Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 03, 2018 | Jul. 30, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | CHEESECAKE FACTORY INC | |
Entity Central Index Key | 887,596 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 3, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-01 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 45,829,812 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jul. 03, 2018 | Jan. 02, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 29,369 | $ 6,008 |
Accounts receivable | 17,806 | 19,865 |
Income taxes receivable | 2,433 | 15,016 |
Other receivables | 31,815 | 67,518 |
Inventories | 34,691 | 42,560 |
Prepaid expenses | 52,946 | 57,666 |
Total current assets | 169,060 | 208,633 |
Property and equipment, net | 936,469 | 935,045 |
Other assets: | ||
Intangible assets, net | 24,524 | 24,065 |
Prepaid rent expenses | 36,759 | 39,399 |
Other | 139,827 | 125,918 |
Total other assets | 201,110 | 189,382 |
Total assets | 1,306,639 | 1,333,060 |
Current liabilities: | ||
Accounts payable | 38,312 | 50,984 |
Gift card liabilities | 133,617 | 163,951 |
Other accrued expenses | 182,659 | 183,016 |
Total current liabilities | 354,588 | 397,951 |
Deferred income taxes | 56,770 | 57,216 |
Deferred rent liabilities | 71,497 | 74,761 |
Deemed landlord financing liability | 114,790 | 108,627 |
Long-term debt | 20,000 | 10,000 |
Other noncurrent liabilities | 76,212 | 70,975 |
Commitments and contingencies (Note 5) | ||
Stockholders' equity: | ||
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued | ||
Common stock, $.01 par value, 250,000,000 shares authorized; 96,228,710 and 95,412,030 issued at July 3, 2018 and January 2, 2018, respectively | 962 | 954 |
Additional paid-in capital | 817,384 | 799,862 |
Retained earnings | 1,369,912 | 1,345,666 |
Treasury stock, 50,401,368 and 49,534,212 shares at cost at July 3, 2018 and January 2, 2018, respectively | (1,574,893) | (1,532,864) |
Accumulated other comprehensive loss | (583) | (88) |
Total stockholders' equity | 612,782 | 613,530 |
Total liabilities and stockholders' equity | $ 1,306,639 | $ 1,333,060 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jul. 03, 2018 | Jan. 02, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 96,228,710 | 95,412,030 |
Treasury stock, shares | 50,401,368 | 49,534,212 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
Revenues | $ 593,178 | $ 569,869 | $ 1,183,869 | $ 1,133,295 |
Costs and expenses: | ||||
Cost of sales | 133,136 | 128,781 | 268,855 | 257,920 |
Labor expenses | 212,521 | 193,063 | 423,235 | 386,898 |
Other operating costs and expenses | 143,796 | 137,461 | 292,128 | 273,111 |
General and administrative expenses | 41,423 | 35,295 | 80,697 | 71,582 |
Depreciation and amortization expenses | 23,727 | 23,297 | 47,729 | 46,493 |
Impairment of assets and lease terminations | 2,583 | 445 | 2,583 | 1,231 |
Preopening costs | 1,449 | 1,309 | 2,548 | 2,279 |
Total costs and expenses | 558,635 | 519,651 | 1,117,775 | 1,039,514 |
Income from operations | 34,543 | 50,218 | 66,094 | 93,781 |
Interest and other expense, net | (2,908) | (1,570) | (4,414) | (2,826) |
Income before income taxes | 31,635 | 48,648 | 61,680 | 90,955 |
Income tax provision | 3,282 | 10,482 | 7,298 | 17,746 |
Net income | $ 28,353 | $ 38,166 | $ 54,382 | $ 73,209 |
Net income per share: | ||||
Basic (in dollars per share) | $ 0.62 | $ 0.80 | $ 1.20 | $ 1.54 |
Diluted (in dollars per share) | $ 0.61 | $ 0.78 | $ 1.16 | $ 1.49 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 45,383 | 47,732 | 45,467 | 47,683 |
Diluted (in shares) | 46,570 | 49,047 | 46,778 | 49,127 |
Cash dividends declared per common share (in dollars per share) | $ 0.29 | $ 0.24 | $ 0.58 | $ 0.48 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 28,353 | $ 38,166 | $ 54,382 | $ 73,209 |
Other comprehensive loss: | ||||
Foreign currency translation adjustment | (249) | (495) | ||
Other comprehensive loss | (249) | (495) | ||
Total comprehensive income | $ 28,104 | $ 38,166 | $ 53,887 | $ 73,209 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total |
Increase (Decrease) in Stockholders' Equity | ||||||
Cumulative effect of adopting the pronouncement related to revenue recognition | Accounting Standards Update 2014-09 | $ (3,560) | $ (3,560) | ||||
Balance (as adjusted) | $ 954 | $ 799,862 | 1,342,106 | $ (1,532,864) | $ (88) | 609,970 |
Balance at Jan. 02, 2018 | $ 954 | 799,862 | 1,345,666 | (1,532,864) | (88) | 613,530 |
Balance (in shares) at Jan. 02, 2018 | 95,412 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 54,382 | 54,382 | ||||
Foreign currency translation adjustment | (495) | (495) | ||||
Cash dividends declared | (26,576) | (26,576) | ||||
Stock-based compensation | $ 4 | 11,209 | 11,213 | |||
Stock-based compensation (in shares) | 379 | |||||
Common stock issued under stock-based compensation plans | $ 4 | 6,313 | 6,317 | |||
Common stock issued under stock-based compensation plans (in shares) | 438 | |||||
Treasury stock purchases | (42,029) | (42,029) | ||||
Balance at Jul. 03, 2018 | $ 962 | $ 817,384 | $ 1,369,912 | $ (1,574,893) | $ (583) | $ 612,782 |
Balance (in shares) at Jul. 03, 2018 | 96,229 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jul. 03, 2018 | Jul. 04, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 54,382 | $ 73,209 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Depreciation and amortization expenses | 47,729 | 46,493 |
Deferred income taxes | 805 | 2,264 |
Impairment of assets and lease terminations | 2,493 | 1,489 |
Stock-based compensation | 11,075 | 9,788 |
Changes in assets and liabilities: | ||
Accounts receivable | 2,089 | 1,559 |
Other receivables | 35,661 | 29,896 |
Inventories | 7,865 | (5,320) |
Prepaid expenses | 4,717 | 1,519 |
Other assets | 1,089 | (4,280) |
Accounts payable | (4,839) | 3,767 |
Income taxes receivable/payable | 12,583 | (6,497) |
Other accrued expenses | (35,101) | (39,948) |
Cash provided by operating activities | 140,548 | 113,939 |
Cash flows from investing activities: | ||
Additions to property and equipment | (51,870) | (43,699) |
Additions to intangible assets | (735) | (619) |
Investments in unconsolidated affiliates | (14,000) | (9,000) |
Proceeds from variable life insurance contract | 540 | |
Cash used in investing activities | (66,065) | (53,318) |
Cash flows from financing activities: | ||
Deemed landlord financing proceeds | 3,631 | |
Deemed landlord financing payments | (2,509) | (2,124) |
Borrowings on credit facility | 30,000 | |
Repayments on credit facility | (20,000) | |
Proceeds from exercise of stock options | 6,317 | 7,709 |
Cash dividends paid | (26,521) | (23,177) |
Treasury stock purchases | (42,029) | (30,554) |
Cash used in financing activities | (51,111) | (48,146) |
Foreign currency translation adjustment | (11) | |
Net change in cash and cash equivalents | 23,361 | 12,475 |
Cash and cash equivalents at beginning of period | 6,008 | 53,839 |
Cash and cash equivalents at end of period | 29,369 | 66,314 |
Supplemental disclosures: | ||
Interest paid | 4,145 | 3,375 |
Income taxes paid | 5,291 | 21,949 |
Construction payable | $ 4,250 | $ 7,429 |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 6 Months Ended |
Jul. 03, 2018 | |
Basis of Presentation and Significant Accounting Policies | |
