What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-04 compared with 2021-05-03 · 218 added, 133 removed, 301 unchanged (54% of the section changed)

26 unchanged sentences

Series A convertible preferred stock, $ .01 par value, 200,000 shares authorized;

200,000 and 200,000 shares issued and outstanding at March 30, 2021 and December 29, 2020, respectively

no and 200,000 shares issued at June 29, 2021 and December 29, 2020, respectively

Stockholders’ equity:

1 unchanged sentence

Common stock, $ .01 par value, 250,000,000 shares authorized;

99,508,470 and 98,645,147 shares issued at March 30, 2021 and December 29, 2020, respectively

105,195,671 and 98,645,147 shares issued at June 29, 2021 and December 29, 2020, respectively

Additional paid-in capital

Retained earnings

Treasury stock, 53,101,293 and 53,026,409 shares at cost at March 30, 2021 and December 29, 2020, respectively

Treasury stock, 53,111,532 and 53,026,409 shares at cost at June 29, 2021 and December 29, 2020, respectively

( 1,701,303 )

( 1,696,743 )

Accumulated other comprehensive loss

Accumulated other comprehensive income/(loss)

Total stockholders’ equity

4 unchanged sentences

(In thousands, except per share data)

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Costs and expenses:

4 unchanged sentences

Depreciation and amortization expenses

Impairment of assets and lease termination expenses

Impairment of assets and lease terminations

Acquisition-related costs

8 unchanged sentences

Dividends on Series A preferred stock

Net loss available to common stockholders

Net loss per common share:

Direct and incremental Series A preferred stock issuance cost

Undistributed earnings allocated to Series A preferred stock

Net income/(loss) available to common stockholders

Net income/(loss) per common share:

Diluted (Note 11)

Weighted-average common shares outstanding:

3 unchanged sentences

(In thousands)

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Net income/(loss)

4 unchanged sentences

Total comprehensive income/(loss)

Comprehensive income attributable to preferred stockholders

Comprehensive income attributable to Series A preferred stockholders

Total comprehensive income/(loss) available to common stockholders

3 unchanged sentences

(In thousands)

For the thirteen weeks ended March 30, 2021:

For the twenty-six weeks ended June 29, 2021:

Series A Convertible

12 unchanged sentences

Treasury stock purchases

Cash dividend declared Series A preferred stock, $ 25.35 per share

Cash dividends declared Series A preferred stock, $ 25.35 per share

Balance, March 30, 2021

( 1,700,700 )

For the thirteen weeks ended March 31, 2020:

Foreign currency translation adjustment

Change in derivative, net of tax

Cash dividends declared common stock, net of forfeitures

Stock-based compensation

Common stock issued under stock-based compensation plans

Common stock issuance

Treasury stock purchases

Series A preferred stock cash-settled conversion

Series A preferred stock conversion to common stock

Deemed dividends on Series A preferred stock

Balance, June 29, 2021

( 1,701,303 )

For the twenty-six weeks ended June 30, 2020:

Series A Convertible

11 unchanged sentences

( 1,695,708 )

Foreign currency translation adjustment

Change in derivative, net of tax

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases

Series A preferred stock issuance

Preferred stock direct costs

Paid-in-kind Series A preferred stock dividends, including beneficial conversion feature

Balance, June 30, 2020

( 1,695,974 )

See the accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

Cash flows from operating activities:

20 unchanged sentences

Borrowings on credit facility

Repayment on credit facility

Convertible debt issuance

Convertible debt direct and incremental costs

Series A preferred stock issuance

Series A preferred stock direct and incremental costs

Series A preferred stock cash-settled conversion

Series A preferred stock conversion direct and incremental costs

Series A preferred stock dividends paid

Common stock issuance

Common stock issuance direct and incremental costs

Proceeds from exercise of stock options

Cash dividends paid

Common stock dividends paid

Treasury stock purchases

Cash provided by financing activities

Cash used in financing activities

Foreign currency translation adjustment

16 unchanged sentences

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”).

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2020 filed with the SEC on February 24, 2021 ("fiscal 2020 10-K").

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes.

2 unchanged sentences

Beginning with our fiscal 2020 10-K, we combined accounts receivable and other receivable on the consolidated balance sheet and statement of cash flow.

