash Flow Information:Cash paid for interest

$
5,442


$
1,907


$
915Cash paid for income taxes, net of refunds

$
9,842


$
4,615


$
12,616Supplemental Disclosure of Non-Cash Items:Purchase of minority interests through issuance of long-term-debt

$
2,693


$
11,732


$
1,851Change in construction payable

$
(6,961
)

$
2,244


$
2,612    44




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 December 28,
    2008
  1.
    Summary
    of Significant Accounting Policies  Organization
    and Nature of Operations
    Fiscal
    Year
    Use of
    Estimates
    Principles
    of Consolidation and Presentation
    Reclassification
    Cash
    and Cash Equivalents
    Receivables
    Inventories
  first-in,
 45




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Property
    and Equipment
            Goodwill
    and Intangible Assets
    Goodwill
   46




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Intangible
    Assets
      Other
    Assets
    Accrued
    Insurance
    Lease
    Obligations
     47




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Other
    Liabilities
  Accounting for Conditional Asset Retirement Obligations.
    Unearned
    Revenue
    Revenue
    Recognition
      Advertising
   48




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Partner
    Bonus Expense, Imputed
    Preopening
    Expense
    Partner
    Investment Expense
      Taxes
  Accounting for
    Income Taxes.
   49




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Share-Based
    Compensation
  Share Based Payment
    Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Weighted average risk-free interest rate


3.1
%


4.7
%


4.9
%Expected life of options (years)


5.5



5.5



5.6Expected stock volatility


35.0
%


35.0
%


35.0
%Expected dividend yield


0.0
%


0.0
%


0.0
%     Income
    from Continuing Operations per Share
  Earnings per Share.
 50




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Numerator:Income from continuing operations

$
35,017


$
36,623


$
34,773Denominator:Basic: Weighted-average shares outstanding during the year


23,776



25,473



26,075Add: Dilutive effect of employee and director equity awards


304



426



662Diluted


24,080



25,899



26,737Income from continuing operations per share:Basic

$
1.47


$
1.44


$
1.33Diluted

$
1.45


$
1.41


$
1.30   Fair
    Value of Financial Instruments
    Concentrations
    of Credit Risk
    Derivatives
    Accounting for Derivative Instruments
    and Hedging Activities
 51




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Recent
    Accounting Pronouncements
  No. FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active, FAS 157-3
  FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 FSP 142-3 FSP 142-3
  Disclosures about Derivative Instruments and Hedging
    Activities
  Business Combinations
 52




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements
  Fair Value Measurements FAS 157-2
    
    Unadjusted Quoted Prices  The fair value of an asset
    or liability is based on unadjusted quoted prices, in active
    markets for identical assets or liabilities. An example would be
    a marketable equity security that is actively traded on the New
    York Stock Exchange. (Level 1)
    Pricing Models with Significant Observable Inputs 
    The fair value of an asset or liability is based on information
    derived from either an active market quoted price, which may
    require further adjustment based on the attributes of the
    financial asset or liability being measured, or an inactive
    market transaction. Examples of such instruments would include
    (i) a quoted price for an actively traded equity investment
    that is adjusted for a contractual trading restriction, or
    (ii) the fair value derived from a trade of an identical or
    similar security in an inactive market. (Level 2)
    Pricing Models with Significant Unobservable Inputs 
    The fair value of an asset or liability is primarily based on
    internally derived assumptions surrounding the timing and amount
    of expected cash flows for the financial instrument. Therefore,
    these assumptions are unobservable in either an active or
    inactive market. An example would be the retained interest in a
    securitization trust. (Level 3) 53




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     Fair Value Measurements as of December 28, 2008Quoted Prices in


SignificantActive Markets for


Other


SignificantIdentical


Observable


UnobservableDecember 28,


Assets/Liabilities


Inputs


Inputs2008


(Level 1)


(Level 2)


(Level 3)


Valuation TechniqueMoney Markets

$
41,125


$



$
41,125


$




market approach401(k) Restoration Plan investments


1,274







1,274







market approachInterest rate swap liability


(1,227
)






(1,227
)






income approachTotal

$
41,172


$



$
41,172


$
         2.
    Discontinued
    Operations  Pei
    Wei
     54




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Form 10-K.
    Accounting for the
    Impairment or Disposal of Long Lived Assets Goodwill and Other Intangible Assets
  Taneko
      Year Ended


