The Cheesecake Factory Reports Results for Fourth Quarter of Fiscal 2018
Total revenues were $585.2 million in the fourth quarter of fiscal 2018 compared to $571.8 million in the fourth quarter of fiscal 2017. Net income and diluted net income per share were $16.2 million and $0.35, respectively, in the fourth quarter of fiscal 2018.
The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the fourth quarter of fiscal 2018, which ended on January 1, 2019.
Total revenues were $585.2 million in the fourth quarter of fiscal 2018 compared to $571.8 million in the fourth quarter of fiscal 2017. Net income and diluted net income per share were $16.2 million and $0.35, respectively, in the fourth quarter of fiscal 2018.
The Company recorded a pre-tax charge of $15.0 million during the fourth quarter of fiscal 2018, including $13.9 million in non-cash impairment primarily related to one restaurant in each of the Cheesecake Factory, Grand Lux Cafe and RockSugar Southeast Asian Kitchen brands. Excluding the after-tax impact from this item, net income and diluted net income per share for the fourth quarter of fiscal 2018 would have been $27.3 million and $0.60, 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 1.9% in the fourth quarter of fiscal 2018.
“Our key financial metrics, including Cheesecake Factory comparable restaurant sales, adjusted operating margin and adjusted earnings per share, met or exceeded our expectations during the fourth quarter,” said David Overton, Chairman and Chief Executive Officer. “Solid operational execution, illustrated by year-over-year increases in labor productivity and food efficiencies, contributed to these results.”
Overton continued, “We are also honored to be recognized as one of the ‘100 Best Companies to Work For®’ by FORTUNE magazine for the sixth consecutive year. Our people are our greatest resource and enable us to deliver delicious, memorable experiences for our guests every day. This accolade is a testament to our strong culture, industry-leading training and tangible career advancement we provide for our staff members and managers. We believe these attributes will continue to differentiate us as an employer of choice, a position that is even more critical today to support continued success in the restaurant industry.”
Overton concluded, “During fiscal 2018, we generated over $290 million in operating cash flow, which coupled with our strong balance sheet, enables us to make investments to support the Company’s growth trajectory, while continuing to return meaningful capital to our shareholders via our dividend and share repurchase program.”
Development
The Company opened three Cheesecake Factory restaurants in the fourth quarter, meeting its objective to open five restaurants in fiscal 2018. Two restaurants opened internationally under licensing agreements during fiscal 2018.
Capital Allocation
The Company’s Board of Directors declared a quarterly cash dividend of $0.33 per share of the Company’s common stock. The dividend is payable on March 19, 2019 to shareholders of record at the close of business on March 4, 2019.
During the fourth quarter of fiscal 2018, the Company repurchased approximately 1.0 million shares of its common stock at a cost of $48.4 million. In fiscal 2018, the Company repurchased approximately 2.3 million shares of its common stock at a cost of $109.3 million.
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 217 full-service, casual-dining restaurants throughout the United States, including Puerto Rico, and Canada, comprised of 201 restaurants under The Cheesecake Factory® mark; 14 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.
