What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-02 compared with 2021-11-04 · 146 added, 206 removed, 136 unchanged (72% of the section changed)

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These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (together with the Securities Act, the “Acts”).

This includes, without limitation, statements regarding corporate social responsibility and in our corporate social responsibility (“CSR”) report, the effects of the COVID-19 pandemic on our financial condition and our results of operations, including our expectations with respect to our ability to reopen and keep open our restaurants, our fiscal 2021 and 2022 outlook, financial guidance, projections, expectations and statements with respect to the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”), as well as expectations of our future financial condition, results of operations, sales, cash flows, plans, targets, goals, objectives, performance, growth potential, competitive position and business;

and our ability to:

This includes, without limitation, statements regarding corporate social responsibility (“CSR”) and in our CSR report, the effects of the COVID-19 pandemic on our financial condition and our results of operations, accelerated and diversified revenue growth as a result of the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”), financial guidance and projections as well as expectations of our future financial condition, results of operations, sales, target growth rates, cash flows, quarterly dividends, corporate strategy, plans, targets, goals, objectives, performance, growth potential, competitive position and business, and statements regarding our ability to:

leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory ® brand to other retail opportunities;

maintain our aggregate sales volumes;

deliver comparable sales growth;

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profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept internationally;

support the growth of North Italia and the FRC brands;

and utilize our capital effectively.

support the growth of North Italia and other FRC restaurants;

operate Social Monk Asian Kitchen and other concepts;

and utilize our capital effectively and continue to issue cash dividends and repurchase our shares.

These forward-looking statements may be affected by various factors including:

the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants and our bakery operations;

supply chain disruptions;

demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational damage to us or any of our brands;

supply chain disruptions and inflation;

the geopolitical environment, demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational damage to us or any of our brands;

economic, public health and political conditions that impact consumer confidence and spending, including the impact of the COVID-19 pandemic and other health epidemics or pandemics on the global economy;

acceptance and success of The Cheesecake Factory in domestic and international markets;

acceptance and success of North Italia, the FRC brands and our other concepts;

acceptance and success of The Cheesecake Factory in international markets;

acceptance and success of North Italia and the FRC concepts, Social Monk Asian Kitchen and other concepts;

the risks of doing business abroad through Company-owned restaurants and/or licensees;

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changes in laws impacting our business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premises dining;

increases in minimum wages and benefit costs, including the cost of group medical insurance;

increases in minimum wages and benefit costs;

the economic health of our landlords and other tenants in retail centers in which our restaurants are located, and our ability to successfully manage our lease arrangements with landlords;

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the economic health of suppliers, licensees, vendors and other third parties providing goods or services to us;

the timing of new unit development;

the timing of our new unit development;

compliance with debt covenants;

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economic and political conditions that impact consumer confidence and spending;

the resolutions of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation;

the resolution of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation;

adverse weather conditions in regions in which our restaurants are located;

factors that are under the control of government agencies, landlords and other third parties;

the risk, costs and uncertainties associated with opening new restaurants;

the risks, costs and uncertainties associated with opening new restaurants;

and other risks and uncertainties detailed from time to time in our filings with the SEC.

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In connection with the “safe harbor” provisions of the Acts, we have identified and are disclosing important factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf.

(See Part II, Item 1A of this report, “Risk Factors,” and Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2020.) These cautionary statements are to be used as a reference in connection with any forward-looking statements.

(See Part II, Item 1A of this report, “Risk Factors,” and Part I, Item 1A, “Risk Factors,” included in our Annual Report

on Form 10-K for the fiscal year ended December 28, 2021.) These cautionary statements are to be used as a reference in connection with any forward-looking statements.

The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC.

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the audited consolidated financial statements and related notes in Part IV, Item 15;

the "Risk Factors"

included in Part I, Item 1A;

the "Management's Discussion and Analysis of Financial Condition and Results of Operations"

included in Part II, Item 7;

the “Risk Factors” included in Part I, Item 1A;

the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7;

and the cautionary statements included throughout this Form 10-Q.

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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, currently 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 masks 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 disruptions and consumer behavior, will determine the significance of the impact 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.

If, in the future, we experience significant disruptions related to COVID-19, we may again implement mitigation actions such as raising additional financing, not declaring future dividends, suspending share repurchases, suspending capital spending, implementing furloughs or modifying our operating strategies.

Some of these measures may have an adverse impact on our business.

The Cheesecake Factory Incorporated is a leader in experiential dining.

We are culinary forward and relentlessly focused on hospitality.

We currently own and operate 308 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® , North Italia ® and a collection within our FRC business.

We currently own and operate 307 restaurants throughout the United States and Canada under brands including 208 The Cheesecake Factory ® , 29 North Italia ® restaurants and a collection within our FRC business.

Internationally, 29 The Cheesecake Factory ® restaurants operate under licensing agreements.

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Financially, we are focused on prudently managing expenses at our restaurants, bakery facilities and corporate support center, and leveraging our size to make the best use of our purchasing power.

