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The Cheesecake Factory Reports Results for Fourth Quarter of Fiscal 2021 and Provides Business Update

Fourth quarter Consolidated Revenues Up 40% to a Record $776.7 Million

The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the fourth quarter of fiscal 2021, which ended on December 28, 2021.

Total revenues were $776.7 million in the fourth quarter of fiscal 2021 compared to $554.6 million in the fourth quarter of fiscal 2020. Net income available to common stockholders and diluted net income per common share were $2.1 million and $0.04, respectively, in the fourth quarter of fiscal 2021.

The company recorded $29.1 million related to pre-tax charges of asset impairments and FRC acquisition-related items, as well as a reserve for uncertain tax positions. Excluding the after-tax impact of these items, adjusted net income and adjusted net income per share for the fourth quarter of fiscal 2021 were $24.9 million and $0.49, 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 33.8% year-over-year in the fourth quarter of fiscal 2021. Relative to the fourth quarter of fiscal 2019, comparable restaurant sales at The Cheesecake Factory restaurants increased 7.7%.

As of today, indoor dining restrictions have been lifted for nearly all of the company’s restaurants across all its concepts. Fiscal 2022 first quarter-to-date through February 15th comparable sales for The Cheesecake Factory restaurants increased approximately 24.3% year-over-year, supported by approximately 30% off-premise sales mix.

“We posted another quarter of solid sales performance across our brands, continuing to outperform the broader casual dining industry and recording record revenues despite the surge in COVID-19 cases from the Omicron variant towards the end of the year,” said David Overton, Chairman and Chief Executive Officer. “Specifically, fourth quarter comparable sales at The Cheesecake Factory were running at 10.6% going into the third week of December relative to fiscal 2019. We believe our operating results would have been in line with expectations but for the softer sales trend during the last two weeks of the quarter which coincided with the Omicron surge.”

Overton continued, “I remain proud of our teams for how they have navigated through all of the challenges this past year while continuing to deliver delicious, memorable experiences for our guests. As we look ahead, I am confident that our best in-class operators will continue to effectively manage through this volatile operating environment, and with our development pipeline in place and solid comparable sales trends across our brands, we are well-positioned to continue to take market share.”

Development

During the fourth quarter of fiscal 2021, four new restaurants opened, including The Cheesecake Factory in Huntsville, AL, North Italia in Orlando and a Blanco and a Culinary Dropout in Denver, meeting the Company’s development objective of opening 14 new restaurants across its concepts during fiscal 2021.

In addition, internationally a third The Cheesecake Factory opened in Shanghai under a licensing agreement during the fourth quarter of fiscal 2021.

Balance Sheet & Cash Flow

As of December 28, 2021, the Company had total available liquidity of $430 million, including a cash balance of $190 million and availability on its revolving credit facility of $240 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.

Conference Call and Webcast

The Company will hold a conference call to review its results for the fourth 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 March 18, 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 306 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 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 [continued outperformance of the broader casual dining industry, managing through the volatile operating environment, development pipeline, solid comparable sales trends across brands and market share]. 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; 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; 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 domestic and 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, including the cost of group medical insurance; 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, 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; the timing of our new unit development; 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 52 Weeks Ended 52 Weeks Ended
Consolidated Statements of Income December 28, 2021 December 29, 2020 December 28, 2021 December 29, 2020

Amount

Percent of

Revenues

Amount

Percent of

Revenues

Amount

Percent of

Revenues

Amount

Percent of

Revenues
 
Revenues

$

776,693

 

100.0

%

$

554,552

 

100.0

%

$

2,927,540

 

100.0

%

$

1,983,225

 

100.0

%

Costs and expenses:
Cost of sales

 

178,896

 

23.0

%

 

127,195

 

22.9

%

 

653,133

 

22.3

%

 

458,332

 

23.1

%

Labor expenses

 

288,127

 

37.1

%

 

218,126

 

39.3

%

 

1,072,628

 

