securities and exchange commission · 2018-07-31 · the company, through its subsidiaries, owns...
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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORTPursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 26, 2018
THE CHEESECAKE FACTORY INCORPORATED(Exact Name of Registrant as Specified in Charter)
Delaware
0-20574
51-0340466(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
26901 Malibu Hills Road
Calabasas Hills, California 91301
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code (818) 871-3000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 ofthe Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company o 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 revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The following information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” Thisinformation shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), orincorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the dateof this report, regardless of any general incorporation language in the filing.
In a press release dated July 31, 2018, a copy of which is furnished as Exhibit 99.1 to this report, The Cheesecake Factory Incorporated(the “Company”) reported financial results for the second quarter of fiscal 2018.
Total revenues were $593.2 million in the second quarter of fiscal 2018 as compared to $569.9 million in the second quarter of fiscal 2017.Net income and diluted net income per share were $28.4 million and $0.61, respectively, in the second quarter of fiscal 2018.
The Company recorded a pre-tax charge of $2.6 million during the second quarter of fiscal 2018 related to the termination of a lease forone The Cheesecake Factory restaurant. Excluding the after-tax impact from this item, net income and diluted net income per share for the secondquarter of fiscal 2018 would have been $30.3 million and $0.65, respectively. Please see the Company’s reconciliation of non-GAAP financialmeasures included in the press release furnished as Exhibit 99.1 to this report.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.4% in the second quarter of fiscal 2018. ITEM 8.01 OTHER EVENTS.
On July 26, 2018, the Board of Directors (the “Board”) of the Company declared a quarterly cash dividend of $0.33 per share which willbe paid on August 28, 2018 to the stockholders of record of each share of the Company’s common stock at the close of business on August 15,2018. Future dividends, if any, will be subject to Board approval.
On July 26, 2018, the Board approved the adoption of a share repurchase plan with J.P. Morgan Securities LLC, pursuant to which theCompany is authorized to repurchase shares of its common stock in open market transactions in accordance with Rule 10b-18 under the SecuritiesExchange Act of 1934, such plan to be effective from August 3, 2018 through August 17, 2018 (the “10b-18 Plan”). The 10b-18 Plan is in additionto an existing share repurchase plan with J.P. Morgan Securities LLC, previously adopted by the Board in accordance with Rule 10b5-1 under theSecurities Exchange Act of 1934 (the “Current 10b5-1 Plan”), which terminates on July 31, 2018.
On July 26, 2018, the Board also approved the adoption of a new share repurchase plan with J.P. Morgan Securities LLC, intended toqualify for the safe harbor under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “New 10b5-1 Plan”). The New 10b5-1Plan will become effective on August 31, 2018 and terminate on February 1, 2019, unless terminated sooner in accordance with its terms.Purchases may be made in the open market or through privately negotiated transactions in support of the Company’s share repurchase plan.Purchases in the open market will be made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.
The Company continues to expect to return substantially all of its free cash flow to shareholders in the form of dividends and sharerepurchases.
On July 31, 2018, the Company posted an updated Investor Presentation on the Company’s Investor Relations website at
investors.thecheesecakefactory.com. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated by reference herein. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
99.1
Press release dated July 31, 2018 entitled, “The Cheesecake Factory Reports Results for Second Quarter of Fiscal2018”
99.2 The Cheesecake Factory Investor Presentation dated August 2018
EXHIBIT INDEX
Exhibit
Description
99.1
Press release dated July 31, 2018 entitled, “The Cheesecake Factory Reports Results for Second Quarter of Fiscal 2018”
99.2
The Cheesecake Factory Investor Presentation dated August 2018
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 31, 2018
THE CHEESECAKE FACTORY INCORPORATED
By: /s/ Matthew E. Clark
Matthew E. Clark
Executive Vice President and Chief Financial Officer
EXHIBIT 99.1
PRESS RELEASE FOR IMMEDIATE RELEASE
Contact: Stacy Feit
(818) 871-3000
THE CHEESECAKE FACTORY REPORTS RESULTS FORSECOND QUARTER OF FISCAL 2018
Increases Quarterly Dividend by 14%
CALABASAS HILLS, Calif., – July 31, 2018– The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported
financial results for the second quarter of fiscal 2018, which ended on July 3, 2018.
