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The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2022 and Provides Business Update

July 27, 2022

The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the second quarter of fiscal 2022, which ended on June 28, 2022.

Total revenues were $832.6 million in the second quarter of fiscal 2022 compared to $769.0 million in the second quarter of fiscal 2021. Net income and diluted net income per share were $25.7 million and $0.50, respectively, in the second quarter of fiscal 2022.

Excluding the after-tax impact of a $0.8 million charge recorded by the Company primarily associated with FRC acquisition-related items, adjusted net income and adjusted net income per share for the second quarter of fiscal 2022 were $26.4 million and $0.52, 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 4.7% year-over-year in the second quarter of fiscal 2022.

“We were pleased with our second quarter topline results across our brands, as we continued to outperform the broader casual dining industry, underscoring the strength of our portfolio,” said David Overton, Chairman and Chief Executive Officer. “Within the four walls of our restaurants, our tenured operators remained focused on delivering delicious, memorable experiences for our guests while maintaining our high labor productivity and food efficiency results.”

“The inflationary environment remains dynamic and in the second quarter we faced measurably higher costs than anticipated. Despite these near-term headwinds, we remain committed to returning margins to pre-pandemic levels while managing our business for the long-term. With record restaurant staffing levels in July and our proven track record of resiliency, I remain confident in our ability to deliver on our objectives and create long-term shareholder value.”

Development

The Company now expects to open as many as 15 new restaurants in fiscal 2022, including as many as four Cheesecake Factory restaurants, four North Italia restaurants, and as many as seven FRC restaurants, including three Flower Child locations. This includes the opening of the first brick and mortar location of Fly Bye, FRC’s newest fast casual dining concept offering Detroit-style pizza and crispy chicken, which opened subsequent to second quarter-end in Phoenix, AZ.

In addition, in fiscal 2022 the Company expects one Cheesecake Factory restaurant to open internationally under a licensing agreement.

Liquidity and Capital Allocation

During the second quarter, the Company generated $54.0 million in cash flow from operating activities.

As of June 28, 2022, the Company had total available liquidity of $433 million, including a cash balance of $195 million and availability on its revolving credit facility of $238 million. Total principal amount of debt outstanding was $475 million, including $345 million in principal amount of 0.375% convertible senior notes due 2026 and $130 million in principal amount drawn on the Company’s revolving credit facility.

The Company repurchased approximately 360,000 shares of its common stock at a cost of $10.9 million in the second quarter of fiscal 2022, and also announced today that its Board of Directors declared a quarterly dividend of $0.27 per share to be paid on August 23, 2022 to shareholders of record at the close of business on August 10, 2022.

Conference Call and Webcast

The Company will hold a conference call to review its results for the second quarter of fiscal 2022 today at 2:00 p.m. Pacific Time. The conference call will be webcast live on the Company’s website at investors.thecheesecakefactory.com and a replay of the webcast will be available through August 26, 2022.

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 309 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within our Fox Restaurant Concepts business. Internationally, 29 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 2022, we were named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the ninth consecutive year. To learn more, visit www.thecheesecakefactory.com, www.northitalia.com and www.foxrc.com.

From Fortune ©2022 Fortune Media IP Limited. All rights reserved. Used under license. Fortune and Fortune 100 Best Companies to Work For are registered trademarks of Fortune Media IP Limited and are used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, The Cheesecake Factory Incorporated.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, without limitation, statements regarding sales trends and strength, competitive position, development expectations, liquidity, quarterly dividends, returning to pre-pandemic margins and creation of long-term shareholder value. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of the Company’s restaurants, international licensee restaurants and the Company’s bakery operations; supply chain disruptions and inflation; the geopolitical environment; demonstrations, political unrest, potential damage to or closure of the Company’s restaurants and potential reputational damage to the Company or any of its brands; economic, public health and political conditions that impact consumer confidence and spending, including the impact of COVID-19 and other health epidemics or pandemics on the global economy; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the Fox Restaurant Concepts restaurants, Social Monk Kitchen and other concepts; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in laws impacting the Company’s business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premise dining; labor constraints, changes in unemployment rates and increases in minimum wages and benefit costs; the economic health of the Company’s landlords and other tenants in retail centers in which its restaurants are located, and the Company’s ability to successfully manage its lease arrangements with landlords; unanticipated costs that may arise in connection with a return to normal course of business; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to the Company; the timing of new unit development; compliance with debt covenants; strategic capital allocation decisions including any share repurchases or dividends; the ability to achieve projected financial results; the resolution of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation; adverse weather conditions in regions in which the Company’s restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risks, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the dates on which they are made and the Company undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.

