CAKE » Topics » Fiscal 2003 Compared to Fiscal 2002

This excerpt taken from the CAKE 10-K filed Apr 6, 2005.

Fiscal 2003 Compared to Fiscal 2002

Revenues

          Total revenues increased 19% to $773.8 million for fiscal 2003 compared to $652.0 million for fiscal 2002. 

          Restaurant sales increased 21% to $731.3 million for fiscal 2003 compared to $603.3 million for the prior fiscal year.  The increase of $128.0 million for fiscal 2003 consisted of the following components: $57.0 million from the openings of fourteen new restaurants during the fiscal year; $68.4 million from restaurants opened prior to fiscal 2003 that were not considered comparable sales during fiscal 2003; and $2.6 million from comparable restaurant sales.  Total restaurant operating weeks increased approximately 21% to 3,531 during fiscal 2003. 

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          Average sales per restaurant operating week for restaurants open during the full fiscal year decreased slightly to $208,100 in fiscal 2003 compared to $210,400 for fiscal 2002.  This decline was principally due to severe weather throughout much of the country during the first six months of the year that resulted in approximately 22 lost days of restaurant sales due to restaurant closings and reduced availability of our outdoor patio seats. In addition, several of our newer restaurants experienced expected sales decreases to their sustainable run-rate levels after their “honeymoon” opening period.  Refer to Item 1: Business – “New Restaurant Sales and Investment Characteristics” in this Annual Report on Form 10-K. 

          Comparable restaurant sales increased approximately 0.7% during fiscal 2003 and our effective price increase for the full fiscal year was approximately 1.2%.  Comparable restaurant sales were also impacted by the severe weather during the first six months of the year.

          Bakery sales to other foodservice operators, retailers and distributors decreased 13% to $42.6 million in fiscal 2003 compared to $48.7 million in the prior fiscal year.  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.  Sales to warehouse club operators represented approximately 62% of total bakery sales for fiscal 2003 compared to 56% for fiscal 2002. 

Restaurant Cost of Sales

          Restaurant cost of sales increased 23% to $175.7 million in fiscal 2003 compared to $143.0 million in fiscal 2002.  This increase was primarily attributable to the 21% increase in restaurant sales during fiscal 2003.  As a percentage of restaurant sales, these costs increased to 24.0% during fiscal 2003 compared to 23.7% for the prior fiscal year. 

Bakery Cost of Sales

          Bakery cost of sales were $19.7 million for fiscal 2003 compared to $22.6 million for the prior fiscal year.  The decrease of $2.9 million was principally attributable to the 13% decrease in bakery sales for fiscal 2003.  As a percentage of bakery sales, bakery cost of sales remained relatively unchanged at 46.3% for fiscal 2003 compared to 46.4% for fiscal 2002.

Labor Expenses

          Labor expenses increased 19.5% to $239.4 million for fiscal 2003 compared to $200.3 million for fiscal 2002.  This increase was principally due to the 19% increase in total revenues during fiscal 2003.  As a percentage of total revenues, labor expenses increased slightly to 30.9% for fiscal 2003 compared to 30.7% for fiscal 2002 reflecting the reverse leverage from the lower than expected restaurant and bakery sales due to weather conditions during the first three months of fiscal 2003 on the fixed portion of labor costs in both operations.  In addition, the severe winter weather in 2003 made it difficult for managers to adjust hourly labor.  Labor expenses were also affected by increased costs for health insurance benefits.

Other Operating Costs and Expenses

          Other operating costs and expenses increased 20.3% to $181.0 million for fiscal 2003 compared to $150.5 million for fiscal 2002.  This increase was principally attributable to the 19% increase in total revenues for fiscal 2003.  As a percentage of total revenues, other operating costs and expenses increased to 23.4% for fiscal 2003 versus 23.1% for fiscal 2002. This increase was due primarily to increased costs for natural gas and electric services to our restaurants amounting to approximately 30 basis points of total revenues; higher costs for our insurance arrangements of approximately 10 basis points and increased selling, distribution and promotional costs related to our outside bakery sales.  These increases were partially offset by costs incurred only in fiscal 2002 associated with the August 2002 bakery product withdrawal of approximately $2.1 million or 0.3% of total revenues. 