Total revenues were $593.2 million in the second quarter of fiscal 2018 as compared to $569.9 million in the second quarter offiscal 2017. Net income and diluted net income per share were $28.4 million and $0.61, respectively, in the second quarter of fiscal2018.
The Company recorded a pre-tax charge of $2.6 million during the second quarter of fiscal 2018 related to the termination of alease for one The Cheesecake Factory restaurant. Excluding the after-tax impact from this item, net income and diluted net incomeper share for the second quarter of fiscal 2018 would have been $30.3 million and $0.65, respectively. Please see the Company’sreconciliation of non-GAAP financial measures at the end of this release.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.4% in the second quarter of fiscal 2018.
“Comparable sales at The Cheesecake Factory and core restaurant operating performance were in line with our expectationsduring the second quarter,” said David Overton, Chairman and Chief Executive Officer . “However, $4.6 million in higher groupmedical insurance costs year-over-year and $4.5 million in increased legal expenses impacted our bottom line results this quarter.”
Overton continued, “We generated over $65 million in operating cash flow during the quarter. The consistency of our cash flowenabled us to increase our dividend for the sixth consecutive year. We continue to execute a balanced capital allocation strategy,investing in long-term growth while returning substantially all of our free cash flow to shareholders through our dividend and sharerepurchase program.” Development
The Company now expects to open as many as six restaurants in fiscal 2018, including one Grand Lux Cafe, scheduled toopen in August 2018, as well as the first location of Social Monk Asian Kitchen, a fast casual concept under development andexpected to open in the fourth quarter of 2018.
26901 Malibu Hills Road, Calabasas Hills, CA 91301 ·Telephone (818) 871-3000 ·Fax (818) 871-3100
In addition, the Company now expects three restaurants to open internationally under licensing agreements in fiscal 2018.
This includes the second location in Saudi Arabia, which opened in April. Capital Allocation
The Company’s Board of Directors declared a quarterly cash dividend of $0.33 per share on the Company’s common stock.The dividend is payable on August 28, 2018 to shareholders of record at the close of business on August 15, 2018.
During the second quarter of fiscal 2018, the Company repurchased approximately 140,000 shares of its common stock at acost of $7.1 million. Conference Call and Webcast
The Company will hold a conference call to review its results for the second quarter of fiscal 2018 today at 2:00 p.m. PacificTime. The conference call will be webcast live on the Company’s website at investors.thecheesecakefactory.com and a replay of thewebcast will be available through August 30, 2018. About The Cheesecake Factory Incorporated
The Cheesecake Factory Incorporated created the upscale casual dining segment in 1978 with the introduction of itsnamesake concept. The Company, through its subsidiaries, owns and operates 213 full-service, casual dining restaurants throughoutthe U.S.A., including Puerto Rico, and Canada, comprised of 198 restaurants under The Cheesecake Factory mark; 13 restaurantsunder the Grand Lux Cafe mark; and two restaurants under the RockSugar Southeast Asian Kitchen mark. Internationally, 21 TheCheesecake Factory restaurants operate under licensing agreements. The Company’s bakery division operates two bakeryproduction facilities, in Calabasas Hills, CA and Rocky Mount, NC, that produce quality cheesecakes and other baked products for itsrestaurants, international licensees and third-party bakery customers. In 2018, the Company was named to the FORTUNE Magazine“100 Best Companies to Work For ” list for the fifth consecutive year. To learn more about the Company, visitwww.thecheesecakefactory.com. FORTUNE and FORTUNE 100 Best Companies to Work For® are registered trademarks of Time Inc. and are used under license. From FORTUNE Magazine, March 1, 2018 ©2018 Time Inc. Used under license.FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, The Cheesecake Factory Incorporated.