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

13 Weeks Ended

 

13 Weeks Ended

 

26 Weeks Ended

 

26 Weeks Ended

Consolidated Statements of Income

June 28, 2022

 

June 29, 2021

 

June 28, 2022

 

June 29, 2021

Amount

Percent of

Revenues

 

Amount

Percent of

Revenues

 

Amount

Percent of

Revenues

 

Amount

Percent of

Revenues

 

 

 

Revenues

$

832,643

 

100.0

%

$

768,956

 

100.0

%

$

1,626,353

 

100.0

%

$

1,396,373

 

100.0

%

Costs and expenses:
Cost of sales

 

204,182

 

24.5

%

 

168,944

 

22.0

%

 

392,683

 

24.1

%

 

304,819

 

21.8

%

Labor expenses

 

304,519

 

36.6

%

 

274,812

 

35.7

%

 

600,282

 

36.9

%

 

504,544

 

36.1

%

Other operating costs and expenses

 

219,200

 

26.3

%

 

199,495

 

25.9

%

 

426,835

 

26.3

%

 

381,028

 

27.3

%

General and administrative expenses

 

50,191

 

6.0

%

 

48,228

 

6.3

%

 

99,314

 

6.1

%

 

92,655

 

6.6

%

Depreciation and amortization expenses

 

22,608

 

2.7

%

 

22,223

 

2.9

%

 

44,113

 

2.7

%

 

44,229

 

3.2

%

Impairment of assets and lease termination expenses

 

106

 

0.0

%

 

-

 

0.0

%

 

313

 

0.0

%

 

594

 

0.0

%

Acquisition-related contingent consideration, compensation
and amortization expenses

 

948

 

0.1

%

 

11,357

 

1.5

%

 

1,839

 

0.1

%

 

11,907

 

0.9

%

Preopening costs

 

2,947

 

0.4

%

 

2,779

 

0.4

%

 

4,711

 

0.3

%

 

6,635

 

0.5

%

Total costs and expenses

 

804,701

 

96.6

%

 

727,838

 

94.7

%

 

1,570,090

 

96.5

%

 

1,346,411

 

96.4

%

Income from operations

 

27,942

 

3.4

%

 

41,118

 

5.3

%

 

56,263

 

3.5

%

 

49,962

 

3.6

%

Interest and other expense, net

 

(1,130

)

(0.2

)%

 

(4,706

)

(0.6

)%

 

(2,591

)

(0.2

)%

 

(7,400

)

(0.5

)%

Income before income taxes

 

26,812

 

3.2

%

 

36,412

 

4.7

%

 

53,672

 

3.3

%

 

42,562

 

3.1

%

Income tax provision

 

1,156

 

0.1

%

 

2,697

 

0.3

%

 

4,853

 

0.3

%

 

4,979

 

0.4

%

Net income

 

25,656

 

3.1

%

 

33,715

 

4.4

%

 

48,819

 

3.0

%

 

37,583

 

2.7

%

Dividends on Series A preferred stock (1)

 

-

 

0.0

%

 

(13,591

)

(1.8

)%

 

-

 

0.0

%

 

(18,661

)

(1.4

)%

Undistributed earnings allocated to Series A preferred stock

 

-

 

0.0

%

 

(3,051

)

(0.4

)%

 

-

 

0.0

%

 

(3,123

)

(0.2

)%

Net income available to common stockholders

$

25,656

 

3.1

%

$

17,073

 

2.2

%

$

48,819

 

3.0

%

$

15,799

 

1.1

%

 
Basic net income per common share

$

0.51

 

$

0.38

 

$

0.97

 

$

0.35

 

Basic weighted average shares outstanding

 

50,387

 

 

45,471

 

 

50,360

 

 

44,830

 

 
Diluted net income per common share (2)

$

0.50

 

$

0.37

 

$

0.96

 

$

0.35

 

Diluted weighted average shares outstanding

 

50,929

 

 

46,777

 

 

50,966

 

 

45,975

 

(1) During the second quarter of fiscal 2021, the Company completed the repurchase of 150,000 shares of its previously outstanding convertible preferred stock and the conversion of the remaining 50,000 shares of convertible preferred stock into approximately 2.4 million shares of the Company’s common stock, which simplified the Company’s capital structure and eliminated future convertible preferred dividends. For GAAP accounting purposes, $13.6 million of the total consideration paid was deemed to be a dividend during the second quarter of fiscal 2021.
(2) Diluted net income per common share reflects an adjustment for reallocation of undistributed earnings to preferred stock of $72,552 and $65,204, respectively, for the thirteen and twenty-six weeks ended June 29, 2021.

