CHEESECAKE FACTORY INC 10-Q

Item 1. Financial Statements. ​ THE CHEESECAKE FACTORY INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 29, ​ December 29, ​ 2021 2020 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 161,768 ​ $ 154,085 Accounts and other receivable ​ ​ 57,934 ​ ​ 75,787 Income taxes receivable ​ 34,655 ​ 36,889 Inventories ​ 41,868 ​ 39,288 Prepaid expenses ​ 32,039 ​ 35,310 Total current assets ​ 328,264 ​ 341,359 Property and equipment, net ​ 761,589 ​ 774,137 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ ​ ​ ​ ​ Intangible assets, net ​ 253,143 ​ 253,160 Operating lease assets ​ 1,241,197 ​ 1,251,027 Other ​ ​ 138,097 ​ ​ 127,371 Total other assets ​ ​ 1,632,437 ​ ​ 1,631,558 Total assets ​ $ 2,722,290 ​ $ 2,747,054 ​ ​ ​ ​ ​ ​ ​ LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 55,377 ​ $ 58,432 Gift card liabilities ​ 169,098 ​ 184,655 Operating lease liabilities ​ ​ 131,189 ​ ​ 132,519 Other accrued expenses ​ ​ 241,488 ​ ​ 210,461 Total current liabilities ​ ​ 597,152 ​ ​ 586,067 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 465,010 ​ 280,000 Operating lease liabilities ​ 1,211,878 ​ 1,224,321 Other noncurrent liabilities ​ ​ 163,642 ​ ​ 149,725 Commitments and contingencies (Note 8) ​ ​ ​ ​ ​ ​ Series A convertible preferred stock, $ .01 par value, 200,000 shares authorized; no and 200,000 shares issued at June 29, 2021 and December 29, 2020, respectively ​ — ​ 218,248 Stockholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock, $ .01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; none issued ​ ​ — ​ ​ — Common stock, $ .01 par value, 250,000,000 shares authorized; 105,195,671 and 98,645,147 shares issued at June 29, 2021 and December 29, 2020, respectively ​ ​ 1,052 ​ ​ 986 Additional paid-in capital ​ 850,601 ​ 878,148 Retained earnings ​ 1,134,186 ​ 1,110,087 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 income/(loss) ​ 72 ​ ( 3,785 ) Total stockholders’ equity ​ 284,608 ​ 288,693 ​ ​ ​ ​ ​ ​ ​ Total liabilities, Series A convertible preferred stock and stockholders’ equity ​ $ 2,722,290 ​ $ 2,747,054 ​ See the accompanying notes to the condensed consolidated financial statements ​ 1 Table of Contents THE CHEESECAKE FACTORY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME /(LOSS) (In thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 June 29, 2021 June 30, 2020 Revenues ​ $ 768,956 ​ $ 295,851 ​ $ 1,396,373 ​ $ 910,957 Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ 168,944 ​ 72,139 ​ 304,819 ​ 213,044 Labor expenses ​ 274,812 ​ 122,812 ​ 504,544 ​ 359,794 Other operating costs and expenses ​ 199,495 ​ 121,675 ​ 381,028 ​ 289,645 General and administrative expenses ​ 48,228 ​ 35,712 ​ 92,655 ​ 79,672 Depreciation and amortization expenses ​ 22,223 ​ 22,590 ​ 44,229 ​ 46,152 Impairment of assets and lease terminations ​ — ​ 2,433 ​ 594 ​ 194,329 Acquisition-related costs ​ ​ — ​ ​ 1,068 ​ ​ — ​ ​ 2,304 Acquisition-related contingent consideration, compensation and amortization expenses/(benefit) ​ ​ 11,357 ​ ​ ( 965 ) ​ ​ 11,907 ​ ​ ( 5,431 ) Preopening costs ​ 2,779 ​ 2,097 ​ 6,635 ​ 5,216 Total costs and expenses ​ 727,838 ​ 379,561 ​ 1,346,411 ​ 1,184,725 Income/(loss) from operations ​ 41,118 ​ ( 83,710 ) ​ 49,962 ​ ( 273,768 ) Interest and other expense, net ​ ( 4,706 ) ​ ( 2,566 ) ​ ( 7,400 ) ​ ( 4,084 ) Income/(loss) before income taxes ​ 36,412 ​ ( 86,276 ) ​ 42,562 ​ ( 277,852 ) Income tax provision/(benefit) ​ 2,697 ​ ( 29,737 ) ​ 4,979 ​ ( 85,150 ) Net income/(loss) ​ ​ 33,715 ​ ​ ( 56,539 ) ​ ​ 37,583 ​ ​ ( 192,702 ) Dividends on Series A preferred stock ​ ( 13,591 ) ​ ( 3,694 ) ​ ( 18,661 ) ​ ( 3,694 ) Direct and incremental Series A preferred stock issuance cost ​ ​ — ​ ​ ( 10,257 ) ​ ​ — ​ ​ ( 10,257 ) Undistributed earnings allocated to Series A preferred stock ​ ( 3,051 ) ​ — ​ ( 3,123 ) ​ — Net income/(loss) available to common stockholders ​ $ 17,073 ​ $ ( 70,490 ) ​ $ 15,799 ​ $ ( 206,653 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.38 ​ $ ( 1.61 ) ​ $ 0.35 ​ $ ( 4.72 ) Diluted (Note 11) ​ $ 0.37 ​ $ ( 1.61 ) ​ $ 0.35 ​ $ ( 4.72 