t64076_10q.htm

UNITED STATES

SECURITY AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 12, 2008

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

Commission File No. 0-26396

BENIHANA INC.

(Exact name of registrant as specified in its charter)

Delaware	65-0538630
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

8685 Northwest 53rd Terrace, Miami, Florida	33166
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (305) 593-0770

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes

o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer	x Accelerated filer

o Non-accelerated filer	o Smaller reporting company
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes

x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock $.10 par value, 5,803,870 shares outstanding at November 7, 2008

Class A common stock $.10 par value, 9,492,780 shares outstanding at November 7, 2008

BENIHANA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SEVEN PERIODS ENDED OCTOBER 12, 2008

TABLE OF CONTENTS

			PAGE
PART I –	FINANCIAL INFORMATION

	Item 1.	Financial Statements – unaudited

		Condensed Consolidated Balance Sheets (unaudited) at October 12, 2008 and March 30, 2008	2

		Condensed Consolidated Statements of Income (unaudited) for the Three and Seven Periods Ended October 12, 2008 and October 14, 2007	3

		Condensed Consolidated Statement of Stockholders' Equity (unaudited) for the Seven Periods Ended October 12, 2008	4

		Condensed Consolidated Statements of Cash Flows (unaudited) for the Seven Periods Ended October 12, 2008 and October 14, 2007	5

		Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 13

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14 - 26

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

	Item 4.	Controls and Procedures	27

PART II –	OTHER INFORMATION

	Item 1.	Legal Proceedings	28 - 29

	Item 1A.	Risk Factors	29

	Item 6.	Exhibits and Reports on Form 8-K	29

-1-

BENIHANA INC. AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS – UNAUDITED

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share information)

	October 12,			March 30,
	2008			2008
Assets
Current Assets:
Cash and cash equivalents	$	1,636		$	1,718
Receivables, net		2,305			4,473
Inventories		6,862			6,477
Income tax receivable		1,784			3,756
Prepaid expenses and other current assets		2,774			2,036
Investment securities available for sale - restricted		593			808
Deferred income tax asset, net		792			347
Total current assets		16,746			19,615

Property and equipment, net		203,491			184,176
Goodwill		29,900			29,900
Deferred income tax asset, net		1,178			746
Other assets, net		8,407			7,217
Total assets	$	259,722		$	241,654

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	8,818		$	6,158
Accrued expenses		25,786			25,226
Accrued put option liability		3,718			3,718
Total current liabilities		38,322			35,102

Deferred obligations under operating leases		12,118			11,296
Borrowings under line of credit		27,382			17,422
Other long term liabilities		804			769
Total liabilities		78,626			64,589

Commitments and contingencies (Notes 5 and 9)

Convertible preferred stock - $1.00 par value; authorized -
5,000,000 shares; Series B mandatory redeemable convertible
preferred stock - authorized - 800,000 shares; issued and outstanding –
800,000 shares, respectively, with a liquidation preference of $20 million
plus accrued and unpaid dividends as of October 12, 2008		19,495			19,449

Stockholders’ Equity
Common stock - $.10 par value; convertible into Class A common
stock; authorized, 12,000,000 shares; issued and outstanding,
5,806,111 and 6,234,964 shares, respectively		581			623
Class A common stock - $.10 par value; authorized, 20,000,000 shares;
issued and outstanding, 9,490,539 and 9,044,436 shares, respectively		949			905
Additional paid-in capital		68,884			68,342
Retained earnings		91,355			87,777
Accumulated other comprehensive loss, net of tax		(168	)		(31	)
Total stockholders’ equity		161,601			157,616
Total liabilities, convertible preferred stock and stockholders' equity	$	259,722		$	241,654

See accompanying notes to unaudited condensed consolidated financial statements.

-2-

BENIHANA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share information)

	Three Periods Ended					Seven Periods Ended
	October 12,			October 14,		October 12,			October 14,
	2008			2007		2008			2007

Revenues
Restaurant sales	$	69,575		$	66,586	$	163,500		$	155,955
Franchise fees and royalties		405			383		940			949
Total revenues		69,980			66,969		164,440			156,904


Costs and Expenses
Cost of food and beverage sales		16,899			15,663		39,499			36,698
Restaurant operating expenses		43,720			40,668		102,640			93,265
Restaurant opening costs		248			752		983			1,461
Marketing, general and administrative expenses		5,747			6,040		14,523			15,066
Total operating expenses		66,614			63,123		157,645			146,490

Income from operations		3,366			3,846		6,795			10,414
Interest (expense) income, net		(334	)		86		(390	)		111

Income before income taxes		3,032			3,932		6,405			10,525
Income tax provision		1,061			1,423		2,242			3,810

Net Income		1,971			2,509		4,163			6,715
Less: Accretion of issuance costs and preferred stock dividends		251			250		585			584

Net income attributable to common stockholders	$	1,720		$	2,259	$	3,578		$	6,131

Earnings Per Share
Basic earnings per common share	$	0.11		$	0.15	$	0.23		$	0.41
Diluted earnings per common share	$	0.11		$	0.15	$	0.23		$	0.39

See accompanying notes to unaudited condensed consolidated financial statements.

-3-

BENIHANA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Seven Periods Ended October 12, 2008

(In thousands, except share information)

				Class A		Additional					Comprehensive			Total
	Common			Common		Paid-in		Retained			Loss,			Stockholders’
	Stock			Stock		Capital		Earnings			Net of Tax			Equity

Balance, March 30, 2008	$	623		$	905	$	68,342	$	87,777		$	(31	)	$	157,616

Comprehensive income:

Net income									4,163						4,163

Change in unrealized loss on
investment securities available for sale, net of tax												(137	)		(137	)

Total comprehensive income															4,026

Issuance of 5,750 shares of
common stock and 11,500
shares of Class A common stock from exercise of options		1			1		76								78

Conversion of 434,603 shares of
common stock into 434,603 shares of Class A common stock		(43	)		43										-

Dividends declared on Series B
preferred stock									(539	)					(539	)

Accretion of issuance costs on
Series B preferred stock									(46	)					(46	)

Stock based compensation							448								448

Tax benefit from stock option
exercises							18								18


Balance, October 12, 2008	$	581		$	949	$	68,884	$	91,355		$	(168	)	$	161,601

See accompanying notes to unaudited condensed consolidated financial statements.

-4-

BENIHANA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Seven Periods Ended
	October 12,			October 14,
	2008			2007

Operating Activities:
Net income	$	4,163		$	6,715
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,811			9,160
Stock-based compensation		448			300
Tax benefit from stock option exercises		(18	)		(1,287	)
Loss on disposal of assets		-			675
Deferred income taxes		(784	)		(1,922	)
Change in operating assets and liabilities that provided (used) cash:
Receivables		1,334			(1,818	)
Inventories		(385	)		(162	)
Prepaid expenses and other current assets		(738	)		551
Income taxes and other long term liabilities		2,025			1,797
Other assets		(1,398	)		(696	)
Accounts payable		2,197			2,966
Accrued expenses and deferred obligations under operating leases		89			3,249
Net cash provided by operating activities		16,744			19,528
Investing Activities:
Expenditures for property and equipment		(27,838	)		(30,566	)
Collection of insurance proceeds		1,470			-
(Purchase) sale of investment securities, available for sale, net		(15	)		59
Cash proceeds from disposal of property and equipment		-			6
Collection on Sushi Doraku note		-			2
Net cash used in investing activities		(26,383	)		(30,499	)
Financing Activities:
Borrowings on line of credit		60,869			13,211
Repayments on line of credit		(50,909	)		(8,004	)
Dividends paid on Series B preferred stock		(499	)		(748	)
Proceeds from issuance of common stock and Class A common stock upon exercise
of stock options		78			2,564
Tax benefit from stock option exercises		18			1,287
Cash dividend paid in lieu of fractional shares on stock split		-			(4	)
Net cash provided by financing activities		9,557			8,306
Net decrease in cash and cash equivalents		(82	)		(2,665	)
Cash and cash equivalents, beginning of period		1,718			8,449
Cash and cash equivalents, end of period	$	1,636		$	5,784

Supplemental Disclosures of Cash Flow Information:
Cash paid during the seven periods:
Interest	$	448		$	88
Income taxes		1,001			3,766
Noncash investing and financing activities:
Acquired property and equipment for which cash payments had not yet been made	$	7,413		$	5,054
Accrued but unpaid dividends on the Series B preferred stock		285			38
Change in unrealized (loss) gain on investment securities available for sale, net of tax		(137	)		58

See accompanying notes to unaudited condensed consolidated financial statements.

