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The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2018

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Increases Quarterly Dividend by 14%

The Cheesecake Factory Incorporated (NASDAQ:CAKE) today reported
financial results for the second quarter of fiscal 2018, which ended on
July 3, 2018.

Total revenues were $593.2 million in the second quarter of fiscal 2018
as compared to $569.9 million in the second quarter of fiscal 2017. Net
income and diluted net income per share were $28.4 million and $0.61,
respectively, in the second quarter of fiscal 2018.

The Company recorded a pre-tax charge of $2.6 million during the second
quarter of fiscal 2018 related to the termination of a lease for one The
Cheesecake Factory restaurant. Excluding the after-tax impact from this
item, net income and diluted net income per share for the second quarter
of fiscal 2018 would have been $30.3 million and $0.65, respectively.
Please see the Company's reconciliation of non-GAAP financial measures
at the end of this release.

Comparable restaurant sales at The Cheesecake Factory restaurants
increased 1.4% in the second quarter of fiscal 2018.

"Comparable sales at The Cheesecake Factory and core restaurant
operating performance were in line with our expectations during the
second quarter," said David Overton, Chairman and Chief Executive
Officer. "However, $4.6 million in higher group medical insurance costs
year-over-year and $4.5 million in increased legal expenses impacted our
bottom line results this quarter."

Overton continued, "We generated over $65 million in operating cash flow
during the quarter. The consistency of our cash flow enabled us to
increase our dividend for the sixth consecutive year. We continue to
execute a balanced capital allocation strategy, investing in long-term
growth while returning substantially all of our free cash flow to
shareholders through our dividend and share repurchase program."

Development

The Company now expects to open as many as six restaurants in fiscal
2018, including one Grand Lux Cafe, scheduled to open in August 2018, as
well as the first location of Social Monk Asian Kitchen, a fast casual
concept under development and expected to open in the fourth quarter of
2018.

In addition, the Company now expects three restaurants to open
internationally under licensing agreements in fiscal 2018. This includes
the second location in Saudi Arabia, which opened in April.

Capital Allocation

The Company's Board of Directors declared a quarterly cash dividend of
$0.33 per share on the Company's common stock. The dividend is payable
on August 28, 2018 to shareholders of record at the close of business on
August 15, 2018.

During the second quarter of fiscal 2018, the Company repurchased
approximately 140,000 shares of its common stock at a cost of $7.1
million.

Conference Call and Webcast

The Company will hold a conference call to review its results for the
second quarter of fiscal 2018 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 August 30, 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 213 full-service,
casual dining restaurants throughout the U.S.A., including Puerto Rico,
and Canada, comprised of 198 restaurants under The Cheesecake Factory®
mark; 13 restaurants under the Grand Lux Cafe® mark; and two
restaurants under the RockSugar Southeast Asian Kitchen®
mark. Internationally, 21 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:
deliver comparable sales growth; provide a differentiated experience to
guests; outperform the casual dining industry and increase its market
share; leverage sales increases and manage flow through; manage through
cost pressures, including increasing wage rates, group medical insurance
costs and legal expenses, and stabilize margins; grow earnings; remain
relevant to consumers; attract and retain qualified management and other
staff; manage risks associated with the magnitude and complexity of
regulations in the states and municipalities where the Company's
restaurants are located; increase shareholder value; find suitable sites
and manage increasing construction costs; 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 the Social Monk Asian Kitchen 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; acceptance and success of the North Italia and Flower Child
restaurants and the Social Monk Asian Kitchen fast casual concept; 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; the risks, costs
and uncertainties associated with opening new restaurants; 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
Condensed Consolidated Financial Statements
(unaudited; in thousands, except per share and statistical data)
               
