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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



| |  | For the fiscal year ended December 28, 2003
| |  | -------------------------------------------



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



| |  | FOR THE TRANSITION PERIOD FROM  TO
| |  | ----------------------------------



Commission file number 000-31149



California Pizza Kitchen, Inc.

(Exact name of Registrant as Specified in its Charter)



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|California                                                     |  | 95-4040623                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)



6053 West Century
Boulevard, 11th Floor

Los Angeles, California 90045-6442

(Address of Principal Executive Offices, including Zip Code)



(310) 342-5000

(Registrants
Telephone Number, including Area Code)



Securities
registered pursuant to Section 12(b) of the Act:

None



Securities registered pursuant to Section 12(g) of the Act:

None



Common Stock, $0.01 par value (title of class)



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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. ̈

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes  x    No ̈



The aggregate market value of voting stock held by non-affiliates of the registrant as of June 27, 2003 was approximately
$409 million based upon the last sales price reported for such date on the Nasdaq National Market. For purposes of this disclosure, shares of Common Stock held by persons who hold more than 5% of the outstanding shares of Common Stock and shares
held by officers and directors of the registrant, have been excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive.



As of March 8, 2004 there were 19,076,344 shares of the registrants Common Stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



The registrant has incorporated by reference into Part III of this Form 10-K
portions of its proxy statement for the registrants 2004 Annual Meeting of Stockholders.



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CALIFORNIA PIZZA KITCHEN, INC.



2003
ANNUAL REPORT ON FORM 10-K



INDEX



|          |  |                                                                                       |  |     
|--------- |  | ------------------------------------------------------------------------------------- |  | ----
|          |  |                                                                                       |  | Page
|Part I.  
|          |  |                                                                                      
|Item 1.   |  | Business                                                                              |  | 3   
|          |  |                                                                                      
|Item 2.   |  | Properties                                                                            |  | 13  
|          |  |                                                                                      
|Item 3.   |  | Legal Proceedings                                                                     |  | 15  
|          |  |                                                                                      
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                   |  | 15  
|         
|Part II. 
|          |  |                                                                                      
|Item 5.   |  | Market for the Registrants Common Stock and Related Stockholder Matters              |  | 16  
|          |  |                                                                                      
|Item 6.   |  | Selected Financial Data                                                               |  | 17  
|          |  |                                                                                      
|Item 7.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|          |  |                                                                                      
|Item 7A.  |  | Quantitative and Qualitative Disclosures About Market Risks                           |  | 31  
|          |  |                                                                                      
|Item 8.   |  | Financial Statements and Supplementary Data                                           |  | 31  
|          |  |                                                                                      
|Item 9.   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 31  
|          |  |                                                                                      
|Item 9A.  |  | Controls and Procedures                                                               |  | 31  
|         
|Part III.
|          |  |                                                                                      
|Item 10.  |  | Directors and Executive Officers of the Registrant                                    |  | 33  
|          |  |                                                                                      
|Item 11.  |  | Executive Compensation                                                                |  | 33  
|          |  |                                                                                      
|Item 12.  |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 33  
|          |  |                                                                                      
|Item 13.  |  | Certain Relationships and Related Transactions                                        |  | 33  
|          |  |                                                                                      
|Item 14.  |  | Principal Accounting Fees and Services                                                |  | 33  
|         
|Part IV. 
|          |  |                                                                                      
|Item 15.  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 34  



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FORWARD-LOOKING STATEMENTS



This report contains forward-looking statements that involve risks and uncertainties. These statements relate to our
future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as expects, anticipates, intends, plans and similar expressions. Our actual results
could differ materially from those discussed in these statements. Factors that could contribute to these differences include those discussed under Risk Factors and elsewhere in this report. The cautionary statements made in this report
should be read as being applicable to all forward-looking statements wherever they appear in this report.



ASSUMPTIONS USED IN THIS REPORT



Throughout this report, our fiscal years ended January 2, 2000, December 31, 2000, December 30, 2001, December 29, 2002 and December 28, 2003 are referred to as years 1999, 2000, 2001, 2002 and 2003 respectively.
Our fiscal year consists of 52 or 53 weeks and ends on the Sunday closest to December 31 in each year. All fiscal years shown are 52 weeks. Our fiscal quarters typically consist of 13 weeks.



PART I



Item 1.    Business



Overview and Strategy



California Pizza
Kitchen is a leading casual dining restaurant chain with a particular focus on the premium pizza segment. As of March 12, 2004, we own, license or franchise 168 restaurants in 27 states, the District of Columbia and five foreign countries, of which
139 are company owned and 29 operate under franchise or license arrangements. During our 19 years of operating history, we have developed a recognized consumer brand and demonstrated the appeal of our concept in a wide variety of geographic areas.



Our restaurants, which feature an exhibition style kitchen
centered around an open flame oven, provide a distinctive, casual dining experience that is family friendly and has broad consumer appeal. Our menu focuses on imaginative toppings and showcase recipes that capture tastes and flavors that customers
readily identify, but do not typically associate with pizza, pasta or salads. The menu showcases such dishes as The Original BBQ Chicken Pizza, Thai Chicken Pizza, Kung Pao Spaghetti and Tricolore Salad as well as the new CPK Club Salad and
California Club Pizza. While we do offer traditional menu items, the success of our concept is due to our ability to interpret food trends on our platform of pizzas, pastas, salads and appetizers, and to offer items that appeal to a variety of
tastes.



Our objective is to extend our leadership position in
the restaurant and premium pizza market by selling innovative, high quality pizzas and related products and by providing exceptional customer service, thereby building a high degree of customer loyalty, brand awareness and superior returns for our
shareholders. To reach these objectives, we plan to increase our market share by expanding our restaurant base in new and existing markets, leverage our partnerships in non-traditional and retail channels and offer innovative menu items on our
platform of pizzas.



Menu



Our menu committee, which is led by our co-founders Rick Rosenfield and
Larry Flax, continuously experiments with food items and flavor combinations in an attempt to create selections that are innovative and capture distinctive tastes. We first applied our innovative approach to creating and defining a new category of
pizzathe premium pizza. For example, our signature creation, The Original BBQ Chicken Pizza, utilizes barbecue sauce instead of tomato sauce, and adds toppings of BBQ chicken breast, smoked Gouda and mozzarella cheeses, sliced red onion and
fresh cilantro. Our Thai Chicken Pizza is created with a base of spicy



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peanut-ginger and sesame sauce, and topped with marinated chicken breast, mozzarella cheese, roasted peanuts, green onions, bean sprouts, julienne carrots
and fresh cilantro. Among our other innovative pizzas are the California Club, Carne Asada, Grilled Garlic Shrimp, Jamaican Jerk Chicken and Pear & Gorgonzola.



We have broadened our menu beyond pizza to include pastas, salads, sandwiches, soups, appetizers and desserts, and we strive
to bring the same level of creativity and innovation involved in developing our pizzas to our entire menu. Among our other signature menu items are Chicken-Tequila Fettucine which captures Southwestern flavors in a rich tequila-lime and jalapeno
cream sauce, The Original BBQ Chicken Chopped Salad which uses both barbecue sauce and garden-herb ranch dressing, Oriental Chicken Salad with crispy angel hair pasta, and our hearth-baked Tortilla Spring Roll Appetizers which are sprinkled with
herbs and baked in our pizza ovens.



Our menu is also designed
to satisfy customers who seek traditional, American-style, tomato sauce-based pizza or authentic, Italian-style Neapolitan pizza. For the traditionalist, we offer a variety of items such as the Mushroom Pepperoni Sausage Pizza, the Fresh Tomato,
Basil and Garlic Pizza, and the Sweet and Spicy Italian Sausages Pizza that combines sweet Italian sausage and grilled spicy Italian sausage, a tomato sauce base, roasted red and yellow peppers and mild onions. Our Neapolitan pizzas are prepared on
a thin, crisp crust and include our Margherita Pizza with imported Italian tomatoes, fresh mozzarella cheese, fresh basil and parmesan cheese and our Rustica Pizza made with imported Italian tomatoes, fresh mozzarella cheese, garlic, crushed
chilies, capers and Mediterranean olives. Our menu similarly accommodates traditional tastes in pastas and salads, with a variety of tomato sauce based pastas and our high quality versions of popular salads, including our CPK Club, Field Greens,
Classic Caesar and Original Chopped.



All of our menu items are
prepared to order in our full service restaurants. This reinforces our customers confidence in the freshness and quality of our preparations and allows us to customize any dish to accommodate specific dietary or taste preferences.



Our menu is continuously evolving to track the increasingly discriminating
and sophisticated palate of the American public. We regularly review the sales mix of our menu items and replace lower selling items in each category with new menu items once or twice a year. Because of our ability to quickly adapt our menu, we
believe that we are able to meet our customers changing tastes and expectations. Our entrees generally range in price from $7.89 to $13.99 and our average guest check during 2003 was approximately $11.60, including alcoholic beverages. We
offer a variety of wines by the bottle or the glass, bottled and tap beers, as well as mixed drinks, primarily to complement our menu offerings.



Operations



Restaurant management.    We currently have 22 regional directors and three regional Vice Presidents of Operations who report
to our Co-Chief Executive Officers. Each regional director oversees three to nine restaurants and supervises the general manager for each restaurant within his or her area of control. The typical full service restaurant management team consists of a
general manager, who oversees the entire operation of the restaurant, a kitchen manager and two other managers. Additionally, depending upon the size and sales volume of a restaurant, we may also employ another kitchen manager or a third manager in
the dining area. Most of our full service restaurants employ approximately 50 to 75 hourly employees, many of whom work part-time. The general manager of each restaurant is responsible for the day-to-day operation of that restaurant, including
hiring, training and development of personnel, as well as operating results. The kitchen manager is responsible for product quality, food costs and kitchen labor costs. Our full service restaurants are generally open Sunday through Thursday from
11:00 a.m. until 10:00 p.m., and on Friday and Saturday from 11:00 a.m. until 11:00 p.m.



Training.    We strive to maintain quality and consistency in each of our restaurants through the careful training and supervision of personnel and the establishment of, and adherence to,
high standards relating to personal performance, food and beverage preparation and maintenance of facilities. We provide all new



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employees with complete orientation and training for their positions to ensure they are able to meet our high standards. Each location has certified trainers
who provide classroom and on-the-job instruction. Employees are certified for their positions by passing a series of tests and evaluations. Beginning January 2003, the Company extended its manager training program by two weeks for a total training
period of 12 weeks. The additional two weeks is dedicated solely to food, which is the essence of the California Pizza Kitchen experience. Training also includes service, kitchen and management responsibilities. An extensive series of interactive
modules and on-line quizzes are used in conjunction with on-the-job training. Newly trained managers are then assigned to their home restaurant where they spend one additional training week with their general manager. We place a high priority on our
continuing management development programs in order to ensure that qualified managers are available for our future openings. In addition, we have detailed written operating procedures, standards and controls, finance modules, food quality assurance
systems, and safety programs. Once a year we hold a general manager conference in which all of our general managers receive financial information and additional training on food preparation, hospitality and other relevant topics.



When we open a new restaurant, we provide varying levels of training to each
employee as is necessary to ensure the smooth and efficient operation of a California Pizza Kitchen restaurant from the first day it opens to the public. Approximately two weeks prior to opening a new restaurant, our dedicated training/opening team
travels to the location to begin intensive training of all new employees for that restaurant. Our training teams remain on site during the first two weeks of operation. We believe this additional investment in our new restaurants is important since
it helps us provide our customers with a quality dining experience from day one. We also make on-site training teams available when our franchisees open new restaurants. After a restaurant has been opened and is operating smoothly, the general
manager supervises the training of new employees.



Recruiting and retention.    We seek to hire experienced general managers and staff. We support our employees by offering competitive wages, competitive benefits, including a 401(k) plan and salary deferral plan,
both with a discretionary match, medical insurance for all of our employees, including part-time workers, generous discounts on dining, and an employee stock purchase plan which allows all employees to participate who have worked for us for at least
a year and who work a minimum of 20 hours per week.



We attempt
to motivate and retain our employees by providing them with opportunities for increased responsibilities and advancement, as well as performance-based cash incentives tied to sales, profitability and qualitative measures. Our most successful general
managers are eligible for promotion to senior general manager status and are entitled to receive more lucrative compensation packages based on various performance criteria. We believe we also enjoy the recruiting advantage of offering our general
managers restaurants that are easier to manage because they are generally smaller than those of our competitors, have hours that typically do not extend late into the night, and generally do not require management of a separate bar business. We
believe these advantages offer our managers an excellent quality of life compared to many of our competitors.



Customer satisfaction.    Customer satisfaction is critically important to us. To that end, we routinely solicit and analyze
our customers opinions through periodic surveys of 20,000 to 25,000 randomly selected guests which is a vital tool in our quality control efforts for both food quality and customer service perspectives.



Marketing



Our marketing strategy focuses on communicating the California Pizza Kitchen brand through many creative and non-traditional
avenues. As one of the pioneers of premium pizza, we continue to benefit from national media attention, featuring our co-founders Rick Rosenfield and Larry Flax, which we believe provides us with a significant competitive advantage. New store
openings, high profile fundraisers and media events currently serve as the focal point of our public relations and media efforts. Our openings are often featured on live local television and radio broadcasts and receives coverage in local
newspapers. We employ a variety of marketing techniques in connection with our new restaurant openings, including charitable fund raising events with invitations to media personalities and community leaders. In addition, we donate 100% of all
opening day



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pizza sales to worthwhile local charities. During 2003, the California Pizza Kitchen Foundation contributed over $250,000 to charities across the U.S., a
150% increase over the prior year.



Over the last year we were
featured on the Today show, Forbes Magazines 200 Growth Stocks,andBusiness Weeks Hot Growth Companies.We also appeared in feature films including Intolerable CrueltyandLaurel
Canyonas well as television shows such asFriends, The O.C.andTwo and a Half Men.We engage to a limited extent in paid advertising for individual restaurant locations, including billboards, direct mail and mall kiosks. Ongoing
marketing efforts include local kids tours with schools and other childrens organizations, concierge parties and on-going publicity programs. We utilize a variety of printed marketing materials, including restaurant location brochures,
hotel concierge cards, take-out menus and direct and electronic mailings. In 2003, we spent an aggregate of 0.9% of restaurant sales on marketing efforts. We expect to continue investing approximately 1.0% of restaurant sales in marketing efforts in
the future.



Our involvement in the community does not end once
we have opened a restaurant. In each of the markets in which we operate, we continuously engage in a variety of charitable and civic causes and donate food and services on an on-going basis. We have developed two cookbooks and 100% of the proceeds
from these cookbooks are donated to various childrens charities. These cookbooks are sold at our restaurants, through national bookstore chains and through on-line retailers. Additionally we donate 10% of all proceeds from our premium frozen
pizza sales sold at retail outlets to local charities.



Expansion strategy
and site selection



In July 2003, Richard Rosenfield and
Larry Flax, co-founders and Co-Chairmen of the Board, reassumed the responsibilities of Co-Chief Executive Officers after Fredrick R. Hipp, President & Chief Executive Officer resigned from the Company and as a member of the Board of Directors.
In connection with this management change, we reviewed our restaurant portfolio, as well as our operations and growth strategy, and decided to slow down our 2004 new restaurant opening schedule to a range of 10 to 12 new units, emphasizing quality
and profitability. Additionally, we appointed a new development team, which applies rigorous qualitative and quantitative criteria during the site selection process, including, but not limited to, local manager and regional director input and site
selection scores.



Our full service restaurants
will continue to represent the majority of our growth in the near term and our expansion strategy focuses primarily on further penetrating existing markets. As such, we anticipate over the next several years that 70% to 80% of our new restaurants
will be in existing markets. This clustering approach enables us to increase brand awareness and improve our operating and marketing efficiencies. For example, clustering enables us to reduce costs associated with regional supervision of restaurant
operations and provide us with the opportunity to leverage marketing costs over a greater number of restaurants. We also believe this approach reduces the risks involved with opening new restaurants given that we better understand the competitive
conditions, consumer tastes, demographics and discretionary spending patterns in our existing markets. In addition, our ability to hire qualified employees is enhanced in markets in which we are well known.



We believe that our site-selection strategy is critical to our success and we
devote substantial effort to evaluating each potential site at the highest levels within our organization. We identify areas within our target markets that meet our demographic requirements, focusing on daytime and evening populations, shopping
patterns, availability of personnel and household income levels. We only consider expanding to new markets that meet our strict demographic criteria. Our site selection criteria are flexible given that we operate restaurants in regional shopping
malls, in-line shopping centers, retail and entertainment centers, freestanding buildings in commercial and residential neighborhoods, office buildings and hotels. We have several long-standing relationships with major mall developers and owners,
and are therefore afforded the opportunity to negotiate multiple location deals.



We plan to open a new full service restaurant prototype in 2004, which is larger than our former prototype. The new prototype is approximately 5,900 square feet, has approximately 210 seats and has been designed to



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encourage a more adult experience and increase alcohol sales. These new restaurants will require on average a higher net investment than historical
restaurants. However, we expect corresponding sales to be higher and ultimately generate a higher restaurant return on investment. We still have the ability to operate a full service restaurant in less than the new prototype size, particularly if we
are able to secure additional patio seating. The size and flexibility of our formats provide us with a competitive advantage in securing sites.



We have signed leases or letters of intent on all prospective 2004 Company-owned full service restaurants.



We also own four California Pizza Kitchen ASAP restaurants, three that were
opened in 2000 and one previously franchised ASAP that we acquired at the beginning of our 2004 fiscal year. We are currently evaluating an expansion strategy for this concept.



Unit level economics



As a result of recent differences in restaurant performance, we now break out our full service restaurant operating results into groups that better
clarify unit level economics. For the fiscal year ended 2003, the 94 full service restaurants opened prior to 2002 averaged $57,644 per week in sales and generated an average restaurant-level margin of 20.4%, compared to 20.1% the prior year. The 18
restaurants opened in 2002 averaged $46,696 per week in sales and generated an average restaurant-level margin of 11.6%, compared to 12.7% in the prior year. The 22 restaurants opened during 2003 averaged $43,274 per week in sales and generated an
average restaurant-level margin of 4.7%. The restaurants opened in the last two years are not typical of the returns we expect in the future and our goal is to achieve more mature operating margins in line with the 94 full service restaurants
referred to above.



Current full service prototypes range
between approximately 4,800 to 5,200 square feet and have approximately 150 seats. Our average cash investment, net of landlord contributions, is approximately $1.3 million for the 22 full service restaurants opened in fiscal 2003, excluding
pre-opening costs, which averaged approximately $183,000 per restaurant.



