13 unchanged sentences
Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 29, 2020.
−Removed: On October 2, 2019, we completed the acquistion of North Italia and the remaining business of Fox Restaurant Concepts LLC ("FRC").
−Removed: As permitted by the Securities and Exchange Commission, management has elected to exclude these businesses from its assessment of internal controls over financial reporting as of December 31, 2019.
−Removed: North Italia's and FRC's operations are included in the Company's 2019 consolidated financial statements for the period from October 2, 2019 to December 31, 2019 and represented 28.3% of the Company's consolidated total assets as of December 31, 2019 and 3.7% of the Company's consolidated total revenues for the year ended December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 29, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV, Item 15 of this report.
Changes in Internal Control over Financial Reporting
−Removed: As previously announced, we acquired North Italia and the remaining business of Fox Restaurant Concepts, including Flower Child and all other FRC brands on October 2, 2019.
−Removed: We have not fully evaluated any changes in internal control over financial reporting associated with the acquisition and therefore any material changes that may result from these acquisitions have not been disclosed in this report.
−Removed: We intend to disclose all material changes resulting from these acquisitions within or prior to the time of our first annual assessment of internal control over financial reporting that is required to include these entities.
−Removed: There have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during fiscal year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the three months ended December 29, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
6 unchanged sentences
EXECUTIVE COMPENSATION
−Removed: The information required by this item is hereby incorporated by reference to the sections entitled “Directors Compensation,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.
+Added: The information required by this item is hereby incorporated by reference to the sections entitled “Directors Compensation,” “Executive Compensation,” “Compensation of Named Executive Officers” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
15 unchanged sentences
Consolidated Balance Sheets
−Removed: Consolidated Statements of Income
−Removed: Consolidated Statements of Comprehensive Income
−Removed: Consolidated Statements of Stockholders’ Equity
+Added: Consolidated Statements of (Loss)/ Income
+Added: Consolidated Statements of Comprehensive (Loss)/ Income
+Added: Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock
Consolidated Statements of Cash Flows
4 unchanged sentences
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
−Removed: We have audited the accompanying consolidated balance sheets of The Cheesecake Factory Incorporated and subsidiaries (the Company) as of December 31, 2019 and January 1, 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).
+Added: We have audited the accompanying consolidated balance sheets of The Cheesecake Factory Incorporated and subsidiaries (the Company) as of December 29, 2020 and December 31, 2019, the related consolidated statements of (loss)/income, comprehensive (loss)/income, stockholders’ equity and Series A convertible preferred stock, and cash flows for each of the years in the three-year period ended December 29, 2020, and the related notes (collectively, the consolidated financial statements).
We also have audited the Company’s internal control over financial reporting as of December 29, 2020, based on criteria established in “ Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and January 1, 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S.
+Added: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 29, 2020 and December 31, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 29, 2020, in conformity with U.S.
generally accepted accounting principles.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2020 based on criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: The Company acquired North Italia and the remaining business of Fox Restaurant Concepts LLC (FRC) during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, North Italia’s and FRC’s internal control over financial reporting associated with 28.3% of total assets and 3.7% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019.
−Removed: Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of North Italia and FRC.
−Removed: Change in Accounting Principles
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers as of January 3, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and has changed its method of accounting for leases as of January 2, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .
+Added: Change in Accounting Principle
+Added: As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 2, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .
Basis for Opinions
22 unchanged sentences
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Assessment of carrying value of property and equipment
−Removed: As discussed in Notes 1 and 6 to the consolidated financial statements, the property and equipment, net, and impairment of assets and lease termination balances as of and for the year ended December 31, 2019 were $832 million and $18 million, respectively.
−Removed: The Company assesses the potential impairment of long-lived assets, which includes property and equipment, net, on an annual basis or whenever events or changes in circumstances indicate the carrying value of the asset or asset group may not be recoverable.
−Removed: We identified the assessment of the carrying value of property and equipment, net, as a critical audit matter.
−Removed: For some restaurant asset groups, the estimated undiscounted cash flow of the asset groups were less than their carrying values, which indicated potential impairment.
−Removed: This required the Company to estimate the fair value of the asset groups in order to measure the amount of impairment expense.
−Removed: The estimates of undiscounted cash flow and fair value resulted in the application of greater auditor judgment.
−Removed: In particular, the revenue growth rate and the operating margin assumptions used to estimate both the undiscounted cash flow and the fair value of the restaurant asset groups were challenging to evaluate as minor changes to those assumptions had a potential significant effect on the Company’s assessment of the carrying value of the restaurant asset groups, and the amount of the related impairment expense.
−Removed: The primary procedures we performed to address the critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s long-lived asset impairment assessment process.
−Removed: This included controls related to the determination of the undiscounted cash flow and fair value of the restaurant asset groups, and the related revenue growth rate and operating margin assumptions.
−Removed: We performed sensitivity analyses over the revenue growth rate and operating margin assumptions to assess their impact on the Company’s determination of the undiscounted cash flow and fair value of the restaurant assets groups.
−Removed: We evaluated the Company’s forecasted revenue growth rate and operating margin assumptions for the restaurant asset groups by comparing the assumptions to the restaurant asset groups’ historical and peer group performance.
−Removed: We compared the Company’s revenue growth rate and operating margin forecasts to actual results to assess the Company’s ability to accurately forecast.
−Removed: Evaluation of the acquisition-date fair values of trade names and trademarks and remeasurement of previously held equity interests
−Removed: As discussed in Notes 1, 2 and 7 to the consolidated financial statements, on October 2, 2019, the Company acquired North Italia and the remaining business of Fox Restaurant Concepts LLC (FRC).
−Removed: As a result of the transaction, the Company acquired trade names and trademarks representing the names of the restaurant concepts acquired.
−Removed: The acquisition-date fair value for the trade names and trademark assets are included in intangibles acquired of $337 million.
−Removed: The Company also remeasured previously held equity interests in North Italia and Flower Child immediately before the acquisition to acquisition-date fair value of $122 million and recognized a gain of $53 million which is included in gain on investments in unconsolidated affiliates in the consolidated statements of operations.
−Removed: We identified the evaluation of the acquisition-date fair value of the North Italia, Flower Child and other FRC trade names and trademark assets and the remeasurement of previously held equity interests in North Italia and Flower Child as a critical audit matter.
−Removed: A high degree of subjective auditor judgment was involved in evaluating certain inputs to the relief from royalty model used to determine the fair value of the trade names and trademarks, and the discounted cash flow model used to determine the enterprise value of North Italia and Flower Child.
−Removed: The key inputs used in the relief from royalty model included royalty rates, discount rates, and revenue growth rates.
−Removed: The key inputs used in the discounted cash flow model included revenue growth rates, EBITDA as a percentage of revenue, and discount rates.
−Removed: There was limited observable market information and the calculated fair value of such assets was sensitive to possible changes in these key inputs.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s acquisition-date valuation process, including controls over the key inputs listed above.
−Removed: In connection with our assessment of the inputs used in the valuation, we compared forecasted revenue growth rates and EBITDA as a percentage of revenue to historical actual results and performing sensitivity analyses to assess the impact of changes to the forecasted revenue growth rates.
+Added: Evaluation of long-lived assets for impairment
+Added: As discussed in Notes 1, 7 and 13 to the consolidated financial statements, the Company assesses the potential impairment of long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the asset or asset group may not be recoverable.
+Added: If the carrying amount of an asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
+Added: The property and equipment, net, and operating lease asset balances as of December 29, 2020 were $774.1 million and $1,251.0 million, respectively.
+Added: Based upon the analyses performed, the Company recognized pre-tax impairment charges for long-lived assets of $36.2 million in fiscal 2020.
+Added: We identified the evaluation of long-lived assets for impairment as a critical audit matter.
+Added: The evaluation of the assumptions used in the undiscounted cash flow analysis and determination of fair value of certain long-lived assets resulted in the application of challenging auditor judgment.
+Added: These assumptions include revenue and the operating margin.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s long-lived asset impairment assessment process.
+Added: This included controls related to the determination of the undiscounted cash flow and fair value of the restaurant asset groups, and the related revenue and operating margin assumptions.
+Added: We performed sensitivity analyses over the revenue and operating margin assumptions to assess the impact of changes in those assumptions on the Company’s determination of the undiscounted cash flow and fair value of the restaurant assets groups.
+Added: We compared the Company’s prior year revenue and operating margin assumptions to current year actual results to assess the Company’s ability to accurately forecast.
+Added: We evaluated the Company’s revenue and operating margin assumptions for the restaurant asset groups by comparing the assumptions to the restaurant asset groups’ historical and peer group performance.
+Added: Evaluation of goodwill for impairment
+Added: As discussed in Notes 1, 2 and 8 to the consolidated financial statements, goodwill as of December 29, 2020 was $1.5 million.
+Added: The Company tests for impairment of goodwill annually or whenever events or changes in circumstances between annual tests indicate a potential impairment.
+Added: The Company determined it was necessary to perform an interim impairment evaluation during the first quarter of fiscal 2020 due to the decrease in stock price coupled with the dining room closures related to the COVID-19 pandemic and significant decline to the equity value of peers and overall U.S.
+Added: stock market.
+Added: Based on the results of this evaluation, the Company recorded impairment expense of $79.4 million.
+Added: The estimated fair value of the reporting units was determined using the income approach using a discounted cash flow analysis.
+Added: We identified the evaluation of goodwill for impairment as a critical audit matter.
+Added: Challenging auditor judgment was involved in evaluating certain assumptions used to determine the fair value of the reporting units.
+Added: These assumptions include future unit growth, cash flows, and discount rates used to estimate the fair value of the reporting units.
+Added: Minor changes to those assumptions had a significant effect on the Company’s estimate of the fair value of the reporting units.
+Added: Additionally, the audit effort associated with the evaluation of the determination of fair value required specialized skills and knowledge.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment evaluation process, including controls over the assumptions listed above.
+Added: We compared future unit growth and cash flows as a percentage of revenue to historical actual results and to the Company’s most recent plans.
+Added: We performed sensitivity analyses over the future unit growth assumption to assess its impact on the Company’s determination of fair value.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
● evaluating the selected discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data
−Removed: ● assessing the forecasted revenue growth rates and EBITDA as a percentage of revenue by comparing them against revenue growth rates and EBITDA as a percentage of revenue of publicly available market data for comparable companies;
−Removed: ● evaluating the selected royalty rates by comparing them against publicly available royalty rates of comparable companies;
−Removed: ● testing the estimates of fair values of the trade name and trademark assets and enterprise values using independently obtained market data and comparing the results to the Company’s fair value estimates.
−Removed: Evaluation of the acquisition-date fair value of contingent consideration
−Removed: As discussed in Notes 1, 2 and 13 to the consolidated financial statements, on October 2, 2019, the Company acquired North Italia and the remaining business of Fox Restaurant Concepts LLC.
−Removed: The acquisition agreement included a contingent consideration provision, a portion of which was considered part of the acquisition consideration, and the remainder of which was considered future compensation expense.
−Removed: The acquisition-date fair values for the acquisition consideration and future compensation expense were $13 million and $7 million, respectively.
−Removed: We identified the evaluation of the acquisition-date fair value of the contingent consideration as a critical audit matter.
−Removed: A high degree of subjective auditor judgment was required in evaluating certain inputs to the Monte Carlo model used to determine the fair value of the contingent consideration.
−Removed: Specifically, the key inputs included forecasted revenue growth rates, EBITDA as a percentage of revenue and volatility rate.
−Removed: There was limited observable market information, and the calculated fair value of the contingent consideration was sensitive to possible changes to these key inputs.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s acquisition-date valuation process, including controls over the key inputs listed above.
−Removed: In connection with our assessment of the revenue and EBITDA forecasts used in the valuation, we compared forecasted revenue growth rates and EBITDA as a percentage of revenue to historical actual results.
+Added: ● assessing cash flows as a percentage of revenue by comparing it against cash flows as a percentage of revenue of publicly available market data for comparable companies
+Added: ● testing the estimates of fair value of the reporting units using independently obtained market data and comparing the results to the Company’s estimates of fair value.
+Added: Evaluation of trade name and trademark intangible assets for impairment
+Added: As discussed in Notes 1, 2 and 8 to the consolidated financial statements, trade name and trademark intangible assets as of December 29, 2020 was $233.7 million.
+Added: The Company tests for impairment of trade name and trademark intangible assets annually or whenever events or changes in circumstances between annual tests indicate a potential impairment.
+Added: The Company determined it was necessary to perform an interim impairment evaluation during the first quarter of fiscal 2020 due to the decrease in stock price coupled with the dining room closures related to the COVID-19 pandemic and significant decline to the equity value of peers and overall U.S.
+Added: stock market.
+Added: Based on the results of this evaluation, the Company recorded impairment expense of $101.0 million.
+Added: The estimated fair value of the trade name and trademark intangible assets was determined using the relief from royalty method.
+Added: We identified the evaluation of trade name and trademark intangible assets for impairment as a critical audit matter.
