Generated $109 million in cash flow from
operations
Third quarter-to-date through July 26th
comparable sales at The Cheesecake Factory restaurants increased
10% over 2019 levels
The Cheesecake Factory
Incorporated (NASDAQ: CAKE) today reported financial results for
the second quarter of fiscal 2021, which ended on June 29,
2021.
Total revenues were $769.0 million in the second quarter of
fiscal 2021 compared to $295.9 million in the second quarter of
fiscal 2020. Net income available to common stockholders and
diluted net income per common share were $17.1 million and $0.37,
respectively, in the second quarter of fiscal 2021.
During the second quarter of fiscal 2021, the Company recorded
$11.4 million in non-cash acquisition-related contingent
consideration and amortization expense primarily associated with
the amendment to the Fox Restaurant Concepts (“FRC”) acquisition
agreement, including the extension of the earn-out period through
2026. Excluding the after-tax impact of this item, the termination
of the Company’s interest rate swap agreement and reflecting the
then potential impact of the conversion of the Company’s
convertible preferred stock into common stock for the period that
it was outstanding during the quarter prior to the repurchase and
conversion on June 15, 2021, adjusted net income and adjusted net
income per share for the second quarter of fiscal 2021 were $43.9
million and $0.80, 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 150.0% year-over-year in the second quarter
of fiscal 2021. Relative to the second quarter of fiscal 2019,
comparable restaurant sales at The Cheesecake Factory restaurants
increased 7.8%.
As of today, nearly all of the Company’s restaurants across its
concepts are operating with no indoor dining restrictions. Fiscal
2021 third quarter-to-date through July 26th comparable sales for
The Cheesecake Factory restaurants increased approximately 61%
year-over-year and 10% relative to the same period in fiscal 2019,
supported by approximately 27% off-premise sales mix. Based on
average weekly sales quarter-to-date of approximately $230,000,
this equates to nearly $12 million on average, per unit on an
annualized basis. Off-premise average weekly sales are about double
the level seen during the same period in fiscal 2019.
“We had a tremendous second quarter, driving record revenues and
strong cash flow,” said David Overton, Chairman and Chief Executive
Officer. “When we reflect on where we were a year ago during the
depths of COVID-19, we are so proud of our team’s accomplishments
that have driven our recovery. Comparable sales at The Cheesecake
Factory restaurants far outpaced pre-COVID levels during the second
quarter and we leveraged the sales to drive solid bottom line
performance. Sales across our concepts further strengthened early
in the third quarter as nearly all of our restaurants are now
operating with no indoor dining restrictions. Additionally, we
opened three new restaurants during the second quarter and with our
most recent opening last week, we are on track to meet our
development objective to open as many as 14 new restaurants across
our concepts this year.”
Development
During the second quarter of fiscal 2021, two North Italia
restaurants opened in Miami and San Antonio, Flower Child opened in
Atlanta, and one Cheesecake Factory restaurant opened
internationally in Shanghai under a licensing agreement. Subsequent
to quarter-end, a second North Italia opened in the Nashville
area.
Balance Sheet & Cash Flow
During the second quarter, the Company generated $108.8 million
in cash flow from operating activities.
As of June 29, 2021, the
Company had total available liquidity of $401.9 million, including
a cash balance of $161.8 million and availability on its revolving
credit facility of $240.1 million. Total principal amount of debt
outstanding was $475 million, including $345 million of 0.375%
convertible senior notes due 2026 issued during the second quarter
and $130 million drawn on the Company’s revolving credit facility
following the previously announced $150 million repayment during
the second quarter.
The Company also completed the offering of 3.125 million shares
of common stock during the second quarter of fiscal 2021. As
previously disclosed, the Company used the net proceeds from the
convertible senior note and common stock offerings to fund
approximately $457.4 million payable in connection with 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 an assumed dividend
during the second quarter of fiscal 2021.
Conference Call and Webcast
The Company will hold a conference call to review its results
for the second quarter of fiscal 2021 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, 2021.