Investing in new Company-owned restaurant development is our top long-term capital allocation priority, with a focus on opening our concepts in premier locations within both new and existing markets.

Investing in new Company-owned restaurant development is our top long-term capital deployment priority, with a focus on opening our concepts in premier locations within both new and existing markets.

We expect our acquisition of North Italia and FRC to further accelerate and diversify our growth opportunities.

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Changes in comparable restaurant sales come from variations in customer traffic as well as in average check.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and stabilizing customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient options for off-premise dining, as we believe there is opportunity for a longer-term increase in our off-premise mix compared to pre-COVID-19 pandemic levels.

We are continuing our efforts on a number of initiatives, including a greater focus on increasing customer throughput in our restaurants, leveraging our gift card program, working with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities, augmenting our marketing programs, enhancing our training programs and leveraging our customer satisfaction measurement platform.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient options for off-premise dining, as we believe there is opportunity for a longer-term elevation of our off-premise mix compared to pre-COVID-19 pandemic levels.

We are continuing our efforts on a number of initiatives, including menu innovation, a greater focus on increasing customer throughput in our restaurants, leveraging our gift card program, working with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities, augmenting our marketing programs, enhancing our training programs and leveraging our customer satisfaction measurement platform.

Average check is driven by menu price increases and/or changes in menu mix.

We generally update The Cheesecake Factory restaurant menus twice a year, and our philosophy is to use price increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer traffic levels.

We have targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.

Currently, our menu pricing is at the higher end of this range.

We generally update The Cheesecake Factory menus twice each year, and our philosophy is to use price increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer traffic levels.

We have historically targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.

Due to the cost pressures we are currently experiencing, particularly in commodities, in the first quarter of fiscal 2022, we implemented price increases above our historical levels to protect margins.

Future near-term pricing actions may also be at levels above historical norms.

In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and cost.

Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses.

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We plan to employ a balanced capital allocation strategy, comprised of:

investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our Revolving Facility and reinstating our dividend and share repurchase program, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth.

At present, our dividends on our common stock and share repurchases are suspended.

Our ability to declare common dividends and repurchase shares in the future will be subject to financial covenants under our Amended Credit Agreement, among other factors.

Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7%, in aggregate across concepts, and comparable sales growth), combined with margin expansion, planned debt repayment and an anticipated capital return program will support our long-term financial objective of 13% to 14% total return to shareholders, on average.

investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our Revolving Facility and returning capital to shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth.

Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of the Amended Credit Agreement and applicable law.

Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7%, in aggregate across concepts, and comparable sales growth), combined with margin expansion, planned debt repayments and an anticipated capital return program will support our long-term financial objective of 13% to 14% total return to shareholders, on average.

We define our total return as earnings per share growth plus our dividend yield.

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The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any other interim period or for the full fiscal year.

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Costs and expenses:

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Depreciation and amortization expenses

Impairment of assets and lease expiration

Acquisition-related costs

Acquisition-related contingent consideration and amortization

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

Thirteen Weeks Ended September 28, 2021 Compared to Thirteen Weeks Ended September 29, 2020

Revenues increased 45.7% to $754.5 million for the fiscal quarter ended September 28, 2021 compared to $517.7 million for the comparable prior year period, primarily due to the effect of the COVID-19 pandemic on prior year sales.

The Cheesecake Factory comparable sales increased by 41.1%, or $170.1 million, from the third quarter of fiscal 2020 and increased 8.3% from the third quarter of fiscal 2019.

Thirteen Weeks Ended March 29, 2022 Compared to Thirteen Weeks Ended March 30, 2021

Revenues increased 24.1% to $778.4 million for the fiscal quarter ended March 29, 2022 compared to $627.4 million for the comparable prior year period, primarily due to an increase in comparable restaurant sales, reflecting the impact of the COVID-19 pandemic in the first quarter of fiscal 2021, as well as additional revenue related to new restaurant openings.

The Cheesecake Factory comparable sales increased by 20.7%, or $102.6 million, from the first quarter of fiscal 2021.

The increase from fiscal 2021 was primarily driven by increased customer traffic of 25.3% primarily due to the impact of the COVID-19 pandemic in the prior year, partially offset by a decline in average check of 4.6% (based on a 8.2% negative change in mix, partially offset by an increase of 3.6% in menu pricing).

We implemented effective menu price increases of approximately 1.5% in both the first and third quarters of fiscal 2021.

Sales through the off-premise channel comprised approximately 28% of our restaurant sales during the third quarter of fiscal 2021 as compared to 45% in the third quarter of fiscal 2020 as many customers have returned to on-premise dining, whereas consumer behavior had shifted towards the off-premise channel during the prior year period due to the pandemic.

However, off-premise sales mix remains elevated versus the pre-pandemic level of 15% during the third quarter of fiscal 2019.

The Cheesecake Factory average sales per restaurant operating week increased 40.7% to $220,362 in the third quarter of fiscal 2021 from $156,643 in the third quarter of fiscal 2020.

