Cheesecake Factory Results

The Cheesecake Factory Reports Results for Fourth Quarter of Fiscal 2017

Cheesecake Factory

The Cheesecake Factory Incorporated (NASDAQ: CAKE) yesterday reported financial results for the fourth quarter of fiscal 2017, which ended on January 2, 2018.

Total revenues were $571.8 million in the fourth quarter of fiscal 2017 as compared to $603.1 million in the fourth quarter of fiscal 2016. The fourth quarter of fiscal 2017 included 13 weeks compared to 14 weeks in the fourth quarter of fiscal 2016. Net income and diluted net income per share were $57.7 million and $1.24, respectively, in the fourth quarter of fiscal 2017.

The Company recorded a $38.5 million benefit to the income tax provision from a revaluation of the Company’s deferred tax assets and liabilities related to recently enacted tax reform. The Company also recorded a pre-tax, non-cash impairment charge of $9.1 million related to one Cheesecake Factory restaurant and one Grand Lux Cafe. Excluding these items, net income and diluted net income per share were $24.7 million and $0.53, respectively, in the fourth quarter of fiscal 2017.

Comparable restaurant sales at The Cheesecake Factory restaurants declined 0.9% in the fourth quarter of fiscal 2017 (13 weeks vs. 13 weeks).

“Our sales trend started to stabilize during the fourth quarter, which coupled with solid operational performance, drove comparable sales and earnings results within our expectations,” said David Overton, Chairman and Chief Executive Officer. “In addition, we opened six restaurants during the quarter, including our first Company-owned international location in Canada, as we continue to execute our growth strategy.”

Overton continued, “Underscoring the strength of our culture and values, we are honored to be recognized as one of the “100 Best Companies to Work For®” by FORTUNE magazine for the fifth consecutive year. As we celebrate the 40th anniversary of our founding this year, our steadfast commitment to taking exceptional care of our guests and staff members has been integral to our success. Even in the face of a challenging restaurant industry environment during 2017, this long-term mindset guides our strategic initiatives and paves the way for a solid future for The Cheesecake Factory.”

Development

The Company opened five Cheesecake Factory restaurants and one RockSugar Southeast Asian Kitchen during the fourth quarter of fiscal 2017, meeting its objective to open eight Company-owned restaurants in fiscal 2017.

In addition, two Cheesecake Factory restaurants opened under licensing agreements internationally during the fourth quarter of fiscal 2017, including the first location in Bahrain and the third location in Qatar, for a total of four locations opened under licensing agreements during fiscal 2017, as expected. In addition, the first location in Beijing opened under a licensing agreement in late January, 2018.

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 March 20, 2018 to shareholders of record at the close of business on February 28, 2018.

During the fourth quarter of fiscal 2017, the Company repurchased approximately 0.4 million shares of its common stock at a cost of $16.6 million. In fiscal 2017, the Company repurchased a total of 2.6 million shares of its common stock at a cost of $123.0 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 214 full-service, casual dining restaurants throughout the U.S.A., including Puerto Rico, and Canada, comprised of 199 restaurants under The Cheesecake Factory® mark; 13 restaurants under the Grand Lux Cafe® mark; and two restaurants under the RockSugar Southeast Asian Kitchen® mark (transitioning from Rock Sugar Pan Asian Kitchen®). Internationally, 20 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 2018, the Company was named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the fifth consecutive year.

 
The Cheesecake Factory Incorporated
Consolidated Financial Statements
(unaudited; in thousands, except per share and statistical data)
                                 
   

 

 

 

 

 

 

 

Consolidated Statements of Income  

13 Weeks Ended

January 2, 2018

 

14 Weeks Ended

January 3, 2017

 

52 Weeks Ended

January 2, 2018

 

