Cheesecake Factory Results

The Cheesecake Factory Reports Results for Third Quarter of Fiscal 2017

Comparable restaurant sales at The Cheesecake Factory restaurants declined 2.3% in the third quarter of fiscal 2017, including an approximately 0.8% negative impact from Hurricanes Harvey, Irma and Maria. Excluding this weather impact, comparable restaurant sales declined 1.5%.

Cheesecake Factory

The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2017, which ended on October 3, 2017.

Total revenues were $555.4 million in the third quarter of fiscal 2017 as compared to $560.0 million in the third quarter of fiscal 2016. Net income and diluted net income per share were $26.4 million and $0.56, respectively, in the third quarter of fiscal 2017.

Comparable restaurant sales at The Cheesecake Factory restaurants declined 2.3% in the third quarter of fiscal 2017, including an approximately 0.8% negative impact from Hurricanes Harvey, Irma and Maria. Excluding this weather impact, comparable restaurant sales declined 1.5%.

“While our third quarter results were impacted by significant hurricane activity, we are so fortunate that our staff members are safe and our restaurants did not sustain any significant damage from the storms,” said David Overton, Chairman and Chief Executive Officer. “I am extremely proud of our teams for coming together to provide relief in every way we could. From uninterrupted payroll in spite of lost operating days and company matching of donations via the California Community Foundation Cheesecake Factory employee HELP Fund, to much needed meals for first responders and emergency supplies shipped directly to our hardest hit area in San Juan, Puerto Rico, we truly lived our purpose of nurturing bodies, minds, hearts and spirits.”

Overton continued, “Excluding the significant weather impact to the quarter, our sales and earnings results were in line with our expectations. As we look forward, we are continuing to invest in the guest experience, which we believe is contributing to stabilization of our underlying sales trend. At the same time, we are focused on diligent cost management to support profitability as we manage through the current industry environment, as well as prudent capital allocation to generate the best returns for our shareholders.”

Development

The Company continues to expect to open eight Company-owned restaurants this year. The Cheesecake Factory in Kapolei, Hawaii opened in September and The Cheesecake Factory in Minnetonka, Minnesota opened in mid-October. The Company expects to open five additional restaurants during the fourth quarter.

In addition, the Company continues to expect four restaurants to open under licensing agreements internationally in fiscal 2017. This includes the second location in Qatar that opened in September, the first location in Bahrain that opened at the end of October and the third location in Qatar, which is expected to open by year-end.

Capital Allocation

The Company’s Board of Directors declared a quarterly cash dividend of $0.29 per share on the Company’s common stock. The dividend is payable on November 28, 2017 to shareholders of record at the close of business on November 15, 2017.

During the third quarter of fiscal 2017, the Company repurchased approximately 1.6 million shares of its common stock at a cost of $75.8 million. The Company now expects to allocate a total of $125 to $150 million toward share repurchases in fiscal 2017.

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 209 full-service, casual dining restaurants throughout the U.S.A., including Puerto Rico, comprised of 195 restaurants under The Cheesecake Factory® mark; 13 restaurants under the Grand Lux Cafe® mark; and one restaurant under the Rock Sugar Pan Asian Kitchen® mark (rebranding to RockSugar Southeast Asian Kitchen®). Internationally, 18 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 39 Weeks Ended 39 Weeks Ended
Consolidated Statement of Income October 3, 2017 September 27, 2016 October 3, 2017 September 27, 2016
Amount   Percent of

