Business Wire | Feb 17, 2021 04:15PM EST

The Cheesecake Factory Reports Results for Fourth Quarter of Fiscal 2020 and Provides Business Update

Feb. 17, 2021

CALABASAS HILLS, Calif.--(BUSINESS WIRE)--Feb. 17, 2021--The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the fourth quarter of fiscal 2020, which ended on December 29, 2020.

Total revenues were $554.6 million in the fourth quarter of fiscal 2020 compared to $694.0 million in the fourth quarter of fiscal 2019. Net loss available to common stockholders and diluted net loss per common share were $37.3 million and $0.85, respectively, in the fourth quarter of fiscal 2020, reflecting the impact of COVID-19. The results in this press release include the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC") on October 2, 2019.

During the fourth quarter of fiscal 2020, the Company recorded pre-tax impairment of assets and lease termination expense of $14.6 million, primarily comprised of non-cash impairment charges for two Grand Lux Cafe locations where the leases are expected to terminate in the next year. The Company also recorded COVID-19 related charges of $5.4 million, for costs such as sick pay, healthcare and meal benefits for furloughed staff members, additional sanitation and personal protective equipment.

Excluding the after-tax impact of these and certain other items, and reflecting the potential impact of the conversion of the Company's convertible preferred stock into common stock, adjusted net loss and adjusted net loss per share for the fourth quarter of fiscal 2020 were $17.2 million and $0.32, 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 decreased 19.5% in the fourth quarter of fiscal 2020, reflecting the impact of COVID-19.

Fiscal 2021 first quarter-to-date through February 16, 2021, comparable sales for The Cheesecake Factory restaurants with reopened indoor dining rooms are down approximately 9%, supported by approximately 40% off-premise sales mix and reflecting the impact of lapping full capacity holidays last year, including this past Valentine's Day and Presidents' Day weekend, as well as restaurant closures associated with the winter storms this week. In aggregate, across restaurant operating models, fiscal 2021 first quarter to-date through February 16, 2021 comparable sales at The Cheesecake Factory restaurants are down approximately 18%.

As of today, approximately 80% of the Company's restaurants across its concepts, including 166 Cheesecake Factory locations, are operating with reopened indoor dining rooms with limited capacity in accordance with local mandates and social distancing protocols. On average, Cheesecake Factory restaurants with reopened dining rooms are operating at 50% capacity. Approximately 17% of the Company's restaurants across its concepts, including 39 Cheesecake Factory locations, are operating with reopened patios, one Cheesecake Factory location is operating an off-premise only model and three locations across the Company's concepts are currently closed.

"We had a good start to the fourth quarter with comparable sales at The Cheesecake Factory restaurants down just high single digits in October despite mandated capacity restrictions," said David Overton, Chairman and Chief Executive Officer. "Through the balance of the fourth quarter, the sales trend softened given the impact of additional dining room closures and capacity restrictions in response to rising COVID-19 cases in a number of our markets. However, our strong position in the off-premise channel helped support the business during this period, with sales at The Cheesecake Factory restaurants that were operating an off-premise only model far exceeding prior peak off-premise sales volumes seen earlier in the COVID-19 pandemic, while restaurants with reopened dining rooms continued to sustain strong performance in the off-premise channel as well."

Overton continued, "I'm proud of how our teams across our concepts continue to manage through the latest round of operating restrictions, enabling delicious, memorable experiences for our guests and solid performance in spite of the challenges they face. Looking ahead, given our sales results so far in the first quarter, we believe that our concepts are well-positioned for a recovery as dining restrictions ease, and we are excited about the long-term growth opportunities that lie ahead as well."

Development

During the fourth quarter of fiscal 2020, The Cheesecake Factory opened in Clearwater, Florida, and Culinary Dropout and Blanco opened additional locations in Arizona. One restaurant opened internationally in Mexico under a licensing agreement during the fourth quarter of fiscal 2020.

Balance Sheet & Cash Flow

During the fourth quarter, the Company generated $35.6 million in cash flow from operating activities.

As of December 29, 2020, the Company had total available liquidity of approximately $250 million, including a cash balance of approximately $154.1 million and availability on its revolving credit facility of $96.6 million. Total debt outstanding was $280.0 million.

A $5.0 million dividend for the fourth quarter of fiscal 2020 was paid in-kind to holders of the Company's convertible preferred stock.

Conference Call and Webcast

The Company will hold a conference call to review its results for the fourth quarter of fiscal 2020 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 19, 2021.