Restaurant franchise and licensing arrangements



As part of our strategy to expand and leverage the California Pizza Kitchen brand, we introduced and franchised the concept of California Pizza Kitchen ASAP in 1996. Our ASAP restaurants are designed specifically for the
grab and go customer in non-traditional locations and are typically 600 to 1,000 square feet in size with a limited menu and common area seating. Our largest ASAP franchisee, Host Marriott Services (hereafter referred to as
HMSHost), operates 19 California Pizza Kitchen ASAP restaurants, primarily in airports, throughout the United States under a development and franchise arrangement. MGM Mirage operates one full service California Pizza Kitchen restaurant
in a high-profile resort in Las Vegas, Nevada. We also have an international franchisee operating five full service restaurants with two in Hong Kong and one each in Singapore, Malaysia, and Indonesia; and another international franchisee operating
four full service restaurants in the Philippines.



Our
development agreement with HMSHost grants it limited exclusive rights to open new ASAP restaurants in airports, travel plazas along toll-roads and in mall food court locations; however, any location proposed by HMSHost is subject to approval by us
in our sole discretion. If HMSHost determines not to submit a bid or proposal for a new airport, travel plaza or mall location or determines not to include us in the proposal or bid, we are free to bid ourselves or to license another party to
operate an ASAP in that location. Under our agreement, HMSHost may only develop a franchised restaurant in a mall when it obtains a master concessionaire agreement with the landlord to provide all food services within the food court or other
multiple-concept area. Once we have agreed to HMSHost development of an ASAP restaurant in an airport or travel plaza location, we may not license or operate a full service restaurant ourselves at that location. There is no corresponding prohibition
with respect to mall locations.



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HMSHosts limited exclusive rights for the development of ASAP restaurants extend until May 2004.
HMSHost pays an initial franchise fee of $20,000 for each ASAP restaurant at a new location, $10,000 for each additional ASAP restaurant at an existing location and continuing royalties at rates of 5% to 5.5% of gross sales. The HMSHost franchise
agreement typically terminates at the same time as an HMSHost concessionaire agreement to operate at an airport or mall terminates.



Our territorial development agreements with our other franchisees grant them the exclusive right to an identified territory subject to meeting development
obligations. Our basic franchise agreement with these franchisees generally requires payment of an initial fee of between $50,000 and $65,000 for a full service restaurant, as well as continuing royalties at a rate of 5% to 6% of gross revenue. Most
of our franchise agreements contain a ten or 20-year term.



Agreement with
Kraft Pizza Company



In 1997 we entered into a strategic
alliance with Kraft Pizza Company (hereafter referred to as Kraft) to manufacture and distribute a line of California Pizza Kitchen premium frozen pizzas in the United States and Canada. Kraft currently makes and distributes frozen
versions of seven of our pizzas: The Original BBQ Chicken; Five-Cheese & Fresh Tomato; Thai Chicken; Roasted Garlic Chicken; Wild Mushroom; Mushroom, Pepperoni & Sausage and Jamaican Jerk Chicken.



Our frozen pizzas are currently sold in 55% of U.S. markets including Los
Angeles, San Francisco, Chicago, Denver, New York, Boston and Atlanta to name just a few. We intend to continue to expand our distribution to include additional selected markets, with a continued focus on those markets in which our restaurants are
located.



Management information systems



All of our restaurants use computerized management information systems,
which are designed to improve operating efficiencies, provide corporate management timely access to financial and marketing data, and reduce restaurant and corporate administrative time and expense. Our restaurant systems include a point-of-sale
system, which facilitates the movement of customer food and beverage orders from the dining areas to the appropriate menu item preparation area within the restaurant. The data captured by our restaurant level systems include restaurant sales, cash
and credit card receipts, quantities of each menu item sold, customer counts and daily labor expense. This information is generally transmitted to the corporate office daily. Each week, every restaurant prepares a flash profit and loss statement
that is compared to budget and the prior year.



Our corporate
information systems provide management with operating reports that show restaurant performance comparisons with budget and prior year results both for the current accounting period and year-to-date. These systems allow us to closely monitor
restaurant sales, cost of sales, labor expense and other restaurant trends on a daily, weekly and monthly basis. We believe these systems enable both restaurant and corporate management to adequately manage the operational and financial performance
of our restaurants as necessary to support our planned expansion.



Purchasing



Our purchasing staff procures all
of our food ingredients, products and supplies. We seek to obtain the highest quality ingredients, products and supplies from reliable sources at competitive prices. To that end, we continually research and evaluate various food ingredients,
products and supplies for consistency and compare them to our detailed specifications. Specific, qualified manufacturers and growers are then inspected and approved for use. This process is repeated at least once a year. To maximize our purchasing
efficiencies and obtain the lowest possible prices for our ingredients, products and supplies, while maintaining the highest quality, our centralized purchasing staff generally negotiates all prices based on one of two formats: (a) fixed price
contracts generally with terms of between one month to one year; or (b) monthly commodity pricing formulas.



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In order to provide the freshest ingredients and products, and to maximize operating efficiencies between
purchase and usage, each restaurants kitchen manager determines its daily usage requirements for food ingredients, products and supplies. The kitchen manager orders accordingly from approved local vendors and our national master distributor.
The kitchen managers also inspect all deliveries daily to ensure that the items received meet our quality specifications and negotiated prices. We have competitively priced, high quality alternative manufacturers, vendors, growers and distributors
available should the need arise.



Employees



As of March 12, 2004, we have approximately 9,600 employees, including
approximately 120 employees located at our corporate headquarters. Our employees are not covered by any collective bargaining agreement. We consider our employee relations to be strong.



Competition



The restaurant industry is intensely competitive. We compete on the basis of the taste, quality and price of food offered, customer service, ambiance,
location and overall dining experience. We believe that our concept, attractive price-value relationship and quality of food and service enable us to differentiate ourselves from our competitors. Although we believe we compete favorably with respect
to each of these factors, many of our direct and indirect competitors are well-established national, regional or local chains and some have substantially greater financial, marketing, and other resources than we do. We also compete with many other
restaurant and retail establishments for site locations and restaurant level employees. The packaged food industry is also intensely competitive.



Trademarks



Our registered trademarks and service marks include, among others, the word mark California Pizza Kitchen, California Pizza Kitchen
ASAP and our stylized logo set forth on the front and back pages of this report. We have registered all of our marks with the United States Patent and Trademark Office. We have registered our most significant trademarks and service marks in
more than 20 foreign countries, in addition to the Benelux Customs Union and the European Union. In order to better protect our brand, we have also registered our ownership of the Internet domain names www.cpk.com and
www.californiapizzakitchen.com. We believe that our trademarks, service marks and other proprietary rights have significant value and are important to our brand-building efforts and the marketing of our restaurant concepts. We have
vigorously protected our proprietary rights in the past and expect to continue to do so. We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights or the use
by others of restaurant features based upon, or otherwise similar to, our concept. It may be difficult for us to prevent others from copying elements of our concept and any litigation to enforce our rights will likely be costly.



Availability of reports



Our Internet address is www.cpk.com. At this internet website we make available, free of charge, our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after we
electronically file such materials with, or furnish them to, the SEC.



Government regulation



Our restaurants are
subject to licensing and regulation by state and local health, sanitation, safety, fire and other authorities, including licensing and regulation requirements for the sale of alcoholic beverages and food. To date, we have not experienced an
inability to obtain or maintain any necessary licenses, permits or approvals, including restaurant, alcoholic beverage and retail licensing. The development and construction of additional



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restaurants will also be subject to compliance with applicable zoning, land use and environmental regulations. We are also subject to federal regulation and
state laws that regulate the offer and sale of franchises and substantive aspects of a licensor-licensee relationship. Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include
minimum wage requirements, overtime, unemployment tax rates, workers compensation rates, citizenship requirements and sales taxes.



We are subject to federal and state environmental regulations, but these rules have not had a material effect on our operations. Various laws concerning
the handling, storage, and disposal of hazardous materials, such as cleaning solvents and the operation of restaurants in environmentally sensitive locations may impact aspects of our operations. During fiscal 2003 there were no material capital
expenditures for environmental control facilities and no such expenditures are anticipated.



Our facilities must comply with the applicable requirements of the Americans with Disabilities Act of 1990 (ADA) and related state statutes. The ADA prohibits discrimination on the basis of disability with
respect to public accommodations and employment. Under the ADA and related state laws, when constructing new restaurants or undertaking significant remodeling of existing restaurants, we must make the restaurants more readily accessible to disabled
persons. We must also make reasonable accommodations for the employment of disabled persons.



We have a significant number of hourly restaurant employees that receive tip income. We have elected to voluntary participate in a Tip Rate Alternative Commitment (TRAC) agreement with the Internal Revenue
Service. By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential employer-only FICA assessments for unreported or underreported tips.



Risk factors



Our growth strategy requires us to open new restaurants at a measured pace. We may not be able to achieve our planned
expansion.



We are pursuing a disciplined growth strategy,
which to be successful depends on our ability, and the ability of our franchisees and licensees, to open new restaurants and to operate these new restaurants on a profitable basis. The success of our planned expansion will be dependent upon numerous
factors, many of which are beyond our control; including the hiring, training and retention of qualified operating personnel, especially managers; identification and availability of suitable restaurant sites; competition for restaurant sites;
negotiation of favorable lease terms; timely development of new restaurants, including the availability of construction materials and labor; management of construction and development costs of new restaurants; securing required governmental
approvals and permits; competition in our markets; and general economic conditions.



Our success depends on our ability to locate a sufficient number of suitable new restaurant sites.



One of our biggest challenges in meeting our growth objectives will be to
secure an adequate supply of suitable new restaurant sites. We have experienced delays in opening some of our restaurants and may experience delays in the future. There can be no assurance that we will be able to find sufficient suitable locations
for our planned expansion in any future period. Delays or failures in opening new restaurants could materially adversely affect our business, financial condition, operating results or cash flows.



We could face labor shortages, which could slow our growth.



Our success depends in part upon our ability to attract,
motivate and retain a sufficient number of qualified employees, including restaurant managers, kitchen staff and servers, necessary to keep pace with our expansion schedule. Qualified individuals of the requisite caliber and number needed to fill
these positions are in short supply in some areas. Although we have not experienced any significant problems in recruiting or retaining employees, any future inability to recruit and retain sufficient individuals may delay the planned openings of
new



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restaurants. Any such delays or any material increases in employee turnover rates in existing restaurants could have a material adverse effect on our
business, financial condition, operating results or cash flows. Additionally, competition for qualified employees could require us to pay higher wages to attract sufficient employees, which could result in higher labor costs.



Our expansion into new markets may present increased risks due to our
unfamiliarity with the area.



As part of our expansion
strategy we will be opening up restaurants in markets in which we have no prior operating experience. These new markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our restaurants in our
existing markets. In addition, our new restaurants will typically take several months to reach budgeted operating levels due to problems associated with new restaurants, including lack of market awareness, inability to hire sufficient staff and
other factors. Although we have attempted to mitigate these factors by paying careful attention to training and staffing needs, there can be no assurance that we will be successful in operating new restaurants on a profitable basis.



Our expansion may strain our infrastructure, which could slow our
restaurant development.



We also face the risk that our
existing systems and procedures, restaurant management systems, financial controls, and information systems will be inadequate to support our planned expansion. We cannot predict whether we will be able to respond on a timely basis to all of the
changing demands that our planned expansion will impose on management and these systems and controls. If we fail to continue to improve our information systems and financial controls or to manage other factors necessary for us to achieve our
expansion objectives, our business, financial condition, operating results or cash flows could be materially adversely affected.



Our restaurant expansion strategy focuses primarily on further penetrating existing markets. This strategy can cause sales in some of our existing
restaurants to decline.



In accordance with our expansion
strategy, we intend to open new restaurants primarily in our existing markets. Since we typically draw customers from a relatively small radius around each of our restaurants, the sales performance and customer counts for restaurants near the area
in which a new restaurant opens may decline due to cannibalization of the existing restaurants customer base.



Our operations are susceptible to changes in food and supply costs, which could adversely affect our margins.



Our profitability depends, in part, on our ability to anticipate and react
to changes in food and supply costs. Our centralized purchasing staff negotiates prices for all of our ingredients and supplies through either contracts (terms of one month up to one year) or commodity pricing formulas. Our national master
distributor delivers goods at a set, flat fee per case twice a week to all of our restaurants. Our contract with our national master distributor, Meadowbrook Meat Company, Inc., expires in June 2004. Furthermore, various factors beyond our control,
including adverse weather conditions and governmental regulations, could also cause our food and supply costs to increase. We cannot predict whether we will be able to anticipate and react to changing food and supply costs by adjusting our
purchasing practices. A failure to do so could adversely affect our operating results or cash flows.



Changes in consumer preferences or discretionary consumer spending could negatively impact our results.



Our restaurants feature pizzas, pastas, salads and appetizers in an upscale,
family-friendly, casual environment. Our continued success depends, in part, upon the popularity of these foods and this style of informal dining. Shifts in consumer preferences away from this cuisine or dining style could materially adversely
affect our future profitability. Also, our success depends to a significant extent on numerous factors affecting discretionary consumer spending, including economic conditions, disposable consumer income and consumer confidence. Adverse changes in
these factors could reduce customer traffic or impose practical limits on pricing,



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either of which could materially adversely affect our business, financial condition, operating results or cash flows. Like other restaurant chains, we can
also be materially adversely affected by negative publicity concerning food quality, illness, injury, publication of government or industry findings concerning food products served by us, or other health concerns or operating issues stemming from
one restaurant or a limited number of restaurants.



Thirty-six percent of our U.S. based restaurants are located in California. As a result, we are highly sensitive to negative occurrences in that state.



Our franchisees and we currently operate a total of 58 restaurants in California (53 are company-owned and five are owned by
franchisees), of which 44 are concentrated in the greater Los Angeles and San Diego metropolitan areas. As a result, we are particularly susceptible to adverse trends and economic conditions in California. In addition, given our geographic
concentration, negative publicity regarding any of our restaurants in California could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes, earthquakes or other natural disasters.



Increases in the minimum wage may have a material adverse
effect on our business and financial results.



A number of
our employees are subject to various minimum wage requirements. The federal minimum wage has remained at $5.15 per hour since September 1, 1997. However, 36.0% of our U.S. based restaurants are located in California and receive compensation equal to
the California minimum wage, which rose from $6.25 per hour effective January 1, 2001 to $6.75 per hour effective January 1, 2002. There may be similar increases implemented in other jurisdictions in which we operate or seek to operate. The
possibility exists that the federal minimum wage will be increased in the near future. These minimum wage increases may have a material adverse effect on our business, financial condition, results of operations or cash flows.



Rising insurance costs could negatively impact profitability.



The cost of insurance (workers compensation insurance,
general liability insurance, health insurance and directors and officers liability) increased significantly in 2003 and is expected to continue to increase in 2004. These increases could have a negative impact on our profitability if we are not able
to negate the effect of such increases by continuing to improve our operating efficiencies.



Compliance with changing regulation of corporate governance and public disclosure may result in additional expense.



Keeping abreast of, and in compliance with, changing laws, regulations and standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and Nasdaq Stock Market rules, has required an increased amount of management attention and external resources. We remain committed to maintaining high standards of corporate governance and public
disclosure. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities.



The
restaurant industry is affected by litigation and publicity concerning food quality, health and other issues, which can cause customers to avoid our restaurants and result in liabilities.



We are sometimes the subject of complaints or litigation from customers or
employees alleging illness, injury or other food quality, health or operational concerns. Adverse publicity resulting from these allegations may materially adversely affect our restaurants, regardless of whether the allegations are valid or whether
California Pizza Kitchen is liable. In fact, we are subject to the same risks of adverse publicity resulting from these sorts of allegations even if the claim involves one of our franchisees or licensees. Further, employee claims against us based
on, among other things, wage discrimination, harassment or wrongful termination may divert



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our financial and management resources that would otherwise be used to benefit the future performance of our operations. We have been subject to these
employee claims before, and a significant increase in the number of these claims or any increase in the number of successful claims could materially adversely affect our business, financial condition, operating results or cash flows. We also are
subject to some states dram shop statutes. These statutes generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated
person.



Future changes in financial accounting standards
may cause adverse unexpected operating results and affect our reported results of operations.



A change in accounting standards can have a significant effect on our reported results and may affect our reporting of transactions completed before the
change is effective. As an example, any changes requiring that we record compensation expense in our consolidated statements of income for employee stock options using the fair value method could have a significant negative effect on our reported
results. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the questioning of current accounting practices may adversely affect our reported financial
results.



|        |  |           
|------- |  | ----------
|Item 2. |  | Properties



Our corporate
headquarters are located in Los Angeles, California. We occupy this facility under a lease, which was renewed effective September 1, 2002 and extends until August 2012. We lease the majority of our restaurant facilities, although we own our
restaurants in: Alpharetta, Georgia; Grapevine, Texas; Scottsdale, Arizona; Schaumburg, Illinois; and one location in Atlanta, Georgia. The majority of our leases are for ten or 15-year terms and include options to extend the terms. The majority of
our leases also include both minimum rent and percentage-of-sales rent provisions.