Revenues

Amount  

Percent of

Revenues

Amount  

Percent of

Revenues

Amount  

Percent of

Revenues

Revenues $ 555,392 100.0 % $ 560,018 100.0 % $ 1,688,687 100.0 % $ 1,672,573 100.0 %
Costs and expenses:
Cost of sales 127,453 22.9 % 128,838 23.0 % 385,373 22.8 % 386,544 23.1 %
Labor expenses 193,466 34.9 % 186,567 33.3 % 580,364 34.4 % 557,436 33.3 %
Other operating costs and expenses 138,423 24.9 % 134,877 24.1 % 411,534 24.4 % 396,414 23.7 %
General and administrative expenses 35,364 6.4 % 36,057 6.4 % 106,946 6.3 % 107,179 6.4 %
Depreciation and amortization expenses 22,999 4.1 % 21,634 3.9 % 69,492 4.1 % 64,559 3.9 %
Impairment of assets and lease terminations - 0.0 % - 0.0 % 1,231 0.1 % - 0.0 %
Preopening costs   3,370     0.6 %   1,982     0.4 %   5,649   0.3 %   6,594   0.4 %
Total costs and expenses   521,075     93.8 %   509,955     91.1 %   1,560,589   92.4 %   1,518,726   90.8 %
Income from operations 34,317 6.2 % 50,063 8.9 % 128,098 7.6 % 153,847 9.2 %
Interest and other expense, net   (1,600 )   (0.3 )%   (2,477 )   (0.4 )%   (4,426 ) (0.3 )%   (6,962 ) (0.4 )%
Income before income taxes 32,717 5.9 % 47,586 8.5 % 123,672 7.3 % 146,885 8.8 %
Income tax provision   6,272     1.1 %   13,012     2.3 %   24,018   1.4 %   39,772   2.4 %
Net income $ 26,445     4.8 % $ 34,574     6.2 % $ 99,654   5.9 % $ 107,113   6.4 %
 
Basic net income per share $ 0.57   $ 0.72   $ 2.11   $ 2.22  
Basic weighted average shares outstanding   46,602     47,815     47,323     48,188  
 
Diluted net income per share $ 0.56   $ 0.70   $ 2.05   $ 2.16  
Diluted weighted average shares outstanding   47,519     49,212     48,582     49,604  
 
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants $ 507,572 $ 512,040 $ 1,543,034 $ 1,530,274
Other   47,820     47,978     145,653     142,299  
Total $ 555,392   $ 560,018   $ 1,688,687   $ 1,672,573  
 
Income/(loss) from operations:
The Cheesecake Factory restaurants (1) $ 60,496 $ 76,808 $ 207,028 $ 233,385
Other 6,003 6,753 18,932 19,434
Corporate   (32,182 )   (33,498 )   (97,862 )   (98,972 )

Total

$ 34,317   $ 50,063   $ 128,098   $ 153,847  
 
(1) Includes $1.2 million in the thirty nine weeks ended October 3, 2017, 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. This amount was recorded in impairment of assets and lease terminations in the condensed consolidated statements of income.
 
 
Selected Consolidated Balance Sheet Information October 3, 2017 January 3, 2017
Cash and cash equivalents $ 19,795 $ 53,839
Total assets 1,275,328 1,293,319
Total liabilities 691,969 690,112
Stockholders' equity 583,359 603,207
 
 
 
13 Weeks Ended 13 Weeks Ended 39 Weeks Ended 39 Weeks Ended
The Cheesecake Factory Supplemental Information October 3, 2017 September 27, 2016 October 3, 2017 September 27, 2016
Comparable restaurant sales -2.3 % 1.7 % -0.8 % 1.2 %
Restaurants opened during period 1 - 2 2
Restaurants open at period-end 194 189 194 189
Restaurant operating weeks 2,511 2,457 7,550 7,341
 

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 13 Weeks Ended 39 Weeks Ended 39 Weeks Ended
October 3, 2017 September 27, 2016 October 3, 2017 September 27, 2016
 
Net Income (GAAP) $ 26,445 $ 34,574 $ 99,654 $ 107,113
After-tax impact from:
- Impairment of assets and lease terminations (1)     -     -     739     -
Adjusted net income (non-GAAP)   $ 26,445   $ 34,574   $ 100,393   $ 107,113
 
Diluted net income per share (GAAP) $ 0.56 $ 0.70 $ 2.05 $ 2.16
After-tax impact from:

- Impairment of assets and lease terminations

    -     -     0.02     -
Adjusted diluted net income per share (non-GAAP) $ 0.56   $ 0.70   $ 2.07   $ 2.16
 
(1) The pre-tax amount associated with the item in the thirty nine weeks ended October 3, 2017 was $1.2 million, and was recorded in impairment of assets and lease terminations.



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