UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 25, 2018
THE CHEESECAKE FACTORY INCORPORATED
(Exact Name of Registrant as Specified in Charter)
Delaware |
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0-20574 |
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51-0340466 |
(State or Other Jurisdiction |
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(Commission |
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(I.R.S. Employer |
26901 Malibu Hills Road
Calabasas Hills, California 91301
(Address of Principal Executive Offices)
Registrants 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 of the 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 revised financial 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. This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.
In a press release dated October 30, 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 third quarter of fiscal 2018.
Total revenues were $580.9 million in the third quarter of fiscal 2018 as compared to $555.4 million in the third quarter of fiscal 2017. Net income and diluted net income per share were $28.5 million and $0.61, respectively, in the third quarter of fiscal 2018.
The Company recorded a pre-tax charge of $0.3 million during the third quarter of fiscal 2018 related to the previously disclosed termination of a lease for one The Cheesecake Factory restaurant. Excluding the after-tax impact from this item, net income and diluted net income per share for the third quarter of fiscal 2018 would have been $28.7 million and $0.62, respectively. Please see the Companys reconciliation of non-GAAP financial measures included in the press release furnished as Exhibit 99.1 to this report.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.5% in the third quarter of fiscal 2018.
ITEM 8.01 OTHER EVENTS.
On October 25, 2018, the Board of Directors (the Board) of the Company declared a quarterly cash dividend of $0.33 per share which will be paid on November 27, 2018 to the stockholders of record of each share of the Companys common stock at the close of business on November 14, 2018. Future dividends, if any, will be subject to Board approval.
On October 30, 2018, the Company posted an updated Investor Presentation on the Companys 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 October 30, 2018 entitled, The Cheesecake Factory Reports Results for Third Quarter of Fiscal 2018 |
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99.2 |
The Cheesecake Factory Investor Presentation dated October 2018 |
EXHIBIT INDEX
Exhibit |
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Description |
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99.1 |
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99.2 |
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The Cheesecake Factory Investor Presentation dated October 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: October 30, 2018 |
THE CHEESECAKE FACTORY INCORPORATED | |
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By: |
/s/ Matthew E. Clark |
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Matthew E. Clark |
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Executive Vice President and Chief Financial Officer |
PRESS RELEASE
FOR IMMEDIATE RELEASE |
Contact: Stacy Feit |
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(818) 871-3000 |
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investorrelations@thecheesecakefactory.com |
THE CHEESECAKE FACTORY REPORTS RESULTS FOR
THIRD QUARTER OF FISCAL 2018
CALABASAS HILLS, Calif., October 30, 2018 The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported financial results for the third quarter of fiscal 2018, which ended on October 2, 2018.
Total revenues were $580.9 million in the third quarter of fiscal 2018 compared to $555.4 million in the third quarter of fiscal 2017. Net income and diluted net income per share were $28.5 million and $0.61, respectively, in the third quarter of fiscal 2018.
The Company recorded a pre-tax charge of $0.3 million during the third quarter of fiscal 2018 related to the previously disclosed termination of a lease for one The Cheesecake Factory restaurant. Excluding the after-tax impact from this item, net income and diluted net income per share for the third quarter of fiscal 2018 would have been $28.7 million and $0.62, respectively. Please see the Companys reconciliation of non-GAAP financial measures at the end of this release.
Comparable restaurant sales at The Cheesecake Factory restaurants increased 1.5% in the third quarter of fiscal 2018.
Our operators executed on our objectives, wage inflation moderated from the second quarter and group medical insurance costs normalized, said David Overton, Chairman and Chief Executive Officer. These factors, coupled with comparable sales performance at The Cheesecake Factory restaurants within our expectations, drove solid profitability during the third quarter.
Overton continued, As 2018 comes to a close, we will open our 200th Cheesecake Factory restaurant next month. This milestone will cap our 40th year of delivering on our mission of absolute guest satisfaction. We look forward to continuing our culture of excellence by providing our guests with great dining experiences, offering growth opportunities for our staff members and maximizing long term value for our shareholders.