Basis of Presentation and Significant Accounting Policies | 1. Basis of Presentation and Significant Accounting Policies 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”) 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 2, 2018 filed with the SEC on February 28, 2018. 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. We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal 2018 consists of 52 weeks and will end on January 1, 2019. Fiscal 2017, which ended on January 2, 2018, was also a 52-week year. Recent Accounting Pronouncements Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the recognition and measurement of leases. Under the new standard, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. The standard requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018 and requires a modified retrospective approach, with optional practical expedients. Although early adoption is permitted, we will adopt these provisions in the first quarter of fiscal 2019. We expect this adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets, but will likely have an insignificant impact on our consolidated statements of income. In preparation for the adoption of the guidance, we are in the process of implementing controls and key system changes to enable the preparation of the required financial information. Recently Adopted Accounting Standards In May 2014, the FASB issued accounting guidance that provides a comprehensive new revenue recognition model that supersedes most of the existing revenue recognition requirements and requires entities to recognize revenue at an amount that reflects the consideration to which a company expects to be entitled in exchange for transferring goods or services to a customer. We implemented this standard as of the first day of fiscal 2018, and the only impact to our condensed consolidated financial statements relates to recognition of development and site fees from our international licensees. Utilizing the cumulative-effect method of adoption, we recorded a $4.8 million increase to deferred revenue and a corresponding reduction of $3.6 million, net of tax, to retained earnings to reverse a portion of the previously recognized fees. Whereas previously we recognized income and received payment upon execution of the agreements and approval of new restaurant sites, respectively, future revenue for these items will be recorded on a straight-line basis over the life of the applicable licensee agreements as the agreements do not contain distinct performance obligations. Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of adopting this standard as compared to the previous revenue recognition guidance was not material to our condensed consolidated balance sheet and condensed consolidated statements of income and comprehensive income in the first quarter of fiscal 2018. Revenue Recognition Our revenues consist of sales at our Company-owned restaurants, sales from our bakery operations to our licensees and other third-party customers, royalties from our licensees’ restaurant sales and consumer packaged goods, and licensee development and site fees. Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues from bakery sales are recognized upon transfer of title and risk to customers. Royalty revenues are recognized in the period the related sales occur, utilizing the sale-based royalty exception available under current accounting guidance. Development and site fees are recognized as revenue over the life of the applicable agreements, ranging from eight to 30 years. In the first half of fiscal 2018, we deferred revenue of $0.2 million for new site agreements. There were no new development agreements executed during the first half of fiscal 2018. We recognized combined development and site fee revenue of $0.1 million and $0.2 million during the thirteen and twenty-six weeks ended July 3, 2018, respectively. We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants. Based on our historical redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” Breakage is recognized over a three-year period in proportion to historical redemption trends and is classified as revenues in our consolidated statements of income. Incremental direct costs related to gift card sales, including commissions and credit card fees, are deferred and recognized in earnings in the same pattern as the related gift card revenue. Certain of our promotional programs include multiple element arrangements that incorporate various performance obligations. We allocate revenue using the relative selling price of each performance obligation considering the likelihood of redemption and recognize revenue upon satisfaction of each performance obligation. During the first half of fiscal 2018, there were no new multiple element arrangements requiring deferral. We recognized $5.9 million of previously deferred revenue related to promotional programs during the thirteen and twenty-six weeks ended July 3, 2018. Revenues are presented net of sales taxes. Sales tax collected is included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities. Impairment of Long-Lived Assets and Lease Terminations We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be disposed of significantly before the end of its previously estimated useful life and significant negative industry or economic trends. We regularly review restaurants that are cash flow negative for the previous four quarters and those that are being considered for closure or relocation to determine if impairment testing is warranted. At any given time, we may be monitoring a small number of locations, and future impairment charges could be required if individual restaurant performance does not improve or we make the decision to close or relocate a restaurant. We recorded $2.6 million of lease termination costs in the second quarter of fiscal 2018 related to the closure of one The Cheesecake Factory restaurant. We recorded $0.4 million and $1.2 million in the thirteen 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 expiration of one The Cheesecake Factory restaurant. Income Taxes The Tax Cuts and Jobs Act (“Tax Act”), which was enacted on December 22, 2017, made significant changes to how corporations are taxed in the U.S., the most prominent of which affecting us was to lower the U.S. statutory corporate tax rate from 35% to 21%. We believe we have properly estimated our federal and state income tax liabilities, and our accounting for the income tax effects of the Tax Act has been completed. However, given the amount and complexity of the changes in tax law resulting from the Tax Act, we continue to analyze the effects of the Tax Act on our income tax provision. We may make further refinements to our calculations considering technical guidance that may be published and changes to current interpretations of certain provisions of the Tax Act. Any impacts to our provision as the result of additional guidance will be recorded in the period in which the guidance is issued. |
Inventories
Inventories | 6 Months Ended |
Jul. 03, 2018 | |
Inventories | |
Inventories | 2. Inventories Inventories consisted of (in thousands): July 3, 2018 January 2, 2018 Restaurant food and supplies $ $ Bakery finished goods and work in progress (1) Bakery raw materials and supplies Total $ $ (1) Our California bakery was closed from February 2018 to June 2018 while we upgraded the facility. In preparation for lost production capacity, we produced additional inventories during the fourth quarter of fiscal 2017. The additional inventory was utilized during the first half of fiscal 2018. |
Gift Cards
Gift Cards | 6 Months Ended |
Jul. 03, 2018 | |
Gift Cards | |
Gift Cards | 3. Gift Cards The following tables present information related to gift cards (in thousands): Gift card liabilities: Thirteen Thirteen Twenty-Six Twenty-Six Beginning balance $ $ $ $ Activations Redemptions and breakage ) ) ) ) Ending balance $ $ $ $ Gift card contract assets: (1) Thirteen Thirteen Twenty-Six Twenty-Six Beginning balance $ $ $ $ Deferrals Amortization ) ) ) ) Ending balance $ $ $ $ (1) Included in prepaid expenses on the condensed consolidated balance sheet. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jul. 03, 2018 | |
Long-Term Debt | |