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Current restaurant locations



As of March 12, 2004, we own, license or franchise 168 restaurants in 27 states, the District of Columbia and five foreign
countries, of which 139 are company owned and 29 operate under franchise or license arrangements. We franchise or license our concept to other restaurant operators including: HMSHost Corporation, which operates 19 California Pizza Kitchen ASAP
restaurants; MGM Mirage, which operates one full service restaurant in a Las Vegas casino; and two franchisees, which currently operate a total of nine full service restaurants in Hong Kong, Indonesia, Malaysia, Singapore and the Philippines.



|                |  |                             |  |                                            |  |                           |  |      
|--------------- |  | --------------------------- |  | ------------------------------------------ |  | ------------------------- |  | -----
|                |  | Company-OwnedRestaurants(1) |  | Franchised/LicensedFull serviceRestaurants |  | FranchisedASAPRestaurants |  | Total
|Domestic        |  |                             |  |                                            |  |                           |  |      
|Alabama         |  | 1                           |  |                                           |  |                          |  | 1    
|Arizona         |  | 4                           |  |                                           |  | 1                         |  | 5    
|California      |  | 53                          |  |                                           |  | 5                         |  | 58   
|Colorado        |  | 5                           |  |                                           |  |                          |  | 5    
|Connecticut     |  | 1                           |  |                                           |  |                          |  | 1    
|Florida         |  | 9                           |  |                                           |  | 3                         |  | 12   
|Georgia         |  | 3                           |  |                                           |  |                          |  | 3    
|Hawaii          |  | 3                           |  |                                           |  |                          |  | 3    
|Illinois(2)     |  | 9                           |  |                                           |  |                          |  | 9    
|Indiana         |  |                            |  |                                           |  | 1                         |  | 1    
|Kentucky        |  | 1                           |  |                                           |  |                          |  | 1    
|Maryland        |  | 3                           |  |                                           |  |                          |  | 3    
|Massachusetts   |  | 4                           |  |                                           |  |                          |  | 4    
|Michigan        |  | 3                           |  |                                           |  |                          |  | 3    
|Minnesota       |  | 2                           |  |                                           |  | 1                         |  | 3    
|Missouri        |  | 6                           |  |                                           |  | 2                         |  | 8    
|Nevada          |  | 1                           |  | 1                                          |  |                          |  | 2    
|New Jersey      |  | 2                           |  |                                           |  |                          |  | 2    
|New York        |  | 4                           |  |                                           |  |                          |  | 4    
|North Carolina  |  | 2                           |  |                                           |  | 2                         |  | 4    
|Ohio            |  | 4                           |  |                                           |  |                          |  | 4    
|Pennsylvania    |  | 1                           |  |                                           |  |                          |  | 1    
|Tennessee       |  | 1                           |  |                                           |  |                          |  | 1    
|Texas           |  | 8                           |  |                                           |  |                          |  | 8    
|Utah            |  | 1                           |  |                                           |  | 1                         |  | 2    
|Virginia        |  | 5                           |  |                                           |  | 1                         |  | 6    
|Washington      |  | 2                           |  |                                           |  |                          |  | 2    
|Washington, D.C |  | 1                           |  |                                           |  | 2                         |  | 3    
|                |  |                             |  |                                           
|International   |  |                             |  |                                            |  |                           |  |      
|Hong Kong       |  |                            |  | 2                                          |  |                          |  | 2    
|Indonesia       |  |                            |  | 1                                          |  |                          |  | 1    
|Malaysia        |  |                            |  | 1                                          |  |                          |  | 1    
|Singapore       |  |                            |  | 1                                          |  |                          |  | 1    
|Philippines     |  |                            |  | 4                                          |  |                          |  | 4    
|                |  |                             |  |                                            |  |                           |  |      
|Totals          |  | 139                         |  | 10                                         |  | 19                        |  | 168  

---

|(1) |  | All of our company-owned restaurants are full service, except for four ASAP restaurants, all of which are located in California.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes one restaurant in the Chicago area in which we are the general partner and own approximately 70% of the total partnership interests.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



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|        |  |                  
|------- |  | -----------------
|Item 3. |  | Legal Proceedings



On February 10, 2003,
one of our former servers filed a class action complaint against us in Orange County Superior Court in California. The plaintiff alleges that we failed to give our food servers, bussers, runners and bartenders rest and meal breaks as required by
California law. Under the California Labor Code, an employer must pay each employee one additional hour of pay at the employees regular rate of compensation for each workday that the required meal or rest period is not provided. The plaintiff
also alleges that additional penalties are owed as a consequence of our resulting failure to pay all wages due at the time of termination of employment and under theories characterizing these alleged breaches as unfair business practices. If the
plaintiff is able to achieve class certification and prevails on the merits of the case, we could potentially be liable for significant amounts. We are still investigating the claims and have participated in one full day of private mediation. No
discovery has taken place as of yet due to a stay in the proceedings ordered by the Court to allow the private mediation, and no date has been set for a hearing on class certification or for trial. We believe that all of our employees were provided
with the opportunity to take all required meal and rest breaks, and as such we intend to vigorously defend our position.



We are also subject to other private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. Such claims
typically involve claims from guests, employees and others related to operational issues common to the foodservice industry. A number of such claims may exist at any given time. We could be affected by adverse publicity resulting from such
allegations, regardless of whether or not such allegations are valid or whether we are determined to be liable. From time to time, we are also involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks. We
believe that the final disposition of such lawsuits and claims will not have a material adverse effect on our financial position, results of operations or liquidity.



|        |  |                                                    
|------- |  | ---------------------------------------------------
|Item 4. |  | Submission of Matters to a Vote of Security Holders



None.



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PART II



Item 5.    Market for the Registrants Common Stock and Related Stockholder Matters



Our common stock is quoted on the Nasdaq National Market under the symbol CPKI. The following table sets forth, for the two most recent fiscal
years, the high and low sales prices as reported on the Nasdaq National market.



|               |  |      |       |     |   |      
|-------------- |  | ---- | ----- | --- | - | -----
|               |  | High |       | Low
|Fiscal 2002:   |  |      |       |     |   |      
|First Quarter  |  | $    | 26.08 |     | $ | 18.75
|Second Quarter |  |      | 26.67 |     |   | 21.85
|Third Quarter  |  |      | 25.32 |     |   | 17.85
|Fourth Quarter |  |      | 28.03 |     |   | 19.71
|Fiscal 2003:   |  |      |       |     |   |      
|First Quarter  |  | $    | 26.57 |     | $ | 21.45
|Second Quarter |  |      | 24.59 |     |   | 18.26
|Third Quarter  |  |      | 22.70 |     |   | 16.25
|Fourth Quarter |  |      | 19.72 |     |   | 17.26



As of March 8, 2004,
there were approximately 156 holders of record of common stock. On March 8, 2004, the last sale price reported on the Nasdaq National Market for our common stock was $19.36 per share.



Dividend Policy



We currently retain all future earnings for the operation and expansion of our business. We have not paid any cash dividends since 1992 when dividends
were paid in connection with PepsiCo, Inc.s acquisition of a controlling interest in the Company.



We have a $20.0 million line of credit agreement with Bank of America, N.A. that expires on June 30, 2004. Our credit agreement with Bank of America, N.A.
currently prohibits us from declaring or paying any dividends or other distributions on any shares of our capital stock other than dividends payable solely in shares of capital stock or the stock of our subsidiaries. Any payment of cash dividends in
the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions contained in our credit agreement with Bank of America, N.A., or other
agreements, and other factors deemed relevant by our Board.



Equity
Compensation Plan Information



Information regarding our
equity compensation plans, including both plans approved by security holders and plans not approved by security holders, will be set forth in the section entitled Equity Compensation and Other MattersEquity Compensation Plan
Information in our definitive proxy statement for our 2004 Annual Meeting of Stockholders, or in an amendment to this Form 10-K, which, as applicable, will be filed within 120 days after our fiscal year end of December 28, 2003, which
information is incorporated herein by this reference.



Recent Sales of
Unregistered Securities



On December 29, 2003, we
purchased certain development rights and the leasehold interests, equipment and other assets utilized in the operation of two California Pizza Kitchen restaurants owned by CAH Restaurants of California, LLC. Approximately 50% of the $2,503,000
aggregate purchase price was paid by the issuance of 67,954 shares of our common stock. The shares were issued to Rick J. Caruso, one of our directors, who owns CAH Restaurants of California, LLC. The issuance of the shares was exempt under Section
4(2) of the Securities



16



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##### Table of Contents

Act of 1933, as amended, and under Regulation D as promulgated thereunder, as a transaction not involving any public offering.



Item 6.    Selected Financial Data



The following selected consolidated financial and operating data for each of the five fiscal years in the period ended December 28, 2003 are derived from our audited consolidated financial statements. The audited
consolidated financial statements and accompanying notes for each of the three fiscal years in the period ended December 28, 2003, and the report of independent auditors on those years, are included elsewhere in this report. This selected
consolidated financial and operating data should be read in conjunction with the consolidated financial statements and accompanying notes, Managements Discussion and Analysis of Financial Condition and Results of Operations and
other financial information included elsewhere in this report.



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##### Table of Contents

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

(dollars in thousands, except per share data, operating data and footnotes)



|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------------------- |  | ----------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                        |  | Fiscal Year |        
|                                                                        |  | 2003        |         |   | 2002 |   |         | 2001 |  |   | 2000    |   |  | 1999 |        
|Statement of Operations Data:                                           |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Revenues:                                                               |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Restaurant sales                                                        |  | $           | 356,260 |   |      | $ | 303,427 |      |  | $ | 246,445 |   |  | $    | 208,322 |   |  | $ | 176,933 |  
|Franchise and other revenues                                            |  |             | 3,627   |   |      |   | 2,895   |      |  |   | 2,817   |   |  |      | 2,482   |   |  |   | 2,260   |  
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total revenues                                                          |  |             | 359,887 |   |      |   | 306,322 |      |  |   | 249,262 |   |  |      | 210,804 |   |  |   | 179,193 |  
|Costs and expenses:                                                     |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cost of sales                                                           |  |             | 87,806  |   |      |   | 73,756  |      |  |   | 60,950  |   |  |      | 51,748  |   |  |   | 44,740  |  
|Labor                                                                   |  |             | 129,702 |   |      |   | 110,151 |      |  |   | 88,898  |   |  |      | 74,341  |   |  |   | 63,701  |  
|Direct operating and occupancy                                          |  |             | 73,949  |   |      |   | 60,652  |      |  |   | 49,344  |   |  |      | 41,079  |   |  |   | 35,848  |  
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total restaurant operating costs                                        |  |             | 291,457 |   |      |   | 244,559 |      |  |   | 199,192 |   |  |      | 167,168 |   |  |   | 144,289 |  
|General and administrative                                              |  |             | 21,488  |   |      |   | 18,161  |      |  |   | 15,489  |   |  |      | 14,349  |   |  |   | 13,123  |  
|Depreciation and amortization                                           |  |             | 17,578  |   |      |   | 14,971  |      |  |   | 11,996  |   |  |      | 9,568   |   |  |   | 8,234   |  
|Pre-opening costs                                                       |  |             | 4,019   |   |      |   | 3,355   |      |  |   | 2,867   |   |  |      | 1,650   |   |  |   | 763     |  
|Severance charge(1)                                                     |  |             | 1,221   |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Stock compensation charge(2)                                            |  |             |        |   |      |   |        |      |  |   |        |   |  |      | 1,949   |   |  |   |        |  
|Loss on impairment of property and equipment and restaurant closures    |  |             | 14,725  |   |      |   | 2,380   |      |  |   |        |   |  |      | 1,839   |   |  |   | 200     |  
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating income                                                        |  |             | 9,399   |   |      |   | 22,896  |      |  |   | 19,718  |   |  |      | 14,281  |   |  |   | 12,584  |  
|Other (expense) income:                                                 |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Bank financing fees                                                     |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (998    | )
|Interest income                                                         |  |             | 317     |   |      |   | 368     |      |  |   | 632     |   |  |      | 469     |   |  |   | 306     |  
|Interest expense                                                        |  |             |        |   |      |   |        |      |  |   | (25     | ) |  |      | (1,881  | ) |  |   | (3,721  | )
|Equity in loss of unconsolidated joint venture                          |  |             | (349    | ) |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total other (expense) income                                            |  |             | (32     | ) |      |   | 368     |      |  |   | 607     |   |  |      | (1,412  | ) |  |   | (4,413  | )
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income tax provision                                      |  |             | 9,367   |   |      |   | 23,264  |      |  |   | 20,325  |   |  |      | 12,869  |   |  |   | 8,171   |  
|Income tax provision                                                    |  |             | (1,411  | ) |      |   | (7,934  | )    |  |   | (7,114  | ) |  |      | (4,504  | ) |  |   | (2,772  | )
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                              |  |             | 7,956   |   |      |   | 15,330  |      |  |   | 13,211  |   |  |      | 8,365   |   |  |   | 5,399   |  
|Redeemable preferred stock accretion                                    |  |             |        |   |      |   |        |      |  |   |        |   |  |      | (3,512  | ) |  |   | (5,147  | )
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income attributable to common shareholders                          |  | $           | 7,956   |   |      | $ | 15,330  |      |  | $ | 13,211  |   |  | $    | 4,853   |   |  | $ | 252     |  
|                                                                        |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income per common share(3):                                         |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic                                                                   |  | $           | 0.42    |   |      | $ | 0.82    |      |  | $ | 0.72    |   |  | $    | 0.35    |   |  | $ |        |  
|Diluted                                                                 |  | $           | 0.42    |   |      | $ | 0.81    |      |  | $ | 0.71    |   |  | $    | 0.35    |   |  | $ |        |  
|Shares used in computing net income per common share (in thousands)(3): |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic                                                                   |  |             | 18,867  |   |      |   | 18,585  |      |  |   | 18,308  |   |  |      | 13,703  |   |  |   |        |  
|Diluted                                                                 |  |             | 19,027  |   |      |   | 18,871  |      |  |   | 18,611  |   |  |      | 14,013  |   |  |   |        |  
|Selected Operating Data:                                                |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Restaurants open at end of year                                         |  |             | 168     |   |      |   | 149     |      |  |   | 131     |   |  |      | 112     |   |  |   | 96      |  
|Company-owned restaurants open at end of year                           |  |             | 137     |   |      |   | 117     |      |  |   | 99      |   |  |      | 82      |   |  |   | 70      |  
|Average weekly company-owned full service restaurant sales              |  | $           | 54,896  |   |      | $ | 55,712  |      |  | $ | 54,438  |   |  | $    | 53,809  |   |  | $ | 49,490  |  
|Comparable company-owned restaurant sales increase(4)                   |  |             | 2.5     | % |      |   | 4.3     | %    |  |   | 3.3     | % |  |      | 7.8     | % |  |   | 4.1     | %
|                                                                        | 
|                                                                        |  | Fiscal Year |        
|                                                                        |  | 2003        |         |   | 2002 |   |         | 2001 |  |   | 2000    |   |  | 1999 |        
|Selected Balance Sheet Data:                                            |  |             |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                                               |  | $           | 15,877  |   |      | $ | 31,261  |      |  | $ | 19,788  |   |  | $    | 12,649  |   |  | $ | 5,686   |  
|Marketable Securities                                                   |  |             | 18,904  |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total assets                                                            |  |             | 185,585 |   |      |   | 168,445 |      |  |   | 145,335 |   |  |      | 116,977 |   |  |   | 94,750  |  
|Total debt, including current portion                                   |  |             |        |   |      |   |        |      |  |   |        |   |  |      | 47      |   |  |   | 40,085  |  
|Redeemable preferred stock                                              |  |             |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | 43,921  |  
|Shareholders equity (deficiency)                                       |  |             | 146,113 |   |      |   | 134,121 |      |  |   | 114,106 |   |  |      | 92,318  |   |  |   | (9,829  | )



18



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##### Table of Contents

---

|(1) |  | Severance charges of $1.2 million represent payments related to the resignations of our former President and Chief Executive Officer and our former Senior Vice President and Chief
Development Officer under the terms of their separation agreements.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Stock compensation charge of $1.9 million in 2000 represents the performance-based stock options becoming exercisable in accordance with variable plan accounting under Accounting
Principles Board Opinion No. 25. The performance-based stock options were granted to Frederick R. Hipp, our former President and Chief Executive Officer.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | See notes 2 and 9 of notes to audited consolidated financial statements for an explanation of the method used to calculate the net income per common share and shares used in
computing net income per common share, basic and diluted.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Company owned restaurants are included in the computation of comparable company owned restaurant sales after they have been open 12 months.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------



19



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##### Table of Contents

Item 7.    Managements Discussion and Analysis of Financial Condition and Results of Operations



Overview



As of March 12, 2004, we own, license or franchise 168 restaurants in 27 states, the District of Columbia and five foreign countries, of which 139 are
company owned and operate under the names California Pizza Kitchen and California Pizza Kitchen ASAP, the remaining 29 operate under franchise or license arrangements. During our 19 years of operating history, we believe we
have developed strong brand awareness and demonstrated the appeal of our concept in a wide variety of geographic areas. Our concept was, and remains, to take our customers favorite food cravings and put them on a pizzato figuratively put
the world on a pizza.



We opened our first casual dining
restaurant in 1985 in Beverly Hills, California and grew steadily to 25 restaurants by early 1992. Our concept, with its signature line of innovative, premium pizzas, open-flame ovens in exhibition-style kitchens and excellent guest service,
attracted PepsiCo, Inc. (hereafter referred to as PepsiCo), which bought a controlling interest in our company in May 1992.



During the approximately five-year period when PepsiCo was our controlling shareholder, we opened 60 restaurants, 17 of which were subsequently closed. We
experimented with different locations and different restaurant sizes, ranging from 3,600 square feet to more than 11,000 square feet. Our rapid expansion strained our infrastructure, resulted in a variety of management and operational changes,
diverted our attention from the execution of our concept and led to disappointing operating results and financial performance, including a decline in comparable restaurant sales in 1996.



At the end of 1996, PepsiCo concluded that it would sell or otherwise divest all of its restaurant businesses, including
California Pizza Kitchen. In September 1997, we consummated a series of transactions to effect a merger and leveraged recapitalization through which an investor group led by Bruckmann, Rosser, Sherrill & Co., L.P. acquired PepsiCos
interest in our company.



Since the beginning of 1998, we have
instituted an accelerated growth plan, focusing largely on further penetrating our existing markets. Between January 1998 and December 2003, we opened 72 new company-owned, full service restaurants and three ASAP restaurants.



In July 2003, Richard Rosenfield and Larry Flax, co-founders and Co-Chairmen
of the Board, reassumed the responsibilities of Co-Chief Executive Officers. In connection with this management change, we reviewed our restaurant portfolio, as well as our operations and growth strategy, and decided to slow down our 2004 new
restaurant opening schedule to a range of 10 to 12 new units, emphasizing quality and profitability.



We plan to open a new restaurant prototype in 2004, which is larger than our former prototype and has been designed to encourage a more adult experience
and increase alcohol sales. These new restaurants will require on average a higher net investment than our historical restaurants. However, we expect corresponding sales to be higher and ultimately generate a higher restaurant cashflow. Pre-opening
expenses for each of these new restaurants is expected to average approximately $185,000 per restaurant.



Our new restaurants experience higher cost of sales, labor and direct operating and occupancy costs for approximately their first 90 to 120 days of
operations in both percentage and dollar terms when compared with our mature restaurants. Accordingly, the volume and timing of new restaurant openings has had, and is expected to continue to have, an impact on pre-opening expenses, cost of sales,
labor and direct operating and occupancy costs until our restaurant operating base is large enough to mitigate these opening costs and inefficiencies.



Our revenues are comprised of restaurant sales, franchise royalties and other income. Our restaurant sales are comprised almost entirely of food and
beverage sales. Our franchise royalties and other revenues consist primarily of monthly royalty income, initial franchise fees and license fees from our strategic alliance with Kraft.



20



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##### Table of Contents

Cost of sales is comprised of food, beverage and paper supply expenses. The components of cost of sales
are variable and increase with sales volume. Labor costs include direct hourly and management wages, bonuses and taxes and benefits for restaurant employees. Direct operating and occupancy costs include restaurant supplies, marketing costs, fixed
rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. Direct operating and occupancy costs generally increase with sales volume but decline as a percentage
of restaurant sales.



General and administrative costs include
all corporate and administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include management, supervisory and staff salaries and related employee benefits,
travel and relocation costs, information systems, training, corporate rent and professional and consulting fees. Depreciation and amortization principally includes depreciation on capital expenditures for restaurants. Pre-opening costs, which are
expensed as incurred, consist of the costs of hiring and training the initial work force, travel, the cost of food used in training, marketing costs, the cost of the initial stocking of operating supplies and other direct costs related to the
opening of a new restaurant.