-5-

BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

General

The accompanying condensed consolidated balance sheet as of March 30, 2008, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of and for the three and seven periods ended October 12, 2008 have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto for the year ended March 30, 2008 appearing in the Benihana Inc. and Subsidiaries (the “Company”) Annual Report on Form 10-K filed with the SEC.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and results of operations. The results of operations for the seven periods (twenty-eight weeks) ended October 12, 2008 and October 14, 2007 are not necessarily indicative of the results to be expected for the full year.

The Company has a 52/53-week fiscal year. The Company’s fiscal year ends on the Sunday occurring within the dates of March 26 and April 1. The Company divides the fiscal year into 13 four-week periods where the first fiscal quarter consists of 4 periods totaling 16 weeks and each of the remaining three quarters consist of 3 periods totaling 12 weeks each. In the event of a 53-week year, the additional week is included in the fourth quarter of the fiscal year. This operating calendar provides for a consistent number of operating days within each period, as well as ensures that certain holidays significant to the Company occur consistently within the same fiscal quarters. Because of the differences in length of fiscal quarters, however, results of operations between the first quarter and the later quarters of a fiscal year are not comparable. Fiscal year 2009 will end on March 29, 2009 and fiscal year 2008 ended on March 30, 2008, where both fiscal years consist of 52 weeks each.

2.	Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 is effective for financial assets and liabilities for fiscal years beginning after November 15, 2007. In February 2008, the FASB amended SFAS 157 by issuing FASB Staff Position (“FSP”) FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” which states that SFAS 157 does not address fair value measurements for purposes of lease classification or measurement. In February 2008, the FASB also issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157,” which delayed the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis.

The Company’s adoption of the provisions of SFAS 157 on March 31, 2008, with respect to financial assets and liabilities measured at fair value, did not have a material impact on its fair value measurements or its unaudited interim condensed consolidated financial statements for the three and seven periods ended October 12, 2008. In accordance with FSP FAS 157-2, the Company is currently evaluating the potential impact of applying the provisions of SFAS 157 to its non-financial assets and liabilities beginning in fiscal 2010, including (but not limited to) the valuation of its reporting units for the purpose of assessing goodwill impairment and the valuation of property and equipment and other long-term assets when assessing long-lived asset impairment.

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BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides reporting entities an option to report selected financial assets and liabilities at fair value. SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The standard also requires additional information to aid financial statement users' understanding of a reporting entity's choice to use fair value on its earnings and also requires entities to display the fair value of those affected assets and liabilities in the primary financial statements. SFAS 159 is effective as of the beginning of a reporting entity's first fiscal year beginning after November 15, 2007. Application of the standard is optional and any impacts are limited to those financial assets and liabilities to which SFAS 159 would be applied. The Company adopted SFAS 159 effective March 31, 2008 and has elected not to measure any of its current eligible financial assets or liabilities at fair value upon adoption.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R establishes the principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141R also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141R is effective for business combinations occurring in fiscal years beginning after December 15, 2008. Early adoption of SFAS 141R is not permitted. Acquisitions, if any, after the effective date will be accounted for in accordance with SFAS 141R.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 applies to all entities that prepare consolidated financial statements but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 establishes accounting and reporting standards that require noncontrolling interests to be reported as a component of equity, changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions and any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value. SFAS 160 is to be applied prospectively to business combinations consummated on or after the beginning of the first annual reporting period on or after December 15, 2008. Acquisitions, if any, after the effective date will be accounted for in accordance with SFAS 160.

3.	Inventories

Inventories consist of the following (in thousands):

	October 12,		March 30,
	2008		2008

Food and beverage	$	2,812	$	2,511
Supplies		4,050		3,966

	$	6,862	$	6,477

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BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	Fair Value of Investments

On March 31, 2008, the Company partially adopted SFAS 157 as a result of applying the deferral provisions of FSP FAS 157-2. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. SFAS 157 clarifies that fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset and liability. As a basis for considering such assumptions, SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

As of October 12, 2008, the Company has certain available for sale investment securities that are required to be measured at fair value on a recurring basis. The Company determined the fair value of its investment securities available for sale using quoted market prices (Level 1 in the fair value hierarchy). The fair value of these investments, reflected in the condensed consolidated balance sheet as of October 12, 2008, is $0.6 million. Financial market conditions have been extremely volatile in the second half of calendar year 2008 and valuations have declined as compared to the period ended March 30, 2008, including the Company’s available for sale investments. The Company does not have any fair value measurements using Level 2 or Level 3 inputs as of October 12, 2008.

5.	Long-Term Debt

At October 12, 2008, the Company had available up to $75 million from Wachovia Bank, National Association (“Wachovia”) under the terms of a line of credit entered on March 15, 2007. The line of credit facility allowed the Company to borrow up to $75 million through March 15, 2012 and was secured by the assets of the Company. There were no scheduled payments prior to maturity; however, the Company could prepay outstanding borrowings prior to that date. The Company had the option to pay interest at Wachovia’s prime rate plus an applicable margin or at the London interbank offering rate (“LIBOR”) plus an applicable margin. The interest rate varied depending upon the ratio of the sum of the Company’s earnings before interest, taxes, depreciation and amortization, as defined in the agreement, to its indebtedness. The Company also incurred a commitment fee on the unused balance available under the terms of the line of credit, based on a leverage ratio. While providing for working capital, capital expenditures and general corporate purposes, the line of credit agreement required that the Company maintain certain financial ratios and profitability amounts and restricted the payment of cash dividends as well as the use of proceeds to purchase stock of the Company. As of October 12, 2008, the Company was in compliance with the covenants of the credit agreement with Wachovia.

At October 12, 2008, the Company had $27.4 million outstanding under the line of credit facility with Wachovia at an interest rate of 3.0%; borrowings from which were used to fund capital expenditures in connection with its expansion and renovation program. The amount available to be borrowed under the line of credit is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which totaled $0.5 million at October 12, 2008.

On November 19, 2008, the Company and Wachovia entered into a Second Amendment to the line of credit facility (“the Amendment”), which amends the line of credit agreement dated March 15, 2007. The Amendment reduces the revolving commitment under the credit agreement from $75 million to $60 million, provided that $10 million of such commitment is subject to Wachovia’s successfully syndicating a portion of the loan or the Company attaining a leverage ratio of less than 3.5 to 1.0 for two consecutive fiscal quarters. The Amendment also permits the Company to further increase the commitment under the credit agreement up to an additional $15 million, subject to certain terms and conditions. For an interim period, the Amendment both decreases the fixed charge coverage ratio and increases the leverage ratio, which the Company is required to maintain under the credit agreement. The Amendment provides for a commitment fee of 0.3% on the unused portion of the loan commitment. Interest rates payable under the amended credit agreement vary depending on the Company’s leverage ratio and range from 1.25% to 3.50% above the applicable LIBOR rate or, at the Company’s option, from 0.0% to 2.0% above the applicable interest rate. Following the Amendment, the Company has available $22.1 million for borrowing, with an additional $10 million available under certain terms and conditions under the line of credit facility.