Corresponding balances for the thirteen weeks ended March 31, 2020 were reclassified to conform to the current presentation.

Corresponding balances for the thirteen and twenty-six weeks ended June 30, 2020 were reclassified to conform to the current presentation.

Use of Estimates

3 unchanged sentences

COVID-19 Pandemic

The Company is subject to continued 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 in March 2020.

We are subject to continued 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 in March 2020.

We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to 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.

In the second quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms across our concepts.

However, restrictions on the type of permitted operating model and occupancy capacity continue to change.

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.

The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

While restrictions on the type of permitted operating model and occupancy capacity continue to change, as of June 29, 2021, nearly all of our restaurants were operating with no indoor dining restrictions.

We cannot predict how long the COVID-19 pandemic will last, whether vaccines will be effective at eliminating or slowing the spread of the virus or variants, whether it will reoccur or whether variants will spike, what additional restrictions may be enacted, to what extent we can maintain sales volumes during or following the resumption of mandated social distancing protocols or masks mandates and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.

The extent of the reopening process, the potential impact of the COVID-19 pandemic on consumer spending behavior, and our ability to continue to adequately staff our restaurants, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

Recent Accounting Pronouncements

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.

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.

This pronouncement is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted.

1 unchanged sentence

We adopted this guidance in the first quarter of fiscal 2021 utilizing the modified retrospective method and, accordingly, recorded a $ 4.8 million cumulative adjustment to retained earnings to reverse previously recorded beneficial conversion features.

As further discussed in Note 5, we issued certain convertible senior notes due 2026 (“Notes”) during the second quarter of fiscal 2021, and the accounting for these instruments was based on the guidance in ASU 2020-06.

Additionally, the impact on diluted earnings per share of the Notes was calculated based on the if-converted method, as further described in Note 11.

Fair Value Measurements

4 unchanged sentences

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):

March 30, 2021

June 29, 2021

Assets/(Liabilities)

1 unchanged sentence

Non-qualified deferred compensation liabilities

Interest rate swap

Acquisition-related deferred consideration

Acquisition-related contingent consideration and compensation liabilities

Interest rate swap

December 29, 2020

2 unchanged sentences

Non-qualified deferred compensation liabilities

Interest rate swap

Acquisition-related deferred consideration

Acquisition-related contingent consideration and compensation liabilities

Interest rate swap

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.

The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 32.0 million.

Results could change materially if different estimates and assumptions were used.

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):

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

Beginning balance

1 unchanged sentence

Ending balance

The change in the fair value of the contingent consideration during the first quarter of 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.

The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 162.7 million.

Results could change materially if different estimates and assumptions were used.

The significant increase in the fair value of the contingent consideration during the first half of fiscal 2021 primarily related to the impact of an amendment to the agreement for the acquisitions of North Italia and FRC (the “Acquisition”) that, among other things, extended the measurement period through fiscal 2026.

The fair values of our cash and cash equivalents, accounts and other receivable, income taxes receivable, prepaid expenses, accounts payable, income taxes payable and other accrued expenses approximate their carrying amounts due to their short duration.

As of June 29, 2021, we had $ 345.0 million aggregate principal amount of Notes outstanding.

The estimated fair value of the Notes based on a market approach as of June 29, 2021 was approximately $ 336.7 million.

The Notes were categorized as Level 2 instruments as the estimated fair value was determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period.

See Note 5 for further discussion of the Notes.

Inventories consisted of (in thousands):

March 30, 2021

June 29, 2021

December 29, 2020

3 unchanged sentences

The following tables present information related to gift cards (in thousands):

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Gift card liabilities:

2 unchanged sentences

Ending balance

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Gift card contract assets:

1 unchanged sentence

Ending balance

The significant declines in redemptions and breakage during the first quarter of 2021 compared to 2020 stem from the impact of the COVID-19 pandemic on our business.

The significant increases in activations, redemptions and breakage during the second quarter of fiscal 2021 compared to the same period of fiscal 2020 stem primarily from the impact of the COVID-19 pandemic.

