Dianne Scott - IR Greg Trojan - President and CEO Greg Levin - CFO Greg Lynds - CDO Kevin Mayer - CMO.

Brian Bittner - Oppenheimer David Tarantino - Robert W. Baird John Glass - Morgan Stanley Jeffrey Bernstein - Barclays Jeff Farmer - Wells Fargo Will Slabaugh - Stephens Inc Andy Barish - Jeffries Joshua Long - Piper Jaffray Sharon Zackfia - William Blair Nick Setyan - Wedbush Securities Paul Westra - Stifel.

Good day and welcome to the BJ's Restaurants Inc. Fourth Quarter and Fiscal 2014 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Greg Trojan, President and Chief Executive Officer. .

Thank you, operator. Good afternoon, everyone and welcome to BJ's Restaurants fiscal 2014 fourth quarter investor conference call and webcast. I'm Greg Trojan, BJ's Chief Executive Officer; and joining me on the call today is Greg Levin, our Chief Financial Officer.

And we also have Greg Lynds, our Chief Development Officer and Kevin Mayer, our Chief Marketing Officer on hand for Q&A. After the market closed today, we released our financial results for the fourth quarter of fiscal 2014, which ended on Tuesday, December 30th, 2014.

You can view the full text of our earnings release on our Web site at www.bjsrestaurants.com. Our agenda today will start with Dianne Scott, our Director of Corporate Relations, providing our standard cautionary disclosure with respect to forward-looking statements. I will then provide an update on our business and current initiatives.

And then Greg Levin, our Chief Financial Officer, will provide a recap of the quarter and some commentary regarding fiscal 2015. After that, we'll open it up to questions. So Dianne, please..

Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.

Investors are cautioned that forward-looking statements are not guarantees of future performance, and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today's date, February 18, 2015.

We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws.

Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission..

Thanks Dianne. Before I get into my formal remarks for the quarter, I'd like to mention that this will Dianne's last conference call with us thus she is going to retire. So on behalf of everyone at BJ's we'd like to thank her for her 19 years of dedication and loyalty to BJ's.

We're going to miss Dianne as an addition to taking care of the investor calls for us, she has up our licensing and corporate governance areas and is largely responsible for obtaining the licenses for the majority of our 158 restaurants. We are all going to miss her and wish her the very best..

Thank you, Greg..

Our Q4 results again demonstrate the important strategies we're making against the key components of the strategic plan outlined last year to drive our top line and we've made comp sales while also maintaining a focus across standard products by managing cost and driving efficiency.

Our 7.1% sales growth in Q4 was a result of our continued methodical new restaurant growth along with positive comp sales of 1.2%. A nice acceleration particularly considering we overlapping higher levels of TV advertising, promotional discounting and overall marketing than last year.

Our significant restaurant level margin improvement of 330 basis points to 18.4% and the substantial increase in net income to 8.3 million was driven by our positive comp sales coupled with our success and eliminating a reducing cost that do not directly affect the quality and overall value of the BJ's dining experience.

We were also more targeted with our promotional efforts versus fiscal 2013 which slowed our traffic momentum a bit but created a much more profitable sales mix in our restaurants. While our guest traffic was relatively flat for the quarter we still outpaced our competition.

Our team’s cost management efforts led to some of the best per restaurant weekly operating and cost performances we have seen over the past several years and touched every significant cost center of our business.

Notably we have retained significant minimum wage increases in California a state where we also generate benefit from tip credits and actually improved overall labor efficiency by 150 bps which was driven primarily from lower hourly labor cost.

Equally impressive is our team’s diligence in driving efficiency in kitchen supplies, repair and maintenance and other operating occupancy costs excluding marketing expense where we improved by approximately 140 basis points versus year ago.

Over the last year we looked at every aspect of our business to see how we could reduce cost and improve processes to achieve efficiencies while maintaining our focus on our guests, hospitality and our reputation for great food.

I cannot emphasize enough that the majority of the successful changes we’ve implemented have come from team member ideas in our restaurants and we have guarded food quality and the overall guest experience with utmost priority throughout this journey.

Reflecting this focus our NPS metrics which are our internal net promoter scores from guest surveys have improved from the already impressive levels at the start of 2014 while we have also maintained our well above average manager and team member retention rate.

It was critical when we began this process that we not gain efficiencies at the expense of our guest experience or our team members engagements at our company. I am proud that we delivered on this challenging task which in conjunction with the solid sales performance contributed to the strong fourth quarter financial results.

As important as the progress we are making on cost structure has been we internally think of these efforts as another means of driving traffic and sales. As I have mentioned previously these BJ’s need to be a leader in price value to maintain and grow our industry leading guest traffic volumes.

We invested heavily in value last year with both our Brewhouse Burgers introduction and the EnLIGHTened health and focus -- value focused menu introduction late last February. Our project Q cost and efficiency work allowed us to invest in value in 2014.

Our overall guest check was essentially flat versus last year compared to an industry average as measured by NASDAQ of around 200 basis points. Without our work on the cost and efficiency side of our business there is no way we could have effectively taken zero pricing for the year.

In other words the combination of compelling innovative items at fantastic price points was key to our traffic outperformance last year and our successful work on reducing cost binded these efforts.

Notably shortly after we introduced our new menu last February approximately 25% of our guests ordered one of our EnLIGHTened menu items such as the kale and roasted Brussels sprouts salad, our Mediterranean Chicken Pita Tacos or our Cherry Chipotle Salmon for instance.

Importantly in Q4 of 2014 and despite the lower relative levels of advertising and in restaurant promotion of these items, they are still selling strong at about the same levels as when we are more actively marketing them earlier in the year.

Our guests had a clear but not surprising message, give us great taste with great value and we will come back. And BJ’s is clearly delivering on this request. Even with our new offerings our base menu items were reduced from about 153 items to approximately 137.

Although we never like to disappoint our guests when one of their favorite menu items disappears we continue to fine tune the menu knowing that our approved overall quality, the credibility of our new menu items and the overall improvement and speed will more than offset any short-term disappointment related to a menu item being discontinued.