-8-

BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.	Income Taxes

The Company files income tax returns which are periodically audited by various federal and state jurisdictions. With few exceptions, the Company is no longer subject to federal and state income tax examinations for years prior to fiscal year 2005. As of October 12, 2008, the Company had $0.7 million of gross unrecognized tax benefits, all of which would impact the tax rate if recognized, and $0.1 million accrued for the payment of interest. Unrecognized tax benefits and related interest and penalties are generally classified as other long term liabilities in the accompanying condensed consolidated balance sheets. It is the Company’s continuing policy to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

7.	Earnings Per Share

Basic earnings per common share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during each period. The diluted earnings per common share computation includes dilutive common share equivalents issued under the Company’s various stock option plans and conversion rights of Series B preferred stock.

The components used in the computation of basic earnings per share and diluted earnings per share for each fiscal year are shown below (in thousands):

	Three Periods Ended				Seven Periods Ended
	October 12,		October 14,		October 12,		October 14,
	2008		2007		2008		2007
Net income, as reported	$	1,971	$	2,509	$	4,163	$	6,715
Less: Accretion of issuance costs and
preferred stock dividends		251		250		585		584
Income for computation of basic earnings per
common share		1,720		2,259		3,578		6,131
Add: Accretion of issuance costs and
preferred stock dividends		-		250		-		584
Income for computation of diluted earnings per
common share	$	1,720	$	2,509	$	3,578	$	6,715

	Three Periods Ended				Seven Periods Ended
	October 12,		October 14,		October 12,		October 14,
	2008		2007		2008		2007

Weighted average number of common shares
used in basic earnings per share		15,290		15,222		15,284		15,103
Effect of dilutive securities:
Stock options		16		352		58		410
Series B preferred stock		-		1,582		-		1,582
Weighted average number of common shares
and dilutive potential common stock used in
diluted earnings per share		15,306		17,156		15,342		17,095

Stock options to purchase 1,412,713 shares of common stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect for the three and seven periods ended October 12, 2008. For the three and seven periods ended October 14, 2007, stock options to purchase 105,000 shares of common stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

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BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In accordance with SFAS 128, “Earnings per Share,” convertible preferred stock shall be assumed to have been converted at the beginning of the period and the resulting common shares shall be included in the denominator of diluted EPS. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. Convertible preferred stock is anti-dilutive whenever the amount of the dividend declared in or accumulated for the current period per common share obtainable upon conversion exceeds basic EPS. For the three and seven periods ended October 12, 2008, the dividend declared per common share obtainable upon conversion of the Series B preferred stock exceeds basic EPS.

8.	Stock-Based Compensation

The number of shares of Class A common stock available for grant under the 2007 Equity Incentive Plan is 750,000, of which a maximum of 550,000 may be issued upon the exercise of incentive stock options. As of October 12, 2008, of these amounts, the Company has granted 25,900 shares of restricted Class A common stock and options to purchase 343,400 shares of Class A common stock, leaving 380,700 shares available for future grants.

The Company recorded $0.2 million (approximately $0.1 million, net of tax) and $0.4 million (approximately $0.3 million, net of tax) in stock compensation expense during the three and seven periods ended October 12, 2008, respectively. The Company recorded $0.1 million (less than $0.1 million, net of tax) and $0.3 million (approximately $0.2 million, net of tax) in stock compensation expense during the three and seven periods ended October 14, 2007, respectively.

Stock Options

Options to purchase 30,000 shares of Class A common stock were granted during the seven periods ended October 12, 2008, and the following assumptions were used in the Black-Scholes option pricing model used in valuing options granted: a risk-free interest rate of 3.7%, an expected life of three years, no expected dividend yield and a volatility factor of 51%. There were no options granted during the seven periods ended October 14, 2007. Assumptions used in estimating the fair value of options granted during the remainder of fiscal 2008 are described in Note 1 to the consolidated financial statements for the year ended March 30, 2008 appearing in the Company’s Annual Report on Form 10-K.

The following is a summary of stock option activity for the seven periods ended October 12, 2008:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life		Value
Outstanding at March 30, 2008		1,529,338		$	9.90		5.2	$	3,612,000
Granted		30,000			8.46
Exercised		(17,250	)		4.43
Outstanding at October 12, 2008		1,542,088		$	9.93		4.2	$	-
Exercisable at October 12, 2008		1,192,021		$	9.40		3.4	$	-

There were no stock options canceled, expired or forfeited during the seven periods ended October 12, 2008. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. For the seven periods ended October 12, 2008 and October 14, 2007, the total intrinsic value of stock options exercised was less than $0.1 million and $3.9 million, respectively. Proceeds from stock options exercised during the seven periods ended October 12, 2008 and October 14, 2007 totaled less than $0.1 million and $2.6 million, respectively. Upon the exercise of stock options, shares are issued from new issuances of stock. The tax benefit realized for tax deductions from stock options exercised during the seven periods ended October 12, 2008 and October 14, 2007 totaled less than $0.1 million and $1.3 million, respectively. As of October 12, 2008, total unrecognized compensation cost related to non-vested share-based compensation totaled $1.0 million and is expected to be recognized over approximately 2.8 years.

-10-

BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Restricted stock

In fiscal 2008, the Company granted 25,900 shares of restricted Class A common stock awards to certain employees, and as of October 12, 2008, none of these awards were vested or forfeited. The grant date fair value of restricted stock awards granted was $10.35 in fiscal year 2008, which was the market price of the underlying shares on the date of grant. As of October 12, 2008, there was $0.2 million of unrecognized compensation cost related to restricted stock awards, which is expected to be recognized over approximately 2.5 years.

9.	Commitments and Contingencies

Haru Minority Interest

In December 1999, the Company completed the acquisition of 80% of the equity of Haru Holding Corp. ("Haru"). The acquisition was accounted for using the purchase method of accounting. Pursuant to the purchase agreement, at any time during the period from July 1, 2005 through September 30, 2005, the holders of the balance of Haru's equity (the “Minority Stockholders”) had a one-time option to sell their remaining shares to the Company (the "put option"). The exercise price under the put option was to be calculated as four and one-half (4½) times Haru's consolidated cash flow for the fiscal year ended March 27, 2005 less the amount of Haru's debt (as that term is defined in the purchase agreement) at the date of the computation. On July 1, 2005, the Minority Stockholders exercised the put option.

The Company believes that the proper application of the put option price formula would result in a payment to the former Minority Stockholders of approximately $3.7 million. The Company has offered to pay such amount to the former Minority Stockholders and recorded a $3.7 million liability with respect thereto.

On August 25, 2006, the former Minority Stockholders sued the Company. The suit (which was originally filed in the Supreme Court of the State of New York, County of New York, but has been removed to the United States District Court for the Southern District of New York) seeks an award of $10.7 million based on the former Minority Stockholders’ own calculation of the put option price formula and actions allegedly taken by the Company to reduce the value of the put option.

On December 19, 2007, the Court dismissed all of the claims against the Company, except for the breach of fiduciary duty and breach of contract claims. On January 25, 2008, the Company filed its Answer and Affirmative Defenses to the Amended Complaint. The Company is engaged in fact and expert discovery, and the Court had set a discovery deadline of November 10, 2008.

The Company believes that it has correctly calculated the put option price and that the claims of the former Minority Stockholders are without merit. However, there can be no assurance as to the outcome of this litigation.

Other Litigation

On May 17, 2007, Benihana Monterey Corporation, a subsidiary of the Company, filed a complaint in the action, Benihana Monterey Corporation v. Nara Benihana Monterey, Inc., et al. The action was commenced against various defendants in connection with a default on a Promissory Note in the amount of $375,000 signed by one of the Company’s franchisees and a Personal Guaranty signed by the owner of such franchise. The Company has obtained judgment against the defendant for approximately $500,000, including repayment of the $375,000 Promissory Note, interest and costs. The Company has served the defendant with an order regarding examination of the defendant’s assets and has filed a subpoena requiring the defendant and the defendant’s entities to produce substantial documents. As of October 12, 2008, the Company has a $400,000 reserve for the estimated portion of the Promissory Note and accrued interest that may not be collectible.