Long-Term Debt

Revolving Credit Facility

On March 30, 2021, we entered into a Second Amendment (the “Second Amendment”) to our existing Third Amended and Restated Loan Agreement, dated July 30, 2019 (as amended by that certain First Amendment, dated as of May 1, 2020 and by the Second Amendment, collectively, the “Amended Credit Agreement”).

10 unchanged sentences

We paid certain customary loan origination fees in conjunction with the Amended Credit Agreement.

During the first quarter of fiscal 2021 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.

Our Liquidity balance was $ 300.4 million at March 29, 2021, and we were in compliance with all covenants under the Amended Credit Agreement in effect at that date.

At June 29, 2021 we had net availability for borrowings of $ 240.1 million, based on a $ 130.0 million outstanding debt balance and $ 29.9 million in standby letters of credit.

Our Liquidity balance at June 30, 2021 was $ 411.9 million, and we were in compliance with all covenants under the Amended Credit Agreement in effect at that date.

The Amended Credit Agreement contains customary affirmative and negative covenants, including limits on cash dividends and share repurchases with respect to our equity interests, and restrictions on indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

1 unchanged sentence

The occurrence of an event of default could result in the termination of commitments under the Revolving Facility, the declaration that all outstanding loans are immediately due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding letters of credit.

Convertible Senior Notes

On June 15, 2021, we issued $ 345.0 million aggregate principal amount of convertible senior notes due 2026 (“Notes”).

The net proceeds from the sale of the Notes were approximately $ 334.9 million after deducting issuance costs related to the Notes.

The Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness;

(ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated to the Notes;

(iii) effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness;

and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

The Notes were issued pursuant to, and are governed by, an indenture (the “Base Indenture”) between us and a trustee (“Trustee”), dated as of June 15, 2021, as supplemented by a first supplemental indenture (the “Supplemental Indenture,” and the Base Indenture, as supplemented by the Supplemental Indenture, the “Indenture”), dated as of June 15, 2021, between the Company and the Trustee.

The Notes accrue interest at a rate of 0.375 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021.

The Notes will mature on June 15, 2026, unless earlier repurchased, redeemed or converted.

Before February 17, 2026, noteholders will have the right to convert their Notes only upon the occurrence of certain events.

From and after February 17, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

We will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of our common stock.

However, upon conversion of any Notes, the conversion value, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of 30 trading days, will be paid in cash up to at least the principal amount of the Notes being converted.

The initial conversion rate is 12.7551 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 78.40 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at our option at any time, and from time to time, on or after June 20, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of our common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice;

and (ii) the trading day immediately before the date we send such notice.

However, we may not redeem less than all of the outstanding Notes unless at least $ 150.0 million aggregate principal amount of Notes are outstanding and not called for redemption as of the time we send the related redemption notice.

In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.

The Notes will have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following:

(i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period);

(ii) our failure to send certain notices under the Indenture within specified periods of time;

(iii) our failure to comply with certain covenants in the Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of our assets and our subsidiaries, taken as a whole, to another person;

(iv) a default by us in our other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture;

(v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $ 20,000,000 ;

(vi) the rendering of certain judgments against us or any of our significant subsidiaries for the payment of at least $ 25,000,000 , where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished;

and (vii) certain events of bankruptcy, insolvency and reorganization involving us or any of our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of ours) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing, then, the Trustee, by notice to us, or noteholders of at least 25 % of the aggregate principal amount of Notes then outstanding, by notice to us and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50 % on the principal amount of the Notes.

As of June 29, 2021, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 335.0 million, net of unamortized issuance costs of $ 10.0 million.

The unamortized balance of issuance costs was recorded as a contra-liability and netted with long-term debt on our condensed consolidated balance sheets.

Total amortization expense was $ 0.1 million during the quarter ended June 29, 2021 and was included in interest expense in the condensed consolidated statements of income/(loss).

The effective interest rate for the Notes was 0.96 % as of June 29, 2021.

Components of lease expense were as follows (in thousands):

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Supplemental information related to leases (in thousands):

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Right-of-use assets obtained in exchange for new operating lease liabilities

The Company has an interest rate swap agreement, which matures on April 1, 2025, to manage our exposure to interest rate movements on our Revolving Facility.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 %.

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.