Year Ended


Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Revenues

$
9,597


$
11,089


$
5,490Lease termination charges


2,576







Severance charges


93







Loss from discontinued operations before income tax benefit


(4,932
)


(3,951
)


(2,465
)Income tax benefit


1,923



1,444



945Loss from discontinued operations, net of tax, before asset
    impairment charges


(3,009
)


(2,507
)


(1,520
)Asset impairment charges, net of tax


(4,582
)


(2,053
)


Loss from discontinued operations, net of tax

$
(7,591
)

$
(4,560
)

$
(1,520
)  55




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  3.
    Other
    Current Assets    December 28,


December 30,2008


2007Receivables

$
24,867


$
15,763Current portion of deferred tax asset


8,344



7,659Prepaid rent


5,180



4,396Income taxes receivable


9,960



2,704Other


3,292



2,030Total other current assets

$
51,643


$
32,552     4.
    Property
    and Equipment    December 28,


December 30,2008


2007Land

$
3,681


$
3,681Building and improvements


15,337



15,263Leasehold improvements


576,861



509,431Furniture, fixtures and equipment


167,153



146,344China and smallwares


17,169



15,287780,201



690,006Less: accumulated depreciation and amortization


(262,775
)


(206,219
)517,426



483,787Add: Construction in progress


6,578



36,358Property and equipment, net

$
524,004


$
520,145   5.
    Intangible
    Assets    December 28,


December 30,2008


2007Intangible assets, gross

$
29,863


$
25,408Accumulated amortization


(5,593
)


(3,404
)Intangible assets, net

$
24,270


$
22,004    56




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2009

$
2,3092010


2,3092011


2,3092012


2,2952013


2,285Thereafter


12,763Total

$
24,270   6.
    Accrued
    Expenses    December 28,


December 30,2008


2007Accrued payroll

$
25,409


$
20,100Sales and use tax payable


5,026



6,215Property tax payable


4,151



3,635Accrued insurance


16,130



13,831Accrued rent


4,315



4,136Other accrued expenses


16,131



11,342Total accrued expenses

$
71,162


$
59,259   7.
    Credit
    Facility      Interest
    Rate Swap
   57




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##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  1-month
    8.
    Long-Term
    Debt    December 28,

December 30,2008

2007Credit line borrowings (see Note 7)


$80,000



$85,000Unsecured promissory notes  related parties, maturing
    January 2008 through November 2010


4,575



6,509Unsecured promissory notes  non-related parties,
    maturing January 2008 through May 2010


2,126



4,947Other


1,548



1,304Total debt


88,249



97,760Less: current portion


5,753



6,932Total long-term debt


$82,496



$90,828       2009


$5,7532010


1,3332011


632012


632013


80,063Thereafter


1,530Total


88,805Less: debt discount


(556
)Total debt


$88,249   Note:
 58




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9.
    Leases      December 28,


December 30,2008


2007Capital lease assets, gross

$
4,494


$
4,494Accumulated amortization


(2,278
)


(2,048
)Capital lease assets, net

$
2,216


$
2,446     December 28,


December 30,2008


2007Building

$
2,246


$
2,416Land


1,050



1,050Capital lease obligations

$
3,296


$
3,466       Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Minimum rent

$
35,052


$
30,511


$
25,346Contingent rent


10,127



9,626



8,886Total rent expense

$
45,179


$
40,137


$
34,232  59




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    OperatingCapital Leases


Leases


Total2009

$
416


$
48,053


$
48,4692010


416



48,411



48,8272011


416



47,070



47,4862012


416



45,852



46,2682013


416



42,706



43,122Thereafter


1,679



144,459



146,138Total minimum lease payments


3,759


$
376,551


$
380,310Less: Amount representing interest


1,590Present value of minimum lease payments

$
2,169     10.
    Preferred
    Stock and Common Stockholders Equity  Preferred
    Stock
    Stock
    Option Plans
  1996 and
    1997 Plans
   60




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  1998
    Plan
    1999
    Plan
    2006
    Plan
   61




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Option
    valuation
    Year EndedDecember 28,

December 30,

December 31,2008

2007

2006Weighted average fair value of stock options granted

$
11.89


$
14.24


$
13.77Intrinsic value of stock options exercised

$
590


$
13,208


$
6,322Tax (shortfall) benefit from share-based compensation

$
(491
)

$
3,981


$
1,937   Option
    activity
    Outstanding OptionsWeighted-AverageRemaining


AggregateWeighted-


Contractual


IntrinsicAverage Exercise


Term


Value(1)Shares


Price (per share)