In calculating comparable
company-owned restaurant sales, we include a restaurant in the comparable base once it has been open for 12 months. As of December 28, 2003, we had 112 full service company-owned restaurants that met this criterion.



Results of operations



Operating results for 2003, 2002 and 2001 are expressed as a percentage of revenues below, except for the components of
restaurant operating costs and expenses, which are expressed as a percentage of restaurant sales:



|                                                                     |  |       |   |  |       |   |  |       |  
|-------------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                     |  | 2003  |   |  | 2002  |   |  | 2001  |  
|Revenues:                                                            |  |       |   |  |       |   |  |       |  
|Restaurant sales                                                     |  | 99.0  | % |  | 99.1  | % |  | 98.9  | %
|Franchise and other revenues                                         |  | 1.0   |   |  | 0.9   |   |  | 1.1   |  
|                                                                     |  |       |   |  |       |   |  |       |  
|Total revenues                                                       |  | 100.0 |   |  | 100.0 |   |  | 100.0 |  
|Costs and expenses:                                                  |  |       |   |  |       |   |  |       |  
|Cost of sales                                                        |  | 24.6  |   |  | 24.3  |   |  | 24.7  |  
|Labor                                                                |  | 36.4  |   |  | 36.3  |   |  | 36.1  |  
|Direct operating and occupancy                                       |  | 20.8  |   |  | 20.0  |   |  | 20.0  |  
|                                                                     |  |       |   |  |       |   |  |       |  
|Total restaurant operating costs                                     |  | 81.8  |   |  | 80.6  |   |  | 80.8  |  
|General and administrative                                           |  | 6.0   |   |  | 5.9   |   |  | 6.2   |  
|Depreciation and amortization                                        |  | 4.9   |   |  | 4.9   |   |  | 4.8   |  
|Pre-opening costs                                                    |  | 1.1   |   |  | 1.1   |   |  | 1.2   |  
|Severance charge                                                     |  | 0.3   |   |  |      |   |  |      |  
|Loss on impairment of property and equipment and restaurant closures |  | 4.1   |   |  | 0.8   |   |  |      |  
|                                                                     |  |       |   |  |       |   |  |       |  
|Operating income                                                     |  | 2.6   |   |  | 7.5   |   |  | 7.9   |  
|Other income (expense):                                              |  |       |   |  |       |   |  |       |  
|Interest income                                                      |  | 0.1   |   |  | 0.1   |   |  | 0.3   |  
|Interest expense                                                     |  |      |   |  |      |   |  |      |  
|Equity in loss of unconsolidated joint venture                       |  | (0.1  | ) |  |      |   |  |      |  
|                                                                     |  |       |   |  |       |   |  |       |  
|Total other income (expense)                                         |  |      |   |  | 0.1   |   |  | 0.3   |  
|                                                                     |  |       |   |  |       |   |  |       |  
|Income before income tax provision                                   |  | 2.6   |   |  | 7.6   |   |  | 8.2   |  
|Income tax provision                                                 |  | (0.4  | ) |  | (2.6  | ) |  | (2.9  | )
|                                                                     |  |       |   |  |       |   |  |       |  
|Net income                                                           |  | 2.2   | % |  | 5.0   | % |  | 5.3   | %
|                                                                     |  |       |   |  |       |   |  |       |  



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##### Table of Contents

Supplemental operating information for company-owned restaurants relative to the 2003 and 2002 years are
expressed in the table below by class:



|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|------------------ |  | ------------------------ |  | ------------------ | -- |  | --------------- | - |  | ---------------------------------- | -- |  | -------------------------- | ------
|                   |  | No. ofFull ServiceStores |  | WeeklySalesAverage |    |  | (,000)Net Sales |   |  | (,000)RestaurantOperatingMargin(1) |    |  | RestaurantOperatingMargin% |       
|Pre-2002 Class     |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 94                       |  | 57,644             |    |  | 286,780         |   |  | 58,520                             |    |  | 20.4                       | %     
|2002               |  | 96                       |  | 55,798             |    |  | 278,541         |   |  | 55,930                             |    |  | 20.1                       | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  | 3.3                | %  |  | 3.0             | % |  | 4.6                                | %  |  | 30                         | bps   
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Class of 2002      |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 18                       |  | 46,696             |    |  | 43,707          |   |  | 5,053                              |    |  | 11.6                       | %     
|2002               |  | 18                       |  | 54,627             |    |  | 21,602          |   |  | 2,744                              |    |  | 12.7                       | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  | (14.5              | )% |  | 102.3           | % |  | 84.1                               | %  |  | (110                       | )  bps
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Class of 2003      |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 22                       |  | 43,274             |    |  | 22,330          |   |  | 1,053                              |    |  | 4.7                        | %     
|2002               |  |                         |  |                   |    |  |                |   |  |                                   |    |  |                           | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  |                   | %  |  |                | % |  |                                   | %  |  |                           | bps   
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Total full service |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 134                      |  | 54,896             |    |  | 352,817         |   |  | 64,626                             |    |  | 18.3                       | %     
|2002               |  | 114                      |  | 55,712             |    |  | 300,143         |   |  | 58,674                             |    |  | 19.5                       | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  | (1.5               | )% |  | 17.5            | % |  | 10.1                               | %  |  | (120                       | )  bps
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|ASAP               |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 3                        |  | 22,071             |    |  | 3,443           |   |  | 177                                |    |  | 5.1                        | %     
|2002               |  | 3                        |  | 21,054             |    |  | 3,284           |   |  | 194                                |    |  | 5.9                        | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  | 4.8                | %  |  | 4.8             | % |  | (8.8                               | )% |  | (80                        | )  bps
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Total restaurants  |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|2003               |  | 137                      |  | 54,118             |    |  | 356,260         |   |  | 64,803                             |    |  | 18.2                       | %     
|2002               |  | 117                      |  | 54,736             |    |  | 303,427         |   |  | 58,868                             |    |  | 19.4                       | %     
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       
|Change             |  |                          |  | (1.1               | )% |  | 17.4            | % |  | 10.1                               | %  |  | (120                       | )  bps
|                   |  |                          |  |                    |    |  |                 |   |  |                                    |    |  |                            |       

---

|(1) |  | Restaurant operating margin is defined as restaurant sales less restaurant operating costs. The table above represents the restaurant operating margin for 2003 and 2002 which
consists of sales of $356,260 and $303,427 and operating costs of $291,457 and $244,559, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2003 (52 weeks) compared to 2002 (52 weeks)



Total Revenues.    Total revenues increased by $53.6 million, or 17.5%, to $359.9 million in 2003 from $306.3 million in 2002
due to a $52.8 million increase in restaurant sales and a $732,000 increase in franchise and other revenues. The increase in restaurant sales was due to $22.3 million in sales derived from the 22 restaurants in the class of 2003, $22.1 million in
additional sales from a full year of operations for the 18 restaurants in the class of 2002 and $8.4 million from the 97 full service and ASAP restaurant sales increase of 3.0%. The increase in comparable restaurant sales was driven by increases in
average check of approximately 3.3% and a decrease in customer counts of approximately 0.9% compared to 2002. Approximately 1.5% of the increase in average check was due to price increases with 1.9% due to shifts in our menu mix. The increase in
franchise and other revenues was due to a $490,000 increase in royalties from Krafts distribution of our frozen pizza, a $177,000 increase in franchise restaurant royalties and a $65,000 increase in initial franchise fees from the opening of
our Hong Kong franchise in December.



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##### Table of Contents

Cost of sales.    Cost of sales increased by $14.0 million, or 19.0%, to $87.8
million in 2003 from $73.8 million in 2002. Cost of sales as a percentage of restaurant sales increased to 24.6% in 2003 from 24.3% in the prior year. The increase was primarily the result of higher produce prices, higher costs from our wine
initiative and additional paper costs associated with the 7.9% and 11.1% increase in take out and delivery, respectively.



Labor.    Labor increased by $19.5 million, or 17.7%, to $129.7 million in 2003 from $110.2 million in 2002. Labor as a
percentage of restaurant sales increased to 36.4% in 2003 from 36.3% in the prior year. The increase in labor as a percentage of restaurant sales was primarily due to lower weekly sales averages in the 40 stores built and opened during 2002 and
2003, which caused a deleveraging effect on management wages.



Direct operating and occupancy.    Direct operating and occupancy increased by $13.2 million, or 21.7%, to $73.9 million in 2003 from $60.7 million in 2002. Direct operating and occupancy as a percentage of
restaurant sales increased to 20.8% in 2003 from 20.0% in the prior year. The increase was primarily due to higher natural gas and electricity costs and low weekly sales averages in the 40 stores built and opened during 2002 and 2003, which caused a
deleveraging effect on fixed occupancy costs.



General and
administrative.    General and administrative costs increased by $3.3 million, or 18.1%, to $21.5 million in 2003 from $18.2 million in 2002. General and administrative costs as a percentage of total revenue increased to 6.0%
in 2003 from 5.9% in the prior year. The increase in general and administrative expenses was primarily a result of higher personnel costs related to new management positions, the return of our co-founders, personnel costs associated with our interim
president and higher travel and moving expenses related to manager relocations.



Depreciation and amortization.    Depreciation and amortization increased by $2.6 million, or 17.3%, to $17.6 million in 2003 from $15.0 million in 2002. The increase was primarily due to
the 22 new restaurants opened during 2003 and a full year of depreciation on the 18 restaurants opened in 2002 partially offset by the 12 company-owned full service restaurants written down under SFAS No. 144, noted below in Loss on impairment
of property and equipment and restaurant closures.



Pre-opening costs.    Pre-opening costs increased by $664,000 to $4.0 million in 2003 from $3.4 million in 2002. The increase was due to the 22 restaurants that opened in 2003 compared to the 18 restaurants that
opened in 2002.



Severance
charges.    Severance charges of $1.2 million represent payments related to the resignations of our former President and Chief Executive Officer and our former Senior Vice President and Chief Development Officer under the
terms of their separation agreements.



Loss on impairment of
property and equipment and restaurant closures.    Loss on impairment of property and equipment and restaurant closures of $14.7 million represents the impairment charge and closure costs for 12 company-owned full service
restaurants, in accordance with SFAS No. 144. The corresponding impairment charge of $2.4 million in 2002 represents the impairment charge and closure costs for one company-owned full service restaurant and one company-owned ASAP restaurant.



Interest income.    Interest income
decreased by $51,000 to $317,000 in 2003 from interest income of $368,000 for 2002. The decrease was a result of the reduced interest rates available from financial institutions for 2003 compared to 2002.



Income tax provision.    The income tax provision
for 2003 and 2002 was based on annual effective tax rates applied to the income before income tax provision. The 15.1% tax rate in 2003 and 34.1% tax rate in 2002 comprise the federal and state statutory rates, less any tax credits, based on the
annual estimated effective tax rate for the respective years. The low 15.1% tax rate in 2003 resulted from higher FICA tax tip credits relative to prior years and tax provision benefits from the $14.7m impairment and $1.2m severance charges incurred
in 2003.



23



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##### Table of Contents

Net income.    Net income decreased by $7.3 million, or 47.7%, to $8.0 million
in 2003 from $15.3 million in 2002. Net income as a percentage of revenues decreased to 2.2% in 2003 from 5.0% in 2002. The decrease as a percentage of revenues was due to the $14.7 million impairment charge and the $1.2 million severance charge
partially offset by the benefit associated with our 15.1% tax rate for 2003.



2002 (52 weeks) compared to 2001 (52 weeks)



Total RevenuesTotal revenues increased by $57.1 million, or 22.9%, to $306.3 million in 2002 from $249.3 million in 2001 due to a $57.0 million increase in restaurant sales and a $78,000 increase in franchise
and other revenues. The increase in restaurant sales was due to $27.0 million in additional sales from a full year of operations for the 16 restaurants that opened in 2001 and the purchase of a franchise restaurant in June 2001, $21.6 million in
sales derived from the 18 restaurants opened in 2002 and $8.4 million from comparable restaurant sales increases of 4.3%. The increase in comparable restaurant sales was driven by increases in average check of approximately 3.9% and an increase in
customer counts of approximately 0.4% compared to 2001. Approximately 2.1% of the increase in average check was due to price increases with the remainder due to modest shifts in our menu mix. The increase in franchise and other revenues was due to a
$229,000 increase in royalties from Krafts distribution of our frozen pizza, a $72,000 decrease in initial franchise fees and a $79,000 decrease in franchise restaurant royalties.



Cost of sales.    Cost of sales increased by $12.8 million, or 21.0%, to $73.8 million in 2002
from $61.0 million in 2001. Cost of sales as a percentage of restaurant sales decreased to 24.3% in 2002 from 24.7% in the prior year. This reduction was primarily a result of increased operational efficiencies, menu pricing and a favorable
commodities market.



Labor.    Labor
increased by $21.3 million, or 24.0%, to $110.2 million in 2002 from $88.9 million in 2001. As a percentage of restaurant sales, labor increased to 36.3% in 2002 from 36.1% in the prior year. The increase in labor as a percentage of restaurant sales
was primarily due to the 20% increase in medical insurance costs compared with 2001.



Direct operating and occupancy.    Direct operating and occupancy increased by $11.3 million, or 22.9%, to $60.7 million in 2002 from $49.3 million in 2001. Direct operating and occupancy as
a percentage of restaurant sales remained flat at 20.0% in 2002 compared to the prior year as higher smallware costs associated with the new November menu and increases in rent were offset by lower utility and delivery charges and higher net sales
spread over relatively fixed restaurant level operating and occupancy expenses.



General and administrative.    General and administrative expenses increased by $2.7 million, or 17.3%, to $18.2 million in 2002 from $15.5 million in 2001. General and administrative
expenses as a percentage of total revenues decreased to 5.9% in 2002 from 6.2% in the prior year. The increase in general and administrative dollar expenses was primarily a result of higher personnel costs related to new management positions. The
decrease in general and administrative expenses as a percentage of revenues was primarily a result of the Companys increasing revenue base and the ability to leverage general and administrative personnel.



Depreciation and amortization.    Depreciation and
amortization increased by $3.0 million, or 25.0%, to $15.0 million in 2002 from $12.0 million in 2001. The increase was primarily due to the 18 new restaurants opened during 2002 and a full year of depreciation on the 16 restaurants opened in 2001.



Pre-opening costs.    Pre-opening
costs increased by $488,000 to $3.4 million in 2002 from $2.9 million in 2001. The increase was due to the 18 restaurants that opened in 2002 compared to the 16 restaurants that opened in 2001, and an increase in the average pre-opening cost due to
additional labor charges, higher housing costs and delays associated with some mall opening dates. We anticipate pre-opening expenses to be approximately $180,000 to $185,000 per restaurant in 2003.



24



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##### Table of Contents

Loss on impairment of property and equipment and restaurant closures.    Loss
on impairment of property and equipment and restaurant closures of $2.4 million represents the impairment charge and closure costs for one company-owned full service restaurant and one company-owned ASAP restaurant, in accordance with SFAS No. 144.
There was no corresponding impairment charge for the December 30, 2001 fiscal year.



Interest income (expense).    Interest income, net of interest expense, decreased by $239,000 to $368,000 in 2002 from interest income of $607,000 in 2001. The decrease was a result of the
reduced interest rates available from financial institutions for 2002 compared to 2001.



Income tax provision.    The income tax provision for 2002 and 2001 was based on annual effective tax rates applied to the income before income tax provision. The 34.1% tax rate in 2002 and
35.0% tax rate in 2001 comprise the federal and state statutory rates, less any tax credits, based on the annual estimated effective tax rate for the respective years.



Net income.    Net income increased by $2.1 million, or 16.0%, to $15.3 million in 2002 from
$13.2 million in 2001. Net income as a percentage of revenues decreased to 5.0% in 2002 from 5.3% in 2001. The decrease as a percentage of revenues was due to the $2.4 million impairment charge, in accordance with SFAS No. 144, for the loss on
impairment of property and equipment and restaurant closure costs for one company-owned full service restaurant and one company-owned California Pizza Kitchen ASAP restaurant.



Potential fluctuations in quarterly results and seasonality



Our quarterly operating results may fluctuate significantly as a result of a variety of factors, including the timing of new
restaurant openings and related expenses, profitability of new restaurants, increases or decreases in comparable restaurant sales, general economic conditions, consumer confidence in the economy, changes in consumer preferences, competitive factors,
changes in food costs, changes in labor costs, war and weather conditions. In the past we have experienced significant variability in pre-opening costs from quarter to quarter. These fluctuations are primarily a function of the timing of restaurant
openings. We typically incur the most significant portion of pre-opening costs associated with a given restaurant in the month of opening. In addition, our experience to date has been that labor and direct operating and occupancy costs associated
with a newly opened restaurant during the first three to four months of operation are often materially greater than what will be expected after that time, both in aggregate dollars and as a percentage of restaurant sales. Accordingly, the number and
timing of new restaurant openings in any quarter has had, and is expected to continue to have, a significant impact on quarterly pre-opening costs, labor and direct operating and occupancy costs. As a result of our new site selection process and new
prototype, our 2004 new restaurant openings are anticipated to open in the last two quarters of 2004.



Our business is also subject to seasonal fluctuations. Historically, sales in most of our restaurants have been higher during the summer months and winter
holiday season. As a result, we expect our highest earnings to occur in those periods. As a result of all of these factors, results for any one-quarter are not necessarily indicative of the results to be expected for any other quarter or for any
year.



Liquidity and capital resources



In recent years we have funded our capital requirements primarily through
cash flow from operations and proceeds from the initial public offering of our stock. In 2003, net cash flow provided by operating activities was $39.0 million compared to $41.2 million in 2002 and $32.7 million in 2001. Net cash flow provided by
operating activities exceeded net income for 2003 primarily due to the effects of depreciation and amortization, loss on impairment of property and equipment and restaurant closures and the net changes in operating assets and liabilities. The net
change in operating assets and liabilities in 2003 was primarily due to an increase in our deferred tax asset and prepaid expenses and other assets resulting from prepaid rent, offset by an increase in accrued liabilities resulting from accrued
payroll tax. In both 2002 and 2001 net cash flow provided by operating



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activities exceeded the net income due to the effects of depreciation and amortization, loss on impairment of property and equipment and restaurant closures
and changes in working capital.



We use cash to fund the
development and construction of new restaurants and remodel our existing restaurants. Net cash used in investing activities in 2003 was $57.4 million compared to $33.5 million in 2002. We opened 22 new restaurants in 2003 compared to 18 in 2002.
Investment activities consisted of capital expenditures of $36.5 million compared to $33.5 million in 2002, which was the result of $28.5 million spent on new restaurants compared to $26.5 million in 2002 and $8.0 million spent on capitalized
maintenance and remodels compared to $7.0 million in 2002. Additionally, we invested $18.9 million of our cash equivalents into short-term marketable securities during 2003 to maximize interest income. We also invested $2.0 million for a 25% equity
interest in a new restaurant concept called LA Food Show, Inc. in March of 2003.