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of1995. 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 achievementsexpressed or implied by forward-looking statements, including uncertainties related to the Company’s ability to: deliver comparablesales growth; provide a differentiated experience to guests; outperform the casual dining industry and increase its market share;leverage sales increases and manage flow through; manage through cost pressures, including increasing wage rates, group medicalinsurance costs and legal expenses, and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualifiedmanagement and other staff; manage risks associated with the magnitude and complexity of regulations in the states andmunicipalities where the Company’s restaurants are located; increase shareholder value; find suitable sites and manage increasingconstruction costs; profitably expand its concepts domestically and in Canada, and work with its licensees to expand its conceptinternationally; support the growth of North Italia and Flower Child restaurants; develop the Social Monk Asian Kitchen fast casualconcept; expand consumer packaged goods licensing revenue; utilize its capital effectively and continue to increase cash dividendsand repurchase its shares; and factors outside of the Company’s control including: economic and political conditions that impactconsumer confidence and spending; impact of recently enacted tax reform; acceptance and success of The Cheesecake Factory ininternational markets; acceptance and success of the North Italia and Flower Child
26901 Malibu Hills Road, Calabasas Hills, CA 91301 ·Telephone (818) 871-3000 ·Fax (818) 871-3100
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restaurants and the Social Monk Asian Kitchen fast casual concept; the risks of doing business abroad through Company-ownedrestaurants and/or licensees; foreign exchange rates and potential changes in NAFTA and cross border taxation; changes inunemployment rates; the economic health of the Company’s landlords and other tenants in retail centers in which its restaurants arelocated; the economic health of suppliers, licensees, 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 ofgovernment 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”). Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue relianceshould not be placed on such statements. Forward-looking statements speak only as of the dates on which they are made and theCompany undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-lookingstatements, whether as a result of new information, future events or otherwise, unless required to do so by securities laws. Investorsare referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of riskfactors contained in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports onForm 8-K as filed with the SEC, which are available at www.sec.gov.
26901 Malibu Hills Road, Calabasas Hills, CA 91301 ·Telephone (818) 871-3000 ·Fax (818) 871-3100
The Cheesecake Factory Incorporated
Condensed Consolidated Financial Statements(unaudited; in thousands, except per share and statistical data)
13 Weeks Ended
13 Weeks Ended
26 Weeks Ended
26 Weeks EndedConsolidated Statements of Income
July 3, 2018
July 4, 2017
July 3, 2018
July 4, 2017
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Revenues
$ 593,178
100.0%
$ 569,869
100.0%
$ 1,183,869
100.0%
$ 1,133,295
100.0%Costs and expenses:
Cost of sales
133,136
22.5%
128,781
22.6%
268,855
22.7%
257,920
22.8%Labor expenses
212,521
35.8%
193,063
33.9%
423,235
35.8%
386,898
34.1%Other operating costs and expenses
143,796
24.2%
137,461
24.1%
292,128
24.7%
273,111
24.1%General and administrative expenses
41,423
7.0%
35,295
6.2%
80,697
6.8%
71,582
6.3%Depreciation and amortization expenses
23,727
4.0%
23,297
4.1%
47,729