+Added: Challenging auditor judgment was involved in evaluating certain assumptions used to determine the fair value of trade name and trademark intangible assets.
+Added: These assumptions include future unit growth, discount rates, and royalty rates used to estimate the fair value of trade name and trademark intangible assets.
+Added: Minor changes to those assumptions had a significant effect on the Company’s estimate of the fair value of trade name and trademark intangible assets.
+Added: Additionally, the audit effort associated with the evaluation of the determination of fair value required specialized skills and knowledge.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s trade name and trademark intangible assets impairment evaluation process, including controls over the assumptions listed above.
+Added: We compared future unit growth to historical actual results and to the Company’s most recent plans.
+Added: We performed sensitivity analyses over the future unit growth assumption to assess its impact on the Company’s determination of fair value.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
−Removed: ● assessing the selected volatility rate by comparing it against publicly available volatility rate of comparable companies;
−Removed: ● developing estimates of the fair values of the contingent consideration using independently obtained external information and comparing the results to the Company’s fair value estimates;
−Removed: ● performing sensitivity analyses to assess the impact of reasonably possible changes to the forecasted revenue growth rates and EBITDA.
+Added: ● evaluating the selected discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data
+Added: ● evaluating the selected royalty rates by comparing them against publicly available royalty rates of comparable companies
+Added: ● testing the estimates of fair value of trade name and trademark intangible assets using independently obtained market data and comparing the results to the Company’s estimates of fair value.
We have served as the Company’s auditor since 2018.
Los Angeles, California
−Removed: March 11, 2020
+Added: February 24, 2021
THE CHEESECAKE FACTORY INCORPORATED
1 unchanged sentence
(In thousands, except share data)
−Removed: December 31, 2019
−Removed: January 1, 2019
Current assets:
Cash and cash equivalents
−Removed: Accounts receivable
+Added: Accounts and other receivable
Income taxes receivable
−Removed: Other receivables
Prepaid expenses
4 unchanged sentences
Operating lease assets
−Removed: Investments in unconsolidated affiliates
Total other assets
−Removed: LIABILITIES AND STOCKHOLDERS’ EQUITY
+Added: LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
−Removed: Income taxes payable
Gift card liabilities
3 unchanged sentences
Deferred income taxes
−Removed: Deferred rent liabilities
−Removed: Deemed landlord financing liabilities
Long-term debt
2 unchanged sentences
Commitments and contingencies (Note 16)
+Added: Series A convertible preferred stock, $ .01 par value, 200,000 shares authorized;
+Added: 200,000 and 0 shares issued and outstanding at December 29, 2020 and December 31, 2019, respectively
Stockholders’ equity:
−Removed: Preferred stock, $ .01 par value, 5,000,000 shares authorized;
+Added: Preferred stock, $ .01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized;
Common stock, $ .01 par value, 250,000,000 shares authorized;
−Removed: 97,685,178 and 96,621,990 shares issued at December 31, 2019 and January 1, 2019, respectively
+Added: 98,645,147 and 97,685,178 shares issued at December 29, 2020 and December 31, 2019, respectively
Additional paid-in capital
Retained earnings
−Removed: Treasury stock, 52,916,434 and 51,791,941 shares at cost at December 31, 2019 and January 1, 2019, respectively
+Added: Treasury stock, 53,026,409 and 52,916,434 shares at cost at December 29, 2020 and December 31, 2019, respectively
( 1,696,743 )
2 unchanged sentences
Total stockholders’ equity
−Removed: Total liabilities and stockholders’ equity
+Added: Total liabilities, Series A convertible preferred stock and stockholders’ equity
See the accompanying notes to the consolidated financial statements.
THE CHEESECAKE FACTORY INCORPORATED
−Removed: CONSOLIDATED STATEMENTS OF INCOME
+Added: CONSOLIDATED STATEMENTS OF (LOSS)/INCOME
(In thousands, except per share data)
5 unchanged sentences
Depreciation and amortization expenses
−Removed: Impairment of assets and lease terminations
+Added: Impairment of assets and lease termination expenses
Acquisition-related costs
−Removed: Acquisition-related contingent consideration, compensation and amortization expenses
+Added: Acquisition-related contingent consideration, compensation and amortization (benefit)/expenses
Preopening costs
Total costs and expenses
−Removed: Income from operations
+Added: (Loss)/income from operations
Gain/(loss) on investments in unconsolidated affiliates
Interest and other expense, net
−Removed: Income before income taxes
−Removed: Income tax provision/(benefit)
−Removed: Net income per share:
−Removed: Weighted average shares outstanding:
+Added: (Loss)/income before income taxes
+Added: Income tax (benefit)/provision
+Added: Net (loss)/ income
+Added: Dividends on Series A preferred stock
+Added: Direct and incremental Series A preferred stock issuance costs
+Added: Net (loss)/income available to common stockholders
+Added: Net (loss)/income per common share:
+Added: Weighted-average common shares outstanding:
See the accompanying notes to the consolidated financial statements.
THE CHEESECAKE FACTORY INCORPORATED
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
+Added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(In thousands)
−Removed: Other comprehensive gain/(loss):
+Added: Net (loss)/income
+Added: Other comprehensive (loss)/gain:
Foreign currency translation adjustment
−Removed: Other comprehensive gain/(loss)
−Removed: Total comprehensive income
+Added: Unrealized loss on derivative, net of tax
+Added: Other comprehensive (loss)/gain
+Added: Total comprehensive (loss)/income
+Added: Comprehensive (loss)/income attributable to preferred stockholders
+Added: Total comprehensive (loss)/income available to common stockholders
See the accompanying notes to the consolidated financial statements.
THE CHEESECAKE FACTORY INCORPORATED
−Removed: CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
+Added: CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE PREFERRED STOCK
(In thousands)
+Added: Series A Convertible
+Added: Preferred Stock
Comprehensive
1 unchanged sentence
( 1,532,864 )
+Added: Cumulative effect of adopting the pronouncement related to revenue recognition, net of tax
+Added: Balance, January 2, 2018, as adjusted
+Added: ( 1,532,864 )
Foreign currency translation adjustment
5 unchanged sentences
( 1,642,140 )
−Removed: Cumulative effect of adopting the pronouncement related to revenue recognition, net of tax
+Added: Cumulative effect of adopting the pronouncement related to lease accounting, net of tax
Balance, January 1, 2019, as adjusted
5 unchanged sentences
Treasury stock purchases
−Removed: Balance, January 1, 2019
−Removed: ( 1,642,140 )
−Removed: Cumulative effect of adopting the pronouncement related to lease accounting, net of tax
−Removed: Balance, January 1, 2019, as adjusted
+Added: Balance, December 31, 2019
( 1,693,122 )
Foreign currency translation adjustment
+Added: Change in derivative, net of tax
Cash dividends declared Common stock, $ 0.36 per share
2 unchanged sentences
Treasury stock purchases
+Added: Series A preferred stock issuance
+Added: Series A preferred stock direct costs
+Added: Paid-in-kind Series A preferred stock dividend, including beneficial conversion feature
Balance, December 29, 2020
5 unchanged sentences
Cash flows from operating activities:
−Removed: Adjustments to reconcile net income to cash provided by operating activities:
+Added: Net (loss)/income
+Added: Adjustments to reconcile net (loss)/income to cash (used in)/provided by operating activities:
Depreciation and amortization expenses
Deferred income taxes
−Removed: Impairment of assets and lease terminations
+Added: Impairment of assets and lease termination expenses
Stock-based compensation
18 unchanged sentences
Cash flows from financing activities:
+Added: Acquisition-related deferred consideration
Deemed landlord financing proceeds
3 unchanged sentences
Proceeds from exercise of stock options
+Added: Series A preferred stock issuance
+Added: Series A preferred stock direct costs
Cash dividends paid
27 unchanged sentences
We are culinary forward and relentlessly focused on hospitality.
−Removed: We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® , North Italia ® and a collection within the Fox Restaurant Concepts ("FRC") subsidiary.
+Added: We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® , North Italia ® and a collection within our Fox Restaurant Concepts ("FRC") business.
Internationally, 27 The Cheesecake Factory ® restaurants operate under licensing agreements.
3 unchanged sentences
All intercompany accounts and transactions for the periods presented have been eliminated in consolidation.
−Removed: On October 2, 2019, we completed the acquistion of North Italia and the remaining business of FRC, including Flower Child and all other FRC brands.
+Added: On October 2, 2019, we completed the acquisition of North Italia and the remaining business of FRC, including Flower Child and all other FRC brands (the "Acquisition").
The results of operations, financial position and cash flows of the acquired businesses are included in our consolidated financial statements as of the acquisition date.
2 unchanged sentences
Fiscal years 2020, 2019 and 2018 each consisted of 52 weeks.
+Added: In fiscal 2019, we separately disclosed accounts receivable and other receivable on the consolidated balance sheet and statement of cash flow.
+Added: In addition, rent related deferred tax assets and liabilities were consolidated and presented as accrued rent in the notes to consolidated financial statements.
+Added: Corresponding prior year balance were reclassified to conform to the current year presentation.
Use of Estimates
7 unchanged sentences
We estimated the fair value of assets and liabilities based upon widely-accepted valuation techniques, including discounted cash flow, relief from royalty and Monte Carlo methods, depending on the nature of the assets acquired or liabilities assumed.
−Removed: We expect minor adjustments to our purchase accounting in the first quarter of fiscal 2020 as we finalize our valuation of the acquired intangible assets.
+Added: We made minor adjustments to our purchase accounting in the first quarter of fiscal 2020 as we finalized our valuation of the acquired intangible assets.
(See Note 2 for further discussion of the Acquisition.)
+Added: COVID-19 Pandemic
+Added: The Company is subject to risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency on March 13, 2020.
+Added: We experienced significant disruptions to our business due to suggested and mandated social distancing and shelter-in-place orders, which resulted in the temporary closure of a number of restaurants across our portfolio while the remaining locations shifted to an off-premise only operating model on an interim basis.
+Added: In our initial response to the COVID-19 pandemic, the Company and its Board of Directors implemented the following measures to preserve liquidity and enhance financial flexibility:
+Added: ● Eliminated non-essential capital expenditures and expenses;
+Added: ● Suspended new unit development;
+Added: ● Reduced board, executive and corporate support staff compensation;
+Added: ● Furloughed approximately 41,000 hourly staff members;
+Added: ● Engaged in discussions with our landlords regarding ongoing rent obligations, including the potential deferral, abatement and/or restructuring of rent otherwise payable during the period of the COVID-19 pandemic related closure;
+Added: ● Increased borrowings under our revolving credit facility;
+Added: ● Raised additional equity capital;
+Added: ● Suspended the dividend on our common stock and share repurchases.
+Added: In late April 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms across our concepts the second week of May.
+Added: During the third quarter of fiscal 2020, we called back to work a majority of our staff members who were previously furloughed, and restored Board, executive and corporate support staff compensation.
+Added: In addition, we resumed new unit development on a limited basis and will continue to evaluate the pace and quantity of new unit development.
+Added: Restrictions on the type of operating model and occupancy capacity continue to change, and these restrictions increased in many of our markets during the fourth quarter of fiscal 2020 with the surge in COVID-19 cases.
+Added: We cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.
+Added: The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the significance of the impact to our operating results and financial position.
+Added: These considerable developments triggered the need to perform interim impairment assessments of our long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of FRC in addition to our annual impairment testing.
+Added: Future changes in estimates could further impact the carrying value of these items.
+Added: (See Notes 7 and 8 for further discussion of impairment of long-lived and intangible assets, respectively.
+Added: See Note 9 for further discussion of the revaluation of contingent consideration.)
Cash and Cash Equivalents
−Removed: Amounts receivable from credit card processors, totaling $ 21.2 million and $ 17.3 million at December 31, 2019 and January 1, 2019, respectively, are considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.
+Added: Amounts receivable from credit card processors, totaling $ 9.1 million and $ 21.2 million at December 29, 2020 and December 31, 2019, respectively, are considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.
+Added: During the last week of fiscal 2020, almost all of our restaurants were operating under capacity restrictions or in an off-premise-only model.
+Added: Therefore, we processed less sales through credit cards causing a decrease in this receivable from the prior year.
Our cash management system provides for the funding of all major bank disbursement accounts on a daily basis as checks are presented for payment.
1 unchanged sentence
Book overdrafts are presented as a current liability in other accrued expenses on our consolidated balance sheet.
−Removed: Accounts and Other Receivables
−Removed: Our accounts receivable principally result from credit sales to bakery customers.
−Removed: Other receivables consist primarily of amounts due from our gift card distributors and landlords.
Concentration of Credit Risk
3 unchanged sentences
Although we maintain balances that exceed the federally insured limit, we have not experienced any losses related to this balance, and we believe credit risk to be minimal.
−Removed: We consider the concentration of credit risk for accounts receivable to be minimal due to the payment histories and general financial condition of our larger bakery customers.
−Removed: Concentration of credit risk related to other receivables is limited as this balance is comprised primarily of amounts due from our gift card distributors and landlords.