This year’s agenda is to capitalize on our current momentum and to the extent the successes we are having with the initiatives introduced over the last 12 to 18 months. As such we remain hard to work to further simplify our menu and kitchen processes under project Q and believe there remains a runway for continued success on this process.

We have several upcoming product introductions which we believe will continue to build our brand in terms of high quality and innovation food while exciting our guests and our team members. For example our new Tavern-Cut thin crust pizza debut earlier this month and is off to a great start.

Not only do our guests love it but it is much simpler and faster to prepare than the hand tossed product is replaced. We are also looking for ways to promoting our award winning deep dish pizza by introducing some new flavors particularly in our newer markets that are not as familiar with our significant pizza heritage.

We continue to strengthen the effectiveness of our marketing efforts as we’ve learned from our branding digital and media experiences. As a result the positive impact from TV in 2014 was even more successful in our core Southern California market than in prior periods reflect ongoing tweaks to both our media strategies and spending.

Our segmented loyalty program offers also continue to generate solid results including the ability to reactivate lapse for infrequent guests. In addition our digital execution has been improved and is delivering consistent improvements in core performance metrics in terms of organic and page search efficiency, Internet and mobile traffic and so on.

While in March we'll begin lapping heavier than normal marketing spend related to last year's menu loss we believe the improved deficiency of all of our spend along with some focused TV will lead to another quarter of positive top line results.

Although our cost were just helped us become more efficient, our approach all along has been to implement highly effective processes and create a permanent mindset among our team members. We will continue to focus in 2015 on identifying areas of opportunities that can allow us to waving our value advantage in our markets.

While we do not contemplate another year of major guest check investment like last, we are committed to continuing to improve our everyday value and affordability. Overall we expect to drive more operating efficiencies as we've demonstrated the success of this approach and offsetting as much as possible anticipated fundamental cost increases ahead.

Last perhaps most important to our future given the broad runway for U.S. growth ahead of us while with every new prototype restaurant opening we've confirmation that our new design is a better layout, a better looking feel for our guest and more efficient for our team members and our shareholders.

As you recall our new 70,400 square foot restaurants are being built for approximately 1 million less than the larger predecessor format. It's one of the few times in life that spending less results in actually a better product.

Our guest have responded positively which is priority one but our team members are also enthusiastic about the new prototype as is makes serving guest at a high level, more consistently obtainable.

With the first type of restaurants built under the new proto performing in line with our expectations, we expect the vast majority of our new restaurant expansion to feature the new design with of course some fine tuning that we've identified since opening the first of these new format last August.

So in summary, the playbook is working very well and we will be building on 2014 successes throughout 2015. BJ's is still a relatively young in developing concept and as such as believe there is a lot of upside as we continue to push these same levers this year.

We are encouraged that they've us headed very much in the right direction as we drive solid guest traffic with consistently improving economics.

I'm delighted to report that we've the quarter under our [belt] 2015 is off to a very encouraging start and we are seeing some of our best traffic gains in major markets such as California, which are not benefitting from the improved weather relative to last year.

Greg will now take you through more of the specifics regarding Q4 and talk a bit more about our 2015 outlook.

Greg?.

All right, thanks Greg. As reflected in our results I noted in this afternoon's press release.

Throughout 2014 we made excellent progress against our initiative to create a more efficient organization while leveraging our industry leading guest traffic levels and long term expansion program all of which contributed to the significant earnings per share outperformance in Q4.

Revenues for the 2014 fourth quarter increased approximately 7.1% year-over-year to 213.9 million while net income and diluted net income per share increased to 8.3 million and $0.31 respectively.

The 7.1% increase in fourth quarter revenues reflects in approximate 7.5% increase in total operating week and a slight decrease in average weekly sales of about 0.4%. Our comparable restaurant sales increased 1.2% during the quarter compared with a decrease of 2.7% in last year's fourth quarter.

As mentioned on our third quarter conference call, with Halloween moving to Saturday night and New Year is moving into the first quarter of 2015 our comparable restaurant sales in fourth quarter were negatively impacted by about 40 basis points.

The 1.2% increase in comparable restaurant sales in the fourth quarter reflects a higher check of approximately 1.4%, which is more than offset by a slight decrease in traffic of 0.2%. The average check increased reflects better menu pricing and comparatively less discounting relative to last year's fourth quarter.

Recall in the fiscal 2013 fourth quarter we discounted through the holidays which reduced our average check and led to deleverage margins and revenue flow through. This year we were successful in offering targeted promotions on select items which built the average check during the holiday.

In the fourth quarter we had about 2.5% in menu pricing, however as I just mentioned our average check increased approximately 1.4% due to our investment in value this past year.

From an overall margin perspective as Greg Trojan mentioned and we noted in our press release today, the benefits we're seeing from project queue around labor and our cost containment and expense management initiative coupled with the improvement in comparable restaurant sales allowed us to achieve overall restaurant level margins of 18.4% this quarter.

This improvement of 330 basis points over last year resulted in outperformance even relative to our internal projections. Specifically cost of sales of 25.6% within the range I provided during our third quarter conference call.

The 25.6% represents a 30 basis points increase compared to last year's fourth quarter and a 50 basis points rise on a quarterly sequential basis. The increase over last year primarily reflects an approximate 2.8% increase in commodities as well as some impact form many mix.

Labor during the fourth quarter was 34.7% it was down a 150 basis points from last year's fourth quarter. This decrease is the result of the improved hourly productivity largely being driven from our project queue initiative and the slight increase in average check over 2013. This helped offset the impact in California minimum wage.

Operating occupancy cost for 21.2% of sales for the fourth quarter and that’s a decrease of 220 basis points from last year including operating occupancy cost is approximately 4.6 million of marketing spend which equates to 2.1% of sale by comparison marketing spend in last year's fourth quarter was 5.8 million or 2.9% of sales.

Excluding marketing our weakly operating and occupancy cost in the fourth quarter averaged approximately $20,300 compared to $21,800 for the same quarter last year.