Net cash provided by financing activities was $3.0 million in 2003 compared to $3.7 million in 2002 and consisted of employee common stock option exercises and purchases under our employee stock purchase plan. As of
December 28, 2003 we have a $20.0 million revolving line of credit, of which nothing is currently outstanding. The line of credit expires on June 30, 2004 and bears interest at either the bank base rate minus 0.75% or LIBOR plus 1.0%. Availability
under the credit facility is reduced by outstanding letters of credit, which totaled $3.5 million as of December 28, 2003. In addition, the credit facility includes financial and non-financial covenants, with which the Company was in full compliance
as of December 28, 2003 and as of the date of this report.



Our
capital requirements, including costs related to opening additional restaurants, have been and will continue to be significant. We anticipate total capital expenditures between $30.0 million and $33.0 million in 2004 with the majority of expenditure
associated with the ten to 12 new store openings previously stated. Other capital expenditure is expected to be consistant with prior year trends and will be primarily directed toward maintenance capital associated with existing and mature stores,
remodels and planned information technology upgrades. We expect to fund all capital requirements using operating cash flow. Additionally, we anticipate pre-opening costs on average to be approximately $185,000; however, any unexpected delays in
construction, labor shortages or other factors could result in higher than anticipated pre-opening costs. Our future cash requirements and the adequacy of available funds will depend on many factors, including the pace of expansion, real estate
markets, site locations and the nature of the arrangements negotiated with landlords. We believe that our current cash balances, together with anticipated cash flows from operations and funds anticipated to be available from our credit facility,
will be sufficient to satisfy our working capital and capital expenditure requirements on a short-term and long-term basis. Changes in our operating plans, acceleration of our expansion plans, lower than anticipated sales, increased expenses or
other events may cause us to seek additional financing sooner than anticipated. Additional financing may not be available on acceptable terms, or at all. Failure to obtain additional financing as needed could have a material adverse effect on our
business and results of operations.



Off-Balance Sheet Arrangements



As part of our on-going business, we do not participate
in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (VIEs), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 28, 2003, we are not involved in any unconsolidated VIE transactions.



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Contractual Commitments



The following table summarizes our contractual commitments as of December 28, 2003 (in millions):



|                               |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |     
|------------------------------ |  | ----- | ----- | ---------------------- | - | --------- |  | --------- | ---- | ---------------- | - | ---- |  | - | ----
|                               |  |       |       | Payments Due by Period
|                               |  | Total |       | Less than1 Year        |   | 1-3 Years |  | 4-5 Years |      | More than 5Years
|Operating Lease Obligations(1) |  |       | 188.3 |                        |   | 21.8      |  |           | 44.0 |                  |   | 41.2 |  |   | 81.3
|                               |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |     
|                               |  | $     | 188.3 |                        | $ | 21.8      |  | $         | 44.0 |                  | $ | 41.2 |  | $ | 81.3
|                               |  |       |       |                        |   |           |  |           |      |                  |   |      |  |   |     

---

|(1) |  | Represents aggregate minimum lease payments. Most of the leases also require contingent rent in addition to the minimum rent based on a percentage of sales and require expenses
incidental to the use of the property.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Related Party
Transactions



On March 6, 2003 we paid $2.0 million for a
25.0% stake in LA Food Show, Inc., an upscale family casual dining restaurant created by our co-founders, Co-Chairmen of the Board of Directors and Co-Chief Executive Officers, Larry S. Flax and Richard L. Rosenfield. Messrs. Flax and Rosenfield own
the remaining 75.0% of equity in LA Food Show, Inc. Under the terms of the agreement we reserve the right of first negotiation for the 75.0% of outstanding equity we do not currently own. We have pre-emptive rights in future financings by LA Food
Show so long as we maintain an ownership interest of at least 15.0%, and are entitled to one of three seats on the LA Food Show Board of Directors.



We have accounted for this investment in accordance with the equity method of accounting as interpreted by APB Opinion No. 18, The Equity Method of
Accounting for Investments In Common Stock. APB Opinion No. 18 requires an investor to record the initial investment at cost and adjust the carrying value of its investment to recognize the investors share of the earnings or loss after
the date of acquisition. At December 28, 2003 our net investment in LA Food Show, Inc., was $1.7 million. On July 24, 2003 Richard L. Rosenfield and Larry S. Flax became Co-Chief Executive Officers of California Pizza Kitchen, Inc.



Effective September 29, 2003, we entered into an employee leasing arrangement
with LA Food Show under which we provide LA Food Show with all of its restaurant level employees and managers, as well as administrative and support services such as payroll, marketing, human resources, facilities management, accounting, information
technology and training. LA Food Show reimburses us for all of the leased employees wages, benefits and other employee-related costs, as well as all business-related expenses incurred by the leased employees. As of March 12, 2004 we have
approximately a $220,000 receivable associated with the employee lease agreement.



One of our directors also serves as President and is sole owner of CAH Restaurants of California, LLC. We had entered into franchise and development agreements with CAH Restaurants of California, LLC pursuant to which
it operated two California Pizza Kitchen restaurants. CAH Restaurants of California, LLC paid franchise and royalty fees to us under these agreements. We recorded an aggregate of $256,000 and $260,000 in such fees during the years ended 2003 and
2002, respectively. On December 29, 2003 we acquired the territory rights and assets used to operate two restaurants from CAH Restaurants of California for $2.5 million. These California restaurants, one ASAP and one full service are located in
Thousand Oaks and Ventura, respectively. The transaction was executed with $1.3 million cash with the balance of the purchase price paid in common stock. CAH Restaurants of California, LLC assigned its right to receive these shares to Mr. Caruso. As
part of the acquisition, we assumed the leases for the two restaurants, on of which is entered into with Westlake Promenade, LLC that is wholly owned by Mr. Caruso.



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For the nine weeks to February 29, 2004, we made aggregated lease payments to Caruso Affiliated Holdings
(CAH) for two California store locations of $45,000 and $31,000 for Thousand Oaks and Marina Del Rey, respectively. These payments consisted of rent of $35,000 and $20,000, common area maintenance charges of $10,000 and $5,000 and percentage rent of
$6,000, respectively. CAH was the owner of record prior to the Companys purchase of the Thousand Oaks store on December 29, 2003 and CAH purchased Marina Waterside shopping center, where our Marina Del Rey store is located, on January 20,
2004.



On August 24, 2001, we loaned one of our officers
$65,000. The loan was supported by a full recourse promissory note and accrued interest at 7.5% per annum. The full recourse promissory note was paid in full, including accrued interest, upon maturation in February 2003.



In connection with our initial public offering, our former Chief Executive
Officer exercised options to purchase 110,696 shares of common stock. Under the agreement granting these options, we were required to pay an amount equal to 20% of the gain recognized by our former Chief Executive Officer for federal income tax
purposes, which was $325,000. In addition, we loaned our former Chief Executive Officer $586,000 which is equal to the difference between the cash payment and the total income tax liability he incurred as a result of this exercise. The full recourse
promissory note was paid in full, including accrued interest, upon maturation in August 2002.



Critical Accounting Policies



Critical accounting policies are those that we believe are most important to portraying our financial condition and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments or
uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in
understanding the judgments that are involved in preparing our consolidated financial statements.



Property and Equipment



Property and equipment is recorded at cost. Property and equipment is depreciated over the assets estimated useful lives using the straight-line method. Leasehold improvements are amortized using the straight-line method over the
estimated useful life of the asset or the term of the related lease, whichever is shorter. The lives for furniture, fixtures, and equipment are ten years. The lives for buildings and leasehold improvements are the shorter of 20 years or the term of
the related operating lease.



Long-Lived Asset Impairments



We assess the impairment of long-lived assets, including restaurant sites
and other assets, when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable. The asset impairment review assesses the fair value of the assets based on the future cash flows the
assets are expected to generate. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from the disposition of the asset (if any) are less than the
related assets carrying amount. Impairment losses are measured as the amount by which the carrying amounts of the assets exceed their fair values. The net proceeds expected from the disposition of the asset are determined by independent quotes
or expected sales prices developed by internal specialists. Estimates of future cash flows and expected sales process are judgments based on our experience and knowledge of local operations. These estimates can be significantly impacted by changes
in real estate market conditions, the economic environment, capital spending decisions and inflation.



For properties to be closed that are under long-term lease agreements the present value of any remaining liability under the lease, discounted using
risk-free rates and net of expected sublease rental that could be



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reasonably obtained for the property is recognized as a liability and expensed. The value of any equipment and leasehold improvements related to a closed
store is reduced to reflect net recoverable values. Internal specialists estimate the subtenant income, future cash flows and asset recovery values based on their historical experience and knowledge of (1) the market in which the store to be closed
is located, (2) the results of our previous efforts to dispose of similar assets and (3) the current economic conditions. Specific real estate markets, the economic environment and inflation affect the actual cost of disposition for these leases and
related assets.



During the years ended December 28, 2003 and
December 29, 2002, we determined that certain identified property and equipment was impaired and as such, incurred impairment charges of $14.7 million and $2.4 million, respectively. There was no remaining net book value associated with any of these
properties at December 28, 2003.



Self-Insurance



Our business is primarily self-insured for workers compensation,
automobile and general liability costs. We record our self-insurance liability, determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Any actuarial projection of ultimate losses is subject to a high
degree of variability. Sources of this variability are numerous and include, but are not limited to, future economic conditions, court decisions and legislative actions. Our workers compensation future funding estimates anticipate no change in
the benefit structure. Statutory changes could have a significant impact on future claim costs.



Our workers compensation liabilities are from claims occurring in various states. Individual state workers compensation regulations have
received a tremendous amount of attention from state politicians, insurers, employers and providers, as well as the public in general. Recent years have seen an escalation in the number of legislative reforms, judicial rulings and social phenomena
affecting our business. The changes in a states political and economic environment increase the variability in the unpaid claim liabilities.



Income Taxes



The Company utilizes the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and the tax basis of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of realization in future periods.



Restaurant and Franchise Revenues



Revenues from the operation of company-owned restaurants are recognized when
sales occur. All fees from franchised operations are included in revenue as earned. Royalty fees are based on franchised restaurants revenues and are recorded by the Company in the period the related franchised restaurants revenues are
earned.



Pre-opening Costs



The Company follows Statement of Position (SOP) 98-5, Reporting on the
Costs of Start-up Activities, which was issued by the Accounting Standards Executive Committee and provides guidance on the financial reporting of the start-up costs and organization costs. The SOP requires costs of start-up activities and
organization costs to be expensed as incurred.



Stock-based Compensation



Statement of Financial Accounting Standards (SFAS) No.
123, Accounting for Stock-Based Compensation, encourages but does not require a fair value based method of accounting for employee stock



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options or similar equity instruments. SFAS No. 123 allows an entity to elect to continue to measure compensation costs under Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to Employees, but requires pro forma disclosure of net earnings as if the fair value based method of accounting had been applied.



The Company elected to follow APB No. 25, and related Interpretations in
accounting for our employee stock options because the alternative fair value accounting provided for under SFAS No. 123, Accounting for Stock Based Compensation, requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB No. 25, because the exercise price of our employee stock options equals or exceeds the fair value of the underlying stock on the date of grant, no compensation expense is recognized.



New Accounting Standards



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



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which is effective for the quarter ending December 31,
2003 for variable interest entities (VIEs) created before February 1, 2003. FIN 46 establishes criteria to identify VIEs and the primary beneficiary of such entities. Entities that qualify as VIEs must be consolidated by their primary
beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. The company adopted FIN 46 in the third quarter
of 2003. We currently have no VIEs and therefore the adoption did not have an effect on our consolidated financial position, results of operations or cash flows.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. This Statement requires that certain instruments that were previously classified as equity on a companys statement of financial position now be classified as liabilities. The Statement is effective for financial
instruments entered into or modified after May 31, 2003, and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. We currently have no instruments impacted by the
adoption of this statement and therefore the adoption did not have an effect on our consolidated financial position, results of operations or cash flows.



In April 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. SFAS No.
149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of
underlying to conform it to the language used in FASB Interpretation No. 45, Guarantor Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others and amends certain other
existing pronouncements. We currently have no derivative instruments therefore the adoption did not have an effect on our consolidated financial position, results of operations or cash flows.



In November 21, 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, which requires that cash consideration received by a customer from a vendor is presumed to be a reduction of
the prices of the vendors products or services and should, therefore, be characterized as a reduction of cost of sales when recognized in the customers income statement. These rules are applied to new arrangements, including
modifications of existing arrangements, entered into after December 31, 2002. The adoption did not have a material effect on the Companys consolidated financial position, results of operations or cash flows.



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Inflation



The primary inflationary factors affecting our operations are food and labor costs. A large number of our restaurant personnel are paid at rates based on
the applicable minimum wage, and increases in the minimum wage directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases.
We believe inflation has not had a material impact on our results of operations in recent years.



Item 7A.    Quantitative and Qualitative Disclosures about Market Risks



Our market risk exposures are related to our cash and cash equivalents and marketable securities. Cash and cash equivalents are invested in highly liquid
short-term investments with maturities of less than three months as of the date of purchase. We are exposed to market risk from changes in market prices related to our investments in marketable securities. As of December 28, 2003 we held $18.9
million in marketable securities. Changes in interest rates affect the investment income we earn on our investments and, therefore, impact our cash flows and results of operations.



In addition, we have a $20.0 million line of credit agreement with Bank of America, N.A. that expires on June 30, 2004.
Interest on the line of credit is calculated on either the bank base rate minus 0.75% or LIBOR plus 1.0%. Currently, there is no outstanding balance under this agreement. Should we draw on this line in the future, changes in interest rates would
affect the interest expense on these loans and, therefore, impact our prospective cash flows and results of operations.



Many of the food products purchased by us are affected by changes in weather, production, availability, seasonality and other factors outside our control.
In an effort to control some of this risk, we have entered into some fixed price purchase commitments with terms of no more than one year. In addition, we believe that almost all of our food and supplies are available from several sources, which
helps to control food commodity risks.



Item 8.    Financial Statements and Supplementary Data



The Consolidated Financial Statements we are required to file hereunder are set forth on pages 42 through 60 of this report.



Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A.    Controls and Procedures



In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship
of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.



We conducted an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and principle financial officer, of the effectiveness of the design and operations of our disclosure
controls and procedures, as defined in rules 13a-15 and 15d-15 promulgated under the Exchange Act. Based upon that evaluation, our Companys Co-Chief Executive Officers and principle financial officer concluded that our disclosure controls and
procedures are effective, as of the end of the period covered by



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this report (December 28, 2003), in ensuring that material information relating to California Pizza Kitchen, Inc., including its consolidated subsidiaries,
required to be disclosed in reports we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and (ii) is
accumulated and communicated to our management, including our Co-Chief Executive Officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.



There were no significant changes in our internal control (including
corrective actions with regard to significant deficiencies or material weaknesses) over financial reporting (as required by the Exchange Act) that occurred during the last fiscal year.



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PART III



Item 10.    Directors and Executive Officers of the Registrant



The information required by this item is incorporated herein by reference from our definitive proxy statement for the 2004 Annual Meeting of Stockholders,
or in an amendment to this Form 10-K, which, as applicable, will be filed within 120 days after our fiscal year end of December 28, 2003.



We adopted a code of ethics applicable to our Co-Chief Executive Officers, principal financial officer, controller and other finance leaders, which is a
code of ethics as defined by applicable rules of the Securities Exchange Commission. The code is publicly available on our website at www.cpk.com. If we make any amendments to this code other than technical, administrative, or other
non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this code to our Co-Chief Executive Officers, principal financial officer, Controller or others performing similar functions, we will disclose the
nature of the amendment or waiver, its effective date and to whom it applies on our website.



Items 11.    Executive Compensation

12.    Security Ownership of Certain Beneficial Owners and Management

13.    Certain Relationships and Related Transactions and

14.    Principal Accounting Fees and Services:



The information required by Items 11, 12, 13 and 14 is hereby incorporated by reference from our definitive proxy statement for the 2004 Annual Meeting of
Stockholders, or in an amendment to this Form 10-K, which, as applicable, will be filed within 120 days after our fiscal year end of December 28, 2003.



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PART IV



Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-k



(a)  The following documents are filed as a part of this Report:



1.    Financial Statements



The following financial statements, as indexed below, are incorporated by reference in Part II, Item 8 of this Annual Report
on Form 10-K:



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                               |  |     
|------------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                               |  | Page
|Report of Independent Auditors                                                                                                 |  | 35  
|                                                                                                                               | 
|Consolidated Financial Statements:                                                                                             |  |     
|                                                                                                                               | 
|Consolidated Balance Sheets at December 28, 2003 and December 29, 2002                                                         |  | 36  
|                                                                                                                               | 
|Consolidated Statements of Income for the Years Ended December 28, 2003, December 29, 2002 and December 30, 2001               |  | 37  
|                                                                                                                               | 
|Consolidated Statements of Shareholders Equity for the Years Ended December 28, 2003, December 29, 2002 and December 30, 2001 |  | 38  
|                                                                                                                               | 
|Consolidated Statements of Cash Flows for the Years Ended December 28, 2003, December 29, 2002 and December 30, 2001           |  | 39  
|                                                                                                                               | 
|Notes to Consolidated Financial Statements                                                                                     |  | 41  



2.    Financial Statements Schedules



All financial statement schedules are omitted because they are not required or are not applicable or the required information the Companys Consolidated Financial Statements and Notes thereto, described in Item 15(a)(1) above.



3.    Exhibits



The Exhibits listed in the Index to Exhibits, which appears immediately
following the signature page and is incorporated herein by reference, are filed as part of this Annual Report on Form 10-K.



(b)  Reports on Form 8-K.



|    |   |  |                                                                                                                                                                           
|--- | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i  | ) |  | We filed a press release dated October 8, 2003, which described certain financial results for the third quarter on Form 8-K under Item 12
on October 10, 2003.            
|    |  
|(ii | ) |  | We filed a press release dated October 23, 2003, which described selected financial results for the third quarter on Form 8-K under Items
7, 9 and 12 on October 23, 2003.



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REPORT OF INDEPENDENT AUDITORS



The Board of
Directors and Shareholders of California Pizza Kitchen, Inc.



We have audited the accompanying consolidated balance sheets of California Pizza Kitchen, Inc. and Subsidiaries (the Company) as of December 28, 2003 and December 29, 2002, and the related consolidated statements of income,
shareholders equity and cash flows for each of the three fiscal years in the period ended December 28, 2003. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of California
Pizza Kitchen, Inc. and Subsidiaries at December 28, 2003 and December 29, 2002 and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended December 28, 2003 in conformity with
accounting principles generally accepted in the United States.