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 301 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.
From FORTUNE. ©2021 Fortune Media IP Limited. FORTUNE 100 Best
Companies to Work For is a trademark of Fortune Media IP Limited
and is used under license. FORTUNE and Fortune Media IP Limited are
not affiliated with, and do not endorse products or services of,
Licensee.
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 average weekly sales on an annualized basis and the
Company being on track to meet its fiscal 2021 development
objective. 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 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; strategic capital
allocation decisions including any share repurchases or dividends;
the ability to achieve projected financial results; economic and
political conditions that impact consumer confidence and spending;
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
29, 2021 June 30, 2020 June 29, 2021 June 30,
2020 Amount Percent ofRevenues Amount
Percent ofRevenues Amount Percent ofRevenues
Amount Percent ofRevenues Revenues
$
768,956
100.0
%
$
295,851
100.0
%
$
1,396,373
100.0
%
$
910,957
100.0
%
Costs and expenses: Cost of sales
168,944
22.0
%
72,139
24.4
%
304,819
21.8
%
213,044
23.4
%
Labor expenses
274,812
35.7
%
122,812
41.5
%
504,544
36.1
%
359,794
39.5
%
Other operating costs and expenses
199,495
25.9
%
121,675
41.1
%
381,028
27.3
%
289,645
31.8
%
General and administrative expenses
48,228
6.3
%
35,712
12.1
%
92,655
6.6
%
79,672
8.7
%
Depreciation and amortization expenses
22,223
2.9
%
22,590
7.6
%
44,229
3.2
%
46,152
5.1
%
Impairment of assets and lease termination expenses
-
0.0
%
2,433
0.8
%
594
0.0
%
194,329
21.3
%
Acquisition-related costs
-
0.0
%
1,068
0.4
%
-
0.0
%
2,304
0.3
%
Acquisition-related contingent consideration, compensationand
amortization expenses/(benefit)
11,357
1.5
%
(965
)
(0.3
)%
11,907
0.9
%
(5,431
)
(0.6
)%
Preopening costs
2,779
0.4
%
2,097
0.7
%
6,635
0.5
%
5,216
0.6
%
Total costs and expenses
727,838
94.7
%
379,561
128.3
%
1,346,411
96.4
%
1,184,725
130.1
%
Income/(loss) from operations
41,118
5.3
%
(83,710
)
(28.3
)%
49,962
3.6
%
(273,768
)
(30.1
)%
Interest and other expense, net
(4,706
)
(0.6
)%
(2,566
)
(0.9
)%
(7,400
)
(0.5
)%
(4,084
)
(0.4
)%
Income/(loss) before income taxes
36,412
4.7
%
(86,276
)
(29.2
)%
42,562
3.1
%
(277,852
)
(30.5
)%
Income tax provision/(benefit)
2,697
0.3
%
(29,737
)
(10.1
)%
4,979
0.4
%
(85,150
)
(9.3
)%
Net income/(loss)
33,715
4.4
%
(56,539
)
(19.1
)%
37,583
2.7
%
(192,702
)
(21.2
)%
Dividends on Series A preferred stock (1)
(13,591
)
(1.8
)%
(3,694
)
(1.2
)%
(18,661
)
(1.4
)%
(3,694
)
(0.4
)%
Direct and incremental Series A preferred stock issuance cost
-
0.0
%
(10,257
)
(3.5
)%
-
0.0
%
(10,257
)
(1.1
)%
Undistributed earnings allocated to Series A preferred stock
(3,051
)
(0.4
)%
-
0.0
%
(3,123
)
(0.2
)%
-
0.0
%
Net income/(loss) available to common stockholders
$
17,073
2.2
%
$
(70,490
)
(23.8
)%
$
15,799
1.1
%
$
(206,653
)
(22.7
)%
Basic net income/(loss) per common share
$
0.38
$
(1.61
)
$
0.35
$
(4.72
)
Basic weighted average shares outstanding
45,471
43,874
44,830
43,824
Diluted net income/(loss) per common share (2)
$
0.37
$
(1.61
)
$
0.35
$
(4.72
)
Diluted weighted average shares outstanding
46,777
43,874
45,975
43,824
(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 29, 2021 June 30, 2020
June 29, 2021 June 30, 2020 Revenues: The Cheesecake
Factory restaurants
$
606,691
$
241,068
$
1,106,080
$
729,539
North Italia
