UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(
(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 |
The |
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.
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).
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.
☒ |
| 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
As of October 30, 2023,
THE CHEESECAKE FACTORY INCORPORATED
INDEX
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
THE CHEESECAKE FACTORY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
October 3, | January 3, | |||||
| 2023 |
| 2023 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts and other receivables | | | ||||
Income taxes receivable |
| |
| | ||
Inventories |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Other assets: | ||||||
Intangible assets, net |
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Operating lease assets |
| |
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Other | | | ||||
Total other assets | | | ||||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Gift card liabilities |
| |
| | ||
Operating lease liabilities | | | ||||
Other accrued expenses | | | ||||
Total current liabilities | | | ||||
Long-term debt |
| |
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Operating lease liabilities |
| |
| | ||
Other noncurrent liabilities | | | ||||
Commitments and contingencies (Note 7) | ||||||
Stockholders’ equity: | ||||||
Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Additional paid-in capital |
| |
| | ||
Retained earnings |
| |
| | ||
Treasury stock inclusive of excise tax, |
| ( |
| ( | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | |
See the accompanying notes to the condensed consolidated financial statements.
1
THE CHEESECAKE FACTORY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(In thousands, except per share data)
(Unaudited)
Thirteen | Thirteen | Thirty-Nine | Thirty-Nine | |||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||
October 3, 2023 |
| September 27, 2022 |
| October 3, 2023 |
| September 27, 2022 | ||||||
Revenues | $ | | $ | | $ | | $ | | ||||
Costs and expenses: | ||||||||||||
Food and beverage costs |
| |
| |
| |
| | ||||
Labor expenses |
| |
| |
| |
| | ||||
Other operating costs and expenses |
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| |
| |
| | ||||
General and administrative expenses |
| |
| |
| |
| | ||||
Depreciation and amortization expenses |
| |
| |
| |
| | ||||
Impairment of assets and lease termination expenses | | — | | | ||||||||
Acquisition-related contingent consideration, compensation and amortization expenses | | | | | ||||||||
Preopening costs |
| |
| |
| |
| | ||||
Total costs and expenses |
| |
| |
| |
| | ||||
Income/(loss) from operations |
| |
| ( |
| |
| | ||||
Interest and other expense, net |
| ( |
| ( |
| ( |
| ( | ||||
Income/(loss) before income taxes |
| |
| ( |
| |
| | ||||
Income tax (benefit)/provision |
| ( |
| ( |
| |
| | ||||
Net income/(loss) | $ | | $ | ( | $ | | $ | | ||||
Net income/(loss) per share: | ||||||||||||
Basic | $ | | $ | ( | $ | | $ | | ||||
Diluted (Note 10) | $ | | $ | ( | $ | | $ | | ||||
Weighted-average shares outstanding: | ||||||||||||
Basic |
| |
| |
| |
| | ||||
Diluted |
| |
| |
| |
| |
See the accompanying notes to the condensed consolidated financial statements.
2
THE CHEESECAKE FACTORY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(Unaudited)
Thirteen | Thirteen | Thirty-Nine | Thirty-Nine | |||||||||
| Weeks Ended |
| Weeks Ended |
| Weeks Ended |
| Weeks Ended | |||||
October 3, 2023 | September 27, 2022 | October 3, 2023 | September 27, 2022 | |||||||||
Net income/(loss) | $ | | $ | ( | $ | | $ | | ||||
Other comprehensive loss: |
|
|
|
| ||||||||
Foreign currency translation adjustment |
| ( |
| ( |
| ( |
| ( | ||||
Other comprehensive loss |
| ( |
| ( |
| ( |
| ( | ||||
Total comprehensive income/(loss) | $ | | $ | ( | $ | | $ | |
See the accompanying notes to the condensed consolidated financial statements.
