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The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2014

July 23, 2014

Company Announces 18 Percent Increase In Quarterly Dividend

CALABASAS HILLS, Calif.--(BUSINESS WIRE)--Jul. 23, 2014-- The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the second quarter of fiscal 2014, which ended on July 1, 2014.

Total revenues were $496.4 million in the second quarter of fiscal 2014 as compared to $470.1 million in the prior year second quarter. Net income and diluted net income per share were $30.0 million and $0.59, respectively, in the second quarter of fiscal 2014.

The Company recorded a $510,196 pre-tax charge during the second quarter of fiscal 2014 related to the relocation of one The Cheesecake Factory restaurant. Excluding this item, net income was $30.4 million and diluted net income per share remained $0.59.

Operating Results

Comparable restaurant sales at The Cheesecake Factory and Grand Lux Cafe increased 1.2% in the second quarter of fiscal 2014. By concept, comparable restaurant sales grew 1.5% at The Cheesecake Factory and declined 2.7% at Grand Lux Cafe.

“Our business is stable and our performance remains consistent, as we delivered our 18th consecutive quarter of positive comparable sales in the second quarter of 2014. We continue to meaningfully outperform the casual dining industry, as we have done each quarter for nearly three years, by staying relevant to consumer tastes and trends, maintaining high standards for quality and providing guests with an exceptional experience,” said David Overton, Chairman and Chief Executive Officer. “In addition, our key performance indicators, including food efficiencies, guest satisfaction scores, restaurant management retention and labor productivity, are tracking at strong levels, as a result of solid operational execution,” continued Overton.

Development

The Company opened one new restaurant and relocated one restaurant during the second quarter of fiscal 2014. The Company continues to expect to open as many as ten Company-owned restaurants in fiscal 2014.

Internationally, the first The Cheesecake Factory restaurant opened in Mexico last week under a licensing agreement. The Company continues to expect as many as three to four restaurants to open in the Middle East and Mexico under licensing agreements in fiscal 2014.

Capital Allocation

The Company also announced today that its Board of Directors approved an increase in its quarterly dividend equating to 18%. The Company’s Board of Directors declared a quarterly cash dividend of $0.165 per share on the Company’s common stock. The dividend is payable on August 19, 2014 to shareholders of record at the close of business on August 6, 2014.

During the second quarter of fiscal 2014, the Company repurchased 528,377 shares of its common stock at a cost of $24.2 million. Year-to-date, the Company repurchased 2.6 million shares of its common stock at a cost of $123.2 million. The Company continues to expect that it will return substantially all of its free cash flow to shareholders in fiscal 2014 in the form of dividends and share repurchases.

“We are attaining our major milestones this year with successful new Company-owned restaurant openings and execution on international expansion, with the opening of our first restaurant in Mexico and the signing of our third licensing agreement, to expand The Cheesecake Factory in Asia. The confidence we have in our business is high, which led us to significantly increase our quarterly dividend again this year,” concluded Overton.

Conference Call and Webcast

A conference call to review the Company’s results for the second quarter of fiscal 2014 will be held today at 2:00 p.m. Pacific Time. The conference call will be broadcast live over the Internet and a replay will be available shortly after the call and continue through August 23, 2014. To listen to the conference call, please go to the Company’s website at www.thecheesecakefactory.com at least 15 minutes prior to the start of the call to register and download any necessary audio software. Click on the “Investors” link on the home page and select the conference call link at the top of the page.

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 operates 182 full-service, casual dining restaurants throughout the U.S. and Puerto Rico, including 170 restaurants under The Cheesecake Factory® mark; 11 restaurants under the Grand Lux Cafe® mark; and one restaurant under the RockSugar Pan Asian Kitchen® mark. Internationally, five The Cheesecake Factory® restaurants operate under licensing agreements. The Company also operates two bakery production facilities in Calabasas Hills, CA and Rocky Mount, NC that produce approximately 70 varieties of quality cheesecakes and other baked products. In 2014, the Company was named to Fortune magazine’s “100 Best Companies to Work For” list. To learn more about the Company, visit www.thecheesecakefactory.com.

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 consistent and dependable comparable sales results over a sustained period of time; the Company’s ability to continue to outperform the casual dining industry; the Company’s ability to remain relevant to consumers, to maintain high quality standards and provide guests with an exceptional experience; the Company’s ability to operate efficiently and effectively; the Company’s ability to expand its concepts domestically and work with its licensees to expand its concept internationally; the Company’s ability to utilize its capital effectively and increase shareholder value through dividends and share repurchases; factors outside of the Company’s control that impact consumer confidence and spending; current and future macroeconomic conditions; 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, 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; and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”), as set forth below. 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 and Subsidiaries

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 Operations July 1, 2014   July 2, 2013   July 1, 2014   July 2, 2013

Amounts

 

Percent of
Revenue

Amounts

 

Percent of
Revenue

Amounts

 

Percent of
Revenue

Amounts

 