Total operating weeks at The Cheesecake Factory restaurants increased 1.0% to 2,689 in the third quarter of fiscal 2021 compared to 2,662 in the prior year.

North Italia comparable sales increased approximately 38% from the third quarter of fiscal 2020 and increased approximately 8% compared to the third quarter of fiscal 2019.

North Italia average sales per restaurant operating week increased 34.4% to $127,098 in the third quarter of fiscal 2021 from $94,561 in the third quarter of fiscal 2020.

Total operating weeks at North Italia increased 17.9% to 349 in the third quarter of fiscal 2021 compared to 296 in the prior year.

Revenues for North Italia, Flower Child and the other FRC brands totaled $112.4 million in the third quarter of fiscal 2021.

Sales through the off-premise channel comprised approximately 28% of our restaurant sales during the first quarter of fiscal 2022 as compared to 43% in the first quarter of fiscal 2021 as many customers have returned to on-premise dining, whereas consumer behavior had shifted towards the off-premise channel during the prior year period due to the pandemic.

However, off-premise sales mix remains elevated versus the pre-pandemic level of 17% during the first quarter of fiscal 2019.

We account for each off-premise order as one customer for traffic measurement purposes.

Therefore, average check is generally higher for off-premise orders as most are for more than one customer.

In turn, the lower mix of sales in the off-premise channel during the first quarter of fiscal 2022 compared to the prior year first quarter was the primary driver of the negative change in mix and also contributed to the increase in traffic.

We implemented effective menu price increases of approximately 3.3% and 1.5% in the first quarter of fiscal 2022 and third quarter of fiscal 2021, respectively.

The Cheesecake Factory average sales per restaurant operating week increased 20.9% to $225,523 in the first quarter of fiscal 2022 from $186,478 in the first quarter of fiscal 2021.

Total operating weeks at The Cheesecake Factory restaurants increased 1.0% to 2,704 in the first quarter of fiscal 2022 compared to 2,678 in the prior year.

North Italia comparable sales increased approximately 32% from the first quarter of fiscal 2021.

The increase from fiscal 2021 was primarily driven by increased customer traffic of 32% primarily due to the impact of the COVID-19 pandemic in the prior year, partially offset by a decrease in average check of 1% (based on a 5% negative change in mix, partially offset by an increase of 4% in menu pricing).

North Italia average sales per restaurant operating week increased 29.2% to $139,940 in the first quarter of fiscal 2022 from $108,328 in the first quarter of fiscal 2021.

Total operating weeks at North Italia increased 24.4% to 377 in the first quarter of fiscal 2022 compared to 303 in the prior year.

Restaurants become eligible to enter the comparable sales base in their 19th month of operation.

At September 28, 2021, there were two The Cheesecake Factory restaurants and five North Italia restaurants not yet in the comparable sales base.

At March 29, 2022, there were three The Cheesecake Factory restaurants and six North Italia restaurants not yet in the comparable sales base.

International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from comparable sales calculations.

External bakery sales were $16.7 million for the third quarter of fiscal 2021 compared to $17.8 million in the comparable prior year period.

Cost of Sales

Cost of sales consists of food, beverage and bakery production supply costs incurred in conjunction with our restaurant and bakery revenues, and excludes depreciation, which is captured separately in depreciation and amortization expenses.

As a percentage of revenues, cost of sales was 22.5% and 22.8% in the third quarters of fiscal 2021 and 2020, respectively, reflecting a shift in sales mix within the restaurants, a lower proportion of third-party bakery revenues and pricing leverage, partially offset by increased costs related to buying in the spot market to meet volume needs that exceeded our contracted levels.

As a percentage of revenues, cost of sales was 23.7% and 21.7% in the first quarters of fiscal 2022 and 2021, respectively, primarily due to inflation in excess of pricing across most categories (2.4%), partially offset by a shift in sales mix within the restaurants and a lower proportion of third-party bakery revenues (0.4%).

Labor Expenses

As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery direct production labor, including associated fringe benefits, were 37.1% and 38.7% in the third quarters of fiscal 2021 and 2020, respectively.

This decrease was primarily due to deleverage in the prior year when costs associated with the COVID-19 pandemic, including maintaining our full restaurant management team and healthcare benefits for our furloughed staff members, were incurred in the reduced sales environment, partially offset by higher group medical costs, wage rates, training labor and overtime in the third quarter of fiscal 2021.

As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery direct production labor, including associated fringe benefits, were 37.3% and 36.6% in the first quarters of fiscal 2022 and 2021, respectively.

This increase was primarily due to wage rates and overtime (1.2%) as well as training labor (0.3%), partially offset by pricing leverage (0.8%) in the first quarter of fiscal 2022.

Other Operating Costs and Expenses

Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), marketing, including delivery commissions, other operating expenses (excluding food costs and labor expenses, which are reported separately) and bakery production overhead and distribution expenses.

As a percentage of revenues, other operating costs and expenses were 26.7% and 30.7% in the third quarters of fiscal 2021 and 2020, respectively.