The differences between the variable LIBO rate and the interest rate swap rate are settled monthly.

We determined that at both March 30, 2021 and March 31, 2020, the interest rate swap agreement was an effective hedging agreement.

Our only derivative is the aforementioned interest rate swap, which is designated as a cash flow hedge.

At March 30, 2021 and March 31, 2020, the fair value of our interest rate swap was a liability of $ 2.3 million and $ 3.1 million, respectively.

We reclassified $ 0.5 million out of accumulated other comprehensive loss (“AOCL”) in the first quarter of fiscal 2021 and none out of AOCL in the first quarter of 2020 for the monthly settlement of the interest rate swap.

No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings in the first quarter of fiscal 2021 or 2020.

The following table summarizes the changes in AOCL, net of tax, related to the interest rate swap (in thousands):

March 30, 2021

March 31, 2020

On June 22, 2021, we terminated our interest rate swap agreement at a cost of $ 2.4 million.

This interest rate swap, which would have matured on April 1, 2025, was established to manage our exposure to interest rate movements on our Revolving Facility.

The interest rate swap entitled 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 %.

The notional amount of the swap agreement was $ 280.0 million through March 31, 2023 and $ 140.0 million from April 1, 2023 through April 1, 2025.

The differences between the variable LIBO rate and the interest rate swap rate were settled monthly.

Prior to termination, the interest rate swap was determined to be an effective hedging agreement.

Our only derivative was the aforementioned interest rate swap, which is designated as a cash flow hedge.

No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings in the first two quarters of fiscal 2021 or fiscal 2020.

The following table summarizes the changes in accumulated other comprehensive income/(loss) ("AOCI"), net of tax, related to the interest rate swap (in thousands):

June 29, 2021

June 30, 2020

Beginning balance

Other comprehensive loss before reclassifications

Amounts reclassified from AOCL

Amounts reclassified from AOCI

Other comprehensive loss, net of tax

2 unchanged sentences

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.

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.

The impact on the derivative liability for our and the counterparty’s non-performance risk to the derivative trade was considered when measuring the fair value of derivative liability.

Commitments and Contingencies

8 unchanged sentences

The tax court has assigned docket number 18150-18 to our case.

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.

On June 30, 2021, the judge issued a ruling on certain procedural motions filed by the parties and set a timeline to conclude discovery and determine if the matter will proceed to trial.

We intend to vigorously defend our position and based on our analysis of the law, regulations and relevant facts, we have not reserved for any potential future payments.

Within the ordinary course of our business, we are subject to private lawsuits, government audits and investigations, administrative proceedings and other claims.

7 unchanged sentences

Stockholders’ Equity and Series A Convertible Preferred Stock

Common Stock Issuance

On June 15, 2021, we issued 3.125 million shares of our common stock for $ 175.0 million.

In connection with the issuance, we incurred direct and incremental costs of $ 8.0 million.

Common Stock – Dividends and Share Repurchases

3 unchanged sentences

(See Note 5 for further discussion of our long-term debt.)

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased 53.1 million shares at a total cost of $ 1,700.7 million through March 30, 2021 with 0.1 million shares repurchased at a cost of $ 4.0 million during the first quarter of fiscal 2021 to satisfy tax withholding obligations on vested restricted share awards.

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased 53.1 million shares at a total cost of $ 1,701.3 million through June 29, 2021 with 10,239 and 85,539 shares repurchased at a cost of $ 0.6 million and $ 4.6 million during the thirteen and twenty-six weeks ended, respectively, to satisfy tax withholding obligations on vested restricted share awards.

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.

1 unchanged sentence

Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us.

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 acquisitions of North Italia and FRC (the "Acquisition "), our share price and current market conditions.

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.

The timing and number of shares repurchased are also subject to legal constraints and financial covenants under the Amended Credit Agreement that limit share repurchases based on a defined ratio.

1 unchanged sentence

Series A Convertible Preferred Stock

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 preferred stock, par value $ 0.01 per share for an aggregate purchase price of $ 200 million, or $ 1,000 per share.

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.

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.

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.

At March 30, 2021, the Liquidation Preference was $ 1,067.42 per share.

Dividend Rights

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.

Such holders are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis.

