What changed in this filing

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Item 1. Financial Statements

2022-05-02 compared with 2021-11-04 · 125 added, 200 removed, 335 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 28,

Current assets:

21 unchanged sentences

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

no and 200,000 shares issued at September 28, 2021 and December 29, 2020, respectively

Stockholders’ equity:

1 unchanged sentence

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

105,292,620 and 98,645,147 shares issued at September 28, 2021 and December 29, 2020, respectively

106,028,803 and 105,365,678 shares issued at March 29, 2022 and December 28, 2021, respectively

Additional paid-in capital

Retained earnings

Treasury stock, 53,126,074 and 53,026,409 shares at cost at September 28, 2021 and December 29, 2020, respectively

Treasury stock, 53,236,854 and 53,139,172 shares at cost at March 29, 2022 and December 28, 2021, respectively

( 1,706,447 )

7 unchanged sentences

(In thousands, except per share data)

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Costs and expenses:

4 unchanged sentences

Depreciation and amortization expenses

Impairment of assets and lease terminations

Acquisition-related costs

Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)

Impairment of assets and lease termination expenses

Acquisition-related contingent consideration, compensation and amortization expenses

Preopening costs

Total costs and expenses

Income/(loss) from operations

Income from operations

Interest and other expense, net

Income/(loss) before income taxes

Income tax (benefit)/ provision

Net income/(loss)

Income before income taxes

Income tax provision

Dividends on Series A preferred stock

Direct and incremental Series A preferred stock issuance cost

Undistributed earnings allocated to Series A preferred stock

Net income/(loss) available to common stockholders

4 unchanged sentences

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

Net income/(loss)

Other comprehensive (loss)/ gain:

March 29, 2022

March 30, 2021

Other comprehensive gain:

Foreign currency translation adjustment

Unrealized gain/(loss) on derivative, net of tax

Other comprehensive (loss)/ gain

Total comprehensive income/(loss)

Unrealized gain on derivative, net of tax

Other comprehensive gain

Total comprehensive income

Comprehensive income attributable to Series A preferred stockholders

Total comprehensive income/(loss) available to common stockholders

Total comprehensive income available to common stockholders

See the accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(In thousands)

For the thirty-nine weeks ended September 28, 2021:

For the thirteen weeks ended March 29, 2022:

Series A Convertible

3 unchanged sentences

( 1,702,509 )

Cumulative effect of adopting ASU 2020-06

Balance, December 29, 2020, as adjusted

( 1,696,743 )

Foreign currency translation adjustment

Change in derivative, net of tax

Cash dividends declared common stock, net of forfeitures

2 unchanged sentences

Treasury stock purchases

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

Balance, March 29, 2022

( 1,706,447 )

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 )

Foreign currency translation adjustment

Cash dividends declared common stock, net of forfeitures

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases

Balance, September 28, 2021

( 1,701,984 )

For the thirty-nine weeks ended September 29, 2020:

For the thirteen weeks ended March 30, 2021:

Series A Convertible

3 unchanged sentences

( 1,696,743 )

Foreign currency translation adjustment

Change in derivative, net of tax

Cash dividends declared Common stock, $ 0.36 per share

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases

Balance, March 31, 2020

( 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

Cumulative effect of adopting ASU 2020-06

Balance, December 29, 2020, as adjusted

( 1,696,743 )

1 unchanged sentence

Change in derivative, net of tax

Cash dividends declared common stock, net of forfeitures

Stock-based compensation

1 unchanged sentence

Treasury stock purchases

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

Balance, September 29, 2020

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

Balance, March 30, 2021

( 1,700,700 )

3 unchanged sentences

(In thousands)

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Cash flows from operating activities:

Net income/(loss)

Adjustments to reconcile net income/(loss) to cash provided by/(used in) operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization expenses

10 unchanged sentences

Other accrued expenses

Cash provided by/(used in) operating activities

Cash provided by operating activities

Cash flows from investing activities:

3 unchanged sentences

Cash flows from financing activities:

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

Acquisition-related deferred consideration and compensation

Proceeds from exercise of stock options

20 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.

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 thirty-nine weeks ended September 29, 2020 were reclassified to conform to the current presentation.

Fiscal year 2022 consists of 53 weeks and will end on January 3, 2023.

Fiscal year 2021, which ended on December 28, 2021, was a 52 -week year.

Use of Estimates

3 unchanged sentences

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 may continue to change, as of September 28, 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 any resumption of mandated social distancing protocols or vaccination or mask mandates and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.