4.0%
46,493
4.1%Impairment of assets and lease terminations
2,583
0.4%
445
0.1%
2,583
0.2%
1,231
0.1%Preopening costs
1,449
0.3%
1,309
0.2%
2,548
0.2%
2,279
0.2%Total costs and expenses
558,635
94.2%
519,651
91.2%
1,117,775
94.4%
1,039,514
91.7%Income from operations
34,543
5.8%
50,218
8.8%
66,094
5.6%
93,781
8.3%Interest and other expense, net
(2,908)
(0.5)%
(1,570)
(0.3)%
(4,414)
(0.4)%
(2,826)
(0.3)%Income before income taxes
31,635
5.3%
48,648
8.5%
61,680
5.2%
90,955
8.0%Income tax provision
3,282
0.5%
10,482
1.8%
7,298
0.6%
17,746
1.5%Net income
$ 28,353
4.8%
$ 38,166
6.7%
$ 54,382
4.6%
$ 73,209
6.5% Basic net income per share
$ 0.62
$ 0.80
$ 1.20
$ 1.54
Basic weighted average shares outstanding
45,383
47,732
45,467
47,683
Diluted net income per share
$ 0.61
$ 0.78
$ 1.16
$ 1.49
Diluted weighted average shares outstanding
46,570
49,047
46,778
49,127
Selected Segment Information
Revenues:
The Cheesecake Factory restaurants
$ 542,102
$ 520,228
$ 1,082,875
$ 1,035,462
Other
51,076
49,641
100,994
97,833
Total
$ 593,178
$ 569,869
$ 1,183,869
$ 1,133,295
Income/(loss) from operations:
The Cheesecake Factory restaurants
$ 69,889
$ 75,989
$ 132,006
$ 146,532
Other
3,983
6,291
9,794
12,929
Corporate
(39,329)
(32,062)
(75,706)
(65,680)
Total
$ 34,543
$ 50,218
$ 66,094
$ 93,781
(1) Includes $2.6 million in the thirteen weeks and twenty six weeks ended July 3, 2018 of lease termination costs related to the closure of one The Cheesecake Factory restaurant, and $0.4 million and $1.2 million in thethirteen weeks and twenty six weeks ended July 4, 2017, respectively, of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease termination ofone The Cheesecake Factory restaurant. These amounts were recorded in impairment of assets and lease terminations in the condensed consolidated statements of income. Selected Consolidated Balance Sheet Information
July 3, 2018
January 2, 2018
Cash and cash equivalents
$ 29,369
$ 6,008
Total assets
1,306,639
1,333,060
Total liabilities
693,857
719,530
Stockholders’ equity
612,782
613,530
13 Weeks Ended
13 Weeks Ended
26 Weeks Ended
26 Weeks EndedThe Cheesecake Factory Supplemental Information
July 3, 2018
July 4, 2017
July 3, 2018
July 4, 2017Comparable restaurant sales
1.4%
-0.5%
1.7%
-0.1%Restaurants opened during period
-
1
-
1Restaurants open at period-end
198
193
198
193Restaurant operating weeks
2,582
2,517
5,169
5,039
26901 Malibu Hills Road, Calabasas Hills, CA 91301 ·Telephone (818) 871-3000 ·Fax (818) 871-3100
(1)
Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with Generally Accepted Accounting Principles (“GAAP”) in this pressrelease, the Company is providing non-GAAP measurements which present net income and diluted net income per share excludingthe impact of certain items. The non-GAAP measurements are intended to supplement the presentation of the Company’s financialresults in accordance with GAAP. The Company believes that the presentation of these items provides additional information tofacilitate the comparison of past and present financial results.
The Cheesecake Factory IncorporatedReconciliation of Non-GAAP Financial Measures
(unaudited; in thousands, except per share data)
13 Weeks Ended
13 Weeks Ended
26 Weeks Ended
26 Weeks Ended
July 3, 2018
July 4, 2017
July 3, 2018
July 4, 2017
Net Income (GAAP)
$ 28,353
$ 38,166
$ 54,382
$ 73,209
After-tax impact from:
- Impairment of assets and lease terminations
1,911
267
1,911
739
Adjusted net income (non-GAAP)
$ 30,264
$ 38,433
$ 56,293
$ 73,948
Diluted net income per share (GAAP)
$ 0.61
$ 0.78
$ 1.16
$ 1.49
After-tax impact from:
- Impairment of assets and lease terminations
0.04
0.00
0.04
0.02
Adjusted diluted net income per share (non-GAAP)
$ 0.65
$ 0.78
$ 1.20
$ 1.51
(1) The pre-tax amount associated with the items was $2.6 million in the thirteen and twenty six weeks ended July 3, 2018, and $0.4 million and $1.2 million, in thethirteen and twenty six weeks ended July 4, 2017, respectively. These amounts were recorded in impairment of assets and lease terminations.