Long-Term Debt | 4. Long-Term Debt We maintain a $200 million unsecured revolving credit facility (“Facility”), $50 million of which may be used for issuances of letters of credit. Availability under the Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. The Facility, which matures on December 22, 2020, contains a commitment increase feature that could provide for an additional $100 million in available credit upon our request and subject to the participating lenders electing to increase their commitments or new lenders being added to the Facility. Certain of our material subsidiaries guarantee our obligations under the Facility. During the second quarter of fiscal 2018, we utilized the Facility to fund a portion of our stock repurchases. At July 3, 2018, we had net availability for borrowings of $159.3 million, based on a $20.0 million outstanding debt balance and $20.7 million in standby letters of credit. We are subject to certain financial covenants under the Facility requiring us to maintain (i) a maximum “Net Adjusted Leverage Ratio” of 4.0 and (ii) a minimum EBITDAR to interest and rental expense ratio (“EBITDAR Ratio”) of 1.9, with each of the capitalized terms in this Note 4 as defined in the Facility. The Facility limits cash 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. Our Net Adjusted Leverage and EBITDAR Ratios were 3.0 and 2.6, respectively, at July 3, 2018, and we were in compliance with all covenants in effect at that date. Borrowings under the Facility bear interest, at our option, at a rate per annum equal to either (i) the Adjusted LIBO Rate plus a margin ranging from 1.00% to 1.75% based on our Net Adjusted Leverage Ratio or (ii) the sum of (a) the highest of (1) the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect, (2) the greater of the Federal Funds Effective Rate or the Overnight Bank Funding Rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin ranging from 0.00% to 0.75% based on our Net Adjusted Leverage Ratio. We also pay customary fees on the unused portion of the Facility and on our outstanding letters of credit. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jul. 03, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | 5. Commitments and Contingencies On November 26, 2014, a former hourly restaurant employee filed a class action lawsuit in the San Diego County Superior Court, alleging that the Company violated the California Labor Code and California Business and Professions Code, by failing to pay overtime, to permit required rest breaks and to provide accurate wage statements, among other claims (Masters v. The Cheesecake Factory Restaurants, Inc., et al.; Case No 37-2014-00040278). The lawsuit seeks unspecified penalties under California Private Attorneys’ General Act (“PAGA”) in addition to other monetary payments. By stipulation, the parties agreed to transfer Case No. 37-2014-00040278 to the Orange County Superior Court. On March 2, 2015, Case No. 37-2014-00040278 was officially transferred and assigned a new Case No. 30-2015-00775529 in the Orange County Superior Court. On June 27, 2016, we gave notice to the court that Case Nos. CIV1504091 and BC603620 described below may be related. On February 13, 2018, the parties in Case No. 30-2015-00775529 reached a tentative settlement subject to documentation and court approval. Based upon the current status of this matter, we have reserved an immaterial amount. On May 21, 2018, a lawsuit was filed in the Los Angeles County Superior Court, alleging similar claims to Case No. 30-2015-00775529 (Silva v. The Cheesecake Factory Restaurants, Inc., et al.; Case No. BC706365). On July 5, 2018, we notified the court that Case No. BC706365 and Case No. 30-2015-00775529 may be related. The plaintiff in Case No. BC70365 seeks unspecified penalties under PAGA in addition to other monetary payments. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments On May 28, 2015, a group of current and former hourly restaurant employees filed a class action lawsuit in the U.S. District Court for the Eastern District of New York, alleging that the Company violated the Fair Labor Standards Act and New York Labor Code, by requiring employees to purchase uniforms for work and violated the State of New York’s minimum wage and overtime provisions (Guglielmo v. The Cheesecake Factory Restaurants, Inc., et al; Case No. 2:15-CV-03117). On September 8, 2015, the Company filed its response to the complaint, requesting the court to compel arbitration against opt-in plaintiffs with valid arbitration agreements. On July 21, 2016, the court issued an order confirming the agreement of the parties to dismiss all class claims with prejudice and to allow the case to proceed as a collective action covering a limited number of the Company’s restaurants in the State of New York. On February 21, 2018, the parties reached a tentative settlement subject to documentation and court approval. Based upon the current status of this matter, we have reserved an immaterial amount. On December 10, 2015, a former restaurant management employee filed a class action lawsuit in the Los Angeles County Superior Court, alleging that the Company improperly classified its managerial employees, failed to pay overtime, and failed to provide accurate wage statements, in addition to other claims. The lawsuit seeks unspecified penalties under PAGA in addition to other monetary payments (Tagalogon v. The Cheesecake Factory Restaurants, Inc.; Case No. BC603620). On March 23, 2016, the parties issued their joint status conference statement at which time we gave notice to the court that Case Nos. 30-2015-00775529 and CIV1504091 may be related. On April 29, 2016, the Company filed its response to the complaint. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments. On July 12, 2017, a lawsuit was filed in the Los Angeles County Superior Court alleging that the Company violated California’s unfair business practices statute by improperly calculating suggested gratuity amounts on split payment transactions (Goldman v. The Cheesecake Factory Incorporated; Case No. BC668334). On December 1, 2017, the Company filed a demurrer to the plaintiff’s complaint. The plaintiff filed his opposition on December 26, 2017. On March 27, 2018, the Court sustained the demurrer without leave to amend as to six of the seven causes of action in the complaint. On April 16, 2018, the Company filed its answer to the complaint, and the parties also agreed to a partial stay of the case for 60 days to allow for informal discussions and an informal exchange of information with the purpose of exploring a possible resolution of the case. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments. During the first quarter of fiscal 2017, the Internal Revenue Service (“IRS”) issued its examination report for tax years 2010, 2011 and 2012 in which they disallowed $12.9 million of our §199 Domestic Production Activity Deductions for the subject years. We protested the examination findings and requested a review of our case by the Appeals Division of the IRS. On June 22, 2018, the Appeals Division issued a Notice of Deficiency for the subject tax years which reduced the disallowance to $8.0 million. We plan to petition the United States Tax Court for a redetermination of the deficiency and intend to vigorously defend our position in litigation. Based on our analysis of the law, regulations and relevant facts, we believe our position will be ultimately sustained. Based on the current status of this matter, we have not reserved for any potential future payments. On February 3, 2017, a class action lawsuit was filed in the U.S. District Court for the Southern District of Florida, alleging that the Company violated the Fair and Accurate Credit Transaction Act, by failing to properly censor consumer credit or debit card information (Muransky v. The Cheesecake Factory Incorporated; Case No. 0:17-cv-60229-JEM). On February 21, 2017 and February 28, 2017, two additional lawsuits were filed in California and New York, respectively, alleging similar claims to Case No. 0:17-cv-60229-JEM (Tibbits v. The Cheesecake Factory Incorporated; Case No. 1:17-cv-00968 ( E.D.N.Y.); Zhang v. The Cheesecake Factory Incorporated; Case No 8:17-cv-00357 (C.D. Cal.)). The Company filed a motion to transfer and dismiss Case No. 0:17-cv-60229-JEM on March 24, 2017 and similarly filed a motion to transfer and dismiss Case No. 1:17-cv-00968 on April 7, 2017. On October 16, 2017, the Florida