/s/    ERNST & YOUNG LLP



Los Angeles, California

January 24, 2004



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

December 28, 2003 and December 29, 2002

(in thousands, except for share data)



|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                             |  | 2003 |         |   | 2002 |  
|Assets                                                                                                                                                                       |  |      |         |   |      |   |         |  
|                                                                                                                                                                             |  |     
|Current assets:                                                                                                                                                              |  |      |         |   |      |   |         |  
|Cash and cash equivalents                                                                                                                                                    |  | $    | 15,877  |   |      | $ | 31,261  |  
|Investment in marketable securities                                                                                                                                          |  |      | 18,904  |   |      |   |        |  
|Accounts receivable                                                                                                                                                          |  |      | 2,591   |   |      |   | 2,933   |  
|Inventories                                                                                                                                                                  |  |      | 2,892   |   |      |   | 2,466   |  
|Prepaid expenses and other current assets                                                                                                                                    |  |      | 3,702   |   |      |   | 1,216   |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|Total current assets                                                                                                                                                         |  |      | 43,966  |   |      |   | 37,876  |  
|Property and equipment, net                                                                                                                                                  |  |      | 130,532 |   |      |   | 126,356 |  
|Investment in unconsolidated joint venture                                                                                                                                   |  |      | 1,651   |   |      |   |        |  
|Deferred taxes, net                                                                                                                                                          |  |      | 6,478   |   |      |   | 2,404   |  
|Other assets                                                                                                                                                                 |  |      | 2,958   |   |      |   | 1,809   |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|Total assets                                                                                                                                                                 |  | $    | 185,585 |   |      | $ | 168,445 |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|                                                                                                                                                                             |  |     
|Liabilities and Shareholders Equity                                                                                                                                         |  |      |         |   |      |   |         |  
|                                                                                                                                                                             |  |     
|Current liabilities:                                                                                                                                                         |  |      |         |   |      |   |         |  
|Accounts payable                                                                                                                                                             |  | $    | 4,069   |   |      | $ | 3,858   |  
|Accrued compensation and benefits                                                                                                                                            |  |      | 12,034  |   |      |   | 10,955  |  
|Deferred rent                                                                                                                                                                |  |      | 7,845   |   |      |   | 6,952   |  
|Other accrued liabilities                                                                                                                                                    |  |      | 9,536   |   |      |   | 8,105   |  
|Accrued income tax                                                                                                                                                           |  |      | 1,375   |   |      |   | 1,444   |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|Total current liabilities                                                                                                                                                    |  |      | 34,859  |   |      |   | 31,314  |  
|Other liabilities                                                                                                                                                            |  |      | 4,613   |   |      |   | 3,010   |  
|                                                                                                                                                                             |  |     
|Commitments and Contingencies                                                                                                                                                |  |      |        |   |      |   |        |  
|                                                                                                                                                                             |  |     
|Shareholders equity:                                                                                                                                                        |  |      |         |   |      |   |         |  
|Common Stock$0.01 par value, 80,000,000 shares authorized, 18,947,164 and 18,743,439 shares issued and outstanding at December 28, 2003
and December 29, 2002, respectively |  |      | 189     |   |      |   | 187     |  
|Additional paid-in capital                                                                                                                                                   |  |      | 215,340 |   |      |   | 211,306 |  
|Accumulated deficit                                                                                                                                                          |  |      | (69,416 | ) |      |   | (77,372 | )
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|Total shareholders equity                                                                                                                                                   |  |      | 146,113 |   |      |   | 134,121 |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  
|Total liabilities and shareholders equity                                                                                                                                   |  | $    | 185,585 |   |      | $ | 168,445 |  
|                                                                                                                                                                             |  |      |         |   |      |   |         |  



See accompanying notes.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME

Years ended December 28, 2003, December 29, 2002 and December
30, 2001

(in thousands, except per share data)



|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                     |  | 2003 |         |   | 2002 |   |         | 2001 | 
|Revenues:                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Restaurant sales                                                     |  | $    | 356,260 |   |      | $ | 303,427 |      |  | $ | 246,445 |  
|Franchise and other revenues                                         |  |      | 3,627   |   |      |   | 2,895   |      |  |   | 2,817   |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total revenues                                                       |  |      | 359,887 |   |      |   | 306,322 |      |  |   | 249,262 |  
|Costs and expenses:                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Cost of sales                                                        |  |      | 87,806  |   |      |   | 73,756  |      |  |   | 60,950  |  
|Labor                                                                |  |      | 129,702 |   |      |   | 110,151 |      |  |   | 88,898  |  
|Direct operating and occupancy                                       |  |      | 73,949  |   |      |   | 60,652  |      |  |   | 49,344  |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total restaurant operating costs                                     |  |      | 291,457 |   |      |   | 244,559 |      |  |   | 199,192 |  
|General and administrative                                           |  |      | 21,488  |   |      |   | 18,161  |      |  |   | 15,489  |  
|Depreciation and amortization                                        |  |      | 17,578  |   |      |   | 14,971  |      |  |   | 11,996  |  
|Pre-opening costs                                                    |  |      | 4,019   |   |      |   | 3,355   |      |  |   | 2,867   |  
|Severance charge                                                     |  |      | 1,221   |   |      |   |        |      |  |   |        |  
|Loss on impairment of property and equipment and restaurant closures |  |      | 14,725  |   |      |   | 2,380   |      |  |   |        |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Operating income                                                     |  |      | 9,399   |   |      |   | 22,896  |      |  |   | 19,718  |  
|Other income (expense):                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Interest income                                                      |  |      | 317     |   |      |   | 368     |      |  |   | 632     |  
|Interest expense                                                     |  |      |        |   |      |   |        |      |  |   | (25     | )
|Equity in loss of unconsolidated joint venture                       |  |      | (349    | ) |      |   |        |      |  |   |        |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total other income (expense)                                         |  |      | (32     | ) |      |   | 368     |      |  |   | 607     |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Income before income tax provision                                   |  |      | 9,367   |   |      |   | 23,264  |      |  |   | 20,325  |  
|Income tax provision                                                 |  |      | (1,411  | ) |      |   | (7,934  | )    |  |   | (7,114  | )
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net income                                                           |  | $    | 7,956   |   |      | $ | 15,330  |      |  | $ | 13,211  |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net income per common share:                                         |  |      |         |   |      |   |         |      |  |   |         |  
|Basic                                                                |  | $    | 0.42    |   |      | $ | 0.82    |      |  | $ | 0.72    |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Diluted                                                              |  | $    | 0.42    |   |      | $ | 0.81    |      |  | $ | 0.71    |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Shares used in calculating net income per common share:              |  |      |         |   |      |   |         |      |  |   |         |  
|Basic                                                                |  |      | 18,867  |   |      |   | 18,585  |      |  |   | 18,308  |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Diluted                                                              |  |      | 19,027  |   |      |   | 18,871  |      |  |   | 18,611  |  
|                                                                     |  |      |         |   |      |   |         |      |  |   |         |  



See accompanying notes.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years ended December 28, 2003, December 29,
2002 and December 30, 2001

(in thousands, except for share data)



|                                                                                                             |  |              |   |                          |        |                     |  |   |         |  |   |          |   |  |   |        
|------------------------------------------------------------------------------------------------------------ |  | ------------ | - | ------------------------ | ------ | ------------------- |  | - | ------- |  | - | -------- | - |  | - | -------
|                                                                                                             |  | Common Stock |   | AdditionalPaid-inCapital |        | Accumulated Deficit |  |   | Total  
|                                                                                                             |  | Shares       |   |                          | Amount |                     |  |  
|Balances at December 31, 2000                                                                                |  | 17,889,091   |   |                          | $      | 179                 |  | $ | 198,052 |  | $ | (105,913 | ) |  | $ | 92,318 
|Exercise of employee stock options                                                                           |  | 206,871      |   |                          |        | 2                   |  |   | 1,104   |  |   |         |   |  |   | 1,106  
|Shares redeemed upon exercise of employee stock option                                                       |  | (9,160       | ) |                          |        |                    |  |   |        |  |   |         |   |  |   |       
|Issuance of common stock, net of issuance costs of $844                                                      |  | 200,000      |   |                          |        | 2                   |  |   | 4,339   |  |   |         |   |  |   | 4,341  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 138,541      |   |                          |        | 1                   |  |   | 1,774   |  |   |         |   |  |   | 1,775  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |                          |        |                    |  |   | 1,355   |  |   |         |   |  |   | 1,355  
|Net income                                                                                                   |  |             |   |                          |        |                    |  |   |        |  |   | 13,211   |   |  |   | 13,211 
|                                                                                                             |  |              |   |                          |        |                     |  |   |         |  |   |          |   |  |   |        
|Balances at December 30, 2001                                                                                |  | 18,425,343   |   |                          |        | 184                 |  |   | 206,624 |  |   | (92,702  | ) |  |   | 114,106
|Exercise of employee stock options                                                                           |  | 189,493      |   |                          |        | 2                   |  |   | 2,022   |  |   |         |   |  |   | 2,024  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 128,603      |   |                          |        | 1                   |  |   | 1,701   |  |   |         |   |  |   | 1,702  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |                          |        |                    |  |   | 959     |  |   |         |   |  |   | 959    
|Net income                                                                                                   |  |             |   |                          |        |                    |  |   |        |  |   | 15,330   |   |  |   | 15,330 
|                                                                                                             |  |              |   |                          |        |                     |  |   |         |  |   |          |   |  |   |        
|Balances at December 29, 2002                                                                                |  | 18,743,439   |   |                          |        | 187                 |  |   | 211,306 |  |   | (77,372  | ) |  |   | 134,121
|Exercise of employee stock options                                                                           |  | 144,748      |   |                          |        | 1                   |  |   | 1,846   |  |   |         |   |  |   | 1,847  
|Issuance of common stock, under employee stock purchase plan                                                 |  | 58,977       |   |                          |        | 1                   |  |   | 1,119   |  |   |         |   |  |   | 1,120  
|Tax benefit from employee stock option exercises and employee stock purchase plan disqualifying dispositions |  |             |   |                          |        |                    |  |   | 1,069   |  |   |         |   |  |   | 1,069  
|Net income                                                                                                   |  |             |   |                          |        |                    |  |   |        |  |   | 7,956    |   |  |   | 7,956  
|                                                                                                             |  |              |   |                          |        |                     |  |   |         |  |   |          |   |  |   |        
|Balances at December 28, 2003                                                                                |  | 18,947,164   |   |                          | $      | 189                 |  | $ | 215,340 |  | $ | (69,416  | ) |  | $ | 146,113
|                                                                                                             |  |              |   |                          |        |                     |  |   |         |  |   |          |   |  |   |        



See accompanying notes.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 28, 2003, December 29, 2002 and
December 30, 2001

(in thousands, except for share data)



|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | 2003 |         |   | 2002 |   |         | 2001 | 
|Operating activities:                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|Net income                                                                        |  | $    | 7,956   |   |      | $ | 15,330  |      |  | $ | 13,211  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                     |  |      | 17,578  |   |      |   | 14,971  |      |  |   | 11,996  |  
|Equity in loss of unconsolidated joint venture                                    |  |      | 349     |   |      |   |        |      |  |   |        |  
|Loss on impairment of property and equipment and restaurant closures              |  |      | 14,725  |   |      |   | 2,380   |      |  |   |        |  
|Change in deferred tax asset                                                      |  |      | (4,074  | ) |      |   | 3,837   |      |  |   | (288    | )
|Changes in operating assets and liabilities:                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Accounts receivable                                                               |  |      | 342     |   |      |   | 1,808   |      |  |   | (1,246  | )
|Inventories                                                                       |  |      | (426    | ) |      |   | (689    | )    |  |   | (168    | )
|Prepaid expenses and other assets                                                 |  |      | (3,635  | ) |      |   | 233     |      |  |   | 1,243   |  
|Accounts payable                                                                  |  |      | 211     |   |      |   | 612     |      |  |   | (227    | )
|Accrued liabilities                                                               |  |      | 5,276   |   |      |   | 1,733   |      |  |   | 8,144   |  
|Other liabilities                                                                 |  |      | 730     |   |      |   | 1,029   |      |  |   | 54      |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                         |  |      | 39,032  |   |      |   | 41,244  |      |  |   | 32,719  |  
|Investing activities:                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|Capital expenditures                                                              |  |      | (36,479 | ) |      |   | (33,497 | )    |  |   | (32,755 | )
|Investments in marketable securities                                              |  |      | (18,904 | ) |      |   |        |      |  |   |        |  
|Investment in unconsolidated joint venture                                        |  |      | (2,000  | ) |      |   |        |      |  |   |        |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                             |  |      | (57,383 | ) |      |   | (33,497 | )    |  |   | (32,755 | )
|Financing activities:                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|Payments on long-term debt                                                        |  |      |        |   |      |   |        |      |  |   | (47     | )
|Net proceeds from issuance of common stock                                        |  |      | 2,967   |   |      |   | 3,726   |      |  |   | 7,222   |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash provided by financing activities                                         |  |      | 2,967   |   |      |   | 3,726   |      |  |   | 7,175   |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |      | (15,384 | ) |      |   | 11,473  |      |  |   | 7,139   |  
|Cash and cash equivalents at beginning of year                                    |  |      | 31,261  |   |      |   | 19,788  |      |  |   | 12,649  |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                          |  | $    | 15,877  |   |      | $ | 31,261  |      |  | $ | 19,788  |  
|                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |      |         |   |      |   |         |      |  |   |         |  
|Cash paid during the year for:                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|Interest                                                                          |  | $    |        |   |      | $ |        |      |  | $ | 25      |  
|Income taxes                                                                      |  | $    | 3,627   |   |      | $ | 5,088   |      |  | $ | 3,737   |  



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Years ended December 28, 2003, December 29, 2002 and December 30, 2001

(in thousands except for share data)



Supplemental disclosure of non-cash financing activities:



During the fiscal year ended December 30, 2001, one of the Companys officers exercised options to purchase 14,375 shares of common stock with an aggregate exercise price of $214 by exchanging 9,160 shares
previously owned.







See accompanying notes.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Years ended December 28, 2003, December 29, 2002 and December 30, 2001

(in thousands, except for
share and per share data)



1.    Description of
Business



Nature of Business



As of December 28, 2003, California Pizza Kitchen, Inc. and its wholly owned
subsidiaries (the Company) owns, operates, licenses or franchises 168 restaurants under the names California Pizza Kitchen and California Pizza Kitchen ASAP in 27 states and the District of Columbia, and five foreign countries, of which
137 are company-owned and 31 operate under franchise or license arrangements.



The Company manages its operations by restaurant. The Company has aggregated its operations to one reportable segment.



2.    Summary of Accounting Policies



Principles of Consolidation



The accompanying consolidated financial statements include the accounts of California Pizza Kitchen, Inc. and its wholly owned subsidiaries. In addition,
the Company was a general partner in a limited partnership, which was formed to operate a restaurant in Chicago. In January 2000, the Company acquired a majority interest in its remaining limited partnership restaurant. As such, beginning January 3,
2000, the Company consolidated the financial statements of the limited partnership with its own financial statements. Prior to fiscal 2000, the Company accounted for its ownership in the limited partnership (which are not material) under the equity
method of accounting. All significant intercompany balances and transactions have been eliminated.



Fiscal Year End



The Companys fiscal year ends on the Sunday closest to December 31. The Companys fiscal years ended December 28, 2003, December 29, 2002 and
December 30, 2001, each covered 52 weeks. For purposes of the accompanying consolidated financial statements, the years ended December 28, 2003, December 29, 2002 and December 30, 2001 may be referred to as the fiscal years 2003, 2002 and 2001,
respectively.



Use of Estimates



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.



Cash and Cash Equivalents



The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Its cash and cash
equivalent balances are not pledged or restricted. The Companys policy is to invest cash in excess of operating requirements in income-producing investments. Cash equivalents at December 28, 2003 consist primarily of money market funds and
local municipality securities.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Investments



The Company accounts for investments in marketable securities in accordance with Statements of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Its investments are classified as marketable securities that are held-to-maturity and have been recorded at amortized cost. At
December 28, 2003 the Company had $18.9 million of held-to-maturity investments that consisted of treasury bills, federal agency securities and auction rate securities. Under current investment guidelines, maturities are restricted to two years or
less.



On March 6, 2003 the Company invested $2.0 million for a
25.0% equity participation in LA Food Show, Inc., an upscale family casual dining restaurant concept. It accounts for this investment in accordance with the equity method of accounting as interpreted by Accounting Principles Board (APB) Opinion No.
18, The Equity Method of Accounting for Investments In Common Stock. APB Opinion No. 18 requires an investor to record the initial investment at cost and adjust the carrying value of the investment to recognize the investors share
of the earnings or loss after the date of acquisition.



Accounts Receivable



The Company negotiates
reimbursements from landlords for the construction of new restaurants. These reimbursements reduce the capitalized costs of new restaurants. Included in accounts receivable are contractual amounts due from landlords related to new restaurant
construction costs. As of December 28, 2003 and December 29, 2002, the Company has recorded receivables related to construction improvement allowances of $1,061 and $2,148, respectively, and has reduced property and equipment by these amounts
accordingly.



Inventories



Inventories consist of food and beverage, uniforms and supplies. Inventories
are stated at the lower of cost (first-in, first-out method) or market.



Property and Equipment



Property and equipment
is recorded at cost. Property and equipment is depreciated over the assets estimated useful lives using the straight-line method. Leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset
or the term of the related lease, whichever is shorter. The lives for furniture, fixtures, and equipment are ten years. The lives for buildings and leasehold improvements are the shorter of 20 years or the term of the related operating lease.



Impairment of Long Lived Assets



The Company assesses the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include a significant underperformance relative to expected historical or projected future
operating results, a significant change in the manner of the use of the asset or a significant negative industry or economic trend.



Liquor License



Transferable liquor licenses, included in other long-term assets, which have a market value are carried at the lower of cost or market and are not
amortized.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Gift Certificates



The Company sells gift certificates and recognizes deferred revenue, included in other accrued liabilities, for gift
certificates outstanding until the gift certificates are redeemed.



Income Taxes



The Company utilizes the
liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and the tax
basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of
realization in future periods.



Restaurant and Franchise
Revenues



Revenues from the operation of company-owned
restaurants are recognized when sales occur. All fees from franchised operations are included in revenue as earned. Royalty fees are based on franchised restaurants revenues and are recorded by the Company in the period the related franchised
restaurants revenues are earned.



Advertising Costs



The Company expenses advertising costs as incurred.
Advertising expenses for 2003, 2002 and 2001 totaled $3,193, $ 2,670 and $2,433, respectively.