13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
Selected Segment Information June 28, 2022 June 29, 2021 June 28, 2022 June 29, 2021
Revenues:
The Cheesecake Factory restaurants

$

640,858

 

$

606,691

 

$

1,250,674

 

$

1,106,080

 

North Italia

 

56,238

 

 

43,566

 

 

108,995

 

 

76,390

 

Other FRC

 

60,020

 

 

47,458

 

 

118,852

 

 

83,652

 

Other

 

75,527

 

 

71,241

 

 

147,832

 

 

130,251

 

Total

$

832,643

 

$

768,956

 

$

1,626,353

 

$

1,396,373

 

 
Income from operations:
The Cheesecake Factory restaurants

$

64,327

 

$

83,198

 

$

127,771

 

$

127,679

 

North Italia

 

5,048

 

 

3,026

 

 

8,726

 

 

3,358

 

Other FRC

 

6,793

 

 

7,282

 

 

14,122

 

 

11,162

 

Other

 

(48,226

)

 

(52,388

)

 

(94,356

)

 

(92,237

)

Total

$

27,942

 

$

41,118

 

$

56,263

 

$

49,962

 

 
Preopening costs:
The Cheesecake Factory restaurants

$

1,372

 

$

584

 

$

2,406

 

$

2,648

 

North Italia

 

1,004

 

 

1,061

 

 

1,414

 

 

2,279

 

Other FRC

 

284

 

 

637

 

 

273

 

 

1,099

 

Other

 

287

 

 

497

 

 

618

 

 

609

 

Total

$

2,947

 

$

2,779

 

$

4,711

 

$

6,635

 

 
Impairment of assets and lease termination expenses:
The Cheesecake Factory restaurants

$

106

 

$

-

 

$

(59

)

$

-

 

North Italia

 

-

 

 

-

 

 

-

 

 

-

 

Other FRC

 

-

 

 

-

 

 

-

 

 

-

 

Other

 

-

 

 

-

 

 

372

 

 

594

 

Total

$

106

 

$

-

 

$

313

 

$

594

 

 
Depreciation and amortization expenses:
The Cheesecake Factory restaurants

$

16,275

 

$

16,487

 

$

31,862

 

$

32,807

 

North Italia

 

1,222

 

 

981

 

 

2,520

 

 

1,825

 

Other FRC

 

1,470

 

 

1,038

 

 

3,051

 

 

2,215

 

Other

 

3,641

 

 

3,717

 

 

6,680

 

 

7,382

 

Total

$

22,608

 

$

22,223

 

$

44,113

 

$

44,229

 

 
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
The Cheesecake Factory restaurants operating information: June 28, 2022 June 29, 2021 June 28, 2022 June 29, 2021
Comparable restaurant sales vs. prior year

 

4.7

%

 

150.0

%

 

12.0

%

 

52.0

%

Restaurants opened during period

 

-

 

 

-

 

 

-

 

 

1

 

Restaurants open at period-end

 

208

 

 

207

 

 

208

 

 

207

 

Restaurant operating weeks

 

2,704

 

 

2,691

 

 

5,408

 

 

5,369

 

 
North Italia operating information:
Comparable restaurant sales vs. prior year

 

12

%

 

182

%

 

21

%

 

63

%

Restaurants opened during period

 

1

 

 

2

 

 

1

 

 

3

 

Restaurants open at period-end

 

30

 

 

26

 

 

30

 

 

26

 

Restaurant operating weeks

 

378

 

 

328

 

 

755

 

 

631

 

 
Other Fox Restaurant Concepts (FRC) operating information:(1)
Restaurants opened during period

 

-

 

 

-

 

 

-

 

 

1

 

Restaurants open at period-end

 

31

 

 

28

 

 

31

 

 

28

 

Restaurant operating weeks

 

403

 

 

354

 

 

806

 

 

696

 

 
Other operating information:(2)
Restaurants opened during period

 

1

 

 

1

 

 

1

 

 

1

 

Restaurants open at period-end

 

39

 

 

39

 

 

39

 

 

39

 

Restaurant operating weeks

 

505

 

 

490

 

 

1,007

 

 

967

 

 
Number of company-owned restaurants:
The Cheesecake Factory

 

208

 

North Italia

 

30

 

Other FRC

 

31

 

Other

 

39

 

Total

 

308

 

 
Number of international-licensed restaurants:
The Cheesecake Factory

29

 

(1) The Other FRC segment includes all FRC brands except Flower Child.
(2) The Other segment includes the Flower Child, Grand Lux Cafe 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

June 28, 2022

 

December 28, 2021

Cash and cash equivalents

$

194,891

$

189,627

Long-term debt, net of issuance costs (1)

 

467,025

 

466,017

(1) Includes $337 million net balance of 0.375% convertible senior notes due 2026 (principal amount of $345 million less $8.0 million in unamortized issuance costs) and $130 million drawn on the Company's revolving credit facility. The unamortized issuance costs were recorded as a contra-liability and netted with long-term debt on the Condensed Consolidated Balance Sheet and are being amortized as interest expense.

