The Cheesecake Factory Reports Results for Third Quarter of Fiscal 2019
Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019.
The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2019, which ended on October 1, 2019.
Total revenues were $586.5 million in the third quarter of fiscal 2019 compared to $575.2 million in the third quarter of fiscal 2018. Net income and diluted net income per share were $16.1 million and $0.36, respectively, in the third quarter of fiscal 2019.
Excluding the after-tax impact of the $7.7 million loss on the Company’s minority investments and $2.4 million in acquisition-related costs, net income and diluted net income per share for the third quarter of fiscal 2019 would have been $26.1 million and $0.59, 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 0.4% in the third quarter of fiscal 2019.
“We continued to outperform the industry during the third quarter and generated both comparable sales at The Cheesecake Factory and operating performance within our expectations,” said David Overton, Chairman and Chief Executive Officer. “Our operators again managed their restaurants well despite the softer industry sales environment.”
Overton continued, “Earlier this month, we completed the acquisitions of North Italia and Fox Restaurant Concepts, reinforcing our leadership position in experiential dining. The integration of North Italia is on track. We recently renegotiated and extended our exclusive DoorDash delivery agreement, which now also covers North Italia and the FRC concepts, underscoring the benefit of our scale for these brands. For the balance of the year, we are focused on driving performance at The Cheesecake Factory restaurants and our acquired businesses, while continuing to execute a smooth integration. With the strength of The Cheesecake Factory brand, coupled with accelerated and diversified growth drivers in North Italia and the FRC concepts, we believe we are well-positioned for 2020 and the long-term.”
Subsequent Event
On October 2, 2019, the Company completed the acquisitions of North Italia and Fox Restaurant Concepts (FRC).
Development
The Company continues to expect to open five Cheesecake Factory restaurants in fiscal 2019, including the Gainesville, Florida location that opened during the third quarter. The Company expects to open three additional locations during the fourth quarter of fiscal 2019.
During the fourth quarter of fiscal 2019, the Company expects to open one North Italia restaurant.
Subsequent to quarter-end, a Flower Child location in McLean, Virginia opened and one additional Flower Child restaurant is expected to open later in the fourth quarter of fiscal 2019, within the FRC subsidiary.
During fiscal 2019, the Company now expects as many as six Cheesecake Factory restaurants to open internationally under licensing agreements. This includes the second location in Abu Dhabi, which opened during the third quarter and the first location in Macao, which recently opened during the fourth quarter. The Company expects two additional licensed locations to open during the fourth quarter of fiscal 2019.
Capital Allocation
The Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share of the Company’s common stock. The dividend is payable on November 26, 2019 to shareholders of record at the close of business on November 12, 2019.
During the third quarter of fiscal 2019, the Company repurchased approximately 263,000 shares of its common stock at an aggregate cost of $11.4 million.
The Company closed on an upsized $400 million revolving credit facility and had $335 million drawn at the end of the third quarter of fiscal 2019, including $285 million to support the funding of the North Italia and FRC acquisitions.
About The Cheesecake Factory Incorporated
The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. Delicious, memorable experiences created by passionate people – this defines who we are and where we are going. We currently own and operate 289 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within the Fox Restaurant Concepts subsidiary. Internationally, 24 The Cheesecake Factory® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. In 2019, we were named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the sixth consecutive year.