This variance was primarily driven by sales leverage.

As a percentage of revenues, other operating costs and expenses were 26.2% and 28.9% in the first quarters of fiscal 2022 and 2021, respectively.

This variance was primarily driven by pricing leverage (1.6%), sales leverage within the occupancy and building costs (0.6%), and lower restaurant-level incentive compensation expense (0.5%), partially offset by higher general liability insurance due to lower claim activity in the prior year (0.2%).

G&A expenses consist of the restaurant management recruiting and training program, restaurant field supervision, corporate support and bakery administrative organizations, as well as gift card commissions to third-party distributors.

As a percentage of revenues, G&A expenses were 6.1% and 7.3% in the third quarters of fiscal 2021 and 2020, respectively.

This variance was primarily driven by sales leverage and expense management.

As a percentage of revenues, G&A expenses were 6.2% and 7.1% in the first quarters of fiscal 2022 and 2021, respectively.

This variance was primarily driven by sales leverage and expense management (0.6%), as well as lower corporate incentive compensation expense (0.3%).

Depreciation and Amortization Expenses

As a percentage of revenues, depreciation and amortization expenses decreased to 3.0% in the third quarter of fiscal 2021 from 4.4% in the comparable prior year period due primarily to sales leverage.

As a percentage of revenues, depreciation and amortization expenses decreased to 2.7% in the first quarter of fiscal 2022 from 3.5% in the comparable prior year period due primarily to sales leverage.

Impairment of Assets and Lease Terminations

During the third quarter of fiscal 2021, we recorded no impairment of assets and lease terminations expense.

In the third quarter of fiscal 2020, we recorded impairment of assets and lease terminations expense of $10.4 million related to lease termination costs and accelerated depreciation for two Grand Lux Cafe locations, RockSugar Southeast Asian Kitchen and one Flower Child location.

Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses/(Benefit)

We recorded $0.7 million and $1.4 million during the third quarter of fiscal 2021 and 2020, respectively, of acquisition-related contingent consideration, compensation and amortization, reflecting changes in the fair value of the deferred and contingent consideration and compensation liabilities, partially offset by amortization of acquired definite-lived licensing agreements.

During the first quarter of fiscal 2022, we recorded impairment of assets and lease terminations expense of $0.2 million related to lease termination costs and accelerated depreciation for two Grand Lux Cafe locations that closed during the quarter.

In the first quarter of fiscal 2021, we recorded impairment of assets and lease terminations expense of $0.6 million related to lease termination costs for two Other restaurants.

Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses

We recorded $0.9 million and $0.6 million during the first quarter of fiscal 2022 and 2021, respectively, of acquisition-related contingent consideration, compensation and amortization.

Preopening Costs

Preopening costs were $3.2 million and $2.4 million in the third quarters of fiscal 2021 and 2020, respectively.

We opened two North Italia, one Other FRC location and one Other location in the third quarter of fiscal 2021 compared to two Other restaurants in the comparable prior year period.

Preopening costs were $1.8 million and $3.9 million in the first quarters of fiscal 2022 and 2021, respectively.

We had no openings in the first quarter of fiscal 2022 compared to one The Cheesecake Factory, one North Italia and one Other FRC location in the comparable prior year period.

Preopening costs include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members.

Also included are expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs, and corporate travel and support activities.

Preopening costs can fluctuate significantly from period to period based on the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Interest and Other Expense, Net

Interest and other expense, net was $1.8 million and $2.9 million for the third quarters of fiscal 2021 and 2020, respectively.

This increase was primarily due to the lower borrowings outstanding on our Amended Facility.

Income Tax (Benefit)/Provision

Our effective income tax rate was (10.5%) and 25.0% for the third quarters of fiscal 2021 and 2020, respectively.

The decrease resulted primarily from a higher proportion of employment credits in relation to pre-tax income/(loss) in fiscal 2021, a benefit in the prior year arising from the expected carryback of our anticipated fiscal 2020 loss to prior years when the federal statutory rate was 35% and a benefit recorded in the third quarter of fiscal 2021 arising from an increase to our fiscal 2020 loss carryback as a result of repaying 100% of the FICA taxes that were deferred in fiscal 2020 under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act.”)

Thirty-Nine Weeks Ended September 28, 2021 Compared to Thirty-Nine Weeks Ended September 29, 2020

Revenues increased 50.5% to $2,150.8 million for the first three quarters of fiscal 2021 compared to $1,428.7 million for the comparable prior year period, primarily due to the effect of the COVID-19 pandemic on prior year sales.

The Cheesecake Factory comparable sales increased by 48.0%, or $539.3 million, from the first three quarters of fiscal 2020 and increased 1.9% from the first three quarters of fiscal 2019.

The increase from fiscal 2020 was primarily driven by increased customer traffic of 42.9% primarily due to the impact of the COVID-19 pandemic in the prior year period and average check growth of 5.1% (based on an increase of 3.0% in menu pricing and a 2.1% positive change in mix).

