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The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2008

CALABASAS HILLS, Calif.--(BUSINESS WIRE)--July 24, 2008--The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the second quarter of fiscal 2008, which ended on July 1, 2008.

Total revenues increased 9% to $407.1 million in the second quarter of fiscal 2008 from $373.2 million in the prior year second quarter. Net income and diluted net income per share were $19.1 million and $0.29, respectively.

Second quarter fiscal 2008 net income and diluted net income per share include the following items: (1) A reduction in after-tax stock-based compensation expense of $1.6 million reflecting an increase in the Company's estimated rate of forfeited stock options; (2) An increase in income tax expense of $2.2 million in taxes and interest relating to the potential disallowance of the deductibility of certain executive compensation under the provisions of Internal Revenue Code Section 162(m); and (3) A decrease in income tax expense of $2.4 million relating to Internal Revenue Service approval of the Company's application for a change in accounting for construction allowances.

Operating Results

Comparable restaurant sales decreased approximately 4.1% in the second quarter of fiscal 2008 from the prior year second quarter.

By concept, comparable restaurant sales decreased an estimated 4.1% and 4.5% at The Cheesecake Factory and Grand Lux Cafe, respectively, in the second quarter of fiscal 2008 from the prior year second quarter.

"We remain focused on executing against our business plan and controlling our costs, as well as strengthening our infrastructure by adding to our talented management team," said David Overton, Chairman and CEO. "Similar to most other casual dining operators, we continue to face headwinds from the current macroeconomic environment and are taking action to mitigate the impact of these conditions.

"Furthermore, during the second quarter we made a number of enhancements to our senior management team with appointments to newly created leadership positions in restaurant operations, kitchen operations and marketing. Our management depth in these areas will further support our commitment to guest satisfaction and assist our efforts to continue building our brand in high-quality ways. In addition, we were again active in returning capital to shareholders through our ongoing share repurchase program," added Overton.

Stock Repurchases

The Company repurchased approximately 2.4 million shares of its common stock during the second quarter of fiscal 2008 at a total cost of approximately $52 million as part of its previously announced fiscal 2008 business plan, which includes estimated share repurchases of between $150 million and $200 million. In the first half of fiscal 2008, the Company repurchased shares totaling approximately $97 million and has 12.9 million shares remaining under its 31 million share authorization.

Targeted New Restaurant Openings

As planned, the Company opened four Cheesecake Factory restaurants and the initial unit of its newest concept, RockSugar Pan Asian Kitchen, during the second quarter of fiscal 2008. The Company anticipates opening two Cheesecake Factory restaurants in the fourth quarter of fiscal 2008, for a total of seven new restaurants this year, in-line with its expectations.

"We had a few particularly strong openings during the second quarter," continued Overton. "The two Cheesecake Factory restaurants that opened in California, in Glendale and Roseville, have delivered combined average weekly sales in excess of $250,000 since opening. These are strong numbers by any account, but are especially noteworthy in the current consumer environment, highlighting the strength of our brand. In addition, the response to RockSugar Pan Asian Kitchen has been excellent with average weekly sales in excess of $205,000 since opening, which is a very solid performance for a new concept and for a restaurant that is relatively smaller in size at approximately 7,600 square feet," concluded Overton.

Conference Call and Webcast

A conference call to review the results for the second quarter of fiscal 2008 will be held on Thursday, July 24, 2008 at 10:00 a.m. Pacific Time. The conference call will be broadcast live over the Internet and a replay will be available shortly after the call and continue through August 23, 2008. To listen to the conference call, please go to the Company's website at thecheesecakefactory.com at least 15 minutes prior to the start of the call to register and download any necessary audio software. Click on the "Investors" link on the home page, and select the link at the top of the page.

About The Cheesecake Factory Incorporated

The Cheesecake Factory Incorporated created the upscale casual dining segment in 1978 with the introduction of its namesake concept and continues to define it today with the two highest productivity concepts in the industry. The Company operates 143 restaurants throughout the U.S. under The Cheesecake Factory(R) name with an extensive menu of more than 200 items and fiscal 2007 average annual unit sales of approximately $10.4 million. Grand Lux Cafe(R), the Company's second concept, has 13 units in operation across the U.S. offering a broad menu of more than 150 items and average annual unit sales of approximately $12.7 million in fiscal 2007. The Company also operates one unit of its newest concept, RockSugar Pan Asian Kitchen(TM), and two bakery production facilities in Calabasas Hills, CA and Rocky Mount, NC that produce over 60 varieties of quality cheesecakes and other baked products. Additionally, the Company licenses two bakery cafe outlets to another foodservice operator under The Cheesecake Factory Bakery Cafe(R) mark. For more information, please visit thecheesecakefactory.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this release are generally identified by words, such as "believes," "anticipates," "plans," "expects," "will," and "would," and similar expressions that are intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. In particular, forward-looking statements regarding the Company's restaurant sales trends are subject to risks and uncertainties due to national and regional economic and public safety conditions that impact consumer confidence and spending, as well as weather and other factors outside of the Company's control. Forward-looking statements regarding the number and timing of the Company's planned new restaurant openings are subject to risks and uncertainties due to factors outside of the Company's control, including factors that are under the control of government agencies, landlords and others. Approximately 12.9 million shares of the Company's common stock may be purchased under the Company's share repurchase authorization. This authorization does not require the Company to purchase a specific number of shares and it may be modified, suspended or terminated at any time. The timing and number of shares repurchased, if any, pursuant to the share repurchase authorization will be subject to a number of factors, including current market conditions, legal constraints and available cash or other sources of funding. Forward-looking statements speak only as of the dates on which they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Company's filings with the Securities and Exchange Commission. These filings are available on a website maintained by the Securities and Exchange Commission at www.sec.gov.

         The Cheesecake Factory Incorporated and Subsidiaries
                  Consolidated Financial Statements
   (unaudited; in thousands, except per share and statistical data)


Consolidated Statements of
 Operations                      13 Weeks Ended      13 Weeks Ended
                                  July 1, 2008        July 3, 2007
-------------------------------------------------- ------------------
                                          Percent            Percent
                                             of                 of
                                 Amounts   Revenue  Amounts   Revenue
                                --------- -------- --------- --------
Revenues                        $407,134   100.0%  $373,167   100.0%
Costs and expenses:
   Cost of sales                 104,540    25.7%    92,283    24.7%
   Labor expenses                133,192    32.7%   120,696    32.3%
   Other operating costs and
    expenses                      96,243    23.6%    85,199    22.9%
   General and administrative
    expenses                      20,211     5.0%    20,237     5.4%
   Depreciation and
    amortization expenses         18,361     4.5%    15,633     4.2%
   Preopening costs                4,619     1.1%     3,724     1.0%
                                --------- -------- --------- --------
      Total costs and expenses   377,166    92.6%   337,772    90.5%
                                --------- -------- --------- --------
Income from operations            29,968     7.4%    35,395     9.5%
Interest expense                  (4,080)   (1.0)%   (3,058)   (0.8)%
Interest income                      596     0.1%     1,398     0.3%
Other income, net                     61     0.0%       272     0.1%
                                --------- -------- --------- --------
Income before income taxes        26,545     6.5%    34,007     9.1%
Income tax provision               7,444     1.8%    10,299     2.7%
                                --------- -------- --------- --------
Net income                        19,101     4.7%    23,708     6.4%
                                ========= ======== ========= ========

Basic net income per share      $   0.29           $   0.33
                                =========          =========
Basic weighted average shares
 outstanding                      65,474             71,786
                                =========          =========

Diluted net income per share    $   0.29           $   0.33
                                =========          =========
Diluted weighted average
 shares outstanding               65,916             72,818
                                =========          =========

Selected Segment Information
-------------------------------
Revenues:
   Restaurants                   392,604           $359,281
   Bakery                         26,736             25,500
   Intercompany bakery sales     (12,206)           (11,614)
                                ---------          ---------
                                 407,134           $373,167
                                =========          =========