| The Cheesecake Factory Incorporated | ||||||||||||||||||||||||||
| Condensed Consolidated Financial Statements | ||||||||||||||||||||||||||
| (unaudited; in thousands, except per share and statistical data) | ||||||||||||||||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 39 Weeks Ended | 39 Weeks Ended | |||||||||||||||||||||||
| Consolidated Statements of Income | October 1, 2019 | October 2, 2018 | October 1, 2019 | October 2, 2018 | ||||||||||||||||||||||
| Amount | Percent of | Amount | Percent of | Amount | Percent of | Amount | Percent of | |||||||||||||||||||
| Revenues | $ | 586,536 |
|
| 100.0 | % | $ | 575,160 |
|
| 100.0 | % | $ | 1,788,662 |
| 100.0 | % | $ | 1,747,176 |
| 100.0 | % | ||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of sales |
| 132,941 |
|
| 22.7 | % |
| 132,168 |
|
| 23.0 | % |
| 403,566 |
| 22.6 | % |
| 398,059 |
| 22.8 | % | ||||
| Labor expenses |
| 213,600 |
|
| 36.4 | % |
| 203,449 |
|
| 35.4 | % |
| 648,831 |
| 36.3 | % |
| 624,432 |
| 35.7 | % | ||||
| Other operating costs and expenses |
| 149,397 |
|
| 25.5 | % |
| 140,975 |
|
| 24.5 | % |
| 451,724 |
| 25.2 | % |
| 426,466 |
| 24.4 | % | ||||
| General and administrative expenses |
| 39,746 |
|
| 6.8 | % |
| 37,469 |
|
| 6.5 | % |
| 116,116 |
| 6.5 | % |
| 118,166 |
| 6.8 | % | ||||
| Depreciation and amortization expenses |
| 21,342 |
|
| 3.6 | % |
| 24,090 |
|
| 4.2 | % |
| 64,363 |
| 3.6 | % |
| 71,819 |
| 4.1 | % | ||||
| Impairment of assets and lease terminations |
| - |
|
| 0.0 | % |
| 263 |
|
| 0.0 | % |
| - |
| 0.0 | % |
| 2,846 |
| 0.2 | % | ||||
| Preopening costs |
| 2,546 |
|
| 0.4 | % |
| 3,251 |
|
| 0.6 | % |
| 6,851 |
| 0.4 | % |
| 5,799 |
| 0.3 | % | ||||
| Total costs and expenses |
| 559,572 |
|
| 95.4 | % |
| 541,665 |
|
| 94.2 | % |
| 1,691,451 |
| 94.6 | % |
| 1,647,587 |
| 94.3 | % | ||||
| Income from operations |
| 26,964 |
|
| 4.6 | % |
| 33,495 |
|
| 5.8 | % |
| 97,211 |
| 5.4 | % |
| 99,589 |
| 5.7 | % | ||||
| Loss on investment in unconsolidated affiliates |
| (10,345 | ) |
| (1.8 | )% |
| (1,558 | ) |
| (0.2 | )% |
| (13,439 | ) | (0.7 | )% |
| (2,686 | ) | (0.1 | )% | ||||
| Interest and other income/(expense), net |
| 6 |
|
| 0.0 | % |
| (1,732 | ) |
| (0.3 | )% |
| (17 | ) | (0.0 | )% |
| (5,018 | ) | (0.3 | )% | ||||
| Income before income taxes |
| 16,625 |
|
| 2.8 | % |
| 30,205 |
|
| 5.3 | % |
| 83,755 |
| 4.7 | % |
| 91,885 |
| 5.3 | % | ||||
| Income tax provision |
| 535 |
|
| 0.1 | % |
| 1,730 |
|
| 0.3 | % |
| 5,171 |
| 0.3 | % |
| 9,028 |
| 0.6 | % | ||||
| Net income | $ | 16,090 |
|
| 2.7 | % | $ | 28,475 |
|
| 5.0 | % | $ | 78,584 |
| 4.4 | % | $ | 82,857 |
| 4.7 | % | ||||
| Basic net income per share | $ | 0.37 |
| $ | 0.63 |
| $ | 1.78 |
| $ | 1.82 |
| ||||||||||||||
| Basic weighted average shares outstanding |
| 43,682 |
|
| 45,321 |
|
| 44,034 |
|
| 45,418 |
| ||||||||||||||
| Diluted net income per share | $ | 0.36 |
| $ | 0.61 |
| $ | 1.76 |
| $ | 1.79 |
| ||||||||||||||
| Diluted weighted average shares outstanding |
| 44,186 |
|
| 46,368 |
|
| 44,643 |
|
| 46,400 |
| ||||||||||||||
| Selected Segment Information | ||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 536,101 |
| $ | 524,846 |
| $ | 1,636,253 |
| $ | 1,596,561 |
| ||||||||||||||
| Other |
| 50,435 |
|
| 50,314 |
|
| 152,409 |
|
| 150,615 |
| ||||||||||||||
| Total | $ | 586,536 |
| $ | 575,160 |
| $ | 1,788,662 |
| $ | 1,747,176 |
| ||||||||||||||
| Income/(loss) from operations: | ||||||||||||||||||||||||||
| The Cheesecake Factory restaurants | $ | 59,664 |
| $ | 63,013 |
| $ | 189,897 |
| $ | 193,955 |
| ||||||||||||||
| Other |
| 4,388 |
|
| 3,495 |
|
| 15,416 |
|
| 14,353 |
| ||||||||||||||
| Corporate |
| (37,088 | ) |
| (33,013 | ) |
| (108,102 | ) |
| (108,719 | ) | ||||||||||||||
| Total | $ | 26,964 |
| $ | 33,495 |
| $ | 97,211 |
| $ | 99,589 |
| ||||||||||||||
| Selected Consolidated Balance Sheet Information | October 1, 2019 (1) | January 1, 2019 | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 306,252 |
| $ | 26,578 |
| ||||||||||||||||||||
| Total assets |
| 2,381,770 |
|
| 1,314,133 |