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General and Administrative Expenses

          G&A expenses increased 13.0% to $35.8 million for fiscal 2003 compared to $31.7 million for fiscal 2002.  This increase was principally due to the planned growth of our supervision and support organizations commensurate with the growth of our restaurant and bakery operations during fiscal 2003.  As a percentage of total revenues, G&A expenses decreased to 4.6% for fiscal 2003 compared to 4.9% for the prior fiscal year, as the 13.0% increase in these expenses for fiscal 2003 was less than the 19% increase in total revenues for the year.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses increased 22.1% to $28.2 million for fiscal 2003 compared to $23.1 million for fiscal 2002.  This increase was principally due to new restaurant openings.  As a percentage of total revenues, depreciation and amortization expenses were 3.7% and 3.5% for fiscal 2003 and 2002, respectively.

Preopening Costs

          Preopening costs increased 10.9% to $12.2 million for fiscal 2003 compared to $11.0 million for the prior fiscal year.  We opened fourteen restaurants during fiscal 2003 compared to twelve openings during fiscal 2002.  In addition, preopening costs were incurred in both years for restaurant openings in progress.

Interest Income, Net, Other Income and Income Tax Provision

          Interest income, net decreased to $3.4 million for fiscal 2003 compared to $3.9 million for fiscal 2002.  This decrease was principally due to lower yields on our interest-bearing cash and short-term investments that, in turn, were attributable to the decline in the general level of interest rates during fiscal 2003.  In addition, we recorded interest expense of approximately $0.1 million in fiscal 2003 associated with landlord construction allowances deemed to be financing in accordance with EITF 97-10, “The Effect of Lessee Involvement in Asset Construction”.  See Note 1 of Notes to Consolidated Financial Statements included in this Form 10-K.

          Other income for fiscal 2003 was $2.9 million compared to $2.2 million for fiscal 2002.  This increase was principally due to higher gains on the sales of investments and marketable securities in order to fund the Company’s working capital requirements.  Our effective income tax rate was 35.1% for fiscal 2003 compared to 35.7% for fiscal 2002.  

This excerpt taken from the CAKE 10-K filed Apr 4, 2005.

Fiscal 2003 Compared to Fiscal 2002

Revenues

          Total revenues increased 19% to $773.8 million for fiscal 2003 compared to $652.0 million for fiscal 2002. 

          Restaurant sales increased 21% to $731.3 million for fiscal 2003 compared to $603.3 million for the prior fiscal year.  The increase of $128.0 million for fiscal 2003 consisted of the following components: $57.0 million from the openings of fourteen new restaurants during the fiscal year; $68.4 million from restaurants opened prior to fiscal 2003 that were not considered comparable sales during fiscal 2003; and $2.6 million from comparable restaurant sales.  Total restaurant operating weeks increased approximately 21% to 3,531 during fiscal 2003. 

30


          Average sales per restaurant operating week for restaurants open during the full fiscal year decreased slightly to $208,100 in fiscal 2003 compared to $210,400 for fiscal 2002.  This decline was principally due to severe weather throughout much of the country during the first six months of the year that resulted in approximately 22 lost days of restaurant sales due to restaurant closings and reduced availability of our outdoor patio seats. In addition, several of our newer restaurants experienced expected sales decreases to their sustainable run-rate levels after their “honeymoon” opening period.  Refer to Item 1: Business – “New Restaurant Sales and Investment Characteristics” in this Annual Report on Form 10-K. 

          Comparable restaurant sales increased approximately 0.7% during fiscal 2003 and our effective price increase for the full fiscal year was approximately 1.2%.  Comparable restaurant sales were also impacted by the severe weather during the first six months of the year.

          Bakery sales to other foodservice operators, retailers and distributors decreased 13% to $42.6 million in fiscal 2003 compared to $48.7 million in the prior fiscal year.  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.  Sales to warehouse club operators represented approximately 62% of total bakery sales for fiscal 2003 compared to 56% for fiscal 2002. 

Restaurant Cost of Sales

          Restaurant cost of sales increased 23% to $175.7 million in fiscal 2003 compared to $143.0 million in fiscal 2002.  This increase was primarily attributable to the 21% increase in restaurant sales during fiscal 2003.  As a percentage of restaurant sales, these costs increased to 24.0% during fiscal 2003 compared to 23.7% for the prior fiscal year. 

