CHEESECAKE FACTORY INCORPORATED - 10-Q Quarterly Report

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 March 29, 2005

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 of incorporation or organization)		(IRS Employer 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 o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o

As of May 4, 2005, 78,081,045 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	1
		Consolidated Statements of Operations	2
		Consolidated Statement of Stockholders’ Equity	3
		Consolidated Statements of Cash Flows	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
	Item 4.	Controls and Procedures	19

PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
	Item 6.	Exhibits	21

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)

	March 29, 2005			December 28, 2004

	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	18,301		$	14,041
Investments and marketable securities		38,618			31,369
Accounts receivable		6,535			8,492
Other receivables		20,620			23,103
Inventories		26,271			22,527
Prepaid expenses		10,282			9,646
Deferred income taxes		5,727			5,368

Total current assets		126,354			114,546

Property and equipment, net		491,475			485,972

Other assets:
Marketable securities		105,545			106,102
Trademarks		2,445			2,327
Prepaid rent		36,894			33,885
Other		16,301			15,885

Total other assets		161,185			158,199

Total assets	$	779,014		$	758,717

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,392		$	32,041
Income taxes payable		11,297			3,411
Other accrued expenses		76,671			74,394

Total current liabilities		110,360			109,846

Deferred income taxes		51,989			51,990
Deferred rent		29,866			28,564
Deemed landlord financing liability		13,755			17,025
Other noncurrent liabilities		8,588			8,440
Commitments and contingencies (Note C)
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; 80,047,384 and 79,884,285 issued at March 29, 2005 and December 28, 2004, respectively		800			799
Additional paid-in capital		262,141			258,812
Retained earnings		329,583			310,624
Unrealized loss on available-for-sale securities		(1,582	)		(897	)
Treasury stock, 1,950,967 shares at cost at both March 29, 2005 and December 28, 2004		(26,486	)		(26,486	)

Total stockholders’ equity		564,456			542,852

Total liabilities and stockholders’ equity	$	779,014		$	758,717

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

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

	Thirteen Weeks Ended March 29, 2005		Thirteen Weeks Ended March 30, 2004

				(restated)
Revenues	$	268,224	$	220,534
Costs and expenses:
Cost of sales		68,918		57,066
Labor expenses		83,019		69,038
Other operating costs and expenses		61,947		49,805
General and administrative expenses		11,609		9,770
Depreciation and amortization expenses		10,193		8,326
Preopening costs		4,393		2,061

Total costs and expenses		240,079		196,066

Income from operations		28,145		24,468
Interest income, net		796		518
Other income, net		137		581

Income before income taxes		29,078		25,567
Income tax provision		10,119		8,974

Net income	$	18,959	$	16,593

Net income per share:
Basic	$	0.24	$	0.22

Diluted	$	0.24	$	0.21

Weighted average shares outstanding:
Basic		78,006		77,094
Diluted		79,925		79,284

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

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 28, 2004	$	799	$	258,812	$	310,624	$	(897	)	$	(26,486	)	$	542,852
Comprehensive income:
Net income		—		—		18,959		—			—
Net unrealized loss		—		—		—		(685	)		—
Total comprehensive income														18,274
Issuance of common stock pursuant to stock option plan		1		1,959		—		—			—			1,960
Tax benefit related to stock options exercised		—		1,370		—		—			—			1,370

Balance, March 29, 2005	$	800	$	262,141	$	329,583	$	(1,582	)	$	(26,486	)	$	564,456

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

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

	Thirteen Weeks Ended March 29, 2005		Thirteen Weeks Ended March 30, 2004

			(restated)
Cash flows from operating activities:
Net income	$	18,959	$	16,593
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expenses		10,193		8,326
(Gain)/loss on sale of available-for-sale securities		7		(271	)
Deferred income taxes		23		(114	)
Tax benefit related to stock options exercised		1,370		8,966
Changes in assets and liabilities: