Cheesecake Factory 3Q Profit Declines :: Restaurant Supply Resource

Cheesecake Factory 3Q Profit Declines

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Restaurant chain Cheesecake Factory Inc. on Tuesday reported a smaller third-quarter profit despite surging restaurant sales, as the company was required to set aside funds to cover expenses from pending labor lawsuits.

Revenues increased 25% to $247.7 million and comparable restaurant sales increased 2.6% compared to the same quarter of the prior year.

Net income for the quarter was $12.8 million or $0.24 per diluted share, including a $4.5 million or $0.06 per share reserve established for pending lawsuits, compared to net income of $14.4 million or $0.28 per diluted share for the same quarter last year. Before the effect of this reserve, net income per diluted share would have been $0.30 per share, composed of the $0.24 per share plus the $0.06 per share related to the reserve.

The reserve was established to accrue for the estimated expenses that may be incurred in connection with claims alleging failure to comply with California labor laws with respect to providing employee meal and rest breaks, as previously disclosed by the Company. This $4.5 million expense is included in the "other operating expenses" line in the Company's Consolidated Statements of Operations.

"We are very pleased with our record revenues for the third quarter, especially considering the severe weather in Florida and other parts of the Southeast," said David Overton, Chairman and CEO. "Sales for our comparable restaurants increased 2.6% in spite of an estimated $1.8 to $2.0 million impact on our total restaurant sales during the quarter due to the weather. The strength of our brand and popularity of our concept is clearly demonstrated by our positive comparable restaurant sales and strong new restaurant openings.

"We expect to achieve our stated goal of opening 16 restaurants in the current year," stated Overton. Seven new Cheesecake Factory restaurants were opened in the third quarter and one Cheesecake Factory restaurant was opened on October 12, bringing the total for the year to twelve. Two additional Cheesecake Factory restaurants are expected to open in the fourth quarter. The Company also opened a Grand Lux Cafe in Dallas during the third quarter and will open an additional Grand Lux Cafe in Houston during the fourth quarter. "We are very happy to extend our Grand Lux Cafe concept into Texas and are pleased with our initial sales from the Dallas location," stated Overton. "We are excited about the long-term growth potential for the Grand Lux Cafe as we continue to fine tune the concept's menu, operations and investment cost."

The Company's current expansion goal for fiscal 2005 is to open as many as 18 new full-service restaurants, consisting of approximately 15 Cheesecake Factory restaurants and three Grand Lux Cafes. Signed leases or letters of intent are in-hand for most of the potential 2005 openings.

Bakery sales to other foodservice operators, retailers and distributors increased 24% to $12.7 million during the third quarter, compared to the same quarter last year. Sales to warehouse clubs continue to be very strong and sales of The Dream Factory product line continue to build.

The Cheesecake Factory Incorporated operates 85 upscale, casual dining restaurants under The Cheesecake Factory® name that offer an extensive menu of more than 200 items with an average check of approximately $16.09. The Company also operates a bakery production facility that produces over 50 varieties of quality cheesecakes and other baked products for the Company's restaurants and for other leading foodservice operators, retailers and distributors. Additionally, the Company operates four upscale casual dining restaurants under the Grand Lux Cafe® name; one self-service, limited menu "express" foodservice operation under The Cheesecake Factory Express® mark inside the DisneyQuest® family entertainment center in Orlando, Florida; and licenses three bakery cafe outlets to another foodservice operator under The Cheesecake Factory Bakery Cafe® name.

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Date Listed: 2004-10-19

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Industry: Restaurants
Category: Financial
Cheesecake Factory
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