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 income and diluted net income per share the impact of items the Company does not consider indicative of its ongoing operations. To reflect the then-potential impact of the conversion of the Company’s convertible preferred stock into common stock for the period that it was outstanding prior to the repurchase and conversion on June 15, 2021, the Company excluded the preferred dividend and assumed 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

 

26 Weeks Ended

 

26 Weeks Ended

June 28, 2022

 

June 29, 2021

 

June 28, 2022

 

June 29, 2021

 
Net income available to common stockholders (GAAP)

$

25,656

 

$

17,073

 

$

48,819

 

$

15,799

 

Dividends on Series A preferred stock

 

-

 

 

13,591

 

 

-

 

 

18,661

 

Net income attributable to Series A preferred stock

 

-

 

 

3,051

 

-

 

3,123

 

COVID-19 related costs(1)

 

-

 

 

-

 

 

-

 

 

4,917

 

Impairment of assets and lease termination expenses(2)

 

106

 

 

-

 

 

313

 

 

594

 

Acquisition-related contingent consideration,
compensation and amortization expenses(3)

 

948

 

 

11,357

 

 

1,839

 

 

11,907

 

Termination of interest rate swap

 

-

 

 

2,354

 

-

 

2,354

 

Uncertain tax position(4)

 

-

 

 

-

 

 

-

 

 

2,471

 

Tax effect of adjustments(5)

 

(275

)

 

(3,565

)

 

(559

)

 

(5,140

)

Adjusted net income (non-GAAP)

$

26,435

 

$

43,861

 

$

50,412

 

$

54,686

 

 
Diluted net income per common share (GAAP)

$

0.50

 

$

0.37

 

$

0.96

 

$

0.35

 

Dividends on Series A preferred stock

 

-

 

 

0.25

 

 

-

 

 

0.34

 

Net Income attributable to Series A preferred stock

 

-

 

 

0.06

 

 

-

 

 

0.06

 

Assumed impact of potential conversion of Series A preferred stock into common stock(6)

 

-

 

 

(0.06

)

 

-

 

 

(0.06

)

COVID-19 related costs

 

-

 

 

-

 

 

-

 

 

0.09

 

Impairment of assets and lease termination expenses

 

0.00

 

 

-

 

 

0.01

 

 

0.01

 

Acquisition-related contingent consideration,
compensation and amortization expenses

 

0.02

 

 

0.21

 

 

0.04

 

 

0.22

 

Termination of interest rate swap

 

-

 

 

0.04

 

 

-

 

 

0.04

 

Uncertain tax position

 

-

 

 

-

 

 

-

 

 

0.05

 

Tax effect of adjustments

 

(0.01

)

 

(0.07

)

 

(0.01

)

 

(0.09

)

Adjusted net income per share (non-GAAP)(7)

$

0.52

 

$

0.80

 

$

0.99

 

$

1.00

 

(1) Represents incremental costs associated with COVID-19 such as sanitation, personal protective equipment, sick and vaccination pay, and healthcare benefits for furloughed staff members.
(2) A detailed breakdown of impairment of assets and lease termination expenses recorded in the thirteen and twenty-six weeks ended June 28, 2022 and June 29, 2021 can be found in the Selected Segment Information table.
(3) Represents changes in the fair value of the deferred consideration and contingent consideration and compensation liabilities related to the North Italia and FRC acquisition, as well as amortization of acquired definite-lived licensing agreements.
(4) Reserve for uncertain tax position. 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.
(5) 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 2022 and 2021 periods.
(6) Represents the impact of assuming the conversion of Series A preferred stock into common stock (8,126,001 and 8,862,280 shares for the thirteen and twenty-six weeks ended June 29, 2021, respectively), resulting in an assumption of 54,632,770 and 54,837,353 weighted-average common shares outstanding for the thirteen and twenty-six weeks ended June 29, 2021, respectively.
(7) Adjusted net income per share may not add due to rounding.

 

Etienne Marcus
(818) 871-3000
investorrelations@thecheesecakefactory.com

Source: The Cheesecake Factory Incorporated
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