(In years)


(In thousands)Options outstanding at January 1, 2006


2,968,117


$
37.84Granted


509,010



33.11Converted Pei Wei options


306,782



5.06Exercised


(211,318
)


14.54Forfeited (canceled)


(238,811
)


46.70Options outstanding at December 31, 2006


3,333,780


$
35.01Granted


308,251



34.94Exercised


(439,924
)


12.78Forfeited (canceled)


(185,299
)


43.55Options outstanding at December 30, 2007


3,016,808


$
37.72Granted


10,842



31.42Exercised


(30,732
)


9.27Forfeited (canceled)


(209,595
)


46.45Options outstanding at December 28, 2008


2,787,323


$
37.36



5.2


$
3,213Options exercisable at December 28, 2008


2,237,962


$
36.64



4.6


$
3,213     (1)
    
    The aggregate intrinsic value of stock options represents the
    closing market price on the last trading day of the quarter less
    the exercise price of each option multiplied by the number of
    in-the-money stock options. 62




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     Options Outstanding


Options ExercisableWeighted- Average


Weighted-





Weighted-Number


Remaining


Average


Number


AverageRange of Exercise Prices

Outstanding


Contractual Life


Exercise Price


Exercisable


Exercise Price$ 1.20 - $10.00


123,862



1.9 years


$
5.85



123,862


$
5.85$10.01 - $15.00


131,273



0.9 years



13.08



131,273



13.08$15.01 - $20.00


239,904



2.4 years



18.71



239,904



18.71$20.01 - $25.00


2,068



3.0 years



24.39



2,068



24.39$25.01 - $30.00


10,512



3.7 years



29.05



10,512



29.05$30.01 - $35.00


860,783



6.0 years



31.51



548,334



31.43$35.01 - $40.00


139,725



6.0 years



38.48



133,724



38.56$40.01 - $45.00


356,374



6.0 years



43.69



291,390



43.72$45.01 - $50.00


269,027



5.0 years



46.38



242,879



46.34$50.01 - $59.11


653,795



6.1 years



55.51



514,016



55.12   Restricted
    stock activity
      Restricted Share Awardsand RSUsWeighted-AverageGrant-DateFair ValueShares


(per share)Restricted share awards outstanding at January 1, 2006





$
Granted


102,700



30.43Vested






Forfeited (canceled)


(6,300
)


30.05Restricted share awards outstanding at December 31, 2006


96,400


$
30.46Granted


128,922



33.84Vested






Forfeited (canceled)


(27,420
)


30.97Restricted share awards outstanding at December 30, 2007


197,902


$
32.59Granted


355,231



18.26Vested






Forfeited (canceled)


(42,439
)


31.47Restricted share awards and RSUs outstanding at
    December 28, 2008


510,694


$
22.72    63




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Share-based
    compensation expense
      Year Ended


Year Ended


Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Labor

$
529


$
906


$
960General and administrative


9,143



9,473



7,869Total share-based compensation


9,672



10,379



8,829Less: tax benefit


(2,495
)


(2,626
)


(2,543
)Total share-based compensation, net of tax

$
7,177


$
7,753


$
6,286         Restricted StockOptions


and RSUs


Total2009

$
4,474


$
2,966


$
7,4402010


2,752



2,055



4,8072011


1,148



1,283



2,4312012


332







3322013


8







8Total

$
8,714


$
6,304


$
15,018     Employee
    Stock Purchase Plan
   64




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Share
    Repurchase Program
      11.
    Benefit
    Plans  401(k)
    Plan
    401(k)
    Restoration Plan
    No. 97-14, Accounting for Deferred Compensation Arrangements Where
    Amounts Are Held in a Rabbi Trust and Invested,
 65




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    12.
    Employment
    Agreements      13.
    Partnership
    Structure     66




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        December 28,


December 30,2008


2007Total number of partners


58



112Partnership interests purchased during the year


149



256Purchase price of partnership interests purchased (in thousands):Cash

$
9,763


$
13,032Debt


2,693



11,732Total

$
12,456


$
24,764   14.
    Income
    Taxes    Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Federal:Current

$
4,258


$
5,475


$
16,479Deferred


5,762



5,668



(5,259
)Total Federal

$
10,020


$
11,143


$
11,220State:Current

$
1,592


$
1,588


$
3,649Deferred


581



(311
)