court granted the Company’s motion to transfer Case No. 0:17-cv-60229JEM to California to be consolidated with Case No. 8:17-cv-00357. The plaintiff in Case No. 1:17-cv-00968 agreed to transfer its case to California and such matter was subsequently consolidated with Case No 8:17-cv-00357. On May 25, 2018, the parties reached a tentative settlement which covers the three consolidated cases. The final settlement agreement is subject to documentation and court approval. Based on the current status of this matter, we have reserved an immaterial amount. On February 3, 2017, five present and former hourly restaurant employees filed a class action lawsuit in the San Diego County Superior Court, alleging that the Company violated the California Labor Code and California Business and Professions Code, by failing to permit required meal and rest breaks, and failing to provide accurate wage statements, among other claims (Abdelaziz v. The Cheesecake Factory Restaurants, Inc., et al.; Case No 37-2016-00039775-CU-OE-CTL). On February 22, 2017, a lawsuit was filed in the San Diego County Superior Court, alleging similar claims to Case No. 37-2016-00039775-CU-OE-CTL (Rodriguez v. The Cheesecake Factory Restaurants, Inc., et al.; Case No. 37-2017-00006571-CU-OE-CTL). The San Diego County Superior Court consolidated Case Nos. 37-2016-00039775-CU-OR-CTL and 37-2017-00006571-CU-OE-CTL. These lawsuits seek unspecified penalties under PAGA in addition to other monetary payments. On July 24, 2018, the parties reached a tentative settlement which covers the two consolidated cases. The final settlement agreement is subject to documentation and court approval. Based upon the current status of these matters, we have reserved an immaterial amount. On June 1, 2018, a former hourly restaurant employee filed a class action lawsuit in the U.S. District Court for the Eastern District of New York, alleging that the Company violated minimum wage and overtime provisions of the Fair Labor Standards Act and New York Labor Code (Orellana v. Grand Lux Cafe, LLC, et al; Case No. 18-cv-02739). The plaintiff seeks unspecified amounts of fees, penalties and other monetary payments on behalf of the plaintiff and other purported class members. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments. On June 7, 2018, the California Department of Industrial Relations issued a $4.2 million wage citation jointly against the Company and its vendor that provides janitorial services to eight of our Southern California restaurants, alleging that the janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor Code (Wage Citation Case No. 35-CM-188798-16). The wage citation seeks to recover penalties and other monetary payments on behalf of the employees that worked for this vendor or its subcontractor. On June 28, 2018, the Company filed its appeal of the wage citation. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments Within the ordinary course of our business, we are subject to private lawsuits, government audits, administrative proceedings and other claims. These matters typically involve claims from customers, staff members and others related to operational and employment issues common to the foodservice industry. A number of these claims may exist at any given time, and some of the claims may be pled as class actions. From time to time, we are also involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks and other intellectual property, both domestically and abroad. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are legally determined to be liable. At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any pending lawsuits, audits, proceedings and claims will not have a material adverse effect individually or in the aggregate on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, audits, proceedings or claims. Legal costs related to such claims are expensed as incurred. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jul. 03, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | 6. Stockholders’ Equity On April 23, 2018, our Board of Directors (“Board”) approved a quarterly cash dividend of $0.29 per share that was paid on May 22, 2018 to the stockholders of record at the close of business on May 10, 2018. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of our Facility and applicable law, and such other factors that our Board considers relevant. On July 21, 2016, our Board increased the authorization to repurchase our common stock by 7.5 million shares to 56.0 million shares. Under this and all previous authorizations, we cumulatively repurchased 50.4 million shares at a total cost of $1,574.9 million through July 3, 2018, including 0.1 million shares at a cost of $7.1 million repurchased during the second quarter of fiscal 2018. Repurchased common stock is reflected as a reduction of stockholders’ equity in treasury stock. Share repurchases have been executed under stock repurchase plans adopted from time to time by our Board in furtherance of its repurchase authorization and are intended to qualify for safe harbor protection in accordance with Rule 10b5-1 and Rule 10b-18 of the Securities Act of 1934, as amended. Repurchases during the second quarter of fiscal 2018 were made under stock repurchase plans adopted by our Board on October 26, 2017, effective from December 1, 2017 through April 30, 2018 and on February 15, 2018, effective from May 1, 2018 through July 31, 2018. Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated by our Board at any time. Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us. All purchases in the open market are made in compliance with Rule 10b-18. We make the determination to repurchase shares based on several factors, including an evaluation of current and future capital needs associated with new restaurant development, current and forecasted cash flows, including dividend payments and growth capital contributions to North Italia and Flower Child, a review of our capital structure and cost of capital, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and financial covenants under our Facility that limit share repurchases based on a defined ratio. (See Note 4 for further discussion of our long-term debt.) Our objectives with regard to share repurchases are to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jul. 03, 2018 | |
Stock-Based Compensation | |
Stock-Based Compensation | 7. Stock-Based Compensation On April 5, 2017, our Board approved an amendment to our 2010 Stock Incentive Plan to increase the number of shares of common stock available for grant under the plan to 12.7 million shares from 9.2 million shares. This amendment was approved by our stockholders at our annual meeting held on June 8, 2017. This is our only active stock-based incentive plan, and approximately 3.2 million of these shares were available for grant as of July 3, 2018. The following table presents information related to stock-based compensation, net of forfeitures (in thousands): Thirteen Thirteen Twenty-Six Twenty-Six Labor expenses $ $ $ $ Other operating costs and expenses General and administrative expenses Total stock-based compensation Income tax benefit Total stock-based compensation, net of taxes $ $ $ $ Capitalized stock-based compensation (1) $ $ $ $ (1) It is our policy to capitalize the portion of stock-based compensation costs for our internal development and legal departments that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations, lease, intellectual property and liquor license acquisition activities and equipment installation. Capitalized stock-based compensation is included in property and equipment, net and other assets on the condensed consolidated balance sheets. Stock Options The weighted average fair value at the grant date for options issued during the second quarter of fiscal 2018 and 2017 was $12.81 and $12.86 per share, respectively. The fair value of options was estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for the second quarter of fiscal 2018 and 