26901 Malibu Hills Road, Calabasas Hills, CA 91301 ·Telephone (818) 871-3000 ·Fax (818) 871-3100
(1)
Exhibit 99.2 ....... . ,..,.,. • ...-. . • .•_ InvestorPresentation August 2018
Safe Harbor Statement Thispresentation containsforward-looking statementsabout our current andpresently expectedperformance trends, growthplans, business goals andother matters. Thesestatements are forward-looking statements withinthe meaning of the PrivateSecurities LitigationReform Act of 1995, ascodified in Section 27A ofthe Securities Act of 1933,as amended, and Section21E of the SecuritiesExchange Act of 1934, asamended (the “Acts”).These forward-lookingstatements include withoutlimitation, statements withrespect to our ability to:provide a differentiatedexperience to guests;deliver comparable salesgrowth; outperform thecasual dining industry;leverage sales increases andmanage flow through;deliver consistent financialperformance; increaseshareholder value; findsuitable sites and manageincreasing constructioncosts; profitably expand ourCompany-ownedrestaurants domesticallyand in Canada, and workwith our licensees toexpand our conceptinternationally; maintainour broad consumer appealand remain relevant toguests; attract and retainqualified management andother staff; manage risksassociated with themagnitude and complexityof regulations in the statesand municipalities wherethe Company’s restaurantsare located; leveragetechnology to drive salesand manage costs; maintainour unit economics; managethrough industry costpressures, includingincreasing wage rates,group medical insurancecosts and legal expenses;stabilize and then expandmargins; achieve ourfinancial objectivesincluding our long-termobjective of 13% - 14%total return to shareholders,on average; producesufficient finished bakeryproduct to supply ourrestaurants and ourlicensees; expand consumerpackaged goods licensingrevenue; support the growthof the Fox Restaurantconcepts; develop theSocial Monk Asian Kitchenfast casual concept; utilizecapital effectively; continueto repurchase our sharesand pay and grow thedividend; and all otherstatements that are nothistorical facts, as well asstatements that arepreceded by, followed byor that include words orphrases such as “believe,”“plan,” “will likely result,”“expect,” “intend,” “willcontinue,” “is anticipated,”“estimate,” “project,”“may,” “could,” “would,”“should” and similarexpressions. Thesestatements are based on ourcurrent expectations andinvolve risks anduncertainties which maycause results to differmaterially from those setforth in such statements.Forward-looking statementsare not guarantees of futureperformance, and unduereliance should not beplaced on such statements.These statements are basedon our current expectationsand involve known andunknown risks anduncertainties that may causeour actual results orperformance to differmaterially from thoseexpressed or implied bysuch statements. Althoughwe believe that theassumptions underlyingforward-looking statementsare currently reasonable,any of the assumptionscould be incorrect orincomplete, and there canbe no assurance thatforward-looking statementswill prove to be accurate.Forward-looking statementsspeak only as of today’sdate, and we undertake noobligation to publiclyupdate or revise anyforward-looking statementsto take into account orotherwise reflectsubsequent events,corrections in underlyingassumptions, or changes incircumstances arising afterthe date that the forward-looking statement wasmade, unless required to doso by law. Please see thefull discussion of risks anduncertainties contained inour filings with theSecurities and ExchangeCommission, including ourlatest Annual Report onForm 10-K, QuarterlyReports on Form 10-Q andCurrent Reports on Form 8-K, which are available atwww.sec.gov. The PrivateSecurities LitigationReform Act of 1995provides certain “safeharbor” provisions forforward-looking statements.All forward-lookingstatements made in thispresentation are madepursuant to the Act. 2
