10-Q 1 cake-20220927x10q.htm FORM 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-20574

THE CHEESECAKE FACTORY INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

51-0340466

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

26901 Malibu Hills Road

Calabasas Hills, California

91301

(Address of principal executive offices)

(Zip Code)

(818) 871-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of Each Class

    

Trading Symbol

    

Name of Each Exchange on which Registered

Common Stock, par value $.01 per share

CAKE

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

    

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of October 24, 2022, 51,420,136 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.

THE CHEESECAKE FACTORY INCORPORATED

INDEX

 

Page
Number

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements:

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of (Loss)/Income (Unaudited)

2

Condensed Consolidated Statements of Comprehensive (Loss)/Income (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock (Unaudited)

4

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6.

Exhibits

36

Signatures

37

PART I — FINANCIAL INFORMATION

Item 1.        Financial Statements.

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

September 27,

December 28,

    

2022

    

2021

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

133,157

$

189,627

Accounts and other receivables

67,661

100,504

Income taxes receivable

 

23,692

 

36,173

Inventories

 

62,275

 

42,839

Prepaid expenses

 

30,953

 

36,446

Total current assets

 

317,738

 

405,589

Property and equipment, net

 

755,524

 

741,746

Other assets:

Intangible assets, net

 

251,639

 

251,701

Operating lease assets

 

1,267,241

 

1,241,237

Other

141,932

157,852

Total other assets

1,660,812

1,650,790

Total assets

$

2,734,074

$

2,798,125

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

59,030

$

54,086

Gift card liabilities

 

174,725

 

211,182

Operating lease liabilities

147,413

131,818

Other accrued expenses

225,000

239,187

Total current liabilities

606,168

636,273

Long-term debt

 

467,528

 

466,017

Operating lease liabilities

 

1,215,009

 

1,218,269

Other noncurrent liabilities

121,873

147,400

Commitments and contingencies (Note 8)

Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; none issued

 

 

Stockholders’ equity:

Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; none issued

Common stock, $.01 par value, 250,000,000 shares authorized; 106,156,302 and 105,365,678 shares issued at September 27, 2022 and December 28, 2021, respectively

1,062

1,054

Additional paid-in capital

 

880,215

 

862,758

Retained earnings

 

1,187,280

 

1,169,150

Treasury stock, 54,485,868 and 53,139,172 shares at cost at September 27, 2022 and December 28, 2021, respectively

 

(1,744,005)

 

(1,702,509)

Accumulated other comprehensive loss

 

(1,056)

 

(287)

Total stockholders’ equity

 

323,496

 

330,166

Total liabilities, Series A convertible preferred stock and stockholders’ equity

$

2,734,074

$

2,798,125

See the accompanying notes to the condensed consolidated financial statements

1

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME

(In thousands, except per share data)

(Unaudited)

Thirteen

Thirteen

Thirty-Nine

Thirty-Nine

    

Weeks Ended

Weeks Ended

Weeks Ended

Weeks Ended

September 27, 2022

    

September 28, 2021

    

September 27, 2022

    

September 28, 2021

Revenues

$

784,001

$

754,474

$

2,410,354

$

2,150,847

Costs and expenses:

Cost of sales

 

197,774

 

169,418

 

590,457

 

474,237

Labor expenses

 

293,040

 

279,957

 

893,322

 

784,501

Other operating costs and expenses

 

217,009

 

201,490

 

643,844

 

582,518

General and administrative expenses

 

50,324

 

45,802

 

149,638

 

138,457

Depreciation and amortization expenses

 

22,651

 

22,576

 

66,764

 

66,805

Impairment of assets and lease termination expenses

313

594

Acquisition-related contingent consideration, compensation and amortization expenses

1,081

685

2,920

12,592

Preopening costs

 

4,327

 

3,169

 

9,038

 

9,804

Total costs and expenses

 

786,206

 

723,097

 

2,356,296

 

2,069,508

(Loss)/income from operations

 

(2,205)

 

31,377

 

54,058

 

81,339

Interest and other expense, net

 

(1,315)

 

(1,794)

 

(3,906)

 

(9,194)

(Loss)/income before income taxes

 

(3,520)

 

29,583

 

50,152

 

72,145

Income tax (benefit)/provision

 

(1,122)

 

(3,097)

 

3,731

 

1,882

Net (loss)/income

(2,398)

32,680

46,421

70,263

Dividends on Series A preferred stock

 

 

 

 

(18,661)

Undistributed earnings allocated to Series A preferred stock

 

 

 

 

(5,804)

Net (loss)/income available to common stockholders

$

(2,398)

$

32,680

$

46,421

$

45,798

Net (loss)/income per common share:

Basic

$

(0.05)

$

0.65

$

0.93

$

0.98

Diluted (Note 11)

$

(0.05)

$

0.64

$

0.92

$

0.96

Weighted-average common shares outstanding:

Basic

 

49,653

 

50,212

 

50,124

 

46,624

Diluted

 

49,653

 

51,113

 

50,708

 

47,675

See the accompanying notes to the condensed consolidated financial statements.