3
THE CHEESECAKE FACTORY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
For the thirty-nine weeks ended October 3, 2023:
|
|
|
|
|
| Accumulated |
| |||||||||||||
Additional | Other | |||||||||||||||||||
Common Stock | Paid-in | Retained | Treasury | Comprehensive | ||||||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings |
| Stock |
| Loss/(Income) |
| Total | |||||||
Balance, January 3, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | | | |||||||||||||
Cash dividends declared common stock, net of forfeitures, $ | — | — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation | | | | — | — | — | | |||||||||||||
Treasury stock purchases | — | — | — | — | ( | — | ( | |||||||||||||
Balance, April 4, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | | | |||||||||||||
Cash dividends declared common stock, net of forfeitures, $ | — | — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation | | | | — | — | — | | |||||||||||||
Treasury stock purchases, inclusive of excise tax | — | — | — | — | ( | — | ( | |||||||||||||
Balance, July 4, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | ( | ( | |||||||||||||
Cash dividends declared common stock, net of forfeitures, $ | — | — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation | | | | — | — | — | | |||||||||||||
Treasury stock purchases, inclusive of excise tax | — | — | — | — | ( | — | ( | |||||||||||||
Balance, October 3, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | ( |
4
For the thirty-nine weeks ended September 27, 2022:
|
|
|
|
|
| Accumulated |
| |||||||||||||
Additional | Other | |||||||||||||||||||
Common Stock | Paid-in | Retained | Treasury | Comprehensive | ||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | (Loss)/Income | Total | ||||||||||||||
Balance, December 28, 2021 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | | | |||||||||||||
Cash dividends declared common stock, net of forfeitures | — | — | — | | — | — | | |||||||||||||
Stock-based compensation | | | | — | — | — | | |||||||||||||
Common stock issued under stock-based compensation plans | | — | | — | — | — | | |||||||||||||
Treasury stock purchases | — | — | — | — | ( | — | ( | |||||||||||||
Balance, March 29, 2022 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | ( | ( | |||||||||||||
Cash dividends declared common stock, net of forfeitures, $ | — | — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation | ( | — | | — | — | — | | |||||||||||||
Common stock issued under stock-based compensation plans | | — | — | — | — | — | — | |||||||||||||
Treasury stock purchases | — | — | — | — | ( | — | ( | |||||||||||||
Balance, June 28, 2022 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Net loss | — | — | — | ( | — | — | ( | |||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | ( | ( | |||||||||||||
Cash dividends declared common stock, net of forfeitures, $ | — | — | — | ( | — | — | ( | |||||||||||||
Stock-based compensation | | | | — | — | — | | |||||||||||||
Common stock issued under stock-based compensation plans | | | — | — | — | — | | |||||||||||||
Treasury stock purchases | — | — | — | — | ( | — | ( | |||||||||||||
Balance, September 27, 2022 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | |
See the accompanying notes to the condensed consolidated financial statements.
5
THE CHEESECAKE FACTORY INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Thirty-Nine |
| Thirty-Nine | |||
Weeks Ended | Weeks Ended | |||||
| October 3, 2023 |
| September 27, 2022 | |||
Cash flows from operating activities: |
|
|
| |||
Net income | $ | $ | | |||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||
Depreciation and amortization expenses | | | ||||
Impairment of assets and lease termination (income)/expense |
| ( |
| | ||
Deferred income taxes | | ( | ||||
Stock-based compensation |
| |
| | ||
Changes in assets and liabilities: | ||||||
Accounts and other receivables | | | ||||
Income taxes receivable/payable |
| ( |
| | ||
Inventories |
| ( |
| ( | ||
Prepaid expenses |
| ( |
| | ||
Operating lease assets/liabilities |
| ( |
| ( | ||
Other assets | ( | | ||||
Accounts payable |
| ( |
| | ||
Gift card liabilities |
| ( |
| ( | ||
Other accrued expenses | | ( | ||||
Cash provided by operating activities |
| |
| | ||
Cash flows from investing activities: | ||||||
Additions to property and equipment |
| ( |
| ( | ||
Additions to intangible assets |
| ( |
| ( | ||
Other | ( | | ||||
Cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: | ||||||
Acquisition-related deferred consideration and compensation | ( | ( | ||||
Proceeds from exercise of stock options | — | | ||||
Common stock dividends paid |
| ( |
| ( | ||
Treasury stock purchases |
| ( |
| ( | ||
Cash used in financing activities |
| ( |
| ( | ||
Foreign currency translation adjustment |
| ( |
| ( | ||
Net change in cash and cash equivalents | ( | ( | ||||
Cash and cash equivalents at beginning of period |
| |
| | ||
Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental disclosures: | ||||||
Interest paid | $ | | $ | | ||
Income taxes paid | $ | | $ | | ||
Construction payable | $ | | $ | |
See the accompanying notes to the condensed consolidated financial statements.
6
THE CHEESECAKE FACTORY INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of The Cheesecake Factory Incorporated and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions for the periods presented have been eliminated in consolidation. The unaudited financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results that may be achieved for any other interim period or for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2023 filed with the SEC on February 27, 2023.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal year 2023 consists of
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates.
COVID-19 Pandemic and Other Impacts to our Operating Environment
During fiscal 2022, the COVID-19 pandemic continued to affect our business during periods of accelerated case counts in which we experienced increased restaurant staff absenteeism and temporary shifts in consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels. Along with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation. Some of these factors have continued to impact our operating results in fiscal 2023, contributing to significantly increased commodity and other costs. We have also encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as supply chain challenges.
The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delays in new restaurant openings. For more information regarding the risks to our business relating to the COVID-19 pandemic and other geopolitical and macroeconomic events, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2023.
Recent Accounting Pronouncements
We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements.