43,566
13,759
76,390
44,271
Other FRC
47,458
12,208
83,652
47,791
Other
71,241
28,816
130,251
89,356
Total
$
768,956
$
295,851
$
1,396,373
$
910,957
Income/(loss) from operations: The Cheesecake Factory restaurants
$
83,198
$
(26,951
)
$
127,679
$
12,373
North Italia
3,026
(4,405
)
3,358
(76,491
)
Other FRC
7,282
(5,212
)
11,162
(75,176
)
Other
(52,388
)
(47,142
)
(92,237
)
(134,474
)
Total
$
41,118
$
(83,710
)
$
49,962
$
(273,768
)
Preopening costs: The Cheesecake Factory restaurants
$
584
$
767
$
2,648
$
2,181
North Italia
1,061
311
2,279
1,264
Other FRC
637
380
1,099
221
Other
497
639
609
1,550
Total
$
2,779
$
2,097
$
6,635
$
5,216
Impairment of assets and lease termination expenses: The Cheesecake
Factory restaurants
$
-
$
2,325
$
-
$
2,941
North Italia
-
-
-
71,524
Other FRC
-
-
-
72,939
Other
-
108
594
46,925
Total
$
-
$
2,433
$
594
$
194,329
Depreciation and amortization expenses: The Cheesecake Factory
restaurants
$
16,487
$
16,867
$
32,807
$
34,144
North Italia
981
901
1,825
1,866
Other FRC
1,038
814
2,215
2,015
Other
3,717
4,008
7,382
8,127
Total
$
22,223
$
22,590
$
44,229
$
46,152
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended
26 Weeks Ended The Cheesecake Factory restaurants
operating information: June 29, 2021 June 30,
2020 June 29, 2021 June 30, 2020 Comparable
restaurant sales vs. prior year
150.0
%
(56.9
)%
52.0
%
(35.0
)%
Comparable restaurant sales vs. 2019
7.8
%
(1.2
)%
Restaurants opened during period
-
-
1
-
Restaurants open at period-end
207
206
207
206
Restaurant operating weeks
2,691
2,640
5,369
5,314
North Italia operating information: Comparable restaurant
sales vs. prior year
182
%
(59
)%
63
%
(17
)%
Comparable restaurant sales vs. 2019
10
%
3
%
Restaurants opened during period
2
-
3
1
Restaurants open at period-end
26
23
26
23
Restaurant operating weeks
328
261
631
551
Other Fox Restaurant Concepts (FRC) operating
information:(1) Restaurants opened during period
-
-
1
-
Restaurants open at period-end
28
25
28
25
Restaurant operating weeks
354
221
696
534
Other operating information:(2) Restaurants opened during
period
1
-
1
1
Restaurants open at period-end
39
40
39
40
Restaurant operating weeks
490
313
967
805
Number of company-owned restaurants: The Cheesecake Factory
207
North Italia
26
Other FRC
28
Other
39
Total
300
Number of international-licensed restaurants: The Cheesecake
Factory
28
(1) The Other FRC segment includes all FRC brands except Flower
Child. (2) The Other segment includes the Flower Child, Grand Lux
Cafe, RockSugar Southeast Asian Kitchen 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 29, 2021
December 29, 2020 Cash and cash equivalents
$
161,768
$
154,085
Long-term debt, net of issuance costs (1)
465,010
280,000
(1) Includes $335 million net balance of 0.375% convertible
senior notes due 2026 (principal amount of $345 million less $10
million in unamortized issuance cost) 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 Sheets and were 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 excludes the preferred dividend and assumes 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 29,
2021 June 30, 2020 June 29, 2021 June 30,
2020 Net loss available to common stockholders (GAAP)
$
17,073
$
(70,490
)
$
15,798
$
(206,653
)
Dividends on Series A preferred stock
13,591
3,694
18,661
3,694
Net income attributable to Series A preferred stock to apply
if-converted method
3,051
-
3,123
-
Direct and incremental Series A preferred stock issuance costs
-
10,257
-
10,257
COVID-19 related costs(1)