Development
The Company now expects to open five restaurants in fiscal 2018. This includes The Cheesecake Factory in Lynnwood, Washington, a suburb of Seattle, and Grand Lux Cafe in Atlanta, which both opened during the third quarter of 2018. The Company expects to open three additional Cheesecake Factory restaurants during the fourth quarter of 2018. The first location of Social Monk Asian Kitchen, a fast casual concept under development, is now expected to open in the first quarter of 2019.
26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100
Given a shift in the mall opening date, the Company now expects The Cheesecake Factory licensed location in Monterrey, Mexico to open in the first quarter of 2019. As a result, the anticipated international development for fiscal 2018 is complete, with two restaurants opened internationally under licensing agreements this year.
Capital Allocation
The Companys Board of Directors declared a quarterly cash dividend of $0.33 per share of the Companys common stock. The dividend is payable on November 27, 2018 to shareholders of record at the close of business on November 14, 2018.
During the third quarter of fiscal 2018, the Company repurchased approximately 370,000 shares of its common stock at a cost of $18.9 million. Year to date, the Company has repurchased approximately 1.2 million shares of its common stock at a cost of $60.9 million.
Conference Call and Webcast
The Company will hold a conference call to review its results for the third quarter of fiscal 2018 today at 2:00 p.m. Pacific Time. The conference call will be webcast live on the Companys website at investors.thecheesecakefactory.com and a replay of the webcast will be available through November 29, 2018.
About The Cheesecake Factory Incorporated
The Cheesecake Factory Incorporated created the upscale casual dining segment in 1978 with the introduction of its namesake concept. The Company, through its subsidiaries, owns and operates 215 full-service, casual dining restaurants throughout the U.S.A., including Puerto Rico, and Canada, comprised of 199 restaurants under The Cheesecake Factory® mark; 14 restaurants under the Grand Lux Cafe® mark; and two restaurants under the RockSugar Southeast Asian Kitchen® mark. Internationally, 21 The Cheesecake Factory® restaurants operate under licensing agreements. The Companys bakery division operates two bakery production facilities, in Calabasas Hills, CA and Rocky Mount, NC, that produce quality cheesecakes and other baked products for its restaurants, 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, visit www.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 of 1995. 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 achievements expressed or implied by forward-looking statements, including uncertainties related to the Companys ability to: deliver comparable sales 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 cost pressures, including increasing wage rates, group medical insurance costs and legal expenses, and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other staff; manage risks associated with the magnitude and complexity of regulations in the jurisdictions where the Companys restaurants are located; increase shareholder value; find suitable sites and manage increasing construction costs; profitably expand its concepts domestically and in Canada, and work with its licensees to expand its concept internationally; support the growth of North Italia and Flower Child restaurants; develop the Social Monk Asian Kitchen fast casual concept; expand consumer packaged goods licensing revenue; utilize its capital effectively and continue to increase cash dividends and repurchase its shares; and factors outside of the Companys control including: economic and political conditions that impact consumer confidence and
26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100
spending; impact of recently enacted tax reform; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of the North Italia and Flower Child restaurants and the Social Monk Asian Kitchen fast casual concept; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; the economic health of the Companys landlords and other tenants in retail centers in which its restaurants are located; 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 Companys restaurants are located; factors that are under the control of government 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 Companys filings with the Securities and Exchange Commission (SEC). Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Forward-looking statements speak only as of the dates on which they are made and the Company undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Companys latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.