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 45,471 ​ 43,874 ​ 44,830 ​ 43,824 Diluted ​ 46,777 ​ 43,874 ​ 45,975 ​ 43,824 ​ See the accompanying notes to the condensed consolidated financial statements. ​ 2 Table of Contents THE CHEESECAKE FACTORY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ Weeks Ended Weeks Ended Weeks Ended Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 ​ June 29, 2021 ​ June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) ​ $ 33,715 ​ $ ( 56,539 ) ​ $ 37,583 ​ $ ( 192,702 ) Other comprehensive gain/(loss): ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment ​ 219 ​ 404 ​ 393 ​ ( 532 ) Unrealized gain/(loss) on derivative, net of tax ​ ​ 1,726 ​ ​ ( 1,467 ) ​ ​ 3,464 ​ ​ ( 3,837 ) Other comprehensive gain/(loss) ​ 1,945 ​ ( 1,063 ) ​ 3,857 ​ ( 4,369 ) Total comprehensive income/(loss) ​ $ 35,660 ​ $ ( 57,602 ) ​ $ 41,440 ​ $ ( 197,071 ) Comprehensive income attributable to Series A preferred stockholders ​ ​ ( 16,937 ) ​ ​ — ​ ​ ( 22,421 ) ​ ​ — Total comprehensive income/(loss) available to common stockholders ​ $ 18,723 ​ $ ( 57,602 ) ​ $ 19,019 ​ $ ( 197,071 ) ​ See the accompanying notes to the condensed consolidated financial statements ​ 3 Table of Contents THE CHEESECAKE FACTORY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE PREFERRED STOCK (In thousands) (Unaudited) ​ For the twenty-six weeks ended June 29, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Series A Convertible ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Preferred Stock ​ ​ Common Stock ​ Paid-in ​ Retained ​ Treasury ​ Comprehensive ​ ​ ​ ​ ​ Shares Amount Shares ​ Amount ​ Capital ​ Earnings ​ Stock ​ Loss ​ Total Balance, December 29, 2020 200 ​ $ 218,248 ​ ​ 98,645 ​ $ 986 ​ $ 878,148 ​ $ 1,110,087 ​ $ ( 1,696,743 ) ​ $ ( 3,785 ) ​ $ 288,693 Cumulative effect of adopting ASU 2020-06 ​ — ​ ​ ( 4,763 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,763 ​ ​ — ​ ​ — ​ ​ 4,763 Balance, December 29, 2020, as adjusted ​ 200 ​ ​ 213,485 ​ ​ 98,645 ​ ​ 986 ​ ​ 878,148 ​ ​ 1,114,850 ​ ​ ( 1,696,743 ) ​ ​ ( 3,785 ) ​ ​ 293,456 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,868 ​ ​ — ​ ​ — ​ ​ 3,868 Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 174 ​ ​ 174 Change in derivative, net of tax — ​ ​ — ​ ​ — ​ — ​ — ​ — ​ — ​ 1,738 ​ 1,738 Cash dividends declared common stock, net of forfeitures ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 399 ​ ​ — ​ ​ — ​ ​ 399 Stock-based compensation — ​ ​ — ​ ​ 293 ​ 3 ​ 5,480 ​ — ​ ​ — ​ — ​ 5,483 Common stock issued under stock-based compensation plans — ​ ​ — ​ ​ 570 ​ 6 ​ 20,417 ​ ​ — ​ — ​ — ​ ​ 20,423 Treasury stock purchases ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 3,957 ) ​ ​ — ​ ​ ( 3,957 ) Cash dividends declared Series A preferred stock, $ 25.35 per share ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 5,070 ) ​ ​ — ​ ​ — ​ ​ ( 5,070 ) Balance, March 30, 2021 ​ 200 ​ $ 213,485 ​ ​ 99,508 ​ $ 995 ​ $ 904,045 ​ $ 1,114,047 ​ $ ( 1,700,700 ) ​ $ ( 1,873 ) ​ $ 316,514 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 33,715 ​ ​ — ​ ​ — ​ ​ 33,715 Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 219 ​ ​ 219 Change in derivative, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,726 ​ ​ 1,726 Cash dividends declared common stock, net of forfeitures ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 15 ​ ​ — ​ ​ — ​ ​ 15 Stock-based compensation ​ — ​ ​ — ​ ​ 44 ​ ​ 1 ​ ​ 5,540 ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,541 Common stock issued under stock-based compensation plans ​ — ​ ​ — ​ ​ 118 ​ ​ 1 ​ ​ 4,361 ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,362 Common stock issuance ​ — ​ ​ — ​ ​ 3,125 ​ ​ 31 ​ ​ 167,019 ​ ​ — ​ ​ — ​ ​ — ​ ​ 167,050 Treasury stock purchases ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 603 ) ​ ​ — ​ ​ ( 603 ) Series A preferred stock cash-settled conversion ​ ( 150 ) ​ ​ ( 160,114 ) ​ ​ — ​ ​ — ​ ​ ( 283,637 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 283,637 ) Series A preferred stock conversion to common stock ​ ( 50 ) ​ ​ ( 53,371 ) ​ ​ 2,401 ​ ​ 24 ​ ​ 53,273 ​ ​ — ​ ​ — ​ ​ — ​ ​ 53,297 Deemed dividends on Series A preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 13,591 ) ​ ​ — ​ ​ — ​ ​ ( 13,591 ) Balance, June 29, 2021 ​ — ​ $ — ​ ​ 105,196 ​ $ 1,052 ​ $ 850,601 ​ $ 1,134,186 ​ $ ( 1,701,303 ) ​ $ 72 ​ $ 284,608 ​ 4 Table of Contents For the twenty-six weeks ended June 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Series A Convertible ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Preferred Stock ​ ​ Common Stock ​ Paid-in ​ Retained ​ Treasury ​ Comprehensive ​ ​ ​ ​ ​ Shares ​ Amount ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Stock ​ Loss ​ Total Balance, December 31, 2019 — ​ ​ — ​ ​ 97,685 ​ $ 977 ​ $ 855,989 ​ $ 1,408,333 ​ $ ( 1,693,122 ) ​ $ ( 435 ) ​ $ 571,742 Net loss — ​ ​ — ​ ​ — ​ — ​ — ​ ( 136,163 ) ​ — ​ — ​ ( 136,163 ) Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 936 ) ​ ​ ( 936 ) Change in derivative, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,370 ) ​ ​ ( 2,370 ) Cash dividends declared Common stock, $ 0.36 per share — ​ ​ — ​ ​ — ​ — ​ — ​ ( 16,376 ) ​ — ​ — ​ ( 16,376 ) Stock-based compensation — ​ ​ — ​ ​ 566 ​ 6 ​ 5,541 ​ — ​ — ​ — ​ ​ 5,547 Common stock issued under stock-based compensation plans ​ — ​ ​ — ​ ​ 203 ​ ​ 2 ​ ​ 111 ​ ​ — ​ ​ — ​ ​ — ​ ​ 113 Treasury stock purchases ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,586 ) ​ ​ — ​ ​ ( 2,586 ) Balance, March 31, 2020 ​ — ​ ​ — ​ ​ 98,454 ​ $ 985 ​ $ 861,641 ​ $ 1,255,794 ​ $ ( 1,695,708 ) ​ $ ( 3,741 ) ​ $ 418,971 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 56,539 ) ​ ​ — ​ ​ — ​ ​ ( 56,539 ) Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 404 ​ ​ 404 Change in derivative, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,467 ) ​ ​ ( 1,467 ) Stock-based compensation ​ — ​ ​ — ​ ​ ( 24 ) ​ ​ — ​ ​ 5,162 ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,162 Common stock issued under stock-based compensation plans ​ — ​ ​ — ​ ​ 35 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Treasury stock purchases ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 266 ) ​ ​ — ​ ​ ( 266 ) Series A preferred stock issuance ​ 200 ​ ​ 189,743 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Preferred stock direct costs ​ — ​ ​ 10,257 ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10,257 ) ​ ​ — ​ ​ — ​ ​ ( 10,257 ) Paid-in-kind Series A preferred stock dividends, including beneficial conversion feature ​ 4 ​ ​ 4,079 ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,079 ) ​ ​ — ​ ​ — ​ ​ ( 4,079 ) Balance, June 30, 2020 ​ 204 ​ $ 204,079 ​ ​ 98,465 ​ $ 985 ​ $ 866,803 ​ $ 1,184,919 ​ $ ( 1,695,974 ) ​ $ ( 4,804 ) ​ $ 351,929 ​ See the accompanying notes to the condensed consolidated financial statements. ​ 5 Table of Contents THE CHEESECAKE FACTORY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six ​ Twenty-Six ​ Weeks Ended ​ Weeks Ended ​ ​ June 29, 2021 June 30, 2020 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income/(loss) ​ $ 37,583 ​ $ ( 192,702 ) ​ ​ ​ ​ ​ ​ ​ Adjustments to reconcile net income/(loss) to cash provided by/(used in) operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization expenses ​ ​ 44,229 ​ ​ 46,152 Impairment of assets and lease termination expense ​ 394 ​ 193,889 Deferred income taxes ​ ​ ( 2,895 ) ​ ​ ( 11,173 ) Stock-based compensation ​ 10,935 ​ 10,617 Changes in assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts and other receivables ​ ​ 17,048 ​ ​ 41,404 Income taxes receivable/payable ​ 1,106 ​ ( 74,387 ) Inventories ​ ( 2,504 ) ​ 6,709 Prepaid expenses ​ 3,274 ​ 7,600 Operating lease assets/liabilities ​ ( 3,883 ) ​ 12,895 Other assets ​ ​ ( 6,612 ) ​ ​ 4,294 Accounts payable ​ ( 3,072 ) ​ 226 Gift card liabilities ​ ( 15,562 ) ​ ( 25,731 ) Other accrued expenses ​ ​ 50,397 ​ ​ ( 55,477 ) Cash provided by/(used in) operating activities ​ 130,438 ​ ( 35,684 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Additions to property and equipment ​ ( 30,902 ) ​ ( 29,424 ) Additions to intangible assets ​ ( 312 ) ​ ( 227 ) Other ​ ​ ( 1,000 ) ​ ​ — Cash used in investing