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 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory(r), North Italia(r) and a collection within the Fox Restaurant Concepts subsidiary. Internationally, 27 The Cheesecake Factory(r) 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 2020, we were named to the FORTUNE Magazine "100 Best Companies to Work For(r)" list for the seventh consecutive year. To learn more, visit www.thecheesecakefactory.com, www.northitalia.com and www.foxrc.com.

From FORTUNE. (c)2020 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 first quarter to-date comparable restaurant sales, continued strength in off-premise sales, the Company's ability to continue to manage through the latest round of operating restrictions, the Company's expectation that its concepts are well-positioned as dining restrictions ease and the Company's long-term growth opportunities. 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; 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 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; 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 due to 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; compliance with debt covenants; 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 risk, 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 IncorporatedCondensed Consolidated Financial Statements(unaudited; in thousands, except per share and statistical data) 13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks EndedConsolidated December 29, 2020^(1) December 31, 2019^(1) December 29, 2020^(1) December 31, 2019^(1)Statements of Income Percent of Percent of Percent Percent Amount Revenues Amount Revenues Amount of Amount of Revenues Revenues

Revenues $ 554,552 100.0 % $ 694,030 100.0 % $ 1,983,225 100.0 % $ 2,482,692 100.0 %

Costs and expenses:Cost of sales 127,195 22.9 % 158,217 22.8 % 458,332 23.1 % 561,783 22.6 %

Labor expenses 218,126 39.3 % 250,836 36.2 % 778,586 39.3 % 899,667 36.3 %

Other operating costs 167,329 30.2 % 179,889 26.0 % 616,069 31.1 % 631,613 25.5 %and expensesGeneral and 40,177 7.3 % 47,273 6.8 % 157,644 7.9 % 160,199 6.5 %administrativeexpensesDepreciation and 22,612 4.1 % 23,770 3.4 % 91,415 4.6 % 88,133 3.5 %amortization expensesImpairment of assets 14,602 2.6 % 18,247 2.6 % 219,333 11.1 % 18,247 0.7 %and lease terminationexpensesAcquisition-related 356 0.1 % 2,080 0.3 % 2,699 0.1 % 5,270 0.2 %costsAcquisition-relatedcontingent 120 0.0 % 1,033 0.1 % (3,872 ) (0.2 )% 1,033 0.0 %consideration,compensation andamortization expensesPreopening costs 2,846 0.5 % 6,298 0.9 % 10,456 0.5 % 13,149 0.5 %

Total costs and 593,363 107.0 % 687,643 99.1 % 2,330,662 117.5 % 2,379,094 95.8 %expenses(Loss)/income from (38,811 ) (7.0 ) 6,387 0.9 % (347,437 ) (17.5 )% 103,598 4.2 %operations %

Loss on investment in - 0.0 % 52,672 7.6 % - 0.0 % 39,233 1.6 %unconsolidatedaffiliatesInterest and other (1,580 ) (0.3 ) (2,480 ) (0.3 ) (8,599 ) (0.5 )% (2,497 ) (0.1 )%(expense)/income, net % %

(Loss)/income before (40,391 ) (7.3 ) 56,579 8.2 % (356,036 ) (18.0 )% 140,334 5.7 %income taxes %

Income tax (benefit)/ (8,074 ) (1.5 ) 7,870 1.2 % (102,671 ) (5.2 )% 13,041 0.5 %provision %

(32,317 ) (5.8 ) 48,709 7.0 % (253,365 ) (12.8 )% 127,293 5.2 %Net (loss)/income %

Dividends on Series A (4,953 ) (0.9 ) - 0.0 % (13,485 ) (0.7 )% - 0.0 %preferred stock %

Direct and incremental - 0.0 % - 0.0 % (10,257 ) (0.5 )% - 0.0 %Series A preferredstock issuance costNet (loss)/income $ (37,270 ) (6.7 ) $ 48,709 7.0 % $ (277,107 ) (14.0 )% $ 127,293 5.2 %available to common %stockholders Basic net (loss)/ $ (0.85 ) $ 1.11 $ (6.32 ) $ 2.90 income per commonshareBasic weighted average 43,928 43,694 43,869 43,949 shares outstanding Diluted net (loss)/ $ (0.85 ) $ 1.10 $ (6.32 ) $ 2.86 income per commonshareDiluted weighted 43,928 44,249 43,869 44,545 average sharesoutstanding (1) Results include the acquisition of North Italia and the remaining businessof Fox Restaurant Concepts LLC ("FRC") on October 2, 2019. 13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks EndedSelected Segment December 29, 2020^(1) December 31, 2019^(1) December 29, 2020^(1) December 31, 2019^(1)InformationRevenues:The Cheesecake Factory $ 438,485 $ 544,629 $ 1,585,008 $ 2,180,882 restaurantsNorth Italia 30,324 35,268 102,585 35,268