36.6

%

 

778,586

 

39.3

%

Other operating costs and expenses

 

209,793

 

27.0

%

 

167,329

 

30.2

%

 

792,311

 

27.0

%

 

616,069

 

31.1

%

General and administrative expenses

 

47,679

 

6.1

%

 

40,177

 

7.3

%

 

186,136

 

6.4

%

 

157,644

 

7.9

%

Depreciation and amortization expenses

 

22,849

 

3.0

%

 

22,612

 

4.1

%

 

89,654

 

3.1

%

 

91,415

 

4.6

%

Impairment of assets and lease termination expenses

 

17,545

 

2.3

%

 

14,602

 

2.6

%

 

18,139

 

0.6

%

 

219,333

 

11.1

%

Acquisition-related costs

 

-

 

0.0

%

 

356

 

0.1

%

 

-

 

0.0

%

 

2,699

 

0.1

%

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

 

6,918

 

0.9

%

 

120

 

0.0

%

 

19,510

 

0.7

%

 

(3,872

)

(0.2

)%

Preopening costs

 

3,907

 

0.5

%

 

2,846

 

0.5

%

 

13,711

 

0.5

%

 

10,456

 

0.5

%

Total costs and expenses

 

775,714

 

99.9

%

 

593,363

 

107.0

%

 

2,845,222

 

97.2

%

 

2,330,662

 

117.5

%

Income/(loss) from operations

 

979

 

0.1

%

 

(38,811

)

(7.0

)%

 

82,318

 

2.8

%

 

(347,437

)

(17.5

)%

Interest and other expense, net

 

(1,504

)

(0.2

)%

 

(1,580

)

(0.3

)%

 

(10,698

)

(0.4

)%

 

(8,599

)

(0.5

)%

Income/(loss) before income taxes

 

(525

)

(0.1

)%

 

(40,391

)

(7.3

)%

 

71,620

 

2.4

%

 

(356,036

)

(18.0

)%

Income tax benefit

 

(2,635

)

(0.3

)%

 

(8,074

)

(1.5

)%

 

(753

)

(0.1

)%

 

(102,671

)

(5.2

)%

Net income/(loss)

 

2,110

 

0.2

%

 

(32,317

)

(5.8

)%

 

72,373

 

2.5

%

 

(253,365

)

(12.8

)%

Dividends on Series A preferred stock (1)

 

-

 

0.0

%

 

(4,953

)

(0.9

)%

 

(18,661

)

(0.6

)%

 

(13,485

)

(0.7

)%

Direct and incremental Series A preferred stock issuance cost

 

-

 

0.0

%

 

-

 

0.0

%

 

-

 

0.0

%

 

(10,257

)

(0.5

)%

Undistributed earnings allocated to Series A preferred stock

 

-

 

0.0

%

 

-

 

0.0

%

 

(4,581

)

(0.2

)%

 

-

 

0.0

%

Net income/(loss) available to common stockholders

$

2,110

 

0.2

%

$

(37,270

)

(6.7

)%

$

49,131

 

1.7

%

$

(277,107

)

(14.0

)%

 
Basic net income/(loss) per common share

$

0.04

 

$

(0.85

)

$

1.03

 

$

(6.32

)

Basic weighted average shares outstanding

 

50,243

 

 

43,928

 

 

47,529

 

 

43,869

 

 
Diluted net income/(loss) per common share (2)

$

0.04

 

$

(0.85

)

$

1.01

 

$

(6.32

)

Diluted weighted average shares outstanding

 

51,053

 

 

43,928

 

 

48,510

 

 

43,869

 

(1) During the second quarter of fiscal 2021, the Company completed the cash-settled conversion 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.

(2) Diluted net income per common share reflects the reallocation of undistributed earnings to preferred stock of $84,883 for the fifty-two weeks ended December 28, 2021.