activities ​ ( 32,214 ) ​ ( 29,651 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Borrowings on credit facility ​ ​ — ​ ​ 90,000 Repayment on credit facility ​ ​ ( 150,000 ) ​ ​ ( 4,000 ) Convertible debt issuance ​ ​ 345,000 ​ ​ — Convertible debt direct and incremental costs ​ ​ ( 10,074 ) ​ ​ — Series A preferred stock issuance ​ ​ — ​ ​ 200,000 Series A preferred stock direct and incremental costs ​ ​ — ​ ​ ( 10,257 ) Series A preferred stock cash-settled conversion ​ ​ ( 443,751 ) ​ ​ — Series A preferred stock conversion direct and incremental costs ​ ​ ( 74 ) ​ ​ — Series A preferred stock dividends paid ​ ​ ( 18,661 ) ​ ​ — Common stock issuance ​ ​ 175,000 ​ ​ — Common stock issuance direct and incremental costs ​ ( 7,950 ) ​ — Proceeds from exercise of stock options ​ ​ 24,785 ​ ​ 113 Common stock dividends paid ​ ( 337 ) ​ ( 15,791 ) Treasury stock purchases ​ ( 4,560 ) ​ ( 2,852 ) Cash used in financing activities ​ ( 90,622 ) ​ 257,213 Foreign currency translation adjustment ​ 81 ​ ( 139 ) Net change in cash and cash equivalents ​ ​ 7,683 ​ ​ 191,739 Cash and cash equivalents at beginning of period ​ 154,085 ​ 58,416 Cash and cash equivalents at end of period ​ $ 161,768 ​ $ 250,155 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosures: ​ ​ ​ ​ ​ ​ Interest paid ​ $ 6,884 ​ $ 7,289 Income taxes paid ​ $ 4,877 ​ $ 423 Construction payable ​ $ 5,016 ​ $ 1,884 ​ See the accompanying notes to the condensed consolidated financial statements. ​ ​ ​ 6 Table of Contents THE CHEESECAKE FACTORY INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 1. Significant Accounting Policies ​ Basis of Presentation ​ The accompanying condensed consolidated financial statements include the accounts of The Cheesecake Factory Incorporated and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions for the periods presented have been eliminated in consolidation. The unaudited financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results that may be achieved for any other interim period or for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended 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. Fiscal 2021 consists of 52 weeks and will end on December 28, 2021. Fiscal 2020, which ended on December 29, 2020, was also a 52 -week year. ​ 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 and twenty-six weeks ended June 30, 2020 were reclassified to conform to the current presentation. ​ Use of Estimates ​ The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates. ​ COVID-19 Pandemic ​ 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. 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. ​ 7 Table of Contents 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. This pronouncement is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. The guidance allows for either full retrospective adoption or modified retrospective adoption. 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. ​ ​ ​ ​ 2. Fair Value Measurements Fair value measurements are estimated based on valuation techniques and inputs categorized as follows: ​ ● Level 1: Quoted prices in active markets for identical assets or liabilities ● Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities ● Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 29, 2021 ​ Level 1 Level 2 Level 3 Assets/(Liabilities) ​ ​ ​ ​ ​ ​ ​ ​ Non-qualified deferred compensation assets ​ $ 89,891 ​ $ — ​ $ — Non-qualified deferred compensation liabilities ​ ​ ( 88,441 ) ​ ​ — ​ ​ — Interest rate swap ​ ​ — ​ ​ — ​ ​ — Acquisition-related deferred consideration ​ ​ — ​ ​ ( 38,606 ) ​ ​ — Acquisition-related contingent consideration and compensation liabilities ​ ​ — ​ ​ — ​ ​ ( 18,681 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 29, 2020 ​ Level 1 Level 2 Level 3 Assets/(Liabilities) ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-qualified deferred compensation assets ​ $ 83,485 ​ $ — ​ $ — Non-qualified deferred compensation liabilities ​ ​ ( 83,702 ) ​ ​ — ​ — Interest rate swap ​ ​ — ​ ​ ( 4,591 ) ​ ​ — Acquisition-related deferred consideration ​ ​ — ​ ​ ( 38,119 ) ​ ​ — Acquisition-related contingent consideration and compensation liabilities ​ ​ — ​ ​ — ​ ​ ( 7,465 ) ​ 8 Table of Contents 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 7,465 ​ $ 13,218 Change in fair value ​ 11,216 ​ ( 5,757 ) Ending balance ​ $ 18,681 ​ $ 7,461 ​ 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 $ 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. ​ ​ 3. Inventories ​ Inventories consisted of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 29, 2021 December 29, 2020 Restaurant food and supplies ​ $ 25,159 ​ $ 24,282 Bakery finished goods and work in progress ​ 9,304 ​ 7,861 Bakery raw materials and supplies ​ 7,405 ​ 7,145 Total ​ $ 41,868 ​ $ 39,288 ​ ​ 9 Table of Contents 4. Gift Cards ​ The following tables present information related to gift cards (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ ​ June 29, 2021 June 30, 2020 June 29, 2021 June 30, 2020 Gift card liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance $ 166,178 $ 161,215 ​ $ 184,655 $ 187,978 Activations ​ 32,487 ​ 16,766 ​ 48,952 ​ 34,106 Redemptions and breakage ​ ( 29,567 ) ​ ( 15,740 ) ​ ( 64,509 ) ​ ( 59,843 ) Ending balance $ 169,098 $ 162,241 ​ $ 169,098 $ 162,241 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ ​ June 29, 2021 June 30, 2020 June 29, 2021 June 30, 2020 Gift card contract assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance $ 16,255 $ 20,685 ​ $ 17,955 $ 23,172 Deferrals ​ 3,412 ​ 1,922 ​ 5,707 ​ 4,125 Amortization ​ ( 3,856 ) ​ ( 4,352 ) ​ ( 7,851 ) ​ ( 9,042 ) Ending balance $ 15,811 $ 18,255 ​ $ 15,811 $ 18,255 ​ 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. ​ 5. 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”). The Amended Credit Agreement, which terminates on July 30, 2024, consists of a $ 400 million revolving loan facility (the “Revolving Facility”), including a $ 40 million sublimit for letters of credit.The Amended Credit Agreement also provides the ability to increase the Revolving Facility in an amount not to exceed (a) during the Covenant Relief Period (as defined below) $ 125 million and (b) thereafter, $ 200 million. The funding of any such increases are subject to receipt of lender commitments and satisfaction of customary conditions precedent. Certain of our material subsidiaries have guaranteed our obligations under the Amended Credit Agreement. ​ The Second Amendment, among other things, (i) extended the prior covenant relief period during which the testing of the net adjusted debt to EBITDAR ratio covenant (the “Net Adjusted Leverage Ratio”) and the EBITDAR to interest and rent expense ratio covenant (the “EBITDAR Ratio”) is suspended until the quarter ending December 28, 2021 (the “Covenant Relief Period”), (ii) continued to impose a monthly liquidity covenant of $ 100 million until the Company has demonstrated compliance with the financial covenants as of the quarter ending December 28, 2021, (iii) provided that the obligations thereunder be secured by a first priority security interest in substantially all of our and any guarantor’s property, with such property to be released upon (a) the termination of the Covenant Relief Period, (b) the Company’s compliance with the Net Adjusted Leverage Ratio and the EBITDAR Ratio as of the quarter ending on March 29, 2022, (c) neither the Company nor any of the guarantors having incurred unsecured debt using certain debt baskets under the Revolving Facility unless such debt is convertible debt or subordinated on customary debt subordination terms reasonably acceptable to the administrative agent and (d) no default or event of default having occurred or continuing, (iv) amended certain negative covenants during the Covenant Relief Period, including certain restrictions on capital expenditures, restricted payments, investments and indebtedness, and (v) permitted the payment of cash dividends with respect to our Series A Convertible Preferred Stock, par value $ 0.01 per share (“Series A preferred stock”) for each fiscal quarter of 2021 in an amount not to exceed $ 5.25 million per quarter. ​ 10 Table of Contents Borrowings