Sales through the off-premise channel comprised approximately 33% of our restaurant sales during the first three quarters of fiscal 2021 as compared to 43% in the first three quarters of fiscal 2020.

However, off-premise sales mix remains elevated versus the pre-pandemic level of 16% during the first three quarters of fiscal 2019.

The Cheesecake Factory average sales per restaurant operating week increased 46.6% to $210,801 in the first three quarters of fiscal 2021 from $143,747 in the first three quarters of fiscal 2020.

Total operating weeks at The Cheesecake Factory restaurants increased 1.0% to 8,058 in the first three quarters of fiscal 2021 compared to 7,976 in the prior year period.

North Italia comparable sales increased approximately 53% from the first three quarters of fiscal 2020 and increased approximately 5% compared to the first three quarters of fiscal 2019.

North Italia average sales per restaurant operating week increased 44.4% to $123,211 in the first three quarters of fiscal 2021 from $85,315 in the first three quarters of fiscal 2020.

Total operating weeks at North Italia increased 15.7% to 980 in the first three quarters of fiscal 2021 compared to 847 in the prior year period.

Revenues for North Italia, Flower Child and the other FRC brands totaled $314.4 million in the third quarter of fiscal 2021.

External bakery sales were $48.8 million for the first three quarters of fiscal 2021 compared to $46.3 million in the comparable prior year period.

Cost of Sales

As a percentage of revenues, cost of sales was 22.0% and 23.2% in the first three quarters of fiscal 2021 and 2020, respectively, reflecting a shift in sales mix within the restaurants, a lower proportion of third-party bakery revenues and pricing leverage, partially offset by increased costs related to buying in the spot market to meet volume needs that exceeded our contracted levels.

Labor Expenses

As a percentage of revenues, labor expenses were 36.5% and 39.2% in the first three quarters of fiscal 2021 and 2020, respectively.

This decrease was primarily due to deleverage in the prior year when costs associated with the COVID-19 pandemic, including maintaining our full restaurant management team and healthcare benefits for our furloughed staff members, were incurred in the reduced sales environment, partially offset by higher wage rates and overtime in the first three quarters of fiscal 2021.

Other Operating Costs and Expenses

As a percentage of revenues, other operating costs and expenses were 27.1% and 31.4% in the first three quarters of fiscal 2021 and 2020, respectively.

This variance was primarily driven by sales leverage, partially offset by increased restaurant-level incentive compensation expense.

As a percentage of revenues, G&A expenses were 6.4% and 8.2% in the first three quarters of fiscal 2021 and 2020, respectively.

This variance was primarily driven by sales leverage and expense management, partially offset by higher corporate incentive compensation expense.

Depreciation and Amortization Expenses

As a percentage of revenues, depreciation and amortization expenses decreased to 3.1% in the first three quarters of fiscal 2021 from 4.8% in the comparable prior year period due primarily to sales leverage.

Impairment of Assets and Lease Terminations

During the first three quarters of fiscal 2021, we recorded impairment of assets and lease terminations expense of $0.6 million related to lease termination costs for two Other restaurants, one of which closed during the fourth quarter of fiscal 2020 and one that closed at the beginning of the first quarter of fiscal 2021.

During the first three quarters of fiscal 2020, we recorded $204.7 million of impairment of assets and lease terminations expense related to the impairment of goodwill, trade names, trademarks and licensing agreements associated with the Acquisitions and long-lived assets for one The Cheesecake Factory, one North Italia, two Other FRC and four Other restaurants, as well as lease termination costs and accelerated depreciation for one The Cheesecake Factory restaurant, two Grand Lux Cafe locations, RockSugar Southeast Asian Kitchen and one Flower Child location.

Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses/(Benefit)

In the first three quarters of fiscal 2021, we recorded $12.6 million of acquisition-related contingent consideration, compensation and amortization, primarily related to the impact of an amendment in the second fiscal quarter to the Acquisition agreement that, among other things, extended the measurement period through fiscal 2026.

In the first three quarters of fiscal 2020, we recorded a benefit of $4.0 million in acquisition-related contingent consideration, compensation and amortization, primarily due to a decrease in the fair value of the contingent consideration and compensation liabilities related to impact of the COVID-19 pandemic.

Preopening Costs

Preopening costs were $9.8 million and $7.6 million in the first three quarters of fiscal 2021 and 2020, respectively.

We opened one The Cheesecake Factory, five North Italia, two Other FRC and two Other locations in the first three quarters of fiscal 2021 compared to one North Italia and three Other locations in the comparable prior year period.

Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Interest and Other Expense, Net

Interest and other expense, net was $9.2 million and $7.0 million for the first three quarters of fiscal 2021 and 2020, respectively.

This increase was primarily due to the termination of the interest rate swap, partially offset by lower borrowings outstanding on our Amended Facility.

Income Tax Provision/(Benefit)

Our effective income tax rate was 2.6% and 30.0% for the first three quarters of fiscal 2021 and 2020, respectively.