13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks Ended
Selected Segment Information December 28, 2021 December 29, 2020 December 28, 2021 December 29, 2020
Revenues:
The Cheesecake Factory restaurants

$

594,590

 

$

438,485

 

$

2,293,225

 

$

1,585,008

 

North Italia

 

51,155

 

 

30,324

 

 

171,901

 

 

102,585

 

Other FRC

 

54,197

 

 

28,792

 

 

182,175

 

 

96,856

 

Other

 

76,751

 

 

56,951

 

 

280,239

 

 

198,776

 

Total

$

776,693

 

$

554,552

 

$

2,927,540

 

$

1,983,225

 

 
Income/(loss) from operations:
The Cheesecake Factory restaurants

$

48,129

 

$

14,331

 

$

242,599

 

$

45,540

 

North Italia

 

3,304

 

 

(49

)

 

8,624

 

 

(77,371

)

Other FRC

 

1,758

 

 

51

 

 

16,323

 

 

(77,026

)

Other

 

(52,212

)

 

(53,144

)

 

(185,228

)

 

(238,580

)

Total

$

979

 

$

(38,811

)

$

82,318

 

$

(347,437

)

 
Preopening costs:
The Cheesecake Factory restaurants

$

1,253

 

$

1,049

 

$

4,868

 

$

4,206

 

North Italia

 

1,175

 

 

683

 

 

4,510

 

 

2,578

 

Other FRC

 

1,239

 

 

797

 

 

3,188

 

 

1,324

 

Other

 

240

 

 

317

 

 

1,145

 

 

2,348

 

Total

$

3,907

 

$

2,846

 

$

13,711

 

$

10,456

 

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

$

11,904

 

$

477

 

$

11,904

 

$

3,261

 

North Italia

 

-

 

 

258

 

 

-

 

 

71,782

 

Other FRC

 

1,305

 

 

110

 

 

1,305

 

 

73,049

 

Other

 

4,336

 

 

13,757

 

 

4,930

 

 

71,241

 

Total

$

17,545

 

$

14,602

 

$

18,139

 

$

219,333

 

 
Depreciation and amortization expenses:
The Cheesecake Factory restaurants

$

16,766

 

$

16,657

 

$

65,987

 

$

67,514

 

North Italia

 

1,185

 

 

841

 

 

4,078

 

 

3,608

 

Other FRC

 

1,379

 

 

1,088

 

 

4,802

 

 

4,090

 

Other

 

3,519

 

 

4,026

 

 

14,787

 

 

16,203

 

Total

$

22,849

 

$

22,612

 

$

89,654

 

$

91,415

 

13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks Ended
The Cheesecake Factory restaurants operating information: December 28, 2021 December 29, 2020 December 28, 2021 December 29, 2020
Comparable restaurant sales vs. prior year

33.8 %

(19.5)%

44.0 %

(28.2)%

Comparable restaurant sales vs. 2019

7.7 %

3.3 %

Restaurants opened during period

1

1

2

1

Restaurants open at period-end

208

206

208

206

Restaurant operating weeks

2,700

2,666

10,758

10,642

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

37 %

(18)%

48 %

(28)%

Comparable restaurant sales vs. 2019

14 %

7 %

Restaurants opened during period

1

-

6

1

Restaurants open at period-end

29

23

29

23

Restaurant operating weeks

372

299

1,352

1,146

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

2

2

4

2

Restaurants open at period-end

31

27

31

27

Restaurant operating weeks

393

330

1,460

1,139

 
Other operating information: (2)
Restaurants opened during period

-

-

2

3

Restaurants open at period-end

40

39

40

39

Restaurant operating weeks

519

479

1,993

1,721

 
Number of company-owned restaurants:
The Cheesecake Factory

208

North Italia

29

Other FRC

31

Other

40

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, 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 December 28, 2021 December 29, 2020
Cash and cash equivalents

$

189,627

$

154,085

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

 

466,017

 