During the first quarter of fiscal 2021, we declared a cash dividend of $ 5.1 million, or $ 25.35 per share.

Conversion Rights

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.

At March 30, 2021, the number of common shares that would be required to be issued upon conversion of the outstanding shares of Series A preferred stock was 9.6 million.

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 the then outstanding common stock.

We have the right to settle any conversion in cash.

As of March 30, 2021, the Series A preferred stock was convertible into approximately 17.1 % of our outstanding common stock, on an as-converted basis.

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.

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.

Upon adoption of ASU 2020-06 in the first quarter of fiscal 2021, we recorded a $ 4.8 million cumulative adjustment to retained earnings to reverse previously recorded beneficial conversion features.

Redemption Rights

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.

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.

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.

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.

Voting Rights

Holders of Series A preferred stock are generally entitled to vote with the holders of the common stock on an as-converted basis.

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.

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.

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.

On April 20, 2020, we issued 200,000 shares of Series A preferred stock, par value $ 0.01 per share for an aggregate purchase price of $ 200.0 million, or $ 1,000 per share.

In connection with the issuance, we incurred direct and incremental costs of $ 10.3 million, which 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.

Upon adoption of ASU 2020-06 in the first quarter of fiscal 2021, we recorded a $ 4.8 million cumulative adjustment to retained earnings to reverse beneficial conversion features recorded during fiscal 2020.

On June 15, 2021, we paid $ 443.8 million in connection with the cash-settled conversion of 150,000 shares of our outstanding Series A preferred stock (effected through a repurchase agreement), which was recognized through additional paid in capital.

We also share-settled the conversion of the remaining 50,000 shares of our outstanding Series A convertible preferred stock into 2,400,864 shares of our common stock.

These are both based on the then current liquidation preference per share of $ 1,067.42 and conversion price of $ 22.23 .

During the first quarter of fiscal 2021, we declared a cash dividend of $ 5.1 million, or $ 25.35 per share, on the Series A preferred stock.

During the second quarter of fiscal 2021, $ 13.6 million in payments were made in connection with the conversion of the preferred stock consisting of $ 3.9 million, or $ 19.72 per share of accrued dividends and $ 9.7 million of an inducement, which is also, deemed to be dividends.

Stock-Based Compensation

1 unchanged sentence

The following table presents information related to stock-based compensation, net of forfeitures (in thousands):

March 30, 2021

March 31, 2020

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

Labor expenses

8 unchanged sentences

Stock Options

We did not issue any stock options during the first quarter of fiscal 2021.

The weighted-average fair value at the grant date for options issued during the first quarter of fiscal 2020 was $ 6.66 per share.

The fair value of options was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions for the first quarter of fiscal 2020:

(a) an expected option term of 6.9 years, (b) expected stock price volatility of 25.7 %, (c) a risk-free interest rate of 1.5 % and (d) a dividend yield on our stock of 3.6 %.

Stock option activity during the thirteen weeks ended March 30, 2021 was as follows:

We did not issue any stock options during the second quarter of fiscal 2021 or 2020.

Stock option activity during the twenty-six weeks ended June 29, 2021 was as follows:

Exercise Price

3 unchanged sentences

Forfeited or cancelled

Outstanding at March 30, 2021

Exercisable at March 30, 2021

Outstanding at June 29, 2021

Exercisable at June 29, 2021

(1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised their options on the fiscal period end date.

The total intrinsic value of options exercised during the thirteen weeks ended March 30, 2021 and March 31, 2020 was $ 5.7 million and $ 35.6 million, respectively.

As of March 30, 2021, total unrecognized stock-based compensation expense related to unvested stock options was $ 6.5 million, which we expect to recognize over a weighted-average period of approximately 3.2 years.

The total intrinsic value of options exercised during the thirteen and twenty-six weeks ended June 29, 2021 was $ 1.4 million and $ 7.1 million, respectively.

There were no options exercised during the thirteen weeks ended June 30, 2020.

The total intrinsic value of options exercised during the twenty-six weeks ended June 30, 2020 was $ 35.6 million.