The decrease resulted primarily from a higher proportion of employment credits in relation to pre-tax income/(loss) in fiscal 2021, a benefit in the prior year arising from the expected carryback of our anticipated fiscal 2020 loss to prior years when the federal statutory rate was 35% and a benefit recorded in 2021 arising from an increase to our fiscal 2020 loss carryback as a result of repaying 100% of the FICA taxes that were deferred in fiscal 2020 under the CARES Act.

This decrease was partially offset by a reserve for an uncertain tax position recorded in fiscal 2021 related to tenant improvement allowances.

Interest and other expense, net was $1.5 million and $2.7 million for the first quarters of fiscal 2022 and 2021, respectively.

This decrease was primarily due to interest in the prior year related to our interest rate swap, which was terminated in June 2021 ($0.5 million), as well as favorability across several other categories.

Income Tax Provision

Our effective income tax rate was 13.8% and 37.1% for the first quarters of fiscal 2022 and 2021, respectively.

The decrease resulted primarily from a reserve for an uncertain tax position recorded in the first quarter of fiscal 2021, partially offset by a lower proportion of employment credits in relation to pre-tax income in the first quarter of fiscal 2022.

Non-GAAP Measures

Adjusted net income and adjusted net income per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP.

Adjusted net income/(loss) and adjusted net income/(loss) per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP.

These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

We calculate these non-GAAP measures by eliminating from net income/(loss) and diluted net income/(loss) per common share the impact of items we do not consider indicative of our ongoing operations.

To reflect the potential impact of the conversion of our Series A preferred stock into common stock for the period that it was outstanding prior to the conversion on June 15, 2021, we exclude the preferred dividend and assume all convertible preferred shares have been converted into common stock.

To reflect the potential impact of the conversion of our Series A preferred stock into common stock for the period that it was outstanding prior to the conversion on June 15, 2021, we excluded the preferred dividend and assumed all convertible preferred shares have been converted into common stock.

(See Note 9 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our preferred stock.) We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

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Following is a reconciliation from net income/(loss) and diluted net income/(loss) per common share to the corresponding adjusted measures (in thousands, except per share data):

September 28, 2021

September 29, 2020

September 28, 2021

September 29, 2020

March 29, 2022

March 30, 2021

Net income/(loss) available to common stockholders

Dividends on preferred stock

Direct and incremental preferred stock issuance costs

Net income attributable to Series A preferred stock

Dividends on Series A preferred stock

COVID-19 related costs (1)

Impairment of assets and lease terminations

Acquisition-related costs

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

Termination of interest rate swap

Uncertain tax position related to tenant improvement allowances

Impairment of assets and lease termination expenses

Acquisition-related contingent consideration, compensation and amortization expenses

Uncertain tax positions

Tax effect of adjustments (2)

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Diluted net income/(loss) per common share

Dividends on preferred stock

Direct and incremental preferred stock issuance costs

Net income attributable to Series A preferred stock

Dividends on Series A preferred stock

Assumed impact of potential conversion of preferred stock into common stock (3)

COVID-19 related costs (1)

Impairment of assets and lease terminations

Acquisition-related costs

Impairment of assets and lease termination expenses

Acquisition-related contingent consideration, compensation and amortization expenses

Termination of interest rate swap

Uncertain tax position related to tenant improvement allowances

Uncertain tax position

Tax effect of adjustments (2)

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(2) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate.

(3) Represents the impact of assuming the conversion of preferred stock into common stock (0 and 5,908,187 shares for the thirteen and thirty-nine weeks ended September 28, 2021, respectively), resulting in an assumption of 51,112,650 and 53,582,824 weighted-average common shares outstanding for the thirteen and thirty-nine weeks ended September 28, 2021.

Represents the impact of assuming the conversion of preferred stock into common stock (9,163,043 and 5,394,188 shares for the thirteen and thirty-nine weeks ended September 29, 2020, respectively), resulting in an assumption of 53,062,945 and 49,243,370 weighted-average common shares outstanding for the thirteen and thirty-nine weeks ended September 29, 2020.

(4) Adjusted net income/(loss) per share may not add due to rounding.

Fourth Quarter Fiscal 2021 Outlook

Fourth quarter-to-date through November 2, 2021, The Cheesecake Factory restaurant comparable sales increased approximately 20% and 10.5% compared to the comparable period in fiscal 2020 and fiscal 2019, respectively.

In the fourth quarter of fiscal 2021, we anticipate about a 1% negative comparable sales impact given that our 2021 fiscal year will end on December 28 th and the balance of the high-volume sales week between Christmas and New Year’s Day will move into the first quarter of fiscal 2022.

Fourth quarter-to-date through November 2, 2021, North Italia comparable sales increased approximately 20% and 14.5% compared to the comparable period in fiscal 2020 and fiscal 2019, respectively.

We currently estimate cost of sales inflation of approximately 6% in the fourth quarter of fiscal 2021, which is approximately three percentage points higher than the third quarter of fiscal 2021.

We expect labor as a percent of sales to be slightly favorable to the third quarter of fiscal 2021 and other operating expenses to be favorable to the third quarter of fiscal 2021 by as much as 0.75% of revenues.