| ||||||||||||||||||||
| Long-term debt |
| 335,000 |
|
| 10,000 |
| ||||||||||||||||||||
| Total liabilities |
| 1,847,954 |
|
| 743,074 |
| ||||||||||||||||||||
| Stockholders' equity |
| 533,816 |
|
| 571,059 |
| ||||||||||||||||||||
| (1) Adoption of the new lease accounting standard (ASC 842) at January 2, 2019, resulted in the increase of lease-related assets and liabilities of $975.1 million and $1,045.4 million, respectively, and a reduction to retained earnings of $41.5 million, net of tax. | ||||||||||||||||||||||||||
| The Cheesecake Factory Restaurants | 13 Weeks Ended | 13 Weeks Ended | 39 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||||
| Supplemental Information | October 1, 2019 | October 2, 2018 | October 1, 2019 | October 2, 2018 | ||||||||||||||||||||||
| Comparable restaurant sales |
| 0.4 | % |
| 1.5 | % | 0.9 | % | 1.7 | % | ||||||||||||||||
| Restaurants opened during period |
| 1 |
|
| 1 |
| 2 |
| 1 |
| ||||||||||||||||
| Restaurants open at period-end |
| 203 |
|
| 199 |
| 203 |
| 199 |
| ||||||||||||||||
| Restaurant operating weeks |
| 2,628 |
|
| 2,580 |
| 7,865 |
| 7,749 |
| ||||||||||||||||
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 uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Reconciliations of the Company’s anticipated adjusted diluted net income per share ranges to their corresponding GAAP measures have not been provided as the Company cannot determine the probable significance or timing of certain reconciling items which are outside of the Company’s control and therefore cannot be reasonably predicted.
| The Cheesecake Factory Incorporated | ||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||
| (unaudited; in thousands, except per share data) | ||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | 39 Weeks Ended | 39 Weeks Ended | |||||||||
| October 1, 2019 | October 2, 2018 | October 1, 2019 | October 2, 2018 | |||||||||
| Net income (GAAP) | $ | 16,090 | $ | 28,475 | $ | 78,584 | $ | 82,857 | ||||
| After-tax impact from: | ||||||||||||
| - Impairment of assets and lease terminations (1) |
| - |
| 195 |
| - |
| 2,106 | ||||
| - Loss on investment (2) |
| 7,655 |
| 1,153 |
| 9,945 |
| 1,988 | ||||
| - Acquisition costs (3) |
| 2,361 |
| - |
| 2,361 |
| - | ||||
| Adjusted net income (non-GAAP) | $ | 26,106 | $ | 29,823 | $ | 90,890 | $ | 86,951 | ||||
| Diluted net income per share (GAAP) | $ | 0.36 | $ | 0.61 | $ | 1.76 | $ | 1.79 | ||||
| After-tax impact from: | ||||||||||||
| - Impairment of assets and lease terminations |
| - |
| 0.00 |
| - |
| 0.05 | ||||
| - Loss on investment |
| 0.17 |
| 0.02 |
| 0.22 |
| 0.04 | ||||
| - Acquisition costs |
| 0.05 |
| - |
| 0.05 |
| - | ||||
| Adjusted diluted net income per share (non-GAAP) (4) | $ | 0.59 | $ | 0.64 | $ | 2.04 | $ | 1.87 | ||||
| (1) The pre-tax amounts associated with this item in the thirteen and thirty nine weeks ended October 2, 2018 were $0.3 million and $2.8 million, respectively. These amounts were recorded in impairment of assets and lease terminations. The tax effect assumes a 26% tax rate based on the federal statutory rate and an estimated blended state tax rate. | ||||||||||||
| (2) The pre-tax amounts associated with these items in the thirteen and thirty nine weeks ended October 1, 2019 were $10.3 million and $13.4 million, respectively. The pre-tax amounts associated with these items in the thirteen and thirty nine weeks ended October 2, 2018 were $1.6 million and $2.7 million, respectively. These amounts were recorded in loss on investment in unconsolidated affiliates. The tax effect assumes a 26% tax rate based on the federal statutory rate and an estimated blended state tax rate. | ||||||||||||
| (3) The pre-tax amount associated with this item in the thirteen and thirty nine weeks ended October 1, 2019 was $3.2 million, and was recorded in general & administrative expenses. The tax effect assumes a 26% tax rate based on the federal statutory rate and an estimated blended state tax rate. | ||||||||||||
| (4) Adjusted diluted net income per share may not add due to rounding. | ||||||||||||
