10-Q

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		(38,791	)		(37,371	)
Investments in available-for-sale securities		(89,030	)		(67,958	)
Sales of available-for-sale securities		71,338			53,360
Net cash used in investing activities		(56,483	)		(51,969	)
Cash flows from financing activities:
Issuance of common stock		4			20
Dividends paid for fractional shares		—			—
Proceeds from exercise of employee stock options		4,286			17,740
Purchase of treasury stock		(847	)		(7,059	)
Net cash provided by financing activities		3,443			10,701
Net change in cash and cash equivalents		(5,731	)		8,304
Cash and cash equivalents at beginning of period		11,033			14,025
Cash and cash equivalents at end of period	$	5,302		$	22,329
Supplemental disclosures:
Interest paid	$	—		$	—
Income taxes paid	$	6,865		$	145

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

4

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 1, 2003
(Unaudited)

NOTE A — BASIS OF PRESENTATION

        The accompanying consolidated financial statements include the accounts of The Cheesecake Factory Incorporated (referred to herein as the “Company” or in the first person notations “we”, “us” and “our”) and its wholly owned subsidiaries (The Cheesecake Factory Restaurants, Inc.; The Cheesecake Factory Bakery Incorporated; The Cheesecake Factory Assets Co. LLC; C.F.I Promotions Co. LLC; C.F.R.I Assets Holding Co. LLC; C.F.R.I. Texas Restaurants LP; The Houston Cheesecake Factory Corporation; Cheesecake Factory Restaurants of Kansas LLC and Grand Lux Cafe LLC) for the thirteen weeks and twenty-six weeks ended July 1, 2003 prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial statements presented herein have not been audited by independent public accountants, but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results for any other interim period or for the full fiscal years presented. The consolidated balance sheet data presented herein for December 31, 2002 was derived from our audited consolidated financial statements for the fiscal year then ended, but does not include all disclosures required by generally accepted accounting principles. The preparation of financial statements in accordance with generally accepted accounting principles requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.

        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. The accompanying interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2002.

NOTE B — INVESTMENTS AND MARKETABLE SECURITIES

        Investments and marketable securities, all classified as available-for-sale, consisted of the following as of July 1, 2003 (in thousands):

Classification	Cost		Fair Value		Unrealized Gain		Balance Sheet Amount		Maturity
Current assets:
Available-for-sale securities:
									November 2003 to
U.S. Treasury securities	$	16,196	$	16,400	$	204	$	16,400	June 2004
									August 2003 to
Corporate debt securities		5,322		5,370		48		5,370	June 2004
Total	$	21,518	$	21,770	$	252	$	21,770
Other assets:
Available-for-sale securities:
									August 2004 to
U.S. Treasury securities	$	67,860	$	68,477	$	617	$	68,477	November 2010
									July 2004 to
Corporate debt securities		30,464		31,406		942		31,406	October 2007
Total	$	98,324	$	99,883	$	1,559	$	99,883

5

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
July 1, 2003
(Unaudited)

NOTE C — STOCK-BASED EMPLOYEE COMPENSATION

        In accordance with the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” we have elected to account for our stock-based employee compensation plans under the intrinsic value method which requires compensation expense to be recorded only if, on the date of grant, the current market price of the Company’s common stock exceeds the exercise price the employee must pay for the stock. The Company’s policy is to grant stock options at the fair market value of the underlying stock at the date of grant. Accordingly, no compensation expense has been recognized for our stock option plans. Had compensation expense for our stock option plans been determined based on the fair value at the grant date for awards through July 1, 2003 consistent with the provisions of SFAS No. 123, our after-tax net income and after-tax net income per share would have been reduced to the pro forma amounts indicated below (in thousands, except net income per share):

	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
Net income, as reported	$	15,269		$	13,248		$	27,908		$	23,814
Total stock-based employee compensation
expense determined under the fair value
method for all awards, net of related tax
effects		(1,939	)		(1,560	)		(3,943	)		(3,142	)
Net income, pro forma	$	13,330		$	11,688		$	23,965		$	20,672
Basic net income per share, as reported	$	0.30		$	0.27		$	0.56		$	0.49
Basic net income per share, pro forma	$	0.27		$	0.24		$	0.48		$	0.42
Diluted net income per share, as reported	$	0.30		$	0.26		$	0.54		$	0.47
Diluted net income per share, pro forma	$	0.26		$	0.23		$	0.47		$	0.40

NOTE D — NET INCOME PER SHARE

        In accordance with the provisions of SFAS No. 128, “Earnings Per Share,” basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per share includes the dilutive effect of potential stock option exercises, calculated using the treasury stock method. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares outstanding. Options do not impact the numerator of the diluted net income per share computation.

NOTE E — STOCK TRANSACTIONS

        During fiscal 1998, our Board of Directors authorized the repurchase of up to 1,687,500 shares of our common stock for reissuance upon the exercise of stock options under the Company’s current stock option plans. As of July 1, 2003, we have repurchased 1,077,300 shares at a total cost of approximately $17.2 million under this authorization.

6

NOTE F — COMPREHENSIVE INCOME

        Comprehensive income consisted of (in thousands):

	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
Net income	$	15,269		$	13,248	$	27,908		$	23,814
Net unrealized gain (loss) on
available-for-sale securities		(180	)		985		(500	)		123
Total comprehensive income	$	15,089		$	14,233	$	27,408		$	23,937

        The Company principally invests its excess cash balances in U.S. Treasury and Agency securities, investment grade corporate debt securities rated “A” or better and money market mutual funds. The Company has historically classified all of its investments and marketable securities as available-for-sale securities, even though its current liquidity position and requirements provide it with the ability to hold a substantial amount of such securities to maturity. Available-for-sale securities are reported at their fair values, with unrealized gains and losses on such securities reflected, net of tax effect, in total comprehensive income and as a separate component of stockholders’ equity. Realized gains and losses are included, net of tax effect, in net income. The net unrealized gain or loss on the Company’s available-for-sale securities will fluctuate from period to period depending on changes in the general level of interest rates and other factors.

NOTE G — RECENT ACCOUNTING PRONOUNCEMENTS

        The Financial Accounting Standards Board (“FASB”) recently issued several Statements of Financial Accounting Standards (“SFAS”). The statements relevant to our line of business and their impact on the Company are as follows:

        SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities,” is effective for exit and disposal activities initiated after December 31, 2002. This standard did not have any effect on our Consolidated Financial Statements.

        SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an Amendment of SFAS No. 123,” provides alternative methods for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation as required by SFAS No. 123, “Accounting for Stock Based Compensation.” This statement also requires additional disclosure related to stock-based
employee compensation in interim financial reporting. This statement is effective for fiscal years ending after
December 15, 2002. This statement did not have any impact on our Consolidated Financial Statements as we have adopted the “disclosure only” provisions of SFAS No. 123. The additional disclosure requirements are reflected in this Form 10-Q.

        SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial statements issued after May 2003. This statement did not have any impact on our Consolidated Financial Statements.

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

        As of July 22, 2003, The Cheesecake Factory Incorporated (referred to herein as the “Company” or in the first person notations “we”, “us” and “our”) operated 63 upscale, full-service, casual dining restaurants under The Cheesecake Factory® mark. We also operated three upscale casual dining restaurants under the Grand Lux Cafe® mark in Los Angeles, California, Chicago, Illinois and Las Vegas, Nevada; one self-service, limited menu “express” foodservice operation under The Cheesecake Factory Express® mark inside the DisneyQuest® family entertainment center in Orlando, Florida; and a bakery production facility. We also licensed three limited menu bakery cafes under The Cheesecake Factory Bakery Cafe® mark to another foodservice operator.

        Our revenues consist of sales from our restaurant operations and sales from our bakery operations to other foodservice operators, retailers and distributors (“bakery sales”). Sales and cost of sales are separately reported for restaurant and bakery activities. All other operating cost and expense categories are reported on a combined basis for both restaurant and bakery activities.

        The Company utilizes a 52/53 week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal 2003 will consist of 52 weeks and will end on December 30, 2003.

Results of Operations

        The following table sets forth, for the periods indicated, the Consolidated Statements of Operations of the Company expressed as percentages of total revenues. The results of operations for the thirteen weeks and twenty-six weeks ended July 1, 2003 are not necessarily indicative of the results to be expected for the full fiscal year.

	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		94.8		91.4		95.2		91.5
Bakery sales to other foodservice
operators, retailers and distributors		5.2		8.6		4.8		8.5
Total revenues		100.0		100.0		100.0		100.0
Costs and expenses:
Restaurant cost of sales		22.7		21.8		22.6		22.0
Bakery cost of sales		2.4		4.1		2.2		4.1
Labor expenses		30.9		30.6		31.6		30.7
Other operating costs and expenses		23.0		22.2		23.0		22.4
General and administrative expenses		4.8		5.0		4.9		5.0
Depreciation and amortization expenses		3.6		3.3		3.7		3.4
Preopening costs		0.9		1.4		0.9		1.6
Total costs and expenses		88.3		88.4		88.9		89.2
Income from operations		11.7		11.6		11.1		10.8
Interest income, net		0.6		0.6		0.5		0.6
Other income, net		0.3		0.3		0.4		0.3
Income before income taxes		12.6		12.5		12.0		11.7
Income tax provision		4.5		4.5		4.3		4.2
Net income		8.1		8.0		7.7		7.5

8

Thirteen Weeks Ended July 1, 2003 Compared to Thirteen Weeks Ended July 2, 2002

Revenues

        For the thirteen weeks ended July 1, 2003, the Company’s total revenues increased 14.1% to $188.6 million compared to $165.4 million for the thirteen weeks ended July 2, 2002. Restaurant sales increased 18.3% to $178.8 million compared to $151.2 million for the same period of the prior year. The $27.6 million increase in restaurant sales consisted of a $0.3 million or 0.3% increase in comparable restaurant sales and a $27.3 million increase from the openings of new restaurants. Sales in comparable restaurants benefited, in part, from the impact of an effective menu price increase of approximately 1%, which was taken in January and February 2003. As a result of the openings of new restaurants during the past 12 months, total restaurant operating weeks increased 20% to 851 compared to 712 for the thirteen weeks ended July 2, 2002. However, average sales per restaurant operating week decreased 1.3% to $212,400 compared to $215,200 for the same period last year due principally to the sales volumes at several newer restaurants that are gradually decreasing, as expected, from their initial grand opening or “honeymoon” sales levels to their sustainable run-rate levels. It is common in the restaurant industry for new locations to open with sales volumes well in excess of their sustainable run-rate levels due to grand opening promotional and consumer awareness activities that generate abnormally high customer traffic for a period of several months.

        Our primary restaurant expansion objective is to increase our total restaurant productive square feet and operating weeks by approximately 23% and 21%, respectively, during fiscal 2003. We currently expect to open as many as 14 new Cheesecake Factory restaurants during fiscal 2003, two of which opened in the first quarter (Edison, NJ and Littleton, CO) and two of which opened in the second quarter (West Nyack, NY and Overland Park, KS). As many as 10 additional restaurant openings are currently planned for the August-December 2003 timeframe. However, due to the nature of the leased spaces that we select for our upscale restaurants and their highly customized layouts, it is difficult to predict, by quarter, the exact timing of our restaurant openings. The number and timing of our planned restaurant openings can be subject to unforeseen delays that are outside of our control, including factors that are under the influence and control of government agencies and landlords.

        Bakery sales decreased 31.0% to $9.8 million for the thirteen weeks ended July 1, 2003 compared to a record-setting $14.2 million for the same period of the prior year which, in turn, represented a 77% increase over the same quarter of fiscal 2001. We previously disclosed in our Form 10-K for the fiscal year ended December 31, 2002 that bakery sales for the first half of fiscal 2003 were expected to be less than the same period last year due to a very difficult sales comparison. During the first half of fiscal 2002, bakery sales were unusually high principally as a result of the initial inventory pipeline fills for new relationships with the largest warehouse club operator and a national retailer. In addition, a former large-account foodservice industry customer discontinued purchasing our product in the third quarter of fiscal 2002 following a voluntary product withdrawal and recall. While our bakery operations have requalified to do business with this customer, purchase activity has not yet resumed. For the thirteen weeks ended July 1, 2003, sales to warehouse clubs comprised approximately 57% of total bakery sales compared to approximately 51% for the same period of the prior year.

Restaurant Cost of Sales

        During the thirteen weeks ended July 1, 2003, restaurant cost of sales increased 18.9% to $42.8 million compared to $36.0 million for the comparable period last year. The related increase of $6.8 million was primarily attributable to new restaurant openings. As a percentage of restaurant sales, these costs were relatively unchanged at 23.9% in the current period versus 23.8% for the same period of the prior year as a result of continued favorable market prices in general for most of the food commodities used in our restaurants, and increasing volume purchase discounts and purchasing power as a result of our continued growth. Assuming that weather or other market conditions outside of our control do not disrupt the current favorable food cost environment, we currently expect the costs for most of our contractible commodities to remain approximately the same during the remainder of fiscal 2003. We are currently able to contract for approximately two-thirds of the food commodities used in our operations for periods up to one year. Approximately one-third of our restaurant cost of sales consists of fresh produce, poultry and dairy commodities that are not currently contractible for periods longer than 30 days in most cases. As a result, these fresh commodities can be subject to unforeseen supply and cost fluctuations due principally to weather and other general agricultural conditions.

9

        The menu at our restaurants is one of the most diversified in the foodservice industry and, accordingly, is not overly dependent on a single commodity. The principal commodity categories for our restaurants include produce, poultry, meat, fish and seafood, cheese, other dairy products, bread and general grocery items. While we have taken steps to qualify multiple suppliers and enter into agreements for some of the key commodities used in our restaurant operations, there can be no assurance that future supplies and costs for commodities used in our restaurant operations will not fluctuate due to weather and other market conditions outside of our control. For new restaurants, cost of sales will typically be higher than normal during the first 90-120 days of operations until our management team at each new restaurant becomes more accustomed to optimally predicting, managing and servicing the high sales volumes typically experienced by our restaurants. Accordingly, restaurant cost of sales as a percentage of restaurant sales could be slightly higher during the August-December 2003 timeframe as a result of our planned openings of as many as 10 new restaurants during that period.

Bakery Cost of Sales

        Bakery cost of sales, which include ingredient, packaging and production supply costs, were $4.5 million for the thirteen weeks ended July 1, 2003 compared to $6.7 million for the same period of the prior year. As a percentage of bakery sales, bakery costs for the thirteen weeks ended July 1, 2003 decreased to 45.5% compared to 47.5% for the comparable period last year. This decrease was primarily attributable to a shift in the mix of sales to products with slightly lower cost of sales as a percentage of their associated price (but with slightly higher selling expenses, which are included in the “other operating costs and expenses” category). While we have taken steps to qualify multiple suppliers and enter into agreements for some of the key commodities used in our bakery operations, there can be no assurance that future supplies and costs for commodities used in our bakery or restaurant operations will not fluctuate due to weather and other market conditions beyond our control. Cream cheese is the most significant commodity used in our bakery products, with an expected requirement for as much as 9-10 million pounds during fiscal 2003. During the first quarter of fiscal 2003, we executed agreements for substantially all of our cream cheese requirements for the 12-month period thereafter with two suppliers at a fixed cost per pound that is slightly lower than the actual cost in fiscal 2002. We may also purchase cream cheese on the spot market as necessary to supplement our agreements.

Labor Expenses

        Labor expenses, which include restaurant-level labor costs and bakery direct production labor costs (including associated fringe benefits), increased 15.0% to $58.3 million for the thirteen weeks ended July 1, 2003 compared to $50.7 million for the same period of the prior year. This increase was principally due to the impact of new restaurant openings. As a percentage of total revenues, labor expenses increased slightly to 30.9% versus 30.6% for the comparable period last year. This percentage increase was primarily due to increased medical insurance costs of approximately 10 to 20 basis points and reverse leverage from lower bakery sales on the fixed portion of labor costs. For new restaurants, labor expenses will typically be higher than normal during the first 90-120 days of operations until our management team at each new restaurant becomes more accustomed to optimally predicting, managing and servicing the high sales volumes typically experienced by our restaurants. Accordingly, labor expenses as a percentage of revenues could be higher during the August-December 2003 timeframe as a result of our planned openings of as many as 10 new restaurants during that period.

Other Operating Costs and Expenses

        Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, insurance, licenses, taxes and utilities), other operating expenses (excluding food costs and labor expenses reported separately) and bakery production overhead, selling and distribution expenses. Other operating costs and expenses increased 18.5% to $43.5 million for the thirteen weeks ended July 1, 2003 compared to $36.7 million for the same period of the prior year. This increase was principally attributable to new restaurant openings. As a percentage of total revenues, other operating costs and expenses increased to 23.0% for the thirteen weeks ended July 1, 2003 versus 22.2% for the same period of fiscal 2002. This percentage increase was primarily attributable to increased costs for our insurance arrangements of approximately 30 to 40 basis points of total revenues; increased costs for natural gas services to our restaurants of approximately 30 basis points of total revenues; and reverse leverage from lower bakery sales on the fixed portion of our other operating costs and expenses. We expect the increased costs of our insurance arrangements to continue throughout fiscal 2003.

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General and Administrative Expenses

        General and administrative (“G&A”) expenses consist of restaurant support expenses (field supervision, manager recruitment and training, relocation and other related expenses), bakery administrative expenses, and corporate support and governance expenses. G&A expenses increased 9.6% to $9.1 million for the thirteen weeks ended July 1, 2003 compared to $8.3 million for the same period of fiscal 2002. As a percentage of total revenues, G&A expenses decreased to 4.8% for the thirteen weeks ended July 1, 2003 compared to 5.0% for the same period of the prior year. This decrease was principally attributable to the leveraging of the fixed component of these costs with higher restaurant sales volumes. During the remainder of fiscal 2003, we plan to continue to add resources to the corporate support and field supervision activities of our operations. Commensurate with the planned openings of as many as 10 new restaurants during the remainder of fiscal 2003, we expect that our absolute G&A expense per quarter will also reflect the ramp-up of restaurant management recruiting and training activities. G&A expenses for fiscal 2003 will also reflect the full-year impact of the new leased training, culinary R&D and office space occupied by the Company in October 2002, as well as new executive positions added to our field supervision organization and other investments to support our future growth. Accordingly, we expect our absolute G&A expense to progressively increase from quarter to quarter during the remainder of fiscal 2003.

Depreciation and Amortization Expenses

        Depreciation and amortization expenses were $6.7 million for the thirteen weeks ended July 1, 2003
compared to $5.5 million for the thirteen weeks ended July 2, 2002. As a percentage of total revenues, depreciation and amortization expenses increased slightly to 3.6% for the thirteen weeks ended July 1, 2003 compared to 3.3% for the same period last year. The increase of $1.2 million for the thirteen weeks ended
July 1, 2003 primarily consisted of higher restaurant depreciation expenses, which were principally due to the openings of new restaurants.

Preopening Costs

        Incurred preopening costs were $1.8 million for the thirteen weeks ended July 1, 2003 compared to $2.2 million for the same period of the prior year. We opened two Cheesecake Factory restaurants during the thirteen weeks ended July 1, 2003 compared to one opening for the same quarter last year. We incurred substantial preopening costs during the same quarter last year related to our third Grand Lux Cafe restaurant, which opened in Chicago in July 2002. In addition, preopening costs were incurred in both periods for restaurant openings in progress.

        Preopening costs include incremental out-of-pocket costs that are directly related to the openings of new restaurants that are not otherwise capitalizable. As a result of the highly customized and operationally complex nature of our upscale, high volume concepts, the restaurant preopening process for our new restaurants is more extensive, time consuming and costly relative to that of most chain restaurant operations. The preopening cost for one of our restaurants usually includes costs to relocate and compensate an average of 11-12 restaurant management employees prior to opening; costs to recruit and train an average of 200-250 hourly restaurant employees; wages, travel and lodging costs for our opening training team and other support employees; and costs for practice service activities. Preopening costs will vary from location to location depending on a number of factors, including the proximity of our existing restaurants; the size and physical layout of each location; the number of management and hourly employees required to open each restaurant; the relative difficulty of the restaurant staffing process; the cost of travel and lodging for different metropolitan areas; and the extent of unexpected delays, if any, in construction and/or obtaining final licenses and permits to open the restaurants, which may also be caused by landlord delays.

        Our direct preopening cost for a 10,000 square foot, single-story restaurant in an established Company market averages approximately $700,000. There will also be other preopening costs associated with each restaurant opening, including costs for corporate travel and support activities. Preopening costs will usually be higher for larger restaurants, our initial entry into new markets and for new concepts such as Grand Lux Cafe. We usually incur the most significant portion of preopening costs for a typical restaurant opening within the two-month period immediately preceding and the month of the restaurant’s opening. Preopening costs will fluctuate from period to period, based on the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant, and the fluctuations could be significant. We expense preopening costs as incurred. Based on our planned openings of as many as 10 new restaurants during the August-December 2003 timeframe, preopening costs will be significantly higher in the second half of fiscal 2003 compared to the prior year. One of these potential openings will be a large Cheesecake Factory restaurant in Honolulu, HI that could open during the fourth quarter of fiscal 2003 and that could likely require a preopening cost of approximately $1 million.

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Twenty-six Weeks Ended July 1, 2003 Compared to Twenty-six Weeks Ended July 2, 2002

Revenues

        For the twenty-six weeks ended July 1, 2003, the Company’s total revenues increased 14.5% to $361.5 million compared to $315.6 million for the twenty-six weeks ended July 2, 2002. Restaurant sales increased 19.1% to $344.0 million compared to $288.8 million for the same period of the prior year. The $55.2 million increase in restaurant sales consisted of a $57.3 million increase from the openings of new restaurants and a $2.1 million or approximate 0.8% decrease in comparable restaurant sales. Restaurant sales in the first half of the current year were unfavorably impacted by severe winter weather throughout much of the country that resulted in approximately 22 lost days of restaurant sales due to restaurant closings. An approximate 1% effective menu price was implemented in Cheesecake Factory restaurants during January and February 2003.

        Bakery sales decreased 34.7% to $17.5 million for the twenty-six weeks ended July 1, 2003 compared to a record-setting $26.8 million for the same period of the prior year which, in turn, represented a 66% increase over the same period of fiscal 2001. During the first half of fiscal 2002, bakery sales were unusually high principally as a result of the initial inventory pipeline fills for new relationships with the largest warehouse club operator and a national retailer. In addition, a former large-account foodservice industry customer discontinued purchasing our product in the third quarter of fiscal 2002 following a voluntary product withdrawal and recall. While our bakery operations have requalified to do business with this customer, purchase activity has not yet resumed.

Restaurant Cost of Sales

        During the twenty-six weeks ended July 1, 2003, restaurant cost of sales increased 17.6% to $81.6 million compared to $69.4 million for the comparable period last year. The related increase of $12.2 million was primarily attributable to new restaurant openings. As a percentage of restaurant sales, this cost decreased to 23.7% versus 24.0% for the same period of the prior year, principally as a result of slightly lower commodity costs due to favorable market prices and increased volume purchase discounts.