The ongoing effects of the COVID-19 pandemic, including, but not limited to, labor-related impacts, supply chain disruption and consumer behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

Beginning in March 2020, COVID-19 and measures to prevent its spread led to temporary closures, shifts to an off-premise only operating model or reduced dining room capacity across our portfolio.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, currently all of our restaurants are operating with no capacity restrictions.

The ongoing effects of COVID-19 and its variants, including, but not limited to, consumer behavior, capacity restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our restaurants and disruptions in the supply chain, will determine the impact to our operating results and financial position.

The impact to our operations has been most notable during the periods of greatest accelerating COVID-19 case counts.

We have incurred and will continue to incur additional costs to address government regulations and the safety of our staff members and customers.

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 Financial Accounting Standard Board (“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.

9 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):

September 28, 2021

March 29, 2022

Assets/(Liabilities)

7 unchanged sentences

Non-qualified deferred compensation liabilities

Interest rate swap

Acquisition-related deferred consideration

1 unchanged sentence

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):

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Beginning balance

2 unchanged sentences

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.

The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at March 29, 2022 was $ 0 to $ 204.0 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 three quarters of fiscal 2021 primarily related to the impact in the second fiscal quarter 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 September 28, 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 September 28, 2021 was approximately $ 333.3 million and 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.

The significant decrease in the fair value of the contingent consideration and compensation liabilities during the first quarter of fiscal 2022 primarily related to the payment of $ 7.2 million per the Fox Restaurant Concept LLC (“FRC”) acquisition agreement.

As of March 29, 2022, 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 March 29, 2022 was approximately $ 308.4 million and 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):

September 28, 2021

March 29, 2022

December 28, 2021

3 unchanged sentences

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

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Gift card liabilities:

2 unchanged sentences

Ending balance

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Gift card contract assets:

4 unchanged sentences

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 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.

Borrowings under the Amended Credit Agreement during the Covenant Relief Period bear interest, at our option, at a rate equal to either:

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.

Subsequent to the Covenant Relief Period, we are required to maintain (i) a maximum Net Adjusted Leverage Ratio of 4.75 and (ii) a minimum EBITDAR Ratio of 1.9 .

Our Net Adjusted Leverage and EBITDAR Ratios were 3.9 and 2.3 , respectively, at March 29, 2022, and we were in compliance with all covenants in effect at that date.

Concurrently with our delivery of the compliance certificate demonstrating our compliance with the financial covenants in the Amended Credit Agreement as of December 28, 2021, the Covenant Relief Period was terminated.

Borrowings under the Amended Credit Agreement during the Covenant Relief Period bore 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:

During the Covenant Relief Period, we also incurred a fee of 0.4 % on the daily amount of unused commitments.

Subsequent to the Covenant Relief Period, borrowings under the Amended Credit Agreement 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.

Subsequent to the Covenant Relief Period, we will also incur a fee of 0.1 % to 0.2 % on the daily amount of unused commitments.

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 September 28, 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 September 30, 2021 was $ 373.1 million, and we were in compliance with all covenants under the Amended Credit Agreement in effect at that date.

At March 29, 2022, 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.

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.

18 unchanged sentences

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.

As of March 29, 2022, no conditions were met that would have impacted the initial conversion rate or conversion price.

In connection with the cash dividend that was declared by our Board on April 21, 2022, on May 12, 2022 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms.

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;

14 unchanged sentences

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 September 28, 2021, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 335.5 million, net of unamortized issuance costs of $ 9.5 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 $ 0.5 million and $ 0.6 million during the thirteen and thirty-nine weeks ended September 28, 2021, respectively 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 September 28, 2021.

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 March 29, 2022, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 336.5 million, net of unamortized issuance costs of $ 8.5 million.

Total amortization expense was $ 0.5 million during the first quarter fiscal 2022.

The effective interest rate for the Notes was 0.96 % as of March 29, 2022.

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

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Supplemental information related to leases (in thousands):

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

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

Operating cash flows from operating leases

Operating cash flows for operating leases

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

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

We terminated our interest rate swap agreement in the second quarter of fiscal 2021.

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.

4 unchanged sentences

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 three 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):

September 28, 2021

September 29, 2020

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

The following table summarizes the changes related to the interest rate swap in accumulated other comprehensive income (“AOCI”), net of tax, during the thirteen weeks ended March 30, 2021 (in thousands):

Beginning balance

17 unchanged sentences

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.

On April 29, 2022, the parties filed a Settlement Stipulation and a Proposed Stipulated Decision (the “Decision”) with the tax court stipulating to the amount of income tax deficiency and the tax court’s entry of the Decision.

We have reserved an immaterial amount in connection with the Decision.

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

11 unchanged sentences

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.

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of the Amended Credit Agreement, in March 2020, our Board of Directors (“Board”) suspended declaring dividends on our common stock as well as our share repurchase programs.