| The Cheesecake Factory Incorporated | |||||||||||||||||||||||||||||||
| Condensed Consolidated Financial Statements | |||||||||||||||||||||||||||||||
| (unaudited; in thousands, except per share and statistical data) | |||||||||||||||||||||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||||||||||||||||||
| Consolidated Statements of Income | January 1, 2019 | January 2, 2018 | January 1, 2019 | January 2, 2018 | |||||||||||||||||||||||||||
| Amount | Percent of Revenues | Amount | Percent of Revenues | Amount | Percent of Revenues | Amount | Percent of Revenues | ||||||||||||||||||||||||
| Revenues | $ | 585,155 | 100.0 | % | $ | 571,815 | 100.0 | % | $ | 2,332,331 | 100.0 | % | $ | 2,260,502 | 100.0 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||
| Cost of sales | 134,821 | 23.0 | % | 134,015 | 23.4 | % | 532,880 | 22.8 | % | 519,388 | 23.0 | % | |||||||||||||||||||
| Labor expenses | 209,702 | 35.8 | % | 197,231 | 34.5 | % | 834,134 | 35.8 | % | 777,595 | 34.4 | % | |||||||||||||||||||
| Other operating costs and expenses | 140,359 | 24.0 | % | 141,257 | 24.7 | % | 566,825 | 24.3 | % | 552,791 | 24.4 | % | |||||||||||||||||||
| General and administrative expenses | 36,604 | 6.3 | % | 34,587 | 6.1 | % | 154,770 | 6.6 | % | 141,533 | 6.2 | % | |||||||||||||||||||
| Depreciation and amortization expenses | 24,157 | 4.1 | % | 23,237 | 4.1 | % | 95,976 | 4.1 | % | 92,729 | 4.1 | % | |||||||||||||||||||
| Impairment of assets and lease terminations | 15,015 | 2.6 | % | 9,112 | 1.6 | % | 17,861 | 0.8 | % | 10,343 | 0.5 | % | |||||||||||||||||||
| Preopening costs | 5,138 | 0.9 | % | 7,629 | 1.3 | % | 10,937 | 0.5 | % | 13,278 | 0.6 | % | |||||||||||||||||||
| Total costs and expenses | 565,796 | 96.7 | % | 547,068 | 95.7 | % | 2,213,383 | 94.9 | % | 2,107,657 | 93.2 | % | |||||||||||||||||||
| Income from operations | 19,359 | 3.3 | % | 24,747 | 4.3 | % | 118,948 | 5.1 | % | 152,845 | 6.8 | % | |||||||||||||||||||
| Loss on investment in unconsolidated affiliates | (2,068 | ) | (0.3 | )% | (336 | ) | 0.0 | % | (4,754 | ) | (0.3 | )% | (479 | ) | 0.0 | % | |||||||||||||||
| Interest and other expense, net | (1,765 | ) | (0.3 | )% | (1,617 | ) | (0.3 | )% | (6,783 | ) | (0.2 | )% | (5,900 | ) | (0.3 | )% | |||||||||||||||
| Income before income taxes | 15,526 | 2.7 | % | 22,794 | 4.0 | % | 107,411 | 4.6 | % | 146,466 | 6.5 | % | |||||||||||||||||||
| Income tax provision/(benefit) | (652 | ) | (0.1 | )% | (34,944 | ) | (6.1 | )% | 8,376 | 0.4 | % | (10,926 | ) | (0.5 | )% | ||||||||||||||||
| Net income | $ | 16,178 | 2.8 | % | $ | 57,738 | 10.1 | % | $ | 99,035 | 4.2 | % | $ | 157,392 | 7.0 | % | |||||||||||||||
| Basic net income per share | $ | 0.36 | $ | 1.26 | $ | 2.19 | $ | 3.35 | |||||||||||||||||||||||
| Basic weighted average shares outstanding | 44,796 | 45,751 | 45,263 | 46,930 | |||||||||||||||||||||||||||
| Diluted net income per share | $ | 0.35 | $ | 1.24 | $ | 2.14 | $ | 3.27 | |||||||||||||||||||||||
| Diluted weighted average shares outstanding | 45,669 | 46,730 | 46,215 | 48,152 | |||||||||||||||||||||||||||
| Note - In the fourth quarter of fiscal 2018, the Company began classifying complimentary meals as contra revenue versus other operating expense. Corresponding amounts for the first three quarters of fiscal 2018 were reclassified to conform to this presentation. For the thirteen and fifty-two weeks ended January 1, 2019, $5.7 million and $23.3 million, respectively, were classified as contra revenue. Corresponding prior year periods were not reclassified. | |||||||||||||||||||||||||||||||
| Selected Segment Information | |||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 530,786 | $ | 514,782 | $ | 2,127,347 | $ | 2,057,816 | |||||||||||||||||||||||
| Other | 54,369 | 57,033 | 204,984 | 202,686 | |||||||||||||||||||||||||||
| Total | $ | 585,155 | $ | 571,815 | $ | 2,332,331 | $ | 2,260,502 | |||||||||||||||||||||||
| Income/(loss) from operations: | |||||||||||||||||||||||||||||||