Bakery Cost of Sales

        Bakery cost of sales were $8.1 million for the twenty-six weeks ended July 1, 2003 compared to $12.8 million for the same period of the prior year. As a percentage of bakery sales, bakery cost of sales for the twenty-six weeks ended July 1, 2003 decreased to 46.3% compared to 47.9% for the comparable period last year. This percentage decrease was primarily due to a shift in the mix of sales to products with slightly lower cost of sales as a percentage of their associated price (but with slightly higher selling expenses, which are reported in the “other operating costs and expenses” category) partially offset by a slight increase in the cost for certain dairy-related commodities.

Labor Expenses

        Labor expenses were $114.2 million for the twenty-six weeks ended July 1, 2003 compared to $96.9 million for the same period of the prior year. The related increase of $17.3 million was principally due to the impact of new restaurant openings. As a percentage of total revenues, labor expenses for the twenty-six weeks ended July 1, 2003 increased to 31.6% compared to 30.7% for the comparable period last year. This percentage increase was primarily due to reverse leverage from less-than-expected restaurant and bakery sales on the fixed portion of labor costs in both operations. Additionally, the unpredictable fluctuations in restaurant sales due to the severe winter weather made it difficult for our restaurant operators to adjust hourly labor accordingly.

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Other Operating Costs and Expenses

        Other operating costs and expenses increased 17.7% to $83.2 million for the twenty-six weeks ended
July 1, 2003 compared to $70.7 million for the same period of the prior year. The related increase of $12.5 million was principally attributable to new restaurant openings. As a percentage of total revenues, occupancy and other expenses were 23.0% for the 26 weeks ended July 1, 2003 compared to 22.4% for the comparable period of fiscal 2002. This increase was due primarily to increased costs for our insurance arrangements of approximately 30 to 40 basis points of total revenues; increased costs for natural gas and electric services to our restaurants of approximately 30 basis points of total revenues; and reverse leverage from lower bakery sales on the fixed portion of our other operating costs and expenses.

General and Administrative Expenses

        General and administrative expenses increased to $17.8 million for the twenty-six weeks ended July 1, 2003 compared to $15.9 million for the same period of fiscal 2002, an increase of $1.9 million or 11.9%. As a percentage of total revenues, general and administrative expenses decreased to 4.9% for the twenty-six weeks ended July 1, 2003 compared to 5.0% for the same period of the prior year. This decrease was principally attributable to the leveraging of the fixed component of these costs with higher sales volumes.

Depreciation and Amortization Expenses

        Depreciation and amortization expenses were $13.3 million for the twenty-six weeks ended July 1, 2003 compared to $10.7 million for the same period of the prior year. The related increase of $2.6 million was principally attributable to new restaurant openings. As a percentage of total revenues, depreciation and amortization expenses were 3.7% for the twenty-six weeks ended July 1, 2003 compared to 3.4% for the same period last year.

Preopening Costs

        Incurred preopening costs were $3.3 million for the twenty-six weeks ended July 1, 2003 compared to $4.9 million for the same period of the prior year. We incurred preopening costs to open four Cheesecake Factory restaurants during each of the twenty-six weeks ended July 1, 2003 and July 2, 2002. We also incurred substantial preopening costs during the twenty-six weeks ended July 2, 2002 related to our third Grand Lux Cafe restaurant, which opened in Chicago in July 2002. In addition, we incurred preopening costs in both periods for other restaurant openings in progress.

Liquidity and Capital Resources

        The following table sets forth a summary of the Company’s key liquidity measurements at July 1, 2003 and December 31, 2002.

	July 1, 2003		December 31, 2002
	(dollar amounts in millions)
Cash and marketable securities on hand	$	127.0	$	114.5
Net working capital	$	5.1	$	11.3
Adjusted net working capital (1)	$	105.0	$	102.9
Current ratio		1.1:1		1.2:1
Adjusted current ratio (1)		2.4:1		2.7:1
Long-term debt		—		—

(1) Includes all marketable securities classified as either current ($21.8 million and $11.8 million at
July 1, 2003 and December 31, 2002, respectively) or noncurrent assets ($99.9 million and $91.6 million at July 1, 2003 and December 31, 2002, respectively).

        During the twenty-six weeks ended July 1, 2003, our balance of cash and marketable securities on hand increased by $12.5 million to $127.0 million from the December 31, 2002 balance. This increase was primarily attributable to increased cash flows from operations. In the table above, we also present adjusted net working capital and current ratio calculations that include all marketable securities classified as either current or noncurrent assets. We believe these adjusted calculations provide investors with useful information regarding our overall liquidity position because all marketable securities are readily available to meet our liquidity requirements. In response to the recent decrease in the general level of interest rates in our forecasted cash flow requirements, we slightly lengthened the average maturity of our marketable securities portfolio in order to capture additional investment yield. As a result, most of our investments in marketable securities now have maturities in excess of one year and are classified as noncurrent assets, but remain available for our liquidity requirements.

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        As of July 22, 2003, there were no borrowings outstanding under the Company’s $25 million revolving credit and term loan facility (the “Credit Facility”). $11.5 million of the Credit Facility has been reserved to support a letter of credit for our insurance programs. Borrowings under the Credit Facility will bear interest at variable rates based, at our option, on either the prime rate of interest, the lending institution’s cost of funds rate plus 0.75% or the applicable LIBOR rate plus 0.75%. The Credit Facility expires on May 31, 2004. On that date, a maximum of $25 million of any borrowings outstanding under the Credit Facility automatically convert into a four-year term loan, payable in equal quarterly installments at interest rates of 0.5% higher than the applicable revolving credit rates. The Credit Facility is not collateralized and requires us to maintain certain financial ratios and to observe certain restrictive covenants with respect to the conduct of its operations, with which we are currently in compliance.

        Our new restaurant development model more closely resembles that of a retail business that occupies leased space in shopping malls, office complexes, strip centers, entertainment centers and other real estate developments. We typically seek to lease our restaurant locations for primary periods of 15 to 20 years. Our rent structures vary from lease to lease, but generally provide for the payment of both minimum and contingent (percentage) rent based on sales. We expend cash for leasehold improvements and furnishings, fixtures and equipment to build out the leased premises. We may also expend cash for permanent improvements that we make to leased premises that will be reimbursed to us by our landlords as construction contributions (also known as tenant improvement allowances) pursuant to agreed-upon terms in the respective leases. If obtained, landlord construction contributions usually take the form of up-front cash, full or partial credits against minimum or percentage rents otherwise payable by us, or a combination thereof. We initially record uncollected landlord construction contributions as other receivables. Our balance of other receivables will fluctuate from period to period, depending on the timing of cash collections from landlords and additional receivables recorded from new restaurant development activities. In the future, we may also develop more freestanding restaurant locations using both ground leases and built-to-suit leases, which are common arrangements used to finance freestanding locations in the restaurant industry. We do not have any current plans to encumber our existing leasehold interests with secured financing. We own substantially all of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.

        For fiscal 2003, we currently estimate our capital expenditure requirement to range between $85-$90 million, net of agreed-upon landlord construction contributions and excluding $11-$12 million of expected noncapitalizable preopening costs for new restaurants. This estimate contemplates $73-$77 million for as many as 14 new restaurants to be opened during fiscal 2003, which includes an increase in estimated construction-in-progress disbursements for anticipated fiscal 2004 openings. The estimated capital expenditures also reflects the fact that three of our planned 14 restaurant openings for fiscal 2003 do not have any landlord construction contributions. Not every potential location that we seek to develop into a restaurant may have landlord construction contributions available, and we would therefore not expect to incur a contingent rent obligation on such locations. Expected capital expenditures for fiscal 2003 also include approximately $8-$9 million for maintenance and capacity addition expenditures to our existing restaurants; and $4 million for potential bakery capacity additions.