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)
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13 Weeks Ended |
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13 Weeks Ended |
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39 Weeks Ended |
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39 Weeks Ended |
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Consolidated Statements of Income |
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October 2, 2018 |
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October 3, 2017 |
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October 2, 2018 |
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October 3, 2017 |
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Amount |
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Percent of |
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Amount |
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Percent of |
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Amount |
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Percent of |
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Amount |
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Percent of |
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Revenues |
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$ |
580,882 |
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100.0% |
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$ |
555,392 |
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100.0% |
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$ |
1,764,751 |
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100.0% |
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$ |
1,688,687 |
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100.0% |
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Costs and expenses: |
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Cost of sales |
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133,598 |
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23.0% |
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127,453 |
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22.9% |
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402,453 |
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22.8% |
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385,373 |
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22.8% |
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Labor expenses |
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204,537 |
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35.2% |
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193,466 |
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34.9% |
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627,772 |
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35.6% |
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580,364 |
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34.4% |
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Other operating costs and expenses |
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144,180 |
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24.8% |
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138,423 |
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24.9% |
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436,308 |
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24.7% |
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411,534 |
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24.4% |
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General and administrative expenses |
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37,469 |
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6.5% |
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35,364 |
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6.4% |
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118,166 |
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6.7% |
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106,946 |
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6.3% |
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Depreciation and amortization expenses |
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24,090 |
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4.1% |
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22,999 |
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4.1% |
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71,819 |
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4.1% |
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69,492 |
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4.1% |
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Impairment of assets and lease terminations |
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263 |
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0.0% |
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- |
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0.0% |
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2,846 |
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0.2% |
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1,231 |
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0.1% |
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Preopening costs |
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3,250 |
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0.6% |
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3,370 |
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0.6% |
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5,798 |
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0.3% |
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5,649 |
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0.3% |
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Total costs and expenses |
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547,387 |
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94.2% |
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521,075 |
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93.8% |
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1,665,162 |
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94.4% |
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1,560,589 |
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92.4% |
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Income from operations |
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33,495 |
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5.8% |
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34,317 |
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6.2% |
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99,589 |
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5.6% |
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128,098 |
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7.6% |
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Interest and other expense, net |
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(3,290) |
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(0.6)% |
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(1,600) |
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(0.3)% |
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(7,704) |
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(0.4)% |
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(4,426) |
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(0.3)% |
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Income before income taxes |
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30,205 |
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5.2% |
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32,717 |
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5.9% |
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91,885 |
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5.2% |
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123,672 |
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7.3% |
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Income tax provision |
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1,730 |
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0.3% |
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6,272 |
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1.1% |
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9,028 |
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0.5% |
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24,018 |
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1.4% |
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Net income |
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$ |
28,475 |
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4.9% |
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$ |
26,445 |
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4.8% |
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$ |
82,857 |
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4.7% |
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$ |
99,654 |
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5.9% |
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Basic net income per share |
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$ |
0.63 |
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$ |
0.57 |
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$ |
1.82 |
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$ |
2.11 |
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Basic weighted average shares outstanding |
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45,321 |
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46,602 |
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45,418 |
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47,323 |
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Diluted net income per share |
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$ |
0.61 |
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$ |
0.56 |
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$ |
1.77 |
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$ |
2.05 |
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Diluted weighted average shares outstanding |
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46,403 |
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47,519 |
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46,682 |
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48,582 |
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Selected Segment Information |
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Revenues: |
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The Cheesecake Factory restaurants |
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$ |
530,210 |
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$ |
507,572 |
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$ |
1,613,085 |
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$ |
1,543,034 |
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Other |
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50,672 |
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47,820 |
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151,666 |
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145,653 |
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Total |
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$ |
580,882 |
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$ |
555,392 |
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$ |
1,764,751 |
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$ |
1,688,687 |
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Income/(loss) from operations: |
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The Cheesecake Factory restaurants (1) |
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$ |
61,950 |
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$ |
60,496 |
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$ |
193,956 |
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$ |
207,028 |
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Other |
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4,559 |
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6,003 |
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14,353 |
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18,932 |
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Corporate |
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(33,014) |
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(32,182) |
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(108,720) |
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(97,862) |
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Total |
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$ |
33,495 |
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$ |
34,317 |
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$ |
99,589 |
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$ |
128,098 |
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(1) Includes $0.3 million and $2.8 million in the thirteen weeks and thirty-nine weeks ended October 2, 2018, respectively, of lease termination costs related to the closure of one The Cheesecake Factory restaurant, and $1.2 million in the thirty-nine weeks ended October 3, 2017 of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease termination of one The Cheesecake Factory restaurant. These amounts were recorded in impairment of assets and lease terminations in the condensed consolidated statements of income.