−Removed: Fair Value Measurements
−Removed: Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:
−Removed: Quoted prices in active markets for identical assets or liabilities.
−Removed: Observable inputs other than quoted prices in active markets for identical assets and liabilities
−Removed: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions
−Removed: The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):
−Removed: December 31, 2019
−Removed: Assets (Liabilities)
−Removed: Non-qualified deferred compensation assets
−Removed: Non-qualified deferred compensation liabilities
−Removed: Acquisition-related deferred consideration
−Removed: Acquisition-related contingent consideration and compensation liabilities
−Removed: January 1, 2019
−Removed: Assets (Liabilities)
−Removed: Non-qualified deferred compensation assets
−Removed: Non-qualified deferred compensation liabilities
−Removed: Deemed landlord financing liabilities
−Removed: Changes in the fair value of non-qualified deferred compensation assets and liabilities and deemed landlord financing liabilities are recognized in interest and other expense, net in our consolidated statements of income.
−Removed: Changes in the fair value of the acquisition-related deferred and contingent consideration and compensation liabilities are recognized in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of income.
−Removed: The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment.
−Removed: The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 69.2 million.
−Removed: Results could change materially if different estimates and assumptions were used.
−Removed: The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liabilities, categorized as Level 3 (in thousands):
−Removed: Balance, January 1, 2019
−Removed: Acquisition-date fair value
−Removed: Change in fair value
−Removed: Balance, December 31, 2019
−Removed: The fair values of our cash and cash equivalents, accounts receivable, income taxes receivable, other receivables, prepaid expenses, accounts payable, income taxes payable and other accrued expenses approximate their carrying amounts due to their short duration.
+Added: We consider the concentration of credit risk for accounts receivable from our bakery customers to be minimal due to the payment histories and general financial condition of our larger bakery accounts.
+Added: Concentration of credit risk related to other receivables is limited as this balance is comprised primarily of amounts due from our gift card distributors, insurance providers and delivery partner.
Inventories consist of restaurant food and other supplies, bakery raw materials and bakery finished goods and are stated at the lower of cost or net realizable value on an average cost basis at the restaurants and on a first-in, first-out basis at the bakeries.
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Improvements are capitalized while repairs and maintenance costs are expensed as incurred.
−Removed: Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter.
+Added: Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the assets or the reasonably certain lease term, whichever is shorter.
Leasehold improvements include the cost of our internal development and construction department.
1 unchanged sentence
Buildings and land improvements
−Removed: 25 to 30 years
Leasehold improvements
3 unchanged sentences
Computer software and equipment
+Added: (1) Other than certain types of restaurant equipment with estimated useful lives that equal or exceed the reasonably certain lease term, in which case the reasonably certain lease term is utilized
Gains and losses related to property and equipment disposals are recorded in depreciation and amortization expenses.
+Added: Impairment of Long-Lived Assets and Lease Termination Expenses
+Added: We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable.
+Added: Factors considered include, but are not limited to, negative cash flow, 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.
+Added: At any given time, we may be monitoring a 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.
+Added: Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
+Added: Impairment testing is performed at the individual restaurant asset group level, which is inclusive of property and equipment and lease right-of-use assets.
+Added: Recoverability is assessed by comparing the carrying value of the assets to the undiscounted cash flows expected to be generated by those assets.
+Added: Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair value, which is determined based on discounted future net cash flows expected to be generated by the assets.
+Added: In fiscal 2020, we recorded $ 36.2 million of expense primarily related to the impairment of one The Cheesecake Factory, one North Italia, two Other FRC and six Other restaurants, as well as lease termination costs and accelerated depreciation for one The Cheesecake Factory and seven Other restaurants.
+Added: In fiscal 2019, we recorded $ 18.2 million of expense related to the impairment of two The Cheesecake Factory and two Other restaurants, as well as lease termination costs and accelerated depreciation for two Other restaurants.
+Added: In fiscal 2018, we recorded $ 17.9 million of expense related to the impairment of one The Cheesecake Factory and two Other restaurants, as well as lease termination costs and accelerated depreciation for two The Cheesecake Factory restaurants.
+Added: These amounts are recorded in impairment of assets and lease terminations on the consolidated statements of income.
Intangible Assets
−Removed: Our intangible assets consist primarily of goodwill, indefinite-lived trade names,trademarks and transferable alcoholic beverage licenses and definite-lived licensing agreements and non-transferable alcoholic beverage licenses.
+Added: Our intangible assets consist of goodwill, indefinite-lived trade names, trademarks and transferable alcoholic beverage licenses and definite-lived licensing agreements and non-transferable alcoholic beverage licenses.
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on estimated undiscounted future cash flows.
If impaired, the asset or asset group is written down to fair value based on discounted future cash flows.
−Removed: Amortization is recorded in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of income.
−Removed: Goodwill and other indefinite-lived intangible assets are not amortized but are instead tested for impairment annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment.
+Added: Goodwill and other indefinite-lived intangible assets are not amortized and are tested for impairment annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment.
First, we determine if, based on qualitative factors, it is more likely than not that an impairment exists.
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If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
−Removed: The quantitative assessment requires an analysis of several best estimates and assumptions, including future sales and operating results and other factors that could affect fair value or otherwise indicate potential impairment.
−Removed: We also consider our reporting units’ projected ability to generate income from operations and positive cash flow in future periods.
+Added: The quantitative assessments require the use of estimates and assumptions regarding future cash flows and asset fair values.
+Added: For the goodwill impairment test, the estimated fair value of the reporting units is determined using a blend of the income approach using a discounted cash flow analysis and the market capitalization approach.
+Added: The fair value of the trade names, trademarks and licensing agreements is estimated using the relief from royalty method.
+Added: These fair value assessments could change materially if different estimates and assumptions were used.
We evaluate the useful lives of our intangible assets, other than goodwill, at each reporting period to determine if they are definite or indefinite-lived.
A determination on useful life requires judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment and expected changes in distribution channels), the level of required maintenance expenditures and the expected lives of other related groups of assets.
−Removed: Impairment of Long-Lived Assets and Lease Terminations
−Removed: We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable.
−Removed: Factors considered include, but are not limited to, negative cash flow, 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.
−Removed: 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.
−Removed: We have determined that our asset group for impairment testing is comprised of the assets and liabilities of each of our individual restaurants, as this is the lowest level of identifiable cash flows.
−Removed: We have identified leasehold improvements as the primary asset because it is the most significant component of our restaurant assets, it is the principal asset from which our restaurants derive their cash flow generating capacity and it has the longest remaining useful life.
−Removed: The recoverability is assessed by comparing the carrying value of the assets to the undiscounted cash flows expected to be generated by these assets.
−Removed: Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair value, which is determined based on discounted future net cash flows expected to be generated by the assets.
−Removed: In fiscal 2019, we recorded $ 18.2 million of impairment of assets and lease termination expense related to the impairment of two The Cheesecake Factory restaurants, one Grand Lux Cafe and Social Monk Asian Kitchen and the closure of one Grand Lux Cafe and one RockSugar Southeast Asian Kitchen.
−Removed: In fiscal 2018, we recorded $ 17.9 million of impairment of assets and lease termination expense related to the impairment of one The Cheesecake Factory restaurant, one Grand Lux Cafe and one RockSugar Southeast Asian Kitchen and the closure of two The Cheesecake Factory restaurants.
−Removed: In fiscal 2017, we recorded $ 10.3 million of impairment of assets and lease termination expense related to three The Cheesecake Factory restaurants, including one relocation and one lease expiration, and one Grand Lux Cafe.
−Removed: These amounts are recorded in impairment of assets and lease terminations on the consolidated statements of income.
+Added: (See Note 8 for further discussion of our intangible assets.)
Investments in Unconsolidated Affiliates
−Removed: During fiscal years 2018, 2017 and until the Acquisition on October 2, 2019, we made minority equity investments in two restaurant concepts, North Italia and Flower Child, bringing our percentage of ownership to 49 % in both concepts immediately prior to the Acquisition.
+Added: From fiscal year 2016 until the Acquisition on October 2, 2019, we held minority equity investments in two restaurant concepts, North Italia and Flower Child, with our percentage of ownership growing to 49 % in each concept immediately prior to the Acquisition.
Since we held a number of rights with regard to participation in policy-making processes, but did not control these entities prior to the Acquisition, we accounted for these investments under the equity method.
Accordingly, we recognized our proportionate share of the reported earnings or losses of these entities on the consolidated statements of income and as an adjustment to our investments on the consolidated balance sheets.
−Removed: Prior to the Acquisition, we assessed the potential impairment of our equity investments whenever events or changes in circumstances indicated that a decrease in value of the investment had occurred that was other than temporary, in which case we would recognize the decrease even though it is in excess of what would otherwise be recognized by application of the equity method.
+Added: We assessed the potential impairment of these equity investments whenever events or changes in circumstances indicated that a decrease in value of the investment had occurred that was other than temporary, in which case we would have recognized the decrease even though it was in excess of what would otherwise be recognized by application of the equity method.
No impairment losses were recorded for these assets during fiscal years 2019 and 2018.
9 unchanged sentences
As our development and site fee agreements do not contain distinct performance obligations, related revenue is recognized on a straight-line basis over the life of the applicable agreements, ranging from eight to 30 years .
−Removed: In fiscal 2019, we deferred revenue of $ 0.2 million for new minimum guarantees for consumer packaged goods and recognized minimum guarantee revenue of $ 0.5 million.
−Removed: In fiscal 2019, we deferred revenue of $ 0.3 million for new site and development agreements and recognized revenue of $ 0.5 million.
−Removed: In fiscal 2018, we deferred revenue of $ 0.9 million for new minimum guarantees for consumer packaged goods and recognized minimum guarantee revenue of $ 0.8 million.
−Removed: In fiscal 2018, we deferred revenue of $ 0.2 million for new site and development agreements and recognized revenue of $ 0.4 million.
−Removed: Prior to the adoption of the new revenue recognition standard in 2018, we recognized revenue for development fees upon execution of new development agreements and for site fees upon our approval of new restaurant sites.
+Added: Deferred and recognized revenue for new minimum guarantees for consumer packaged goods and for new site and development agreements were immaterial in all periods presented.
We recognize a liability upon the sale of our gift cards and recognize revenue when these gift cards are redeemed in our restaurants.
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During fiscal 2019, we deferred revenue of $ 7.9 million related to promotional programs and recognized $ 7.3 million of previously deferred revenue related to promotional programs.
−Removed: (See Recent Accounting Pronouncements for further discussion of our adoption of the new revenue recognition accounting guidance.)
We currently lease all of our restaurant locations, generally with initial terms of 10 to 20 years plus two five-year renewal options.
8 unchanged sentences
In addition to leases for our restaurant locations, we also lease automobiles and certain equipment that is used in the restaurants, bakeries and corporate office.
−Removed: The automobile leases are the only non-real estate leases included in our operating lease assets and liabilities.
+Added: The leases for our restaurant locations, automobiles and certain restaurant equipment are included in our operating lease assets and liabilities.
All other leases are immaterial or qualify for the short-term lease exclusion.
2 unchanged sentences
Control is defined as having both the right to obtain substantially all the economic benefits from the use of the asset and to direct how and for what purpose the asset is used.
−Removed: At lease commencement, we evaluate each lease to determine its appropriate classification as an operating or finance lease.
−Removed: All of our restaurant and automobile leases are classified as operating leases.
−Removed: For restaurant leases existing at transition, we will continue to apply our historical practice of excluding executory costs, and only minimum base rent will be factored into the initial operating lease liability and corresponding lease asset.
+Added: At lease commencement, we evaluate each material lease and those that don’t qualify for the short-term exclusion to determine its appropriate classification as an operating or finance lease.
+Added: All of the leases evaluated meet the criteria for classification as operating leases.
+Added: For restaurant leases that existed as of the adoption of ASC 842, we continued to apply our historical practice of excluding executory costs, and only minimum base rent was factored into the initial operating lease liability and corresponding lease asset.
For restaurant leases beginning after adoption of ASC 842, we have elected the single lease component practical expedient.
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Because we do not generally borrow on a collateralized basis, we derive an appropriate incremental borrowing rate using the interest rate we pay on our non-collateralized borrowings, adjusted for the amount of the lease payments, the lease term and the effect of designating specific collateral with a value equal to the unpaid lease payments for that lease.
−Removed: We apply the incremental borrowing rate on a portfolio basis given the impact of applying it on a lease by lease basis would be immaterial.
We monitor for events or changes in circumstances that require reassessment of our leases.
8 unchanged sentences
Rent expense is included in other operating costs and expenses in the consolidated statements of income.
+Added: In April 2020, the FASB staff issued interpretive guidance that indicated it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract) rather than as a lease modification.
+Added: Lessees may make the election for any lessor-provided lease concession related to the impact of the COVID-19 pandemic if the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee.
