-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KrVjeYEo3IXplUln6r4Ss/R+WPvVpHiB6BP0y8MeGDw0CuZKL99oQt/4Mj09Vnww FcAclbp7CNbFJtpO1wLVOA== 0000912057-96-017639.txt : 19960816 0000912057-96-017639.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEESECAKE FACTORY INCORPORATED CENTRAL INDEX KEY: 0000887596 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 510340466 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20574 FILM NUMBER: 96611817 BUSINESS ADDRESS: STREET 1: 26950 AGOURA RD CITY: CALABASAS HILLS STATE: CA ZIP: 91301 BUSINESS PHONE: 8188809323 MAIL ADDRESS: STREET 2: 26950 AGOURA RD CITY: CALABASAS HILLS STATE: CA ZIP: 91301 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 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) 880-9323 --------------- 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 ----- ----- As of August 8, 1996, 10,910,958 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 (Unaudited) Consolidated Balance Sheets - June 30, 1996 and December 31, 1995.......................................... 1 Consolidated Statements of Operations - Thirteen weeks and twenty-six weeks ended June 30, 1996 and July 2, 1995...... 2 Consolidated Statements of Cash Flows - Twenty-six weeks ended June 30, 1996 and July 2, 1995. ..................... 3 Notes to Consolidated Financial Statements - June 30, 1996... 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................... 6-10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K........................... 11 Signatures........................................................... 12 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, DECEMBER 31, ASSETS 1996 1995 ----------- ------------ Current assets: Cash and cash equivalents $ 8,327,451 $10,077,713 Marketable securities 4,244,850 4,154,525 Accounts receivable 2,073,946 2,213,317 Other miscellaneous receivables 2,885,421 2,674,276 Due from affiliates, officers and employees 139,873 621,771 Inventories 3,559,391 2,711,805 Preopening expenses 6,439,071 6,103,182 Prepaid expenses 1,089,423 1,022,558 ----------- ----------- Total current assets 28,759,426 29,579,147 ----------- ----------- Property and equipment, net 60,399,611 54,445,425 ----------- ----------- Other assets: Marketable securities 2,700,965 2,768,427 Other miscellaneous receivables 5,149,907 3,129,901 Deferred income taxes 319,322 363,786 Other 2,406,099 1,479,876 ----------- ----------- Total other assets 10,576,293 7,741,990 ----------- ----------- Total assets $99,735,330 $91,766,562 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank borrowings $ 3,000,000 $ -- Accounts payable 7,380,520 9,312,877 Income taxes payable 909,189 75,296 Other accrued expenses 5,409,122 3,835,851 Deferred income taxes 2,336,328 2,336,328 ----------- ----------- Total current liabilities 19,035,159 15,560,352 ----------- ----------- Stockholders' equity: Preferred Stock, $.01 par value, 5,000,000 shares authorized, none issued and outstanding -- -- Common Stock, $.01 par value, 30,000,000 shares authorized; 10,907,958 and 10,853,508 issued and outstanding, respectively 109,079 108,535 Additional paid-in capital 54,840,365 54,112,418 Retained earnings 26,097,829 22,411,408 Marketable securities valuation account (347,102) (426,151) ----------- ----------- Total stockholders' equity 80,700,171 76,206,210 ----------- ----------- Total liabilities and stockholders' equity $99,735,330 $91,766,562 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 1 THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN WEEKS THIRTEEN WEEKS TWENTY-SIX WEEKS TWENTY-SIX WEEKS ENDED JUNE 30, ENDED JULY 2, ENDED JUNE 30, ENDED JULY 2, 1996 1995 1996 1995 -------------- -------------- ---------------- ---------------- Revenues Restaurant sales $33,745,418 $24,544,577 $64,856,387 $45,900,563 Bakery sales 5,464,878 3,952,524 9,733,907 7,566,187 ----------- ----------- ----------- ----------- Total revenues 39,210,296 28,497,101 74,590,294 53,466,750 ----------- ----------- ----------- ----------- Costs and expenses Cost of food, beverages and supplies 9,937,608 7,439,805 19,152,410 13,820,978 Bakery costs 2,293,841 1,635,204 4,080,597 3,056,277 Operating expenses: Labor 12,599,066 8,609,502 23,449,766 16,372,998 Occupancy and other 5,520,062 3,978,875 10,735,313 7,656,453 General and administrative expenses 3,435,051 2,546,450 6,914,075 4,822,989 Depreciation and amortization expenses 2,586,479 1,400,081 5,093,989 2,592,076 ----------- ----------- ----------- ----------- Total costs and expenses 36,372,107 25,609,917 69,426,150 48,321,771 ----------- ----------- ----------- ----------- Income from operations 2,838,189 2,887,184 5,164,144 5,144,979 Interest income 135,156 328,014 255,623 710,765 Interest (expense) (18,271) 0 (18,271) 0 Other income 45,477 94,732 59,994 103,894 ----------- ----------- ----------- ----------- Income before income taxes 3,000,551 3,309,930 5,461,490 5,959,638 Income tax provision 938,350 932,092 1,775,069 1,784,606 ----------- ----------- ----------- ----------- Net income $ 2,062,201 $ 2,377,838 $ 3,686,421 $ 4,175,032 =========== =========== =========== =========== Earnings per share: Primary $ .19 $ .22 $ .34 $ .39 =========== =========== =========== =========== Weighted average shares outstanding 10,945,398 10,719,241 10,943,258 10,674,462 =========== =========== =========== =========== Fully diluted $ .19 $ .22 $ .33 $ .38 =========== =========== =========== =========== Weighted average shares outstanding 11,124,854 10,879,863 11,136,321 10,877,506 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 2 THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS TWENTY-SIX WEEKS TWENTY-SIX WEEKS ENDED JUNE 30, ENDED JULY 2, 1996 1995 ---------------- ---------------- Cash flows from operating activities: Net income $ 3,686,421 $ 4,175,032 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 5,093,989 2,592,076 (Gain) loss on asset sale (4,500) -- Loss on held-to-maturity securities -- 330 Loss on available-for-sale securities 13,478 4,714 Deferred income taxes -- 329,417 Changes in assets and liabilities: Accounts receivable 139,371 176,613 Other miscellaneous receivables (2,231,151) 617,811 Due from affiliates, officers and employees 481,898 5,172 Inventories (847,586) (113,533) Preopening expenses (2,983,164) (1,789,640) Prepaid expenses (265,755) (780,439) Other (1,046,830) (77,661) Accounts payable (1,932,357) 1,247,317 Income taxes payable 833,893 389,665 Other accrued expenses 1,573,271 1,445,807 ----------- ------------ Cash provided by operating activities 2,510,978 8,222,681 ----------- ------------ Cash flows from investing activities: Additions to property and equipment (8,081,403) (15,167,879) Sale of property and equipment 4,500 -- Sales of held-to-maturity securities -- 2,569,082 Investments in available-for-sale securities -- (1,124,287) Sales of available-for-sale securities 87,172 4,026,832 ----------- ------------ Cash used by investing activities (7,989,731) (9,696,252) ----------- ------------ Cash flows from financing activities: Proceeds from short-term bank borrowings 3,000,000 -- Common stock issued 544 1,978 Proceeds from exercise of employee stock options 727,947 2,409,871 ----------- ------------ Cash provided by financing activities 3,728,491 2,411,849 ----------- ------------ Net change in cash and cash equivalents (1,750,262) 938,278 Cash and cash equivalents at beginning of period 10,077,713 397,753 ----------- ------------ Cash and cash equivalents at end of period $ 8,327,451 $ 1,336,031 =========== ============ Supplemental disclosures: Interest paid $ 18,116 $ -- =========== ============ Income taxes paid $ 941,176 $ 1,065,252 =========== ============ The accompanying notes are an integral part of these consolidated financial statements. 3 THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of The Cheesecake Factory Incorporated and Subsidiaries (the "Company") for the thirteen weeks and twenty-six weeks ended June 30, 1996 and July 2, 1995 have been prepared in accordance with generally accepted accounting principles, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet data presented herein for December 31, 1995 was derived from the Company's audited consolidated financial statements for the fiscal year then ended. The financial statements presented herein for the thirteen weeks and twenty-six weeks ended June 30, 1996 include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. Effective January 3, 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires the Company to report available-for-sale securities at fair value, with unrealized gains and losses excluded from the earnings and reported as a separate component of stockholders' equity until realized. Debt securities that the Company expects to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities not classified as either held-to-maturity securities or trading securities (bought and held principally for the purpose of selling those securities in the near term) are classified as available-for-sale securities and reported at fair value. Fair value is determined by the most recently traded price of the security at the balance sheet date, plus any accrued interest. Net realized gains or losses are determined on the specified identification cost method. Unrealized losses in market value on available-for-sale securities are recognized, net of tax effect, in a valuation allowance as a separate component of stockholders' equity. As of June 30, 1996, all of the Company's investments in marketable securities were classified as available-for-sale securities. Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to requirements of the Securities and Exchange Commission. Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 1995. 4 THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 NOTE B - MARKETABLE SECURITIES Marketable securities consisted of the following as of June 30, 1996:
UNREALIZED BALANCE (LOSS) SHEET CLASSIFICATION COST FAIR VALUE GAIN AMOUNT MATURITY - ------------------------------------------------------------------------------------------------------------------------------- Current assets: Available-for-sale securities: Preferred stocks and warrants $2,010,000 $1,755,000 $(255,000) $1,755,000 No maturity dates U.S. Treasury Notes 2,501,172 2,489,850 (11,322) 2,489,850 November 1996 ------------------------------------------------------- Total $4,511,172 $4,244,850 $(266,322) $4,244,850 ======================================================= Other assets: Available-for-sale securities: Corporate bonds $2,976,990 $2,700,965 $(276,025) $2,700,965 February 1998 to August 2013 ------------------------------------------------------- Total $2,976,990 $2,700,965 $(276,025) $2,700,965 =======================================================
NOTE C - NET INCOME PER SHARE Net income per common share calculations are based on the weighted average number of common shares and common share equivalents outstanding during the thirteen week and twenty-six week periods ended June 30, 1996 and July 2, 1995. Primary net income per share amounts for the thirteen week and twenty-six week periods ended June 30, 1996 are based on the weighted average number of shares outstanding during the periods, increased by the common equivalent shares (vested and exercisable stock options) determined using the treasury stock method. Fully diluted net income per share amounts for the thirteen week and twenty-six week periods ended June 30, 1996 are based on the weighted average number of shares outstanding during the periods, increased by the common equivalent shares (vested and exercisable stock options as well as nonvested and contingently exercisable stock options) determined using the treasury stock method, utilizing the higher of the average market price or ending market price for the Company's common stock for the measurement period. The treasury stock method of calculating dilutive common equivalent shares was not utilized for the thirteen week and twenty-six week periods ended July 2, 1995 due to immateriality; therefore, the amounts presented for those periods have not been restated. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table presents for the thirteen weeks and the twenty-six weeks ended June 30, 1996 and July 2, 1995 the Consolidated Statements of Operations of the Company expressed as percentages of total revenues. The results of operations for the first twenty-six weeks of fiscal 1996 are not necessarily indicative of the results to be expected for the full fiscal year.
THIRTEEN THIRTEEN TWENTY-SIX TWENTY-SIX WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED JUNE 30, JULY 2, JUNE 30, JULY 2, 1996 1995 1996 1995 ----------------------------------------------------------- % % % % Revenues: Restaurant sales 86.1 86.1 87.0 85.8 Bakery sales 13.9 13.9 13.0 14.2 ----- ----- ----- ----- Total revenues 100.0 100.0 100.0 100.0 ----- ----- ----- ----- Costs and expenses: Cost of food, beverages, and supplies 25.3 26.1 25.6 25.9 Bakery costs 5.9 5.7 5.5 5.7 Operating expenses: Labor 32.1 30.2 31.4 30.6 Occupancy and other 14.1 14.0 14.5 14.3 General and administrative expenses 8.8 8.9 9.3 9.0 Depreciation and amortization expenses 6.6 5.0 6.8 4.9 ----- ----- ----- ----- Total costs and expenses 92.8 89.9 93.1 90.4 ----- ----- ----- ----- Income from operations 7.2 10.1 6.9 9.6 Interest income 0.2 1.2 0.3 1.3 Interest expense -- -- -- -- Other income (expense), net 0.1 0.3 0.1 0.2 ----- ----- ----- ----- Income before income taxes 7.5 11.6 7.3 11.1 Income tax provision 2.3 3.3 2.4 3.3 ----- ----- ----- ----- Net income 5.2 8.3 4.9 7.8 ===== ===== ===== =====
GENERAL The Company's revenues are derived from restaurant sales and bakery sales to other restaurants and wholesalers/retailers. Certain expenses relate to restaurant sales (cost of food, beverages and supplies) or to bakery sales (bakery costs), while other expenses relate to both restaurant and bakery sales (operating expenses including occupancy, general and administrative expenses, and depreciation and amortization expenses). Statements contained herein which are not historical facts are forward looking statements. Important factors which could cause the Company's actual results to differ materially from those projected in, or inferred by, forward looking statements are (but are not necessarily limited to) the following: the impact of increasing competition in the upscale casual dining segment of the restaurant industry; changes in general economic conditions which impact consumer spending for restaurant occasions; adverse weather conditions which cause the 6 underutilization of outdoor patio seating available at many of the Company's restaurants; unforeseen events which increase the cost to develop and/or delay the development and opening of new restaurants; unexpected increases in the cost of raw materials, labor, and other resources necessary to operate both the restaurants and the bakery; technological difficulties and