 
Consolidated Statements of Income

13 Weeks Ended

July 3, 2018

13 Weeks Ended

July 4, 2017

26 Weeks Ended

July 3, 2018

26 Weeks Ended

July 4, 2017

Amount  

Percent of

Revenues

Amount  

Percent of

Revenues

Amount  

Percent of

Revenues

Amount  

Percent of

Revenues

Revenues $ 593,178 100.0% $ 569,869 100.0% $ 1,183,869 100.0% $ 1,133,295 100.0%
Costs and expenses:
Cost of sales 133,136 22.5% 128,781 22.6% 268,855 22.7% 257,920 22.8%
Labor expenses 212,521 35.8% 193,063 33.9% 423,235 35.8% 386,898 34.1%
Other operating costs and expenses 143,796 24.2% 137,461 24.1% 292,128 24.7% 273,111 24.1%
General and administrative expenses 41,423 7.0% 35,295 6.2% 80,697 6.8% 71,582 6.3%
Depreciation and amortization expenses 23,727 4.0% 23,297 4.1% 47,729 4.0% 46,493 4.1%
Impairment of assets and lease terminations 2,583 0.4% 445 0.1% 2,583 0.2% 1,231 0.1%
Preopening costs   1,449       0.3%   1,309       0.2%   2,548     0.2%   2,279     0.2%
Total costs and expenses   558,635       94.2%   519,651       91.2%   1,117,775     94.4%   1,039,514     91.7%
Income from operations 34,543 5.8% 50,218 8.8% 66,094 5.6% 93,781 8.3%
Interest and other expense, net   (2,908 )     (0.5)%   (1,570 )     (0.3)%   (4,414 )   (0.4)%   (2,826 )   (0.3)%
Income before income taxes 31,635 5.3% 48,648 8.5% 61,680 5.2% 90,955 8.0%
Income tax provision   3,282       0.5%   10,482       1.8%   7,298     0.6%   17,746     1.5%
Net income $ 28,353       4.8% $ 38,166       6.7% $ 54,382     4.6% $ 73,209     6.5%
 
Basic net income per share $ 0.62   $ 0.80   $ 1.20   $ 1.54  
Basic weighted average shares outstanding   45,383     47,732     45,467     47,683  
 
Diluted net income per share $ 0.61   $ 0.78   $ 1.16   $ 1.49  
Diluted weighted average shares outstanding   46,570     49,047     46,778     49,127  
 
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants $ 542,102 $ 520,228 $ 1,082,875 $ 1,035,462
Other   51,076     49,641     100,994     97,833  
Total $ 593,178   $ 569,869   $ 1,183,869   $ 1,133,295  
 
Income/(loss) from operations:
The Cheesecake Factory restaurants (1) $ 69,889 $ 75,989 $ 132,006 $ 146,532
Other 3,983 6,291 9,794 12,929
Corporate   (39,329 )   (32,062 )   (75,706 )   (65,680 )
Total $ 34,543   $ 50,218   $ 66,094   $ 93,781  
 
(1) Includes $2.6 million in the thirteen weeks and twenty six weeks
ended July 3, 2018 of lease termination costs related to the closure
of one The Cheesecake Factory restaurant, and $0.4 million and $1.2
million in the thirteen weeks and twenty six weeks ended July 4,
2017, respectively, of accelerated depreciation and impairment
expense related to the relocation of one The Cheesecake Factory
restaurant and the lease termination of one The Cheesecake Factory
restaurant. These amounts were recorded in impairment of assets and
lease terminations in the condensed consolidated statements of
income.
 
 
Selected Consolidated Balance Sheet Information

July 3, 2018

January 2, 2018

Cash and cash equivalents $ 29,369 $ 6,008
Total assets 1,306,639 1,333,060
Total liabilities 693,857 719,530
Stockholders' equity 612,782 613,530
 
 
 
The Cheesecake Factory Supplemental Information

13 Weeks Ended

July 3, 2018

13 Weeks Ended

July 4, 2017

26 Weeks Ended

July 3, 2018

26 Weeks Ended

July 4, 2017

Comparable restaurant sales 1.4% -0.5% 1.7% -0.1%
Restaurants opened during period - 1 - 1
Restaurants open at period-end 198 193 198 193
Restaurant operating weeks 2,582 2,517 5,169 5,039

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

July 3, 2018

13 Weeks Ended

July 4, 2017

26 Weeks Ended

July 3, 2018

26 Weeks Ended

July 4, 2017

 
Net Income (GAAP) $ 28,353 $ 38,166 $ 54,382 $ 73,209
After-tax impact from:
- Impairment of assets and lease terminations (1)   1,911   267   1,911   739
Adjusted net income (non-GAAP) $ 30,264 $ 38,433 $ 56,293 $ 73,948
 
Diluted net income per share (GAAP) $ 0.61 $ 0.78 $ 1.16 $ 1.49
After-tax impact from:
- Impairment of assets and lease terminations   0.04   0.00   0.04   0.02
Adjusted diluted net income per share (non-GAAP) $ 0.65 $ 0.78 $ 1.20 $ 1.51
 
(1) The pre-tax amount associated with the items was $2.6 million in
the thirteen and twenty six weeks ended July 3, 2018, and $0.4
million and $1.2 million, in the thirteen and twenty six weeks ended
July 4, 2017, respectively. These amounts were recorded in
impairment of assets and lease terminations.

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