under the Amended Credit Agreement during the Covenant Relief Period bear interest, at our option, at a rate equal to either: (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) 1.5 %. We also pay a fee of 0.4 % on the daily amount of unused commitments under the Amended Credit Agreement. ​ Subsequent to the Covenant Relief Period, borrowings under the Amended Credit Agreement will bear interest, at our option, at a rate equal to either: (i) 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. ​ 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. We paid certain customary loan origination fees in conjunction with the Amended Credit Agreement. 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. The Amended Credit Agreement also contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgements, cross defaults to material indebtedness and events constituting a change of control. 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. ​ 11 Table of Contents 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. ​ 12 Table of Contents 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. ​ ​ ​ 6. Leases ​ Components of lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended Thirteen Weeks Ended ​ Twenty-Six Weeks Ended ​ Twenty-Six Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 June 29, 2021 June 30, 2020 Operating ​ $ 32,460 ​ $ 32,915 ​ $ 64,854 ​ $ 65,955 Variable ​ 19,212 ​ 11,160 ​ ​ 35,693 ​ ​ 26,988 Short-term ​ 71 ​ 123 ​ ​ 141 ​ ​ 253 Total ​ $ 51,743 ​ $ 44,198 ​ $ 100,688 ​ $ 93,196 ​ Supplemental information related to leases (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 ​ Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 68,559 ​ $ 57,775 ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ ​ 20,021 ​ ​ 32,329 ​ ​ ​ ​ 7. Derivative ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six ​ Twenty-Six ​ Weeks Ended Weeks Ended ​ ​ June 29, 2021 ​ June 30, 2020 Beginning balance ​ $ ( 3,464 ) ​ $ — Other comprehensive loss before reclassifications ​ 2,514 ​ ​ ( 4,045 ) Amounts reclassified from AOCI ​ 950 ​ ​ 208 Other comprehensive loss, net of tax ​ 3,464 ​ ​ ( 3,837 ) Ending balance ​ $ — ​ $ ( 3,837 ) ​ 13 Table of Contents We classified this interest rate swap within Level 2 of the valuation hierarchy described in Note 2. 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 our and the counterparty’s non-performance risk to the derivative trade was considered when measuring the fair value of derivative liability. ​ ​ 8. Commitments and Contingencies ​ 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. 35-CM-188798-16). The wage citation seeks to recover penalties and other monetary payments on behalf of the employees that worked for this vendor or its subcontractor. On June 28, 2018, we filed an appeal of the wage citation. On June 11, 2020, the DLSE postponed the hearing on the Company’s appeal due to safety concerns related to the COVID-19 pandemic. 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. On September 11, 2018 we petitioned the United States Tax Court for a redetermination of the deficiency. The tax court has assigned docket number 18150-18 to our case. 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. These matters typically involve claims from customers, staff members and others related to operational and employment issues common to the foodservice industry. A number of these claims may exist at any given time, and some of the claims may be pled as class actions. From time to time, we are also involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks and other intellectual property, both domestically and abroad. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are legally determined to be liable. ​ At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any pending lawsuits, audits, 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. Legal costs related to such claims are expensed as incurred. ​ 9. 