duplicative/inefficient costs associated with the Company's transition to, and its temporary underutilization of, its new bakery production facility; the amount and rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure to support the expanded operations of both the restaurants and the bakery; the availability, amount, type, and cost of financing for the Company and any changes to that financing; the revaluation of any of the Company's assets (and related expenses); and the amount of, and any changes to, tax rates. RESULTS OF OPERATIONS CURRENT YEAR QUARTER VS. PRIOR YEAR QUARTER The Company's total revenues increased 38% to $39.2 million versus $28.5 million for the same quarter of the prior year. Restaurant sales increased 38% to $33.7 million versus $24.5 million for the quarter ended July 2, 1995. This $9.2 million increase was attributable to a $1.5 million (6.3%) increase in comparable restaurant sales for the quarter and $7.7 million from the opening of new restaurants. Sales in comparable restaurants benefited from generally favorable weather conditions (which enabled the effective utilization of outdoor patio seating available at several of the restaurants) and the impact of an approximate 2.5% effective menu price increase that was taken in all restaurants during the December 1995 - January 1996 period. Bakery sales increased 38% to $5.5 million versus $3.9 million for the same quarter in the prior year. This increase was principally attributable to increased wholesale sales to supermarkets, warehouse clubs, and other large-account foodservice retailers and distributors. Cost of food, beverages and supplies for the restaurants was $9.9 million versus $7.4 million for the comparable quarter last year. The related increase of $2.5 million was primarily attributable to new restaurant openings. As a percentage of restaurant sales, these costs decreased slightly to 29.5% in 1996 versus 30.3% for the same quarter of the prior year. Bakery costs, which include raw materials, packaging, and other production-related supplies, were $2.3 million versus $1.6 million for the comparable quarter in 1995. The related increase of $0.7 million was primarily attributable to the 38% increase in bakery sales for the quarter ended June 30, 1996. As a percentage of bakery sales, bakery costs increased to 42.0% in 1996 versus 41.4% for the comparable 1995 quarter. This increase was principally due to slightly higher costs and usage of certain ingredients and lower profit margins realized on sales to certain large customers, particularly supermarkets and warehouse clubs. During fiscal 1996, the Company will experience certain inefficient production costs associated with the transition of its production operations to its new production facility. However, once the transition is fully completed, the Company believes that the opportunity will exist to realize a gradual improvement in the operating leverage of the new production facility. Operating expenses, including labor and occupancy, increased to $18.1 million compared to $12.6 million for the comparable quarter of the prior year. This increase of $5.5 million was principally attributable to the opening of new restaurants, increased business activity in existing operations, and the impact of the new bakery production facility. As a percentage of total revenues, operating expenses increased to 46.2% for the quarter ended June 30, 1996 versus 44.2% for the same quarter of the prior year. This increase was principally attributable to new restaurant openings, higher bakery labor costs associated with the transition to, and start up of, the new production facility, and increased operating costs of a fixed and semi-fixed nature associated with the estimated four-fold increase in capacity with the new production facility. Operating expenses principally consist of labor (and related fringe benefits), rent (and associated occupancy costs), laundry, maintenance and cleaning, utilities, repairs, and other operating expenses for both the restaurants and the bakery. Operating expense comparisons will be unfavorable for the remainder of fiscal 1996 principally as a result of the increased fixed and semi-fixed costs associated with the new bakery production facility. 7 General and administrative expenses increased 35% to $3.4 million in 1996 versus $2.5 million for the comparable 1995 quarter. This increase of $0.9 million was principally attributable to variable selling and administrative expenses associated with the 38% increase in total revenues for the quarter ended June 30, 1996, as well as increased investments in the support infrastructure for both the restaurants and the bakery. As a percentage of total revenues, general and administrative expenses decreased slightly to 8.8% in 1996 versus 8.9% in 1995. General and administrative expenses principally consist of bakery product development and promotional/administrative expenses, certain restaurant administrative expenses (credit card discounts, insurance, and