(791
)Total State

$
2,173


$
1,277


$
2,858Total income tax expense

$
12,193


$
12,420


$
14,078     Year EndedDecember 28,


December 30,


December 31,2008


2007


2006Income tax expense at federal statutory rate


35.0
%


35.0
%


35.0
%State taxes, net of federal expense


4.9
%


2.6
%


3.8
%Share-based compensation expense


(0.1
)%


0.0
%


0.4
%FICA tip credit


(13.5
)%


(11.6
)%


(9.7
)%Other, net


(0.5
)%


(0.7
)%


(0.7
)%Total effective rate


25.8
%


25.3
%


28.8
%  67




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    December 28,


December 30,2008


2007Deferred tax assets:Preopening expenses

$
2,832


$
2,750FICA and AMT credit carryforwards


1,781



335Goodwill and intangibles


8,855



8,391Unearned compensation


2,671



3,921Insurance


2,397



5,289Share-based compensation expense


9,456



6,387Other


2,597



3,081Straight line rent


1,670



1,360Deferred revenue


2,908



Total deferred tax assets

$
35,167


$
31,514Deferred tax liabilities:Depreciation on property and equipment

$
36,976


$
28,067Net deferred tax assets (liabilities) before valuation allowance

$
(1,809
)

$
3,447Less: valuation allowance


(247
)


(101
)Net deferred tax assets (liabilities)

$
(2,056
)

$
3,346        68




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Beginning balance on December 30, 2007

$
1,175Decreases attributable to tax positions taken during prior
    periods


66Increases attributable to tax positions taken during the current
    period


187Decreases related to settlements with taxing authorities


(106
)Decreases resulting from a lapse of applicable statutes of
    limitations


(63
)Ending balance on December 28, 2008

$
1,259       15.
    Commitments
    and Contingencies  Purchase
    Obligations
  12-month
  Litigation
    and other
    16.
    Segment
    Reporting   69




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Total


Shared Services


Bistro


Pei WeiFiscal Year 2008Revenues

$
1,198,124


$



$
919,963


$
278,161Segment profit


136,163



(1,462
)


115,880



21,745Capital expenditures


87,178



2,450



65,546



19,182Depreciation and amortization


68,711



1,462



51,091



16,158Total assets


667,363



20,478



534,224



112,661Goodwill


6,819







6,566



253Fiscal Year 2007Revenues

$
1,084,193


$



$
849,743


$
234,450Segment profit


128,409



(1,416
)


109,679



20,146Capital expenditures


151,553



157



111,248



40,148Depreciation and amortization


55,988



1,416



42,294



12,278Total assets


622,630



16,451



488,021



118,158Goodwill


6,819







6,566



253Fiscal Year 2006Revenues

$
932,116


$



$
756,634


$
175,482Segment profit


119,859



(1,137
)


105,378



15,618Capital expenditures


114,330



3,848



76,853



33,629Depreciation and amortization


44,378



1,137



34,451



8,790     Reconciliation of Non-GAAP Financial Information to GAAP
    measures (in thousands):
  Fiscal Year2008


2007


2006Segment profit

$
136,163


$
128,409


$
119,859Less: General and administrative


(77,488
)


(66,968
)


(56,030
)Less: Preopening expense


(8,457
)


(14,310
)


(11,922
)Less: Partner investment expense


354



2,012



(4,371
)Less: Interest & other income (expense), net


(3,362
)


(100
)


1,315Income from continuing operations before provision for income
    taxes

$
47,210


$
49,043


$
48,851  70




---



##### Table of Contents



P.F.
    CHANGS CHINA BISTRO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  17.
    Interim
    Financial Results (Unaudited)    Fiscal 2008


Fiscal 2007First


Second


Third


Fourth


First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


QuarterRevenues

$
305,917


$
301,533


$
295,877


$
294,797


$
262,014


$
264,660


$
268,120


$
289,399Income from continuing operations before provision for income
    taxes


13,559



13,531



9,712



10,408



15,201



13,557



7,870



12,415Income from continuing operations


9,978



9,895



7,655



7,489



11,033



9,951



6,003



9,636Loss from discontinued operations, net of tax


(329
)


(525
)


(4,693
)


(2,044
)


(568
)


(674
)


(728
)


