The Cheesecake Factory(CAKE) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the thirteen weeks ended April 4, 2023, highlighting a 9.1% revenue increase to $866.1 million and a rise in net income to $28.1 million Condensed Consolidated Balance Sheets As of April 4, 2023, total assets were $2.74 billion, liabilities $2.44 billion, and stockholders' equity $299.8 million, reflecting slight changes from the fiscal year start | Balance Sheet Highlights | April 4, 2023 (in thousands USD) | January 3, 2023 (in thousands USD) | | :--- | :--- | :--- | | Total Assets | $2,742,488 | $2,775,220 | | Cash and cash equivalents | $116,164 | $114,777 | | Total current assets | $313,636 | $345,768 | | Total Liabilities | $2,442,649 | $2,483,217 | | Long-term debt | $468,536 | $468,032 | | Total current liabilities | $626,695 | $656,678 | | Total Stockholders' Equity | $299,839 | $292,003 | Condensed Consolidated Statements of Income Revenues for the thirteen weeks ended April 4, 2023, increased 9.1% to $866.1 million, with net income rising to $28.1 million and diluted EPS to $0.56 | Income Statement Highlights | Thirteen Weeks Ended April 4, 2023 (in thousands USD) | Thirteen Weeks Ended March 29, 2022 (in thousands USD) | | :--- | :--- | :--- | | Revenues | $866,114 | $793,710 | | Income from operations | $33,926 | $28,321 | | Net Income | $28,050 | $23,163 | | Diluted EPS | $0.56 | $0.45 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $292.0 million to $299.8 million in Q1 2023, driven by net income and offset by dividends and share repurchases - Declared a cash dividend of $0.27 per share, totaling $13.9 million[17] - Purchased treasury stock for $12.4 million during the quarter[17] Condensed Consolidated Statements of Cash Flows Operating activities generated $65.0 million in cash, while investing and financing activities used $38.2 million and $25.6 million respectively, resulting in a net cash increase of $1.4 million | Cash Flow Activity | Thirteen Weeks Ended April 4, 2023 (in thousands USD) | | :--- | :--- | | Cash provided by operating activities | $65,035 | | Cash used in investing activities | $(38,162) | | Cash used in financing activities | $(25,558) | | Net change in cash and cash equivalents | $1,387 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, macroeconomic impacts, long-term debt including a $400 million revolver and $345 million convertible notes, segment performance, and legal contingencies - Operating results in fiscal 2023 continue to be impacted by supply chain challenges and significant commodity and wage inflation[26] - As of April 4, 2023, $130.0 million was outstanding under the Revolver Facility, with $238.5 million in net availability for borrowings[38] - The company has $345.0 million in aggregate principal of 0.375% convertible senior notes due 2026[41][48] Segment Revenues (Q1 2023) | Segment Revenues (Q1 2023) | Revenue (in thousands USD) | | :--- | :--- | | The Cheesecake Factory restaurants | $656,000 | | North Italia | $63,303 | | Other FRC | $68,640 | | Other | $78,171 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, including a 9.1% revenue increase, comparable sales growth, cost fluctuations, and strategic priorities, projecting fiscal 2023 revenues of approximately $3.55 billion Results of Operations Q1 2023 revenues rose 9.1% to $866.1 million, driven by comparable sales growth, with labor costs decreasing to 36.0% and adjusted diluted EPS increasing to $0.61 - Total revenues increased 9.1% to $866.1 million for Q1 2023[92] Comparable Sales Growth (Q1 2023 vs Q1 2022) | Comparable Sales Growth (Q1 2023 vs Q1 2022) | Increase | | :--- | :--- | | The Cheesecake Factory | 5.7% | | North Italia | ~9% | - Labor expenses as a percentage of revenue decreased from 37.3% to 36.0% year-over-year, primarily due to menu pricing leverage[97] - Adjusted diluted net income per share increased to $0.61 from $0.47 in the prior-year quarter[105] Fiscal 2023 Outlook Fiscal 2023 outlook projects total revenues of approximately $3.55 billion, with plans to open 20-22 new restaurants and Q2 2023 revenues between $870 million and $890 million - Anticipates total revenue for fiscal 2023 to be approximately $3.55 billion[106] - Plans to open 20 to 22 new restaurants in fiscal 2023, with capital expenditures of $165 million to $175 million[107] - Expects total revenues for Q2 2023 to be approximately $870 million to $890 million[108] Liquidity and Capital Resources Primary liquidity source is cash from operations ($65.0 million in Q1 2023), with key uses including capital expenditures, dividends, and share repurchases, supported by a $400 million revolving credit facility - Cash provided by operating activities increased to $65.0 million in Q1 2023 from $33.5 million in Q1 2022[111][112] - As of April 4, 2023, $130.0 million was outstanding on the Revolver Facility, with $238.5 million in net availability[115] - Repurchased 0.3 million shares for $12.4 million and paid $13.2 million in common stock dividends during Q1 2023[117][118] Quantitative and Qualitative Disclosures About Market Risk The company discusses market risks from commodity price volatility, interest rate changes on variable-rate debt, and investment fluctuations, noting a hypothetical 1% interest rate rise would increase annual interest expense by $1.3 million - Commodity price volatility remains a key risk, with ongoing inflation above historical levels; a hypothetical 1% increase in food costs would have negatively impacted cost of sales by $2.1 million in Q1 2023[124][126] - The company is exposed to interest rate risk on its Loan Agreement; a hypothetical 1% rise in interest rates would increase annual interest expense by $1.3 million[127] - Market risk exists for investments supporting non-qualified plans; a hypothetical 10% decline in market value would reduce net income by $2.1 million due to tax impact[127] Controls and Procedures Management concluded disclosure controls and procedures were effective as of April 4, 2023, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of April 4, 2023[128] - No material changes in internal control over financial reporting were identified during the quarter[129] PART II - OTHER INFORMATION Legal Proceedings Note 7 details a tentatively settled wage citation case and two new class-action complaints filed in February 2023 regarding alleged improper website visitor tracking - A 2018 wage citation case has reached a tentative settlement, with an immaterial amount reserved by the company[51] - Two class-action lawsuits were filed in February 2023 alleging privacy and wiretapping violations due to website tracking, which the company intends to vigorously defend[52] Risk Factors No material changes to risk factors were identified from the Annual Report on Form 10-K for the fiscal year ended January 3, 2023 - The company refers to its Annual Report on Form 10-K for a description of risk factors, indicating no material changes during the quarter[132] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2023, the company repurchased 341,000 shares, including 204,000 under a public plan for $12.4 million and 137,188 for tax obligations Share Repurchase Activity (Q1 2023) | Share Repurchase Activity (Q1 2023) | Shares (in thousands of shares) | Average Price Paid per Share | | :--- | :--- | :--- | | Total Shares Purchased | 341 | - | | Purchased as Part of Public Plan | 204 | - | | Withheld for Tax Obligations | 137 | - | - The company repurchased 0.3 million shares at a cost of $12.4 million during Q1 2023 under its publicly announced plan[135] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements - Lists all exhibits filed with the report, including CEO/CFO certifications and iXBRL data files[137]