other administrative expenses), restaurant supervision costs, and corporate support expenses. The Company plans to continue to strengthen its restaurant and bakery support infrastructures during fiscal 1996. Additionally, the Company plans to aggressively pursue additional national accounts business for its new bakery production facility, which will involve continuing investments in product development and promotional programs. Depreciation and amortization increased 85% to $2.6 million in 1996 versus $1.4 million for the comparable 1995 quarter. This increase of $1.2 million was attributable to higher restaurant preopening cost amortization ($0.6 million), higher depreciation and amortization expense related to the new bakery production facility ($0.3 million), and increased depreciation expense related to four additional restaurants in operation, exclusive of preopening cost amortization ($0.3 million). The Company defers preopening costs until the opening of new restaurants and then amortizes the deferred costs over the 12-month period immediately following the respective openings. During the remainder of fiscal 1996, preopening cost amortization comparisons versus the respective amounts for fiscal 1995 will continue to be unfavorable, as the Company will be simultaneously amortizing the preopening costs associated with four restaurants which opened during fiscal 1995 in addition to those associated with the planned fiscal 1996 openings of four additional restaurants. As a percentage of revenues, interest income decreased 1.0 percentage points to 0.2% for the quarter ended June 30, 1996. This reduction was attributable to lower levels of investments in marketable securities on hand, reflecting the Company's increased capital expenditure activity for new restaurants and the new bakery facility. The Company currently expects its effective tax rate for fiscal 1996 to be approximately 32.5%, which will be significantly higher than the 26.2% effective tax rate for fiscal 1995. The lower effective tax rate for fiscal 1995 principally reflected the impact of significant research and state investment tax credits associated with the development and construction of the new bakery production facility. CURRENT YEAR-TO-DATE VS. PRIOR YEAR-TO-DATE For the twenty-six weeks ended June 30, 1996, the Company's total revenues increased 40% to $74.6 million versus $53.5 million for the same period of the prior year. Restaurant sales increased 41% to $64.9 million versus $45.9 million for the twenty-six weeks ended July 2, 1995. This $19.0 million increase was attributable to a $3.1 million (6.8%) increase in comparable restaurant sales for the quarter and $15.9 million from the opening of new restaurants. Bakery sales increased 29% to $9.7 million versus $7.6 million for the same period of the prior year. This increase was principally attributable to increased wholesale sales to supermarkets, warehouse clubs, and other large-account foodservice retailers and distributors. Cost of food, beverages and supplies for the restaurants was $19.2 million versus $13.8 million for the comparable quarter last year. The related increase of $5.4 million was primarily attributable to new restaurant openings. As a percentage of restaurant sales, these costs decreased slightly to 29.5% in 1996 versus 30.1% for the same period of the prior year. Bakery costs, which include raw materials, packaging, and other production-related supplies, were $4.1 million versus $3.1 million for the comparable period in 1995. The related increase of $1.0 million was primarily attributable to the 29% increase in bakery sales for the twenty-six weeks ended June 30, 1996. As a percentage of bakery sales, bakery costs increased to 41.9% in 1996 versus 40.4% for the comparable 1995 period. This increase was principally due to slightly higher costs and usage of certain ingredients and lower profit margins realized on sales to certain large customers, particularly supermarkets and warehouse clubs. 8 Operating expenses, including labor and occupancy, increased to $34.2 million compared to $24.0 million for the comparable period of the prior year. This increase of $10.2 million was principally attributable to the opening of new restaurants, increased business activity in existing operations, and the impact of the new bakery production facility. As a percentage of total revenues, operating expenses increased to 45.8% for the twenty-six weeks ended June 30, 1996 versus 44.9% for the same period of the prior year. This increase was principally attributable to new restaurant openings, higher bakery labor costs associated with the transition to, and start up of, the new production facility, and increased operating costs of a fixed and semi-fixed nature associated with the estimated four-fold increase in capacity with the new production facility. General and administrative expenses increased 43% to $6.9 million in 1996 versus $4.8 million for the comparable 1995 period. This increase of $2.1 million was principally attributable to variable selling and administrative expenses associated with the 40% increase in total revenues for the twenty-six weeks ended June 30, 1996, as well as increased investments in the support infrastructure for both the restaurants and the bakery. As a percentage of total revenues, general and administrative expenses increased slightly to 9.3% in 1996 versus 9.0% in 1995. Depreciation and amortization increased 97% to $5.1 million in 1996 versus $2.6 million for the comparable 1995 period. This increase of $2.5 million was attributable to higher preopening cost amortization ($1.4 million), higher depreciation and amortization expense related to the new bakery production facility ($0.5 million), and increased depreciation expense related to four additional restaurants in operation, exclusive of preopening cost amortization ($0.6 million). As a percentage of revenues, interest income decreased 1.0 percentage points to 0.3% for the twenty-six weeks ended June 30, 1996. This reduction was attributable to lower levels of investments in marketable securities on hand, reflecting the Company's increased capital expenditure activity for new restaurants and the new bakery facility. LIQUIDITY AND CAPITAL RESOURCES Following is a summary of the Company's key liquidity measurements for the twenty-six week periods ended June 30, 1996, December 31, 1995, and July 2, 1995: TWENTY-SIX WEEK PERIODS ENDED ------------------------------------- JUNE 30, DECEMBER 31, JULY 2, 1996 1995 1995 -------- ------------ ------- (DOLLAR AMOUNTS IN MILLIONS) Cash and marketable securities on hand, end of period $15.3 $17.0 $26.3 Cash provided by operations $ 2.5 $ 4.6 $ 8.2 Capital expenditures $ 8.1 $14.2 $15.2 Net working capital, end of period $ 9.7 $14.0 $ 7.5 Current ratio, end of period 1.5:1 1.9:1 1.6:1 9 During the trailing twelve months ended June 30, 1996, the Company's total amount of cash and marketable securities on hand decreased by $11.0 million to $15.3 million. This decrease was principally due to capital expenditures for new restaurants and the new bakery production facility which totaled $22.3 million during the same period. The Company will require additional capital resources primarily for the development and construction of new restaurants. The Company has historically leased the land and building shells for its restaurants; however, the Company has expended cash for leasehold improvements and fixtures, furnishings, and equipment. During fiscal 1996, the Company plans to open four new restaurants which will require a total capital expenditure of approximately $18 million (excluding landlord construction contributions). Additionally, capital expenditures of approximately $1-$2 million will be required to fully complete the new bakery production facility. An additional $1-$2 million of maintenance-related capital expenditures will also be required during fiscal 1996. Total anticipated capital expenditures of $20-$22 million for fiscal 1996 are expected to be financed through a combination of cash and marketable securities on hand, cash provided by operations, landlord construction contributions (when available), and drawdowns on the Company's $10 million revolving credit facility which was established in February 1996. As of June 30, 1996, $3.0 million had been borrowed under the revolving credit facility. The Company and the financial institution providing the revolving credit facility have executed a letter of intent to amend the facility to, among other things, increase the maximum amount borrowable by the Company to $15 million and to add a term loan conversion feature. During fiscal 1996, the Company will seek to obtain additional debt and/or equity capital to finance its planned restaurant expansion in fiscal 1997 and thereafter. The Company may seek other sources of financing, including equipment financing or the sale/leaseback of assets comprising its headquarters and bakery production facility. There can be no assurance that any additional financing will be available on favorable terms, if at all. 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. None. (b) Reports on Form 8-K. None. 11 SIGNATURES Pursuant to the requirements 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. THE CHEESECAKE FACTORY INCORPORATED Date: August 8, 1996 By: /s/ DAVID M. OVERTON ------------------------------------- David M. Overton Chairman of the Board, President, Chief Executive and Operating Officer By: /s/ GERALD W. DEITCHLE ------------------------------------- Gerald W. Deitchle Senior Vice President and Chief Financial Officer 12 EX-27 2 EX-27 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-29-1996 JUN-30-1996 8,327,451 4,244,850 4,959,367 0 3,559,391 28,759,426 74,826,495 14,426,884 99,735,330 19,035,159 0 0 0 109,079 80,591,092 99,735,330 74,590,294 74,590,294 23,233,007 23,233,007 46,193,143 0 18,271 5,461,490 1,775,069 3,686,421 0 0 0 3,686,421 .34 .33
-----END PRIVACY-ENHANCED MESSAGE-----