(2,590
)Net income


9,649



9,370



2,962



5,445



10,465



9,277



5,275



7,046Basic income from continuing operations per share


0.42



0.41



0.32



0.32



0.43



0.39



0.23



0.39Basic net income per share


0.40



0.39



0.13



0.23



0.41



0.36



0.20



0.28Diluted income from continuing operations per share


0.41



0.41



0.32



0.31



0.42



0.38



0.23



0.38Diluted net income per share


0.40



0.39



0.12



0.23



0.40



0.36



0.20



0.28Basic weighted average shares outstanding


23,972



23,898



23,613



23,623



25,488



25,708



25,773



24,923Diluted weighted average shares outstanding


24,295



24,247



23,927



23,851



26,046



26,129



26,105



25,257  71




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure Controls and Procedures
  Form 10-K, Co-CEOs Rule 13a-15(e)
  Managements Annual Report on Internal Control over
    Financial Reporting Rule 13a-15(f)
  Internal Control 
    Integrated Framework. Internal
    Control  Integrated Framework.
    Change in Internal Control Over Financial
    Reporting
  Item 9B.
    Other
    Information   72




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  
                  73




---



##### Table of Contents



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   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Form 10-K:
                Form 10-K.
 74




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##### Table of Contents



ExhibitNumber

Description Document3(i)(1)


Amended and Restated Certificate of Incorporation.3(ii)


Amended and Restated By-laws.4
.1(2)

Specimen Common Stock Certificate.4
.2(2)

Amended and Restated Registration Rights Agreement dated
    May 1, 1997.10
.1(2)

Form of Indemnification Agreement for directors and executive
    officers.10
.2(2)

1998 Stock Option Plan and forms of agreement thereunder.10
.3(2)

1997 Restaurant Manager Stock Option Plan and forms of Agreement
    thereunder.10
.4(2)

1996 Stock Option Plan and forms of Agreement thereunder.10
.5(2)

1998 Employee Stock Purchase Plan.10
.13(3)

1999 Nonstatutory Stock Option Plan.10
.16(4)

Common Stock Purchase Agreement dated January 11, 2001.10
.17(5)

Pei Wei Asian Diner, Inc. 2001 Stock Option Plan.10
.23(6)

Key Employee Stock Purchase Plan and forms of Agreement
    thereunder.10
.25(7)

2006 Equity Incentive Plan.10
.26(7)

Amended and Restated 1998 Stock Option Plan.10
.27(8)

2007 Credit Agreement dated August 31, 2007.10
.28(9)

Employment Agreement between the Company and Richard L.
    Federico, as amended, dated May 21, 2008.10
.29(9)

Employment Agreement between the Company and Robert T. Vivian,
    as amended, dated May 21, 2008.10
.30(9)

Employment Agreement between the Company and Russell Owens, as
    amended, dated May 21, 2008.10
.31(9)

Employment Agreement between the Company and R. Michael Welborn,
    as amended, dated May 21, 2008.10
.32(9)

Employment Agreement between the Company and Mark Mumford, as
    amended, dated May 21, 2008.10
.33(9)

Non-Employee Director Compensation Plan, effective
    April 17, 2008.10
.34

Separation Agreement between the Company and Russell Owens,
    dated December 18, 2008.21
.1

List of Subsidiaries.23
.1

Consent of KPMG LLP, Independent Registered Public Accounting
    Firm31
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Richard L. Federico.31
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Robert T. Vivian.31
.3

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Mark D. Mumford.32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Richard L. Federico.32
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Mark D. Mumford.32
.3

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Robert T. Vivian.     
    
    Management Contract or Compensatory Plan.(1)
    
    Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    dated April 25, 2002.(2)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-59749).(3)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    dated March 6, 2001.(4)
    
    Incorporated by reference to the Registrants
    Form 10-Q,
    dated April 1, 2001.(5)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    dated February 19, 2002.(6)
    
    Incorporated by reference to the Registrants
    Form S-8
    dated January 31, 2005.(7)
    
    Incorporated by reference to the Registrants
    Form 8-K
    dated May 4, 2006.(8)
    
    Incorporated by reference to the Registrants
    Form 10-Q,
    dated October 26, 2007.(9)
    
    Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    filed on July 23, 2008. 75




---



##### Table of Contents



SIGNATURES
      By:
    /s/  RICHARD
    L. FEDERICO   Chairman and Co-Chief Executive Officer
  By:
    /s/  ROBERT
    T. VIVIAN   Co-Chief Executive Officer
  POWER OF
    ATTORNEY
      Signature

Title

DateBy:

/s/  F.
    LANE CARDWELL, JR.F.
    Lane Cardwell, Jr.