2017, respectively: (a) an expected option term of 6.9 years in both periods, (b) expected stock price volatility of 26.4% and 23.7%, (c) a risk-free interest rate of 2.8% and 2.0%, and (d) a dividend yield on our stock of 2.2% and 1.7%. Stock option activity during the twenty-six weeks ended July 3, 2018 was as follows: Shares Weighted Weighted Aggregate (In thousands) (Per share) (In years) (In thousands) Outstanding at January 2, 2018 $ $ Granted Exercised ) Forfeited or cancelled ) Outstanding at July 3, 2018 $ $ Exercisable at July 3, 2018 $ $ (1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised their options on the fiscal period end date. The total intrinsic value of options exercised during the thirteen and twenty-six weeks ended July 3, 2018 was $4.3 million and $4.7 million, respectively. The total intrinsic value of options exercised during the thirteen and twenty-six weeks ended July 4, 2017 was $3.4 million and $10.0 million, respectively. As of July 3, 2018, total unrecognized stock-based compensation expense related to unvested stock options was $8.3 million, which we expect to recognize over a weighted average period of approximately 3.5 years. Restricted Shares and Restricted Share Units Restricted share and restricted share unit activity during the twenty-six weeks ended July 3, 2018 was as follows: Shares Weighted (In thousands) (Per share) Outstanding at January 2, 2018 $ Granted Vested ) Forfeited ) Outstanding at July 3, 2018 $ Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant. The weighted average fair value for restricted shares and restricted share units issued during the second quarter of fiscal 2018 and fiscal 2017 was $51.88 and $62.50, respectively. The fair value of shares that vested during the thirteen and twenty-six weeks ended July 3, 2018 was $1.4 million and $11.8 million, respectively. The fair value of shares that vested during the thirteen and twenty-six weeks ended July 4, 2017 was $2.0 million and $12.9 million, respectively. As of July 3, 2018, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $36.0 million, which we expect to recognize over a weighted average period of approximately 3.0 years. |
Net Income Per Share
Net Income Per Share | 6 Months Ended |
Jul. 03, 2018 | |
Net Income Per Share | |
Net Income Per Share | 8. Net Income Per Share Basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, reduced by unvested restricted stock awards. As of July 3, 2018 and July 4, 2017, 1.7 million and 1.8 million shares, respectively, of restricted stock issued to staff members were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal years ended on those dates. Diluted net income per share includes the dilutive effect of outstanding equity awards, calculated using the treasury stock method. Shares of common stock equivalents of 1.7 million and 1.1 million for July 3, 2018 and July 4, 2017, respectively, were excluded from the diluted calculation due to their anti-dilutive effect. Thirteen Thirteen Twenty-Six Twenty-Six (In thousands, except per share data) Net income $ $ $ $ Basic weighted average shares outstanding Dilutive effect of equity awards Diluted weighted average shares outstanding Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ |
Segment Information
Segment Information | 6 Months Ended |
Jul. 03, 2018 | |
Segment Information | |
Segment Information | 9. Segment Information For decision-making purposes, our management reviews discrete financial information for The Cheesecake Factory, Grand Lux Cafe and RockSugar Southeast Asian Kitchen restaurants, our bakery division, consumer packaged goods and our international licensing operations. Based on quantitative thresholds set forth in ASC 280, “Segment Reporting,” The Cheesecake Factory is our only business that meets the criteria of a reportable operating segment. Grand Lux Cafe, RockSugar Southeast Asian Kitchen, bakery, consumer packaged goods and international licensing are combined in “Other.” Unallocated corporate expenses, assets and capital expenditures are presented below as reconciling items to the amounts presented in the condensed consolidated financial statements. Segment information is presented below (in thousands): Thirteen Thirteen Twenty-Six Twenty-Six Revenues: The Cheesecake Factory restaurants $ $ $ $ Other Total $ $ $ $ Income/(loss) from operations: The Cheesecake Factory restaurants (1) $ $ $ $ Other Corporate ) ) ) ) Total $ $ $ $ Depreciation and amortization: The Cheesecake Factory restaurants $ $ $ $ Other Corporate Total $ $ $ $ Capital expenditures: The Cheesecake Factory restaurants $ $ $ $ Other (2) Corporate Total $ $ $ $ July 3, 2018 January 2, 2018 Total assets: The Cheesecake Factory restaurants $ $ Other Corporate Total $ $ (1) The thirteen and twenty-six weeks ended July 3, 2018 both include $2.6 million of lease termination costs related to the closure of one The Cheesecake Factory restaurant. The thirteen and twenty-six weeks ended July 4, 2017 includes $0.4 million and $1.2 million, respectively, of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant. (2) The thirteen and twenty-six weeks ended July 3, 2018 include costs related to an infrastructure modernization of our California bakery facility. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jul. 03, 2018 | |
Subsequent Events | |
Subsequent Events | 10. Subsequent Events On July 26, 2018, our Board declared a quarterly cash dividend of $0.33 per share to be paid on August 28, 2018 to the stockholders of record at the close of business on August 15, 2018. On July 26, 2018, our Board approved the adoption of a stock repurchase plan intended to qualify for safe harbor protection in accordance with Rule 10b-18 of the Securities Act of 1934, as amended. This plan will be effective from August 3, 2018 through August 17, 2018. On July 26, 2018, our Board also approved the adoption of a stock repurchase plan intended to qualify for safe harbor protection in accordance with Rule 10b5-1 of the Securities Act of 1934, as amended. This plan will be effective from August 31, 2018 through February 1, 2019. |
Basis of Presentation and Sig18
Basis of Presentation and Significant Accounting Policies (Policies) | 6 Months Ended |
Jul. 03, 2018 | |
Basis of Presentation and Significant Accounting Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the recognition and measurement of leases. Under the new standard, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. The standard requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018 and requires a modified retrospective approach, with optional practical expedients. Although early adoption is permitted, we will adopt these provisions in the first quarter of fiscal 2019. We expect this adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets, but will likely have an insignificant impact on our consolidated statements of income. In preparation for the adoption of the guidance, we are in the process of implementing controls and key system changes to enable the preparation of the required financial information. Recently Adopted Accounting Standards In May 2014, the FASB issued accounting guidance that provides a comprehensive new revenue recognition model that supersedes most of the existing revenue recognition requirements and requires entities to recognize revenue at an amount that reflects the consideration to which a company expects to be entitled in exchange for transferring goods or services to a customer. We implemented this standard as of the first day of fiscal 2018, and the only impact to our condensed consolidated financial statements relates to recognition of development and site fees from our international licensees. Utilizing the cumulative-effect method of adoption, we recorded a $4.8 million increase to deferred revenue and a corresponding reduction of $3.6 million, net of tax, to retained earnings to reverse a portion of the previously recognized fees. Whereas previously we recognized income and received payment upon execution of the agreements and approval of new restaurant sites, respectively, future revenue for these items will be recorded on a straight-line basis over the life of the applicable licensee agreements as the agreements do not contain distinct performance obligations. Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of adopting this standard as compared to the previous revenue recognition guidance was not material to our condensed consolidated balance sheet and condensed consolidated statements of income and comprehensive income in the first quarter of fiscal 2018. |
