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UNITED STATES SECURITIES 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 July 1, 2003


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

Commission File Number 0-20574

THE CHEESECAKE FACTORY INCORPORATED
(Exact Name of Registrant as Specified in its Charter)


Delaware   51-0340466
(State or other jurisdiction   (IRS Employer
of incorporation or organization)   Identification No.)
     
26950 Agoura Road  
Calabasas Hills, California   91301
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (818) 871-3000

Securities registered pursuant to Section 12(b) of the Act: None

_________________

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

        Indicate by check mark whether the Registrant is an accelerated filer (as determined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

        As of July 22, 2003, 51,457,082 shares of the registrant’s Common Stock, $.01 par value, were outstanding.



THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

INDEX


Page
Number

PART I.

FINANCIAL INFORMATION

   
 

Item 1.

   Financial Statements:

   
   

   Consolidated Balance Sheets — July 1, 2003 and December 31, 2002

1

 
   

   Consolidated Statements of Operations — Thirteen and twenty-six weeks ended July 1,        2003 and July 2, 2002

2

 
   

   Consolidated Statement of Stockholders’ Equity — Twenty-six weeks ended July 1,
       2003

3

 
   

   Consolidated Statements of Cash Flows — Twenty-six weeks ended July 1, 2003 and        July 2, 2002

4

 
   

   Notes to Consolidated Financial Statements — July 1, 2003

5

 
 

Item 2.

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

8

 
 

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk

15

 
 

Item 4.

   Controls and Procedures

16

 
       

PART II.

OTHER INFORMATION

   
 

Item 1.

   Legal Proceedings

18

 
 

Item 4.

   Submission of Matters to a Vote of Stockholders

18

 
 

Item 6.

   Exhibits and Reports on Form 8-K

19

 
       

Signatures

21

 

Index to Exhibits

22

  


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)


July 1,
2003
  December 31,
2002
 
   
 (unaudited)
      
ASSETS    
Current assets:    
   Cash and cash equivalents     $ 5,302   $ 11,033  
   Investments and marketable securities       21,770         11,819  
   Accounts receivable       5,152     5,490  
   Other receivables       16,523     17,751  
   Inventories       24,464     17,985  
   Prepaid expenses       3,299     7,050  
   Deferred income taxes       2,411     2,160  
         Total current assets       78,921     73,288  
Property and equipment, net       307,813     282,213  
Other assets:    
   Marketable securities       99,883     91,634  
   Other receivables       7,035     5,868  
   Trademarks       1,990     1,940  
   Other       10,867     8,899  
         Total other assets       119,775     108,341  
                  Total assets     $ 506,509   $ 463,842  
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
   Accounts payable     $ 16,842   $ 14,839  
   Income taxes payable       4,778     —  
   Other accrued expenses       48,326     47,154  
         Total current liabilities       69,946     61,993  
   Deferred income taxes       22,285     22,285  
Stockholders’ equity:    
   Preferred stock, $.01 par value, 5,000,000 shares authorized; none    
      issued and outstanding       —     —  
   Junior participating cumulative preferred stock, $.01 par value, 150,000    
      shares authorized; none issued and outstanding       —     —  
   Common stock, $.01 par value, 150,000,000 shares authorized;    
      51,456,986 and 50,995,890 issued at July 1, 2003 and    
      December 31, 2002, respectively       514     510  
   Additional paid-in capital       214,143     205,994  
   Retained earnings       215,684     187,776  
   Unrealized gain on available-for-sale securities       1,164     1,664  
   Treasury stock, 1,077,300 and 1,047,300 shares at cost at July 1, 2003    
      and December 31, 2002, respectively       (17,227 )   (16,380 )
         Total stockholders’ equity       414,278     379,564  
                  Total liabilities and stockholders’ equity     $ 506,509   $ 463,842  

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

1


THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Net Income Per Share Data)
(Unaudited)


Thirteen
Weeks Ended
July 1, 2003
  Thirteen
Weeks Ended
July 2, 2002
  Twenty-six
Weeks Ended
July 1, 2003
  Twenty-six
Weeks Ended
July 2, 2002
 
Revenues:                    
   Restaurant sales     $ 178,816   $ 151,203   $ 343,992   $ 288,840  
   Bakery sales to other foodservice    
      operators, retailers and distributors       9,804     14,157     17,488     26,754  
         Total revenues       188,620     165,360     361,480     315,594  
Costs and expenses:    
   Restaurant cost of sales       42,785     35,991     81,629     69,411  
   Bakery cost of sales       4,465     6,725     8,104     12,806  
   Labor expenses       58,318     50,681     114,162     96,943  
   Other operating costs and expenses       43,456     36,683     83,233     70,708  
   General and administrative expenses       9,098     8,314     17,784     15,873  
   Depreciation and amortization expenses       6,720     5,532     13,266     10,711  
   Preopening costs       1,784     2,247     3,302     4,931  
         Total costs and expenses       166,626     146,173     321,480     281,383  
Income from operations       21,994     19,187     40,000     34,211  
Interest income, net       1,065     994     1,922     1,990  
Other income, net       687     423     1,481     834  
Income before income taxes       23,746     20,604     43,403     37,035  
Income tax provision       8,477     7,356     15,495     13,221  
Net income     $ 15,269   $ 13,248   $ 27,908   $ 23,814  
Net income per share:    
   Basic     $ 0.30   $ 0.27   $ 0.56   $ 0.49  
   Diluted     $ 0.30   $ 0.26   $ 0.54   $ 0.47  
Weighted average shares outstanding:    
   Basic       50,287     48,898     50,160     48,832  
   Diluted       51,665     50,915     51,538     51,069  

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


2


THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In Thousands)
(Unaudited)


Common
Stock
  Additional
Paid-in
Capital
  Retained
Earnings
  Unrealized
Gain (Loss) on
Available-for-Sale
Securities
  Treasury
Stock
    Total
 
Balance, December 31, 2002 $ 510       $ 205,994       $ 187,776               $ 1,664              $ (16,380 )       $ 379,564  
Comprehensive income:
   Net income   —     —     27,908       —       —        
   Net unrealized loss   —     —     —       (500 )     —        
     Total comprehensive income   27,408  
Issuance of common stock pursuant to stock
  option plan		   4     4,286     —       —       —       4,290  
Tax benefit related to stock option plan   —     3,863     —       —       —       3,863  
Purchase of treasury stock   —     —     —       —       (847 )     (847 )
 
 
Balance, July 1, 2003 $ 514   $ 214,143   $ 215,684     $ 1,164     $ (17,227 )   $ 414,278  
 
 

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


3


THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)


Twenty-six
Weeks Ended
July 1, 2003
   Twenty-six
Weeks Ended
July 2, 2002
 
Cash flows from operating activities:            
   Net income     $ 27,908   $ 23,814  
Adjustments to reconcile net income to cash provided by operating    
   activities:    
   Depreciation and amortization       13,266     10,711  
   Gain on available-for-sale securities       (1,287 )   (670 )
   Deferred income taxes       27     (4 )
Changes in assets and liabilities:    
   Accounts receivable       338     366  
   Other receivables       61     5,918  
   Inventories       (6,479 )   (2,288 )
   Prepaid expenses       3,751     717  
   Trademarks       (50 )   (68 )
   Other       (2,042 )   (472 )
   Accounts payable       2,003     (6,769 )
   Income taxes payable       8,641     13,894  
   Other accrued expenses       1,172     4,423  
      Net cash provided by operating activities       47,309     49,572  
Cash flows from investing activities:    
   Additions to property and equipment