In addition, we estimate G&A of approximately $47 million and preopening of approximately $5 million in the fourth quarter of fiscal 2021.

We estimate our tax rate for the fourth quarter of fiscal 2021 to be approximately 5%.

(3) Represents the impact of assuming the conversion of preferred stock into common stock (9,598,559 shares), resulting in an assumption of 53,787,314 weighted-average common shares outstanding for the thirteen weeks ended March 30, 2021.

(4) Adjusted net income per share may not add due to rounding.

Fiscal 2022 Outlook

Looking ahead to fiscal 2022, due to the disruptions in the supply chain impacting the restaurant industry and the broader economy, our purchasing team is still in the process of contracting as you would expect in these circumstances.

The labor market is also dynamic, and we are currently anticipating inflation, inclusive of known minimum wage increases, to be similar to the 5% level we have experienced in our restaurants on a year-to-date basis during fiscal 2021.

We currently have 3% pricing in The Cheesecake Factory menu and plan to remain at that level for the remainder of the fiscal 2021.

Should the cost pressures prove to not be transitory in nature, we will implement pricing actions above our historical levels at our menu change during the first quarter of fiscal 2022 to protect margins.

We plan to open as many as 20 new restaurants in fiscal 2022, including five The Cheesecake Factory restaurants, seven North Italia restaurants and eight restaurants within our FRC business, which includes three Flower Child locations.

Based on extrapolating recent trends and assuming no material disruptions from COVID-19 or other factors, we anticipate total revenue for the second quarter of fiscal 2022 to be approximately $830 million to $850 million and for the full fiscal year to be approximately $3.3 billion to $3.4 billion, with The Cheesecake Factory fiscal year 2022 average sales per location reaching just over $12 million, including the impact of the 53rd operating week.

We remain committed to protecting our longer-term restaurant-level margins and will take appropriate actions, including additional menu pricing to offset structural and permanent costs, as needed.

However, we will likely continue to absorb short-term cost fluctuations driven by the current environment.

Including the February 2022 price increase, we currently have 4.75% pricing in The Cheesecake Factory menu and anticipate taking another menu price increase that is above our historical norm in the third quarter of fiscal 2022.

For fiscal year 2022, we expect commodity inflation of low to mid double digits inclusive of the recent geopolitical environment, with mid-teens inflation in the second quarter of fiscal 2022 moderating to high single digit inflation in the fourth quarter of fiscal 2022.

We expect fiscal year 2022 net labor inflation of approximately 6% when factoring in wage rates and channel mix, among other components such as payroll taxes and benefits.

We also anticipate other operating costs and expenses as a percentage of revenues to improve as we move through the year, with a full year average of approximately 25.5%.

In addition, we expect fiscal 2022 G&A expenses of approximately $210 million, preopening costs of approximately $18 million, depreciation and amortization expenses of approximately $90 million and are utilizing a tax rate of approximately 11% to 12% for modeling purposes.

We plan to open as many as 15 to 16 new restaurants in fiscal 2022, including four The Cheesecake Factory restaurants, four to five North Italia restaurants and as many as seven restaurants within our FRC business, which includes three to four Flower Child locations.

We anticipate approximately $150 million in cash capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.

Liquidity and Capital Resources

During the first three quarters of fiscal 2021, our cash and cash equivalents decreased by $23.1 million to $131.0 million.

Our corporate financial objectives are to maintain a sufficiently strong and conservative balance sheet to support our operating initiatives and unit growth while maintaining financial flexibility to provide the financial resources necessary to protect and enhance the competitiveness of our restaurant and bakery brands and to provide a prudent level of financial capacity to manage the risks and uncertainties of conducting our business operations under various economic and industry cycles.

Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures.

However, given the impact of the COVID-19 pandemic on our operations, during fiscal 2020 we increased borrowings under our credit facility and issued convertible preferred stock to increase our liquidity.

During fiscal 2021, we used net proceeds from issuing convertible senior notes and additional common stock to fund the repurchase of the majority of our Series A preferred stock and the conversion of the remaining Series A preferred stock into common stock, simplifying our capital structure and eliminating future convertible preferred stock dividends.

We also utilized a portion of the net proceeds to reduce borrowings under our credit facility.

Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of our restaurant locations.

Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure.

We are not limited to the use of lease arrangements as our only method of opening new restaurants.

However, we believe our operating lease arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner.

During the first quarter of fiscal 2022, our cash and cash equivalents decreased by $6.1 million to $183.6 million.

The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions):

September 28 2021

September 29, 2020

Cash provided by/(used in) operating activities

March 29, 2022

March 30, 2021

Cash provided by operating activities

Additions to property and equipment

Convertible debt issuance, net of issuance cost

Common stock issuance, net of issuance cost

Net borrowings/(repayments) on credit facility

Series A preferred stock issuance, net of issuance cost

Series A preferred stock cash-settled conversion

Series A preferred stock dividends paid

Proceeds from exercise of stock options

Common stock dividends paid

Treasury stock purchases

Cash Provided by/(Used in) Operating Activities

Cash flows from operations increased by $151.9 million from the first three quarters of fiscal 2020 primarily due to a lesser impact from the COVID-19 pandemic during the first three quarters of fiscal 2021, partially offset by the payback of $36.5 million of payroll taxes that were deferred in fiscal 2020 under the CARES Act.

