Cheesecake Factory Results

The Cheesecake Factory Reports Results for Third Quarter of Fiscal 2016

Cheesecake Factory

The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2016, which ended on September 27, 2016.

Total revenues were $560.0 million in the third quarter of fiscal 2016 as compared to $526.7 million in the third quarter of fiscal 2015. Net income and diluted net income per share were $34.6 million and $0.70, respectively, in the third quarter of fiscal 2016.

Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.7% in the third quarter of fiscal 2016.

“We delivered our 27th consecutive quarter of positive comparable sales as we continue to create unique dining experiences for our guests, supporting consistent and predictable performance,” said David Overton, Chairman and Chief Executive Officer. “We meaningfully outpaced the casual dining industry during the third quarter, underscoring our differentiated positioning as we remain a destination of choice in a competitive landscape.”

Overton concluded, “Sales leverage and effective cost management drove solid year-over-year operating margin expansion and earnings growth. We are executing at a high level operationally, positioning us well for a strong finish to 2016 and as we look ahead to 2017.”

Development

The Company continues to expect to open as many as eight Company-owned restaurants domestically in fiscal 2016. Subsequent to quarter-end, three restaurants opened in October and the Company expects to open three additional restaurants during the remainder of the fourth quarter.

Internationally, the Company now expects as many as four restaurants to open under licensing agreements in fiscal 2016, including The Cheesecake Factory at Dubai Festival City Mall that opened in August.

Capital Allocation

The Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share on the Company’s common stock. The dividend is payable on November 22, 2016 to shareholders of record at the close of business on November 9, 2016.

During the third quarter of fiscal 2016, the Company repurchased 0.8 million shares of its common stock at a cost of $42.4 million. Year-to-date, the Company has repurchased 2.4 million shares of its common stock at a cost of $119.0 million. The Company continues to expect that it will return its free cash flow to shareholders in fiscal 2016 in the form of dividends and share repurchases.

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 205 full-service, casual dining restaurants throughout the U.S.A. and Puerto Rico, including 192 restaurants under The Cheesecake Factory® mark; 12 restaurants under the Grand Lux Cafe® mark; and one restaurant under the RockSugar Pan Asian Kitchen® mark. Internationally, 13 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 2016, the Company was named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the third consecutive year. 

 
 
The Cheesecake Factory Incorporated and Subsidiaries
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 Statement of Operations September 27, 2016 September 29, 2015 September 27, 2016 September 29, 2015
Amount   Percent of

Revenues

Amount   Percent of

Revenues

Amount   Percent of

Revenues

Amount   Percent of

Revenues

Revenues $ 560,018 100.0 % $ 526,688 100.0 % $ 1,672,573 100.0 % $ 1,573,768 100.0 %
Costs and expenses:
Cost of sales 128,838 23.0 % 125,605 23.9 % 386,544 23.1 % 378,840 24.1 %
Labor expenses 186,567 33.3 % 172,101 32.7 % 557,436 33.3 % 511,765 32.5 %
Other operating costs and expenses 134,877 24.1 % 128,427 24.4 % 396,414 23.7 % 375,537 23.9 %
General and administrative expenses 36,057 6.4 % 33,277 6.3 % 107,179 6.4 % 101,697 6.5 %
Depreciation and amortization expenses 21,634 3.9 % 21,317 4.0 % 64,559 3.9 % 63,652 4.0 %
Impairment of assets and lease expiration - 0.0 % 6,011 1.1 % - 0.0 % 6,011 0.4 %
Preopening costs   1,982       0.4 %   4,306       0.8 %   6,594     0.4 %   9,815   0.6 %
Total costs and expenses   509,955       91.1 %   491,044       93.2 %   1,518,726     90.8 %   1,447,317     92.0 %
Income from operations 50,063 8.9 % 35,644 6.8 % 153,847 9.2 % 126,451 8.0 %
Interest and other (expense)/income, net   (2,477 )     (0.4 )%   (722 )     (0.2 )%   (6,962 )   (0.4 )%   (4,049 )   (0.2 )%
Income before income taxes 47,586 8.5 % 34,922 6.6 % 146,885 8.8 % 122,402 7.8 %
Income tax provision   13,012       2.3 %   8,746       1.6 %   39,772     2.4 %   33,079     2.1 %
Net income $ 34,574       6.2 % $ 26,176       5.0 % $ 107,113     6.4 % $ 89,323     5.7 %
 
Basic net income per share $ 0.72   $ 0.54   $ 2.22   $ 1.83  
Basic weighted average shares outstanding   47,815     48,848     48,188     48,841  
 
Diluted net income per share $ 0.70   $ 0.52   $ 2.16   $ 1.76  
Diluted weighted average shares outstanding   49,212     50,637     49,604     50,660  
 
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants $ 512,040 $ 481,076 $ 1,530,274 $ 1,437,178
Other   47,978     45,612     142,299     136,590  
$ 560,018   $ 526,688   $ 1,672,573   $ 1,573,768  
 
Income from operations:
The Cheesecake Factory restaurants $ 76,808 $ 67,473 $ 233,385 $ 211,466
Other (1) 6,753 (725 ) 19,434 10,601
Corporate   (33,498 )   (31,104 )   (98,972 )   (95,616 )
$ 50,063   $ 35,644   $ 153,847   $ 126,451  
 
(1) Includes $6.0 million of impairment expense related to RockSugar Pan Asian Kitchen in the thirteen and thirty-nine weeks ended September 29, 2015.
 
 
Selected Consolidated Balance Sheet Information September 27, 2016 December 29, 2015
Cash and cash equivalents $ 65,845 $ 43,854
Total assets 1,204,379 1,233,346
Total liabilities 614,848 644,807
Stockholders' equity 589,531 588,539
 
 
 
13 Weeks Ended 13 Weeks Ended 39 Weeks Ended 39 Weeks Ended
The Cheesecake Factory Supplemental Information September 27, 2016 September 29, 2015 September 27, 2016 September 29, 2015
Comparable restaurant sales 1.7 % 2.2 % 1.2 % 3.0 %
Restaurants opened during period - 2 2 4
Restaurants open at period-end 189 181 189 181
Restaurant operating weeks 2,457 2,336 7,341 6,946
 
 

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 and Subsidiaries
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
September 27, 2016 September 29, 2015 September 27, 2016 September 29, 2015
 
Net Income (GAAP) $ 34,574 $ 26,176 $ 107,113 $ 89,323
After-tax impact from:
- Impairment of assets and lease terminations (1)     -     3,607     -     3,607
Net Income (non-GAAP)   $ 34,574   $ 29,783   $ 107,113   $ 92,930
 
Diluted net income per share (GAAP) $ 0.70 $ 0.52 $ 2.16 $ 1.76
After-tax impact from:
- Impairment of assets and lease terminations     -     0.07     -     0.07
Diluted net income per share (non-GAAP) $ 0.70   $ 0.59   $ 2.16   $ 1.83
 
(1) The pre-tax amount associated with the item in fiscal 2015 was $6.0 million.



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