Percent of
Revenue

Revenues $ 496,406 100.0 % $ 470,118 100.0 % $ 977,837 100.0 % $ 933,136 100.0 %
Costs and expenses:
Cost of sales 120,667 24.3 % 112,947 24.0 % 240,029 24.5 % 227,240 24.3 %
Labor expenses 160,777 32.4 % 151,162 32.2 % 320,227 32.7 % 302,145 32.4 %
Other operating costs and expenses 119,577 24.1 % 113,805 24.2 % 235,210 24.1 % 224,783 24.1 %
General and administrative expenses 29,042 5.9 % 27,811 5.9 % 60,284 6.2 % 56,600 6.1 %
Depreciation and amortization expenses 20,534 4.1 % 19,215 4.1 % 40,785 4.2 % 38,445 4.1 %
Impairment of assets and lease terminations 510 0.1 % 1,505 0.3 % 696 0.1 % 2,149 0.2 %
Preopening costs 2,608   0.5 %   2,503     0.5 %   4,842   0.5 %   3,817   0.4 %
Total costs and expenses 453,715   91.4 %   428,948     91.2 %   902,073   92.3 %   855,179   91.6 %
Income from operations 42,691 8.6 % 41,170 8.8 % 75,764 7.7 % 77,957 8.4 %
Interest and other (expense)/income, net (1,544 ) (0.3 )%   (1,271 )   (0.3 )%   (2,935 ) (0.3 )%   (2,581 ) (0.3 )%
Income before income taxes 41,147 8.3 % 39,899 8.5 % 72,829 7.4 % 75,376 8.1 %
Income tax provision 11,098   2.2 %   11,316     2.4 %   20,262   2.0 %   21,501   2.3 %
Net income $ 30,049   6.1 % $ 28,583     6.1 % $ 52,567   5.4 % $ 53,875   5.8 %
 
Basic net income per share $ 0.61   $ 0.54   $ 1.05   $ 1.02  
Basic weighted average shares outstanding 49,349     52,892     50,044     52,574  
 
Diluted net income per share $ 0.59   $ 0.52   $ 1.01   $ 0.99  
Diluted weighted average shares outstanding 51,358     55,073     52,098     54,692  
 
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants $ 451,454 $ 424,845 $ 888,060 $ 837,396
Other 44,952     45,273     89,777     95,740  
$ 496,406   $ 470,118   $ 977,837   $ 933,136  
 
Income from operations:
The Cheesecake Factory restaurants $ 65,046 $ 62,718 $ 123,036 $ 121,955
Other 4,589 5,106 9,015 9,606
Corporate (26,944 )   (26,654 )   (56,287 )   (53,604 )
$ 42,691   $ 41,170   $ 75,764   $ 77,957  
 

Selected Consolidated Balance Sheet Information

July 1, 2014

December 31, 2013

Cash and cash equivalents   $ 25,577 $ 61,751
Total assets 1,080,521 1,124,114
Long-term debt 25,000 -
Total liabilities 571,383 546,761
Stockholders' equity 509,138 577,353
 
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
Supplemental Information July 1, 2014 July 2, 2013 July 1, 2014 July 2, 2013
Comparable restaurant sales percentage change 1.2 % 0.8 % 1.0 % 1.1 %
Restaurants opened during period 2 1 3 1
Restaurants open at period-end 182 175 182 175
Restaurant operating weeks 2,355 2,263 4,702 4,554
 

Reconciliation of Non-GAAP Results to GAAP Results

In addition to the results provided in accordance with Generally Accepted Accounting Principles ("GAAP") in this press release, the Company is providing non-GAAP measurements which present the second quarter and year-to-date fiscal 2014 and fiscal 2013 net income and diluted net income per share excluding the impact from certain items. Additional detail regarding the second quarter fiscal 2014 item can be found on the first page of this press release.

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.

  13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
July 1, 2014 July 2, 2013 July 1, 2014 July 2, 2013
(unaudited; in thousands, except per share data)
Net income (GAAP) $ 30,049 $ 28,583 $ 52,567 $ 53,875
After-tax impact from:
- Impairment of assets and lease terminations (1)   306   903   418   1,289
Net income (non-GAAP) $ 30,355 $ 29,486 $ 52,985 $ 55,164
 
Diluted net income per share (GAAP) $ 0.59 $ 0.52 $ 1.01 $ 0.99
After-tax impact from:
- Impairment of assets and lease terminations (1)   0.01   0.02   0.01   0.02
Diluted net income per share (non-GAAP) (2) $ 0.59 $ 0.54 $ 1.02 $ 1.01

(1) The pre-tax amounts associated with these items were $510 in the second quarter of fiscal 2014, $186 in the first quarter of fiscal 2014, $1,505 in the second quarter of fiscal 2013, and $644 in the first quarter of fiscal 2013, and were recorded in impairment of assets and lease terminations.
(2) Diluted net income per share may not add due to rounding.

Source: The Cheesecake Factory Incorporated

The Cheesecake Factory Incorporated
W. Douglas Benn, (818) 871-3000
investorrelations@thecheesecakefactory.com