This is a decline of about 7% and puts us on target with our initiative to reduce operating and occupancy cost by at least a $1000 a week a target that we highlighted last year at our February 2014 Analyst Day.

G&A in the fourth quarter was 12.3 million representing 5.8% of sales G&A came in about $1 million better than anticipated primarily due to lower training cost for new managers lower than anticipated equity compensation expectations and lower legal another cooperate expenses.

The lower than anticipated manger training expense is really due to three things. First our retention rate continues to be extremely high resulting in lower new higher training.

Second we opened fewer restaurants in the fourth quarter this year compare to last year and third as we discussed our new restaurant prototype is smaller and with a result of project Q we are opening new restaurants with a lower management part and less power team members.

Depreciation and amortization was approximately 14.1 million or 6.6% of sales and averaged a little over 700 per restaurant week which is in line with our most recent D&A trend.

More importantly depreciation and amortization for restaurant operating week of $7000 was basically flat with last year's fourth quarter and highlight progress against our goal to increase return on investment capital by working to numerator to margin expansion while more efficiently deploying capital.

Free opening was 1.2 million during the quarter was primarily represents cost for the three restaurants we opened during this quarter.

We had a little pick up here as well relative to the expected range of 1.5 million to 2 million as we have obtain our pre-opening cost come down a little into the upper $400,000 range this year and we do not encourage much pre-opening expense for related to restaurants expected to open in the first quarter of 2015.

Our tax rate was about 25% for the quarter was slightly higher than my 24% projection but was in line with our expectations for the full year without 25%. In terms of capital allocation and as noted previously in the fiscal 2014 fourth quarter we opened three new restaurants in Fort Myers, Florida; Laurel, Maryland; and Richmond, Virginia.

We also continued our program of returning capital to shareholders and during the quarter we allocated approximately 29 million towards the purchase of 800,000 shares of our common stock.

Since the authorization of our initial share repurchase program in April of 2014 we repurchased and retired approximately 2.8 million shares at BJs stock for approximately 100 million. This leaves us with approximately 50 million remaining under our current authorized share repurchase plan.

With regards to liquidity we ended the fourth quarter with a little over 30 million of cash and 15 million of funded debt on our line of credit which is in effect until September 2019.

Our line of credit for 150 million and provides us the flexibility to continue our national expansion program while returning capital to shareholders to our share repurchase plan. With regards to CapEx we spend approximately $90 million this past year and that excludes tenant improvement allowances and sale lease back proceeds.

Before we open the call up to questions let me spend a couple of minutes providing some commentary our outlook for 2015. All of these commentaries are subject to risk and uncertainties associated with forward-looking statements as discussed in our filings with the SEC.

Through the first seven weeks of the quarter our comps sales are in the mid-single digit range a good question of this increase is being driven by increase guest count.

As we noted earlier New Year's eve move to Q1 of this year from Q4 last year and as a result the first week of January was very strong with more recent trends and that kind of mid-single digit range.

While we won't review the specific of each restaurants and market we're reviewing our comp sales in California, Texas and Florida where we have the great concentration of comp sales we continue to do better than the industry in driving guest traffic based on the data we are seeing from Knapp-Track and Black Box.

Also please remember that when comparing BJs some of the industry data we don’t have the benefit of copying against adverse year ago weather for the majority of our markets and restaurant. We currently have around 3% of menu pricing in Q1 and our expecting mid-2% range in Q2 of menu pricing.

In modeling sales trends for the first quarter I expect continued pressure on average check until we lap our new menu roll out from last year starting about a week. As a result about two thirds of the quarter will reflect this impact.

Additionally, a quarter to date sales trends have been in the mid-single digit range, we will soon begin to lap the higher media spend we did last year as we rolled out our new menu. In fact beginning March 10th through March 30th we ran television in about 11 markets including all of California where we have the most restaurants.

As Greg Trojan mentioned we will have some TV in March this year but it will very limited compared to last year. Therefore and based on how comp sales trended during the quarter last year I am anticipating that comp sales will moderate in the later part of the quarter as we lapped this marketing spend.

Also while the industry has gotten off to a nice start we believe we need to see how the overall industry performs as it cycles through the weather comparisons and as we begin the normalize against the tax refunds which have come on time in 2015 compared to last year’s delay.

So while we remain optimistic about the advantages we have created for ourselves through our operating cost and management disciplines we remain slightly guarded regarding the consumer until we see clear evidence with comparisons that the consumer is back.

Moving past comps for the first quarter I would expect approximately 2,040 restaurant operating weeks marking an approximate 7% increase from the 1,908 in last year’s Q1.

While our long term increase in annual capacity target of 10% has not changed as evidenced by the 15 new restaurants we plan to open this year, our annual increase in operating weeks this year will be slightly less due to less carry over weeks from the class of 2014 restaurants.

I would expect our cost of sales to be in the mid-25% range or pretty consistent with what we saw in Q4 however we think that our overall commodity basket will only increase in the 1% to 1.5% range and that’s down from our last forecast when we reported in Q3.

I do believe as we progress through the year we can move cost of sales back down in to the low 25% range. With regard to labor we will see higher medical insurance costs as a result of the implementation of the Affordable Care Act.

In fact based on our estimates Affordable Care Act will impact labor by about 30 or 40 basis points, all else being equal. Additionally we continue to expect higher state payroll taxes as many states have increased their payroll taxes to help fund unemployment deficit.

The higher unemployment taxes will primarily occur in the first and second quarters of the year after which time we will have hit many of the state tax caps or limits. Fortunately the benefits we are seeing from project Q some of which will be more fully implemented in the first half of fiscal 2015 should help offset some of these cost pressures.

Therefore with the reasonable comp sales the benefits of project Q to help offset some of the costs related to ACA and other unemployment related costs our goal over time is to move labor on a full year basis back down into the upper 34% to right about 35% range this year.