7
2. Fair Value Measurements
Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:
● | Level 1: Quoted prices in active markets for identical assets or liabilities |
● | Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities |
● | Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions |
The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):
| October 3, 2023 | ||||||||
| Level 1 |
| Level 2 |
| Level 3 | ||||
Assets/(Liabilities) |
| ||||||||
Non-qualified deferred compensation assets | $ | | $ | — | $ | — | |||
Non-qualified deferred compensation liabilities | ( | — | — | ||||||
Acquisition-related deferred consideration | — | — | — | ||||||
Acquisition-related contingent consideration and compensation liabilities | — | — | ( |
| January 3, 2023 | ||||||||
| Level 1 |
| Level 2 |
| Level 3 | ||||
Assets/(Liabilities) | |||||||||
Non-qualified deferred compensation assets | $ | | $ | — | $ | — | |||
Non-qualified deferred compensation liabilities | ( | — | — | ||||||
Acquisition-related deferred consideration | — | ( | — | ||||||
Acquisition-related contingent consideration and compensation liabilities | — | — | ( |
The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liabilities categorized as Level 3 (in thousands):
| Thirty-Nine |
| Thirty-Nine | |||
Weeks Ended | Weeks Ended | |||||
| October 3, 2023 |
| September 27, 2022 | |||
Beginning balance | $ | | $ | | ||
Payment | ( | ( | ||||
Change in fair value |
| |
| | ||
Ending balance | $ | | $ | |
The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment. The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at October 3, 2023 was $
The fair values of our cash and cash equivalents, accounts and other receivables, income taxes receivable, prepaid expenses, accounts payable, income taxes payable and other accrued liabilities approximate their carrying amounts due to their short duration.
8
As of October 3, 2023, we had $
3. Inventories
Inventories consisted of (in thousands):
| October 3, 2023 |
| January 3, 2023 | |||
Restaurant food and supplies | $ | | $ | | ||
Bakery finished goods and work in progress |
| |
| | ||
Bakery raw materials and supplies |
| |
| | ||
Total | $ | | $ | |
4. Gift Cards
The following tables present information related to gift cards (in thousands):
| Thirteen | Thirteen | Thirty-Nine | Thirty-Nine | ||||||||
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |||||||||
October 3, 2023 |
| September 27, 2022 |
| October 3, 2023 |
| September 27, 2022 | ||||||
Gift card liabilities: | ||||||||||||
Beginning balance |
| $ | |
| $ | | $ | |
| $ | | |
Activations |
| |
| |
| |
| | ||||
Redemptions and breakage |
| ( |
| ( |
| ( |
| ( | ||||
Ending balance |
| $ | |
| $ | | $ | |
| $ | |
| Thirteen | Thirteen | Thirty-Nine | Thirty-Nine | ||||||||
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |||||||||
| October 3, 2023 |
| September 27, 2022 |
| October 3, 2023 |
| September 27, 2022 | |||||
Gift card contract assets: | ||||||||||||
Beginning balance |
| $ | |
| $ | | $ | |
| $ | | |
Deferrals |
| |
| |
| |
| | ||||
Amortization |
| ( |
| ( |
| ( |
| ( | ||||
Ending balance |
| $ | |
| $ | | $ | |
| $ | |
5. Long-Term Debt
Revolving Credit Facility
On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $
On October 6, 2022, we repaid the outstanding balance under the then-existing credit agreement and borrowed the same amount on the Revolver Facility. As of October 3, 2023, we had net availability for borrowings of $
9
Under the Revolver Facility, we are subject to the following financial covenants as of the last day of each fiscal quarter: (i) a maximum ratio of net adjusted debt to EBITDAR (the “Amended Net Adjusted Leverage Ratio”) of
Borrowings under the Loan Agreement bear interest, at the Company’s election, at a rate equal to either: (i) the sum of (A) adjusted term SOFR (as defined in the Loan Agreement, the “Term SOFR Rate”) plus (B) a rate variable based on the Amended Net Adjusted Leverage Ratio, ranging from
We are also subject to customary events of default that, if triggered, could result in acceleration of the maturity of the Revolver Facility. Subject to certain exceptions, the Revolver Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.
Convertible Senior Notes
On June 15, 2021, we issued $
The Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness; (ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. The Notes were issued pursuant to, and are governed by, an indenture (the “Base Indenture”) between us and a trustee (“Trustee”), dated as of June 15, 2021, as supplemented by a first supplemental indenture (the “Supplemental Indenture,” and the Base Indenture, as supplemented by the Supplemental Indenture, the “Indenture”), dated as of June 15, 2021, between the Company and the Trustee.
The Notes accrue interest at a rate of
10
The Notes are redeemable, in whole or in part (subject to certain limitations described below), at our option at any time, and from time to time, on or after June 20, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of our common stock exceeds
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.
The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a
If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of ours) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to us, or noteholders of at least