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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 June 29, 2004

or

|_| 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

        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 defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

        As of July 20, 2004, 51,824,627 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 – June 29, 2004 and December 30, 2003       1  
                Consolidated Statements of Operations - Thirteen and twenty-six weeks ended    
                     June 29, 2004 and July 1, 2003       2  
                Consolidated Statement of Stockholders’ Equity – Twenty-six weeks ended    
                     June 29, 2004       3  
                Consolidated Statements of Cash Flows –Thirteen and twenty-six weeks ended    
                     June 29, 2004 and July 1, 2003       4  
                Notes to Consolidated Financial Statements – June 29, 2004       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       17  
         Item 4. Controls and Procedures       17  
     
PART II. OTHER INFORMATION    
         Item 1. Legal Proceedings       19  
         Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity    
                     Securities       19  
         Item 4. Submission of Matters to a Vote of Stockholders       20  
         Item 6. Exhibits and Reports on Form 8-K       20  
           
Signatures       22  
Index to Exhibits       23  


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

  June 29,
2004 		  December 30,
2003 		 
     
 
 
      (Unaudited)        
ASSETS                
                 
Current assets:                
   Cash and cash equivalents     $ 8,012   $ 15,167  
   Investments and marketable securities       27,665     33,988  
   Accounts receivable       4,630     7,360  
   Other receivables       24,602     23,416  
   Inventories       22,048     20,434  
   Prepaid expenses       6,375     10,403  
   Deferred income taxes       4,619     4,725  
      Total current assets       97,951     115,493  
Property and equipment, net       414,431     359,969  
Other assets:                
   Marketable securities       100,553     87,852  
   Other receivables       7,730     7,371  
   Trademarks       2,174     2,046  
   Other       14,170     12,077  
      Total other assets       124,627     109,346  
        Total assets     $ 637,009   $ 584,808  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
   Accounts payable     $ 19,326   $ 25,996  
   Income taxes payable       7,369     —  
   Other accrued expenses       55,041     55,558  
      Total current liabilities       81,736     81,554  
Deferred income taxes       35,721     35,721  
Other noncurrent liabilities       10,503     9,631  
Commitments and contingencies                
Stockholders’ equity:                
   Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued       —     —  
   Junior participating cumulative preferred stock, $.01 par value, 150,000                
      shares authorized; none issued       —     —  
   Common stock, $.01 par value, 150,000,000 shares authorized; 53,072,756 and                
      52,126,185 issued at June 29, 2004 and December 30, 2003, respectively       530     521  
   Additional paid-in capital       254,095     229,157  
   Retained earnings       280,079     245,612  
   Unrealized loss on available-for-sale securities       (1,169 )   (161 )
   Treasury stock, 1,249,100 and 1,077,300 shares at cost at June 29, 2004    
      and December 30, 2003, respectively       (24,486 )   (17,227 )
      Total stockholders’ equity       509,049     457,902  
        Total liabilities and stockholders’ equity     $ 637,009   $ 584,808  

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
June 29, 2004
  Thirteen
Weeks Ended
July 1, 2003
  Twenty-six
Weeks Ended
June 29, 2004
  Twenty-six
Weeks Ended
July 1, 2003
 
Revenues:                    
   Restaurant sales     $ 223,062   $ 178,816   $ 434,278   $ 343,992  
   Bakery sales to other foodservice    
      operators, retailers and distributors       11,858     9,804     21,176     17,488  
      Total revenues       234,920     188,620     455,454     361,480  
Costs and expenses:    
   Restaurant cost of sales       57,506     42,785     110,015     81,629  
   Bakery cost of sales       6,176     4,465     10,733     8,104  
   Labor expenses       71,659     58,318     140,697     114,162  
   Other operating costs and expenses       52,754     43,456     102,744     83,233  
   General and administrative expenses       9,874     9,098     19,644     17,784  
   Depreciation and amortization expenses       8,256     6,720     16,443     13,266  
   Preopening costs       2,047     1,784     4,068     3,302  
      Total costs and expenses       208,272     166,626     404,344     321,480  
Income from operations       26,648     21,994     51,110     40,000  
Interest income, net       673     1,065     1,293     1,922  
Other income, net       124     687     705     1,481  
Income before income taxes       27,445     23,746     53,108     43,403  
Income tax provision       9,633     8,477     18,641     15,495  
Net income     $ 17,812   $ 15,269   $ 34,467   $ 27,908  
     
Net income per share:    
   Basic     $ 0.34   $ 0.30   $ 0.67   $ 0.56  
   Diluted     $ 0.34   $ 0.30   $ 0.65   $ 0.54  
     
Weighted average shares outstanding:    
   Basic       51,818     50,287     51,607     50,160  
   Diluted       52,941     51,665     52,895     51,538  

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
Loss on
Available-for-Sale
Securities
  Treasury
Stock
  Total
 
Balance, December 30, 2003     $ 521   $ 229,157   $ 245,612   $ (161 ) $ (17,227 ) $ 457,902  
     
Comprehensive income:    
  Net income       —     —     34,467     —     —      
  Net unrealized loss       —     —     —     (1,008 )   —     33,459  
    Total comprehensive income          
Issuance of common stock pursuant to stock    
  option plan       9     13,877     —     —     —     13,886  
Tax benefit related to stock options    
  exercised       —     11,061     —     —     —     11,061  
Purchase of treasury stock       —     —     —     —     (7,259 )   (7,259 )
                                         
Balance, June 29, 2004     $ 530   $ 254,095   $ 280,079   $ (1,169 ) $ (24,486 ) $ 509,049  

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
June 29, 2004
  Twenty-six
Weeks Ended
July 1, 2003
 
Cash flows from operating activities:            
   Net income     $ 34,467   $ 27,908  
  Adjustments to reconcile net income to cash provided    
     by operating activities:    
     Depreciation and amortization expenses       16,443     13,266  
     Gain on sale of available-for-sale securities       (236 )   (1,287 )
     Deferred income taxes       651