As is historical in our business I expect Q1 of 2015 to be higher than the remaining quarters in the year due to the reset of taxes in Q1 as I just mentioned. Also specifically for Q1 I would expect incentive compensation at the restaurants to be slightly greater than planned based on sales to-date.

Taking all this into consideration I expect labor in Q1 to be in the mid to upper 35% range. Of course labor as a percent of sales could vary from our current estimates based on the weekly sale averages in the actual comparable restaurant sales results.

With regard to occupancy and operating cost for the year our expense management and margin enhancement initiatives have significantly reduced these expenses and our goal is to hold the line on these savings while using additional savings to offset some of the normal and stationary pressure we get each year.

As such we are targeting total occupancy and operating cost to be in the low to mid 21% range. Included in this total occupancy and operating cost will be approximately 2.3% of marketing spend which is consistent with the levels of marketing spend in 2014.

Our G&A expenses for 2015 in absolute dollar terms are currently projected to be approximately 55 million. The main increase in G&A is primarily in management and training as the number of new restaurant openings increases from 11 in 2014 to 15 in 2015.

Preopening cost should be in the range of about 7.7 million for the planned opening of 15 new restaurants this year and the opening of two small brewpub locations in Texas.

As we have mentioned in the past and disclosed in our filings changes to the Texas Alcoholic Beverage Commission laws have allowed for the construction of these brewpub operations which will allow us to more efficiently produce our beer for our Texas restaurants.

These two small brewpubs will be introducing all of our beer in the state of Texas starting in the third quarter and they will also have just a small testing room for the requirement of the Texas Alcoholic Beverage Commission. Ultimately this should lead to lower beer cost in Texas after we work through the opening expenses and gets fully ramped up.

As such I am including about 300,000 in preopening related to these brewpub locations in my estimate. Overall the CapEx for this initial amounts to around 5.5 million including the land that we purchased in Texas of which 3 million was expense in 2014 or capitalized in 2014 with the balance to be recorded in 2015.

From a quarterly perspective we are currently targeting two restaurant sales in this first quarter which have already opened and at the six restaurants in the second quarter plus we will have opening cost for the two new Texas brewpubs in the second quarter I just mentioned.

Based on our tax planning initiatives and also assuming the WATSI credits are reinstated, we are targeting an effective ttax rate for 2015 up 28%, this is higher than our 2014 rate because of additional tax credits we received this past year and higher planned pretax income for 2015.

However, depending on the timing of credits or changes to actual results, our rates could vary from quarter-to-quarter.

Reflecting the waiting following the 2014 repurchase activity anticipate our diluted shares outstanding will be around 27 million for the year and again we still have 50 million outstanding on our current share repurchase authorization.

CapEx for 2015 is expected to be around 100 million before any tenant improvement allowances or sale leaseback proceeds.

We currently expect to fund our ongoing expansion, capital expenditures and share repurchases from cash on hand, our cash flow operations, proceeds from tenant improvement allowances and sale leaseback transactions as well as through our line of credit.

Our unsecured revolving line of credit as I mentioned is for a $150 million and its current rates around 1.5% so we're presently budgeting about a $1 million of interest expense in 2015. However, this could change based on our additional share repurchase and timing of new restaurants or -- initiative.

Before we open the call up to questions, I want to sum up 2014's accomplishment and acknowledge the contributions of our field team and corporate team and their superb execution against our strategies to enhance shareholder value. For those who've followed BJ's we laid out a three year plan almost a year ago at our Analyst Day.

This plan was predicated on three major initiatives, reignite sales, improve operating margins and elevate the investment returns from our new restaurants.

I think it's evident that we make tangible progress on every one of those initiative throughout the year and our results are reflected in our second half of 2014 financial growth and expectations for further growth this year in 2015.

While our pursuit of affordability let us to incur some negative menu mix as it relates to top line sales, our guest have enthusiastically embraced the new menu items as evidence by the fact that our guest counts have consistently outpace the industry at large. This started with our February 2014 new menu and continues to move in the right direction.

Over the past year we also began implementing a wide range of ideas that came from our operators, as a result of the Project Q initiative and successfully eliminating some of the complexity in the kitchen while improving both the quality and consistency of our menu item.

As noted earlier, these changes allowed us to leverage labor in the second half of the year and overcome significant minimum wage increases in California, where we have about 40% of our restaurants.

We also laid out a plan to eliminate a $1,000 a week from our operating occupancy cost and it's exceeded in finishing fiscal 2014 averaging about 21,000 a week compared to a little over 22,000 a week in fiscal 2013.

And finally beginning in August of this year, we rolled out our new prototype restaurant that cost approximately $1 million less than our prior prototype. This restaurant not only cost less but requires less staffing, is more efficient and collectively is elevating our returns on invested capital.

With our enormous growth runway and expectations for the 425 BJ's restaurants over time, this is a very significant accomplishment and one which will pay dividend over the near and long term.

Our new restaurant prototype over time will also lowered depreciation and amortization cost, which coupled with our improvement in restaurant margins and G&A leverage should set BJ's up for many years of margin expansion. As communicated previously, our goal is to get our restaurant level cash flow margins into the 19 plus percent range.

This past year we finished at 17.9% and we are working hard to get that into the low to mid 18% range this fiscal year, putting us on target to get to 19% in 2016, which is the time frame we identified a year ago.

And remember, our restaurant level margins include marketing, many of our peers do not include marketing and the restaurant level margins but included in G&A. The bottom line is that we set out a very specific plan and we're making measured visible progress towards achieving the plan.

We are not yet where we want to be and believe that there is still a lot of work to be done, the fact is we are well on our way.

I want to again express management's appreciation for the innovation and commitment to food quality and guest service and hospitality that are keenly delivered every day while reiterating the commitment to leveraging our operational improvement, balance sheet liquidity and focus on growth to deliver new long term value for our shareholders.

That's it for our formal remarks. Operator, let's open it up for questions. .

Thank you. [Operator Instructions] We will now take our first question from Brian Bittner with Oppenheimer..