2

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In thousands)

(Unaudited)

Thirteen

Thirteen

Thirty-Nine

Thirty-Nine

   

Weeks Ended

   

Weeks Ended

   

Weeks Ended

   

Weeks Ended

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Net (loss)/income

$

(2,398)

$

32,680

$

46,421

$

70,263

Other comprehensive (loss)/gain:

 

 

 

 

Foreign currency translation adjustment

 

(724)

 

(238)

 

(769)

 

155

Unrealized gain on derivative, net of tax

3,464

Other comprehensive (loss)/gain

 

(724)

 

(238)

 

(769)

 

3,619

Total comprehensive (loss)/income

(3,122)

32,442

45,652

73,882

Comprehensive income attributable to Series A preferred stockholders

(24,872)

Total comprehensive (loss)/income available to common stockholders

$

(3,122)

$

32,442

$

45,652

$

49,010

See the accompanying notes to the condensed consolidated financial statements

3

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE PREFERRED STOCK

(In thousands)

(Unaudited)

For the thirty-nine weeks ended September 27, 2022:

    

    

    

    

    

    

    

Accumulated

    

Series A Convertible

Additional

Other

Preferred Stock

Common Stock

Paid-in

Retained

Treasury

Comprehensive

  

Shares

  

Amount

  

  

Shares

  

Amount

  

Capital

  

Earnings

  

Stock

  

Loss

  

Total

Balance, December 28, 2021

$

105,366

$

1,054

$

862,758

$

1,169,150

$

(1,702,509)

$

(287)

$

330,166

Net income

23,163

23,163

Foreign currency translation adjustment

255

255

Cash dividends declared common stock, net of forfeitures

22

22

Stock-based compensation

608

6

5,569

5,575

Common stock issued under stock-based compensation plans

55

0

83

83

Treasury stock purchases

(3,938)

(3,938)

Balance, March 29, 2022

$

106,029

$

1,060

$

868,410

$

1,192,335

$

(1,706,447)

$

(32)

$

355,326

Net income

25,656

25,656

Foreign currency translation adjustment

(300)

(300)

Cash dividends declared common stock, net of forfeitures, $0.27 per share

(14,260)

(14,260)

Stock-based compensation

(40)

0

6,141

6,141

Common stock issued under stock-based compensation plans

41

0

0

0

Treasury stock purchases

(10,879)

(10,879)

Balance, June 28, 2022

$

106,030

$

1,060

$

874,551

$

1,203,731

$

(1,717,326)

$

(332)

$

361,684

Net loss

(2,398)

(2,398)

Foreign currency translation adjustment

(724)

(724)

Cash dividends declared common stock, net of forfeitures, $0.27 per share

(14,053)

(14,053)

Stock-based compensation

32

1

5,664

5,665

Common stock issued under stock-based compensation plans

94

1

0

1

Treasury stock purchases

(26,679)

(26,679)

Balance, September 27, 2022

 

$

106,156

$

1,062

$

880,215

$

1,187,280

$

(1,744,005)

$

(1,056)

$

323,496

4

For the thirty-nine weeks ended September 28, 2021:

    

    

 

 

    

    

    

    

    

Accumulated

    

Series A Convertible

Additional

Other

Preferred Stock

Common Stock

Paid-in

Retained

Treasury

Comprehensive

Shares

Amount

Shares

Amount

Capital

Earnings

Stock

Loss

Total

Balance, December 29, 2020

200

$

218,248

98,645

$

986

$

878,148

$

1,110,087

$

(1,696,743)

$

(3,785)

$

288,693

Cumulative effect of adopting ASU 2020-06

(4,763)

4,763

4,763

Balance, December 29, 2020, as adjusted

200

213,485

98,645

986

878,148

1,114,850

(1,696,743)

(3,785)

293,456

Net income

3,868

3,868

Foreign currency translation adjustment

174

174

Change in derivative, net of tax

1,738

1,738

Cash dividends declared common stock, net of forfeitures

399

399

Stock-based compensation

293

3

5,480

5,483

Common stock issued under stock-based compensation plans

570

6

20,417

20,423

Treasury stock purchases

(3,957)

(3,957)

Cash dividends declared Series A preferred stock, $25.35 per share

(5,070)

(5,070)

Balance, March 30, 2021

200

$

213,485

99,508

$

995

$

904,045

$

1,114,047

$

(1,700,700)

$

(1,873)

$

316,514

Net income

33,715

33,715

Foreign currency translation adjustment

219

219

Change in derivative, net of tax

1,726

1,726

Cash dividends declared common stock, net of forfeitures

15

15

Stock-based compensation

44

1

5,540

5,541

Common stock issued under stock-based compensation plans

118

1

4,361

4,362

Common stock issuance

3,125

31

167,019

167,050

Treasury stock purchases

(603)

(603)

Series A preferred stock cash-settled conversion

(150)

(160,114)

(283,637)

(283,637)

Series A preferred stock conversion to common stock

(50)

(53,371)

2,401

24

53,273

53,297

Deemed dividends on Series A preferred stock

(13,591)

(13,591)

Balance, June 29, 2021

$

105,196

$

1,052

$

850,601

$

1,134,186

$

(1,701,303)

$

72

$

284,608

Net income

32,680

32,680

Foreign currency translation adjustment