The Cheesecake Factory Reports Results for Q3 of Fiscal 2020

Calabas Hills / CA. (cf) The Cheesecake Factory Incorporated reported financial results for the third quarter of fiscal 2020, which ended on September 29, 2020.

Total revenues were USD 517.7 million in the third quarter of fiscal 2020 compared to USD 586.5 million in the third quarter of fiscal 2019. Net loss and diluted net loss per share were USD 28.3 million and USD 0.76, respectively, in the third 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 third quarter of fiscal 2020, the Company recorded pre-tax impairment of assets and lease termination expense of USD 10.4 million, USD 5.4 million of which was cash lease termination expense associated with one Grand Lux Cafe location that discontinued operations during the third quarter and RockSugar Southeast Asian Kitchen, which is scheduled to discontinue operations at the end of the year. The remainder was primarily related to non-cash accelerated depreciation associated with the closed Grand Lux Cafe location and accrued lease termination expense associated with another Grand Lux Cafe location that the Company expects to close by the end of the year. The Company also recorded Covid-19 related charges of USD 2.6 million, for costs such as sick pay, 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 third quarter of fiscal 2020 were USD 17.7 million and USD 0.33, 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 23.3 percent in the third quarter of fiscal 2020, reflecting the impact of Covid-19.

Fiscal fourth quarter-to-date through October 27, 2020, The Cheesecake Factory restaurants with reopened indoor dining rooms have recaptured, on average, approximately 90 percent of prior year annualized sales volumes, supported by approximately 40 percent off-premise sales mix. In aggregate, including locations with only reopened patios and off-premise only operating models, fiscal fourth quarter to-date through October 27, 2020 comparable sales at The Cheesecake Factory restaurants are down approximately 7 percent.

As of today, approximately 90 percent of the Company’s restaurants across its concepts, including 187 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 percent capacity. Approximately 7 percent of the Company’s restaurants across its concepts, including 17 Cheesecake Factory locations, are operating with reopened patios with social distancing in accordance with California and Toronto dining restrictions. Currently, two locations, including one Cheesecake Factory restaurant, are operating an off-premise only model and five locations across the Company’s concepts are currently closed.

«We have continued to drive sales at The Cheesecake Factory restaurants despite mandated capacity restrictions as many of our guests have been eager to return to our restaurants and we have continued to sustain strength in the off-premise channel. In fact, we were able to maintain the vast majority of off-premise sales from the second quarter, even with additional restaurants able to reopen indoor dining rooms during the third quarter,» said David Overton, Chairman and Chief Executive Officer. «We believe this underscores the broad consumer appeal and strong guest affinity for The Cheesecake Factory brand.»

Overton continued, «We have seen a continued sales recovery at North Italia and the FRC concepts, underscoring the strength of these brands as well. Operational execution was solid across our concepts, reinforcing our financial position. In turn, we believe we are poised to continue to manage through the Covid-19 environment and emerge in a competitively strong position.»

Development

During the third quarter of fiscal 2020, two Flower Child locations opened in Houston and Oklahoma City. Subsequent to quarter-end, Culinary Dropout opened in Scottsdale, Arizona. No new restaurants were opened by the Company’s international licensees during the third quarter of fiscal 2020.

Balance Sheet + Cash Flow

During the third quarter, the Company generated USD 3.0 million in cash flow from operating activities. As of September 29, 2020, cash and cash equivalents totaled USD 243.8 million and total debt was USD 376.0 million. Subsequent to quarter-end, the Company repaid USD 96.0 million of its revolving credit facility, bringing its debt balance to USD 280.0 million. A USD 4.8 million dividend for the third quarter of fiscal 2020 was paid in-kind to holders of the Company’s convertible preferred stock.