Income from operations:
   Restaurants                    46,510           $ 53,238
   Bakery                          2,963              3,696
   Corporate                     (19,505)           (21,539)
                                ---------          ---------
                                  29,968           $ 35,395
                                =========          =========


Consolidated Statements of
 Operations                        26 Weeks Ended     26 Weeks Ended
                                    July 1, 2008       July 3, 2007
--------------------------------------------------- ------------------
                                           Percent            Percent
                                              of                 of
                                  Amounts   Revenue  Amounts   Revenue
                                 --------- -------- --------- --------
Revenues                         $800,937   100.0%  $729,750   100.0%
Costs and expenses:
   Cost of sales                  205,279    25.6%   181,843    24.9%
   Labor expenses                 265,715    33.2%   239,536    32.8%
   Other operating costs and
    expenses                      192,141    24.0%   169,993    23.3%
   General and administrative
    expenses                       40,554     5.1%    39,709     5.5%
   Depreciation and amortization
    expenses                       36,454     4.5%    31,023     4.3%
   Preopening costs                 7,105     0.9%     6,808     0.9%
                                 --------- -------- --------- --------
      Total costs and expenses    747,248    93.3%   668,912    91.7%
                                 --------- -------- --------- --------
Income from operations             53,689     6.7%    60,838     8.3%
Interest expense                   (7,619)   (0.9)%   (4,105)   (0.5)%
Interest income                     1,118     0.1%     3,030     0.4%
Other income, net                    (114)    0.0%       539     0.1%
                                 --------- -------- --------- --------
Income before income taxes         47,074     5.9%    60,302     8.3%
Income tax provision               13,644     1.7%    18,188     2.5%
                                 --------- -------- --------- --------
Net income                         33,430     4.2%    42,114     5.8%
                                 ========= ======== ========= ========

Basic net income per share       $   0.50           $   0.57
                                 =========          =========
Basic weighted average shares
 outstanding                       66,792             74,404
                                 =========          =========

Diluted net income per share     $   0.50           $   0.56
                                 =========          =========
Diluted weighted average shares
 outstanding                       67,240             75,522
                                 =========          =========

Selected Segment Information
---------------------------------
Revenues:
   Restaurants                    771,288           $702,362
   Bakery                          53,819             50,440
   Intercompany bakery sales      (24,170)           (23,052)
                                 ---------          ---------
                                  800,937           $729,750
                                 =========          =========

Income from operations:
   Restaurants                     88,575           $ 95,359
   Bakery                           6,046              7,803
   Corporate                      (40,932)           (42,324)
                                 ---------          ---------
                                   53,689           $ 60,838
                                 =========          =========

Selected Consolidated Balance Sheet     July 1, 2008   January 1, 2008
 Information
----------------------------------------------------   ---------------
Cash and cash equivalents                 $   93,784        $   36,867
Investments and marketable
 securities                                    1,001            12,362
Total assets                               1,143,630         1,145,753
Long-term debt                               275,000           175,000
Total liabilities                            633,998           582,827
Stockholders' equity                         509,632           562,926

                                           13      13      26      26
                                        Weeks   Weeks   Weeks   Weeks
                                         Ended   Ended   Ended   Ended
Supplemental Information               July 1, July 3, July 1, July 3,
                                          2008    2007    2008    2007
---------------------------------------------- ------- ------- -------
Comparable restaurant sales percentage
 change (1)                              -4.1%    1.1%   -3.1%    0.8%
Restaurants opened during period            5       2       5       3
Restaurants open at period-end (2)        157     135     157     135
Restaurant operating weeks (2)          2,005   1,740   3,993   3,460
(1) Includes The Cheesecake Factory and Grand Lux Cafe
(2) Includes The Cheesecake Factory, Grand Lux Cafe and RockSugar Pan
     Asian Kitchen

CONTACT: The Cheesecake Factory Incorporated
Jill Peters, (818) 871-8342
jpeters@thecheesecakefactory.com

SOURCE: The Cheesecake Factory Incorporated