The Cheesecake Factory Incorporated (NASDAQ: CAKE) today
reported financial results for the third quarter of fiscal 2018,
which ended on October 2, 2018.
Total revenues were $580.9 million in the third quarter of
fiscal 2018 compared to $555.4 million in the third quarter of
fiscal 2017. Net income and diluted net income per share were $28.5
million and $0.61, respectively, in the third quarter of fiscal
2018.
The Company recorded a pre-tax charge of $0.3 million during the
third quarter of fiscal 2018 related to the previously disclosed
termination of a lease for one The Cheesecake Factory restaurant.
Excluding the after-tax impact from this item, net income and
diluted net income per share for the third quarter of fiscal 2018
would have been $28.7 million and $0.62, respectively. Please see
the Company’s reconciliation of non-GAAP financial measures at the
end of this release.
Comparable restaurant sales at The Cheesecake Factory
restaurants increased 1.5% in the third quarter of fiscal 2018.
“Our operators executed on our objectives, wage inflation
moderated from the second quarter and group medical insurance costs
normalized,” said David Overton, Chairman and Chief Executive
Officer. “These factors, coupled with comparable sales performance
at The Cheesecake Factory restaurants within our expectations,
drove solid profitability during the third quarter.”
Overton continued, “As 2018 comes to a close, we will open our
200th Cheesecake Factory restaurant next month. This milestone will
cap our 40th year of delivering on our mission of absolute guest
satisfaction. We look forward to continuing our culture of
excellence by providing our guests with great dining experiences,
offering growth opportunities for our staff members and maximizing
long term value for our shareholders.”
Development
The Company now expects to open five restaurants in fiscal 2018.
This includes The Cheesecake Factory in Lynnwood, Washington, a
suburb of Seattle, and Grand Lux Cafe in Atlanta, which both opened
during the third quarter of 2018. The Company expects to open three
additional Cheesecake Factory restaurants during the fourth quarter
of 2018. The first location of Social Monk Asian Kitchen, a fast
casual concept under development, is now expected to open in the
first quarter of 2019.
Given a shift in the mall opening date, the Company now expects
The Cheesecake Factory licensed location in Monterrey, Mexico to
open in the first quarter of 2019. As a result, the anticipated
international development for fiscal 2018 is complete, with two
restaurants opened internationally under licensing agreements this
year.
Capital Allocation
The Company’s Board of Directors declared a quarterly cash
dividend of $0.33 per share of the Company’s common stock. The
dividend is payable on November 27, 2018 to shareholders of record
at the close of business on November 14, 2018.
During the third quarter of fiscal 2018, the Company repurchased
approximately 370,000 shares of its common stock at a cost of $18.9
million. Year to date, the Company has repurchased approximately
1.2 million shares of its common stock at a cost of $60.9
million.
Conference Call and Webcast
The Company will hold a conference call to review its results
for the third quarter of fiscal 2018 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 November 29, 2018.
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
215 full-service, casual dining restaurants throughout the U.S.A.,
including Puerto Rico, and Canada, comprised of 199 restaurants
under The Cheesecake Factory® mark; 14 restaurants under the Grand
Lux Cafe® mark; and two restaurants under the RockSugar Southeast
Asian Kitchen® mark. Internationally, 21 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. To learn more
about the Company, visit www.thecheesecakefactory.com.
FORTUNE and FORTUNE 100 Best Companies to Work For® are
registered trademarks of Time Inc. and are used under license. From
FORTUNE Magazine, March 1, 2018 ©2018 Time Inc. Used under license.
FORTUNE and Time Inc. 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. These statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by forward-looking statements, including
uncertainties related to the Company’s ability to: deliver
comparable sales growth; provide a differentiated experience to
guests; outperform the casual dining industry and increase its
market share; leverage sales increases and manage flow through;
manage cost pressures, including increasing wage rates, group
medical insurance costs and legal expenses, and stabilize margins;
grow earnings; remain relevant to consumers; attract and retain
qualified management and other staff; manage risks associated with
the magnitude and complexity of regulations in the jurisdictions
where the Company’s restaurants are located; increase shareholder
value; find suitable sites and manage increasing construction
costs; profitably expand its concepts domestically and in Canada,
and work with its licensees to expand its concept internationally;
support the growth of North Italia and Flower Child restaurants;
develop the Social Monk Asian Kitchen fast casual concept; expand
consumer packaged goods licensing revenue; utilize its capital
effectively and continue to increase cash dividends and repurchase
its shares; and factors outside of the Company’s control including:
economic and political conditions that impact consumer confidence
and spending; impact of recently enacted tax reform; acceptance and
success of The Cheesecake Factory in international markets;
acceptance and success of the North Italia and Flower Child
restaurants and the Social Monk Asian Kitchen fast casual concept;
the risks of doing business abroad through Company-owned
restaurants and/or licensees; foreign exchange rates, tariffs and
cross border taxation; changes in unemployment rates; the economic
health of the Company’s landlords and other tenants in retail
centers in which its restaurants are located; the economic health
of suppliers, licensees, vendors and other third parties providing
goods or services to the Company; 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”). Investors are cautioned
that forward-looking statements are not guarantees of future
performance and that undue reliance should not be placed on such
statements. 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 securities laws. 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)
Consolidated
Statements of Income
13 Weeks Ended
October 2, 2018
13 Weeks Ended
October 3, 2017
39 Weeks Ended
October 2, 2018
39 Weeks Ended
October 3, 2017
Amount
Percent of
Revenues
Amount
Percent of
Revenues
Amount
Percent of
Revenues
Amount
Percent of
Revenues
Revenues $ 580,882 100.0% $ 555,392 100.0% $ 1,764,751 100.0% $
1,688,687 100.0% Costs and expenses: Cost of sales 133,598 23.0%
127,453 22.9% 402,453 22.8% 385,373 22.8% Labor expenses 204,537
35.2% 193,466 34.9% 627,772 35.6% 580,364 34.4% Other operating
costs and expenses 144,180 24.8% 138,423 24.9% 436,308 24.7%
411,534 24.4% General and administrative expenses 37,469 6.5%
35,364 6.4% 118,166 6.7% 106,946 6.3% Depreciation and amortization
expenses 24,090 4.1% 22,999 4.1% 71,819 4.1% 69,492 4.1% Impairment
of assets and lease terminations 263 0.0% - 0.0% 2,846 0.2% 1,231
0.1% Preopening costs 3,250 0.6%
3,370 0.6% 5,798 0.3%
5,649 0.3% Total costs and expenses
547,387 94.2% 521,075
93.8% 1,665,162 94.4% 1,560,589
92.4% Income from operations 33,495 5.8% 34,317 6.2%
99,589 5.6% 128,098 7.6% Interest and other expense, net
(3,290 ) (0.6)% (1,600 ) (0.3)%
(7,704 ) (0.4)% (4,426 ) (0.3)% Income
before income taxes 30,205 5.2% 32,717 5.9% 91,885 5.2% 123,672
7.3% Income tax provision 1,730 0.3%
6,272 1.1% 9,028
0.5% 24,018 1.4% Net income $ 28,475
4.9% $ 26,445 4.8% $ 82,857
4.7% $ 99,654 5.9% Basic net
income per share $ 0.63 $ 0.57 $ 1.82 $ 2.11
Basic weighted average shares outstanding 45,321
46,602 45,418 47,323
Diluted net income per share $ 0.61 $ 0.56
$ 1.77 $ 2.05 Diluted weighted average shares
outstanding 46,403 47,519 46,682
48,582
Selected Segment
Information Revenues: The Cheesecake Factory restaurants $
530,210 $ 507,572 $ 1,613,085 $ 1,543,034 Other 50,672
47,820 151,666 145,653
Total $ 580,882 $ 555,392 $ 1,764,751 $
1,688,687 Income/(loss) from operations: The
Cheesecake Factory restaurants (1) $ 61,950 $ 60,496 $ 193,956 $
207,028 Other 4,559 6,003 14,353 18,932 Corporate (33,014 )
(32,182 ) (108,720 ) (97,862 ) Total $ 33,495
$ 34,317 $ 99,589 $ 128,098 (1)
Includes $0.3 million and $2.8 million in the thirteen weeks and
thirty-nine weeks ended October 2, 2018, respectively, of lease
termination costs related to the closure of one The Cheesecake
Factory restaurant, and $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.
These amounts were recorded in impairment of assets and lease
terminations in the condensed consolidated statements of income.
Selected Consolidated Balance Sheet
Information October 2, 2018 January 2, 2018 Cash
and cash equivalents $ 12,639 $ 6,008 Total assets 1,308,063
1,333,060 Total liabilities 694,657 719,530 Stockholders' equity
613,406 613,530
The Cheesecake Factory
Restaurants
Supplemental Information
13 Weeks Ended
October 2, 2018
13 Weeks Ended
October 3, 2017
39 Weeks Ended
October 2, 2018
39 Weeks Ended
October 3, 2017
Comparable restaurant sales 1.5% -2.3% 1.7% -0.8% Restaurants
opened during period 1 1 1 2 Restaurants open at period-end 199 194
199 194 Restaurant operating weeks 2,580 2,511 7,749 7,550
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 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 2, 2018 October 3, 2017 October
2, 2018 October 3, 2017 Net income (GAAP) $
28,475 $ 26,445 $ 82,857 $ 99,654 After-tax impact from: -
Impairment of assets and lease terminations (1) 195 -
2,106 739 Adjusted net income (non-GAAP) $ 28,670 $
26,445 $ 84,963 $ 100,393 Diluted net income per share
(GAAP) $ 0.61 $ 0.56 $ 1.77 $ 2.05 After-tax impact from: -
Impairment of assets and lease terminations 0.00 -
0.05 0.02 Adjusted diluted net income per share
(non-GAAP) (2) $ 0.62 $ 0.56 $ 1.82 $ 2.07 (1) The pre-tax
amounts associated with the items in the thirteen and thirty-nine
weeks ended October 2, 2018 were $0.3 million and $2.8 million,
respectively. The pre-tax amount associated with the item in the
thirty-nine weeks ended October 3, 2017 was $1.2 million. These
amounts were recorded in impairment of assets and lease
terminations. (2) Adjusted diluted net income per share may
not add due to rounding.
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The Cheesecake Factory IncorporatedStacy Feit(818)
871-3000investorrelations@thecheesecakefactory.com
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