+Added: During fiscal 2020, we received a number of lease concessions, primarily in the form of rent deferrals or reduction over the period of time when our restaurant business was adversely impacted and have elected to apply the interpretive guidance.
+Added: This election did not have a material impact on our consolidated financial statements.
+Added: Three concession agreements did not qualify for this accounting election and were treated as lease modifications.
+Added: We deferred rent payments of $ 7.6 million, the majority of which is due in fiscal 2021.
Self-Insurance Liabilities
2 unchanged sentences
Our estimated liabilities, which are not discounted, are based on information provided by our insurance brokers and insurers, combined with our judgment regarding a number of assumptions and factors, including the frequency and severity of claims, claims development history, case jurisdiction, applicable legislation and our claims settlement practices.
+Added: Significant judgment is required to estimate IBNR amounts, as parties have yet to assert such claims.
+Added: If actual claims trends, including the severity or frequency of claims, differ from our estimates, our financial results could be impacted.
Stock-Based Compensation
−Removed: We maintain stock-based incentive plans under which equity awards may be granted to staff members and consultants.
+Added: We maintain stock-based incentive plans under which equity awards may be granted to staff members, consultants and non-employee directors.
We account for the awards based on fair value measurement guidance and amortize to expense over the vesting period using a straight-line or graded-vesting schedule, as applicable.
12 unchanged sentences
Income tax credits are recorded as a reduction of tax expense.
−Removed: Uncertain tax positions taken or expected to be taken in a tax return are recognized (or derecognized) in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained on its technical merits upon examination by tax authorities, taking into account available administrative remedies and litigation.
−Removed: A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution.
+Added: We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and record a valuation allowance if, based on all available evidence, we determine that some portion of the tax benefit will not be realized.
+Added: In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies (when applicable) and results of recent operations.
+Added: If we later determine that we would be able to realize our deferred tax assets in excess of their net recorded amount, we adjust the deferred tax asset valuation allowance and reduce income tax expense.
+Added: We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the relevant taxing authorities based solely on its technical merits, taking into account available administrative remedies and litigation.
+Added: If this threshold is met, we recognize only the portion of the tax benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
+Added: We record a liability for any portion of the tax benefit that does not meet these recognition and measurement criteria and we adjust this liability through income tax expense in the period in which the uncertain tax position is effectively settled, when the statute of limitations expires for the relevant taxing authority to examine the tax position or when new information becomes available.
We recognize interest related to uncertain tax positions in income tax expense.
Penalties related to uncertain tax positions are recorded in general and administrative expenses.
−Removed: Net Income per Share
−Removed: 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.
−Removed: At December 31, 2019, January 1, 2019 and January 2, 2018, 1.8 million shares, 1.7 million shares and 1.7 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.
−Removed: Diluted net income per share includes the dilutive effect of outstanding equity awards, calculated using the treasury stock method.
−Removed: Shares of common stock equivalents of 2.3 million, 1.5 million and 1.6 million for fiscal 2019, 2018 and 2017, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.
+Added: Net (Loss)/Income per Share
+Added: Basic net (loss)/income per share is computed by dividing net (loss)/income available to common stockholders by the weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock awards.
+Added: At December 29, 2020, December 31, 2019 and January 1, 2019, 2.0 million shares, 1.8 million shares and 1.7 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.
+Added: Holders of our Series A Convertible Preferred Stock, par value $ 0.01 per share (the "Series A preferred stock") participate in dividends on an as-converted basis when declared on common stock.
+Added: As a result, our Series A preferred stock meets the definition of a participating security which requires us to apply the two-class method to compute both basic and diluted net income per share.
+Added: The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that would otherwise have been available to common stockholders.
+Added: In addition, as our Series A preferred stock is a participating security, we are required to calculate diluted net income per share under the if-converted method in addition to the two-class method and utilize the most dilutive result.
+Added: In periods where there is a net loss, no allocation of undistributed net loss to preferred stockholders is performed as the holders of our Series A preferred stock are not contractually obligated to participate in our losses.
(In thousands, except per share data)
+Added: Basic net (loss)/income per common share:
+Added: Net (loss)/income
+Added: Dividends on Series A preferred stock
+Added: Direct and incremental Series A preferred stock issuance costs
+Added: Net (loss)/income available to common stockholders
Basic weighted-average shares outstanding
+Added: Basic net (loss)/income per common share
+Added: Diluted net (loss)/income per common share:
+Added: Net (loss)/income available to common stockholders
+Added: Basic weighted-average shares outstanding
Dilutive effect of equity awards (1)
Diluted weighted-average shares outstanding
−Removed: Basic net income per share
−Removed: Diluted net income per share
−Removed: Comprehensive Income
−Removed: Comprehensive income includes all changes in equity during a period except those resulting from investment by and distribution to owners.
−Removed: Our comprehensive income consists of net income and translation gains and losses related to our Canadian restaurant operations.
+Added: Diluted net (loss)/income per common share
+Added: (1) Shares of common stock equivalents of 4.0 million, 2.3 million and 1.5 million for fiscal 2020, 2019 and 2018, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.
+Added: Comprehensive (Loss)/Income
+Added: Comprehensive (loss)/income includes all changes in equity during a period except those resulting from investment by and distribution to owners.
+Added: Our comprehensive income consists of net (loss)/income, unrealized losses on our interest rate swap and translation gains and losses related to our Canadian restaurant operations.
Foreign Currency
8 unchanged sentences
Recently Adopted Accounting Standards
−Removed: We adopted FASB Accounting Standards Codification (“ASC”) Topic 842, Leases, as of January 2, 2019, using the alternative transition method and recorded a cumulative effect adjustment to beginning retained earnings without restating prior periods.
+Added: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):
+Added: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.
+Added: The update eliminates, adds and modifies certain disclosure requirements for fair value measurements.
+Added: We adopted this standard as of the beginning of fiscal 2020 and such adoption did not have a significant impact on our consolidated financial statements.
+Added: We adopted FASB ASC Topic 842, Leases, as of January 2, 2019, using the alternative transition method and recorded a cumulative effect adjustment to beginning retained earnings without restating prior periods.
We elected the package of practical expedients which allowed us to carry forward our historical lease classification, our assessment of whether a contract is or contains a lease and our initial direct costs for any leases that existed prior to adoption of the new standard.
2 unchanged sentences
All prior lease-related balances of $ 39.2 million of prepaid rent, $ 140.2 million in property and equipment, net, $ 6.2 million of intangible assets, net, $ 82.1 million of deferred rent liabilities and $ 118.7 million of deemed landlord financing were reclassified into operating lease assets or eliminated upon ASC 842 adoption.
−Removed: We adopted ASC Topic 606, Revenue from Contracts with Customers, as of January 3, 2018.
−Removed: This accounting guidance 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.
−Removed: 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 development and site fees from our international licensees.
−Removed: 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 license agreements as the agreements do not contain distinct performance obligations.
−Removed: Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.
−Removed: The impact of adopting this standard as compared to the previous revenue recognition guidance was not material to our consolidated balance sheet and consolidated statements of income and comprehensive income.
Recently Issued Accounting Standards
−Removed: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):
−Removed: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.
−Removed: The update eliminates, adds and modifies certain disclosure requirements for fair value measurements.
−Removed: The new standard is effective for us on January 1, 2020.
−Removed: We have substantially completed our assessment of the new standard and do not expect its adoption to have a significant impact on our consolidated financial statement disclosures.
+Added: In August 2020, the FASB issued Accounting Standards Update ("ASU") 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity's own equity.
+Added: This pronouncement is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted.
+Added: The guidance allows for either full retrospective adoption or modified retrospective adoption.
+Added: We plan to adopt this pronouncement for our fiscal year beginning December 30, 2020 utilizing the modified retrospective method.
+Added: Depending on the future value of our stock price, the adoption of this standard could have a material impact on our additional paid-in capital and retained earnings balances due to the elimination of the beneficial conversion feature provision.
On October 2, 2019 (the “Closing Date” or “Closing”), we completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC, including Flower Child and all other FRC brands.
7 unchanged sentences
The Acquisition, which we expect will accelerate and diversify our revenue growth, was completed for consideration consisting of the following components:
−Removed: $ 288.1 million in cash at Closing, which was primarily funded by drawing on the New Facility;
+Added: $ 288.1 million in cash at Closing, which was primarily funded by drawing on our credit facility;
assumption of $ 10.0 million in debt previously owed by FRC to us;
−Removed: a $ 12.0 million indemnity escrow amount specifically related to North Italia due ratably over the next two years ;
−Removed: and $ 45.0 million of deferred consideration due ratably over the next four years (including a $ 13.0 million indemnity escrow amount specifically related to the remaining FRC businesses).
−Removed: The acquisition agreement also included a contingent consideration provision, a portion of which was considered part of the acquisition consideration, and the remainder of which was considered future compensation expense.
−Removed: The acquisition-date fair values for the acquisition consideration and future compensation expense were $ 12.8 million and $ 7.3 million, respectively.
−Removed: The contingent consideration is payable on the fifth anniversary of the Closing Date and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other than North Italia and Flower Child) during the five years after Closing.
−Removed: We are also required to provide financing to FRC in an amount sufficient to support achievement of these targets during the five years after Closing.
−Removed: The fair value of the contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues and volatility factors, among other variables and estimates, and has no maximum payment.
−Removed: The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 69.2 million.
−Removed: The fair value will be evaluated each reporting period and the contingent consideration will be adjusted accordingly.
+Added: a $ 12.0 million indemnity escrow amount specifically related to North Italia due ratably over two years ;
+Added: and $ 45.0 million of deferred consideration due ratably over four years (including a $ 13.0 million indemnity escrow amount specifically related to the remaining FRC businesses).
The assumption of debt previously owed by North Italia to us represents the effective settlement of a preexisting relationship.
Since we determined the loans were at market terms, the debt assumed was treated as purchase consideration, and no gain or loss was recorded.
+Added: The acquisition agreement also included a contingent consideration provision, a portion of which was considered part of the acquisition consideration, and the remainder of which was considered future compensation expense.
+Added: The acquisition-date fair values for the acquisition consideration and future compensation expense were $ 12.8 million and $ 7.3 million, respectively, determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates.
+Added: The contingent consideration, which has no maximum payment, is payable on the fifth anniversary of the Closing Date and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other than North Italia and Flower Child) during the five years after Closing.
+Added: We are also required to provide financing to FRC in an amount sufficient to support achievement of these targets during the five years after Closing.
Since the Acquisition represents a business combination achieved in stages, we remeasured our previously-held equity interests in North Italia and Flower Child immediately before the acquisition to acquisition-date fair value of $ 122.0 million and recognized a resulting gain of $ 52.7 million which is included in gain/(loss) on investments in unconsolidated affiliates in our consolidated statements of operations.
The fair value of the previously-held interests was determined using a discounted cash flow model based on estimated future revenues, margins and discount rates, among other variables and estimates.
−Removed: The following table summarizes the preliminary calculation of goodwill based on the excess of consideration transferred and the fair value of the previously held equity interests over the fair value of the assets acquired and liabilities assumed (in thousands).
−Removed: December 31, 2019
+Added: The following table summarizes the calculation of goodwill, as finalized in the first quarter of fiscal 2020, based on the excess of consideration transferred and the fair value of the previously held equity interests over the fair value of the assets acquired and liabilities assumed (in thousands).
Purchase consideration:
14 unchanged sentences
Total net assets acquired
−Removed: Goodwill is related to the benefits expected as result of the Acquisition, including acceleration and diversification of our revenue growth, and of the $ 78.4 million recorded as preliminary goodwill, $ 73.1 million is expected to be deductible for tax purposes.
−Removed: $ 29.2 million of the goodwill recorded relates to North Italia.
+Added: Goodwill is related to the benefits expected as result of the Acquisition, including acceleration and diversification of our revenue growth.
+Added: $ 29.2 million of the goodwill recorded as part of our purchase accounting entries related to North Italia.
+Added: During fiscal 2020, we recorded goodwill impairment expense of $ 79.4 million.
+Added: (See Note 8 for further discussion of our goodwill assessment and resulting impairment charge.) $ 74.2 million of goodwill is expected to be deductible for tax purposes.
Property and equipment will be depreciated over useful lives of 3 years to 30 years .
2 unchanged sentences
The fair value of the acquired intangible assets was determined utilizing the relief from royalty method based on estimated future revenues, royalty rates and discount rates, among other variables and estimates.
−Removed: We expect minor adjustments to our purchase accounting in the first quarter of fiscal 2020 as we finalize our valuation of the acquired intangible assets.
+Added: During fiscal 2020, we recorded impairment expense of $ 103.3 million related to the acquired intangible assets.
+Added: (See Note 8 for further discussion of our intangible asset assessment and resulting impairment charge.)
Operating lease assets include values associated with favorable and unfavorable market leases that will amortize over a weighted-average period of 15.2 years.
The fair value of the operating lease assets was derived using an income approach based on market transaction data and estimated discount rates, among other variables and estimates.