Director

February 11, 2009By:

/s/  RICHARD
    L. FEDERICORichard
    L. Federico

Chairman, Co-Chief Executive Officer and Director (Principal
    Executive Officer)

February 11, 2009By:

/s/  LESLEY
    H. HOWELesley
    H. Howe

Director

February 11, 2009By:

/s/  KENNETH
    A. MAYKenneth
    A. May

Director

February 11, 2009By:

/s/  MARK
    D. MUMFORDMark
    D. Mumford

Chief Financial Officer (Principal Financial and Accounting
    Officer)

February 11, 2009By:

/s/  M.
    ANN RHOADESM.
    Ann Rhoades

Director

February 11, 2009 76




---



##### Table of Contents



Signature

Title

DateBy:

/s/  JAMES
    G. SHENNAN, JR.James
    G. Shennan, Jr.

Director

February 11, 2009By:

/s/  ROBERT
    T. VIVIANRobert
    T. Vivian

Co-Chief Executive Officer and Director (Principal Executive
    Officer)

February 11, 2009By:

/s/  KENNETH
    J. WESSELSKenneth
    J. Wessels

Director

February 11, 2009By:

/s/  R.
    MICHAEL WELBORNR.
    Michael Welborn

Executive Vice President of Global Brand Development and Director

February 11, 2009  77




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description Document3(i)(1)


Amended and Restated Certificate of Incorporation.3(ii)


Amended and Restated By-laws.4
.1(2)

Specimen Common Stock Certificate.4
.2(2)

Amended and Restated Registration Rights Agreement dated
    May 1, 1997.10
.1(2)

Form of Indemnification Agreement for directors and executive
    officers.10
.2(2)

1998 Stock Option Plan and forms of agreement thereunder.10
.3(2)

1997 Restaurant Manager Stock Option Plan and forms of Agreement
    thereunder.10
.4(2)

1996 Stock Option Plan and forms of Agreement thereunder.10
.5(2)

1998 Employee Stock Purchase Plan.10
.13(3)

1999 Nonstatutory Stock Option Plan.10
.16(4)

Common Stock Purchase Agreement dated January 11, 2001.10
.17(5)

Pei Wei Asian Diner, Inc. 2001 Stock Option Plan.10
.23(6)

Key Employee Stock Purchase Plan and forms of Agreement
    thereunder.10
.25(7)

2006 Equity Incentive Plan.10
.26(7)

Amended and Restated 1998 Stock Option Plan.10
.27(8)

2007 Credit Agreement dated August 31, 2007.10
.28(9)

Employment Agreement between the Company and Richard L.
    Federico, as amended, dated May 21, 2008.10
.29(9)

Employment Agreement between the Company and Robert T. Vivian,
    as amended, dated May 21, 2008.10
.30(9)

Employment Agreement between the Company and Russell Owens, as
    amended, dated May 21, 2008.10
.31(9)

Employment Agreement between the Company and R. Michael Welborn,
    as amended, dated May 21, 2008.10
.32(9)

Employment Agreement between the Company and Mark Mumford, as
    amended, dated May 21, 2008.10
.33(9)

Non-Employee Director Compensation Plan, effective
    April 17, 2008.10
.34

Separation Agreement between the Company and Russell Owens,
    dated December 18,2008.21
.1

List of Subsidiaries.23
.1

Consent of KPMG LLP, Independent Registered Public Accounting
    Firm.31
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Richard L. Federico.31
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Robert T. Vivian.31
.3

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 for Mark D Mumford.32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Richard L. Federico.32
.2

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Robert T. Vivian.32
.3

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 for Mark D Mumford.     
    
    Management Contract or Compensatory Plan.(1)
    
    Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    dated April 25, 2002.(2)
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-59749).(3)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    dated March 6, 2001.(4)
    
    Incorporated by reference to the Registrants
    Form 10-Q,
    dated April 1, 2001.(5)
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    dated February 19, 2002.(6)
    
    Incorporated by reference to the Registrants
    Form S-8
    dated January 31, 2005.(7)
    
    Incorporated by reference to the Registrants
    Form 8-K
    dated May 4, 2006.(8)
    
    Incorporated by reference to the Registrants
    Form 10-Q,
    dated October 26, 2007.(9)
    
    Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q
    filed on July 23, 2008. 78