Congratulations, guys. When we go back to February, 2014, you talked about it, you laid out a goal to get to 6% EBIT margins by 2016. Would you say where you stand today, a year later, are you ahead of that goal internally? And, on top of that, when you think about your comps, we just saw incredible leverage off of the low 2% comp.

What type of comp do we need, maybe, going forward, to possibly hit that target earlier than the end of 2016 in an optimistic situation?.

Brian first of all thank you. In regards to our plan we still continue to look at three year plan that we're going to achieve if you remember that February plan one of things that we talked about there was getting reasonable comp sales.

I think we use 2% in the number there and I think that is still something that we look at in regard to trying to leverage our business and grow the overall margin up into that 6% operating number and getting the restaurant other margin to 19%. If you look at the fourth quarter yes we're happy with 18-4 it was on a 1% comp.

So you could probably see that if we didn’t get additional comp sales or there should be additional leverage to kind of come through.

At the same time we phased on may be some headwinds that we’re fully I know that’s a contemplate but you didn’t understand how the market was going to react overtime and what I mean by that is we saw higher food cost inflation.

So even as we put together our three year plan we expect to cost sales frankly to say closer to 25% they bumped up to 25-6 we've got a work through that year with some of the other initiatives are going on that’s one of those things that will help us get closer to the 19% margin I think the other things that we're working on will continue to drive the cost side of our business.

And then as I said the most important part of that is driving top line sales and we're still going to stick to the fact that we need reasonable comp sales probably in two plus percent range to continue to leverage I was seeing throughout our entire P&L..

We'll now take our next question from David Tarantino with Robert W. Baird..

Congratulations on great results. So my question is about the sales strength you're seeing in the first quarter and just wondering if you kind a step back and think about all the reasons why sales might be accelerating the way they are what are your thoughts on why you've seen such strong comps so far.

I think you mentioned Greg that you're not seeing a weather benefit so is it something you're doing internally or do you think maybe the economy is getting better or some combination of that..

We are seeing some weather benefit we just not see to the same aspect given our the 5% of our restaurant in California in particular but Texas was hit hard last year by ice storms and Oklahoma et cetera and our Ohio restaurants. So please don’t misunderstand us we are seeing some of that benefit, just not to the same extent perhaps so of other.

I think the biggest driver on a macro basis because we're not the only ones out there seeing this momentum is and the entire industry thinks that will result early this year is be a fundamentally the consumer seeing the end on more confident plays overall.

We do think this tax return dynamic is an interesting one you look at the data and clearly the timing and the acceleration of returns versus last year is pretty significantly different. So we do think that was a benefit to your early parts of the quarter obviously between now and April that will even out.

But that we think is helped gas price have helped and we've said all along we didn’t see the perhaps that effecting our business credit as much as other people were forecasting and the latest retail numbers sort of there out. But it certainly has occurred right and that’s been another help.

So all of those macro factors together have been big benefits and then we have hammered for quite a long time and focusing on this traffic and through value and innovation in the value and speed and getting better that marketing.

So as was usually the case of the combination we think our traffic numbers in particularly there are out that we're outperforming even the rising tight because of the things that we’re doing particularly menu and for speed et cetera. But at the end of the day we're happy to have a combination of both working in our favor. .

Great that’s helpful and may be one for Greg Levin. You gave some fairly detailed assumptions on the cost ratios you're making cost ratios across the PNL you're making for this year what is that assume as far as comps I think maybe you eluted to it in the last question. Where do you assume comp settle into after the first quarter. .

David we don’t give specific comp guidance in that standpoint as I mentioned while we see a mid-single digits right now I do expect it to come down a little bit and I think we're still picking somewhere hopefully not a low single digit from that standpoint..

We’ll take our next question from John Glass with Morgan Stanley..

Can you talk a little about what you're expectations for mixes in 2015. If you look over that menu roll out from last year this mix flat now or do you think you still have to see similar value promotions to drive mix down then we falls from advertising result..

In general we're not looking at anything at the level of last year for sure. But we do have some menu innovations to that we think will be great additions to the menu throughout this year. But they don’t represent a change from overall guests chat perspective like we experienced last year.

So in general I would answer that question as it’s more flat than driving it or negatively impacting it from that perspective..

In the current advertising that was a percentage of sales do you think that’s sustainable or over time do you think that goes higher given that to increase your share seem to be rather defilements to the level for the brand for the next couple of years?.

I think we’re still young in that concept we’re generally filling our way to ultimately where that balance is but in the near term 2015 we’re thinking about the levels that you have seen us spend in the last year..

We’ll take our next question from Jeffrey Bernstein with Barclays..

Two questions, just one on the unit growth side.

Just wondering conceptually or wonder if you can tell us maybe your percentage of stores in new versus existing markets but is it safe to assume that when you first go into these new markets the AUVs would be are you seeing AUVs be a little lower because of the lack of brand recognition and the quite higher because of just lack of efficiency when you first go into a new market or perhaps opposite that the AUVs are actually stronger because it’s kind of the new brand and address some initial excitement? I am just wondering what the mix of new and existing is and then what you see from an AUV and margin standpoint in a new market? And then I had one follow up..

Jeff, this is Greg Levin here.

So a couple of things here one is the majority of our restaurants going forward you can kind of quantify what we say I guess got there in new markets and what I mean by that is as we talked about it over the last year we currently aren’t building really any in California and very little in Texas kind of our two biggest markets that are basically 90 of a 158 restaurants or so those two markets.

We’re still adding some restaurants in Florida the majority of our restaurants are going to be kind of in the mid-Atlantic and going at to East Coast it’s going to be a few restaurants in the Ohio valley and then also kind of connecting Texas and Florida in the Southeast area.

And while we already have some restaurants in those areas so we don’t consider them entirely new markets we’re building out the cluster in those areas versus maybe three or four years ago when it was really there is California, Texas and beginning in Florida from a build out standpoint.

So there is a little change and what that means and what we’re seeing out of that is with the lack of brand awareness the restaurants coming out of the gate are probably maybe a little less than what we’ve seen in the past from the top line sales perspective.