        We have commenced an evaluation of various alternatives to develop a second bakery production facility, which will likely be located on the East Coast. We currently expect to complete this evaluation before the end of fiscal 2003 and to commence initial work on a second facility during fiscal 2004. During fiscal 2003, we plan to add equipment to our current bakery production facility that will effectively increase the productive capacity of that facility by approximately 20%. The required funding for this capacity addition is contemplated in the capital expenditure estimate provided in the preceding paragraph.

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        Based on our current expansion objectives and opportunities, we believe that our cash and short-term investments on hand, coupled with expected cash provided by operations, available borrowings under our Credit Facility and expected landlord construction contributions should be sufficient to finance our planned capital expenditures and other operating activities through fiscal 2004. We may seek additional funds to finance our growth in the future. However, there can be no assurance that such funds will be available when needed or be available on terms acceptable to us.

        During fiscal 1998, our Board of Directors authorized the repurchase of up to 1,687,500 shares of our common stock for reissuance upon the exercise of stock options under the Company’s current stock option plans. Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us. Under this authorization, we have repurchased 1,077,300 shares at a total cost of approximately $17.2 million under this authorization through July 22, 2003.

Recent Accounting Pronouncements

        The Financial Accounting Standards Board (“FASB”) recently issued several Statements of Financial Accounting Standards (“SFAS”). The statements relevant to our line of business and their impact on the Company are as follows:

        SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities,” is effective for exit and disposal activities initiated after December 31, 2002. This standard did not have any effect on our Consolidated Financial Statements.

        SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an Amendment of SFAS No. 123,” provides alternative methods for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation as required by SFAS No. 123, “Accounting for Stock Based Compensation.” This statement also requires additional disclosure related to stock-based employee compensation in interim financial reporting. This statement is effective for fiscal years ending after December 15, 2002. This statement did not have any impact on our Consolidated Financial Statements as we have adopted the “disclosure only” provisions of SFAS No. 123. The additional disclosure requirements are reflected in this Form 10-Q.

        SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial statements issued after May 2003. This statement did not have any impact on our Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risk from changes in interest rates on funded debt. This exposure relates to our $25 million revolving credit and term loan facility (the “Credit Facility”). As of July 22, 2003, there were no borrowings outstanding under the Credit Facility. Borrowings under the Credit Facility bear interest at variable rates based on either the prime rate of interest, the lending institution’s cost of funds plus 0.75% or LIBOR plus 0.75%. A hypothetical 1% interest rate change would not have any current impact on our results of operations.

        A change in market prices also exposes us to market risk related to our investments in marketable securities. As of July 1, 2003, we held $122 million in marketable securities. A hypothetical 10% decline in the market value of those securities would result in a $12.2 million unrealized loss and a corresponding decline in their fair value. This hypothetical decline would not affect cash flows from operations and would not have an impact on net income until the securities were disposed of.

        We purchase food and other commodities for use in our operations, based upon market prices established with our suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control. To manage this risk in part, we attempt to enter into fixed price purchase commitments, with terms typically up to one year, for many of our commodity requirements. However, we are currently unable to contract for substantially all of our fresh commodities such as produce, poultry, fish and dairy items for periods longer than 30 days. Dairy costs can also fluctuate due to government regulation. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have the ability to increase certain menu prices, or vary certain menu items offered, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. The Company does not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.

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Item 4. Controls and Procedures

        Based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Act of 1934, as amended), our Chief (principal) Executive Officer and our Chief (principal) Financial Officer have concluded that such controls and procedures were effective as of the period covered by this report. In connection with such evaluation, no change in the Company’s internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Forward-looking Statements and Risk Factors

        Certain information included in this Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project”, “may,” “could,” “would,” “should” and similar expressions are intended to identify forward-looking statements. These statements, and any other statements that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time (the “Act”).

        In connection with the “safe harbor” provisions of the Act, we are filing the following summary to identify important factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission. Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Although we believe that the assumptions underlying forward-looking statements are reasonable, any of the assumptions could be incorrect, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date on which they are made. We do not undertake any obligation to modify or revise any forward-looking statement to take into account or otherwise reflect subsequent events, or circumstances arising after the date that the forward-looking statement was made.

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        The following risk factors may affect our operating results and the environment within which we conduct our business. If our projections and estimates regarding these factors differ materially from what actually occurs, our actual results could vary significantly from any results expressed or implied by forward-looking statements. These risk factors include, but are not limited to, changes in general economic, demographic, geopolitical or public safety conditions which affect consumer behavior and spending for restaurant dining occasions, including the ongoing ramifications of the September 11, 2001 terrorist attacks and the governmental response thereto, including the armed conflict in Iraq or possibly other countries; increasing competition in the upscale casual dining segment of the restaurant industry; adverse weather conditions which impact customer traffic at the Company’s restaurants in general and which cause the temporary underutilization of outdoor patio seating available at most of the Company’s restaurants; various factors which increase the cost to develop and/or affect the number and timing of the openings of new restaurants, including factors under the influence and control of government agencies, landlords, construction contractors and others; fluctuations in the availability and/or cost of raw materials, management and hourly labor, energy or other resources necessary to successfully operate the Company’s restaurants and bakery production facility; the Company’s ability to raise prices sufficiently to offset cost increases, including increased costs for minimum wages, employee benefits and insurance arrangements; the success of strategic and operating initiatives, including new restaurant concepts and new bakery product lines; depth of management; adverse publicity about the Company, its restaurants or bakery products, or the effects of ongoing union organizing efforts; the Company’s current dependence on a single bakery production facility; the Company’s ability to obtain and retain large-account customers for its bakery operations; changes in timing and/or scope of the purchasing plans of large-account bakery customers which can cause fluctuations in bakery sales and the Company’s consolidated operating results; the rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure to support the Company’s growing operations; relations between the Company and its employees; legal claims and litigation against the Company; the availability, amount, type, and cost of capital for the Company and the deployment of such capital, including the amounts of planned capital expenditures; changes in, or any failure to comply with, governmental regulations; the amount of, and any changes to, tax rates and the success of various initiatives to minimize taxes; and other risks and uncertainties referenced in this Form 10-Q or our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

        The Attorney General of the State of California (State Attorney General) filed lawsuits on or about
April 10, 2003 in the Los Angeles Superior Court against the Company, as well as several other restaurant chains, alleging that the defendants violated the provisions of an initiative statute known as “Proposition 65" and California Business and Professions Code Section 17203 by serving fish containing mercury and mercury compounds without providing the warnings required by Proposition 65. The lawsuit seeks the assessment of civil penalties under the statutes of $2,500 per day for each violation and an injunction requiring the furnishing of the requisite notice. The Company and several other restaurant litigants against whom similar lawsuits were filed are participating in an industry-wide task force to investigate the allegations asserted in the lawsuit. Committees of this task force are in ongoing discussions with representatives of the State Attorney General to investigate and discuss the scientific basis for the allegations and reach agreement on any notices that may be required under Proposition 65. The Company has implemented interim notices under Proposition 65 in order to mitigate liability to the Company while this investigation is proceeding and pending settlement. The filing of the lawsuit by the State Attorney General has preempted action by private litigants to assert the same claims under Proposition 65. Since the State Attorney General’s lawsuit is limited to certain identified species of fish, it is possible that private actions may be asserted as to other as yet unidentified species of fish and seafood which may or may not be asserted against the Company. The State Attorney General’s office has moved to consolidate this lawsuit with similar lawsuits previously filed against several supermarket companies. The Company cannot reasonably estimate at this time the potential liability, if any, arising as a result of this litigation. The Company intends to defend the lawsuit vigorously. Although the outcome cannot be ascertained at this time, the Company does not believe that its disposition would have a material adverse effect on the Company’s financial position, results of operations or liquidity.

        In December 2002, two former hourly restaurant employees in California filed a lawsuit against the Company alleging violations of California labor laws with respect to providing meal and rest breaks. The lawsuit seeks unspecified amounts of penalties and other monetary payments on behalf of the plaintiffs and other purported class members. Discovery is currently continuing in this matter. The Company intends to vigorously defend its position. Although the outcome cannot be ascertained at this time, the Company does not believe that its disposition would have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Item 4. Submission of Matters to a Vote of Stockholders

        Our Annual Meeting of Stockholders was held on May 13, 2003 in Thousand Oaks, California. The matters submitted for a vote and the related election results are as follows:

(a) To elect two nominees to serve as directors of the Company for three-year terms and until respective successors shall be qualified. The results of the vote taken were as follows:

	For	Withhold
Jerome I. Kransdorf	27,868,775	8,143,559
Wayne H. White	27,867,827	8,144,507

(b) To act upon a stockholder’s non-binding proposal recommending the Board adopt a policy to submit for stockholder approval all equity compensation plans, including the Year 2000 Performance Stock Option Plan. The result of the vote taken was as follows:

For	Against	Abstain
17,446,040	13,483,782	351,834

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(c) To act upon a stockholder’s non-binding proposal recommending the Board establish a policy of expensing in the Company’s annual income statement the costs of all future stock options issued by the Company. The result of the vote taken was as follows:

For	Against	Abstain
12,482,483	18,151,804	647,369

(d) To act upon a stockholder’s non-binding proposal recommending the Board submit the stockholder’s rights plan or “poison pill” to a stockholder vote for approval, and if this approval is not granted in the form of a majority of the shares outstanding, then the rights plan be redeemed. The result of the vote taken was as follows:

For	Against	Abstain
18,019,442	13,184,118	78,096

(e) To act upon a stockholder’s non-binding proposal recommending the Board repeal the provisions in the Certificate of Incorporation and Bylaws that provide for the Company’s classified board. The result of the vote taken was as follows:

For	Against	Abstain
19,253,757	11,793,300	234,599

(f) To act upon a stockholder’s non-binding proposal recommending the Board separate the position of Chairman and Chief Executive Officer and provide that the Chairman of the Board be an independent, outside director elected by the directors. The result of the vote taken was as follows:

For	Against	Abstain
9,230,395	21,828,315	222,946

(g) To act upon a stockholder’s non-binding proposal recommending the Board remove the stockholder “supermajority” voting requirement. The result of the vote taken was as follows:

For	Against	Abstain
21,747,948	9,480,089	53,619

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

Exhibit 3.1 Amendment of Bylaws of Corporation

Exhibit 10.13 Peter J. D’Amelio Employment Agreement

Exhibit 31.1 Rule 13a-14(a) Certification of Principal Executive Officer

Exhibit 31.2 Rule 13a-14(a) Certification of Principal Financial Officer

Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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(b) Reports on Form 8-K.

The Company filed the following reports on Form 8-K during the second quarter:

        On April 21, 2003, the Company filed a current report on Form 8-K announcing first quarter financial results.

        On May 20, 2003, the Company filed a current report on Form 8-K announcing the opening of The Cheesecake Factory restaurant in West Nyack, New York; and the proxy voting results subsequent to the Company’s Annual Meeting of Stockholders.

        On June 3, 2003, the Company filed a current report on Form 8-K announcing that Company management would be presenting at investment conferences in June.

        On July 1, 2003, the Company filed a current report on Form 8-K announcing the opening of The Cheesecake Factory restaurant in Overland Park, Kansas.

        The Company filed the following reports on Form 8-K subsequent to the close of the second quarter:

        On July 15, 2003, the Company filed a current report on Form 8-K announcing that the second quarter earnings conference call would be broadcast on the Internet.

        On July 22, 2003, the Company filed a current report on Form 8-K announcing the second quarter financial results.

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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.

Date: July 22, 2003 THE CHEESECAKE FACTORY INCORPORATED
                    


By:  /s/ DAVID OVERTON
      ——————————————
      David Overton
      Chairman of the Board and Chief Executive Officer
      (Principal Executive Officer)


By:  /s/ GERALD W. DEITCHLE
      ——————————————
      Gerald W. Deitchle
      President and Chief Financial Officer
      (Principal Executive Officer)


By:  /s/ MICHAEL J. DIXON
      ——————————————
      Michael J. Dixon
      Vice President - Finance and Controller
      (Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number	Exhibit Title
3.1	Amendment of Bylaws of Corporation
10.13	Peter J. D’Amelio Employment Agreement
31.1	Rule 13a-14(a) Certification of Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
	the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
	the Sarbanes-Oxley Act of 2002

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EX-3.1

EXHIBIT 3.1

THE CHEESECAKE FACTORY INCORPORATED

AMENDMENT OF THE BYLAWS OF THE CORPORATION

        In order to conform to the requirements of Section 219 of the Delaware General Corporation Law, the Company’s Board of Directors approved an amendment to Article II, Section 6 of the Bylaws of the Corporation on April 14, 2003, as follows:

Article II

Section 6. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, or cause to be prepared and made, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing in this section shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the Corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

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EX-10.13

EXHIBIT 10.13

THE CHEESECAKE FACTORY INCORPORATED

Peter J. D’Amelio Employment Contract

AGREEMENT

        This AGREEMENT (the “Agreement”) is entered into this 29th day of August, 2001 between THE CHEESECAKE FACTORY INCORPORATED (the “Company”) and Peter J. D’Amelio (“Executive”).

        WHEREAS, the parties desire to enter into this Agreement setting forth certain terms and conditions of the employment relationship of Executive with the Company.

        NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Company and Executive hereby agree as follows:

        1. Employment.

Executive is employed as the Senior Vice President of Restaurant Operations of the Company. In this capacity, Executive shall have such duties and responsibilities as may be designated to Executive by Chief Executive Officer of the Company from time to time. Executive shall devote substantially all Executive’s time, attention and energies to the business and affairs of the Company and its subsidiaries.

        2. Term.

Subject to Section 4(a) below), the “Term” of this Agreement shall be for the period commencing on the date hereof and ending on the later of (a) the third anniversary of the date hereof; or (b) if a Change of Control occurs during the Term, then that date which is twenty-four (24) months following the date of the Change of Control.

        3. Certain Terms Defined.

For purposes of this Agreement:

                (a) Executive shall be deemed to be “Permanently Disabled” if a physical or mental condition occurs and persists which, in the written opinion of a licensed physician selected by Executive, or at the option of the Company in the event of a dispute as to whether or not Executive is Permanently Disabled, selected by the Board of Directors of the Company, in good faith, has rendered Executive unable to perform Executive’s duties hereunder for a period of ninety (90) days or more and, in the written opinion of such physician, the condition will continue for an indefinite period of not less than an additional ninety (90) day period, rendering Executive unable to return to Executive’s duties.

                (b) “Affiliate” means any corporation affiliated with any Person whose actions result in a Change of Control (or which, as a result of the completion of the transactions causing a Change of Control shall become affiliated) within the meaning of the Code.

                (c) “Base Salary” means, as of the Date of Termination, the highest annual base salary of Executive in any of the last two fiscal years preceding the fiscal year of such Date of Termination.

                (d) “Beneficial Owner” shall have the meaning given to such term in the Exchange Act.

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                (e) “Cause” means termination upon: (i) the failure or refusal by Executive to substantially perform Executive’s duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness or disability); (ii) the occurrence of Executive misconduct that constitutes a material breach of the Company’s Code of Ethics and Code of Conduct, including without limitation, an unauthorized disclosure or use of insider information, customer lists, recipes, processes, trade secrets or other confidential or proprietary information, or solicitation of any of the Company’s agents or employees to work for another business entity, or any other misconduct that is materially injurious to the Company, monetarily or otherwise; or (iii) Executive’s commission of acts of dishonesty, theft, embezzlement, fraud, or misrepresentation, or commission of such other acts of moral turpitude as would reasonable prevent or significantly diminish the effective performance of Executive’s duties.

                (f) A “Change of Control” occurs:

                        (i) if any Person (other than Executive) or that Person’s Affiliate is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% of more of the combined voting power of the Company’s then outstanding voting securities (“Voting Securities”) after the commencement date of this Agreement; or

                        (ii) upon the consummation of a merger or consolidation of the Company with any other corporation (or other entity), other than:

                                I. a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;

                                II. a merger or consolidation effected to implement a re-capitalization of the Company (or similar transaction) in which no Person acquires more than 20% of the combined voting power of the Company’s then outstanding Voting Securities; or

                                III. a merger or consolidation which would result in the directors of the Company (who were directors immediately prior thereto) continuing to constitute at least 50% of all directors of the surviving entity after such merger or consolidation. In this paragraph (iv), “surviving entity” shall mean only an entity in which all the Company’s stockholders immediately before such merger or consolidation (determined without taking into account any stockholders properly exercising appraisal or similar rights) become stockholders by the terms of such merger or consolidation, and the phrase “directors of the Company (who were directors immediately prior thereto)” shall include only individuals who were directors of the Company at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation.

                        (iii) upon the consummation of a plan of complete liquidation or a sale or disposition of all or substantially all of the Company’s assets; or

                        (iv) if, during any period of 24 consecutive months, individuals, who at the beginning of such period constitute the Board of Directors of the Company, and any new director whose election by the Board of Directors, or whose nomination for election by the Company’s stockholders, was approved by a vote of at least one-half (1/2) of the directors then in office (other than in connection with a contested election), cease for any reason to constitute at least a majority of the Board of Directors.

                (g) “Code” means the Internal Revenue Code of 1986, as amended.

                (h) “Date of Termination” means the date of actual receipt of a written notice of termination or any later date specified therein (but not more than fifteen (15) days after the date of giving such notice), as the case may be; provided that (i) if Executive’s employment is terminated by the Company for any reason other than for Cause, the Date of Termination is the date on which the Company notifies Executive of such termination; (ii) if the Executive’s employment is terminated by the Executive with Good Reason or otherwise, the date of termination is the date the Executive notifies the Company of such termination; (iii) if Executive’s employment is terminated due to Permanent Disability, the Date of Termination is the date of receipt of such notice; and (iv) if Executive’s employment is terminated due to Executive’s death, the Date of Termination shall be the date of death.

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                (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

                (j) “Person” is given the meaning as such term is used in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that unless this Agreement provides to the contrary, the term shall not include the Company, any trustee or other fiduciary holding securities under an Executive benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

                (k) “Voluntary Termination with Good Reason” means an election by Executive to terminate employment with the Company following a Change of Control, provided that (i)one or more of the following factors occurs within the twelve (12) month period prior to the Date of Termination, and (ii) Executive is in Good Standing as of the Date of Termination:

                        I. The annual base salary payable to Executive at the time of termination has decreased by tenpercent (10%) or more from the average annual base salary payable to Executive during the twelve (12) month period prior to the Change in Control.

                        II. Executive’s ability to participate, on an equal basis with other employees of the Company holding equivalent positions in the Company, in any Company stock option, stock equity or bonus plan which is then in effect has been terminated.

                        III. The Company has demoted Executive to a position at the Company which is one or more grades lower than the position Executive held prior to the Change of Control (e.g., Senior Vice-President to Vice President; Vice-President to Director).

                        IV. The designated permanent location of Executive’s workplace is transferred by the Company to a location exceeding 60 miles from Executive’s permanent workplace location immediately prior to the Change of Control.

                (l) “Not in Good Standing” with reference to Executive means that (i) the Company has commenced and is diligently pursuing to conclusion, an investigation of Executive with respect to any matter which, if found by the Company to be true, would be grounds for termination for Cause of Executive, or (ii) the Company, upon the conclusion of any investigation referenced in clause (i) of this Section has determined that reasonable grounds exist to terminate Executive or take other serious disciplinary action. If, upon the conclusion of any investigation under clause (i), the Company has not determined that reasonable grounds exist to terminate Executive or take other serious disciplinary action, then Executive shall be deemed to be in Good Standing as to such matter.

        4. Termination.

                (a) For Cause or Not in Good Standing. This Agreement shall terminate automatically upon a termination of Executive’s employment with the Company for Cause, or upon Executive’s death or Permanent Disability, or upon the conclusion of an investigation referenced in Section 3(l) above and a determination by the Company, in good faith, that Executive is Not in Good Standing.

                (b) At Will Employment. Nothing in this Agreement shall alter the “at will” employment relationship between the Company and Executive, and either the Company or Executive may terminate Executive’s employment at any time and for any reason, or no reason at all, with or without Cause and regardless if Executive is Not in Good Standing or in Good Standing.

26

        5. Certain Benefits Upon Voluntary Termination for Good Reason; Involuntary Termination without Cause; and Change of Control.

                (a) If, other than a termination due to death or Permanent Disability, Executive’s employment with the Company is (i) terminated by Executive due to a Voluntary Termination for Good Reason occurring no sooner than six (6) months and no later than twenty-four (24) months from the date of a Change in Control, or (ii) terminated by the Company without Cause on or before twenty-four (24) months after the date of a Change in Control, and on the Date of Termination Executive is in Good Standing, then:

                        I. the Company shall pay to Executive a lump sum cash payment, within thirty (30) days of the Date of Termination, equal to one-half of Executive’s annual Base Salary; and

                        II. the Company shall pay all costs and expenses necessary to continue any coverages provided to Executive and Executive’s dependents immediately prior to the Date of Termination under any health or dental insurance, life insurance, and long term disability insurance plan (which obligation may be satisfied, at Company’s election, by paying Executive’s contribution under COBRA to the extent such coverages are insurable under COBRA), for a period not to exceed the earlier of twelve (12) months from the date of termination or the date Executive becomes eligible for similar benefits under any subsequent employer’s plan.

                (b) If Executive’s employment with the Company is (i) terminated by Executive due to a Voluntary Termination for Good Reason occurring no sooner than six (6) months and no later than twenty-four (24) months from the date of a Change in Control, or (ii) terminated by the Company without Cause on or before twenty-four (24) months after the date of a Change in Control (including a termination due to death or Permanent Disability), and Executive is in Good Standing on the Date of Termination, then the Company shall pay to Executive, if, as and when such payment may be made to other employees participating in the Company’s Performance Incentive Plan or any other bonus or incentive plan (other than a stock option or stock equity plan) then in effect for employees in a similar positions as Executive as of the Date of Termination (or as of the date of demotion, if a Voluntary Termination for Good Reason occurs due to the events described in Section 3(l)III above), a prorata portion of any bonus payable under such plan, calculated based upon the number of days Executive was employed by the Company in the fiscal year in which the termination occurs.

                (c) Provided Executive is then in Good Standing, upon the occurrence of (i) a Change of Control during the Term or (ii) Executive’s termination due to death or Permanent Disability, all then unvested stock options granted to Executive prior to and including the Company’s fiscal year 2000, if any, under the 1992 Employee Performance Stock Option Plan (the “Plans”) or the Year 2000 Performance Stock Option Plan, shall immediately vest, and shall be exercisable by Executive in accordance with the terms of the applicable stock option agreement.

                (d) Provided Executive is then in Good Standing, upon the occurrence of a Change of Control, all then unvested stock options granted to Executive during and after the Company’s fiscal year 2001, if any, under the Plans or under any other employee stock option or stock equity plan adopted after fiscal year 2000, which would have vested pursuant to Executive’s stock option agreement on or before that date which is 364 days from the date of the Change of Control, shall immediately vest, and shall be exercisable by Executive in accordance with the terms of the applicable stock option agreement.

                (e) The provisions of Section 5(c) or 5 (d) above may be triggered only once, in the aggregate, during the Term of this Agreement, so that, for example, should a Change of Control occur and thereafter Executive is terminated due to a Permanent Disability, then Executive would be entitled to the benefits under such sections only once, upon the initial Change of Control. In addition, Executive shall not be entitled to receive severance benefits of any kind from any wholly owned subsidiary or other affiliated entity of the Company, if in connection with the same event or series of events the benefits provided for in this Section 5 above were triggered.

                (f) Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. In the event that Executive’s employment terminates by reason of Executive’s death, all benefits provided in this Section 5 which are payable upon a termination due to death shall be paid to Executive’s estate or as Executive’s executor shall direct, but payment may be deferred until Executive’s executor or personal representative has been appointed and qualified pursuant to the laws in effect in Executive’s jurisdiction of residence at the time of Executive’s death.

27

        6. Assignment.

                (a) This Agreement is personal to each of the parties hereto. No party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto, except that this Agreement shall be binding upon and inure to the benefit of any successor of the Company.

                (b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes this Agreement by operation of law, or otherwise.

                (c) This Agreement shall inure to the benefit of and be enforceable by the parties hereto and their respective successors, personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

        7. Additional Covenants of Executive.

In consideration of this Agreement, and in addition to Executive’s obligations under any other Company rule, policy or procedure, Executive agrees to the following:

               (a) Noncompetition. Executive agrees that during the Term of this Agreement, Executive will not, directly or indirectly, without the prior written consent of the Company, provide consultative service with or without pay, own, manage, operate, join, control, participate in, or be connected as a stockholder, partner, or otherwise with any business, individual, partner, firm, corporation, or other entity which is then in competition with the Company or any present affiliate of the Company; provided, however, that the “beneficial ownership” by Executive, either individually or as a member of a “group,” as such terms are used in Rule 13d of the Exchange Act, of not more than 1% of the voting stock of any publicly held corporation shall not be a violation of this Agreement. It is further expressly agreed that the Company will or would suffer irreparable injury if Executive were to compete with the Company or any subsidiary or affiliate of the Company in violation of this Agreement and that the Company would by reason of such competition be entitled to injunctive relief in a court of appropriate jurisdiction, and Executive further consents and stipulates to the entry of such injunctive relief in such a court prohibiting Executive from competing with the Company or any subsidiary or affiliate of the Company in violation of this Agreement.

               (b) Anti-solicitation. Executive agrees that during the Term of this Agreement, and for a period of two (2) years thereafter, Executive will not (i) influence or attempt to influence customers, franchisees, landlords, or suppliers of the Company or any of its present or future subsidiaries or affiliates, either directly or indirectly, to divert their business to any individual, partnership, firm, corporation or other entity then in competition with the business of the Company, or any subsidiary or affiliate of the Company, (ii) disparage the Company or its officers or directors during or after employment in an attempt to discredit the Company, its assets, and/or future growth, or (iii) recruit, solicit or encourage other employees of the Company to leave his/her employment at the Company.

        8. Notice.

For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other addresses as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon actual receipt:

28

Company:	The Cheesecake Factory Incorporated
	26950 Agoura Road
	Calabasas, California 91301
	Attn: Chief Executive Officer
with a copy to:	The Cheesecake Factory Incorporated
	26950 Agoura Road
	Calabasas, California 91301
	Attn: General Counsel
Executive:	Mr. Peter J. D’Amelio
	___________________________
	___________________________

        9. Amendments or Additions.

No amendment or additions to this Agreement shall be binding unless in writing and signed by both parties hereto. Only the Chief Executive Officer may bind the Company to any amendment or modification of this Agreement.

        10. Section Headings.

The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

        11. Severability.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

        12. Counterparts.

This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

        13. Arbitration.

Any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by binding arbitration held in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, except as specifically otherwise provided in this Section 13. This Section 13 shall be construed and enforced in accordance with the Federal Arbitration Act, notwithstanding any other choice of law provision in this Agreement. Notwithstanding the foregoing:

               (a) Equitable Relief. Any party hereto may, in its discretion, apply to a court of competent jurisdiction for equitable relief. Such an application shall not be deemed a waiver of the right to compel arbitration pursuant to this Section.

               (b) Arbitrators. The panel to be appointed shall consist of three neutral arbitrators: one selected by the Company, one selected by Executive, and one selected by the designees of the Company and Grantee.

               (c) Procedures. The arbitrator(s) shall allow such discovery as the arbitrator(s) determine appropriate under the circumstances and shall resolve the dispute as expeditiously as practicable, and if reasonably practicable, within one hundred twenty (120) days after the selection of the arbitrator(s). The arbitrator(s) shall give the parties written notice of the decision, with the reasons therefor set out, and shall have thirty (30) days thereafter to reconsider and modify such decision if any party so requests within ten (10) days after the decision.

29

               (d) Authority. The arbitrator(s) shall have authority to award relief under legal or equitable principles, including interim or preliminary relief, and to allocate responsibility for the costs of the arbitration and to award recovery of attorneys fees and expenses in such manner as is determined to be appropriate by the arbitrator(s).

               (e) Entry of Judgment. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having in personam and subject matter jurisdiction. Company and Grantee hereby submit to the in personam jurisdiction of the Federal and State courts in Los Angeles, California, for the purpose of confirming any such award and entering judgment thereon.

               (f) Confidentiality. All proceedings under this Section 13, and all evidence given or discovered pursuant hereto, shall be maintained in confidence by all parties and by the arbitrators.

        14. Miscellaneous.

No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.

        15. Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

        16. VENUE; WAIVER OF JURY TRIAL.

IN THE EVENT OF ANY ACTION OR PROCEEDING BETWEEN EXECUTIVE AND THE COMPANY OR ITS SUBSIDIARIES REGARDING THIS AGREEMENT, THE PARTIES AGREE TO SUBMIT THE JURISDICTION OF THE STATE OR FEDERAL COURTS WITHIN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND AGREE THAT VENUE IN SUCH COURTS IS ACCEPTABLE TO THE GRANTEE AND THE COMPANY BOTH PARTIES AND WAIVE THEIR RIGHTS TO CLAIM FORUM NON CONVENIENS. EXECUTIVE AND THE COMPANY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY.

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated above.

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COMPANY:


THE CHEESECAKE FACTORY INCORPORATED

By:  /s/ DAVID OVERTON
      ——————————————
      David Overton, Chief Executive Officer

EXECUTIVE:

By:  /s/ PETER J. D’AMELIO
      ——————————————
      Peter J. D’Amelio
      Position at Company:
      Senior Vice President, Restaurant Operations

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EX-31.1

EXHIBIT 31.1

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, David Overton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Cheesecake Factory Incorporated;

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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)(4) and 15d-15(e)(4)) for the registrant and 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 quarterly report is being prepared;

(b) 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

(c) 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 affect the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers 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 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.

July 22, 2003
/s/ DAVID OVERTON
————————————————————
David Overton
Chairman of the Board and Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Gerald W. Deitchle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Cheesecake Factory Incorporated;

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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)(4) and 15d-15(e)(4)) for the registrant and 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 quarterly report is being prepared;

(b) 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

(c) 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 affect the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officers 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 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.

July 22, 2003
/s/ GERALD W. DEITCHLE
————————————————————
Gerald W. Deitchle
President and Chief Financial Officer

33

EX-32.1

EXHIBIT 32.1

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-Q for the period ended July 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Overton, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(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 result of operations of the Company.

/s/ DAVID OVERTON
———————————————————
David Overton
Chairman of the Board and Chief Executive Officer

34

EX-32.2

EXHIBIT 32.2

THE CHEESECAKE FACTORY INCORPORATED

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report of The Cheesecake Factory Incorporated (the “Company”) on Form 10-Q for the period ended July 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald W. Deitchle, President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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 result of operations of the Company.

/s/ GERALD W. DEITCHLE
———————————————————
Gerald W. Deitchle
President and Chief Financial Officer

35