Revenue Recognition | Revenue Recognition Our revenues consist of sales at our Company-owned restaurants, sales from our bakery operations to our licensees and other third-party customers, royalties from our licensees’ restaurant sales and consumer packaged goods, and licensee development and site fees. Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues from bakery sales are recognized upon transfer of title and risk to customers. Royalty revenues are recognized in the period the related sales occur, utilizing the sale-based royalty exception available under current accounting guidance. Development and site fees are recognized as revenue over the life of the applicable agreements, ranging from eight to 30 years. In the first half of fiscal 2018, we deferred revenue of $0.2 million for new site agreements. There were no new development agreements executed during the first half of fiscal 2018. We recognized combined development and site fee revenue of $0.1 million and $0.2 million during the thirteen and twenty-six weeks ended July 3, 2018, respectively. We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants. Based on our historical redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” Breakage is recognized over a three-year period in proportion to historical redemption trends and is classified as revenues in our consolidated statements of income. Incremental direct costs related to gift card sales, including commissions and credit card fees, are deferred and recognized in earnings in the same pattern as the related gift card revenue. Certain of our promotional programs include multiple element arrangements that incorporate various performance obligations. We allocate revenue using the relative selling price of each performance obligation considering the likelihood of redemption and recognize revenue upon satisfaction of each performance obligation. During the first half of fiscal 2018, there were no new multiple element arrangements requiring deferral. We recognized $5.9 million of previously deferred revenue related to promotional programs during the thirteen and twenty-six weeks ended July 3, 2018. Revenues are presented net of sales taxes. Sales tax collected is included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities. |
Impairment of Long-Lived Assets and Lease Terminations | Impairment of Long-Lived Assets and Lease Terminations We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner in which an asset is being used, an expectation that an asset will be disposed of significantly before the end of its previously estimated useful life and significant negative industry or economic trends. We regularly review restaurants that are cash flow negative for the previous four quarters and those that are being considered for closure or relocation to determine if impairment testing is warranted. At any given time, we may be monitoring a small number of locations, and future impairment charges could be required if individual restaurant performance does not improve or we make the decision to close or relocate a restaurant. We recorded $2.6 million of lease termination costs in the second quarter of fiscal 2018 related to the closure of one The Cheesecake Factory restaurant. We recorded $0.4 million and $1.2 million in the thirteen 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 expiration of one The Cheesecake Factory restaurant. |
Income Taxes | Income Taxes The Tax Cuts and Jobs Act (“Tax Act”), which was enacted on December 22, 2017, made significant changes to how corporations are taxed in the U.S., the most prominent of which affecting us was to lower the U.S. statutory corporate tax rate from 35% to 21%. We believe we have properly estimated our federal and state income tax liabilities, and our accounting for the income tax effects of the Tax Act has been completed. However, given the amount and complexity of the changes in tax law resulting from the Tax Act, we continue to analyze the effects of the Tax Act on our income tax provision. We may make further refinements to our calculations considering technical guidance that may be published and changes to current interpretations of certain provisions of the Tax Act. Any impacts to our provision as the result of additional guidance will be recorded in the period in which the guidance is issued. |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jul. 03, 2018 | |
Inventories | |
Schedule of inventories | Inventories consisted of (in thousands): July 3, 2018 January 2, 2018 Restaurant food and supplies $ $ Bakery finished goods and work in progress (1) Bakery raw materials and supplies Total $ $ (1) Our California bakery was closed from February 2018 to June 2018 while we upgraded the facility. In preparation for lost production capacity, we produced additional inventories during the fourth quarter of fiscal 2017. The additional inventory was utilized during the first half of fiscal 2018. |
Gift Cards (Tables)
Gift Cards (Tables) | 6 Months Ended |
Jul. 03, 2018 | |
Gift Cards | |
Schedule of gift card liabilities | The following tables present information related to gift cards (in thousands): Gift card liabilities: Thirteen Thirteen Twenty-Six Twenty-Six Beginning balance $ $ $ $ Activations Redemptions and breakage ) ) ) ) Ending balance $ $ $ $ |
Schedule of gift card assets | The following tables present information related to gift cards (in thousands): Gift card contract assets: (1) Thirteen Thirteen Twenty-Six Twenty-Six Beginning balance $ $ $ $ Deferrals Amortization ) ) ) ) Ending balance $ $ $ $ (1) Included in prepaid expenses on the condensed consolidated balance sheet. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jul. 03, 2018 | |
Stock-Based Compensation | |
Schedule of information related to stock-based compensation, net of forfeitures | The following table presents information related to stock-based compensation, net of forfeitures (in thousands): Thirteen Thirteen Twenty-Six Twenty-Six Labor expenses $ $ $ $ Other operating costs and expenses General and administrative expenses Total stock-based compensation Income tax benefit Total stock-based compensation, net of taxes $ $ $ $ Capitalized stock-based compensation (1) $ $ $ $ (1) It is our policy to capitalize the portion of stock-based compensation costs for our internal development and legal departments that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations, lease, intellectual property and liquor license acquisition activities and equipment installation. Capitalized stock-based compensation is included in property and equipment, net and other assets on the condensed consolidated balance sheets. |
Schedule of stock option activity | Shares Weighted Weighted Aggregate (In thousands) (Per share) (In years) (In thousands) Outstanding at January 2, 2018 $ $ Granted Exercised ) Forfeited or cancelled ) Outstanding at July 3, 2018 $ $ Exercisable at July 3, 2018 $ $ (1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised their options on the fiscal period end date. |
Schedule of restricted share and restricted share unit activity | Shares Weighted (In thousands) (Per share) Outstanding at January 2, 2018 $ Granted Vested ) Forfeited ) Outstanding at July 3, 2018 $ |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 6 Months Ended |
Jul. 03, 2018 | |
Net Income Per Share | |