−Removed: During fiscal 2019, we incurred $ 5.3 million of costs to effect and integrate the Acquisition, which were expensed in accordance with ASC 805 and are included in acquisition-related costs in our consolidated statements of operations.
−Removed: In addition, we incurred $ 1.0 million related to changes in the fair value of the deferred and contingent consideration and compensation liabilities, as well as amortization of acquired definite-lived licensing agreements, which are included in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of operations.
+Added: During fiscal 2020 and 2019, we incurred $ 2.7 million and $ 5.3 million of costs, respectively, to effect and integrate the Acquisition.
+Added: These costs were expensed in accordance with ASC 805 and are included in acquisition-related costs in our consolidated statements of operations.
Pro Forma Results of Operations (unaudited)
4 unchanged sentences
In the opinion of the Company’s management, the unaudited pro forma financial information includes all significant necessary adjustments that can be factually supported to reflect the effects of the Acquisition and related transactions.
−Removed: The unaudited pro forma financial information is provided for informational purposes only and are not necessarily indicative of what our actual results of operations would have been had the Acquisition and related transactions been completed as of January 2, 2018 or that may be achieved in the future.
−Removed: Other Receivables
−Removed: Other receivables consisted of (in thousands):
+Added: The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what our actual results of operations would have been had the Acquisition and related transactions been completed as of January 2, 2018 or that may be achieved in the future.
+Added: Fair Value Measurements
+Added: Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:
+Added: Quoted prices in active markets for identical assets or liabilities
+Added: Observable inputs other than quoted prices in active markets for identical assets and liabilities
+Added: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions
+Added: The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):
December 29, 2020
−Removed: January 1, 2019
+Added: Assets/(Liabilities)
+Added: Non-qualified deferred compensation assets
+Added: Non-qualified deferred compensation liabilities
+Added: Acquisition-related deferred consideration
+Added: Acquisition-related contingent consideration and compensation liabilities
+Added: Interest rate swap
+Added: December 31, 2019
+Added: Assets/(Liabilities)
+Added: Non-qualified deferred compensation assets
+Added: Non-qualified deferred compensation liabilities
+Added: Acquisition-related deferred consideration
+Added: Acquisition-related contingent consideration and compensation liabilities
+Added: Changes in the fair value of non-qualified deferred compensation assets and liabilities are recognized in interest and other expense, net in our consolidated statements of income.
+Added: Changes in the fair value of the acquisition-related deferred and contingent consideration and compensation liabilities are recognized in acquisition-related contingent consideration, compensation and amortization (benefit)/expenses in our consolidated statements of income.
+Added: See Note 12 for information regarding the financial statement classification of fair value changes in our interest rate swap.
+Added: The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment.
+Added: The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 32.0 million at December 29, 2020 and $ 0 to $ 69.2 million at December 31, 2019.
+Added: Results could change materially if different estimates and assumptions were used.
+Added: The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liabilities, categorized as Level 3 (in thousands):
+Added: Balance, January 1, 2019
+Added: Acquisition-date fair value
+Added: Change in fair value
+Added: Balance, December 31, 2019
+Added: Change in fair value
+Added: Balance, December 29, 2020
+Added: The change in the fair value of the contingent consideration during fiscal 2020 primarily stemmed from the delay of future new restaurant openings caused by the impact of the COVID-19 pandemic on the estimated cash flows used in the valuation.
+Added: The fair values of our cash and cash equivalents, accounts receivable, income taxes receivable, other receivables, prepaid expenses, accounts payable, income taxes payable and other accrued expenses approximate their carrying amounts due to their short duration.
+Added: Accounts and Other Receivables
+Added: Accounts and other receivables consisted of (in thousands):
+Added: December 29, 2020
+Added: December 31, 2019
Gift card distributors (1)
+Added: Bakery customers
Insurance providers
−Removed: Landlord construction contributions
+Added: Delivery partner
+Added: (1) The decrease in receivables from gift card distributors stems from the impact of the COVID-19 pandemic on our business .
Inventories consisted of (in thousands):
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Restaurant food and supplies
1 unchanged sentence
Bakery raw materials and supplies
+Added: (1) The decrease in bakery finished goods and work in progress inventories is due to strong demand coupled with manufacturing disruptions resulting from the COVID-19 pandemic .
Prepaid Expenses
1 unchanged sentence
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Gift card contract assets
2 unchanged sentences
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Land and related improvements
15 unchanged sentences
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Indefinite-lived intangible assets:
5 unchanged sentences
Non-transferable alcoholic beverage licenses
−Removed: Leasehold acquisition assets
Total definite-lived intangible assets
Total intangible assets, net
−Removed: Amortization expenses related to our definite-lived intangible assets was $ 0.3 million, $ 0.6 million and $ 0.6 million for fiscal 2019, 2018 and 2017, respectively.
+Added: Amortization expenses related to our definite-lived intangible assets were $ 0.7 million, $ 0.3 million and $ 0.6 million for fiscal 2020, 2019 and 2018, respectively.
Definite-lived intangible assets will be amortized over one to 55 years .
−Removed: We performed our annual assessment of indefinite-lived intangible assets and concluded as of the date of the test, there was no impairment of these assets.
−Removed: Components of lease expense were as follows (in thousands):
−Removed: Rent expense on all operating leases (under ASC 840) was as follows (in thousands):
−Removed: Straight-lined minimum base rent
−Removed: Contingent rent
−Removed: Common area maintenance and taxes
−Removed: Supplemental information related to leases (in thousands, except percentages):
−Removed: Cash paid for amounts included in the measurement of lease liabilities:
−Removed: Operating cash flows from operating leases
−Removed: Right-of-use assets obtained in exchange for new operating lease liabilities
−Removed: Weighted-average remaining lease term — operating leases (in years)
−Removed: Weighted-average discount rate — operating leases
−Removed: (1) Includes $ 223.5 million in right-of-use assets related to the Acquisition.
−Removed: (See Note 2 for further discussion of the Acquisition.)
−Removed: As of December 31, 2019, the maturities of our operating lease liabilities are as follows (in thousands):
−Removed: Total future lease payments
−Removed: Present value of lease liabilities
−Removed: Operating lease liabilities include $ 867.2 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 136.2 million of legally binding minimum lease payments for leases signed but not yet commenced.
−Removed: As of January 1, 2019, the aggregate minimum annual lease payments under operating leases (under ASC 840), including amounts characterized as deemed landlord financing payments, were as follows (in thousands):
+Added: Due to the decrease in our stock price coupled with the dining room closures related to the COVID-19 pandemic and significant decline to the equity value of our peers and overall U.S.
+Added: stock market, we determined it was necessary to perform an interim assessment of our goodwill, trade names, trademarks and licensing agreements during the first quarter of fiscal 2020.
+Added: For the goodwill impairment test, the estimated fair value of the reporting units was determined using a blend of the income approach using a discounted cash flow analysis and the market capitalization approach.
+Added: The fair value of the trade names, trademarks and licensing agreements was estimated using the relief from royalty method.
+Added: There were a number of estimates and significant judgments made by management in performing these evaluations, such as future unit growth, average unit volumes, cash flows, discount rates and royalty rates.
+Added: Accordingly, actual results could vary significantly from such estimates.
+Added: Based on the results of this assessment, we recorded goodwill impairment expense related to the Other FRC, North Italia and Flower Child operating segments of $ 33.8 million, $ 27.7 million and $ 17.9 million, respectively.
+Added: In addition, we recorded impairment expense of $ 101.0 million and $ 2.3 million related to trade names and trademarks, and licensing agreements, respectively.
+Added: More than half of the total impairment amount was driven by the impact on our market capitalization, with the balance related to lower future cash flow estimates.
+Added: The reduced projections stemmed primarily from our decision to delay fiscal 2020 unit development, thereby moving our expected unit growth trajectory out by one year.
+Added: The cash flow estimates assumed that average unit volumes and margins would substantially return to pre-COVID-19 levels by mid-fiscal 2021.
+Added: We performed our annual assessment of indefinite-lived intangible assets as of the first day of our fiscal fourth quarter and concluded as of the date of the test that there was no further impairment of these assets, other than $ 0.4 million of expense related to transferable alcoholic beverage licenses.
Other assets consisted of (in thousands):
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Non-qualified deferred compensation assets
2 unchanged sentences
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Gift card liabilities:
3 unchanged sentences
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Gift card contract assets (1) :
2 unchanged sentences
(1) Included in prepaid expenses on the consolidated balance sheets.
+Added: The significant declines in activations, redemptions and breakage during fiscal 2020 compared to fiscal 2019 stem from the impact of the COVID-19 pandemic on our business.
Other Accrued Expenses
1 unchanged sentence
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Self-insurance
3 unchanged sentences
Deferred consideration
+Added: (1) The decrease in accrued salaries and wages is due to lower labor expenses in the COVID-19 pandemic operating environment.
+Added: (2) The increase in accrued payroll and sales taxes represents the allowed deferral of certain payroll taxes under the CARES Act, partially offset by lower payroll taxes due to reduced salaries and wages.
Long-Term Debt
−Removed: On July 30, 2019, we entered into a Third Amended and Restated Loan Agreement (the “New Facility”), which amends and restates in its entirety our prior Second Amended and Restated Loan Agreement dated as of December 22, 2015.
−Removed: The New Facility, which terminates on July 30, 2024, provides us with revolving loan commitments that total $ 400 million (of which $ 40 million may be used for issuances of letters of credit).
−Removed: The New Facility contains a commitment increase feature that could provide for an additional $ 200 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 New Facility.
−Removed: At December 31, 2019, we had net availability for borrowings of $ 90.6 million, based on an outstanding debt balance of $ 290.0 million and $ 19.4 million in standby letters of credit.
−Removed: During fiscal 2019, we utilized the New Facility to fund the Acquisition (see Note 2 for further discussion of the Acquisition).
−Removed: During fiscal years 2019, 2018 and 2017, we utilized our previous credit facility to fund a portion of our stock repurchases.
−Removed: We are subject to certain financial covenants under the New Facility requiring us to maintain (i) a maximum “Net Adjusted Leverage Ratio” of 4.75 and (ii) a minimum EBITDAR to interest and rent expense ratio (“EBITDAR Ratio”) of 1.9 , as well as customary events of default that, if triggered, could results in acceleration of the maturity of the New Facility.
−Removed: The New Facility also 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.
−Removed: Borrowings under the New Facility bear interest, at our option, at a rate equal to either (i) the adjusted LIBO Rate (as customarily defined) (the “Adjusted LIBO Rate”) plus a margin that is based on our net adjusted leverage ratio, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an 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 that is based on our net adjusted leverage ratio.
−Removed: Letters of credit issued under the New Facility bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the adjusted LIBO Rate plus other customary fees charged by the issuing bank.
−Removed: Under the New Facility, we paid certain customary loan origination fees and will pay an unused fee on the unused portion of the New Facility that is also based on our Net Adjusted Leverage Ratio.
−Removed: Our Net Adjusted Leverage and EBITDAR Ratios were 3.8 and 2.5 , respectively, at December 31, 2019, and we were in compliance with all covenants in effect at that date.
−Removed: Our obligations under the New Facility are unsecured.
−Removed: Certain of our material subsidiaries have guaranteed our obligations under the New Facility.
−Removed: The New Facility will be used for our general corporate purposes, including for the issuance of standby letters of credit to support our self-insurance programs, and to fund dividends, stock repurchases and permitted acquisitions.
+Added: On July 30, 2019, we entered into a Third Amended and Restated Loan Agreement (the “Facility”) which amended and restated in its entirety our prior Second Amended and Restated Loan Agreement dated as of December 22, 2015.
+Added: The Facility, which terminates on July 30, 2024, provides us with revolving loan commitments that total $ 400 million (of which $ 40 million may be used for issuances of letters of credit).
+Added: The Facility contains a commitment increase feature that could provide for additional available credit upon our request and subject to the participating lenders electing to increase their commitments or new lenders being added to the Facility.
+Added: Certain financial covenants under the Facility require us to maintain (i) a maximum "Net Adjusted Leverage Ratio"
+Added: of 4.75 and (ii) a minimum ratio of EBITDAR to interest and rent expense of 1.9 ("EBITDAR Ratio"), as well as customary events of default that, if triggered, could result in acceleration of the maturity of the Facility.
+Added: The Facility also limits cash distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.
+Added: During the first quarter of fiscal 2020, we increased our borrowings under the Facility to bolster our cash position and enhance financial flexibility given the impact of the COVID-19 pandemic on our operations.
+Added: To provide additional financial flexibility, on May 1, 2020 (the “Effective Date”), we entered into a First Amendment (the “Amendment”) to the Facility (as amended by the Amendment, the “Amended Facility”).