A Compelling InvestmentOpportunity • Highlydifferentiated conceptsdelivering experience aunique guest • • Diversifiedgrowth drivers Sustainedtrack record of consistentfinancial performance •Robust cash flow to supportgrowth and maximizeshareholder value 3
Company Overview andKey CompetitiveAdvantages 4
Our Global Footprint Highquality, high profilelocations worldwide Saudi(3) UAE (2) Mexico 5Company-Owned 198 13 2International - LicensedMiddle East15 Mexico3China, Including HongKong3 5 Guadalajara City(2) Beijing Shanghai HongKong Lebanon (1)Kuwait(3) Bahrain (1) QatarArabia (5) TorontoCompany-Owned: 213
International LicensedPresence GuadalajaraShanghai Abu Dhabi 6Dubai Festival City
The Cheesecake Factory -A Highly DifferentiatedConcept Bakery 7Integrated Ambiance,Service and HospitalityBest-in-Class OperationalExecution Leader in MenuInnovation
Industry Leader in MenuInnovation Breadth ofMenu Is a Key CompetitiveAdvantage Quality • 250menu items made freshfrom scratch in-houseRelevance • No veto vote –something for everyoneacross price points Menuupdated twice a year •Performance • • Drivessales Continued marketshare gains Profit •Increases sales at fullmargin 8
Dining With Us Is anExperience Ambiance,Service and HospitalityDrive Sales 9
Leveraging Technology toDrive Sales 10 OnlineOrdering Net Promoter-Based Guest SatisfactionPlatform Delivery
Integrated Bakery – The“Cheesecake” Magic •Produces over 70cheesecakes and otherbaked desserts Industry-Leading Dessert Sales 16%• Enables creativity andquality control 11
Broad Consumer Appeal Adivision of Vice MediaLLC With $32 a ModerateAverage Check HighestUnit Volumes ($ inmillions) $10.6 $25 $22$22 $21 $21 $5.0 $15 $4.7Maggianos Yard HouseBJ'sTexas OliveOutbackLongHorn BonefishCarrabbas Yard HouseMaggianos BonefishOutback CarrabbasLongHorn Olive TexasBJ'sRoadhouse Garden GardenRoadhouse Source: LatestSEC filings and companypresentations 12 $28$18$17 $8.3$8.1 $5.6$3.4$3.3$3.0$2.9 #1 FoodQuality
Strong Consumer AcrossChannels Engagement Ittakes more than 30 minutesto prepare a small batch ofour Sake Butter Sauce, andthat’s just one of dozens ofsauces that we prepare freshin-house every day. 5M+fans 370K followersMillions of Viewers 650Kfollowers 13
Capitalizing on the Powerof the Brand HomeTM TheCheesecake Factory At 14
Best-in-Class DualManagement OperationalExecution Industry-LeadingRetention Average Tenureby Position StructureAbove 4-Walls 29 years 20years 19 years 17 years 12years 12 Senior VP ofOperations Regional VicePresident Area Director ofOperations Area KitchenOperations ManagerGeneral Manager ------------------Executive KitchenManager years FORTUNEand FORTUNE 100 BestCompanies to Work For®are registered trademarks ofTime Inc. and are usedunder license. FromFORTUNE Magazine,March 1, 2018 ©2018Time Inc. Used underlicense. FORTUNE andTime Inc. are not affiliatedwith, and do not endorseproducts or services of, TheCheesecake FactoryIncorporated. 15 EKMEKM EKM EKM EKMEKM Area KitchenOperations Manager GMGM GM GM GM GMArea Director ofOperations
Leveraging Technology toManage Costs 16Dashboards AutomatedProduction Call Market-Based Labor AnalyticsKitchen ManagementSystem
Diversified Growth Drivers17
The Cheesecake Factory –Returns-Focused GrowthOpportunity for 300Domestic & 8 - 10Canadian Locations OverTime • • Site-based strategyFocused on premierlocations – high street,lifestyle centers and Amalls Infill and newmarkets Target 7,500 –10,000 sq. ft. • • 18 *Illustrative example oftarget returns for newrestaurant openings.Average Unit Economics*Sales $10.6 ~18% $8+20% - 25% EBITDA %Cash Capex InvestmentCash-on-Cash Return