As of June 29, 2021, total unrecognized stock-based compensation expense related to unvested stock options was $ 5.9 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirteen weeks ended March 30, 2021 was as follows:

Restricted share and restricted share unit activity during the twenty-six weeks ended June 29, 2021 was as follows:

(In thousands)

Outstanding at December 29, 2020

Outstanding at March 30, 2021

Outstanding at June 29, 2021

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant.

The weighted average fair value for restricted shares and restricted share units issued during the first quarter of fiscal 2021 and 2020 was $ 48.38 and $ 40.01 , respectively.

The fair value of shares that vested during the thirteen weeks ended March 30, 2021 was $ 9.5 million.

As of March 30, 2021, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 46.5 million, which we expect to recognize over a weighted-average period of approximately 3.2 years.

The weighted average fair value for restricted shares and restricted share units issued during the second quarter of fiscal 2021 and 2020 was $ 59.07 and $ 23.56 , respectively.

The fair value of shares that vested during the thirteen weeks and twenty-six weeks ended June 29, 2021 was $ 1.6 million and $ 11.1 million, respectively.

The fair value of shares that vested during the thirteen weeks and twenty-six weeks ended June 30, 2020 was $ 1.8 million and $ 12.4 million, respectively.

As of June 29, 2021, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 46.6 million, which we expect to recognize over a weighted-average period of approximately 3.1 years.

Net Income/(Loss) Per Share

Basic net income/(loss) per share is computed by dividing net income/(loss) available to common stockholders by the weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock awards.

At both March 30, 2021 and March 31, 2020, 2.1 million shares of restricted stock issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal periods ended on those dates.

Diluted net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common stock equivalents outstanding for the period.

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.

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.

At June 29, 2021 and June 30, 2020, 2.1 million and 2.0 million shares, respectively, of restricted stock issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal periods ended on those dates.

Diluted net income/(loss) per share is computed by dividing net income/(loss) available to common stockholders by the weighted-average number of common stock equivalents outstanding for the period.

Common stock equivalents for the Notes are determined by application of the if-converted method, and common stock equivalents for outstanding stock options and restricted stock are determined by the application of the treasury stock method.

Holders of our Series A Convertible Preferred Stock, par value $ 0.01 per share (the "Series A preferred stock") participated in dividends on an as-converted basis when declared on common stock.

As a result, our Series A preferred stock met 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.

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.

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.

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.

March 30, 2021

March 31, 2020

In addition, as our Series A preferred stock was 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.

In periods where there is a net loss, no allocation of undistributed net loss to preferred stockholders was performed as the holders of our Series A preferred stock were not contractually obligated to participate in our losses.

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020

(In thousands, except per share data)

2 unchanged sentences

Dividends on Series A preferred stock

Net loss available to common stockholders

Direct and incremental preferred stock issuance costs

Undistributed earnings allocated to Series A preferred stock

Net income/(loss) available to common stockholders

Basic weighted-average shares outstanding

Basic net loss per common share

Basic net income/(loss) per common share

Diluted net income/(loss) per common share:

Net loss available to common stockholders

Net income/(loss) available to common stockholders

Reallocation of undistributed earnings to Series A preferred stock

Net income/(loss) available to common stockholders for diluted EPS

Basic weighted-average shares outstanding

1 unchanged sentence

Diluted weighted-average shares outstanding

Diluted net loss per common share

(1) Shares of common stock equivalents of 1.5 million and 3.8 million as of March 30, 2021 and March 31, 2020, respectively, were excluded from the diluted calculation due to their anti-dilutive effect .

Diluted net income/(loss) per common share

(1) Shares of common stock equivalents related to outstanding stock options and restricted stock of 0.9 million and 3.9 million as of June 29, 2021 and June 30, 2020, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.

No shares of common stock equivalents related to the Notes were included in the diluted calculation due to their anti-dilutive effect .

Segment Information

1 unchanged sentence

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.

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.

The remaining operating segments (Flower Child, our bakery division and Grand Lux Cafe) along with our businesses that do not qualify as operating segments (RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen) are combined in Other.

Unallocated corporate expenses, capital expenditures and assets are also combined in Other.

Segment information is presented below (in thousands):

March 30, 2021

March 31, 2020

The Cheesecake Factory

June 29, 2021

June 30, 2020

June 29, 2021

June 30, 2020