Selected Consolidated Balance Sheet Information |
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October 2, 2018 |
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January 2, 2018 |
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Cash and cash equivalents |
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$ |
12,639 |
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$ |
6,008 |
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Total assets |
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1,308,063 |
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1,333,060 |
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Total liabilities |
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694,657 |
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719,530 |
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Stockholders equity |
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613,406 |
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613,530 |
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The Cheesecake Factory Restaurants |
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13 Weeks Ended |
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13 Weeks Ended |
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39 Weeks Ended |
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39 Weeks Ended |
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Supplemental Information |
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October 2, 2018 |
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October 3, 2017 |
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October 2, 2018 |
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October 3, 2017 |
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Comparable restaurant sales |
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1.5% |
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-2.3% |
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1.7% |
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-0.8% |
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Restaurants opened during period |
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1 |
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1 |
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1 |
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2 |
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Restaurants open at period-end |
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199 |
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194 |
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199 |
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194 |
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Restaurant operating weeks |
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2,580 |
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2,511 |
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7,749 |
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7,550 |
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26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100
Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (GAAP) in this press release, the Company is providing non-GAAP measurements which present net income and diluted net income per share excluding the impact of certain items. The non-GAAP measurements are intended to supplement the presentation of the Companys financial results in accordance with GAAP. The Company believes that the presentation of these items provides additional information to facilitate the comparison of past and present financial results.
The Cheesecake Factory Incorporated
Reconciliation of Non-GAAP Financial Measures
(unaudited; in thousands, except per share data)
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13 Weeks Ended |
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13 Weeks Ended |
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39 Weeks Ended |
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39 Weeks Ended |
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October 2, 2018 |
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October 3, 2017 |
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October 2, 2018 |
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October 3, 2017 |
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Net income (GAAP) |
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$ |
28,475 |
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$ |
26,445 |
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$ |
82,857 |
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$ |
99,654 |
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After-tax impact from: |
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- Impairment of assets and lease terminations (1) |
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195 |
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- |
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2,106 |
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739 |
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Adjusted net income (non-GAAP) |
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$ |
28,670 |
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$ |
26,445 |
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$ |
84,963 |
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$ |
100,393 |
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Diluted net income per share (GAAP) |
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$ |
0.61 |
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$ |
0.56 |
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$ |
1.77 |
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$ |
2.05 |
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After-tax impact from: |
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- Impairment of assets and lease terminations |
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0.00 |
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- |
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0.05 |
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0.02 |
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Adjusted diluted net income per share (non-GAAP) (2) |
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$ |
0.62 |
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$ |
0.56 |
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$ |
1.82 |
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$ |
2.07 |
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(1) The pre-tax amounts associated with the items in the thirteen and thirty-nine weeks ended October 2, 2018 were $0.3 million and $2.8 million, respectively. The pre-tax amount associated with the item in the thirty-nine weeks ended October 3, 2017 was $1.2 million. These amounts were recorded in impairment of assets and lease terminations.
(2) Adjusted diluted net income per share may not add due to rounding.