Other FRC 28,792 39,335 96,856 39,335

Other 56,951 74,798 198,776 227,207

Total $ 554,552 $ 694,030 $ 1,983,225 $ 2,482,692

(Loss)/income fromoperations^(2):The Cheesecake Factory $ 14,331 $ 54,571 $ 45,540 $ 258,374 restaurantsNorth Italia (49 ) 1,608 (77,371 ) 1,608

Other FRC 51 5,309 (77,026 ) 5,309

Other (53,144 ) (55,101 ) (238,580 ) (161,693 )

Total $ (38,811 ) $ 6,387 $ (347,437 ) $ 103,598

Preopening costs:The Cheesecake Factory $ 1,049 $ 4,093 $ 4,206 $ 9,967 restaurantsNorth Italia 683 1,297 2,578 1,297

Other FRC 797 49 1,324 49

Other 317 859 2,348 1,836

Total $ 2,846 $ 6,298 $ 10,456 $ 13,149

Depreciation andamortization:The Cheesecake Factory $ 16,657 $ 17,631 $ 67,514 $ 70,971 restaurantsNorth Italia 841 829 3,608 829

Other FRC 1,088 1,037 4,090 1,037

Other 4,026 4,273 16,203 15,296

Total $ 22,612 $ 23,770 $ 91,415 $ 88,133

(1) The Company completed the acquisition of North Italia and the remainingbusiness of FRC on October 2, 2019. The Company's consolidated financialstatements include the results of the acquired businesses as of the date ofacquisition.(2) During the thirteen weeks ended December 29, 2020, the Company recordedimpairment of assets and lease termination expenses of $0.5 million for TheCheesecake Factory restaurants, $0.3 million for North Italia, $0.1 million forOther FRC and $13.7 million for the Other segment. During the fifty-two weeksended December 29, 2020, the Company recorded impairment of assets and leasetermination expenses of $3.3 million for The Cheesecake Factory restaurants,$71.8 million for North Italia, $73.0 million for Other FRC and $71.2 millionfor Other. The Cheesecake Factoryrestaurants operatinginformation:Comparable restaurant (19.5 ) 0.6 % (28.2 ) 0.8 %sales % %

Restaurants opened 1 3 1 5 during periodRestaurants open at 206 206 206 206 period-endRestaurant operating 2,666 2,655 10,642 10,520 weeks North Italia operatinginformation:Comparable restaurant (18 ) 4 % (28 ) 4 %sales % %

Restaurants opened - 1 1 1 during periodRestaurants open at 23 22 23 22 period-endRestaurant operating 299 280 1,146 280 weeks Other Fox RestaurantConcepts (FRC)operating information:^(1)Restaurants opened 2 - 2 - during periodRestaurants open at 27 25 27 25 period-endRestaurant operating 330 325 1,139 325 weeks Other operatinginformation:^(2)Restaurants opened - 2 3 3 during periodRestaurants open at 39 39 39 39 period-endRestaurant operating 479 525 1,721 1,180 weeks Number ofcompany-ownedrestaurants:The Cheesecake Factory 206

North Italia 23

Other FRC 27

Other 39

Total 295

Number ofinternational-licensedrestaurants:The Cheesecake Factory 27

(1) The Other FRC segment includes all FRC brands except Flower Child.(2) The Other segment includes the Flower Child, Grand Lux Cafe, RockSugarSoutheast Asian Kitchen and Social Monk Asian Kitchen concepts, as well as theCompany's third-party bakery, international and consumer packaged goodsbusinesses, unallocated corporate expenses and gift card costs. Selected ConsolidatedBalance Sheet December 29, 2020 December 31, 2019InformationCash and cash $ 154,085 $ 58,416 equivalentsLong-term debt 280,000 290,000

