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The Cheesecake Factory Reports Results for Fourth Quarter of Fiscal 2017

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The Cheesecake Factory Incorporated (NASDAQ:CAKE) today reported
financial results for the fourth quarter of fiscal 2017, which ended on
January 2, 2018.

Total revenues were $571.8 million in the fourth quarter of fiscal 2017
as compared to $603.1 million in the fourth quarter of fiscal 2016. The
fourth quarter of fiscal 2017 included 13 weeks compared to 14 weeks in
the fourth quarter of fiscal 2016. Net income and diluted net income per
share were $57.7 million and $1.24, respectively, in the fourth quarter
of fiscal 2017.

The Company recorded a $38.5 million benefit to the income tax provision
from a revaluation of the Company's deferred tax assets and liabilities
related to recently enacted tax reform. The Company also recorded a
pre-tax, non-cash impairment charge of $9.1 million related to one
Cheesecake Factory restaurant and one Grand Lux Cafe. Excluding these
items, net income and diluted net income per share were $24.7 million
and $0.53, respectively, in the fourth quarter of fiscal 2017.

Comparable restaurant sales at The Cheesecake Factory restaurants
declined 0.9% in the fourth quarter of fiscal 2017 (13 weeks vs. 13
weeks).

"Our sales trend started to stabilize during the fourth quarter, which
coupled with solid operational performance, drove comparable sales and
earnings results within our expectations," said David Overton, Chairman
and Chief Executive Officer. "In addition, we opened six restaurants
during the quarter, including our first Company-owned international
location in Canada, as we continue to execute our growth strategy."

Overton continued, "Underscoring the strength of our culture and values,
we are honored to be recognized as one of the "100 Best Companies to
Work For®" by FORTUNE magazine for the fifth consecutive
year. As we celebrate the 40th anniversary of our founding this year,
our steadfast commitment to taking exceptional care of our guests and
staff members has been integral to our success. Even in the face of a
challenging restaurant industry environment during 2017, this long-term
mindset guides our strategic initiatives and paves the way for a solid
future for The Cheesecake Factory."

Development

The Company opened five Cheesecake Factory restaurants and one RockSugar
Southeast Asian Kitchen during the fourth quarter of fiscal 2017,
meeting its objective to open eight Company-owned restaurants in fiscal
2017.

In addition, two Cheesecake Factory restaurants opened under licensing
agreements internationally during the fourth quarter of fiscal 2017,
including the first location in Bahrain and the third location in Qatar,
for a total of four locations opened under licensing agreements during
fiscal 2017, as expected. In addition, the first location in Beijing
opened under a licensing agreement in late January, 2018.

Capital Allocation

The Company's Board of Directors declared a quarterly cash dividend of
$0.29 per share on the Company's common stock. The dividend is payable
on March 20, 2018 to shareholders of record at the close of business on
February 28, 2018.

During the fourth quarter of fiscal 2017, the Company repurchased
approximately 0.4 million shares of its common stock at a cost of $16.6
million. In fiscal 2017, the Company repurchased a total of 2.6 million
shares of its common stock at a cost of $123.0 million.

Conference Call and Webcast

The Company will hold a conference call to review its results for the
fourth quarter of fiscal 2017 today at 2:00 p.m. Pacific Time. The
conference call will be webcast live on the Company's website at investors.thecheesecakefactory.com
and a replay of the webcast will be available through March 23, 2018.

About The Cheesecake Factory Incorporated

The Cheesecake Factory Incorporated created the upscale casual dining
segment in 1978 with the introduction of its namesake concept. The
Company, through its subsidiaries, owns and operates 214 full-service,
casual dining restaurants throughout the U.S.A., including Puerto Rico,
and Canada, comprised of 199 restaurants under The Cheesecake Factory®
mark; 13 restaurants under the Grand Lux Cafe® mark; and two
restaurants under the RockSugar Southeast Asian Kitchen® mark
(transitioning from Rock Sugar Pan Asian Kitchen®).
Internationally, 20 The Cheesecake Factory® restaurants
operate under licensing agreements. The Company's bakery division
operates two bakery production facilities, in Calabasas Hills, CA and
Rocky Mount, NC, that produce quality cheesecakes and other baked
products for its restaurants, international licensees and third-party
bakery customers. In 2018, the Company was named to the FORTUNE Magazine
"100 Best Companies to Work For®" list for the fifth
consecutive year. To learn more about the Company, visit www.thecheesecakefactory.com.