Schedule of basic and diluted income per share | Thirteen Thirteen Twenty-Six Twenty-Six (In thousands, except per share data) Net income $ $ $ $ Basic weighted average shares outstanding Dilutive effect of equity awards Diluted weighted average shares outstanding Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jul. 03, 2018 | |
Segment Information | |
Schedule of segment information | Segment information is presented below (in thousands): Thirteen Thirteen Twenty-Six Twenty-Six Revenues: The Cheesecake Factory restaurants $ $ $ $ Other Total $ $ $ $ Income/(loss) from operations: The Cheesecake Factory restaurants (1) $ $ $ $ Other Corporate ) ) ) ) Total $ $ $ $ Depreciation and amortization: The Cheesecake Factory restaurants $ $ $ $ Other Corporate Total $ $ $ $ Capital expenditures: The Cheesecake Factory restaurants $ $ $ $ Other (2) Corporate Total $ $ $ $ July 3, 2018 January 2, 2018 Total assets: The Cheesecake Factory restaurants $ $ Other Corporate Total $ $ (1) The thirteen and twenty-six weeks ended July 3, 2018 both include $2.6 million of lease termination costs related to the closure of one The Cheesecake Factory restaurant. The thirteen and twenty-six weeks ended July 4, 2017 includes $0.4 million and $1.2 million, respectively, of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant. (2) The thirteen and twenty-six weeks ended July 3, 2018 include costs related to an infrastructure modernization of our California bakery facility. |
Basis of Presentation and Sig24
Basis of Presentation and Significant Accounting Policies (Details) | 6 Months Ended | 12 Months Ended |
Jul. 03, 2018 | Jan. 02, 2018 | |
Basis of Presentation and Significant Accounting Policies | ||
Length of fiscal year | P364D | P364D |
Basis of Presentation and Sig25
Basis of Presentation and Significant Accounting Policies - Recent Accounting Pronouncements (Details) - Accounting Standards Update 2014-09 $ in Millions | 6 Months Ended |
Jul. 03, 2018USD ($) | |
Recent Accounting Pronouncements | |
Increase to deferred revenue | $ 4.8 |
Reduction of retained earnings | $ (3.6) |
Basis of Presentation and Sig26
Basis of Presentation and Significant Accounting Policies - Revenue Recognition (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Jul. 03, 2018USD ($) | Jul. 03, 2018USD ($) | |
Revenue Recognition | ||
Gift card breakage period | 3 years | |
New site agreements | ||
Revenue Recognition | ||
Deferred revenue | $ 0.2 | $ 0.2 |
Development and site fee | ||
Revenue Recognition | ||
Revenue recognized | 0.1 | 0.2 |
Promotional programs | ||
Revenue Recognition | ||
Deferred revenue recognized | $ 5.9 | $ 5.9 |
Minimum | ||
Revenue Recognition | ||
Revenue recognition for development and site fees over the life of the applicable licensee agreements (in years) | 8 years | |
Maximum | ||
Revenue Recognition | ||
Revenue recognition for development and site fees over the life of the applicable licensee agreements (in years) | 30 years |
Basis of Presentation and Sig27
Basis of Presentation and Significant Accounting Policies - Impairment of Long-Lived Assets and Lease Terminations (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018USD ($)item | Jul. 04, 2017USD ($) | Jul. 03, 2018USD ($)item | Jul. 04, 2017USD ($)item | |
Impairment of long-lived assets and lease terminations | ||||
Impairment of assets and lease terminations | $ 2,583 | $ 445 | $ 2,583 | $ 1,231 |
The Cheesecake Factory restaurants | ||||
Impairment of long-lived assets and lease terminations | ||||
Lease termination costs | $ 2,600 | $ 2,600 | ||
Impairment of assets and lease terminations | $ 400 | $ 1,200 | ||
Number of restaurants related to relocation | item | 1 | |||
Number of restaurants discontinued | item | 1 | 1 |
Basis of Presentation and Sig28
Basis of Presentation and Significant Accounting Policies - Income Taxes (Details) | Dec. 31, 2017 | Jul. 03, 2018 |
Basis of Presentation and Significant Accounting Policies | ||
U.S. statutory corporate tax rate (as a percent) | 35.00% | 21.00% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jul. 03, 2018 | Jan. 02, 2018 |
Inventories | ||
Restaurant food and supplies | $ 18,524 | $ 18,407 |
Bakery finished goods and work in progress | 10,108 | 18,423 |
Bakery raw materials and supplies | 6,059 | 5,730 |
Total | $ 34,691 | $ 42,560 |
Gift Cards (Details)
Gift Cards (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | |
Gift card liabilities: | ||||
Beginning balance | $ 138,134 | $ 127,618 | $ 163,951 | $ 153,629 |
Activations | 28,451 | 29,428 | 50,195 | 51,083 |
Redemptions and breakage | (32,968) | (33,406) | (80,529) | (81,072) |
Ending balance | 133,617 | 123,640 | 133,617 | 123,640 |
Gift card contract assets: | ||||
Beginning balance | 21,718 | 21,787 | 23,814 | 23,786 |
Deferrals | 3,680 | 3,583 | 6,402 | 6,374 |
Amortization | (4,779) | (4,776) | (9,597) | (9,566) |
Ending balance | $ 20,619 | $ 20,594 | $ 20,619 | $ 20,594 |
Long-Term Debt (Details)
Long-Term Debt (Details) $ in Millions | 6 Months Ended |
Jul. 03, 2018USD ($) | |
Long-Term Debt | |
Maximum commitments | $ 200 |
Maximum commitments, letter of credit sub-facility | 50 |
Additional available credit | 100 |
Available borrowings | 159.3 |
Outstanding borrowings | 20 |
Outstanding letters of credit | $ 20.7 |
Net Adjusted Leverage Ratio | 3 |
EBITDAR Ratio | 2.6 |
Maximum | |
Long-Term Debt | |
Financial covenant, Net Adjusted Leverage Ratio | 4 |
Minimum | |
Long-Term Debt | |
Financial covenant, EBITDAR Ratio | 1.9 |
Adjusted LIBO Rate | |
Long-Term Debt | |
Credit facility, floating interest rate basis | Adjusted LIBO Rate |
Adjusted LIBO Rate | Maximum | |
Long-Term Debt | |
Credit facility, basis spread on variable rate, (as a percent) | 1.75% |
Adjusted LIBO Rate | Minimum | |
Long-Term Debt | |
Credit facility, basis spread on variable rate, (as a percent) | 1.00% |
Federal Funds Effective Rate | |
Long-Term Debt | |
Credit facility, floating interest rate basis | Federal Funds Effective Rate |
Credit facility, basis spread on variable rate, (as a percent) | 0.50% |
One-month Adjusted LIBO Rate | |
Long-Term Debt | |
Credit facility, floating interest rate basis | one-month Adjusted LIBO Rate |
Fixed percentage added to variable rate | 1.00% |
One-month Adjusted LIBO Rate | Maximum | |
Long-Term Debt | |
Credit facility, basis spread on variable rate, (as a percent) | 0.75% |
One-month Adjusted LIBO Rate | Minimum | |
Long-Term Debt | |
Credit facility, basis spread on variable rate, (as a percent) | 0.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Jul. 24, 2018item | Jul. 07, 2018item | Jun. 07, 2018USD ($) | May 25, 2018item | Apr. 16, 2018 | Mar. 27, 2018item | Feb. 28, 2017item | Feb. 03, 2017item | Jun. 22, 2018USD ($) | Apr. 04, 2017USD ($) |
Commitments and Contingencies | ||||||||||
Number of causes of action in the complaint, demurrer without leave to amend | 6 | |||||||||
Number of causes of action in the complaint | 7 | |||||||||
Period of partial stay of the case | 60 days | |||||||||
Number of additional lawsuits filed | 2 | |||||||||
Number of consolidated cases | 2 | 3 | ||||||||
Number of present and former restaurant hourly employees filed a class action lawsuit | 5 | |||||||||
Number of restaurants receiving janitorial services | 8 | |||||||||
Wage citation | $ | $ 4.2 | |||||||||
Internal Revenue Service (IRS) | ||||||||||
Commitments and Contingencies | ||||||||||
Tax disallowance | $ | $ 12.9 | |||||||||
Appeals Office | ||||||||||
Commitments and Contingencies | ||||||||||
Tax disallowance | $ | $ 8 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 23, 2018 | Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | Jan. 02, 2018 | Jul. 21, 2016 | Jul. 20, 2016 |
Stockholders Equity | ||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.29 | $ 0.29 | $ 0.24 | $ 0.58 | $ 0.48 | |||
Repurchased shares since program inception | 50,401,368 | 50,401,368 | 49,534,212 | |||||
Value of shares repurchased since program inception | $ 1,574,893 | $ 1,574,893 | $ 1,532,864 | |||||
Treasury stock repurchased during period | $ 42,029 | |||||||
Treasury Stock | ||||||||
Stockholders Equity | ||||||||