-11-

BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

On August 3, 2007, the Company was served with a complaint in the action, National Cable Communications, LLC v. The Romann Group and Benihana Inc. In this action, plaintiff alleged that the Company was jointly and severally liable with its co-defendant, the Romann Group for unpaid payments relating to spot cable advertisements allegedly purchased by Romann Group on behalf of the Company and placed by plaintiff. Plaintiff's complaint demanded judgment of approximately $570,000 plus interest, costs and disbursements. The Company answered the complaint, denying liability with respect to the plaintiff’s claims and asserted cross-claims against the Romann Group. The Romann Group served its answer in this action denying the Company’s cross claims and asserted counterclaims against the plaintiff and cross-claims against the Company for unspecified damages. In June 2008, the Court bifurcated this action and directed the plaintiff’s contract claims against the Company to trial. On September 4, 2008, the Court issued a decision holding that the Company was not liable to the plaintiff on the claims asserted. On October 15, 2008, the Company reached a settlement with the Romann Group to discontinue, without prejudice, the cross-claims against each other in order to avoid incurring further time and expense.

The Company is not subject to any other pending legal proceedings, other than ordinary routine claims incidental to its business, which the Company does not believe will materially impact results of operations.

Supply Agreements

The Company has entered into non-cancellable supply agreements for the purchase of beef and certain seafood items, in the normal course of business, at fixed prices for periods up to twelve months. These supply agreements will eliminate volatility in the cost of the commodities over the terms of the agreements. These supply agreements are not considered derivative contracts.

10.	Restaurant Operating Expenses

Restaurant operating expenses consist of the following (in thousands):

	Three Periods Ended				Seven Periods Ended
	October 12,		October 14,		October 12,		October 14,
	2008		2007		2008		2007

Labor and related costs	$	24,039	$	22,922	$	57,645	$	52,787
Restaurant supplies		1,684		1,501		3,979		3,537
Credit card discounts		1,343		1,274		3,138		2,927
Utilities		2,472		1,945		5,199		4,192
Occupancy costs		4,412		3,899		10,223		9,360
Depreciation and amortization		4,020		3,837		9,601		8,738
Other restaurant operating expenses		5,750		5,290		12,855		11,724
Total restaurant operating expenses	$	43,720	$	40,668	$	102,640	$	93,265

11.	Segment Reporting

The Company’s reportable segments are those that are based on the Company’s methods of internal reporting and management structure. The Company manages operations by restaurant concept.

Revenues for each of the segments consist of restaurant sales. Franchise revenues, while generated from Benihana franchises, have not been allocated to the Benihana teppanyaki segment. Franchise revenues are reflected as corporate revenues.

-12-

BENIHANA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The tables below present information about reportable segments (in thousands):

	Three Periods Ended
	October 12, 2008
	Teppanyaki		RA Sushi		Haru		Corporate			Consolidated

Revenues	$	46,413	$	14,420	$	8,742	$	405		$	69,980
Income (loss) from operations		3,984		424		976		(2,018	)		3,366
Capital expenditures, net of insurance proceeds		5,290		2,047		63		-			7,400

	Three Periods Ended
	October 14, 2007
	Teppanyaki		RA Sushi		Haru		Corporate			Consolidated

Revenues	$	48,971	$	10,106	$	7,509	$	383		$	66,969
Income (loss) from operations		5,211		270		1,024		(2,659	)		3,846
Capital expenditures		8,131		1,943		6,078		-			16,152

	Seven Periods Ended
	October 12, 2008
	Teppanyaki		RA Sushi		Haru		Corporate			Consolidated

Revenues	$	110,646	$	32,223	$	20,631	$	940		$	164,440
Income (loss) from operations		9,685		530		2,338		(5,758	)		6,795
Capital expenditures, net of insurance proceeds		17,835		8,237		296		-			26,368

	Seven Periods Ended
	October 14, 2007
	Teppanyaki		RA Sushi		Haru		Corporate			Consolidated

Revenues	$	114,485	$	23,556	$	17,914	$	949		$	156,904
Income (loss) from operations		13,265		1,091		2,768		(6,710	)		10,414
Capital expenditures		19,544		3,892		7,130		-			30,566

12.

401K Plan

The Company adopted the Benihana 401K Plan (“the 401K Plan”) effective June 23, 2008. All eligible employees, as determined in accordance with Internal Revenue Service guidelines, who are at least age twenty-one or older can participate in the 401K Plan upon completion of one year of employment with the Company. The 401K Plan permits employees to elect to contribute a portion of their eligible compensation into the 401K Plan. The Company’s matching contributions under the 401K Plan are discretionary and are calculated as a percentage of eligible employee elective salary deferrals. These matching contributions have a six year graded vesting schedule. For the seven periods ended October 12, 2008, the Company accrued employer matching contributions to the 401K Plan of less than $0.1 million.

-13-

BENIHANA INC. AND SUBSIDIARIES

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

OVERVIEW

The Company’s revenues consist of sales of food and beverages at the Company’s restaurants and licensing fees from franchised restaurants. Cost of restaurant food and beverages sold represents the direct cost of the ingredients for the prepared food and beverages sold. Restaurant operating expenses consist of direct and indirect labor, occupancy costs, advertising and other costs that are directly attributed to each restaurant location. Restaurant opening costs include rent incurred during the development period, as well as labor, training expenses and certain other pre-opening charges which are expensed as incurred.

Restaurant revenues and expenses are dependent upon a number of factors including the number of restaurants in operation, restaurant patronage and the average check amount. Expenses are additionally dependent upon commodity costs, average wage rates, marketing costs and the costs of administering restaurant operations.

Total revenues increased 4.5% and 4.8% in the current three and seven periods ended October 12, 2008, respectively, while net income decreased 21.4% and 38.0% in the current three and seven periods ended October 12, 2008, respectively, when compared to the corresponding periods a year ago. Earnings per diluted share decreased 26.7% and 41.0% in the current three and seven periods ended October 12, 2008, respectively, when compared to the corresponding periods a year ago. For purposes of calculating diluted earnings per share, the Company experienced a decrease of 10.8% and 10.3% in the diluted weighted average shares outstanding for the current three and seven periods ended October 12, 2008, respectively, when compared to the corresponding periods a year ago.

Results for the three and seven periods ended October 12, 2008 were adversely impacted by a challenging economic environment, resulting in softer sales trends and increased costs at the restaurant level. In response to the ongoing macroeconomic and industry challenges, the Company is actively managing its controllable expenses and, in an effort to drive traffic, continues to highlight the distinct nature of the guest experience with the new multi-media campaign at its Benihana teppanyaki concept and through a combination of media advertising and local marketing initiatives at its RA Sushi and Haru concepts. Additionally, the Company has opted to postpone the remodeling of two Benihana teppanyaki restaurants, reduce capital expenditures and limit near-term expansion to those development projects for which leases have already been executed.

The following tables reflect changes in restaurant count during the three and seven periods ended October 12, 2008 and October 14, 2007:

	Three Periods Ended
	October 12, 2008
	Teppanyaki		RA Sushi		Haru		Total

Restaurant count, beginning of period		60		20		9		89
Openings		-		1		-		1
Restaurant count, end of period		60		21		9		90

	Three Periods Ended
	October 14, 2007
	Teppanyaki		RA Sushi		Haru		Total

Restaurant count, beginning of period		59		14		7		80
Openings		1		-		-		1
Restaurant count, end of period		60		14		7		81

-14-

	Seven Periods Ended
	October 12, 2008
	Teppanyaki			RA Sushi		Haru		Total

Restaurant count, beginning of period		60			18		9		87
Openings		-			3		-		3
Restaurant count, end of period		60			21		9		90

	Seven Periods Ended
	October 14, 2007
	Teppanyaki			RA Sushi		Haru		Total

Restaurant count, beginning of period		59			13		7		79
Openings		2			1		-		3
Closings		(1	)		-		-		(1	)
Restaurant count, end of period		60			14		7		81

As of October 12, 2008, there were also 19 franchised Benihana teppanyaki restaurants operating in the United States, Latin America and the Caribbean.