The Cheesecake Factory –Expanding InternationalLicensed Presence •Continued expansion withincurrent geographiesPotential for additionalgeographies with currentlicensees Opportunity toadd licensees and territories• • 19 Shanghai $0 CapitalExpenditure +1¢ PerRestaurant in EPS, onAverage
…CAKE 2022 • Multi-concept with segment, pricepoint/occasion, real estateand labor modeldiversification • Leveragingbrand power, operationalestate developmentexpertise excellence, scale,supply chain and realIllustrative Unit GrowthRoadmap * * Unit Growth~20 units per year Near-Term 2019E 2021E 20*Represent two of FoxRestaurant Concepts’ high-growth brands that theCompany has mademinority investments in.Long-Term PotentialTarget Size (sq. ft.) 7,500 –10,0005,000 - 6,0003,000– 7,000 $1,000/sq.ft.$1,000/sq. ft.$1,000/sq.ft. Unit Economics NewUnits/Year 65 - 66 - 8 Top-Line Growth Contribution~3%1% - 2%1% - 2%Incremental GrowthOpportunities
Levers to Rebuild MarginsAdjusted Operating Margin~7.5% +50 bps +30 bps+30 bps Maintain flatrestaurant margins ~6.4%*Efficiencies, Pricing, Cost& Portfolio ManagementLabor & Other InflationaryPressures 2018E 2023E*Adjusted operating marginanticipated in 2018 EPSguidance range providedJuly 31, 2018, excludingthe impact of $4.6 millionin higher group medicalinsurance costs and $4.5million in increased legalexpenses incurred duringthe second quarter of fiscal2018. 21 Leverage BakeryTechnology & ProjectedSales Growth International& CPG Flow ThroughG&A Leverage
CAKE 5-Year Plan 22Top-Line Growth DriversComparable Sales Growth~1% - 2% ~5% UnitGrowth Total Top-LineGrowth 6% - 7% 2023EFinancial Targets Revenues~$3 billion 6%+ $4.5015% Net Income MarginEPS ROIC
Creating Value forShareholders Long-TermObjective: 13% - 14%Total Return toShareholders, on Average(EPS + Dividend) RevenueGrowth ~6% - 7%Comparable Sales GrowthUnit Growth OperatingMargin Expansion ShareRepurchases Dividend 23Total Return toShareholders ~1% - 2%~5% ~25 bps ~3% ~2%
Track Record of ConsistentFinancial Performance 24
Continuing to Outperformthe Industry ComparableSales - Historical 2-yearStack 2011 2012 20132014 2015 2016 2017 2018YTD 4.2% 4.1% 4.0%3.8% 3.3% 2.6% 2.0%1.6% 1.0% 0.8% 0.4%(0.4)% (0.9)% (1.6)%(2.2)% Knapp-Track Index25 0.0%
Leveraged Sales andManaged CostsProfitability to SupportAdjusted Earnings PerShare* $2.83 $1.97 20102011 2012 2013 2014 20152016 2017 26 *Please seeAppendix for GAAP tonon-GAAP reconciliations.$2.37 $2.60 $2.10 $1.88$1.64 $1.42
Our Restaurants GenerateSignificant Cash Flow FreeCash Flow and StrongBalance Sheet ProvideSignificant Financial($ millions) Flexibility$128 $120 $112 $107 20112012 2013 2014 2015 20162017 YTD 27 Free cashflow defined as cash flowfrom operations less capitalexpenditures/investments.Please see Appendix forGAAP to non-GAAPreconciliations and for anexplanation regarding anaccounting reclassificationfor prior years. $158 $75$135 $100 $94 2010 2018
Effective CapitalAllocation Supports OurFinancial Objectives $1+Billion in ShareRepurchases ReducingWASO 3% Per YearCommitted to Continuing($ millions) to GrowDividend 60,446 48,152$13 2010 2011 2012 20132014 2015 Dividend 20162017 Capex / InvestmentShare Repurchases WASO28 $42 $27 $50 $36 $146$184 $30 $123 $109 $141$172 $101 $158 $154 $139$114 $106 $52 $86 $77$42
Disciplined, Returns-Focused Growth Has PaidOff Return on InvestedCapital (ROIC) 17% 14%13% 2010 2011 2012 20132014 2015 2016 2017ROIC = NOPAT / Averageinvested capital NOPAT =Income from operationsexcluding non-recurringexpenses (-) income taxprovision Invested Capital= Property and equipment+ long-term assets + networking capital (-) cashand cash equivalents 2915%15% 15% 14% 13%