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 ​ To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of the Amended Credit Agreement, in March 2020, our Board suspended the quarterly dividend on our common stock, as well as share repurchases. Prior to this suspension, our Board declared cash dividends of $ 0.36 per common share for the first quarter of fiscal 2020. 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 Credit Agreement and applicable law, and such other factors that the Board considers relevant. (See Note 5 for further discussion of our long-term debt.) ​ 14 Table of Contents 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. ​ Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. 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 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. (See Note 5 for further discussion of our long-term debt.) ​ Series A Convertible Preferred Stock ​ 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. ​ 15 Table of Contents 10. Stock-Based Compensation ​ We maintain stock-based incentive plan under which incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units may be granted to staff members, consultants and non-employee directors. The following table presents information related to stock-based compensation, net of forfeitures (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ June 29, 2021 June 30, 2020 June 29, 2021 June 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Labor expenses ​ $ 2,061 ​ $ 1,926 ​ $ 4,103 ​ $ 3,893 Other operating costs and expenses ​ 72 ​ 70 ​ 146 ​ 139 General and administrative expenses ​ 3,359 ​ 3,114 ​ 6,686 ​ 6,585 Total stock-based compensation ​ 5,492 ​ 5,110 ​ 10,935 ​ 10,617 Income tax benefit ​ 1,349 ​ 1,255 ​ 2,685 ​ 2,608 Total stock-based compensation, net of taxes ​ $ 4,143 ​ $ 3,855 ​ $ 8,250 ​ $ 8,009 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capitalized stock-based compensation (1) ​ $ 49 ​ $ 52 ​ $ 88 ​ $ 91 (1) It is our policy to capitalize the portion of stock-based compensation costs for our internal development department that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations and equipment installation. Capitalized stock-based compensation is included in property and equipment, net on the condensed consolidated balance sheets. ​ Stock Options ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Remaining ​ Aggregate ​ ​ ​ ​ Average ​ Contractual ​ Intrinsic ​ Shares Exercise Price Term Value (1) ​ ​ (In thousands) ​ (Per share) ​ (In years) ​ (In thousands) Outstanding at December 29, 2020 ​ 2,294 ​ $ 45.35 ​ 5.0 ​ $ 307 Granted — ​ ​ — ​ ​ ​ ​ ​ Exercised ( 577 ) ​ ​ 42.97 ​ ​ ​ ​ ​ Forfeited or cancelled ( 1 ) ​ ​ 61.59 ​ ​ ​ ​ ​ Outstanding at June 29, 2021 ​ 1,716 ​ $ 46.14 ​ 5.6 ​ $ 12,215 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at June 29, 2021 861 ​ $ 48.98 ​ 4.0 ​ $ 4,089 (1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised their options on the fiscal period end date. ​ The total intrinsic value of options exercised during the thirteen and twenty-six weeks ended 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. ​ 16 Table of Contents Restricted Shares and Restricted Share Units ​ Restricted share and restricted share unit activity during the twenty-six weeks ended June 29, 2021 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ ​ ​ Fair ​ Shares Value ​ ​ (In thousands) ​ (Per share) Outstanding at December 29, 2020 ​ 2,008 ​ $ 43.70 Granted 480 ​ ​ 50.50 Vested ( 232 ) ​ ​ 47.98 Forfeited ( 144 ) ​ ​ 44.87 Outstanding at June 29, 2021 ​ 2,112 ​ $ 44.69 ​ Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant. The weighted average fair value for restricted shares and restricted share units issued during the second quarter of fiscal 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. ​ ​ 11. 