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 (loss)/income and net (loss)/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 (loss)/income and diluted net (loss)/income per share the impact of items the Company does not consider indicative of its ongoing operations. To reflect the potential impact of the conversion of the Company's convertible preferred stock into common stock, the Company excludes the preferred dividend and direct and incremental preferred stock issuance costs, 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 IncorporatedReconciliation of Non-GAAP Financial Measures(unaudited; in thousands, except per share data) 13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended December 29, December 31, December 29, December 31, 2020 2019 2020 2019 Net (loss)/income $ (37,270 ) $ 48,709 $ (277,107 ) $ 127,293 available to commonstockholders (GAAP)Dividends on Series 4,953 - 13,485 - A preferred stockDirect andincremental Series - - 10,257 - A preferred stockissuance costsCOVID-19 related 5,384 - 22,963 - costs^(1)Impairment ofassets and lease 14,603 18,247 219,333 18,247 terminationexpenses^(2)Acquisition-related 357 2,080 2,699 5,270 costs^(3)Acquisition-relatedcontingentconsideration, 120 1,033 (3,872 ) 1,033 compensation andamortizationexpenses^(4)Loss on investment - - - 13,439 in unconsolidatedaffiliates^(5)Gain on investment - (52,672 ) - (52,672 )in unconsolidatedaffiliates^(6)Tax effect of (5,321 ) 8,141 (62,692 ) 3,818 adjustments^(7)Adjusted net (loss) $ (17,174 ) $ 25,538 $ (74,934 ) $ 116,428 /income (non-GAAP) Diluted net (loss)/ $ (0.85 ) $ 1.10 $ (6.32 ) $ 2.86 income per commonshare (GAAP)Dividends on Series 0.09 - 0.27 - A preferred stockDirect andincremental Series - - 0.20 - A preferred stockissuance costsAssumed impact ofpotentialconversion of 0.15 - 0.80 - Series A preferredstock into commonstock^(8)COVID-19 related 0.10 - 0.46 - costsImpairment ofassets and lease 0.27 0.41 4.36 0.41 terminationexpensesAcquisition-related 0.01 0.05 0.05 0.12 costsAcquisition-relatedcontingentconsideration, 0.00 0.02 (0.08 ) 0.02 compensation andamortizationexpensesLoss on investment - - - 0.30 in unconsolidatedaffiliatesGain on investment - (1.19 ) - (1.18 )in unconsolidatedaffiliatesTax effect of (0.10 ) 0.18 (1.25 ) 0.09 adjustmentsAdjusted net (loss) $ (0.32 ) $ 0.58 $ (1.49 ) $ 2.61 /income per share(non-GAAP)^(9) (1) Represents incremental costs associated with COVID-19 such as additionalsanitation, personal protective equipment, and healthcare benefits and otherexpenses associated with furloughed staff members. For the thirteen weeks endedDecember 29, 2020, the Company recorded $5.4 million for these costs withapproximately $2.0 million reflected in labor expenses, $3.6 million in otheroperating expenses and ($0.2) million in General & Administrative expenses. Forthe fifty-two weeks ended December 29, 2020, the Company recorded $23.0 millionfor these costs with approximately $2.2 million in cost of sales, $11.9 millionreflected in labor expenses, $8.8 million in other operating expenses and $0.1million in General & Administrative expenses.(2) During the thirteen weeks ended December 29, 2020, the Company recordedimpairment of assets and lease termination expenses of $0.5 million for TheCheesecake Factory restaurants, $0.3 million for North Italia, $0.1 million forOther FRC and $13.7 million for the Other segment. During the fifty-two weeksended December 29, 2020, the Company recorded impairment of assets and leasetermination expenses of $3.3 million for The Cheesecake Factory restaurants,$71.8 million for North Italia, $73.0 million for Other FRC and $71.2 millionfor Other.(3) Represents costs incurred to effect and integrate the North and FRCacquisition.(4) Represents changes in the fair value of the deferred consideration andcontingent consideration and compensation liabilities related to the North andFRC acquisition, as well as amortization of acquired definite-lived licensingagreements.(5) Represents the Company's share of pre-acquisition losses incurred by NorthItalia and Flower Child.(6) Represents gain related to the acquisition of the remaining equity interestin North Italia and Flower Child.(7) Based on the federal statutory rate and an estimated blended state taxrate, the tax effect on all adjustments assumes a 26% tax rate for fiscal 2020and 2019.(8) Represents the impact of assuming the conversion of Series A preferredstock into common stock (9,378,275 shares and 6,390,210 shares for the thirteenweeks and fifty-two weeks ended December 29, 2020, respectively), resulting inan assumption of 53,306,694 and 50,258,815 weighted-average common sharesoutstanding, respectively, for the thirteen weeks and fifty-two weeks endedDecember 29, 2020.(9) Adjusted net (loss)/income per share may not add due to rounding. View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005902/en/

CONTACT: Stacy Feit (818) 871-3000 investorrelations@thecheesecakefactory.com