In April 2022, our Board declared a quarterly dividend and reinstated our share repurchase programs.

(See Note 13 for further information on the approved dividend.) 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.)

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 $ 1,702.0 million through September 28, 2021 with 14,542 and 100,081 shares repurchased at a cost of $ 0.7 million and $ 5.2 million during the thirteen and thirty-nine weeks ended, respectively, 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 53.2 million shares at a total cost of $ 1,706.4 million through March 29, 2022, with 97,682 shares repurchased at a cost of $ 3.9 million during the thirteen weeks ended March 29, 2022 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.

Our share repurchase program 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.

Share repurchases may be made from time to time in open market purchases, privately negotiated transactions, accelerated share repurchase programs, issuer self-tender offers or otherwise.

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 FRC acquisition agreement, our share price and current market conditions.

The timing and number of shares repurchased are also subject to legal constraints and 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.

On April 20, 2020, we issued 200,000 shares of Series A Convertible 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.

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.

5 unchanged sentences

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.

We maintain stock-based incentive plans 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):

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Labor expenses

8 unchanged sentences

Stock Options

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

Stock option activity during the thirty-nine weeks ended September 28, 2021 was as follows:

We did not issue any stock options during the first quarter of fiscal 2022 or fiscal 2021.

Stock option activity during the thirteen weeks ended March 29, 2022 was as follows:

Exercise Price

4 unchanged sentences

Forfeited or cancelled

Outstanding at September 28, 2021

Exercisable at September 28, 2021

Outstanding at March 29, 2022

Exercisable at March 29, 2022

(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.

There were no options exercised during the thirteen weeks ended September 28, 2021.

The total intrinsic value of options exercised during thirty-nine weeks ended September 28, 2021 was $ 7.1 million.

There were no options exercised during the thirteen weeks ended September 29, 2020.

The total intrinsic value of options exercised during the thirty-nine weeks ended September 29, 2020 was $ 35,606 .

As of September 28, 2021, total unrecognized stock-based compensation expense related to unvested stock options was $ 5.4 million, which we expect to recognize over a weighted-average period of approximately 2.7 years.

The total intrinsic value of options exercised during thirteen weeks ended March 29, 2022 and March 30, 2021 was $ 4.9 million and $ 5.7 million, respectively.

As of March 29, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $ 4.1 million, which we expect to recognize over a weighted-average period of approximately 2.4 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended September 28, 2021 was as follows:

Restricted share and restricted share unit activity during the thirteen weeks ended March 29, 2022 was as follows:

(In thousands)

Outstanding at December 28, 2021

Outstanding at September 28, 2021

Outstanding at March 29, 2022

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 third quarter of fiscal 2021 and 2020 was $ 51.95 and $ 24.00 , respectively.

The fair value of shares that vested during the thirteen weeks and thirty-nine weeks ended September 28, 2021 was $ 2.1 million and $ 13.3 million, respectively.

The fair value of shares that vested during the thirteen weeks and thirty-nine weeks ended September 29, 2020 was $ 1.8 million and $ 14.2 million, respectively.

As of September 28, 2021, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 45.8 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.

The weighted average fair value for restricted shares and restricted share units issued during the first quarter of fiscal 2022 and 2021 was $ 39.59 and $ 48.38 , respectively.

The fair value of shares that vested during the thirteen weeks ended March 29, 2022 and March 30, 2021 was $ 12.4 million and $ 9.5 million, respectively.

As of March 29, 2022, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 61.7 million, which we expect to recognize over a weighted-average period of approximately 3.3 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 September 28, 2021 and September 29, 2020, 2.1 million and 1.9 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.

At March 29, 2022 and March 30, 2021, 2.5 million and 2.1 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.

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 required 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.

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

In addition, as our Series A preferred stock was a participating security, we were 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 was 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.

March 29, 2022

March 30, 2021

(In thousands, except per share data)

Basic net income/(loss) per common share:

Net income/(loss)

Dividends on Series A preferred stock

Direct and incremental preferred stock issuance costs

Undistributed earnings allocated to Series A preferred stock

Net income/(loss) available to common stockholders

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Diluted net income/(loss) per common share

(1) Shares of common stock equivalents related to outstanding stock options and restricted stock of 3.8 million and 4.0 million as of September 28, 2021 and September 29, 2020, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.

(1) Shares of common stock equivalents related to outstanding stock options and restricted stock of 2.9 million and 1.5 million as of March 29, 2022 and March 30, 2021, 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.

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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.

Based on quantitative thresholds set forth in Accounting Standards Codification (“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 are combined in Other.

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

Segment information is presented below (in thousands):

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021