However the hard part about that and I talked about this before is the fact that they’re just not California restaurant and what I mean by that for those that have followed BJ’s we have consistently said look in California our restaurants again open up at a 170% of volume and we’re going to settling that a 120% or 130% of volume and frankly they have to because the cost structure in California.

So when we open a majority of restaurants in California you tend to see our weekly sales average greater than our comp sales because of the honeymoon out of those newer restaurants.

Going forward we’re going to see that weekly sales average probably be a little bit less because of these newer markets in that regard and then over time start to drive up comp sales and then frankly what we’re seeing there going forward.

In regards to the margins though and looking at our new restaurant performance frankly the new 7,400 square foot prototype and the changes we’ve made to our menu moving from 180 items down to 137 items the process around project Q in regards to simplification in the kitchen we’re actually seeing better ramp up from a margin perspective of our restaurants of what we’ve seen really over the last three or four years including California restaurants where we have matured team members taking those things over.

The fact is smaller restaurants are little bit easier to run in that regard so while maybe the sales volume isn’t where we've seen them in the past because you don’t have California levels we’re seeing better cost of sales efficiency ramp up to mature margins on labor faster better use of operating occupancy cost and overall very excited about kind of the new markets and the new restaurants together..

Got it, and then just the one other question you mentioned the couple of times in the call your comps and I guess you’ve benchmarked I think you mentioned Knapp-Track you also mentioned black box as well so just wondering who do you define as your one of those your kind of the main competitive set and how would you think it performed versus those I mean in terms of get one talking about and improving macro and everyone seem their early trends.

But didn’t know whether you think that you would be outpacing that index or whether because you have volumes and what not but you would perhaps not see as much of a bounce back in recovery stage I think we’ve heard that from Cheesecake Factory where they sort of just not as likely that we see as much upside as the industry because maybe we didn’t lose as much or maybe their volumes are already still high.

So I am just wondering how you think you are performing and improving that across the industry?.

There is a couple of things there we’re not look at first of all we look at both of them I think both of them relevant and it give good information both on from how trends are going and we try to see, there is obviously differences there what's going on to kind of analyze our business against them.

One of the most important things that we tend to look at is our comp sales are going to be dominated really by kind of three main areas and that is California, Texas and Florida to some degree.

And so what we tend to do is try to look at those different entities indexes I guess and look at them and those specific markets and we look at them really both on top line sales and guest traffic and right now because of the decision that we've made over the last year where we're taking a little bit of menu mix hit, we tend to look at what's going on with guest traffic and can we outperform it? Now I'll tell you everybody sitting in this room and frankly I'd venture to guest that the same thing in every other office out there in restaurant phase that everybody is really down competitively and frankly I want to be beating those indexes, I know Greg Trojan does - BJ's does.

So we look at it and we get very happy that we're beaten them from a guest traffic stand point frankly I would like to be beaten them from the sales standpoint and I think we have an opportunity there.

In regard to our high average unit volume it always makes it more challenging but the fact is that's what we're here to do, figure out better ways to drive more guest into our restaurant whether it's using the mobile app, whether it's looking at - and Project Q to be fastening our kitchen to service more guest those are offering that we'll continue to look at to drive more guest into our restaurants..

And what we've shown, just to add on to Greg's comment there is no one internally here ever - what we're doing already doing someone's business we can't grow comp sales then and our traffic numbers which is really the limiting factor in terms of capacity I've shown that over the last few quarters and last year's trend and beating traffic pretty delightedly to increase - those industries.

And as Greg mentioned the factor has been on the same store sales where we've liked a little bit has been we've taken our guest check and kept that essentially flat versus some pretty significant pricing out there -- so, John asked a question earlier, we don't see that same kind of guest check headwind in this coming year as we saw last year.

We should be able to leverage those traffic gains into same kind of overall same store sale being better or commenced - traffic that's the medium to long term -- ..

We will take our next question from Jeff Farmer with Wells Fargo..

Great, thanks. Greg Levin, thinking about how we're going to position, so looking back to 2014 or several periods where you called out some same store sales choppiness as you shifted from both sort of markets and planned periods I think you just call about potentially mid-March as a potential mismatch rolling over 2014 and new venue introduction.

Are there any other periods that we should be thinking about as we sort of model comps Q2, Q3, Q4 moving forward?.

No, I don't think so. Jeff, I don't have the full calendar in front of me, but is there kind of still phase in Q2 not moving around from a weak standpoint. Spring break - when the colleges are from that standpoint. New Year's eve for Q4 will be again in 2016 from this standpoint so I think overall everything kind of aligns up the same.

In regards to really thinking about from a media or marketing spending, March was our heaviest marketing of last year really with the launch of that new menu while we've mainly lower overlapped here with some FSIs or digital or everything as we do but not to the extent really in March..

All right, that's helpful and then you gave us a lot of color but bottom line was just looking at all four quarters of '14 you pretty handily beat your guidance on both the labor occupancy and operating lines, so I guess I'm just curious that's the function of I guess delivering the Project Q initiatives or seeing results from the Project Q initiatives more quickly that you'd expected or it was just sort of a greater opportunity that you'd expected with Project Q?.

I'd want to clarify this point, because it's a lot. Project Q is really around labor, top line sales, menu innovation and so on and then the operating occupancy is kind of a separate project for say.

So when I look at between those two areas, I think Project Q changes that we've implemented really start to hit more towards the second half of this year some of it - a little bit by California minimum wage and some of that unfortunately get a masked a little bit here by the affordable carrack in 2015 but not having Project Q out there would have been a lot more stress I think on that the labor line in our restaurant.

In regards to the operating occupancy cost, when I look at that and look at it from trend standpoint, Q1 and Q2 both were around 21,000-21,500 for operating as the Q2 is our highest weakly sales average so in Q3 and Q4 we've been able to drop that down into the mid-20,500 per week, this excludes marketing.

So, I don't necessarily know as you came on quicker that what we were expecting, I think one of the things that people miss a little bit Jeff is unfortunately we have to go through 2013 to get the improvement of 2014 and what I mean by this is, we've spent a lot of time in 2013 planning for these things.