| The Cheesecake Factory restaurants (1) | $ | 58,254 | $ | 56,553 | $ | 252,210 | $ | 263,581 | |||||||||||||||||||||||
| Other (2) | (5,360 | ) | (1,385 | ) | 8,993 | 17,547 | |||||||||||||||||||||||||
| Corporate | (33,535 | ) | (30,421 | ) | (142,255 | ) | (128,283 | ) | |||||||||||||||||||||||
| Total | $ | 19,359 | $ | 24,747 | $ | 118,948 | $ | 152,845 | |||||||||||||||||||||||
| (1) Includes the following recorded in impairment of assets and lease terminations in the consolidated statements of income: $3.7 million in the thirteen weeks ended January 1, 2019; $6.6 million in the fifty-two weeks ended January 1, 2019; $1.3 million in the thirteen weeks ended January 2, 2018; and $2.5 million in the fifty-two weeks ended January 2, 2018. | |||||||||||||||||||||||||||||||
| (2) Includes the following recorded in impairment of assets and lease terminations in the consolidated statements of income: $11.3 million in the thirteen and fifty-two weeks ended January 1, 2019 and $7.8 million in the thirteen and fifty-two weeks ended January 2, 2018. | |||||||||||||||||||||||||||||||
| Selected Consolidated Balance Sheet Information | January 1, 2019 | January 2, 2018 | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 26,578 | $ | 6,008 | |||||||||||||||||||||||||||
| Total assets | 1,314,133 | 1,333,060 | |||||||||||||||||||||||||||||
| Total liabilities | 743,074 | 719,530 | |||||||||||||||||||||||||||||
| Stockholders' equity | 571,059 | 613,530 | |||||||||||||||||||||||||||||
| The Cheesecake Factory Restaurants | 13 Weeks Ended | 13 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | |||||||||||||||||||||||||||
| Supplemental Information | January 1, 2019 | January 2, 2018 | January 1, 2019 | January 2, 2018 | |||||||||||||||||||||||||||
| Comparable restaurant sales (3) | 1.9 | % | (0.9 | )% | 1.7 | % | (0.8 | )% | |||||||||||||||||||||||
| Restaurants opened during period | 3 | 5 | 4 | 7 | |||||||||||||||||||||||||||
| Restaurants open at period-end | 201 | 199 | 201 | 199 | |||||||||||||||||||||||||||
| Restaurant operating weeks | 2,595 | 2,552 | 10,344 | 10,102 | |||||||||||||||||||||||||||
| (3) Underlying comparable restaurant sales for the thirteen weeks and fifty-two weeks ended January 2, 2018 reflect the reclassification in the note above in the calculation of comparable restaurant sales growth for the thirteen weeks and fifty-two weeks ended January 1, 2019 to maintain comparability. | |||||||||||||||||||||||||||||||
Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“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 | 13 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| January 1, 2019 | January 2, 2018 | January 1, 2019 | January 2, 2018 | |||||||||||||||
| Net income (GAAP) | $ | 16,178 | $ | 57,738 | $ | 99,035 | $ | 157,392 | ||||||||||
| After-tax impact from: | ||||||||||||||||||
| - Impairment of assets and lease terminations (1) | 11,111 | 5,467 | 13,217 | 6,206 | ||||||||||||||
| - Deferred tax revaluation (2) | - | (38,525 | ) | - | (38,525 | ) | ||||||||||||
| Adjusted net income (non-GAAP) | $ | 27,289 | $ | 24,680 | $ | 112,252 | $ | 125,073 | ||||||||||
| Diluted net income per share (GAAP) | $ | 0.35 | $ | 1.24 | $ | 2.14 | $ | 3.27 | ||||||||||
| After-tax impact from: | ||||||||||||||||||
| - Impairment of assets and lease terminations | 0.24 | 0.12 | 0.29 | 0.13 | ||||||||||||||
| - Deferred tax revaluation | - | (0.82 | ) | - | (0.80 | ) | ||||||||||||
| Adjusted diluted net income per share (non-GAAP) (3) | $ | 0.60 | $ | 0.53 | $ | 2.43 | $ | 2.60 | ||||||||||
| (1) The pre-tax amounts associated with the items in the thirteen and fifty-two weeks ended January 1, 2019 were $15.0 million and $17.9 million, respectively. The pre-tax amounts associated with the items in the thirteen and fifty-two weeks ended January 2, 2018 were $9.1 million and $10.3 million, respectively. 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. | ||||||||||||||||||