REVENUES

Three Periods Ended October 12, 2008 Compared to October 14, 2007:

The following table shows revenues for the three periods ended October 12, 2008 when compared to the same period in the prior fiscal year as well as the related dollar and percentage changes (dollar amounts in thousands):

	Three Periods Ended				Change
	October 12,		October 14,
	2008		2007		$		%

Restaurant sales	$	69,575	$	66,586	$	2,989		4.5	%
Franchise fees and royalties		405		383		22		5.7	%
Total revenues	$	69,980	$	66,969	$	3,011		4.5	%

-15-

Components of restaurant revenues consisted of the following (dollar amounts in thousands):

	Three Periods Ended				Change
	October 12,		October 14,
	2008		2007		$			%
Total restaurant sales by concept:
Teppanyaki	$	46,413	$	48,971	$	(2,558	)		-5.2	%
RA Sushi		14,420		10,106		4,314			42.7	%
Haru		8,742		7,509		1,233			16.4	%
Total restaurant sales	$	69,575	$	66,586	$	2,989			4.5	%

Comparable restaurant sales by concept:
Teppanyaki	$	44,251	$	46,651	$	(2,400	)		-5.1	%
RA Sushi		8,885		10,028		(1,143	)		-11.4	%
Haru		6,907		7,509		(602	)		-8.0	%
Total comparable restaurant sales	$	60,043	$	64,188	$	(4,145	)		-6.5	%

The decrease in Benihana teppanyaki comparable sales was primarily the result of a 6.3% decrease in dine-in guest counts offset by an increase of 1.6% in the average per person dine-in guest check at locations opened longer than one year. RA Sushi’s decrease in comparable sales was primarily driven by an 11.3% decrease in dine-in guest counts and a decrease of 0.9% in the average per person dine-in guest check at locations opened longer than one year. Haru’s comparable sales decrease was primarily the result of an 11.7% decrease in dine-in guest counts as well as an 8.6% decrease in take-out sales offset by an increase of 4.5% in the average per person dine-in guest check at locations open longer than one year. The decrease in average per person dine-in guest check at RA Sushi is primarily attributable to an extended lower-priced happy hour menu implemented during the second quarter of 2009, partially offset by a 1% price increase on regular menu items. The increase in the average per person dine-in guest check at Haru is primarily due to a 1% price increase effected during the second quarter of 2009.

The Company believes that the decreases experienced in comparable guest counts are reflective of the current economic conditions impacting consumers. Whereas economic concerns originally were primarily concentrated in certain geographic regions, particularly in the Arizona, Southern California, South Florida and Nevada markets where the Company has 15 out of its 21 RA Sushi restaurants and approximately 30% of its Benihana teppanyaki locations as of October 12, 2008, recent economic developments have negatively impacted consumers in all areas where the Company operates.

The following table summarizes the changes in restaurant sales between the three periods ended October 12, 2008 and October 14, 2007 (in thousands):

	Teppanyaki			RA Sushi			Haru			Total


Restaurant sales during the three periods ended October 14, 2007	$	48,971		$	10,106		$	7,509		$	66,586
Decrease in comparable sales		(2,400	)		(1,143	)		(602	)		(4,145	)
Increase from new restaurants		911			5,457			1,835			8,203
Decrease from closed restaurants		(423	)		-			-			(423	)
Decrease from temporary closures, net		(646	)		-			-			(646	)
Restaurant sales during the three periods ended October 12, 2008	$	46,413		$	14,420		$	8,742		$	69,575

-16-

Seven Periods Ended October 12, 2008 Compared to October 14, 2007:

The following table shows revenues for the seven periods ended October 12, 2008 when compared to the same period in the prior fiscal year as well as the related dollar and percentage changes (dollar amounts in thousands):

	Seven Periods Ended				Change
	October 12,		October 14,
	2008		2007		$			%

Restaurant sales	$	163,500	$	155,955	$	7,545			4.8	%
Franchise fees and royalties		940		949		(9	)		-0.9	%
Total revenues	$	164,440	$	156,904	$	7,536			4.8	%

Components of restaurant revenues consisted of the following (dollar amounts in thousands):

	Seven Periods Ended				Change
	October 12,		October 14,
	2008		2007		$			%
Total restaurant sales by concept:
Teppanyaki	$	110,646	$	114,485	$	(3,839	)		-3.4	%
RA Sushi		32,223		23,556		8,667			36.8	%
Haru		20,631		17,914		2,717			15.2	%
Total restaurant sales	$	163,500	$	155,955	$	7,545			4.8	%

Comparable restaurant sales by concept:
Teppanyaki	$	101,812	$	106,245	$	(4,433	)		-4.2	%
RA Sushi		21,116		23,478		(2,362	)		-10.1	%
Haru		16,514		17,914		(1,400	)		-7.8	%
Total comparable restaurant sales	$	139,442	$	147,637	$	(8,195	)		-5.6	%

The decrease in Benihana teppanyaki comparable sales was primarily the result of a 4.8% decrease in dine-in guest counts offset by an increase of 0.6% in the average per person dine-in guest check at locations opened longer than one year. RA Sushi’s decrease in comparable sales was primarily driven by an 11.0% decrease in dine-in guest counts offset by an increase of 0.5% in the average per person dine-in guest check at locations opened longer than one year. Haru’s comparable sales decrease was primarily the result of an 11.7% decrease in dine-in guest counts as well as a 10.3% decrease in takeout sales offset by an increase of 5.9% in the average per person dine-in guest check at locations open longer than one year. The increase in average per person dine-in guest check at RA Sushi is primarily attributable to a 1% price increase effected during the second quarter of 2009 and a 3% increase effected during the second quarter of 2008, partially offset by the impact of an extended lower-priced happy hour menu implemented during the second quarter of 2009. The increase in average per person dine-in guest check at Haru is primarily attributable to a 1% price increase effected in the second quarter of 2009 and a 3% price increase effected during the second quarter of 2008.

-17-

The following table summarizes the changes in restaurant sales between the seven periods ended October 12, 2008 and October 14, 2007 (in thousands):

	Teppanyaki			RA Sushi			Haru			Total

Restaurant sales during the seven periods ended October 14, 2007	$	114,485		$	23,556		$	17,914		$	155,955
Decrease in comparable sales		(4,433	)		(2,362	)		(1,400	)		(8,195	)
Increase from new restaurants		3,136			11,029			4,117			18,282
Decrease from closed restaurants		(1,306	)		-			-			(1,306	)
Decrease from temporary closures, net		(1,236	)		-			-			(1,236	)
Restaurant sales during the seven periods ended October 12, 2008	$	110,646		$	32,223		$	20,631		$	163,500

COSTS AND EXPENSES

Three Periods Ended October 12, 2008 Compared to October 14, 2007:

The following table summarizes costs and expenses by concept, as well as consolidated, for the three periods ended October 12, 2008 and October 14, 2007 (in thousands):

	Three Periods Ended
	October 12, 2008

	Teppanyaki		RA Sushi		Haru		Corporate		Consolidated

Cost of food and beverage sales	$	11,090	$	3,776	$	2,033	$	-	$	16,899
Restaurant operating expenses		29,288		9,137		5,295		-		43,720
Restaurant opening costs		95		153		-		-		248
Marketing, general and administrative expenses		1,956		930		438		2,423		5,747
Total operating expenses	$	42,429	$	13,996	$	7,766	$	2,423	$	66,614