Operating Leases



The
Company accounts for operating leases on a straight-line basis in accordance with SFAS No. 13, Accounting for Operating Leases. The Company leases restaurant and office facilities that have terms expiring between 2004 and 2024. The
restaurant facilities primarily have renewal clauses of ten to 20 years exercisable at the option of the Company with rent escalation clauses stipulating specific rent increases, some of which are based on the consumer price index. Certain of these
leases require the payment of contingent rentals based on a percentage of gross revenues, as defined.



Pre-opening Costs



The Company follows Statement of Position (SOP) 98-5, Reporting on the Costs of Start-up Activities, which was issued by the Accounting
Standards Executive Committee and provides guidance on the financial reporting of the start-up costs and organization costs. The SOP requires costs of start-up activities and organization costs to be expensed as incurred.



Earnings Per Share



The Company calculates net income per share in accordance with SFAS No. 128,
Earnings Per Share. Basic Earnings Per Share (EPS) is computed by dividing net income or loss attributable to common shareholders by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, warrants to purchase common stock and common stock options using the treasury stock method) were exercised or converted into common stock.
Potential common shares in the diluted EPS computation are excluded where their effect would be antidilutive.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Stock-based Compensation



In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123s fair value method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB No. 28, Interim Financial Reporting to require disclosure in the summary of significant accounting policies of the effects of
an entitys accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to
account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair
value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25. As allowed by SFAS No. 123, the Company has elected to continue to utilize the accounting method prescribed by APB Opinion No. 25 and have adopted the disclosure
requirements of SFAS No. 148.



Fair Value of Financial
Instruments



The fair values of the Companys cash
and cash equivalents, trade accounts receivable, accounts payable and all other current liabilities approximate their carrying values because of the short maturities of these instruments.



Concentrations of Credit Risk



Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, which
may exceed federally insured limits, cash equivalents, which are primarily commercial paper and marketable securities, which are treasury bills, federal agency securities and auction rate securities. The Company places its cash, cash equivalents and
marketable securities with high quality financial institutions.



The Company maintains a food distribution contract with its sole national master distributor, Meadowbrook Meat Company, Inc. that potentially subjects the Company to a concentration of business risk. This contract expires July 2, 2004.
Management of the Company believes it will be able to negotiate a similarly priced contract with either its current sole master distributor or another distributor.



Recent Accounting Pronouncements



The Financial Accounting Standards Board (FASB) recently issued several Statements of Financial Accounting
Standards (SFAS). The statements relevant to the Companys line of business and the impact on us are as follows:



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which is effective for the quarter ending December 31,
2003 for variable interest entities (VIEs) created before February 1, 2003. FIN 46 establishes criteria to identify VIEs and the primary beneficiary of such entities. Entities that qualify as VIEs must be consolidated by their primary
beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. The company adopted FIN 46 in the third quarter
of 2003. The Company currently has no VIEs and therefore the adoption did not have an effect on the Companys consolidated financial position, results of operations or cash flows.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. This Statement requires that certain instruments that were previously classified as equity on a companys statement of financial position now be classified as liabilities. The Statement is
effective for financial instruments entered into or modified after May 31, 2003, and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The Company currently has no
instruments impacted by the adoption of this statement and therefore the adoption did not have an effect on the Companys consolidated financial position, results of operations or cash flows.



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities, which is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. SFAS No. 149 clarifies under what
circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS No. 133, clarifies when a derivative contains a financing component, amends the definition of underlying to conform it
to the language used in FASB Interpretation No. 45, Guarantor Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others and amends certain other existing pronouncements. The Company
currently has no derivative instruments therefore the adoption did not have an effect on the Companys consolidated financial position, results of operations or cash flows.



In November 21, 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 02-16, Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a Vendor, which requires that cash consideration received by a customer from a vendor is presumed to be a reduction of the prices of the vendors products or services
and should, therefore, be characterized as a reduction of cost of sales when recognized in the customers income statement. These rules are applied to new arrangements, including modifications of existing arrangements, entered into after
December 31, 2002. The adoption did not have a material effect on the Companys consolidated financial position, results of operations or cash flows.



3.    Property and Equipment



Property and equipment consist of the following:



|                                               |  |      |         |      |   |        
|---------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                               |  | 2003 |         | 2002
|Land                                           |  | $    | 5,786   |      | $ | 5,786  
|Buildings                                      |  |      | 9,990   |      |   | 9,506  
|Furniture, fixtures and equipment              |  |      | 99,914  |      |   | 80,095 
|Leasehold improvements                         |  |      | 135,733 |      |   | 116,274
|Construction-in-progress                       |  |      | 1,590   |      |   | 4,897  
|                                               |  |      |         |      |   |        
|                                               |  |      | 253,013 |      |   | 216,558
|Less accumulated depreciation and amortization |  |      | 122,481 |      |   | 90,202 
|                                               |  |      |         |      |   |        
|                                               |  | $    | 130,532 |      | $ | 126,356
|                                               |  |      |         |      |   |        



On an annual basis the
Company reviews the carrying value of long-lived assets in accordance with SFAS No. 144, Accounting for Impairment and Disposal of Long-Lived Assets, on a restaurant-by-restaurant basis. In accordance with SFAS No. 144, the Company
recognizes the impairment of certain property and equipment by reducing the carrying value of the assets to the estimated fair value based on discounted cash flows of each under-performing restaurant. The Company increased accumulated depreciation
and amortization and recorded a loss on impairment of property and equipment of $14,725 and $2,380 in 2003 and 2002, respectively.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



4.    Long-term Debt



On December 15, 2000, the Company replaced its prior credit agreement with a $20.0 million revolving line of credit with
Bank of America, N.A., of which zero is outstanding as of December 28, 2003. The credit line bears interest at either the bank base rate minus 0.75% or LIBOR plus 1.0% and expires on June 30, 2004. The terms of the credit line include financial
covenants, which the Company was in compliance with as of December 28, 2003.



The credit agreement provides for the issuance of letters of credit, which reduce the availability under the revolving line. Letters of credit outstanding in connection with various insurance programs totaled $3,514
and $1,570 at December 28, 2003 and December 29, 2002, respectively.



5.    Income Taxes



The
details of the provision for income taxes are as follows:



|          |  |      |        |   |      |   |        |      |  |   |        |  
|--------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|          |  | 2003 |        |   | 2002 |   |        | 2001 | 
|Current:  |  |      |        |   |      |   |        |      |  |   |        |  
|Federal   |  | $    | (4,484 | ) |      | $ | (2,747 | )    |  | $ | (6,280 | )
|State     |  |      | (1,001 | ) |      |   | (1,350 | )    |  |   | (1,122 | )
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  |      | (5,485 | ) |      |   | (4,097 | )    |  |   | (7,402 | )
|Deferred: |  |      |        |   |      |   |        |      |  |   |        |  
|Federal   |  |      | 3,569  |   |      |   | (3,612 | )    |  |   | 264    |  
|State     |  |      | 505    |   |      |   | (225   | )    |  |   | 24     |  
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  |      | 4,074  |   |      |   | (3,837 | )    |  |   | 288    |  
|          |  |      |        |   |      |   |        |      |  |   |        |  
|          |  | $    | (1,411 | ) |      | $ | (7,934 | )    |  | $ | (7,114 | )
|          |  |      |        |   |      |   |        |      |  |   |        |  



The income tax
provision differs from the federal statutory rate because of the effect of the following items for the fiscal years 2003, 2002 and 2001:



|                                           |  |       |    |  |       |    |  |       |   
|------------------------------------------ |  | ----- | -- |  | ----- | -- |  | ----- | --
|                                           |  | 2003  |    |  | 2002  |    |  | 2001  |   
|Statutory rate                             |  | (35.0 | )% |  | (35.0 | )% |  | (35.0 | )%
|State income taxes, net of federal benefit |  | (3.5  | )  |  | (4.0  | )  |  | (3.6  | ) 
|General business and tip tax credit        |  | 30.0  |    |  | 8.0   |    |  | 8.4   |   
|Other                                      |  | (6.6  | )  |  | (3.1  | )  |  | (4.8  | ) 
|Valuation allowance                        |  |      |    |  |      |    |  |      |   
|                                           |  |       |    |  |       |    |  |       |   
|                                           |  | (15.1 | )% |  | (34.1 | )% |  | (35.0 | )%
|                                           |  |       |    |  |       |    |  |       |   



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deferred income taxes reflect the net tax effects of temporary differences between the carrying value
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys net deferred tax asset at December 28, 2003 and December 29, 2002 consist of the following:



|                                                |  |      |        |   |      |   |        |  
|----------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                |  | 2003 |        |   | 2002 |  
|Deferred tax assets:                            |  |      |        |   |      |   |        |  
|Asset impairment reserves                       |  | $    | 9,730  |   |      | $ | 4,055  |  
|Insurance reserves                              |  |      | 613    |   |      |   | 352    |  
|Vacation reserves                               |  |      | 857    |   |      |   | 688    |  
|Other accruals                                  |  |      | 1,533  |   |      |   | 806    |  
|Tax credits                                     |  |      | 749    |   |      |   | 381    |  
|Accrued rent                                    |  |      | 335    |   |      |   | 359    |  
|Book depreciation (under)/over tax depreciation |  |      | (7,248 | ) |      |   | (4,793 | )
|Partnership basis                               |  |      | (91    | ) |      |   | 556    |  
|                                                |  |      |        |   |      |   |        |  
|Net deferred tax asset                          |  | $    | 6,478  |   |      | $ | 2,404  |  
|                                                |  |      |        |   |      |   |        |  



6.    Shareholders Equity



On January 14, 2003 and July 15, 2003 employees purchased 29,576 and 29,401 shares respectively, of common stock from the Company under the Companys employee stock purchase plan. The net proceeds to the Company were $578 and $542,
respectively.



On January 15, 2002 and July 17, 2002, employees
purchased 67,537 and 61,066 shares of common stock from the Company under the Companys employee stock purchase plan. The net proceeds to the Company were $890 and $812, respectively.



7.    Common Stock Option Plans



In 1998, the Company adopted the 1998 Stock Based Incentive Compensation
Plan (1998 Plan). The 1998 Plan allows for the Company to reward, retain and attract valued employees, directors and independent contractors. In fiscal 2001, the Company increased the amount of shares reserved under the 1998 Plan for
future awards from 2,500,000 shares to 3,500,000 shares. In fiscal 2003, the Company increased the amount of shares reserved under the 1998 Plan for future awards from 3,500,000 shares to 4,000,000 shares. Options under the 1998 Plan may be either
nonqualified options or incentive stock options. Nonqualified options may be granted at prices determined by the Companys Board of Directors. Incentive stock options may be granted at not less than 100% of fair value on the date of grant for
employees owning 10% or less of the Companys stock and at not less than 110% for employees owning more than 10% of the Companys stock. The Companys Board of Directors determines the terms governing the exercise of options and
direct stock bonuses.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Shares subject to option under the Plans were as follows:



|                                 |  |           |   |  |                              |      
|-------------------------------- |  | --------- | - |  | ---------------------------- | -----
|                                 |  | Shares    |   |  | WeightedAverageExercisePrice
|Outstanding at December 31, 2000 |  | 1,046,622 |   |  | $                            | 10.05
|Granted                          |  | 606,000   |   |  |                              | 21.46
|Exercised                        |  | (206,871  | ) |  |                              | 6.37 
|Canceled                         |  | (200,262  | ) |  |                              | 14.86
|                                 |  |           |   |  |                              |      
|Outstanding at December 30, 2001 |  | 1,245,489 |   |  |                              | 10.05
|Granted                          |  | 583,000   |   |  |                              | 20.64
|Exercised                        |  | (189,493  | ) |  |                              | 10.68
|Canceled                         |  | (22,231   | ) |  |                              | 19.68
|                                 |  |           |   |  |                              |      
|Outstanding at December 29, 2002 |  | 1,616,765 |   |  |                              | 17.81
|Granted                          |  | 746,350   |   |  |                              | 20.93
|Exercised                        |  | (144,748  | ) |  |                              | 10.00
|Canceled                         |  | (130,631  | ) |  |                              | 20.82
|                                 |  |           |   |  |                              |      
|Outstanding at December 28, 2003 |  | 2,087,736 |   |  | $                            | 19.28
|                                 |  |           |   |  |                              |      



The following table
summarizes information regarding options outstanding and options exercisable at December 28, 2003:



|                         |  |                 |  |                                         |  |                              |       |                                        |         |                              |   |      
|------------------------ |  | --------------- |  | --------------------------------------- |  | ---------------------------- | ----- | -------------------------------------- | ------- | ---------------------------- | - | -----
|Range of Exercise Prices |  | Number ofShares |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |       | NumberExercisableas ofDecember 28,2003 |         | WeightedAverageExercisePrice
|$  2.50  6.54           |  | 34,371          |  | 4.65                                    |  | $                            | 2.51  |                                        | 34,371  |                              | $ | 2.51 
|8.70  9.26              |  | 72,007          |  | 5.87                                    |  |                              | 8.75  |                                        | 69,507  |                              |   | 8.74 
|15.0019.96              |  | 1,198,589       |  | 6.89                                    |  |                              | 17.95 |                                        | 465,230 |                              |   | 17.01
|20.5223.51              |  | 782,769         |  | 7.98                                    |  |                              | 22.28 |                                        | 273,287 |                              |   | 22.16
|                         |  |                 |  |                                         |  |                              |       |                                        |         |                              |   |      
|                         |  | 2,087,736       |  | 7.25                                    |  | $                            | 19.28 |                                        | 842,395 |                              | $ | 17.41
|                         |  |                 |  |                                         |  |                              |       |                                        |         |                              |   |      



Options available for
future grant totaled 541,559 and 657,278 shares at December 28, 2003 and December 29, 2002, respectively.



On August 2, 2000 in connection with the Companys initial public offering, options to purchase 110,696 shares of common stock were exercised. These
options required the Company to reimburse 20% of the taxable gain incurred upon exercise to the employee. As a result, the Company incurred a variable plan accounting charge of $1,949 in accordance with APB No. 25, Accounting for Stock Issued
to Employees representing the difference between the fair value of the stock at the time of exercise and the option strike price plus the 20% tax reimbursement.



The Company has adopted the disclosure only provisions of SFAS No. 123 and will continue to use the intrinsic
value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized for its stock option plans. Had compensation
expense for stock option plans been determined based on the fair value at the grant date for awards in fiscal 2003, 2002 and 2001 consistent with the provisions of SFAS No. 123, the



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Companys 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):



|                                                                                                                               |  |      |        |      |   |        |  |   |       
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                                                                                               |  | 2003 |        | 2002 |   | 2001  
|Net income as reported                                                                                                         |  | $    | 7,956  |      | $ | 15,330 |  | $ | 13,211
|Deduct:                                                                                                                        |  |      |        |      |   |        |  |   |       
|Total stock-based employee compensation expense determined under fair value methods for all awards, net of related tax effects |  |      | 3,426  |      |   | 2,166  |  |   | 1,245 
|                                                                                                                               |  |      |        |      |   |        |  |   |       
|Pro forma net income                                                                                                           |  | $    | 4,530  |      | $ | 13,164 |  | $ | 11,966
|                                                                                                                               |  |      |        |      |   |        |  |   |       
|Net income per share:                                                                                                          |  |      |        |      |   |        |  |   |       
|Basic, as reported                                                                                                             |  | $    | 0.42   |      | $ | 0.82   |  | $ | 0.72  
|Basic, pro forma                                                                                                               |  | $    | 0.24   |      | $ | 0.71   |  | $ | 0.65  
|Diluted, as reported                                                                                                           |  | $    | 0.42   |      | $ | 0.81   |  | $ | 0.71  
|Diluted, pro forma                                                                                                             |  | $    | 0.24   |      | $ | 0.70   |  | $ | 0.64  
|Weighted average shares used in computation:                                                                                   |  |      |        |      |   |        |  |   |       
|Basic                                                                                                                          |  |      | 18,867 |      |   | 18,585 |  |   | 18,308
|Diluted                                                                                                                        |  |      | 19,027 |      |   | 18,871 |  |   | 18,611



The fair value of
these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the fiscal years ended 2003, 2002 and 2001.



|                          |  |      |   |  |      |   |  |      |  
|------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                          |  | 2003 |   |  | 2002 |   |  | 2001 |  
|Risk free interest rate   |  | 3.03 | % |  | 2.53 | % |  | 5.00 | %
|Expected lives (in years) |  | 5.00 |   |  | 5.00 |   |  | 5.00 |  
|Dividend yield            |  |     | % |  |     | % |  |     | %
|Expected volatility       |  | 0.31 | % |  | 0.42 | % |  | 0.35 | %



The impact of applying
SFAS No. 123, as amended by SFAS No. 148, in this pro forma disclosure is not necessarily indicative of the effect on income in the future. The Company anticipates making additional stock-based compensation awards in the future.



8.    Net Income Per Common Share



Reconciliation of basic and diluted net income per common share in
accordance with SFAS No. 128 for the fiscal years ended December 28, 2003, December 29, 2002 and December 30, 2001 is as follows:



|                                                                                         |  |      |        |      |   |        |  |   |       
|---------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                                                         |  | 2003 |        | 2002 |   | 2001  
|Numerator for basic and diluted net income per share attributable to common shareholders |  | $    | 7,956  |      | $ | 15,330 |  | $ | 13,211
|                                                                                         |  |      |        |      |   |        |  |   |       
|Denominator (in thousands):                                                              |  |      |        |      |   |        |  |   |       
|Denominator for basic net income per common shareweighted average shares                |  |      | 18,867 |      |   | 18,585 |  |   | 18,308
|Employee stock options                                                                   |  |      | 160    |      |   | 286    |  |   | 303   
|                                                                                         |  |      |        |      |   |        |  |   |       
|Denominator for diluted net income per common shareweighted average shares              |  |      | 19,027 |      |   | 18,871 |  |   | 18,611
|                                                                                         |  |      |        |      |   |        |  |   |       



There were no shares
considered antidilutive for the purposes of this computation.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



9.    Commitments and Contingencies



Commitments



The Company leases certain restaurant facilities and its corporate
headquarters under non-cancelable operating leases with terms ranging from five to 20 years. The restaurant leases generally require payment of contingent rents based on a percentage of sales and require payment of various expenses incidental to the
use of property. Rent expense on all operating leases approximated $22,052 for fiscal 2003, $18,257 for fiscal 2002, and $14,888 for fiscal 2001, including contingent rental expense of $1,827, $1,348 and $1,255 for the fiscal years 2003, 2002 and
2001, respectively. Most leases contain renewal options and may be subject to periodic adjustments for inflation and scheduled escalations.