+Added: The Amended Facility provides for, among other things, (i) a covenant relief period (the “Covenant Relief Period”) from the Effective Date until we demonstrate compliance with our financial covenants as of the quarter ending on or after June 29, 2021, during which we are not required to comply with financial covenants requiring maintenance of the maximum Net Adjusted Leverage Ratio and minimum EBITDAR Ratio, (ii) a substitution of the Net Adjusted Leverage Ratio and EBITDAR Ratio covenants with a liquidity covenant for the calendar month ending May 31, 2020 and continuing through the calendar month ending February 28, 2021 that requires our Liquidity to be at least $ 65,000,000 at the end of each calendar month (with Liquidity being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the revolving facility) (and solely for the fiscal quarter ending March 30, 2021, we can meet either (x) both the Net Adjusted Leverage Ratio test and the EBITDAR Ratio test or (y) meet the minimum Liquidity test), with the minimum Liquidity covenant to be tested again from the calendar month ending April 30, 2021 until we demonstrate compliance with the Net Adjusted Leverage Ratio and EBITDAR Ratio for a fiscal quarter ending on or after March 30, 2021, (iii) a lowered amount of permitted increases to revolving loan commitments under the Amended Facility during the Covenant Relief Period from $ 200,000,000 to $ 125,000,000 , (iv) a limit on capital expenditures not to exceed $ 90,000,000 during the Covenant Relief Period, and (v) increased limitations on our ability to make restricted payments, incur debt, and consummate acquisitions during the Covenant Relief Period.
+Added: Borrowings under the Amended Facility during the Covenant Relief Period bear interest, at our option, at a rate equal to either:
+Added: (i) the adjusted LIBO Rate (as customarily defined, the “Adjusted LIBO Rate”) plus 2.5 %, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank funding rate, in either case plus 0.5 %, and (3) the one-month Adjusted LIBO Rate plus 1.0 %, plus (b) 1.50 %.
+Added: We also pay a fee of 0.4 % on the daily amount of unused commitments under the Amended Facility.
+Added: Subsequent to the Covenant Relief period, borrowings under the Amended Facility will bear interest, at our option, at a rate equal to either:
+Added: (i) the adjusted LIBO Rate (as customarily defined) (the “Adjusted LIBO Rate”) plus a margin that is based on our net adjusted leverage ratio, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an 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 that is based on our net adjusted leverage ratio.
+Added: Letters of credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the adjusted LIBO Rate plus other customary fees charged by the issuing bank.
+Added: We paid certain customary loan origination fees in conjunction with both the Facility and Amended Facility.
+Added: Our obligations under the Amended Facility are unsecured, and certain of our material subsidiaries have guaranteed these obligations.
+Added: During the fourth quarter of fiscal 2020, we repaid a portion of the outstanding balance on the Amended Facility such that at December 29, 2020, we had net availability for borrowings of $ 96.6 million, based on a $ 280.0 million outstanding debt balance and $ 23.4 million in standby letters of credit.
+Added: Our Liquidity balance was $ 249.5 million at December 29, 2020, and we were in compliance with all covenants under the Amended Facility in effect at that date.
We capitalized interest expense related to new restaurant openings and major remodels totaling $ 0.8 million, $ 0.6 million and $ 0.4 million in fiscal 2020, 2019 and 2018, respectively.
+Added: Components of lease expense were as follows (in thousands):
+Added: Rent expense on all operating leases (under ASC 840) was as follows (in thousands):
+Added: Straight-lined minimum base rent
+Added: Contingent rent
+Added: Common area maintenance and taxes
+Added: Supplemental information related to leases (in thousands, except percentages):
+Added: Cash paid for amounts included in the measurement of lease liabilities:
+Added: Operating cash flows from operating leases
+Added: Right-of-use assets obtained in exchange for new operating lease liabilities
+Added: Weighted-average remaining lease term — operating leases (in years)
+Added: Weighted-average discount rate — operating leases
+Added: (1) Includes $ 223.5 million in right-of-use assets related to the Acquisition.
+Added: (See Note 2 for further discussion of the Acquisition.)
+Added: As of December 29, 2020, the maturities of our operating lease liabilities were as follows (in thousands):
+Added: Total future lease payments
+Added: Present value of lease liabilities
+Added: Operating lease liabilities include $ 840.5 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 130.5 million of legally binding minimum lease payments for leases signed but not yet commenced.
+Added: On March 13, 2020, we entered into an interest rate swap agreement to manage our exposure to interest rate movements on our Facility.
+Added: The agreement became effective on April 1, 2020 and matures on April 1, 2025.
+Added: The interest rate swap entitles us to receive a variable rate of interest based on the one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802 %.
+Added: The notional amount of the swap agreement is $ 280.0 million through March 31, 2023 and $ 140.0 million from April 1, 2023 through April 1, 2025.
+Added: The differences between the variable LIBO rate and the interest rate swap rate are settled monthly.
+Added: We determined that at December 29, 2020, the interest rate swap agreement was an effective hedging agreement.
+Added: Our only derivative is the aforementioned interest rate swap, which is designated as a cash flow hedge.
+Added: Therefore, changes in fair value are initially included as a component of accumulated other comprehensive loss (AOCL) and subsequently reclassified to earnings as interest expense when the hedged forecasted transaction occurs.
+Added: Any ineffective portion of changes in the fair value are immediately recognized in earnings as interest expense.
+Added: We classify cash inflows and outflows from derivatives within operating activities on the consolidated statements of cash flows.
+Added: At December 29, 2020, the fair value of our interest rate swap was a liability of $ 4.6 million and was included in other noncurrent liabilities in the consolidated balance sheet.
+Added: We reclassified $ 1.1 million out of AOCL in fiscal 2020 for the monthly settlement of the interest rate swap.
+Added: No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings during fiscal 2020.
+Added: The following table summarizes the changes in AOCL, net of tax, related to the interest rate swap (in thousands):
+Added: Balance, December 31, 2019
+Added: Other comprehensive loss before reclassifications
+Added: Amounts reclassified from AOCL
+Added: Other comprehensive loss, net of tax
+Added: Balance, December 29, 2020
+Added: We classified this interest rate swap within Level 2 of the valuation hierarchy described in Note 3.
+Added: Our counterparty under this arrangement provided monthly statements of the market values of this instrument based on significant inputs that were observable or could be derived principally from, or corroborated by, observable market data for substantially the full term of the asset or liability.
+Added: The impact on the derivative liability for the Company’s and the counterparty’s non-performance risk to the derivative trade was considered when measuring the fair value of derivative liability.
Other Noncurrent Liabilities
1 unchanged sentence
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Non-qualified deferred compensation liabilities
1 unchanged sentence
Contingent consideration and compensation liabilities
−Removed: (See Note 17 for further discussion of our non-qualified deferred compensation plan.)
+Added: Payroll taxes (1)
+Added: (1) Represents the allowed deferral of certain payroll taxes under the CARES Act.
Commitments and Contingencies
−Removed: Purchase obligations, which include inventory purchases, equipment purchases, information technology and other miscellaneous commitments, were $ 118.2 million and $ 149.8 million at December 31, 2019 and January 1, 2019, respectively.
+Added: Purchase obligations, which include inventory purchases, equipment purchases, information technology and other miscellaneous commitments, were $ 91.6 million and $ 118.2 million at December 29, 2020 and December 31, 2019, respectively.
These purchase obligations are primarily due within three years and recorded as liabilities when goods are received or services rendered.
−Removed: Real estate obligations, which include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were $ 176.1 million and $ 12.6 million at December 31, 2019 and January 1, 2019, respectively.
−Removed: The purchase price of the Acquisition includes a $ 12 million indemnity escrow amount specifically related to North Italia due ratably over the next two years ;
−Removed: and $ 45 million of deferred consideration due ratably over the next four years (including a $ 13 million indemnity escrow amount specifically related to the remaining FRC businesses).
+Added: Real estate obligations, which include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were $ 130.5 million and $ 176.1 million at December 29, 2020 and December 31, 2019, respectively.
+Added: The Acquisition purchase price included a $ 12 million indemnity escrow amount specifically related to North Italia due ratably over two years , $ 6.0 million of which was paid in fiscal 2020;
+Added: and $ 45 million of deferred consideration due ratably over four years (including a $ 13 million indemnity escrow amount specifically related to the remaining FRC businesses), $ 11.3 million of which was paid in fiscal 2020.
The acquisition agreement also included a contingent consideration provision which is payable on the fifth anniversary of the Closing Date and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other than North Italia and Flower Child) during the five years after Closing.
1 unchanged sentence
(See Note 2 for further discussion of the Acquisition.)
−Removed: As credit guarantees to insurers, we had $ 19.4 million and $ 20.7 million at December 31, 2019 and January 1, 2019, respectively, in standby letters of credit related to our self-insurance liabilities.
+Added: As credit guarantees to insurers, we had $ 23.4 million and $ 19.4 million at December 29, 2020 and December 31, 2019, respectively, in standby letters of credit related to our self-insurance liabilities.
All standby letters of credit are renewable annually.
1 unchanged sentence
The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to us (“IBNR”) as of the balance sheet date.
−Removed: The total accrued liability for our self-insured plans was $ 67.7 million and $ 72.2 million at December 31, 2019 and January 1, 2019, respectively.
+Added: The total accrued liability for our self-insured plans was $ 62.6 million and $ 68.4 million at December 29, 2020 and December 31, 2019, respectively.
On June 7, 2018, the California Department of Industrial Relations issued a $ 4.2 million wage citation jointly against the Company and our 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.
2 unchanged sentences
On June 28, 2018, we filed an appeal of the wage citation.
−Removed: The Company’s appeal of the wage citation is tentatively scheduled for hearing in July 2020.
−Removed: We intend to vigorously defend this action.
−Removed: 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.
+Added: On June 11, 2020, the DLSE postponed the hearing on the Company’s appeal due to safety concerns related to the COVID-19 pandemic.
+Added: 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 22, 2018, the Internal Revenue Service issued a Notice of Deficiency in which they disallowed $ 8.0 million of our §199 Domestic Production Activities Deduction for tax years 2010, 2011 and 2012.
2 unchanged sentences
We intend to vigorously defend our position in litigation and based on our analysis of the law, regulations and relevant facts, we have not reserved for any potential future payments.
−Removed: Within the ordinary course of our business, we are subject to private lawsuits, government audits, administrative proceedings and other claims.
+Added: Within the ordinary course of our business, we are subject to private lawsuits, government audits and investigations, 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.
2 unchanged sentences
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.
−Removed: 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.
+Added: At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any pending lawsuits, audits, investigations, 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.
3 unchanged sentences
In addition, the employment agreement with our Chief Executive Officer specifies an annual founder’s retirement benefit of $ 650,000 for ten years , commencing six months after termination of his full-time employment.
−Removed: Stockholders’ Equity
−Removed: Cash dividends of $ 1.38 , $ 1.24 and $ 1.06 were declared during fiscal 2019, 2018 and 2017, respectively.
−Removed: 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 the New Facility and applicable law, and such other factors that the Board considers relevant.
+Added: Stockholders’ Equity and Series A Convertible Preferred Stock
+Added: Common Stock - Dividends and Share Repurchases
+Added: To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Facility, in March 2020, our Board suspended the quarterly dividend on our common stock, as well as share repurchases.
+Added: Prior to this suspension, our Board declared cash dividends of $ 0.36 per common share for the first quarter of fiscal 2020.
+Added: Cash dividends of $ 1.38 and $ 1.24 per common share were declared during fiscal 2019 and 2018, respectively.
+Added: 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 the Amended Facility and applicable law, and such other factors that the Board considers relevant.
(See Note 12 for further discussion of our long-term debt.)
1 unchanged sentence
During fiscal 2020, 2019 and 2018, we repurchased 0.1 million, 1.1 million and 2.3 million shares of our common stock at a cost of $ 3.6 million, $ 51.0 million and $ 109.3 million, respectively.
+Added: Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth.
Repurchased common stock is reflected as a reduction of stockholders’ equity in treasury stock.
1 unchanged sentence
Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us.
−Removed: We make the determination to repurchase shares based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market conditions.
−Removed: (See Note 2 for further discussion of the Acquisition.) The timing and number of shares repurchased are also subject to legal constraints and financial covenants under the New Facility that limit share repurchases based on a defined ratio.
−Removed: (See Note 12 for further discussion of our long-term debt.) Our objectives regarding 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.
+Added: Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market conditions.
+Added: (See Note 2 for further discussion of the Acquisition.) The timing and number of shares repurchased are also subject to legal constraints and financial covenants under the Amended Facility that limit share repurchases based on a defined ratio.
+Added: (See Note 12 for further discussion of our long-term debt.)
+Added: Series A Convertible Preferred Stock
+Added: On April 20, 2020, to increase our liquidity given the impact of the COVID-19 pandemic on our operations, we issued 200,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A preferred stock”) for an aggregate purchase price of $ 200 million, or $ 1,000 per share.
+Added: In connection with the issuance, we incurred direct and incremental costs of $ 10.3 million, including financial advisory fees, closing costs, legal expenses, a commitment fee and other offering-related expenses.
+Added: These direct and incremental costs reduced the Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020, the first measurement date.
+Added: The Series A preferred stock ranks senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution upon which each share of Series A preferred stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price (without giving effect to the commitment fee), plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.