	Three Periods Ended
	October 14, 2007

	Teppanyaki		RA Sushi		Haru		Corporate		Consolidated

Cost of food and beverage sales	$	11,470	$	2,510	$	1,683	$	-	$	15,663
Restaurant operating expenses		30,385		6,041		4,242		-		40,668
Restaurant opening costs		212		263		277		-		752
Marketing, general and administrative expenses		1,693		1,022		283		3,042		6,040
Total operating expenses	$	43,760	$	9,836	$	6,485	$	3,042	$	63,123

-18-

The following table summarizes costs and expenses as a percentage of restaurant sales by concept, as well as consolidated, for the three periods ended October 12, 2008 and October 14, 2007:

	Three Periods Ended
	October 12, 2008

	Teppanyaki			RA Sushi			Haru			Consolidated

Cost of food and beverage sales		23.9	%		26.2	%		23.3	%		24.3	%
Restaurant operating expenses		63.1	%		63.4	%		60.6	%		62.8	%
Restaurant opening costs		0.2	%		1.1	%		0.0	%		0.4	%
Marketing, general and administrative expenses		4.2	%		6.4	%		5.0	%		8.3	%
Total operating expenses		91.4	%		97.1	%		88.8	%		95.7	%

	Three Periods Ended
	October 14, 2007

	Teppanyaki			RA Sushi			Haru			Consolidated

Cost of food and beverage sales		23.4	%		24.8	%		22.4	%		23.5	%
Restaurant operating expenses		62.0	%		59.8	%		56.5	%		61.1	%
Restaurant opening costs		0.4	%		2.6	%		3.7	%		1.1	%
Marketing, general and administrative expenses		3.5	%		10.1	%		3.8	%		9.1	%
Total operating expenses		89.3	%		97.3	%		86.4	%		94.8	%

Cost of food and beverage sales

The cost of food and beverage sales increased in the current three periods in dollar amount and when expressed as a percentage of restaurant sales when compared to the corresponding period a year ago. Cost of food and beverage sales, which is generally variable with sales, increased with the net increase in restaurant sales and due to increased commodity prices during the current fiscal year. The increase, when expressed as a percentage of sales, during the current three periods is primarily attributable to the increase in commodity prices as well as a lower-priced extended happy hour menu implemented during the second quarter of 2009 at the Company’s RA Sushi locations. This increase was partially offset by a 1% menu price increase at the Company’s RA Sushi and Haru locations during the three periods ended October 12, 2008. While the Company has not been able to increase menu prices sufficiently to fully offset commodity cost increases experienced during fiscal 2009 to date, the Company expects certain of these pressures to ease beginning in the fourth fiscal quarter of the current year. The Company has been able to renew certain commodity purchase agreements at terms more favorable than those currently in place.

Restaurant operating expenses

The Company continued to recognize additional depreciation expense totaling less than $0.1 million and $0.8 million during the three periods ended October 12, 2008 and October 14, 2007, respectively, which resulted from reevaluating the remaining useful lives of assets at Benihana teppanyaki restaurants to be renovated as part of the Company’s rejuvenation program. During the three periods ended October 12, 2008 and October 14, 2007, the Company incurred $0.1 million and $0.3 million, respectively, in ongoing expenses at Benihana teppanyaki restaurants temporarily closed for remodeling.

-19-

Restaurant opening costs

Consolidated restaurant opening costs in the three periods ended October 12, 2008 decreased in dollar amount and as a percentage of sales when compared to the prior year corresponding period. The decrease in the current period when compared to the equivalent period a year ago is due to the timing of store openings.

Marketing, general and administrative costs

Consolidated marketing, general and administrative costs decreased in dollar amount and when expressed as a percentage of sales in the three periods ended October 12, 2008 as compared to the prior year corresponding period. The decrease in absolute amount is primarily due to the Company’s efforts to actively control corporate expenses. While marketing, general and administrative costs are expected to increase in absolute amount in the current fiscal year, the decrease as a percentage of sales is consistent with the Company’s expectation to begin leveraging the additions to its infrastructure by the end of fiscal year 2009.

Interest (expense) income, net

Interest expense increased in the three periods ended October 12, 2008 when compared to the prior year corresponding period as the Company continues to draw on the line of credit to finance the expansion and renovation programs. Interest income decreased in the three periods ended October 12, 2008 when compared to the corresponding period in prior year and is expected to decrease in the future as the Company is in a net borrowing position.

Income tax provision

The Company’s effective income tax rate was 35.0% and 36.2% for the three periods ended October 12, 2008 and October 14, 2007, respectively. During the three periods ended October 12, 2008, the Company’s effective income tax rate was favorably impacted by increasing tax credits with decreasing taxable income.

Seven Periods Ended October 12, 2008 Compared to October 14, 2007:

The following table summarizes costs and expenses by concept, as well as consolidated, for the seven periods ended October 12, 2008 and October 14, 2007 (in thousands):

	Seven Periods Ended
	October 12, 2008

	Teppanyaki		RA Sushi		Haru		Corporate		Consolidated

Cost of food and beverage sales	$	26,575	$	8,159	$	4,765	$	-	$	39,499
Restaurant operating expenses		69,839		20,263		12,538		-		102,640
Restaurant opening costs		103		880		-		-		983
Marketing, general and administrative expenses		4,444		2,391		990		6,698		14,523
Total operating expenses	$	100,961	$	31,693	$	18,293	$	6,698	$	157,645

	Seven Periods Ended
	October 14, 2007

	Teppanyaki		RA Sushi		Haru		Corporate		Consolidated

Cost of food and beverage sales	$	26,902	$	5,805	$	3,991	$	-	$	36,698
Restaurant operating expenses		69,615		13,766		9,884		-		93,265
Restaurant opening costs		471		560		430		-		1,461
Marketing, general and administrative expenses		4,232		2,334		841		7,659		15,066
Total operating expenses	$	101,220	$	22,465	$	15,146	$	7,659	$	146,490

-20-

The following table summarizes costs and expenses as a percentage of restaurant sales by concept, as well as consolidated, for the seven periods ended October 12, 2008 and October 14, 2007:

	Seven Periods Ended
	October 12, 2008

	Teppanyaki			RA Sushi			Haru			Consolidated

Cost of food and beverage sales		24.0	%		25.3	%		23.1	%		24.2	%
Restaurant operating expenses		63.1	%		62.9	%		60.8	%		62.8	%
Restaurant opening costs		0.1	%		2.7	%		0.0	%		0.6	%
Marketing, general and administrative expenses		4.0	%		7.4	%		4.8	%		8.9	%
Total operating expenses		91.2	%		98.4	%		88.7	%		96.4	%

	Seven Periods Ended
	October 14, 2007

	Teppanyaki			RA Sushi			Haru			Consolidated

Cost of food and beverage sales		23.5	%		24.6	%		22.3	%		23.5	%
Restaurant operating expenses		60.8	%		58.4	%		55.2	%		59.8	%
Restaurant opening costs		0.4	%		2.4	%		2.4	%		0.9	%
Marketing, general and administrative expenses		3.7	%		9.9	%		4.7	%		9.7	%
Total operating expenses		88.4	%		95.3	%		84.6	%		93.9	%

Cost of food and beverage sales

The cost of food and beverage sales increased in the current seven periods in dollar amount and when expressed as a percentage of restaurant sales when compared to the corresponding period a year ago. Cost of food and beverage sales, which is generally variable with sales, increased with the net increase in restaurant sales and due to increased commodity prices during the current fiscal year. The increase, when expressed as a percentage of sales, during the current seven periods is primarily attributable to the increase in commodity prices as well as a lower-price extended happy hour menu implemented during the second quarter of 2009 at the Company’s RA Sushi locations. This increase was partially offset by a 1% menu price increase at the Company’s RA Sushi and Haru locations during the three periods ended October 12, 2008. During the three periods ended October 14, 2007, menu prices were increased approximately 3% at the Company’s RA Sushi and Haru locations. While the Company has not been able to increase menu prices sufficiently to fully offset commodity cost increases experienced during fiscal 2009 to date, the Company expects certain of these pressures to ease beginning in the fourth fiscal quarter of the current year. The Company has been able to renew certain commodity purchase agreements at terms more favorable than those currently in place.

