The Cheesecake Factory Incorporated (NASDAQ: CAKE) today
reported financial results for the second quarter of fiscal 2023,
which ended on July 4, 2023.
Total revenues were $866.2 million in the second quarter of
fiscal 2023 compared to $832.6 million in the second quarter of
fiscal 2022. Net income and diluted net income per share were $42.7
million and $0.87, respectively, in the second quarter of fiscal
2023.
The Company recorded a pre-tax net expense of $0.6 million
related to Fox Restaurant Concepts (“FRC”) acquisition-related
expenses and impairment of assets and lease termination income.
Excluding the after-tax impact of these items, adjusted net income
and adjusted net income per share for the second quarter of fiscal
2023 were $43.1 million and $0.88, 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 1.5% year-over-year in the second quarter of
fiscal 2023 and increased 14.1% relative to the second quarter of
fiscal 2019, on an operating week basis.
“I am pleased to report our second quarter results marked the
third consecutive quarter of sequential profit margin expansion,
finishing above our expectations, reflecting continued progress
against our stated goal of recapturing our margins,” said David
Overton, Chairman and Chief Executive Officer. “We delivered
another quarter of comparable sales growth across our portfolio of
concepts, with comparable sales at The Cheesecake Factory
restaurants continuing to outpace the industry relative to 2019.
Our experienced operators drove solid operational execution within
our restaurants to deliver year-over-year improvements in labor
productivity and hourly staff and manager retention.”
“We opened three new restaurants during the second quarter,
including two in the Miami area which opened to impressive demand,
underscoring the strength of the consumer demand for our concepts
and the unique dining experiences we provide for our guests. We
remain intently focused on accelerating our unit growth and
achieving our long-term unit growth objectives, despite ongoing
construction and permitting challenges.”
Development
During the second quarter of fiscal 2023, the Company opened a
Cheesecake Factory and a Henry in the Miami area and a Doughbird in
Tucson, AZ. While all of the sites in the Company’s pipeline remain
active, the Company continues to experience some delays in opening
dates due to construction challenges and permit approval delays. As
a result, the Company now expects to open as many as 20 new
restaurants in fiscal 2023, including as many as six Cheesecake
Factory restaurants, five North Italia restaurants, and as many as
nine FRC restaurants, including three Flower Child locations.
In addition, in fiscal 2023 the Company expects two to three
Cheesecake Factory restaurants to open internationally under
licensing agreements.
Liquidity and Capital Allocation
As of July 4, 2023, the Company had total available liquidity of
$330.1 million, including a cash balance of $91.6 million and
availability on its revolving credit facility of $238.5 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 280,400 shares of its
stock at a cost of $9.3 million in the second quarter of fiscal
2023. In addition, the Company’s Board of Directors has declared a
quarterly dividend of $0.27 per share to be paid on August 29, 2023
to shareholders of record at the close of business on August 16,
2023.
Conference Call and Webcast
The Company will hold a conference call to review its results
for the second quarter of fiscal 2023 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 September 1, 2023.
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 321 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, 30 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 2023, we were named to the FORTUNE
Magazine “100 Best Companies to Work For®” list for the tenth
consecutive year. To learn more, visit
www.thecheesecakefactory.com, www.northitalia.com and
www.foxrc.com.
From Fortune ©2023 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 the Company’s goal of recapturing margins, comparable
sales outpacing the industry, unit growth objectives and restaurant
development. 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: economic, public health and political conditions that
impact consumer confidence and spending, including rising interest
rates, periods of heightened inflation and market instability, and
armed conflicts; supply chain disruptions; 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; pandemics and related containment measures,
including the potential for quarantines or restriction on in-person
dining; 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; 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; 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 with
respect to 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; changes in laws impacting the Company’s
business; 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 July 4,
2023 June 28, 2022 July 4, 2023 June 28,
2022
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Revenues
$
866,170
100.0
%
$
832,643
100.0
%
$
1,732,284
100.0
%
$
1,626,353
100.0
%
Costs and expenses: Food and beverage cost
201,094
23.2
%
204,182
24.5
%
407,318
23.5
%
392,683
24.1
%
Labor expenses
306,149
35.3
%
304,519
36.6
%
617,677
35.7
%
600,282
36.9
%
Other operating costs and expenses
226,996
26.2
%
219,200
26.3
%
457,925
26.4
%
426,835
26.3
%
General and administrative expenses
54,488
6.4
%
50,191
6.0
%
108,557
6.3
%
99,314
6.1
%
Depreciation and amortization expenses