-
11,730
4,917
15,020
Impairment of assets and lease termination expenses(2)
-
2,433
594
194,329
Acquisition-related costs(3)
-
1,068
-
2,304
Acquisition-related contingent consideration,compensation and
amortization expenses/(benefit)(4)
11,357
(965
)
11,907
(5,431
)
Termination of Interest rate swap
2,354
-
2,354
-
Uncertain tax position related to tenant improvement allowances(5)
-
-
2,471
-
Tax effect of adjustments(6)
(3,565
)
(3,710
)
(5,140
)
(53,618
)
Adjusted net income/(loss) (non-GAAP)
$
43,861
$
(45,983
)
$
54,685
$
(40,098
)
Diluted net loss per common share (GAAP)
$
0.37
$
(1.61
)
$
0.35
$
(4.72
)
Dividends on Series A preferred stock
0.25
0.07
0.34
0.08
Net income attributable to Series A preferred stock to apply
if-converted method
0.06
-
0.06
-
Direct and incremental Series A preferred stock issuance costs
-
0.20
-
0.22
Assumed impact of potential conversion of Series A preferred stock
into common stock(7)
(0.06
)
0.22
(0.06
)
0.35
COVID-19 related costs
-
0.23
0.09
0.32
Impairment of assets and lease termination expenses
-
0.05
0.01
4.11
Acquisition-related costs
-
0.02
-
0.05
Acquisition-related contingent consideration,compensation and
amortization expenses/(benefit)
0.21
(0.02
)
0.22
(0.11
)
Termination of Interest rate swap
0.04
-
0.04
-
Uncertain tax position related to tenant improvement allowances
-
-
0.05
-
Tax effect of adjustments
(0.07
)
(0.07
)
(0.09
)
(1.13
)
Adjusted net income/(loss) per share (non-GAAP)(8)
$
0.80
$
(0.90
)
$
1.00
$
(0.85
)
(1) Represents incremental costs associated with COVID-19
such as sick and vaccination pay, healthcare and meal benefits for
furloughed staff members, additional sanitation and personal
protective equipment. (2) A detailed breakdown of impairment of
assets and lease termination expenses recorded in the thirteen and
twenty-six weeks ended June 29, 2021 and June 30, 2020 can be found
in the Selected Segment Information table. (3) Represents costs
incurred to effect and integrate the North and FRC acquisition. (4)
Represents changes in the fair value of the deferred consideration
and contingent consideration and compensation liabilities related
to the North and FRC acquisition, as well as amortization of
acquired definite-lived licensing agreements. The increase during
the thirteen weeks ended June 29, 2021 primarily reflects the
impact of the amendment to the Fox Restaurant Concepts acquisition
agreement that, among other things, included the extension of the
earn-out period through 2026. (5) Reserve for uncertain tax
position related to tenant improvement allowances. 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. (6) 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 2021 and 2020
periods. (7) 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 54,902,770 and
54,837,353 weighted-average common shares outstanding for the
thirteen and twenty-six weeks ended June 29, 2021, respectively.
The impact of assuming the conversion of Series A preferred stock
into common stock (7,019,521 and 3,509,761 shares for the thirteen
and twenty-six weeks ended June 30, 2020, respectively), resulting
in an assumption of 50,893,967 and 47,333,583 weighted-average
common shares outstanding for the thirteen and twenty-six weeks
ended June 30, 2020, respectively. (8) Adjusted net income per
share may not add due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210727006061/en/
Stacy Feit (818) 871-3000 investorrelations@thecheesecakefactory.com
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