26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100
Safe Harbor Statement This presentation contains forward-looking statements about our current and presently expected performance trends, growth plans, business goals and other matters. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Acts). These forward-looking statements include without limitation, statements with respect to our ability to: provide a differentiated experience to guests; deliver comparable sales growth; outperform the casual dining industry; leverage sales increases and manage flow through; deliver consistent financial performance; increase shareholder value; find suitable sites and manage increasing construction costs; profitably expand our Company-owned restaurants domestically and in Canada, and work with our licensees to expand our concept internationally; maintain our broad consumer appeal and remain relevant to guests; attract and retain qualified management and other staff; manage risks associated with the magnitude and complexity of regulations in the states and municipalities where the Companys restaurants are located; leverage technology to drive sales and manage costs; maintain our unit economics; manage through industry cost pressures, including increasing wage rates, group medical insurance costs and legal expenses; stabilize and then expand margins; achieve our financial objectives including our long-term objective of 13% - 14% total return to shareholders, on average; produce sufficient finished bakery product to supply our restaurants and our licensees; expand consumer packaged goods licensing revenue; support the growth of the Fox Restaurant concepts; develop the Social Monk Asian Kitchen fast casual concept; utilize capital effectively; continue to repurchase our shares and pay and grow the dividend; and all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as believe, plan, will likely result, expect, intend, will continue, is anticipated, estimate, project, may, could, would, should and similar expressions. These statements are based on our current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Forward-looking statements are not guarantees of future performance, and undue reliance should not be placed on such statements. These statements are based on our current expectations and involve known and unknown risks and uncertainties that may cause our actual results or performance to differ materially from those expressed or implied by such statements. Although we believe that the assumptions underlying forward-looking statements are currently reasonable, any of the assumptions could be incorrect or incomplete, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of todays date, and we undertake no obligation to publicly update or revise any forward-looking statements to take into account or otherwise reflect subsequent events, corrections in underlying assumptions, or changes in circumstances arising after the date that the forward-looking statement was made, unless required to do so by law. Please see the full discussion of risks and uncertainties contained in our filings with the Securities and Exchange Commission, including our latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.sec.gov. The Private Securities Litigation Reform Act of 1995 provides certain safe harbor provisions for forward-looking statements. All forward-looking statements made in this presentation are made pursuant to the Act. 2
A Compelling Investment Opportunity Highly differentiated concepts delivering experience a unique guest Diversified growth drivers Sustained track record of consistent financial performance Robust cash flow to support growth and maximize shareholder value 3
Company Overview and Key Competitive Advantages 4
Our Global Footprint High quality, high profile locations worldwide Saudi (3) UAE (2) Mexico 5 Company-Owned 199 14 2 International - Licensed Middle East15 Mexico3 China, Including Hong Kong3 5 Guadalajara City (2) Beijing Shanghai Hong Kong Lebanon (1)Kuwait (3) Bahrain (1) Qatar Arabia (5) Toronto Company-Owned: 215
International Licensed Presence Guadalajara Shanghai Abu Dhabi 6 Dubai Festival City
The Cheesecake Factory - A Highly Differentiated Concept Bakery 7 Integrated Ambiance, Service and Hospitality Best-in-Class Operational Execution Leader in Menu Innovation
Industry Leader in Menu Innovation Breadth of Menu Is a Key Competitive Advantage Quality 250 menu items made fresh from scratch in-house Relevance No veto vote something for everyone across price points Menu updated twice a year Performance Drives sales Continued market share gains Profit Increases sales at full margin 8