53 Weeks Ended

January 3, 2017

    Amount   Percent of 

Revenues

  Amount   Percent of 

Revenues

  Amount   Percent of 

Revenues

  Amount   Percent of 

Revenues

Revenues   $ 571,815       100.0 %   $ 603,146       100.0 %   $ 2,260,502     100.0 %   $ 2,275,719     100.0 %
Costs and expenses:                                
Cost of sales     134,015       23.4 %     140,084       23.2 %     519,388     23.0 %     526,628     23.2 %
Labor expenses     197,231       34.5 %     202,562       33.6 %     777,595     34.4 %     759,998     33.4 %
Other operating costs and expenses     141,257       24.7 %     143,951       23.9 %     552,791     24.4 %     540,365     23.7 %
General and administrative expenses     34,587       6.1 %     38,863       6.4 %     141,533     6.2 %     146,042     6.4 %
Depreciation and amortization expenses     23,237       4.1 %     23,451       3.9 %     92,729     4.1 %     88,010     3.9 %
Impairment of assets and lease terminations     9,112       1.6 %     114       0.0 %     10,343     0.5 %     114     0.0 %
Preopening costs     7,629       1.3 %     6,975       1.2 %     13,278     0.6 %     13,569     0.6 %
Total costs and expenses     547,068       95.7 %     556,000       92.2 %     2,107,657     93.2 %     2,074,726     91.2 %
Income from operations     24,747       4.3 %     47,146       7.8 %     152,845     6.8 %     200,993     8.8 %
Interest and other expense, net     (1,953 )     (0.3 )%     (2,263 )     (0.4 )%     (6,379 )   (0.3 )%     (9,225 )   (0.4 )%
Income before income taxes     22,794       4.0 %     44,883       7.4 %     146,466     6.5 %     191,768     8.4 %
Income tax provision/(benefit)     (34,944 )     -6.1 %     12,502       2.0 %     (10,926 )   -0.5 %     52,274     2.3 %
Net income   $ 57,738       10.1 %   $ 32,381       5.4 %   $ 157,392     7.0 %   $ 139,494     6.1 %
                                 
Basic net income per share   $ 1.26         $ 0.68         $ 3.35         $ 2.91      
Basic weighted average shares outstanding     45,751           47,403           46,930           47,981      
                                 
Diluted net income per share   $ 1.24         $ 0.66         $ 3.27         $ 2.83      
Diluted weighted average shares outstanding     46,730           48,795           48,152           49,372      
                                 
Selected Segment Information                                
Revenues:                                
The Cheesecake Factory restaurants   $ 514,782         $ 547,809         $ 2,057,816         $ 2,078,083      
Other     57,033           55,337           202,686           197,636      
Total   $ 571,815         $ 603,146         $ 2,260,502         $ 2,275,719      
                                 
Income/(loss) from operations:                                
The Cheesecake Factory restaurants (1)   $ 56,553         $ 74,673         $ 263,581         $ 308,058      
Other (2)     (1,385 )         8,189           17,547           27,623      
Corporate     (30,421 )         (35,716 )         (128,283 )         (134,688 )    
Total   $ 24,747         $ 47,146         $ 152,845         $ 200,993      
                                 
(1) Includes the following recorded in impairment of assets and lease terminations in the consolidated statements of income: $1.3 million in the thirteen weeks ended January 2, 2018 related to one The Cheesecake Factory restaurant; $2.5 million in the fifty-two weeks ended January 2, 2018 related to three The Cheesecake Factory restaurants; and $0.1 million in the fourteen and fifty-three weeks ended January 3, 2017 related to one The Cheesecake Factory restaurant.
 
(2) Includes $7.8 million recorded in impairment of assets and lease terminations in the consolidated statements of income in the thirteen and fifty-two weeks ended January 2, 2018 related to one Grand Lux Cafe.
                                 
Selected Consolidated Balance Sheet Information   January 2, 2018   January 3, 2017                
Cash and cash equivalents       $ 6,008         $ 53,839                  
Total assets         1,333,060           1,293,319                  
Total liabilities         719,530           690,112                  
Stockholders' equity         613,530           603,207                  
                                 
                                 
                                 
   

 

 

 

 

 

 

 

The Cheesecake Factory Supplemental Information  

13 Weeks Ended

January 2, 2018

 

14 Weeks Ended

January 3, 2017

 

52 Weeks Ended

January 2, 2018

 

53 Weeks Ended

January 3, 2017

Comparable restaurant sales         -0.9 %         1.1 %       -0.8 %       1.2 %
Restaurants opened during period         5           5         7         7  
Restaurants open at period-end         199           194         199         194  
Restaurant operating weeks         2,546           2,690         10,096         10,031  
                                             

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     14 Weeks Ended     52 Weeks Ended     53 Weeks Ended
    January 2, 2018     January 3, 2017     January 2, 2018     January 3, 2017
                               
Net Income (GAAP)     $ 57,738         $ 32,381       $ 157,392         $ 139,494
After-tax impact from:                              
- Impairment of assets and lease terminations (1)       5,467           68         6,206           68
- Deferred tax revaluation (2)       (38,525 )         -         (38,525 )         -
Adjusted net income (non-GAAP)     $ 24,680         $ 32,449       $ 125,073         $ 139,562
                               
Diluted net income per share (GAAP)     $ 1.24         $ 0.66       $ 3.27         $ 2.83
After-tax impact from:                              
- Impairment of assets and lease terminations       0.12           0.00         0.13           0.00
- Deferred tax revaluation       (0.83 )         -         (0.80 )         -
Adjusted diluted net income per share (non-GAAP) (3)     $ 0.53         $ 0.67       $ 2.60         $ 2.83
                               
(1) The pre-tax amounts associated with these items were $9.1 million and $10.3 million in the thirteen weeks and fifty-two weeks ended January 2, 2018, respectively, and $0.1 million in the fourteen and fifty-three weeks ended January 3, 2017. 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.



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