Our future cash flow performance will depend on the ongoing effects of the COVID-19 pandemic, including, but not limited to, labor-related impacts, supply chain disruptions and consumer behavior.

Acquisition-related deferred consideration and compensation

Cash Provided by Operating Activities

Cash flows from operations increased by $11.9 million from the first quarter of fiscal 2021 primarily due to a lesser impact of the COVID-19 pandemic.

Property and Equipment

Capital expenditures were $49.2 million and $38.3 million in the first three quarters of fiscal 2021 and 2020, respectively.

We opened ten restaurants in the fiscal 2021 period comprised of one The Cheesecake Factory, five North Italia, two Other FRC and two Other locations, of which a portion of the development was completed in fiscal 2020, compared to one North Italia and three Flower Child restaurants during the comparable prior year period.

We currently estimate fiscal 2021 cash capital expenditures to be approximately $80 million.

Capital expenditures for new restaurants, including locations under development, were $16.5 million and ($0.3) million for the first quarters of fiscal 2022 and 2021, respectively.

Capital expenditures also included $12.2 million and $6.7 million for our existing restaurants and $0.4 million and $0.8 million for bakery and corporate capacity and infrastructure investments in the first quarters of fiscal 2022 and 2021, respectively.

We currently anticipate fiscal 2022 capital expenditures to be approximately $150 million.

Acquisition-Related Deferred Consideration and Compensation

During the first quarter of fiscal 2022, we made a payment of $7.2 million for contingent consideration and compensation related to the FRC acquisition.

Convertible Senior Notes

On June 15, 2021, we issued $345.0 million aggregate principal amount Notes.

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

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

On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes (“Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted.

At March 29, 2022, the conversion rate for the Notes was 12.7551 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately $78.40 per share of common stock.

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.

(See Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of the Notes.)

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.

Revolving Facility

Revolving Credit Facility

On March 30, 2021, we entered into an Amended Credit Agreement, which terminates on July 30, 2024, and 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 also provides the ability to increase the Revolving Facility in an amount not to exceed (a) during the Covenant Relief Period $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.

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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.

As of September 28, 2021, we were in compliance with the covenants set forth in the Revolving Facility.

As of March 29, 2022, we were in compliance with the covenants set forth in the Revolving Facility.

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.

(See Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term debt.)

During the first quarter of fiscal 2020, we increased our borrowings under our Revolving Facility to bolster our cash position and enhance financial flexibility.

In the second quarter of fiscal 2021, we utilized a portion of the net proceeds from our Notes and common share offerings to reduce the balance on our Revolving Facility, such that 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.

Series A Preferred Stock

During the second quarter of fiscal 2020, we issued 200,000 shares of Series A preferred stock for an aggregate purchase price of $200.0 million to increase our liquidity given the impact of the COVID-19 pandemic on our operations.

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

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

During the second quarter of fiscal 2021, we paid $457.3 million in connection with the cash-settled conversion of 150,000 shares of our outstanding Series A preferred stock (effected through a repurchase agreement), and the share-settled conversion of the remaining 50,000 shares of our outstanding Series A preferred stock into 2,400,864 shares of our common stock, of which $13.6 million was deemed to be a dividend.

(See Note 9 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our preferred stock.)

Common Stock Dividends

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.

Prior to this suspension, our Board declared cash dividends of $0.36 per common share for the first quarter of fiscal 2020.

Cash dividends of $0.3 million paid in the first quarter of fiscal 2021 represent dividends previously accrued on restricted stock awards that vested during the quarter.

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 other such 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, our Board suspended declaring dividends on our common stock.

Cash dividends of $2.2 million were paid in the first quarter of fiscal 2021, represent dividends previously accrued on restricted stock awards that vested during those quarters.

In April 2022, our Board declared a quarterly dividend.

(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 other such factors that the Board considers relevant.

Share Repurchases

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 100,081 shares repurchased at a cost of $5.2 million during the first three quarters of fiscal 2021 to satisfy tax withholding obligations on vested restricted share awards.

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased 53.2 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 first quarter of fiscal 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.

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Credit Agreement, in March 2020, our Board suspended share repurchases.

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.

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Credit Agreement, our Board suspended our share repurchase program.

In April 2022, our Board reinstated our share repurchase program.

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 9 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase authorization and methods.)

Cash Flow Outlook

We believe that our cash and cash equivalents, combined with expected cash flows provided by operations and available borrowings under the Revolving Facility, will provide us with adequate liquidity for the next 12 months.

As of September 28, 2021, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties.

As of March 29, 2022, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties.

Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.

Critical Accounting 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.

Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended December 28, 2021.

Recent Accounting Pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis