The Cheesecake Factory Reports Results for First Quarter of Fiscal 2021 and Provides Business Update
Second quarter-to-date through April 27th comparable sales at The Cheesecake Factory restaurants increased over 2019 levels
The Cheesecake Factory Incorporated (NASDAQ: CAKE) yesterday reported financial results for the first quarter of fiscal 2021, which ended on March 30, 2021.
Total revenues were $627.4 million in the first quarter of fiscal 2021 compared to $615.1 million in the first quarter of fiscal 2020. Net loss available to common stockholders and diluted net loss per common share were $1.2 million and $0.03, respectively, in the first quarter of fiscal 2021.
During the first quarter of fiscal 2021, the Company recorded COVID-19 related charges of $4.9 million, for costs such as sick and vaccination pay, healthcare and meal benefits for furloughed staff members, additional sanitation and personal protective equipment. Excluding the after-tax impact of these and certain other items, and reflecting the potential impact of the conversion of the Company’s convertible preferred stock into common stock, adjusted net income and adjusted net income per share for the first quarter of fiscal 2021 were $10.8 million and $0.20, respectively. Please see the Company’s reconciliation of non-GAAP financial measures at the end of this press release.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 2.8% year-over-year in the first quarter of fiscal 2021. Relative to the first quarter of fiscal 2019, comparable restaurant sales at The Cheesecake Factory restaurants declined 10.4%.
Fiscal 2021 second quarter-to-date through April 27th comparable sales for The Cheesecake Factory restaurants increased approximately 220% year-over-year and 7% relative to the same period in fiscal 2019, supported by approximately one-third off-premise sales mix and reflecting eased COVID-19 restrictions, as well as strong consumer spending trends.
As of today, nearly all of the Company’s restaurants across its concepts, including 206 Cheesecake Factory locations, are operating with reopened indoor dining rooms with limited capacity in accordance with local mandates and social distancing protocols. On average, Cheesecake Factory restaurants with reopened dining rooms are operating at approximately 60% indoor capacity. One Cheesecake Factory location is operating an off-premise only model and two locations across the Company’s concepts are currently closed with plans to reopen by the end of the second quarter.
“We saw a significant increase in sales at The Cheesecake Factory restaurants and across our portfolio in March as COVID-19 dining restrictions eased and consumer spending generally increased,” said David Overton, Chairman and Chief Executive Officer. “In addition to these positive macro trends, we believe our performance also demonstrates the power of The Cheesecake Factory brand as we saw meaningful pent-up demand to dine at our restaurants, while we also continued to drive strong off-premise sales volumes. Our operators did a tremendous job managing the sales levels - delivering delicious, memorable experiences for our guests and also exceeding our expectations across our key performance indicators, including operating margins.”
Overton continued, “We are honored to be recognized as one of the ‘100 Best Companies to Work For®’ by FORTUNE magazine for the eighth consecutive year, continuing to underscore our position as an employer of choice. This accolade is even more meaningful in the context of the challenges we faced during 2020 and the unique labor environment the restaurant industry is currently experiencing. We believe we have one of the best teams in the industry, which we expect to continue to differentiate us in the COVID-19 operating environment and as we emerge from the pandemic.”
Development
During the first quarter of fiscal 2021, The Cheesecake Factory opened in Washington, D.C., North Italia opened in Birmingham, Alabama and Blanco opened in Nashville. Subsequent to quarter-end, North Italia opened in Miami and one Cheesecake Factory restaurant opened internationally in Shanghai under a licensing agreement.
Balance Sheet & Cash Flow
During the first quarter, the Company generated $21.6 million in cash flow from operating activities.
As of March 30, 2021, the Company had total available liquidity of approximately $278 million, including a cash balance of approximately $181.3 million and availability on its revolving credit facility of $96.6 million. Total debt outstanding was $280.0 million.
As previously announced, a $5.1 million cash dividend for the first quarter of fiscal 2021 was paid on March 31, 2021 to holders of the Company’s convertible preferred stock.
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 298 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, 28 The Cheesecake Factory® restaurants operate under licensing agreements.
| The Cheesecake Factory Incorporated | ||||||||||
| Condensed Consolidated Financial Statements | ||||||||||
| (unaudited; in thousands, except per share and statistical data) | ||||||||||
| 13 Weeks Ended | 13 Weeks Ended | |||||||||
| Consolidated Statements of Income | March 30, 2021 | March 31, 2020 | ||||||||
| Amount | Percent of | Amount | Percent of | |||||||
| Revenues | $ 627,417 | 100.0 | % | $ 615,106 | 100.0 | % | ||||
| Costs and expenses: | ||||||||||
| Cost of sales | 135,875 | 21.7 | % | 140,905 | 22.9 | % | ||||
| Labor expenses | 229,732 | 36.6 | % | 236,982 | 38.6 | % | ||||
| Other operating costs and expenses | 181,533 | 28.9 | % | 167,970 | 27.3 | % | ||||
| General and administrative expenses | 44,427 | 7.1 | % | 43,960 | 7.1 | % | ||||
| Depreciation and amortization expenses | 22,006 | 3.5 | % | 23,562 | 3.8 | % | ||||
| Impairment of assets and lease termination expenses | 594 | 0.1 | % | 191,896 | 31.2 | % | ||||
| Acquisition-related costs | - | 0.0 | % | 1,236 | 0.2 | % | ||||
| Acquisition-related contingent consideration, compensation and amortization expenses/(benefit) | 550 | 0.1 | % | (4,466 | ) | (0.7 | )% | |||
| Preopening costs | 3,856 | 0.6 | % | 3,119 | 0.5 | % | ||||
| Total costs and expenses | 618,573 | 98.6 | % | 805,164 | 130.9 | % | ||||
| Income/(loss) from operations | 8,844 | 1.4 | % | (190,058 | ) | (30.9 | )% | |||
| Interest and other expense, net | (2,694 | ) | (0.4 | )% | (1,518 | ) | (0.2 | )% | ||
| Income/(loss) before income taxes | 6,150 | 1.0 | % | (191,576 | ) | (31.1 | )% | |||
| Income tax provision/(benefit) | 2,282 | 0.4 | % | (55,413 | ) | (9.0 | )% | |||
| Net income/(loss) | 3,868 | 0.6 | % | (136,163 | ) | (22.1 | )% | |||
| Dividends on Series A preferred stock | (5,070 | ) | (0.8 | )% | - | 0.0 | % | |||
| Net loss available to common stockholders | $ (1,202 | ) | (0.2 | )% | $ (136,163 | ) | (22.1 | )% | ||
| Basic net loss per common share | $ (0.03 | ) | $ (3.11 | ) | ||||||
| Basic weighted average shares outstanding | 44,189 | 43,773 | ||||||||
| Diluted net loss per common share | $ (0.03 | ) | $ (3.11 | ) | ||||||
| Diluted weighted average shares outstanding | 44,189 | 43,773 | ||||||||
| 13 Weeks Ended | 13 Weeks Ended | ||||||
| Selected Segment Information | March 30, 2021 | March 31, 2020 | |||||
| Revenues: | |||||||
| The Cheesecake Factory restaurants | $ 499,389 | $ 488,471 | |||||
| North Italia | 32,823 | 30,512 | |||||
| Other FRC | 36,194 | 35,583 | |||||
| Other | 59,011 | 60,540 | |||||
| Total | $ 627,417 | $ 615,106 | |||||
| Income/(loss) from operations: | |||||||
| The Cheesecake Factory restaurants | $ 44,481 | $ 39,324 | |||||
| North Italia | 332 | (72,086 | ) | ||||
| Other FRC | 3,880 | (69,964 | ) | ||||
| Other | (39,849 | ) | (87,332 | ) | |||
| Total | $ 8,844 | $ (190,058 | ) | ||||
| Preopening costs: | |||||||
| The Cheesecake Factory restaurants | $ 2,063 | $ 1,414 | |||||
| North Italia | 1,217 | 953 | |||||
| Other FRC | 463 | (159 | ) | ||||
| Other | 113 | 911 | |||||
| Total | $ 3,856 | $ 3,119 | |||||
| Impairment of assets and lease termination expenses: | |||||||
| The Cheesecake Factory restaurants | $ - | $ 616 | |||||
| North Italia | - | 71,524 | |||||
| Other FRC | - | 72,939 | |||||
| Other | 594 | 46,817 | |||||
| Total | $ 594 | $ 191,896 | |||||
| Depreciation and amortization expenses: | |||||||
| The Cheesecake Factory restaurants | $ 16,320 | $ 17,277 | |||||
| North Italia | 844 | 965 | |||||
| Other FRC | 1,177 | 1,201 | |||||
| Other | 3,665 | 4,119 | |||||
| Total | $ 22,006 | $ 23,562 | |||||
| 13 Weeks Ended | 13 Weeks Ended | |||||
| The Cheesecake Factory restaurants operating information: | March 30, 2021 | March 31, 2020 | ||||
| Comparable restaurant sales vs. prior year | 2.8 % | (12.9)% | ||||
| Comparable restaurant sales vs. 2019 | (10.4)% | |||||
| Restaurants opened during period | 1 | - | ||||
| Restaurants open at period-end | 207 | 206 | ||||
| Restaurant operating weeks | 2,678 | 2,674 | ||||
| North Italia operating information: | ||||||
| Comparable restaurant sales vs. prior year | 5 % | (12)% | ||||
| Comparable restaurant sales vs. 2019 | (5)% | |||||
| Restaurants opened during period | 1 | 1 | ||||
| Restaurants open at period-end | 24 | 23 | ||||
| Restaurant operating weeks | 303 | 290 | ||||
| Other Fox Restaurant Concepts (FRC) operating information:(1) | ||||||
| Restaurants opened during period | 1 | - | ||||
| Restaurants open at period-end | 28 | 25 | ||||
| Restaurant operating weeks | 342 | 313 | ||||
| Other operating information:(2) | ||||||
| Restaurants opened during period | - | 1 | ||||
| Restaurants open at period-end | 38 | 40 | ||||
| Restaurant operating weeks | 477 | 492 | ||||
| Number of company-owned restaurants: | ||||||
| The Cheesecake Factory | 207 | |||||
| North Italia | 24 | |||||
| Other FRC | 28 | |||||
| Other | 38 | |||||
| Total | 297 | |||||
| Number of international-licensed restaurants: | ||||||
| The Cheesecake Factory | 27 | |||||
| (1) The Other FRC segment includes all FRC brands except Flower Child. | ||||||
| (2) The Other segment includes the Flower Child, Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen concepts, as well as the Company's third-party bakery, international and consumer packaged goods businesses, unallocated corporate expenses and gift card costs. |
| Selected Consolidated Balance Sheet Information | March 30, 2021 | December 29, 2020 | ||||
| Cash and cash equivalents | $ 181,345 | $ 154,085 | ||||
| Long-term debt | 280,000 | 280,000 | ||||
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 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. These non-GAAP measures are calculated by eliminating from net loss and diluted net loss per share the impact of items the Company does not consider indicative of its ongoing operations. To reflect the potential impact of the conversion of the Company’s convertible preferred stock into common stock, the Company excludes the preferred dividend and assumes all convertible preferred shares convert to common stock. The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.
| The Cheesecake Factory Incorporated | ||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||
| (unaudited; in thousands, except per share data) | ||||||||
| 13 Weeks Ended | 13 Weeks Ended | |||||||
| March 30, 2021 | March 31, 2020 | |||||||
| Net loss available to common stockholders (GAAP) | $ (1,202 | ) | $ (136,163 | ) | ||||
| Dividends on Series A preferred stock | 5,070 | - | ||||||
| COVID-19 related costs(1) | 4,917 | 3,290 | ||||||
| Impairment of assets and lease termination expenses(2) | 594 | 191,896 | ||||||
| Acquisition-related costs(3) | - | 1,236 | ||||||
| Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)(4) | 550 | (4,466 | ) | |||||
| Uncertain tax position related to tenant improvement allowances(5) | 2,471 | - | ||||||
| Tax effect of adjustments(6) | (1,576 | ) | (49,908 | ) | ||||
| Adjusted net income (non-GAAP) | $ 10,824 | $ 5,885 | ||||||
| Diluted net loss per common share (GAAP) | $ (0.03 | ) | $ (3.11 | ) | ||||
| Dividends on Series A preferred stock | 0.09 | - | ||||||
| Assumed impact of potential conversion of Series A preferred stock into common stock(7) | 0.00 | - | ||||||
| COVID-19 related costs | 0.09 | 0.07 | ||||||
| Impairment of assets and lease termination expenses | 0.01 | 4.38 | ||||||
| Acquisition-related costs | - | 0.03 | ||||||
| Acquisition-related contingent consideration, compensation and amortization expenses/(benefit) | 0.01 | (0.10 | ) | |||||
| Uncertain tax position related to tenant improvement allowances | 0.05 | - | ||||||
| Tax effect of adjustments | (0.03 | ) | (1.14 | ) | ||||
| Adjusted net income per share (non-GAAP)(8) | $ 0.20 | $ 0.13 | ||||||
| (1) Represents incremental costs associated with COVID-19 such as sick and vaccination pay, healthcare and meal benefits for furloughed staff members, additional sanitation and personal protective equipment. For the thirteen weeks ended March 30, 2021, the Company recorded $4.9 million for these costs with approximately $4.6 million reflected in other operating expenses and $0.3 million in labor expenses. For the thirteen weeks ended March 31, 2020, the Company recorded $3.3 million for these costs with approximately $2.3 million reflected in labor expenses and $1.0 million in other operating expenses. | ||||||
| (2) A detailed breakdown of impairment of assets and lease termination expenses recorded in the thirteen weeks ended March 30, 2021 and March 31, 2020 can be found in the Selected Segment Information table. | ||||||
| (3) Represents costs incurred to effect and integrate the North and FRC acquisition. | ||||||
| (4) Represents changes in the fair value of the deferred consideration and contingent consideration and compensation liabilities related to the North and FRC acquisition, as well as amortization of acquired definite-lived licensing agreements. | ||||||
| (5) Reserve for uncertain tax position related to tenant improvement allowances. Uncertain tax positions taken in a tax return are recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by tax authorities based on its technical merits, taking into account available administrative remedies and litigation. | ||||||
| (6) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate for the fiscal 2021 and 2020 periods. | ||||||
| (7) Represents the impact of assuming the conversion of Series A preferred stock into common stock (9,598,559 shares for the thirteen weeks ended March 30, 2021), resulting in an assumption of 53,787,314 weighted-average common shares outstanding for the thirteen weeks ended March 30, 2021. | ||||||
| (8) Adjusted net income per share may not add due to rounding. |