+Added: At December 29, 2020, the Liquidation Preference was $ 1,042.66 per share.
+Added: Dividend Rights
+Added: The holders of Series A preferred stock are entitled to dividends on the Liquidation Preference at the rate of 9.5 % per annum, payable in cash or, at our option, paid in-kind.
+Added: Such holders are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis.
+Added: We recorded in-kind dividends of $ 13.5 million during fiscal 2020.
+Added: Conversion Rights
+Added: Each holder has the right, at its option, to convert its Series A preferred stock, in whole or in part, into fully paid and non-assessable shares of our common stock at a conversion price equal to $ 22.23 per share, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events and certain anti-dilutive offerings if they occur on or prior to April 19, 2021.
+Added: As of December 29, 2020, the number of common shares that would be required to be issued upon conversion of the outstanding shares of Series A preferred stock was 9.4 million.
+Added: Pursuant to the terms of the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq listing rules (the “Stockholder Approval”), no holder may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of common stock if and solely to the extent that such conversion would result in the holder beneficially owning in excess of 19.9 % of then outstanding common stock.
+Added: We have the right to settle any conversion in cash.
+Added: As of December 29, 2020, the Series A preferred stock was convertible into approximately 17.1 % of our outstanding common stock, on an as-converted basis.
+Added: After April 20, 2023 and subject to certain conditions, we may, at our option, require conversion of all of the outstanding shares of Series A preferred stock to common stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date we notify the holders of Series A preferred stock of the election to convert, the closing price of the common stock is at least 200 % of the conversion price.
+Added: We will not exercise our right to mandatorily convert all outstanding shares of Series A preferred stock unless certain liquidity conditions with regard to the shares of common stock to be issued upon such conversion are satisfied.
+Added: We determined that the nature of the Series A preferred stock was more akin to an equity instrument than a debt instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Series A preferred stock.
+Added: As such, the conversion options were not required to be bifurcated from the host under FASB Accounting Standards Codification (“ASC 815”), Derivatives and Hedging.
+Added: We also determined that the Series A preferred stock did not contain a beneficial conversion feature (“BCF”) upon issuance.
+Added: However, the associated dividends for fiscal 2020 generated a BCF of $ 4.8 million based on the fair value of our stock price on the commitment date (the date the dividends were declared to be paid in-kind) as compared to the conversion price.
+Added: Any BCF determined to exist is recorded as a debit to retained earnings and an increase to preferred stock.
+Added: Redemption Rights
+Added: On and after October 20, 2027, holders of the Series A preferred stock have the right to require redemption of all or any part of the Series A preferred stock for an amount equal to the Liquidation Preference.
+Added: Upon certain change of control events, we are required to redeem, subject to conversion rights of the holders of Series A preferred stock, all of the outstanding shares of Series A preferred stock for cash consideration equal to the greater of (i) the Liquidation Preference and (ii) the amount that such holder would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.
+Added: We may redeem any or all of the Series A preferred stock for an amount equal to (i) 120 % of the Liquidation Preference thereof at any time between April 21, 2025 and April 19, 2026 and (ii) 100 % of the Liquidation Preference at any time beginning on April 20, 2026, provided that such holder will have the right to convert the Series A preferred stock immediately prior to and in lieu of such redemption.
+Added: To the extent such holder elects to convert the Series A preferred stock in lieu of such redemption and the number of shares of common stock issuable upon such conversion would exceed 19.9 % of the outstanding shares of common stock, and the Stockholder Approval has not been obtained as of such date, any portion in excess of such limit will remain outstanding as Series A preferred stock.
+Added: Since the redemption of the Series A preferred stock is contingently redeemable and therefore not certain to occur, the Series A preferred stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity.
+Added: As the Series A preferred stock is redeemable in certain circumstances at the option of the holder and is redeemable in certain circumstances upon the occurrence of an event that is not solely within our control, we have classified the Series A preferred stock separately from stockholders’ equity in the consolidated balance sheets.
+Added: As noted above, we determined that the nature of the Series A preferred stock was more akin to an equity instrument than a debt instrument.
+Added: However, we determined that the economic characteristics and risks of the embedded put option, call option and redemption upon change of control provision were not clearly and closely related to the Series A preferred stock.
+Added: Therefore, we assessed these items further and determined they did not meet the definition of a derivative under ASC 815, Derivatives and Hedging.
+Added: Voting Rights
+Added: Holders of Series A preferred stock are generally entitled to vote with the holders of the common stock on an as-converted basis.
+Added: Holders of Series A preferred stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A preferred stock, issuances of securities that are senior to, or equal in priority with, the Series A preferred stock and certain business combinations and binding or statutory share exchanges or reclassification involving the Series A preferred stock unless such events do not adversely affect the rights, preferences or voting powers of such preferred stock.
+Added: In addition, for so long as the holders of Series A preferred stock hold record and beneficial ownership of 25 % of the Series A preferred stock issued to them, such holders will have the right to designate one member to our board of directors.
+Added: If the holders cease to have such designation right, for so long as the holders have record and beneficial ownership of shares of common stock issued upon conversion of the Series A preferred stock that constitute at least 5 % of the outstanding common stock, the holders will have the right to nominate one person for election to our board of directors.
Stock-Based Compensation
2 unchanged sentences
To date, we have only granted non-qualified stock options, restricted shares and restricted share units of common stock under these plans.
−Removed: No grants have been made to non-employee directors under these plans.
On April 5, 2017, our Board approved an amendment to our 2010 Stock Incentive Plan to increase the number of shares of common stock reserved for grant under the plan to 12.7 million shares from 9.2 million shares.
4 unchanged sentences
Approximately 4.9 million of these shares were available for grant as of December 29, 2020.
−Removed: Stock options generally vest at 20 % per year and expire eight years from the date of grant.
+Added: Stock options generally vest at 20 % per year and expire eight to ten years from the date of grant.
Restricted shares and restricted share units generally vest between three to five years from the date of grant and require that the staff member remains employed in good standing with the Company as of the vesting date.
14 unchanged sentences
Capitalized stock-based compensation is included in property and equipment, net on the consolidated balance sheets.
−Removed: (2) Fiscal 2017 stock-based compensation expense includes a $ 3.9 million benefit for an out-of-period adjustment related to a correction in stock-based compensation valuation and forfeitures.
Stock Options
46 unchanged sentences
The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported to us as of the balance sheet date.
−Removed: The accrued liability for our self-insured benefit plans, which is included in other accrued expenses, was $ 10.8 million and $ 10.4 million as of December 31, 2019 and January 1, 2019, respectively.
+Added: The accrued liability for our self-insured benefit plans, which is included in other accrued expenses, was $ 14.8 million and $ 10.8 million as of December 29, 2020 and December 31, 2019, respectively.
(See Note 1 for further discussion of accounting for our self-insurance liabilities.)
The provision for income taxes consisted of the following (in thousands):
−Removed: Income before income taxes
+Added: (Loss)/Income before income taxes
Income tax (benefit)/provision:
2 unchanged sentences
Total (benefit)/provision
−Removed: (1) The 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.
−Removed: corporate tax rate from 35 % to 21 %.
−Removed: In addition to the benefit of a lower rate in future years, the enactment of the Tax Act caused us to revalue our deferred tax assets and liabilities to reflect the new rate, resulting in a benefit to our fiscal 2017 income tax provision of $ 38.5 million.
The following reconciles the U.S.
4 unchanged sentences
Other credits and incentives
−Removed: Manufacturing deduction
+Added: Impact of net operating loss carryback
Deferred compensation
Equity compensation
−Removed: Impact of statutory rate change on deferred taxes
Effective tax rate
+Added: On March 27, 2020, the CARES Act was signed into law.
+Added: Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions allowing for the carryback of net operating losses generated in fiscal years 2018, 2019 and 2020 and technical amendments regarding the expensing of qualified improvement property (“QIP”).
+Added: We expect to carry back our fiscal 2020 net operating loss and claim accelerated depreciation on QIP placed in service during fiscal 2018 and 2019.
+Added: We expect to file carryback claims during fiscal 2021, and we estimate that these claims will generate cash refunds of approximately $ 36 million.
+Added: The effects of these claims were included in our provision for income taxes using estimates based on the best information available at the time we prepared our consolidated financial statements.
+Added: Legislative and judicial developments relating to these provisions may evolve and the actual effects of these claims may differ from our estimates, which, in turn, may result in adjustments to our effective tax rate.
+Added: The CARES Act also allowed eligible employers to defer the remittance of certain FICA taxes otherwise payable during calendar year 2020 and remit half of such deferred amounts on or before December 31, 2021 and half on or before December 31, 2022.
+Added: We deferred approximately $ 36.6 million of FICA tax remittances under this provision.
+Added: We plan to remit the first half of the deferred amount within 8.5 months of year-end 2020 (or by the date we file our 2020 tax return, if earlier) in order to secure a fiscal 2020 tax deduction.
+Added: The effects of this planned remittance have been included in our fiscal 2020 provision for income taxes.
+Added: We may, however, elect to remit the total amount of deferred FICA tax within 8.5 months of year-end 2020 (or by the date we file our 2020 tax return, if earlier), in which case the actual benefit of our net operating loss carryback will differ from our estimate.
+Added: This, in turn, would result in an adjustment to our fiscal 2021 effective tax rate.
Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):
December 29, 2020
−Removed: January 1, 2019
+Added: December 31, 2019
Deferred tax assets:
1 unchanged sentence
Insurance reserves
+Added: Operating lease liability
Deferred income
−Removed: Stock-based compensation
Tax credit carryforwards
+Added: Stock-based compensation
+Added: State and foreign net operating loss carryforwards
+Added: Derivative asset
Valuation allowance
2 unchanged sentences
Prepaid expenses
−Removed: Net deferred tax liability
−Removed: At December 31, 2019 and January 1, 2019, we had $ 1.9 million and $ 2.4 million, respectively, of state tax credit carryforwards, consisting of hiring and investment credits, which began to expire in 2013, and $ 0.8 million and $ 0.7 million, respectively, of foreign net operating losses and $ 14.3 million and $ 3.3 million, respectively, of federal credit carryforwards which begin to expire in 2038.
−Removed: We assess the available evidence to estimate if sufficient future taxable income will be generated to use these carryforwards.
−Removed: Based on this evaluation, we recorded a valuation allowance of $ 0.7 million and $ 0.8 million at December 31, 2019 and January 1, 2019, respectively, to reflect the amount that we will likely not realize.
+Added: Operating lease asset
+Added: Net deferred tax asset/(liability)
+Added: At December 29, 2020 and December 31, 2019, we had $ 35.6 million and $ 14.3 million, respectively, of U.S.
+Added: federal credit carryforwards which begin to expire in 2038.
+Added: This increase was driven primarily by our fiscal 2020 net operating loss.
+Added: At December 29, 2020, we had $ 79.5 million of state net operating loss carryforwards, resulting primarily from our fiscal 2020 loss, with statutory carryforward periods ranging from 5 years to no expiration period.
+Added: The earliest year that a material state new operating loss will expire in 2030.
+Added: At both December 29, 2020 and December 31, 2019, we had $ 1.9 million of state hiring and investment credits which begin to expire in 2024.
+Added: At December 29, 2020 and December 31, 2019, we had $ 2.7 million and $ 2.9 million, respectively, of foreign net operating loss carryforwards which begin to expire in 2038.
+Added: We assess the available evidence to estimate if these carryforwards and our other deferred tax assets will be realized.
+Added: We concluded that a substantial portion of our deferred tax assets are more likely than not to be realized by reversals of existing taxable temporary differences and that forecasted future taxable income, exclusive of reversing temporary differences, will result in realization of a substantial portion of the remainder.
+Added: We did not need to consider tax planning strategies in this analysis.
+Added: Based on this evaluation, at December 29, 2020 and December 31, 2019 we recorded a valuation allowance of $ 1.0 million and $ 0.7 million, respectively, to reflect the amount that we will likely not realize.
This assessment could change if estimates of future taxable income during the carryforward period are revised.
7 unchanged sentences
Balance at end of year
−Removed: At both December 31, 2019 and January 1, 2019, we had $ 0.2 million of accrued interest and penalties related to uncertain tax positions.
+Added: At December 29, 2020 and December 31, 2019, we had $ 0.3 million and $ 0.2 million, respectively of accrued interest and penalties related to uncertain tax positions.
None of the balance of uncertain tax positions at December 29, 2020 relates to tax positions for which it is reasonably possible that the total amount could decrease during the next twelve months based on the lapses of statutes of limitations.
Segment Information
−Removed: Our operating segments are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands, our bakery division and Grand Lux Cafe, the businesses for which our management reviews discrete financial information for decision-making purposes.
+Added: Our operating segments, the businesses for which our management reviews discrete financial information for decision-making purposes, are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands, our bakery division and Grand Lux Cafe.
Based on quantitative thresholds set forth in ASC 280, “Segment Reporting,” The Cheesecake Factory, North Italia and the other FRC brands are the only businesses that meet the criteria of a reportable operating segment.