A Compelling InvestmentOpportunity • Highlydifferentiated conceptsdelivering experience aunique guest • • Diversifiedgrowth drivers Sustainedtrack record of consistentfinancial performance •Robust cash flow to supportgrowth and maximizeshareholder value 30
Appendix 31
Non-GAAP ReconciliationIn addition to the resultsprovided in accordancewith the GenerallyAccepted AccountingPrinciples (“GAAP”) inthis presentation, theCompany is providing non-GAAP measurements whichpresent diluted net incomeper share excluding theimpact of certain items andfree cash flow. The non-GAAP measurements areintended to supplement thepresentation of thecompany’s financial resultsin accordance with GAAP.The company believesfacilitate that thepresentation of these itemsprovides additionalinformation to thecomparison of past andpresent financial results. 32
Non-GAAP ReconciliationThe Cheesecake FactoryIncorporatedReconciliation of Non-GAAP Financial Measures($ in thousands, except pershare data) Fiscal Year2010 2011 2012 2013 20142015 2016 2017 NetIncome (GAAP) After-taximpact from: - Impairmentof assets and leaseterminations (1) - PartialIRS settlement (2) -Unwinding of interest ratecollars (3) - Proceeds fromvariable life insurancecontract (4) - Deferred taxrevaluation (5) Adjustednet income (non-GAAP)$ 81,713 $ 95,720 $ 98,423$ 114,356 $ 101,276$ 116,523 $ 139,494$ 157,392 - - 4,425 - - 928(1,506) - - - 5,722 - - (419)- (337) 418 3,607 - - - - 686,206 - - - (38,525) - - - - - -- - - - - - $ 86,138 $ 95,142$ 103,726 $ 114,019$ 101,694 $ 120,130$ 139,562 $ 125,073Diluted net income pershare (GAAP) After-taximpact from: - Impairmentof assets and leaseterminations - Partial IRSsettlement - Unwinding ofinterest rate collars -Proceeds from variable lifeinsurance contract -Deferred tax revaluationAdjusted diluted netincome per share (non-GAAP) (6) $ 1.35 $ 1.64$ 1.78 $ 2.10 $ 1.96 $ 2.30$ 2.83 $ 3.27 - - 0.02(0.03) - - - 0.11 (0.01) - - -- 0.01 0.07 0.00 0.13 - -(0.01) - - - - - - - - - - - - - - -- (0.80) 0.07 - - $ 1.42$ 1.64 $ 1.88 $ 2.10 $ 1.97$ 2.37 $ 2.83 $ 2.60 (1)The pre-tax amountsassociated with these itemsin fiscal 2011, 2012, 2013,2014, 2015, 2016 and 2017were $1,547, $9,536,$(561), $696, $6,011, $114and $10,343, respectively,and were recorded inimpairment of assets andlease terminations. (2) Thepre-tax amounts associatedwith this item were $719and $1,075 and wererecorded in interest andother (expense)/income, netand income tax provision,respectively. (3) The pre-tax amount associated withthis item was $7,376 andwas recorded in interestexpense. (4) This item isnon-taxable and is recordedin interest and other(expense)/income, net. (5)Fiscal 2017 includes a$38.5 million benefit to theincome tax provisionrelated to tax reformenacted in December 2017.(6) Adjusted diluted netincome per share may notadd due to rounding. 33
Non-GAAP ReconciliationThe Cheesecake FactoryIncorporatedReconciliation of Non-GAAP Financial Measures($ in millions) Fiscal Year2010 2011 2012 2013 20142015 2016 2017 2018YTD Cash Flow fromOperations (1) CapitalExpenditures / InvestmentsFree Cash Flow $ 170 42$ 197 77 $ 198 86 $ 213106 $ 249 114 $ 248 154$ 316 158 $ 239 139 $ 14166 $ 128 $ 120 $ 112 $ 107$ 135 $ 94 $ 158 $ 100$ 75 (1) The excess taxbenefit related to stockoptions exercised is nolonger reclassified fromcash flows from operatingactivities to cash flowsfrom financing activities inthe consolidated statementsof cash flows. Theconsolidated statements ofcash flows for fiscal 2016,2015, 2014, 2013, 2012,2011 and 2010 have beenadjusted to conform to thecurrent year presentation.34