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 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. ​ 17 Table of Contents 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 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ June 29, 2021 June 30, 2020 June 29, 2021 June 30, 2020 ​ ​ (In thousands, except per share data) Basic net income/(loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) ​ $ 33,715 ​ $ ( 56,539 ) ​ $ 37,583 ​ $ ( 192,702 ) Dividends on Series A preferred stock ​ ( 13,591 ) ​ ( 3,694 ) ​ ( 18,661 ) ​ ( 3,694 ) Direct and incremental preferred stock issuance costs ​ — ​ ( 10,257 ) ​ — ​ ( 10,257 ) Undistributed earnings allocated to Series A preferred stock ​ ​ ( 3,051 ) ​ ​ — ​ ​ ( 3,123 ) ​ ​ — Net income/(loss) available to common stockholders ​ 17,073 ​ ( 70,490 ) ​ 15,799 ​ ( 206,653 ) Basic weighted-average shares outstanding ​ ​ 45,471 ​ ​ 43,874 ​ ​ 44,830 ​ ​ 43,824 Basic net income/(loss) per common share ​ $ 0.38 ​ $ ( 1.61 ) ​ $ 0.35 ​ $ ( 4.72 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted net income/(loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) available to common stockholders ​ ​ 17,073 ​ ​ ( 70,490 ) ​ ​ 15,799 ​ ​ ( 206,653 ) Reallocation of undistributed earnings to Series A preferred stock ​ ​ 73 ​ ​ — ​ ​ 65 ​ ​ — Net income/(loss) available to common stockholders for diluted EPS ​ ​ 17,146 ​ ​ ( 70,490 ) ​ ​ 15,864 ​ ​ ( 206,653 ) Basic weighted-average shares outstanding ​ ​ 45,471 ​ ​ 43,874 ​ ​ 44,830 ​ ​ 43,824 Dilutive effect of equity awards (1) ​ ​ 1,306 ​ ​ — ​ ​ 1,145 ​ ​ — Diluted weighted-average shares outstanding ​ ​ 46,777 ​ ​ 43,874 ​ ​ 45,975 ​ ​ 43,824 Diluted net income/(loss) per common share ​ $ 0.37 ​ $ ( 1.61 ) ​ $ 0.35 ​ $ ( 4.72 ) (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 . ​ 12. Segment Information ​ 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. 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. ​ 18 Table of Contents Segment information is presented below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen ​ Thirteen ​ Twenty-Six ​ Twenty-Six ​ ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ Weeks Ended ​ June 29, 2021 June 30, 2020 June 29, 2021 ​ June 30, 2020 Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ 606,691 ​ $ 241,068 ​ $ 1,106,080 ​ $ 729,539 North Italia ​ ​ 43,566 ​ ​ 13,759 ​ ​ 76,390 ​ ​ 44,271 Other FRC ​ ​ 47,458 ​ ​ 12,208 ​ ​ 83,652 ​ ​ 47,791 Other ​ 71,241 ​ 28,816 ​ 130,251 ​ 89,356 Total ​ $ 768,956 ​ $ 295,851 ​ $ 1,396,373 ​ $ 910,957 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income/(loss) from operations: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ 83,198 ​ $ ( 26,951 ) ​ $ 127,679 ​ $ 12,373 North Italia ​ ​ 3,026 ​ ​ ( 4,405 ) ​ ​ 3,358 ​ ​ ( 76,491 ) Other FRC ​ ​ 7,282 ​ ​ ( 5,212 ) ​ ​ 11,162 ​ ​ ( 75,176 ) Other ​ ( 52,388 ) ​ ( 47,142 ) ​ ( 92,237 ) ​ ( 134,474 ) Total ​ $ 41,118 ​ $ ( 83,710 ) ​ $ 49,962 ​ $ ( 273,768 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ 16,487 ​ $ 16,867 ​ $ 32,807 ​ $ 34,144 North Italia ​ ​ 981 ​ ​ 901 ​ ​ 1,825 ​ ​ 1,866 Other FRC ​ ​ 1,038 ​ ​ 814 ​ ​ 2,215 ​ ​ 2,015 Other ​ 3,717 ​ 4,008 ​ 7,382 ​ 8,127 Total ​ $ 22,223 ​ $ 22,590 ​ $ 44,229 ​ $ 46,152 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impairment of assets and lease termination expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ — ​ $ 2,325 ​ $ — ​ $ 2,941 North Italia ​ ​ — ​ ​ — ​ ​ — ​ ​ 71,524 Other FRC ​ ​ — ​ ​ — ​ ​ — ​ ​ 72,939 Other ​ ​ — ​ ​ 108 ​ ​ 594 ​ ​ 46,925 Total ​ $ — ​ $ 2,433 ​ $ 594 ​ $ 194,329 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ 7,846 ​ $ 12,116 ​ $ 11,926 ​ $ 20,714 North Italia ​ ​ 5,277 ​ ​ 30 ​ ​ 6,489 ​ ​ 2,994 Other FRC ​ ​ 6,646 ​ ​ 687 ​ ​ 7,365 ​ ​ 1,791 Other ​ 3,906 ​ 816 ​ 5,122 ​ 3,925 Total ​ $ 23,675 ​ $ 13,649 ​ $ 30,902 ​ $ 29,424 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preopening costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Cheesecake Factory restaurants ​ $ 584 ​ $ 767 ​ $ 2,648 ​ $ 2,181 North Italia ​ ​ 1,061 ​ ​ 311 ​ ​ 2,279 ​ ​ 1,264 Other FRC ​ ​ 637 ​ ​ 380 ​ ​ 1,099 ​ ​ 221 Other ​ ​ 497 ​ ​ 639 ​ ​ 609 ​ ​ 1,550 Total ​ $ 2,779 ​ $ 2,097 ​ $ 6,635 ​ $ 5,216 ​ ​ ​ ​ ​ ​ ​ ​ ​ June 29, 2021 December 29, 2020 Total assets: ​ ​ ​ ​ ​ ​ The Cheesecake Factory ​ $ 1,608,850 ​ $ 1,671,733 North Italia ​ ​ 254,910 ​ ​ 270,218 Other FRC ​ 289,494 ​ 308,866 Other ​ 569,036 ​ 496,237 Total ​ $ 2,722,290 ​ $ 2,747,054 ​ ​ ​ 19 Table of Contents 13. Subsequent Events ​ None ​ ​ 20 Table of Contents