−Removed: The remaining operating segments, including Flower Child, along with our businesses that don’t qualify as operating segments are combined in Other.
+Added: The remaining operating segments (Flower Child, our bakery division and Grand Lux Cafe) along with our businesses that don’t qualify as operating segments are combined in Other.
Unallocated corporate expenses, capital expenditures and assets, which were previously classified in a separate Corporate line, are also combined in Other.
2 unchanged sentences
Segment information is presented below (in thousands):
−Removed: The Cheesecake Factory restaurants
−Removed: Income/(loss) from operations:
−Removed: The Cheesecake Factory restaurants (2)
+Added: The Cheesecake Factory
+Added: (Loss)/income from operations:
+Added: The Cheesecake Factory
Depreciation and amortization:
−Removed: The Cheesecake Factory restaurants
+Added: The Cheesecake Factory
+Added: Impairment of assets and lease termination:
+Added: The Cheesecake Factory
Preopening costs:
−Removed: The Cheesecake Factory restaurants
+Added: The Cheesecake Factory
Capital expenditures:
−Removed: The Cheesecake Factory restaurants
+Added: The Cheesecake Factory
Total assets:
−Removed: The Cheesecake Factory restaurants
+Added: The Cheesecake Factory
(1) We completed the acquisition of North Italia and the remaining business of FRC on October 2, 2019.
1 unchanged sentence
(See Note 2 for further discussion of the Acquisition.)
−Removed: (2) Fiscal years 2019, 2018 and 2017 include impairment of assets and lease terminations expense of $ 8.9 million, $ 6.6 million and $ 2.5 million, respectively.
−Removed: (See Note 1 for further discussion of these charges.)
−Removed: (3) Fiscal years 2019, 2018 and 2017 include impairment of assets and lease terminations expense of $ 9.3 million, $ 11.3 million and $ 7.8 million, respectively.
−Removed: (See Note 1 for further discussion of these charges.) Fiscal 2019 included $ 6.3 million of acquisition-related costs and acquisition-related contingent consideration, compensation and amortization expense.
+Added: (2) Fiscal 2020 and fiscal 2019 include ($ 1.2 ) million and $ 6.3 million, respectively, of acquisition-related (benefit)/expenses.
+Added: These amounts were recorded in acquisition-related costs and acquisition-related contingent consideration, compensation and amortization (benefit)/expenses in the consolidated statements of income.
(See Note 2 for further discussion of the Acquisition.)
2 unchanged sentences
Quarter Ended:
−Removed: April 2, 2019
−Removed: October 1, 2019
+Added: March 31, 2020 (1)
+Added: June 30, 2020 (1)
+Added: September 29, 2020 (1)
December 29, 2020 (1)
−Removed: Income from operations (1)(2)
−Removed: Net income (1)(2)
−Removed: Basic net income per share (4)
−Removed: Diluted net income per share (4)
+Added: Loss from operations (2)(3)
+Added: Net loss (2)(3)
+Added: Net loss available to common stockholders (2)(3)
+Added: Basic net loss per share (4)
+Added: Diluted net loss per share (4)
Cash dividends declared per common share
2 unchanged sentences
October 1, 2019
−Removed: January 1, 2019
+Added: December 31, 2019 (1)
Income from operations (2)(3)
3 unchanged sentences
Cash dividends declared per common share
−Removed: (1) The fourth quarter of fiscal 2019 includes revenues, loss from operations and net loss of $ 92.0 million, $ 2.1 million, and $ 1.5 million, respectively related to the acquired businesses.
−Removed: In addition, income from operations included $ 3.2 million and $ 3.1 million of acquisition-related expense in the third and fourth quarters of fiscal 2019, respectively, with a corresponding impact to net income of $ 2.4 million and $ 2.3 million, respectively.
−Removed: These amounts were recorded in acquisition-related costs and acquisition-related contingent consideration, compensation and amortization expense in the consolidated statements of income.
+Added: (1) We completed the acquisition of North Italia and the remaining business of FRC on October 2, 2019.
+Added: The results of the acquired businesses are included in our consolidated financial statements as of the acquisition date.
(See Note 2 for further discussion of the Acquisition.)
−Removed: (2) In the fourth quarter of fiscal 2019, income from operations included impairment of assets and lease terminations expense of $ 18.2 million, with an corresponding impact to net income of $ 13.5 million.
−Removed: (See Note 1 for further discussion of these charges.)
−Removed: (3) In fiscal 2018, income from operations included $ 2.6 million, $ 0.3 million and $ 15.0 million of impairment of assets and lease terminations expense in the second, third and fourth quarters, respectively, with an corresponding impact to net income of $ 1.9 million, $ 0.2 million and $ 11.1 million, respectively.
+Added: (2) In the first, second, third and fourth quarters of fiscal 2020, loss from operations included acquisition-related (benefit)/expenses of ($ 3.2 ) million, $ 0.1 million, $ 1.4 million and $ 0.5 million, with a corresponding impact to net loss of ($ 2.4 ) million, $ 0.1 million, $ 1.1 million and $ 0.4 million, respectively.
+Added: Income from operations for the third and fourth quarters of fiscal 2019 included $ 3.2 million and $ 3.1 million of acquisition-related expenses, respectively, with a corresponding impact to net income of $ 2.4 million and $ 2.3 million, respectively.
+Added: These amounts were recorded in acquisition-related costs and acquisition-related contingent consideration, compensation and amortization (benefit)/expenses in the consolidated statements of income.
+Added: (See Note 2 for further discussion of the Acquisition.)
+Added: (3) In the first, second, third and fourth quarters of fiscal 2020, loss from operations included impairment of assets and lease termination expenses of $ 191.9 million, $ 2.4 million, $ 10.4 million and $ 14.6 million, with a corresponding impact to net loss of $ 142.0 million, $ 1.8 million, $ 7.7 million and $ 10.8 million, respectively.
+Added: In the fourth quarter of fiscal 2019, income from operations included impairment of assets and lease termination expenses of $ 18.2 million, with a corresponding impact to net income of $ 13.5 million.
(See Note 1 for further discussion of these charges.)
−Removed: (4) Net income per share calculations for each quarter are based on the weighted average diluted shares outstanding for that quarter and may not total to the full year amount.
−Removed: While seasonal fluctuations generally do not have a material impact on our quarterly results, the year-over-year comparison of our quarterly results can be significantly impacted by the number and timing of new restaurant openings and associated preopening costs, the calendar days of the week on which holidays occur, the impact from inclement weather and other climatic conditions and other variations in revenues and expenses.
−Removed: As a result of these factors, our financial results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
+Added: (4) Net (loss)/income per share calculations for each quarter are based on the weighted-average diluted shares outstanding for that quarter and may not total to the full year amount.
+Added: While seasonal fluctuations generally do not have a material impact on our quarterly results, year-over-year comparisons can be significantly impacted by the number and timing of new restaurant openings and associated preopening costs, the timing of holidays, the impact from inclement weather, other variations in revenues and expenses, and for the fiscal 2020 versus fiscal 2019 comparisons, by the impact of the COVID-19 pandemic and results of the Acquisition.
+Added: Because of these and other factors, our financial results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
Subsequent Events
−Removed: On February 18, 2020, our Board of Directors approved a quarterly cash dividend of $ 0.36 per share to be paid on March 20, 2020 to the stockholders of record on March 9, 2020.
EXHIBIT INDEX
10 unchanged sentences
Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock of The Cheesecake Factory Incorporated
−Removed: Description of The Cheesecake Factory Incorporated’s Securities Registerd Pursuant to Secion 12 of the Securities Exchange Act
−Removed: Filed herewith
+Added: Certificate of Designations of The Cheesecake Factory Incorporated, dated April 20, 2020
+Added: Description of The Cheesecake Factory Incorporated’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act
Employment Agreement, effective as of April 1, 2017, between The Cheesecake Factory Incorporated and David M.
−Removed: First Amendment to Employment Agreement, effective as of April 1, 2018, between The Cheesecake Factory Incorporated and David M.
Incorporated by
1 unchanged sentence
Exhibit Number
+Added: First Amendment to Employment Agreement, effective as of April 1, 2018, between The Cheesecake Factory Incorporated and David M.
Employment Agreement, effective as of March 3, 2016, between The Cheesecake Factory Incorporated and David M.
−Removed: Employment Agreement, effective as of March 3, 2016, between The Cheesecake Factory Incorporated and W.
−Removed: Douglas Benn*
−Removed: Employment Agreement, effective as of March 3, 2016, between The Cheesecake Factory Incorporated and Debby R.
−Removed: Employment Agreement, effective as of March 3, 2016, between The Cheesecake Factory Incorporated and Max Byfuglin*
Employment Agreement, effective as of July 7, 2017, between The Cheesecake Factory Incorporated and Matthew E.
4 unchanged sentences
Form of Indemnification Agreement*
+Added: Indemnification Agreement, dates as of April 20, 2020, between The Cheesecake Factory Incorporated and Paul D.
Inducement Agreement dated as of July 27, 2005
5 unchanged sentences
The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended May 28, 2015*
+Added: The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended April 5, 2017*
Incorporated by
1 unchanged sentence
Exhibit Number
−Removed: The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended April 5, 2017*
Form of Grant Agreement for Executive Officers under 2010 Stock Incentive Plan*
9 unchanged sentences
Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement for Senior Executive under the 2010 Stock Incentive Plan, for equity grants made after February 15, 2018*
+Added: Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement under the 2010 Stock Incentive Plan, for equity grants made on or after February 13, 2019*
Incorporated by
1 unchanged sentence
Exhibit Number
−Removed: Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement under the 2010 Stock Incentive Plan, for equity grants made on or after February 13, 2019*
The Cheesecake Factory Incorporated Stock Incentive Plan*
−Removed: 2015 Amended and Restated Annual Performance Incentive Plan, as amended and restated May 28, 2015*
+Added: Form of Notice of Grant and Stock Unit Grant Agreement for Directors under The Cheesecake Factory Incorporated Stock Incentive Plan*
+Added: Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement for Executive Officers under The Cheesecake Factory Incorporated Stock Incentive Plan*
+Added: Filed herewith
+Added: Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement under The Cheesecake Factory Incorporated Stock Incentive Plan*
+Added: Filed herewith
+Added: Form of Notice of Grant and Restricted Share Agreement for MEP I under The Cheesecake Factory Incorporated Stock Incentive Plan*
+Added: Filed herewith
+Added: 2015 Amended and Restated Performance Incentive Plan (Amended and Restated on September 2, 2020)*
Third Amended and Restated Loan Agreement with JPMorgan Chase Bank, National Association dated as of July 30, 2019
+Added: First Amendment, dates as of May 1, 2020, to the Third Amended and Restated Loan Agreement, dated as of July 30, 2019, between The Cheesecake Factory Incorporated, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time part thereto
+Added: Subscription Agreement, dated April 20, 2020, but and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC
+Added: Registration Rights Agreement, dated April 20, 2020, by and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC
+Added: Acknowledgement and Support Agreement, dated April 20, 2020, by and between David Overton and RC Cake Holdings LLC
List of Subsidiaries
2 unchanged sentences
Filed herewith
−Removed: Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP
−Removed: Filed herewith
Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer
Filed herewith
+Added: Incorporated by
+Added: Reference from
+Added: Exhibit Number
Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer
6 unchanged sentences
Filed herewith
−Removed: Incorporated by
−Removed: Reference from
−Removed: Exhibit Number
The following materials from The Cheesecake Factory Incorporated’s Annual Report on Form 10-K for the year ended December 29, 2020, formatted in Inline eXtensible Business Reporting Language (iXBRL):
8 unchanged sentences
(P) This exhibit has been paper filed and is not subject to the hyperlinking requirements of Item 601 of Regulation S-K.
−Removed: Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 11th day of March 2020.
+Added: Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of February, 2021.
THE CHEESECAKE FACTORY INCORPORATED
9 unchanged sentences
Chairman of the Board and
−Removed: March 11, 2020
+Added: February 24, 2021
David Overton
3 unchanged sentences
Executive Vice President and
−Removed: March 11, 2020
+Added: February 24, 2021
Chief Financial Officer
2 unchanged sentences
Senior Vice President, Controller and
−Removed: March 11, 2020
+Added: February 24, 2021
Chief Accounting Officer
(Principal Accounting Officer)
−Removed: March 11, 2020
+Added: February 24, 2021
/s/ ALEXANDER L.
−Removed: March 11, 2020
+Added: February 24, 2021
+Added: February 24, 2021
/s/ JEROME I.
−Removed: March 11, 2020
−Removed: March 11, 2020
+Added: February 24, 2021
+Added: /s/ JANICE MEYER
+Added: February 24, 2021
/s/ LAURENCE B.
−Removed: March 11, 2020
−Removed: March 11, 2020
+Added: February 24, 2021
+Added: February 24, 2021
/s/ HERBERT SIMON
−Removed: March 11, 2020
+Added: February 24, 2021
Herbert Simon
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.