The aggregate future minimum annual lease payments under non-cancelable operating leases for the fiscal years succeeding December 28, 2003 are as follows:



|                    |  |   |        
|------------------- |  | - | -------
|Fiscal year ending: |  |   |        
|2004                |  | $ | 21,810 
|2005                |  |   | 22,052 
|2006                |  |   | 21,913 
|2007                |  |   | 21,491 
|2008                |  |   | 19,735 
|Thereafter          |  |   | 81,315 
|                    |  |   |        
|                    |  | $ | 188,316
|                    |  |   |        



Contingencies



Occasionally, the Company is a defendant in litigation
arising in the ordinary course of its business, including claims resulting from slip and fall accidents, employment-related claims and claims from guests or employees alleging illness, injury or other food quality, health or operational
concerns. To date, none of these types of litigation, all of which are covered by insurance, has had a material effect on the Company and, as of the date of this report, the Company is not a party to any material litigation.



10.    Employee Benefit Plans



In January 1994, the Company established a defined contribution plan for
certain qualified employees as defined. Participants may contribute from 1% to 15% of pretax compensation, subject to certain limitation. The plan provides for certain discretionary contributions by the Company.



The Company has also established an Executive Retirement Savings Plan (the
ERSP). The ERSP is a non-qualified deferred compensation plan for its highly compensated employees as defined in the ERSP and who are otherwise ineligible for participation in the 401(k) plans. The ERSP allows participating employees to
defer up to 100% of the receipt of their base compensation and their eligible bonuses. The plan provides for certain discretionary contributions by the Company. Employee deferrals and Company discretionary matches are deposited into a
rabbi trust established by the Company.



The
Company recorded contribution expenses of $268, $282 and $131 for fiscal 2004, 2003, and 2002, respectively for both the defined contribution plan and ERSP. The contributions are made subsequent to each fiscal year end.



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CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In November 1999, the Company adopted an employee stock purchase plan (Purchase Plan) under Section
423 of the Internal Revenue Code of 1986 which became effective with the initial public offering in August 2000 and reserved 375,000 shares for issuance thereunder. In 2003, the Company increased the aggregate number of shares available for sale
under the Purchase Plan to 750,000 shares. The Purchase Plan allows eligible employees to purchase common stock at a discount, but only through payroll deductions, during consecutive 24 month offering periods, subject to automatic reset if favorable
to the employees. Each offering period will be divided into four consecutive six-month purchase periods. The price at which the stock is purchased under the Purchase Plan is equal to 85% of the lower of the fair market value of the common stock on
the first day of the offering period and the fair market value of the common stock on the last day of the purchase period.



On January 14, 2003 and July 15, 2003 employees purchased 29,576 and 29,401 shares respectively, of common stock from the Company under the Companys
employee stock purchase plan. The net proceeds to the Company were $578 and $542, respectively.



On January 15, 2002 and July 17, 2002, employees purchased 67,537 and 61,066 shares of common stock from the Company under the Companys employee
stock purchase plan. The net proceeds to the Company were $890 and $812, respectively.



11.    Related Party Transactions



On March 6, 2003 the Company paid $2.0 million for a 25.0% stake in LA Food Show, Inc., an upscale family casual dining restaurant created by the Companys co-founders, Co-Chairmen of the Board of Directors and Co-Chief Executive
Officers, Larry S. Flax and Richard L. Rosenfield. Messrs. Flax and Rosenfield own the remaining 75.0% of equity in LA Food Show, Inc. Under the terms of the agreement the Company reserves the right of first negotiation for the 75.0% of outstanding
equity it does not currently own. The Company has pre-emptive rights in future financings by LA Food Show so long as it maintains an ownership interest of at least 15.0%, and are entitled to one of three seats on the LA Food Show Board of Directors.



The Company has accounted for this investment in accordance
with the equity method of accounting as interpreted by APB Opinion No. 18, The Equity Method of Accounting for Investments In Common Stock. APB Opinion No. 18 requires an investor to record the initial investment at cost and adjust the
carrying value of its investment to recognize the investors share of the earnings or loss after the date of acquisition. At December 28, 2003 the Companys net investment in LA Food Show, Inc., was $1.7 million.



Effective September 29, 2003, the Company entered into an employee leasing
arrangement with LA Food Show under which it provides LA Food Show with all of its restaurant level employees and managers, as well as administrative and support services such as payroll, marketing, human resources, facilities management,
accounting, information technology and training. LA Food Show reimburses us for all of the leased employees wages, benefits and other employee-related costs, as well as all business-related expenses incurred by the leased employees.



A Company director, Rick Caruso, also serves as President and
is sole owner of CAH Restaurants of California, LLC. The Company has entered into franchise and development agreements with CAH Restaurants of California, LLC pursuant to which it operated two California Pizza Kitchen restaurants. CAH Restaurants of
California, LLC paid franchise and royalty fees to the Company under these agreements. The Company has recorded an aggregate of $256,000, $260,000 and $204,000 in such fees during the years ended 2003, 2002 and 2001, respectively. On December 29,
2003 the Company acquired the territory rights and assets used to operate two restaurants from CAH Restaurants of California for $2.5 million. These California stores are located in Thousand Oaks and Ventura and are an ASAP and full service
restaurant, respectively. The transaction was executed with $1.3 million cash with the balance of the purchase price paid in common stock.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company also made aggregate lease payments to Caruso Affiliated Holdings (CAH) for two California
store locations, of $45,000 and $31,000 for Thousand Oaks and Marina Del Rey, respectively. These payments consisted of rent of $35,000 and $20,000, common area maintenance charges of $10,000 and $5,000 and percentage rent of $6,000, respectively.
CAH was the owner of record prior to the Companys purchase of the Thousand Oak store on December 29, 2003 and CAH purchased Marina Waterside shopping center, where the Companys Marina Del Rey store is located, on January 20, 2004.



On August 24, 2001, the Company loaned one of its officers
$65,000. The loan was supported by a full recourse promissory note and accrued interest at 7.5% per annum. The full recourse promissory note was paid in full, including accrued interest, upon maturation in February 2003.



In connection with the Companys initial public offering, its former
Chief Executive Officer exercised options to purchase 110,696 shares of common stock. Under the agreement granting these options, the Company was required to pay an amount equal to 20% of the gain recognized by its former Chief Executive Officer for
federal income tax purposes, which was $325,000. In addition, the Company loaned its former Chief Executive Officer $586,000 which is equal to the difference between the cash payment and the total income tax liability he incurred as a result of this
exercise. The full recourse promissory note was paid in full, including accrued interest, upon maturation in August 2002.



12.    Quarterly Financial Data (Unaudited)



Summarized unaudited quarterly financial data (in thousands, except net income per share).



|                                    |  |             |        |              |   |              |  |   |             |   |  |   |       
|----------------------------------- |  | ----------- | ------ | ------------ | - | ------------ |  | - | ----------- | - |  | - | ------
|                                    |  | Mar 30,2003 |        | June 29,2003 |   | Sept 28,2003 |  |   | Dec 28,2003
|Quarter Ended:                      |  |             |        |              |   |              |  |   |             |   |  |   |       
|Total revenues                      |  | $           | 82,857 |              | $ | 87,864       |  | $ | 93,096      |   |  | $ | 96,070
|Operating income (loss)             |  |             | 5,942  |              |   | 6,524        |  |   | (7,153      | ) |  |   | 4,086 
|Net income (loss)                   |  |             | 3,993  |              |   | 4,395        |  |   | (4,846      | ) |  |   | 4,414 
|Diluted net income (loss) per share |  | $           | 0.21   |              | $ | 0.23         |  | $ | (0.26       | ) |  | $ | 0.24  
|                                    |  |             |        |             
|                                    |  | Mar 31,2002 |        | June 30,2002 |   | Sept 29,2002 |  |   | Dec 29,2002
|Quarter Ended:                      |  |             |        |              |   |              |  |   |             |   |  |   |       
|Total revenues                      |  | $           | 70,216 |              | $ | 75,626       |  | $ | 78,944      |   |  | $ | 81,536
|Operating income                    |  |             | 5,666  |              |   | 6,595        |  |   | 4,445       |   |  |   | 6,190 
|Net income                          |  |             | 3,736  |              |   | 4,344        |  |   | 3,005       |   |  |   | 4,245 
|Diluted net income per share        |  | $           | 0.20   |              | $ | 0.23         |  | $ | 0.16        |   |  | $ | 0.22  



52



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                           
|3.1(B)        |  | Amended and Restated Articles of Incorporation, and amendments thereto                                                                                                                                                                
|              | 
|3.2(A)        |  | Amended and Restated Bylaws                                                                                                                                                                                                           
|              | 
|4.1(A)        |  | Specimen Common Stock Certificate                                                                                                                                                                                                     
|              | 
|4.2(A)        |  | Registration Rights Agreement dated September 30, 1997                                                                                                                                                                                
|              | 
|10.1(A)       |  | Memorandum of Understanding Regarding Form of Agreement between Host Marriott Services and California Pizza Kitchen, Inc. dated May 12, 1998                                                                                          
|              | 
|10.2(A)       |  | Third Amended and Restated Employment Agreement of Richard L. Rosenfield dated July 6, 2000                                                                                                                                           
|              | 
|10.3(A)       |  | Third Amended and Restated Employment Agreement of Larry S. Flax dated July 6, 2000                                                                                                                                                   
|              | 
|10.4(A)       |  | Severance Agreement between Frederick R. Hipp and California Pizza Kitchen, Inc. dated March 31, 1998                                                                                                                                 
|              | 
|10.5(A)       |  | Severance Agreement between Tom N. Jenneman and California Pizza Kitchen, Inc. dated November [sic], 1999                                                                                                                             
|              | 
|10.6(A)       |  | California Pizza Kitchen, Inc. Employee Stock Purchase Plan adopted on November 2, 1999, as amended on June 23, 2000                                                                                                                  
|              | 
|10.7(A)       |  | California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan adopted February 5, 1998, as amended on July 21, 1998 and November 2, 1999 and forms of stock option agreement
thereunder                                 
|              | 
|10.8(A)       |  | California Pizza Kitchen, Inc. Non-Qualified Stock Option Agreements between California Pizza Kitchen, Inc. and Frederick R. Hipp dated March 31, 1998                                                                                
|              | 
|10.9(B)       |  | Credit Agreement by and between California Pizza Kitchen, Inc. and Bank of America, N.A., dated December 15, 2000                                                                                                                     
|              | 
|10.10(B)      |  | Master Subsidiary Guaranty issued from Bank of America, N.A. by CPK Management Company and California Pizza Kitchen of Illinois, Inc. dated December 15, 2000                                                                         
|              | 
|10.11(C)      |  | Third and Fourth Amendments to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan dated as of July 28, 2000 and May 1, 2001                                                                                  
|              | 
|10.12(D)      |  | Shareholders Agreement among LA Food Show, Inc., Richard L. Rosenfield and Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza
Kitchen, Inc., dated March 6, 2003                
|              | 
|10.13(D)      |  | Subscription Agreement among Richard L. Rosenfield, Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen, Inc., dated March 6,
2003                                        
|              | 
|10.14(D)      |  | Certificate Of Determination of the Series A 8% Convertible Preferred Stock of LA Food Show, Inc. filed with the California Secretary of State on March 4, 2003                                                                       
|              | 
|10.15(D)      |  | Amendment No. 1 to Shareholders Agreement among LA Food Show, Inc., Richard L. Rosenfield, Larry S. Flax as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and
California Pizza Kitchen, Inc., dated March 11, 2003
|              | 
|10.16         |  | Agreement for Purchase and Sale of Assets between CAH Restaurants of California, LLC and California Pizza Kitchen, Inc. dated as of December 29, 2003, and exhibits thereto.                                                          
|              | 
|23            |  | Consent of Ernst & Young LLP                                                                                                                                                                                                          
|              | 
|31.1          |  | Certification of Principal Executive Officers pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                                                    



53



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##### Table of Contents

|              |  |                                                                                                                                                                                  
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                      
|              | 
|31.2          |  | Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|              | 
|32.1          |  | Certification of Principal Executive Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                           
|              | 
|32.2          |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            

---

|(A) |  | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-37778).
|--- |  | ----------------------------------------------------------------------------------------------------------



|(B) |  | Incorporated by reference to the registrants Registration Statement on Form S-1 (Registration 333-53088).
|--- |  | ----------------------------------------------------------------------------------------------------------



|(C) |  | Incorporated by reference to the registrants Quarterly Report on Form 10-Q dated April 1, 2001.
|--- |  | ------------------------------------------------------------------------------------------------



|(D) |  | Incorporated by reference to the registrants Annual Report on Form 10-K dated March 14, 2003.
|--- |  | ----------------------------------------------------------------------------------------------



54



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.



|                      |  |  |  |                                |  |     |  |                                                                                                                     
|--------------------- |  |  |  | ------------------------------ |  | --- |  | --------------------------------------------------------------------------------------------------------------------
|Dated: March 12, 2004 |  |  |  | California Pizza Kitchen, Inc.
|                      |  |  |  |                               
|                      |  |  |  |                                |  | By: |  | /s/    LARRY S.
FLAX                                                                                                
|                      |  |  |  |                                |  |     |  | Larry S. Flax Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director                       
|                      |  |  |  |                               
|                      |  |  |  |                                |  | By: |  | /s/    RICHARD L.
ROSENFIELD                                                                                        
|                      |  |  |  |                                |  |     |  | Richard L. Rosenfield Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director               
|                      |  |  |  |                               
|                      |  |  |  |                                |  | By: |  | /s/    SUSAN M.
COLLYNS                                                                                             
|                      |  |  |  |                                |  |     |  | Susan M. Collyns Chief Accounting Officer and Vice President of Finance (Principal Financial and Accounting Officer)



Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                  |  |                                                                                                               |  |               
|------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                         |  | Title                                                                                                         |  | Date          
|                                                  |  |                                                                                                              
|/s/    LARRY S.
FLAXLarry S. Flax                 |  | Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive Officer) |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    RICHARD L.
ROSENFIELDRichard L.
Rosenfield |  | Co-Chairman of the Board, Co-Chief Executive Officer, Co-President and Director (Principal Executive Officer) |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    SUSAN M.
COLLYNSSusan M. Collyns           |  | Chief Accounting Officer and Vice President of Finance (Principal Financial and Accounting Officer)           |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    WILLIAM C.
BAKERWilliam C. Baker           |  | Director                                                                                                      |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    RICK J.
CARUSORick J. Caruso               |  | Director                                                                                                      |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    HENRY
GLUCKHenry Gluck                     |  | Director                                                                                                      |  | March 12, 2004
|                                                  |  |                                                                                                              
|/s/    CHARLES G.
PHILLIPSCharles G.
Phillips     |  | Director                                                                                                      |  | March 12, 2004



55



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                           
|              | 
|3.1(B)        |  | Amended and Restated Articles of Incorporation, and amendments thereto                                                                                                                                                                
|              | 
|3.2(A)        |  | Amended and Restated Bylaws                                                                                                                                                                                                           
|              | 
|4.1(A)        |  | Specimen Common Stock Certificate                                                                                                                                                                                                     
|              | 
|4.2(A)        |  | Registration Rights Agreement dated September 30, 1997                                                                                                                                                                                
|              | 
|10.1(A)       |  | Memorandum of Understanding Regarding Form of Agreement between Host Marriott Services and California Pizza Kitchen, Inc. dated May 12, 1998                                                                                          
|              | 
|10.2(A)       |  | Third Amended and Restated Employment Agreement of Richard L. Rosenfield dated July 6, 2000                                                                                                                                           
|              | 
|10.3(A)       |  | Third Amended and Restated Employment Agreement of Larry S. Flax dated July 6, 2000                                                                                                                                                   
|              | 
|10.4(A)       |  | Severance Agreement between Frederick R. Hipp and California Pizza Kitchen, Inc. dated March 31, 1998                                                                                                                                 
|              | 
|10.5(A)       |  | Severance Agreement between Tom N. Jenneman and California Pizza Kitchen, Inc. dated November 1999                                                                                                                                    
|              | 
|10.6(A)       |  | California Pizza Kitchen, Inc. Employee Stock Purchase Plan adopted on November 2, 1999, as amended on June 23, 2000                                                                                                                  
|              | 
|10.7(A)       |  | California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan adopted February 5, 1998, as amended on July 21, 1998 and November 2, 1999 and forms of stock option agreement
thereunder                                 
|              | 
|10.8(A)       |  | California Pizza Kitchen, Inc. Non-Qualified Stock Option Agreements between California Pizza Kitchen, Inc. and Frederick R. Hipp dated March 31, 1998                                                                                
|              | 
|10.9(B)       |  | Credit Agreement by and between California Pizza Kitchen, Inc. and Bank of America, N.A., dated December 15, 2000                                                                                                                     
|              | 
|10.10(B)      |  | Master Subsidiary Guaranty issued from Bank of America, N.A. by CPK Management Company and California Pizza Kitchen of Illinois, Inc. dated December 15, 2000                                                                         
|              | 
|10.11(C)      |  | Third and Fourth Amendments to California Pizza Kitchen, Inc. 1998 Stock-Based Incentive Compensation Plan dated as of July 28, 2000 and May 1, 2001                                                                                  
|              | 
|10.12(D)      |  | Shareholders Agreement among LA Food Show, Inc., Richard L. Rosenfield and Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza
Kitchen, Inc., dated March 6, 2003                
|              | 
|10.13(D)      |  | Subscription Agreement among Richard L. Rosenfield, Larry S. Flax, as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and California Pizza Kitchen, Inc., dated March 6,
2003                                        
|              | 
|10.14(D)      |  | Certificate Of Determination of the Series A 8% Convertible Preferred Stock of LA Food Show, Inc. filed with the California Secretary of State on March 4, 2003                                                                       
|              | 
|10.15(D)      |  | Amendment No. 1 to Shareholders Agreement among LA Food Show, Inc., Richard L. Rosenfield, Larry S. Flax as trustee of the Larry S. Flax Revocable Trust dated June 18, 2002 and
California Pizza Kitchen, Inc., dated March 11, 2003
|              | 
|10.16         |  | Agreement for Purchase and Sale of Assets between CAH Restaurants of California, LLC and California Pizza Kitchen, Inc. dated as of December 29, 2003, and exhibits thereto.                                                          
|              | 
|23            |  | Consent of Ernst & Young LLP                                                                                                                                                                                                          
|              | 
|31.1          |  | Certification of Principal Executive Officers pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                                                    



56



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##### Table of Contents

|              |  |                                                                                                                                                                                  
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                      
|              | 
|31.2          |  | Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|              | 
|32.1          |  | Certification of Principal Executive Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                           
|              | 
|32.2          |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            

---

|(A) |  | Incorporated by reference to the Registrants Registration Statement on Form S-1 (Registration 333-37778).
|--- |  | ----------------------------------------------------------------------------------------------------------



|(B) |  | Incorporated by reference to the Registrants Registration Statement on Form S-1 (Registration 333-53088).
|--- |  | ----------------------------------------------------------------------------------------------------------



|(C) |  | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q dated April 1, 2001.
|--- |  | ------------------------------------------------------------------------------------------------



|(D) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K dated March 14, 2003.
|--- |  | ----------------------------------------------------------------------------------------------



57