Restaurant operating expenses

Restaurant operating expenses increased in dollar amount and when expressed as a percentage of restaurant sales when compared to the corresponding period a year ago. The increase in absolute amount is consistent with the increase in number of restaurant units experienced between periods. The increase, when expressed as a percentage of sales, is a result of operating inefficiencies associated with decreasing comparable sales in the current period at mature restaurants, specifically as it relates to labor, utilities and fixed costs, as well as the opening of three new RA Sushi restaurants. Offsetting the increase in restaurant operating expenses during the seven periods ended October 12, 2008 is $0.5 million in business interruption insurance proceeds received and recognized related to the Benihana teppanyaki restaurant located in Memphis, TN that was damaged by fire in February 2008. No similar proceeds were recognized during the prior fiscal year.

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The Company continued to recognize additional depreciation expense totaling $0.4 million and $1.8 million during the seven periods ended October 12, 2008 and October 14, 2007, respectively, which resulted from reevaluating the remaining useful lives of assets at Benihana teppanyaki restaurants to be renovated as part of the Company’s rejuvenation program. During the seven periods ended October 12, 2008 and October 14, 2007, the Company incurred $0.9 million and $1.2 million, respectively, in ongoing expenses at Benihana teppanyaki restaurants temporarily closed for remodeling.

Restaurant opening costs

Consolidated restaurant opening costs in the seven periods ended October 12, 2008 decreased in dollar amount and as a percentage of sales as compared to the prior year corresponding period. The decrease in the current period when compared to the equivalent period a year ago is due to the timing of store openings.

Marketing, general and administrative costs

Consolidated marketing, general and administrative costs decreased in dollar amount and when expressed as a percentage of sales in the seven periods ended October 12, 2008 as compared to the prior year corresponding period. The decrease in absolute amount is primarily due to the Company’s efforts to actively control corporate expenses. While marketing, general and administrative costs are expected to increase in absolute amount in the current fiscal year, the decrease as a percentage of sales is consistent with the Company’s expectation to begin leveraging the additions to its infrastructure by the end of fiscal year 2009.

Interest (expense) income, net

Interest expense increased in the seven periods ended October 12, 2008 when compared to the prior year corresponding period as the Company continues to draw on the line of credit to finance the expansion and renovation programs. Interest income decreased in the seven periods ended October 12, 2008 when compared to the corresponding period in prior year and is expected to decrease in the future as the Company is in a net borrowing position.

Income tax provision

The Company’s effective income tax rate was 35.0% and 36.2% for the seven periods ended October 12, 2008 and October 14, 2007, respectively. During the seven periods ended October 12, 2008, the Company’s effective income tax rate was favorably impacted by increasing tax credits with decreasing taxable income.

FINANCIAL RESOURCES

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The Company’s liquidity and capital resource strategies are focused on managing capital to maintain compliance with the financial ratios contained in the amended line of credit agreement with Wachovia. The Company believes that, under the terms of the amended credit facility, it has sufficient capital available to execute its expansion plans, along with the flexibility necessary to operate in the current economic environment.

Since restaurant businesses do not have large amounts of inventory and accounts receivable, there is generally no need to finance such items. As a result, many restaurant businesses, including the Company, operate with negative working capital. During the seven periods ended October 12, 2008, working capital deficit has increased by $6.1 million. This trend is reflective of the Company’s ongoing expansion and renovation programs, which have resulted in decreased cash and cash equivalents as well as increased liabilities associated with capital expenditures.

The following table summarizes the sources and uses of cash and cash equivalents (in thousands):

	Seven Periods Ended
	October 12,			October 14,
	2008			2007

Net cash provided by operating activities	$	16,744		$	19,528
Net cash used in investing activities		(26,383	)		(30,499	)
Net cash provided by financing activities		9,557			8,306
Net decrease in cash and cash equivalents	$	(82	)	$	(2,665	)

The Company implemented a design initiative to develop a prototype Benihana teppanyaki restaurant to improve the unit-level economics while shortening construction time and improving decor. To date, the Company has opened four locations using this design. Under a renovation program commenced during 2005, the Company is also using many of the design elements of the new prototype to refurbish the Company’s mature Benihana teppanyaki restaurant units.

During fiscal 2006, management made a strategic decision to accelerate the renovation and revitalization program, by transforming a planned 24 mature Benihana teppanyaki units in order to opportunistically build a stronger foundation for its core brand amid a growing American appetite for Asian cuisine. Given the current economic environment, the Company has opted to postpone the remodeling of the last two Benihana teppanyaki restaurants and reduce capital expenditures. The Company plans to complete the renovation of an aggregate 22 of its mature Benihana teppanyaki restaurants by the end of January 2009, using many of the design elements of the new prototype Benihana teppanyaki restaurant. The two postponed units will be refurbished at a later time under the Company’s normal maintenance program. As of November 7, 2008, the Company has completed a total of twenty-one renovations.

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Renovations currently require on average, between $2.0 million and $2.3 million in capital expenditures per unit. The cost to remodel each unit is directly dependent on the scope of work to be performed at each location. Management is continuously reviewing the extent of work to be performed at these sites. The scope of work may be impacted by the age of the location, current condition of the location as well as local permitting requirements. The renovation of the older Benihana teppanyaki units is necessary to ensure the continued relevance of the Benihana brand, and the program will enhance the Company’s leadership position as the premier choice for Japanese-style dining.

Other future capital requirements depend on numerous factors, including market acceptance of products, the timing and rate of expansion of the business, acquisitions and other factors. The Company has experienced increases in its expenditures commensurate with growth in its operations and management anticipates that expenditures will continue to increase in the foreseeable future. The Company has, however, limited near-term expansion to those development projects for which leases have already been executed. As of November 7, 2008, the Company had fourteen restaurants under development, consisting of eight Benihana teppanyaki restaurants and six RA Sushi restaurants.

In addition to investments in new restaurant units and the renovation program, the Company will use its capital resources to settle the outstanding liability incurred when the Minority Stockholders exercised their put option in Haru Holding Corp. on July 1, 2005. The Company believes that the proper application of the put option price formula would result in a payment to the former Minority Stockholders of approximately $3.7 million. The Company has offered to pay such amount to the former Minority Stockholders and recorded a $3.7 million liability with respect thereto. As further discussed in Part II. Item 1, Legal Proceedings, the former Minority Stockholders of Haru Holding Corp. (“Haru”) are seeking an award of $10.7 million in respect of the exercise of the put option on their remaining 20% interest in Haru. The Company believes that it has correctly calculated the put option price at $3.7 million. However, there can be no assurance as to the outcome of this litigation.

Management believes that the Company’s cash from operations and the funds available under its credit facility will provide sufficient capital to fund operations, commitments and contingencies, the remainder of the restaurant renovation program and restaurant expansion for at least the next twelve months.

Operating Activities

Net cash provided by operating activities totaled $16.7 million and $19.5 million for the seven periods ended October 12, 2008 and October 14, 2007, respectively. The decrease resulted primarily from a decrease in net income during the current seven periods when compared to the comparable seven periods a year ago.

Investing Activities

Capital expenditures decreased from $30.6 million for the seven periods ended October 14, 2007 to $27.8 million for the seven periods ended October 12, 2008 in response to the current macroeconomic conditions where the Company has opted to reduce capital expenditures and has limited near-term expansion to those development projects for which leases have already been executed.

During the seven periods ended October 12, 2008, the Company received $1.5 million in insurance proceeds related to the Benihana teppanyaki restaurant located in Memphis, TN that was damaged by fire, where the proceeds are being used to rebuild the restaurant.