Dining With Us Is an Experience Ambiance, Service and Hospitality Drive Sales 9
Leveraging Technology to Drive Sales 10 Online Ordering Net Promoter-Based Guest Satisfaction Platform Delivery
Integrated Bakery The Cheesecake Magic Produces over 70 cheesecakes and other baked desserts Industry-Leading Dessert Sales 16% Enables creativity and quality control 11
Broad Consumer Appeal A division of Vice Media LLC With $32 a Moderate Average Check Highest Unit Volumes ($ in millions) $10.6 $25 $22 $22 $21 $21 $5.0 $15 $4.7 Maggianos Yard House BJ'sTexas OliveOutback LongHorn Bonefish Carrabbas Yard House Maggianos Bonefish Outback Carrabbas LongHorn Olive TexasBJ's Roadhouse Garden Garden Roadhouse Source: Latest SEC filings and company presentations 12 $28 $18$17 $8.3$8.1 $5.6 $3.4$3.3$3.0$2.9 #1 Food Quality
Strong Consumer Across Channels Engagement It takes more than 30 minutes to prepare a small batch of our Sake Butter Sauce, and thats just one of dozens of sauces that we prepare fresh in-house every day. 5M+ fans 370K followers Millions of Viewers 660K followers 13
Capitalizing on the Power of the Brand HomeTM The Cheesecake Factory At 14
Best-in-Class Dual Management Operational Execution Industry-Leading Retention Average Tenure by Position Structure Above 4-Walls 29 years 20 years 19 years 17 years 12 years 12 Senior VP of Operations Regional Vice President Area Director of Operations Area Kitchen Operations Manager General Manager ------------------Executive Kitchen Manager years 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. 15 EKM EKM EKM EKM EKM EKM Area Kitchen Operations Manager GM GM GM GM GM GM Area Director of Operations
Leveraging Technology to Manage Costs 16 Dashboards Automated Production Call Market-Based Labor Analytics Kitchen Management System
Diversified Growth Drivers 17
The Cheesecake Factory Returns-Focused Growth Opportunity for 300 Domestic & 8 - 10 Canadian Locations Over Time Site-based strategy Focused on premier locations high street, lifestyle centers and A malls Infill and new markets Target 7,500 10,000 sq. ft. 18 * Illustrative example of target returns for new restaurant openings. Average Unit Economics* Sales $10.6 ~18% $8+ 20% - 25% EBITDA % Cash Capex Investment Cash-on-Cash Return
The Cheesecake Factory Expanding International Licensed Presence Continued expansion within current geographies Potential for additional geographies with current licensees Opportunity to add licensees and territories 19 Shanghai $0 Capital Expenditure +1¢ Per Restaurant in EPS, on Average
CAKE 2022 Multi-concept with segment, price point/occasion, real estate and labor model diversification Leveraging brand power, operational estate development expertise excellence, scale, supply chain and real Illustrative Unit Growth Roadmap * * Unit Growth ~20 units per year Near-Term 2019E 2021E 20 *Represent two of Fox Restaurant Concepts high-growth brands that the Company has made minority investments in. Long-Term Potential Target 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 New Units/Year 65 - 66 - 8 Top-Line Growth Contribution ~3%1% - 2%1% - 2% Incremental Growth Opportunities
Levers to Rebuild Margins 2023E Adjusted Operating Margin Target ~7.5% Leverage Bakery Technology & Projected Sales Growth International & CPG Flow Through Maintain flat restaurant margins Efficiencies, Pricing, Cost Management Portfolio Management G&A Leverage Labor & Other Inflationary Pressures +20 bps +30 bps + 30 bps +50 bps 21 Five Pillars
CAKE 5-Year Plan 22 Top-Line Growth Drivers Comparable Sales Growth ~1% - 2% ~5% Unit Growth Total Top-Line Growth 6% - 7% 2023E Financial Targets Revenues ~$3 billion 6%+ $4.50 15% Net Income Margin EPS ROIC
Creating Value for Shareholders Long-Term Objective: 13% - 14% Total Return to Shareholders, on Average (EPS + Dividend) Revenue Growth ~6% - 7% Comparable Sales Growth Unit Growth Operating Margin Expansion Share Repurchases Dividend 23 Total Return to Shareholders ~1% - 2% ~5% ~25 bps ~3% ~2%
Track Record of Consistent Financial Performance 24
Continuing to Outperform the Industry Comparable Sales - Historical 2-year Stack 2011 2012 2013 2014 2015 2016 2017 2018 YTD 4.2% 4.1% 4.0% 3.8% 3.3% 2.6% 2.0% 1.0% 0.8% 0.8% 0.4% (0.1)% (0.4)% (0.9)% (1.6)% (2.2)% Knapp-Track Index 25
Leveraged Sales and Managed Costs Profitability to Support Adjusted Earnings Per Share* $2.83 $1.97 2010 2011 2012 2013 2014 2015 2016 2017 26 *Please see Appendix for GAAP to non-GAAP reconciliations. $2.37 $2.60 $2.10 $1.88 $1.64 $1.42