Number of shares authorized to be repurchased | 56,000,000 | 7,500,000 | ||||||
Repurchased shares since program inception | 50,400,000 | 50,400,000 | ||||||
Value of shares repurchased since program inception | $ 1,574,900 | $ 1,574,900 | ||||||
Shares repurchased during period | 100,000 | |||||||
Treasury stock repurchased during period | $ 7,100 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - shares shares in Millions | Jul. 03, 2018 | Apr. 05, 2017 | Apr. 04, 2017 |
Stock-Based Compensation | |||
Shares authorized for issuance under share-based compensation plan | 12.7 | 9.2 | |
Shares available for grant | 3.2 |
Stock-Based Compensation - Net
Stock-Based Compensation - Net of Tax (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | |
Stock-Based Compensation | ||||
Total stock-based compensation | $ 5,062 | $ 5,173 | $ 11,075 | $ 9,788 |
Income tax benefit | 1,263 | 1,979 | 2,763 | 3,744 |
Total stock-based compensation, net of taxes | 3,799 | 3,194 | 8,312 | 6,044 |
Capitalized stock-based compensation | 68 | 93 | 138 | 148 |
Labor expenses | ||||
Stock-Based Compensation | ||||
Total stock-based compensation | 2,576 | 1,716 | 4,175 | 3,461 |
Other operating costs and expenses | ||||
Stock-Based Compensation | ||||
Total stock-based compensation | 46 | 64 | 110 | 162 |
General and administrative expenses | ||||
Stock-Based Compensation | ||||
Total stock-based compensation | $ 2,440 | $ 3,393 | $ 6,790 | $ 6,165 |
Stock-Based Compensation - Weig
Stock-Based Compensation - Weighted Average Fair Value (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | Jan. 02, 2018 | |
Stock Options | |||||
Stock-Based Compensation | |||||
Weighted average fair value at the grant date for options issued (in dollars per share) | $ 12.81 | $ 12.86 | |||
Weighted average assumptions under Black-Scholes valuation model | |||||
Expected option term | 6 years 10 months 24 days | 6 years 10 months 24 days | |||
Expected stock price volatility (as a percent) | 26.40% | 23.70% | |||
Risk-free interest rate (as a percent) | 2.80% | 2.00% | |||
Dividend yield (as a percent) | 2.20% | 1.70% | |||
Stock option activity, Shares | |||||
Outstanding at beginning of year (in shares) | 1,741 | ||||
Granted (in shares) | 381 | ||||
Exercised (in shares) | (211) | ||||
Forfeited or cancelled (in shares) | (37) | ||||
Outstanding at end of year (in shares) | 1,874 | 1,874 | 1,741 | ||
Exercisable at end of year (in shares) | 1,085 | 1,085 | |||
Weighted Average Exercise Price | |||||
Outstanding at beginning of year (in dollars per share) | $ 42.25 | ||||
Granted (in dollars per share) | 47.22 | ||||
Exercised (in dollars per share) | 30.03 | ||||
Forfeited or cancelled (in dollars per share) | 51.71 | ||||
Outstanding at end of year (in dollars per share) | $ 44.43 | 44.43 | $ 42.25 | ||
Exercisable at end of year (in dollars per share) | $ 40.12 | $ 40.12 | |||
Weighted Average Remaining Contractual Term (In years) | |||||
Weighted Average Remaining Contractual Term (In years) | 4 years 6 months | 4 years | |||
Exercisable at end of year (In years) | 2 years 10 months 24 days | ||||
Aggregate Intrinsic Value | |||||
Outstanding at beginning of year | $ 14,766 | ||||
Outstanding at end of year | $ 23,119 | 23,119 | $ 14,766 | ||
Exercisable at end of year | 17,718 | 17,718 | |||
Total intrinsic value of options exercised | 4,300 | $ 3,400 | 4,700 | $ 10,000 | |
Unrecognized Stock-based Compensation Expense | |||||
Total unrecognized stock-based compensation expenses related to unvested stock options, restricted shares and restricted share units | $ 8,300 | $ 8,300 | |||
Expected weighted average period for recognition of compensation expense related to unvested stock option | 3 years 6 months | ||||
Restricted Shares and Restricted Share Units | |||||
Restricted Shares and Restricted Share Units, Shares | |||||
Outstanding at beginning of year (in shares) | 1,694 | ||||
Granted (in shares) | 391 | ||||
Vested (in shares) | (282) | ||||
Forfeited (in shares) | (87) | ||||
Outstanding at end of year (in shares) | 1,716 | 1,716 | 1,694 | ||
Fair value of shares vested | $ 1,400 | $ 2,000 | $ 11,800 | $ 12,900 | |
Weighted Average Fair Value | |||||
Outstanding at beginning of year (in dollars per share) | $ 46.38 | ||||
Granted (in dollars per share) | $ 62.50 | 47.73 | |||
Vested (in dollars per share) | 41.83 | ||||
Forfeited (in dollars per share) | 49.37 | ||||
Outstanding at end of year (in dollars per share) | $ 47.36 | $ 47.36 | $ 46.38 | ||
Unrecognized Stock-based Compensation Expense | |||||
Total unrecognized stock-based compensation expenses related to unvested stock options, restricted shares and restricted share units | $ 36,000 | $ 36,000 | |||
Expected weighted average period for recognition of compensation expense related to unvested stock option | 3 years |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 | |
Net Income Per Share | ||||
Antidilutive securities excluded from calculation of basic earnings per share (in shares) | 1,700 | 1,100 | ||
Net income per share, basic and diluted | ||||
Net income | $ 28,353 | $ 38,166 | $ 54,382 | $ 73,209 |
Basic weighted average shares outstanding (in shares) | 45,383 | 47,732 | 45,467 | 47,683 |
Dilutive effect of equity awards (in shares) | 1,187 | 1,315 | 1,311 | 1,444 |
Diluted weighted average shares outstanding (in shares) | 46,570 | 49,047 | 46,778 | 49,127 |
Basic net income per share (in dollars per share) | $ 0.62 | $ 0.80 | $ 1.20 | $ 1.54 |
Diluted net income per share (in dollars per share) | $ 0.61 | $ 0.78 | $ 1.16 | $ 1.49 |
Restricted Shares and Restricted Share Units | ||||
Net Income Per Share | ||||
Antidilutive securities excluded from calculation of basic earnings per share (in shares) | 1,700 | 1,800 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jul. 03, 2018USD ($)item | Jul. 04, 2017USD ($) | Jul. 03, 2018USD ($)item | Jul. 04, 2017USD ($)item | Jan. 02, 2018USD ($) | |
Segment Information | |||||
Revenues | $ 593,178 | $ 569,869 | $ 1,183,869 | $ 1,133,295 | |
Income/(loss) from operations | 34,543 | 50,218 | 66,094 | 93,781 | |
Depreciation and amortization | 23,727 | 23,297 | 47,729 | 46,493 | |
Capital expenditures | 21,182 | 24,476 | 51,870 | 43,699 | |
Total assets | 1,306,639 | 1,306,639 | $ 1,333,060 | ||
Impairment of assets and lease terminations | 2,583 | 445 | 2,583 | 1,231 | |
The Cheesecake Factory restaurants | |||||
Segment Information | |||||
Revenues | 542,102 | 520,228 | 1,082,875 | 1,035,462 | |
Income/(loss) from operations | 69,889 | 75,989 | 132,006 | 146,532 | |
Depreciation and amortization | 19,634 | 19,091 | 39,272 | 38,128 | |
Capital expenditures | 10,696 | 21,113 | 30,162 | 39,256 | |
Total assets | 910,889 | 910,889 | 937,512 | ||
Lease termination costs | $ 2,600 | $ 2,600 | |||
Impairment of assets and lease terminations | 400 | $ 1,200 | |||
Number of restaurants related to relocation | item | 1 | ||||
Number of restaurants discontinued | item | 1 | 1 | |||
Other | |||||
Segment Information | |||||
Revenues | $ 51,076 | 49,641 | $ 100,994 | $ 97,833 | |
Income/(loss) from operations | 3,983 | 6,291 | 9,794 | 12,929 | |
Depreciation and amortization | 2,832 | 2,998 | 5,932 | 5,975 | |
Capital expenditures | 9,372 | 1,546 | 19,950 | 1,911 | |
Total assets | 174,307 | 174,307 | 167,096 | ||
Corporate | |||||
Segment Information | |||||
Income/(loss) from operations | (39,329) | (32,062) | (75,706) | (65,680) | |
Depreciation and amortization | 1,261 | 1,208 | 2,525 | 2,390 | |
Capital expenditures | 1,114 | $ 1,817 | 1,758 | $ 2,532 | |
Total assets | $ 221,443 | $ 221,443 | $ 228,452 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Jul. 26, 2018 | Apr. 23, 2018 | Jul. 03, 2018 | Jul. 04, 2017 | Jul. 03, 2018 | Jul. 04, 2017 |
Subsequent Events | ||||||
Cash dividends declared per common share (in dollars per share) | $ 0.29 | $ 0.29 | $ 0.24 | $ 0.58 | $ 0.48 | |
Subsequent Events | ||||||
Subsequent Events | ||||||
Cash dividends declared per common share (in dollars per share) | $ 0.33 |