Bakery Cost of Sales

          Bakery cost of sales were $19.7 million for fiscal 2003 compared to $22.6 million for the prior fiscal year.  The decrease of $2.9 million was principally attributable to the 13% decrease in bakery sales for fiscal 2003.  As a percentage of bakery sales, bakery cost of sales remained relatively unchanged at 46.3% for fiscal 2003 compared to 46.4% for fiscal 2002.

Labor Expenses

          Labor expenses increased 19.5% to $239.4 million for fiscal 2003 compared to $200.3 million for fiscal 2002.  This increase was principally due to the 19% increase in total revenues during fiscal 2003.  As a percentage of total revenues, labor expenses increased slightly to 30.9% for fiscal 2003 compared to 30.7% for fiscal 2002 reflecting the reverse leverage from the lower than expected restaurant and bakery sales due to weather conditions during the first three months of fiscal 2003 on the fixed portion of labor costs in both operations.  In addition, the severe winter weather in 2003 made it difficult for managers to adjust hourly labor.  Labor expenses were also affected by increased costs for health insurance benefits.

Other Operating Costs and Expenses

          Other operating costs and expenses increased 20.3% to $181.0 million for fiscal 2003 compared to $150.5 million for fiscal 2002.  This increase was principally attributable to the 19% increase in total revenues for fiscal 2003.  As a percentage of total revenues, other operating costs and expenses increased to 23.4% for fiscal 2003 versus 23.1% for fiscal 2002. This increase was due primarily to increased costs for natural gas and electric services to our restaurants amounting to approximately 30 basis points of total revenues; higher costs for our insurance arrangements of approximately 10 basis points and increased selling, distribution and promotional costs related to our outside bakery sales.  These increases were partially offset by costs incurred only in fiscal 2002 associated with the August 2002 bakery product withdrawal of approximately $2.1 million or 0.3% of total revenues. 

31


General and Administrative Expenses

          G&A expenses increased 13.0% to $35.8 million for fiscal 2003 compared to $31.7 million for fiscal 2002.  This increase was principally due to the planned growth of our supervision and support organizations commensurate with the growth of our restaurant and bakery operations during fiscal 2003.  As a percentage of total revenues, G&A expenses decreased to 4.6% for fiscal 2003 compared to 4.9% for the prior fiscal year, as the 13.0% increase in these expenses for fiscal 2003 was less than the 19% increase in total revenues for the year.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses increased 22.1% to $28.2 million for fiscal 2003 compared to $23.1 million for fiscal 2002.  This increase was principally due to new restaurant openings.  As a percentage of total revenues, depreciation and amortization expenses were 3.7% and 3.5% for fiscal 2003 and 2002, respectively.

Preopening Costs

          Preopening costs increased 10.9% to $12.2 million for fiscal 2003 compared to $11.0 million for the prior fiscal year.  We opened fourteen restaurants during fiscal 2003 compared to twelve openings during fiscal 2002.  In addition, preopening costs were incurred in both years for restaurant openings in progress.

Interest Income, Net, Other Income and Income Tax Provision

          Interest income, net decreased to $3.4 million for fiscal 2003 compared to $3.9 million for fiscal 2002.  This decrease was principally due to lower yields on our interest-bearing cash and short-term investments that, in turn, were attributable to the decline in the general level of interest rates during fiscal 2003.  In addition, we recorded interest expense of approximately $0.1 million in fiscal 2003 associated with landlord construction allowances deemed to be financing in accordance with EITF 97-10, “The Effect of Lessee Involvement in Asset Construction”.  See Note 1 of Notes to Consolidated Financial Statements included in this Form 10-K.

          Other income for fiscal 2003 was $2.9 million compared to $2.2 million for fiscal 2002.  This increase was principally due to higher gains on the sales of investments and marketable securities in order to fund the Company’s working capital requirements.  Our effective income tax rate was 35.1% for fiscal 2003 compared to 35.7% for fiscal 2002.  

EXCERPTS ON THIS PAGE:

10-K
Apr 6, 2005
10-K
Apr 4, 2005

RELATED TOPICS for CAKE:

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