Our Restaurants Generate Significant Cash Flow Free Cash Flow and Strong Balance Sheet Provide Significant Financial ($ millions) Flexibility $128 $120 $112 $107 2011 2012 2013 2014 2015 2016 2017 YTD 27 Free cash flow defined as cash flow from operations less capital expenditures/investments. Please see Appendix for GAAP to non-GAAP reconciliations and for an explanation regarding an accounting reclassification for prior years. $158 $90 $135 $100 $94 2010 2018
Effective Capital Allocation Supports Our Financial Objectives $1+ Billion in Share Repurchases Reducing WASO 3% Per Year Committed to Continuing ($ millions) to Grow Dividend 60,446 48,152 $13 2010 2011 2012 2013 2014 2015 Dividend 2016 2017 Capex / Investment Share Repurchases WASO 28 $42 $27 $50 $36 $146 $184 $30 $123 $109 $141 $172 $101 $158 $154 $139 $114 $106 $52 $86 $77 $42
Disciplined, Returns-Focused Growth Has Paid Off Return on Invested Capital (ROIC) 17% 14% 13% 2010 2011 2012 2013 2014 2015 2016 2017 ROIC = NOPAT / Average invested capital NOPAT = Income from operations excluding non-recurring expenses (-) income tax provision Invested Capital = Property and equipment + long-term assets + net working capital (-) cash and cash equivalents 29 15%15% 15% 14% 13%
A Compelling Investment Opportunity Highly differentiated concepts delivering experience a unique guest Diversified growth drivers Sustained track record of consistent financial performance Robust cash flow to support growth and maximize shareholder value 30
Appendix 31
Non-GAAP Reconciliation In addition to the results provided in accordance with the Generally Accepted Accounting Principles (GAAP) in this presentation, the Company is providing non-GAAP measurements which present diluted net income per share excluding the impact of certain items and free cash flow. The non-GAAP measurements are intended to supplement the presentation of the companys financial results in accordance with GAAP. The company believes facilitate that the presentation of these items provides additional information to the comparison of past and present financial results. 32
Non-GAAP Reconciliation The Cheesecake Factory Incorporated Reconciliation of Non-GAAP Financial Measures ($ in thousands, except per share data) Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 Net Income (GAAP) After-tax impact from: - Impairment of assets and lease terminations (1) - Partial IRS settlement (2) - Unwinding of interest rate collars (3) - Proceeds from variable life insurance contract (4) - Deferred tax revaluation (5) Adjusted net 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 - - - - 68 6,206 - - - (38,525) - - - - - - - - - - - - $ 86,138 $ 95,142 $ 103,726 $ 114,019 $ 101,694 $ 120,130 $ 139,562 $ 125,073 Diluted net income per share (GAAP) After-tax impact from: - Impairment of assets and lease terminations - Partial IRS settlement - Unwinding of interest rate collars - Proceeds from variable life insurance contract - Deferred tax revaluation Adjusted diluted net income 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 amounts associated with these items in fiscal 2011, 2012, 2013, 2014, 2015, 2016 and 2017 were $1,547, $9,536, $(561), $696, $6,011, $114 and $10,343, respectively, and were recorded in impairment of assets and lease terminations. (2) The pre-tax amounts associated with this item were $719 and $1,075 and were recorded in interest and other (expense)/income, net and income tax provision, respectively. (3) The pre-tax amount associated with this item was $7,376 and was recorded in interest expense. (4) This item is non-taxable and is recorded in interest and other (expense)/income, net. (5) Fiscal 2017 includes a $38.5 million benefit to the income tax provision related to tax reform enacted in December 2017. (6) Adjusted diluted net income per share may not add due to rounding. 33
Non-GAAP Reconciliation The Cheesecake Factory Incorporated Reconciliation of Non-GAAP Financial Measures ($ in millions) Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Cash Flow from Operations (1) Capital Expenditures / Investments Free Cash Flow $ 170 42 $ 197 77 $ 198 86 $ 213 106 $ 249 114 $ 248 154 $ 316 158 $ 239 139 $ 181 91 $ 128 $ 120 $ 112 $ 107 $ 135 $ 94 $ 158 $ 100 $ 90 (1) The excess tax benefit related to stock options exercised is no longer reclassified from cash flows from operating activities to cash flows from financing activities in the consolidated statements of cash flows. The consolidated statements of cash flows for fiscal 2016, 2015, 2014, 2013, 2012, 2011 and 2010 have been adjusted to conform to the current year presentation. 34
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