280,000

(1) Incudes $336 million net balance of 0.375% convertible senior notes due 2026 (principal amount of $345 million less $9 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 52 Weeks Ended 52 Weeks Ended
December 28, 2021 December 29, 2020 December 28, 2021 December 29, 2020
 
Net income/(loss) available to common stockholders (GAAP)

$

2,110

 

$

(37,270

)

$

49,131

 

$

(277,107

)

Dividends on Series A preferred stock

 

-

 

 

4,953

 

 

18,661

 

 

13,485

 

Direct and incremental Series A preferred stock issuance costs

 

-

 

 

-

 

 

-

 

 

10,257

Net income attributable to Series A preferred stock to apply if-converted method

 

-

 

 

-

 

 

4,581

 

 

-

 

COVID-19 related costs (1)

 

-

 

 

5,384

 

 

4,917

 

 

22,963

 

Impairment of assets and lease termination expenses (2)

 

17,545

 

 

14,602

 

 

18,139

 

 

219,333

 

Acquisition-related costs (3)

 

-

 

 

356

 

 

-

 

 

2,699

 

Acquisition-related contingent consideration, compensation and amortization expenses/(benefit) (4)

 

6,918

 

 

120

 

 

19,510

 

 

(3,872

)

Termination of Interest rate swap

 

-

 

 

-

 

 

2,354

 

 

-

Uncertain tax positions (5)

 

4,667

 

 

-

 

 

7,139

 

 

-

Tax effect of adjustments (6)

 

(6,361

)

 

(5,321

)

 

(11,679

)

 

(62,692

)

Adjusted net income/(loss) (non-GAAP)

$

24,879

 

$

(17,176

)

$

112,753

 

$

(74,934

)

 
Diluted net income/(loss) per common share (GAAP)

$

0.04

 

$

(0.85

)

$

1.01

 

$

(6.32

)

Dividends on Series A preferred stock

 

-

 

 

0.09

 

 

0.35

 

 

0.27

Direct and incremental Series A preferred stock issuance costs

 

-

 

 

-

 

 

-

 

 

0.20

Net income attributable to Series A preferred stock to apply if-converted method

 

-

 

 

-

 

 

0.09

 

 

-

 

Assumed impact of potential conversion of Series A preferred stock into common stock (7)

 

-

 

 

0.15

 

 

(0.08

)

 

0.80

 

COVID-19 related costs

 

-

 

 

0.10

 

 

0.09

 

 

0.46

Impairment of assets and lease termination expenses

 

0.34

 

 

0.27

 

 

0.34

 

 

4.36

Acquisition-related costs

 

-

 

 

0.01

 

 

-

 

 

0.05

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

 

0.14

 

 

0.00

 

 

0.37

 

 

(0.08

)

Termination of Interest rate swap

 

-

 

 

-

 

 

0.04

 

 

-

Uncertain tax positions

 

0.09

 

 

-

 

 

0.13

 

 

-

Tax effect of adjustments

 

(0.12

)

 

(0.10

)

 

(0.22

)

 

(1.25

)

Adjusted net income/(loss) per share (non-GAAP) (8)

$

0.49

 

$

(0.32

)

$

2.13

 

$

(1.49

)

(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 fifty-two weeks ended December 28, 2021 and December 29, 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.

(5) Reserve for uncertain tax positions related to tenant improvement allowances and Section 199 deductions. 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 (0 and 4,431,140 shares for the thirteen and fifty-two weeks ended December 28, 2021, respectively), resulting in an assumption of 50,243,003 and 51,959,879 weighted-average common shares outstanding for the thirteen and fifty-two weeks ended December 28, 2021, respectively. The impact of assuming the conversion of Series A preferred stock into common stock (9,378,275 and 6,390,210 shares for the thirteen and fifty-two weeks ended December 29, 2020, respectively), resulting in an assumption of 53,306,694 and 50,258,815 weighted-average common shares outstanding for the thirteen and fifty-two weeks ended December 29, 2020, respectively.

(8) Adjusted net income per share may not add due to rounding.

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