23,332
2.7
%
22,608
2.7
%
46,287
2.7
%
44,113
2.7
%
Impairment of assets and lease termination expenses
(653
)
(0.1
)%
106
0.0
%
1,589
0.1
%
313
0.0
%
Acquisition-related contingent consideration, compensation and
amortization expenses
1,287
0.1
%
948
0.1
%
2,476
0.1
%
1,839
0.1
%
Preopening costs
6,006
0.7
%
2,947
0.4
%
9,058
0.5
%
4,711
0.3
%
Total costs and expenses
818,699
94.5
%
804,701
96.6
%
1,650,887
95.3
%
1,570,090
96.5
%
Income from operations
47,471
5.5
%
27,942
3.4
%
81,397
4.7
%
56,263
3.5
%
Interest and other expense, net
(2,162
)
(0.3
)%
(1,130
)
(0.2
)%
(4,042
)
(0.2
)%
(2,591
)
(0.2
)%
Income before income taxes
45,309
5.2
%
26,812
3.2
%
77,355
4.5
%
53,672
3.3
%
Income tax provision
2,634
0.3
%
1,156
0.1
%
6,630
0.4
%
4,853
0.3
%
Net income
42,675
4.9
%
25,656
3.1
%
70,725
4.1
%
48,819
3.0
%
Basic net income per share
$
0.88
$
0.51
$
1.46
$
0.97
Basic weighted average shares outstanding
48,492
50,387
48,593
50,360
Diluted net income per share
$
0.87
$
0.50
$
1.43
$
0.96
Diluted weighted average shares outstanding
49,085
50,929
49,296
50,966
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended
26 Weeks Ended Selected Segment Information July
4, 2023 June 28, 2022 July 4, 2023 June 28,
2022 Revenues: The Cheesecake Factory restaurants
$
652,481
$
640,858
$
1,308,481
$
1,250,674
North Italia
65,934
56,238
129,237
108,995
Other FRC
65,728
60,020
134,368
118,852
Other
82,027
75,527
160,198
147,832
Total
$
866,170
$
832,643
$
1,732,284
$
1,626,353
Income from operations: The Cheesecake Factory restaurants
$
85,677
$
64,327
$
164,073
$
127,771
North Italia
6,627
5,048
11,233
8,726
Other FRC
6,079
6,793
14,790
14,122
Other
(50,912
)
(48,226
)
(108,699
)
(94,356
)
Total
$
47,471
$
27,942
$
81,397
$
56,263
Preopening costs: The Cheesecake Factory restaurants
$
3,091
$
1,372
$
4,539
$
2,406
North Italia
618
1,004
1,064
1,414
Other FRC
1,999
284
2,720
273
Other
298
287
735
618
Total
$
6,006
$
2,947
$
9,058
$
4,711
Impairment of assets and lease termination expenses: The
Cheesecake Factory restaurants
$
38
$
106
$
131
(59
)
North Italia
-
-
-
-
Other FRC
-
-
55
-
Other
(691
)
-
1,403
372
Total
$
(653
)
$
106
$
1,589
$
313
Depreciation and amortization expenses: The Cheesecake
Factory restaurants
$
16,235
$
16,275
$
32,244
$
31,862
North Italia
1,668
1,222
3,135
2,520
Other FRC
1,809
1,470
3,736
3,051
Other
3,620
3,641
7,172
6,680
Total
$
23,332
$
22,608
$
46,287
$
44,113
13 Weeks Ended 13 Weeks Ended 26 Weeks
Ended 26 Weeks Ended The Cheesecake Factory
restaurants operating information: July 4, 2023 June
28, 2022 July 4, 2023 June 28, 2022 Comparable
restaurant sales vs. prior year
1.5
%
4.7
%
3.6
%
12.0
%
Comparable restaurant sales vs. 2019
14.1
%
13.0
%
14.5
%
10.5
%
Restaurants opened during period
1
-
1
-
Restaurants open at period-end
211
208
211
208
Restaurant operating weeks
2,734
2,704
5,471
5,408
North Italia operating information: Comparable
restaurant sales vs. prior year
8
%
12
%
8
%
21
%
Comparable restaurant sales vs. 2019
30
%
22
%
30
%
23
%
Restaurants opened during period
-
1
-
1
Restaurants open at period-end
33
30
33
30
Restaurant operating weeks
429
378
858
755
Other Fox Restaurant Concepts (FRC) operating
information:(1) Restaurants opened during period
2
-
3
-
Restaurants open at period-end
37
31
37
31
Restaurant operating weeks
462
403
913
806
Other operating information:(2) Restaurants opened
during period
-
1
1
1
Restaurants open at period-end
40
39
40
39
Restaurant operating weeks
520
505
1,035
1,007
Number of company-owned restaurants: The Cheesecake
Factory
211
North Italia
33
Other FRC
37
Other
40
Total
321
Number of international-licensed restaurants: The
Cheesecake Factory
30
(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 July 4,
2023 January 3, 2023 Cash and cash equivalents
$
91,557
$
114,777
Long-term debt, net of issuance costs (1)
469,040
468,032
(1)
Includes $339 million net balance of 0.375% convertible senior
notes due 2026 (principal amount of $345 million less $6.0 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. 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 July 4,
2023 June 28, 2022 July 4, 2023 June 28,
2022 Net income (GAAP)
$
42,675
$
25,656
$
70,725
$
48,819
Impairment of assets and lease termination expenses(1)
(653
)
106
1,589
313
Acquisition-related contingent consideration, compensation and
amortization expenses(2)
1,287
948
2,476
1,839
Tax effect of adjustments(3)
(165
)
(275
)
(1,057
)
(559
)
Adjusted net income (non-GAAP)
$
43,144
$
26,435
$
73,733
$
50,412
Diluted net income per share (GAAP)
$
0.87
$
0.50
$
1.43
$
0.96
Impairment of assets and lease termination expenses
(0.01
)
0.00
0.03
0.01
Acquisition-related contingent consideration,compensation and
amortization expenses
0.03
0.02
0.05
0.04
Tax effect of adjustments
(0.00
)
(0.01
)
(0.02
)
(0.01
)
Adjusted net income per share (non-GAAP)(4)
$
0.88
$
0.52
$
1.50
$
0.99
(1)
A detailed breakdown of impairment of assets and lease termination
expenses recorded in the thirteen and twenty-six weeks ended July
4, 2023 and June 28, 2022 can be found in the Selected Segment
Information table.
(2)
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.
(3)
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 2023 and 2022 periods.
(4)
Adjusted net income per share may not add due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802580454/en/
Etienne Marcus (818) 871-3000
investorrelations@thecheesecakefactory.com
Cheesecake Factory (NASDAQ:CAKE)
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