FORTUNE and FORTUNE 100 Best Companies to Work For® are registered
trademarks of Time Inc. and are used under license. From FORTUNE
Magazine, March 1, 2018 ©2018 Time Inc. Used under license. FORTUNE and
Time Inc. are not affiliated with, and do not endorse products or
services of, The Cheesecake Factory Incorporated.

Safe Harbor Statement

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements
of the Company to be materially different from any future results,
performance or achievements expressed or implied by forward-looking
statements, including uncertainties related to the Company's ability to:
stabilize comparable sales results; provide a differentiated experience
to guests; outperform the casual dining industry and increase its market
share; leverage sales increases and manage flow through; stabilize
margins; grow earnings; remain relevant to consumers; attract and retain
qualified management and other staff; increase shareholder value;
profitably expand its concepts domestically and in Canada, and work with
its licensees to expand its concept internationally; support the growth
of North Italia and Flower Child restaurants; develop a fast casual
concept; expand consumer packaged goods licensing revenue; utilize its
capital effectively and continue to increase cash dividends and
repurchase its shares; and factors outside of the Company's control
including: economic and political conditions that impact consumer
confidence and spending; impact of recently enacted tax reform;
acceptance and success of The Cheesecake Factory in international
markets; the risks of doing business abroad through Company-owned
restaurants and/or licensees; foreign exchange rates and potential
changes in NAFTA and cross border taxation; changes in unemployment
rates; the economic health of the Company's landlords and other tenants
in retail centers in which its restaurants are located; the economic
health of suppliers, licensees, vendors and other third parties
providing goods or services to the Company; adverse weather conditions
in regions in which the Company's restaurants are located; factors that
are under the control of government agencies, landlords and other third
parties; and other risks and uncertainties detailed from time to time in
the Company's filings with the Securities and Exchange Commission
("SEC"). Investors are cautioned that forward-looking statements are not
guarantees of future performance and that undue reliance should not be
placed on such statements. Forward-looking statements speak only as of
the dates on which they are made and the Company undertakes no
obligation to publicly update or revise any forward-looking statements
or to make any other forward-looking statements, whether as a result of
new information, future events or otherwise, unless required to do so by
securities laws. Investors are referred to the full discussion of risks
and uncertainties associated with forward-looking statements and the
discussion of risk factors contained in the Company's latest Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K as filed with the SEC, which are available at www.sec.gov.

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

 

 

 

 

Consolidated Statements of Income

13 Weeks Ended
January 2, 2018

14 Weeks Ended
January 3, 2017

52 Weeks Ended
January 2, 2018

53 Weeks Ended
January 3, 2017

Amount Percent of

Revenues

Amount Percent of

Revenues

Amount Percent of

Revenues

Amount Percent of

Revenues

Revenues $ 571,815 100.0 % $ 603,146 100.0 % $ 2,260,502 100.0 % $ 2,275,719 100.0 %
Costs and expenses:
Cost of sales 134,015 23.4 % 140,084 23.2 % 519,388 23.0 % 526,628 23.2 %
Labor expenses 197,231 34.5 % 202,562 33.6 % 777,595 34.4 % 759,998 33.4 %
Other operating costs and expenses 141,257 24.7 % 143,951 23.9 % 552,791 24.4 % 540,365 23.7 %
General and administrative expenses 34,587 6.1 % 38,863 6.4 % 141,533 6.2 % 146,042 6.4 %
Depreciation and amortization expenses 23,237 4.1 % 23,451 3.9 % 92,729 4.1 % 88,010 3.9 %
Impairment of assets and lease terminations 9,112 1.6 % 114 0.0 % 10,343 0.5 % 114 0.0 %
Preopening costs   7,629     1.3 %   6,975     1.2 %   13,278   0.6 %   13,569   0.6 %
Total costs and expenses   547,068     95.7 %   556,000     92.2 %   2,107,657   93.2 %   2,074,726   91.2 %
Income from operations 24,747 4.3 % 47,146 7.8 % 152,845 6.8 % 200,993 8.8 %
Interest and other expense, net   (1,953 )   (0.3 )%   (2,263 )   (0.4 )%   (6,379 ) (0.3 )%   (9,225 ) (0.4 )%
Income before income taxes 22,794 4.0 % 44,883 7.4 % 146,466 6.5 % 191,768 8.4 %
Income tax provision/(benefit)   (34,944 )   -6.1 %   12,502     2.0 %   (10,926 ) -0.5 %   52,274   2.3 %
Net income $ 57,738     10.1 % $ 32,381     5.4 % $ 157,392   7.0 % $ 139,494   6.1 %
 