So that's how they start to rollout into 2014 for example, we brought in new place as you talked about in several way brought that in from overseas at a lower price - it takes six months to get that to rollout. So we are working on that in 2013 to get that a rollout in 2014.

So I'm not sure it move in quicker than what we expected I think it's kind of moving online I think really the factor matter that in the last two quarters Q3 and Q4 we have some positive comp sales and that helps to leverage you leverage you overall on entire P&L..

Our next question comes from Will Slabaugh with Stephens Inc..

I hate to beat a dead horse with the margin here.

As you get 18.4% this quarter thinking about that longer term 19% level of about '16 I wonder and realizing this in to know that you're wonder sort of as we approached next year, in your mind what potential is for us to be go ahead and hit that earlier and if you have a longer term it should be on that in mind to this point..

Will I guess the best way to answer that question is when we go said your 19% margin that’s on an annual basis. So will there be a quarter or two we're above the 19%.

I think there is an opportunity there in Q2 of this year to five negative 1.7% negative comp we have restaurant level EBITA of 18.6% so I could see us with solid comps getting above that from certain quarters. But I wanted to finish the year and that 19% and then continue to drive it from there.

Once we reached 19% it’s now like we've got to the top of the mountain and we're going roll out our picnic basket we're here to continue working and drive this business and become more efficient and leverage our business thus we can..

One quick follow up if I could the longer term unit growth picture. You talk about that per footage growth in the 10% range for a while now and I realize the math’s works out you being only 12 below that for 1Q in terms of 2015.

But considering the improvements that you're seeing now is that give you more confidence to maybe take that percentage growth rate up a little bit or you going to be comfortable longer term in that low double digit range..

The limiting factor ultimately for us and there is some variability when we say low double digit right. But we’re not going to we're not going to be 20% in restaurant re-growth company unless we figure out how to come mass the produce people.

And the experience managers and the folk that take to run our restaurant we're everybody thinks that are concept in retail and restaurant is different but the volumes that we run in our restaurant we just can't tie our folks other concepts and they come as general manager of these days.

So that tends to be a limiting factor we do think we have the capability to open more restaurants on an absolute number and give some of what more aggressive there but it's not going to be a - because of the people factors that it take to do this the right way..

Our next question comes from Andy Barish with Jeffries..

Hey guys wondering on marketing for 2015 if there are significant shifts falling in couple years of looking at TV and using a lot of print and then secondly can you give us an update sort of the BJs app and how that’s performed kind of versus your expectations. .

I think I'll answer the Media mix question in the way we're that is something that we continue to test and evolve in we have a better idea of where and you're getting more of efficient as I mentioned my remarks around TV and we're seeing even better results in some of our key areas that we've been running in.

So we see that being a continuing part of our mixed and we're also seeing some encouraging results on the things we're doing on the digital side that range from traffic driving in the world of search. But also in social et cetera all the usual areas you hear people talking about.

But as obviously quite measurable and we're seeing some underlying dynamic there that our quite encouraging.

So in general much like you're hearing other people talk about is our shifts towards digital spend I wouldn’t call it again world changing but we're definitely waiting more resources on the digital side overall and then last but not least we are working on having success on mining is been then base to our loyalty program and doing that in segmented focus way we're leading almost active discounting to folks we haven’t seen in a while and that’s driving some real traffic for us as well.

So that’s in general have thinking about it. We're still testing all kinds of media outside of that, different forms within those umbrellas. You know, on and market basis but in general that’s however thinking about the trends. .

And in regards to the app it's performing exactly kid of where we thought it was going to be. We said we're early we're not expecting somebody with your usage meaning your amount of vacations in casual dining is as great and let’s call it QSR in the coffee from that standpoint.

We continued to get great feedback from the guests that use it and love it especially for the table side of things for take-out for putting their name on the wait list and mobile pay is phenomenal if you guys have ever used the mobile pay and now we’ve got our new restaurant in Nanuet on the East Coast that can get out there.

Mobile pay is an unbelievable changer in regard to casual dining and I do think over time it will catch on different from that standpoint and the other thing that we would say is we’re actually kind of happy that we’re seeing other casual dining concepts go into this areas of business because it provides a little bit wider adoption for consumers to think about it.

So it’s a small part of our business but something that we continue to like having out there and like having to first mover advantage for us..

We’ll take our next question from Joshua Long with Piper Jaffray..

I was curious as you’ve executed against project Q and then continue to roll out the new smaller prototype which is maybe easier or less complex on a relative basis to your older format.

If that has changed your thinking in terms of what complexity means in terms of the BJ’s menu? So you’ve gone from 180 down to now 137 menu items as you’ve gotten more comfortable and you’ve cut out a lot of the more complex things.

Is that maybe creates more opportunity for reduction or maybe even go the other way with allowing some of these menu innovations to the additions to the menu? Just trying to think about kind of where the ultimate menu might shake out as you gotten better at executing on complexity?.

What I would say overall Joshua is we don’t have hard and fast number in mind here but having said that we don’t feel and I don’t believe that we’re done in terms of getting our menu down a bit further.

And we’ve been quite cautious in our core legacy market particularly in California where people are attached to the items and we don’t have things on our menu today that aren’t selling so we figured we’d eliminated those long ago.

So, just as a frame reference our new restaurants are opening with a menu that’s closer in the low ones quantities and so folks that are used to BJ’s find that to be as plenty of diversity and lots of variety on our menu. So that may give you a sense of sort of the range that we think is reasonable somewhere in that range in that ballpark.

And then in terms of new items one of the reasons we’re doing this is though we make space and effective capacity in our kitchen so that we can introduce new items.

But again not a hard and fast rule but for items that we’re contemplating as permanent members of the menu versus LTOs in general we have a conversation around we’re going to take in the sustained number of items off the menu if not a few more than we add, so that over time we’re not back to where we were a year and half ago where we were basically maxed out.

