The Cheesecake Factory Provides Recapitalization Update
29 June 2021 - 6:15AM
Business Wire
The Cheesecake Factory
Incorporated (NASDAQ: CAKE) today provided a recapitalization
update following the completion of its recent offerings of $345
million of 0.375% convertible senior notes due 2026 and $175
million of shares of the Company’s common stock. As previously
disclosed, the Company used the net proceeds from the offerings to
fund approximately $457.4 million payable in connection with the
repurchase of 150,000 shares of its previously outstanding Series A
convertible preferred stock and the conversion of the remaining
50,000 shares of Series A convertible preferred stock into
approximately 2.4 million shares of the Company’s common stock,
which simplified the Company’s capital structure.
In addition, using cash on
hand and approximately $44 million in excess proceeds from the
exercise of the underwriters’ over-allotment option in connection
with the convertible notes offering, the Company repaid $150
million of its revolving credit facility, bringing the balance
under the facility to $130 million. In connection with the debt
repayment, the Company also terminated its interest rate swap
agreement. As of June 25, 2021, the Company’s cash balance was
approximately $144 million. The Company currently plans to maintain
approximately $125 million in cash on its balance sheet and will
evaluate additional potential debt repayment as part of its broader
capital allocation strategy.
For the balance of the
covenant relief period under its revolving credit agreement,
borrowings will bear interest at LIBOR plus 250 basis points and
thereafter the interest rate on the facility will revert to LIBOR
plus a leverage-based margin ranging from 100 to 175 basis points.
The $345 million in convertible senior notes will accrue interest
at a rate of 0.375% per annum, payable semi-annually in arrears on
June 15 and December 15 each year, beginning on December 15, 2021.
Including the amortization of the issuance costs associated with
the convertible senior notes, the effective expense in the interest
line item on the income statement related to the notes is expected
to be approximately 1% annually.
With regard to the common
stock offering, the underwriters elected not to exercise their
over-allotment option in keeping with the Company’s strategy to
minimize the dilution associated with the offering. As a result of
the issuance of 3.125 million shares in connection with the
offering and the conversion of the remaining 50,000 shares of the
previously outstanding Series A convertible preferred stock into
approximately 2.4 million shares of the Company’s common stock,
shares outstanding increased by approximately 5.5 million shares
compared to 9.6 million shares underlying the former Series A
convertible preferred stock. In total, weighted average diluted
shares outstanding following these transactions are expected to be
approximately 51.5 million.
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 300 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, 28 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 2021, we were named to the FORTUNE
Magazine “100 Best Companies to Work For®” list for the eighth
consecutive year. To learn more, visit
www.thecheesecakefactory.com, www.northitalia.com and
www.foxrc.com.
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Companies to Work For is a trademark of Fortune Media IP Limited
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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 the Company’s current plans to maintain approximately
$125 million in cash on its balance sheet and to evaluate
additional potential debt repayment as part of its broader capital
allocation strategy, the Company’s revolving credit facility, the
expected effective expense in the interest line item on the income
statement related to the convertible senior notes, and the expected
weighted average diluted shares outstanding following the
transactions. 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: completion of the Company’s quarterly review procedures;
the rapidly evolving nature of the COVID-19 outbreak 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; 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; 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; 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; 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 due to a return
to normal course of business including potential negative impacts
from furlough actions; the economic health of suppliers, licensees,
vendors and other third parties providing goods or services to the
Company; compliance with debt covenants; 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 risk, 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.
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Stacy Feit (818) 871-3000 investorrelations@thecheesecakefactory.com
Cheesecake Factory (NASDAQ:CAKE)
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