Basic net income per share $ 1.26   $ 0.68   $ 3.35   $ 2.91  
Basic weighted average shares outstanding   45,751     47,403     46,930     47,981  
 
Diluted net income per share $ 1.24   $ 0.66   $ 3.27   $ 2.83  
Diluted weighted average shares outstanding   46,730     48,795     48,152     49,372  
 
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants $ 514,782 $ 547,809 $ 2,057,816 $ 2,078,083
Other   57,033     55,337     202,686     197,636  
Total $ 571,815   $ 603,146   $ 2,260,502   $ 2,275,719  
 
Income/(loss) from operations:
The Cheesecake Factory restaurants (1) $ 56,553 $ 74,673 $ 263,581 $ 308,058
Other (2) (1,385 ) 8,189 17,547 27,623
Corporate   (30,421 )   (35,716 )   (128,283 )   (134,688 )
Total $ 24,747   $ 47,146   $ 152,845   $ 200,993  
 
(1) Includes the following recorded in impairment of assets and
lease terminations in the consolidated statements of income: $1.3
million in the thirteen weeks ended January 2, 2018 related to one
The Cheesecake Factory restaurant; $2.5 million in the fifty-two
weeks ended January 2, 2018 related to three The Cheesecake Factory
restaurants; and $0.1 million in the fourteen and fifty-three weeks
ended January 3, 2017 related to one The Cheesecake Factory
restaurant.
 
(2) Includes $7.8 million recorded in impairment of assets and lease
terminations in the consolidated statements of income in the
thirteen and fifty-two weeks ended January 2, 2018 related to one
Grand Lux Cafe.
 
Selected Consolidated Balance Sheet Information January 2, 2018 January 3, 2017
Cash and cash equivalents $ 6,008 $ 53,839
Total assets 1,333,060 1,293,319
Total liabilities 719,530 690,112
Stockholders' equity 613,530 603,207
 
 
 

 

 

 

 

The Cheesecake Factory Supplemental Information

13 Weeks Ended

January 2, 2018

14 Weeks Ended
January 3, 2017

52 Weeks Ended
January 2, 2018

53 Weeks Ended
January 3, 2017

Comparable restaurant sales -0.9 % 1.1 % -0.8 % 1.2 %
Restaurants opened during period 5 5 7 7
Restaurants open at period-end 199 194 199 194
Restaurant operating weeks 2,546 2,690 10,096 10,031
 

Reconciliation of Non-GAAP Results to GAAP Results

In addition to the results provided in accordance with Generally
Accepted Accounting Principles ("GAAP") in this press release, the
Company is providing non-GAAP measurements which present net income and
diluted net income per share excluding the impact of certain items.

The non-GAAP measurements are intended to supplement the presentation of
the Company's financial results in accordance with GAAP. The Company
believes that the presentation of these items provides additional
information to facilitate the comparison of past and present financial
results.

 
The Cheesecake Factory Incorporated
Reconciliation of Non-GAAP Financial Measures
(unaudited; in thousands, except per share data)
                     
 
13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
January 2, 2018 January 3, 2017 January 2, 2018 January 3, 2017
 
Net Income (GAAP) $ 57,738 $ 32,381 $ 157,392 $ 139,494
After-tax impact from:
- Impairment of assets and lease terminations (1) 5,467 68 6,206 68
- Deferred tax revaluation (2)     (38,525 )     -     (38,525 )     -
Adjusted net income (non-GAAP)   $ 24,680     $ 32,449   $ 125,073     $ 139,562
 
Diluted net income per share (GAAP) $ 1.24 $ 0.66 $ 3.27 $ 2.83
After-tax impact from:
- Impairment of assets and lease terminations 0.12 0.00 0.13 0.00
- Deferred tax revaluation     (0.83 )     -     (0.80 )     -
Adjusted diluted net income per share (non-GAAP) (3)   $ 0.53     $ 0.67   $ 2.60     $ 2.83
 
(1) The pre-tax amounts associated with these items were $9.1
million and $10.3 million in the thirteen weeks and fifty-two weeks
ended January 2, 2018, respectively, and $0.1 million in the
fourteen and fifty-three weeks ended January 3, 2017. These amounts
were recorded in impairment of assets and lease terminations.
(2) Fiscal 2017 includes a $38.5 million benefit to the income tax
provision related to recently enacted tax reform.
(3) Adjusted diluted net income per share may not add due to
rounding.

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