So we’re trying to maintain quite a good discipline in regards to that that doesn’t mean menu to menu it’s going to exactly work that way but philosophically maintaining that level of discipline so that we can execute in the kitchen is important..

Understood, and then thinking more about off premise sales opportunities something we’ve talked about in the past and we spend a lot of time talking about things that are going on in the restaurant in terms of menu innovations and then just easing the overall guest experience.

So I was curious if you can provide an update around off premise sales whether that catering or two go and then is there an opportunity to leverage some of these tech tools that you have invested in overtime to drive that pizza business as well?.

Josh this is Greg Levin. First of all as I mentioned I think earlier the mobile app is great for off premise and take out and we get a lot of guests users for that and the ability as you can imagine the place your order pay for and then just then just pick it up is tremendous and that’s going to help grow that channel there.

We’ll continue to work off premise usually through local restaurant marketing events and everything for last year it wasn’t one of the highest priorities for us meaning we didn’t we still have specific initiatives against it.

But we continue to evaluate our catering offering from off premise standpoint and we’re looking at is there other ways on the mobile app to do things around party packs and everything.

So it’s something that we’ll continue to evaluate especially with our deep dish pizza we think it can be more so we’ll continue to work it but it wasn’t for at least 2014 one of our major initiatives versus some of the other things we are working on..

We’ll take our next question from Sharon Zackfia with William Blair..

You talked a little bit about the new prototype and how it seem like it might even be a more labor efficient. I was just wondering if you could give us any kind of inside on what the restaurant level margin differential might be between the new prototype and the former format that you used..

Sharon I can’t it’s a great question and the reason I can’t -- and first of all the restaurants are less than six months old so they haven’t necessarily reached for full maturity from that standpoint the bigger thing that I’ve seen and I talked about this - forgive me if I rehashed stuff I talked about in the past and that is I always describe our margins kind of like a football game and that is, as a first six months or so you move the ball down the field and you get down to about the 20 yard line and this takes the remaining six months to a year to get over from 20 yard line into the end zone and I'd tell you right now based on our newer restaurants we marched the ball down the field to the 20 yard line faster than where we've in the past.

So, it took six months maybe it's taken five or four months right now to get down there all through a combination of mini things by the way it's not just a new prototype it's a back as Greg Trojan just mentioned that our newer restaurants are opening up with 137 menu items or less in certain locations.

And then the restaurants themselves being a little bit of smaller makes it easy.

So, it's a combination of that and other things around Project Q but until we get probably a year end to this meaning until next August, it's hard to see where they're exactly going to settle but I'd tell you just a fact that getting to mature margins quicker that in itself is worth a whole lot in regards to return on investment capital..

Our next question comes from Nick Setyan with Wedbush Securities..

Hi, -- congrats again on a great quarter. My question is more trying to clarify the - group of locations.

Are those included in the 15 units for next year and I think of the comment that they just have a small testing room, is that in addition to like a restaurants Greg, or is that - how should think about, how would it be sales little bit differently?.

Yes, Nick it's a great question. Those will just having small testing rooms, they will not be in our sales from that standpoint. It's not count in the 15 restaurants, so 15 restaurants we're building basically two brewpubs by the small testing room. Whatever we sell in that testing room will basically be a credit against your cost so to speak..

Our final question today comes from Paul Westra with Stifel..

Great, thanks, good afternoon. Couple of follow up questions, one is on your commodity cost outlook, you've got it for the 15 years to be stay 1.5 versus your target 2.5, can you give a little color where that savings coming from and how much you contracted now as there into calendar '15? And I have one more follow up..

All right, couple of things in regard to that specifically we contracted about 60% of our commodities are contracted for the full year and where we've seen the come down is two areas, one is chickens come down a little bit from we thought it was going to be but frankly chicken is going to be more expensive for us as well as continued beef in that regard.

But where we're expecting to get it to come down a little bit really Paul is the dairy cost and cheese and we've locked in I'd say about 50% as are achieved for next year. So that's the big are that's coming down as well as couple of other areas going to next year and sea food will be lower as well.

So, dairy and sea food come down pretty much contracted and then chicken and beef are up a little bit..

Great and then a last question is I think you said mid to low 18% range and I hope total margins you hit this calendar year is obviously just throughout 18.4, seasonally fourth quarter is usually one of your weakest but not the weakest quarter so we think that why not perhaps a little bit more than that or is there maybe something some other conservatives - on that?.

Well, first of all, I'm always going to take the conservative wrote but as I look through just this last year, Q1 was 17, Q2 pumped up at 18.6, Q3 was 17.6 and maybe just hit an 18.4 in Q4. So you look through its still kind of up and down based on weekly sales averages through last year.

The other thing is the inflationary environment as we go into next year will get offset a little bit by project and some of other cost containment but they're getting come through a little bit.

So for instance the throughput that we just saw here in Q4 all of the sudden come Q1 of next year and we're going to get that 30 to 40 basis points increase from the affordable carrack.

So, I think we've ability to offset it, we're not going to be able to get the entire Project Q savings dollar for dollar flowing through because some of it will be offset from the ACA.

So, that's why when I trying to look at how we're stair stepping our business I tend to think that will end up 2014 kind of in that 18% range as I talked about on an annual basis setting ourselves up for 2016 to get to the 19 plus percent range..

Kind of maybe one last question, pricing is at 3% here in the first quarter than 2.5 in the second we assume 2.5 reminder of the year?.

I don't know exactly nowhere the reminder of the year is going to be but if you remember last year at this time Paul we rolled out our new menu of 1.4%, that kind of for lack of the better term rolled out March 01st, is called the new menu.

So, we're sitting at about 3% right now or so and then the one four rolls off so put you down in some kind of the middle whatever 1.5 range I guess and then we're going to have about 1% or so kind of come on right at the same time that's how we get to the kind of the mid to 2.5% range and then as we get closer to the summer, we'll give you an idea of what we're seeing in regards to maybe additional pricing..

Ladies and gentlemen, that concludes today's question-and-answer session and today's presentation. Thank you for your participation and have a good night..