Financing Activities

The Company began drawing on its line of credit in fiscal year 2008. Additionally, the Company expects to continue to draw on the line of credit in the near future, as a result of planned development. Refer to “Financial Resources” above for a discussion of the amended terms of the Company’s line of credit facility. During the seven periods ended October 12, 2008, the Company borrowed $60.9 million under the credit facility and made $50.9 million in payments. During the seven periods ended October 14, 2007, the Company borrowed $13.2 million under the credit facility and made $8.0 million in payments.

During the seven periods ended October 12, 2008 and October 14, 2007, proceeds from stock option exercises totaled less than $0.1 million and $2.6 million, respectively.

-24-

During the seven periods ended October 12, 2008 and October 14, 2007, the Company paid $0.5 million and $0.7 million, respectively, in dividends on the Series B preferred stock.

Contractual Obligations

There were no material changes outside the ordinary course of business during the interim period to those contractual obligations disclosed in the Company’s annual report on Form 10-K for the year ended March 30, 2008.

Critical Accounting Policies

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these condensed consolidated financial statements. A summary of significant accounting policies and estimates and a description of accounting policies that are considered critical may be found in the Company’s 2008 Annual Report on Form 10-K, filed on June 13, 2008, in Note 1 of the Notes to Consolidated Financial Statements and the Critical Accounting Policies section of Management’s Discussion and Analysis.

There were no significant changes to the Company’s accounting policies during the seven periods ended October 12, 2008.

Recently Issued Accounting Standards

In accordance with FSP FAS 157-2, the Company is currently evaluating the potential impact of applying the provisions of SFAS 157 to its non-financial assets and liabilities beginning in fiscal 2010, including (but not limited to) the valuation of its reporting units for the purpose of assessing goodwill impairment and the valuation of property and equipment and other long-term assets when assessing long-lived asset impairment.

-25-

Forward-Looking Statements

This quarterly report contains various “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s expectations or beliefs concerning future events, including unit growth, future capital expenditures and other operating information. A number of factors could, either individually or in combination, cause actual results to differ materially from those included in the forward-looking statements, including changes in consumer dining preferences, fluctuations in commodity prices, availability of qualified employees, changes in the general economy, industry cyclicality, and in consumer disposable income, competition within the restaurant industry, availability of suitable restaurant locations, harsh weather conditions in areas in which the Company and its franchisees operate restaurants or plan to build new restaurants, acceptance of the Company’s concepts in new locations, changes in governmental laws and regulations affecting labor rates, employee benefits, and franchising, ability to complete restaurant construction and renovation programs and obtain governmental permits on a reasonably timely basis, an adverse outcome in the dispute between the Company and the Minority Stockholders of Haru and other factors that the Company cannot presently foresee.

The Impact of Inflation

The primary inflationary factors affecting the Company’s operations are labor and commodity costs. Other than labor costs, inflation has not been a significant factor in the Company’s business for the past several years. Profitability is dependent, among other things, on the Company’s ability to anticipate and react to changes in the costs of operating resources, including food and other raw materials, labor and other supplies and services. To the extent permitted by competition, the Company has mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in the future. To the extent that price increases cannot be passed along to the Company’s customers, those increases could impact the Company’s financial results. The Company increased menu prices at its RA Sushi and Haru locations by 1% during the second fiscal quarter of 2009 to mitigate the impact of increases in commodity costs and minimum wage rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain risks of increasing interest rates and commodity prices. The interest on the Company’s indebtedness is largely variable and is benchmarked to the prime rate in the United States or to the London interbank offering rate. The Company may protect itself from interest rate increases from time-to-time by entering into derivative agreements that fix the interest rate at predetermined levels. The Company has a policy not to use derivative agreements for trading purposes. The Company has no derivative agreements as of October 12, 2008.

The Company had $27.4 million of borrowings under its line of credit facility outstanding at October 12, 2008. Based on the amounts outstanding as of October 12, 2008, a 100 basis point change in interest rates would result in an approximate change to interest expense of approximately $0.3 million.

The Company purchases commodities such as chicken, beef, lobster and shrimp for the Company’s restaurants. The prices of these commodities may be volatile depending upon market conditions. The Company does not purchase forward commodity contracts because the changes in prices for them have historically been short-term in nature and, in the Company’s view, the cost of the contracts is in excess of the benefits.

The Company has entered into supply agreements for the purchase of beef and certain seafood items, in the normal course of business, at fixed prices for up to twelve month terms. These supply agreements will eliminate volatility in the cost of the commodities over the terms of the agreements. These supply agreements are not considered derivative contracts.

-26-

Seasonality of Business

The Company has a 52/53-week fiscal year. The Company’s fiscal year ends on the Sunday occurring within the dates of March 26 through April 1. The Company divides the fiscal year into 13 four-week periods. Because of the odd number of periods, the Company’s first fiscal quarter consists of 4 periods totaling 16 weeks and each of the remaining three quarters consists of 3 periods totaling 12 weeks each. In the event of a 53-week year, the additional week is included in the fourth quarter of the fiscal year. This operating calendar provides the Company a consistent number of operating days within each period, as well as ensures that certain holidays significant to the Company occur consistently within the same fiscal quarters. Because of the differences in length of fiscal quarters, however, results of operations between the first quarter and the later quarters of a fiscal year are not comparable. Fiscal year 2009 will end on March 29, 2009 and fiscal year 2008 ended on March 30, 2008, where both fiscal years consist of 52 weeks each.

The Company’s business is not highly seasonal although it has more patrons coming to the Company’s Benihana teppanyaki restaurants for special holidays such as Mother’s Day, Valentine’s Day and New Year’s Eve. Mother’s Day falls in the Company’s first fiscal quarter of each year, New Year’s Eve falls in the third quarter and Valentine’s Day falls in the fourth quarter.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to the Securities and Exchange Act Rule 13a-15. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

-27-

BENIHANA INC. AND SUBSIDIARIES

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Haru Minority Interest

On August 25, 2006, the former Minority Stockholders sued the Company. The suit (which was originally filed in the Supreme Court of the State of New York, County of New York, but has since been removed to the United States District Court for the Southern District of New York) seeks an award of $10.7 million based on the former Minority Stockholders’ own calculation of the put option price formula and actions allegedly taken by the Company to reduce the value of the put option.

Other Litigation

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ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors, in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2008, which could materially affect the Company’s business, financial condition or future results. Except for the risk factor set forth below, there have been no material changes with respect to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2008. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to management may materially adversely affect the Company’s business, financial condition and/or operating results.

The recent general economic conditions and the disruptions in the financial markets may adversely impact consumer spending patterns and the availability and cost of credit.

The disruptions in the financial markets may have an adverse effect on the economy, which may negatively impact consumer spending patterns. A decrease in discretionary spending due to decreases in consumer confidence in the economy could impact the frequency with which customers choose to dine out or the amount they spend on meals while dining out, thereby decreasing revenues or adversely impacting the Company’s operating results. The disruptions in the financial markets and continuing economic downturn may adversely impact the availability of credit already arranged and the availability and cost of credit in the future. There can be no assurance that government responses to the disruptions in the financial markets will restore consumer confidence, stabilize the markets or increase the availability of credit.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibit 31.1 – Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 – Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 – Chief Executive Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 – Chief Financial Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

-29-

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Benihana Inc.
		(Registrant)

Date: November 21, 2008		/s/ Joel A. Schwartz
		Joel A. Schwartz
		Chief Executive Officer
		and Chairman of the
		Board of Directors

1.	I have reviewed this quarterly report on Form 10-Q of Benihana Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1.	I have reviewed this quarterly report on Form 10-Q of Benihana, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 21, 2008		/s/ Jose I. Ortega
		Jose I. Ortega
		Vice President - Finance and
		Chief Financial Officer

/s/ Jose I. Ortega
Jose I. Ortega
Vice President - Finance and
Chief Financial Officer

November 21, 2008

	1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.