What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-01 · 164 added, 126 removed, 383 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(In thousands, except share and per share data)

September 27,

Current assets:

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

106,029,780 and 105,365,678 shares issued at June 28, 2022 and December 28, 2021, respectively

106,156,302 and 105,365,678 shares issued at September 27, 2022 and December 28, 2021, respectively

Additional paid-in capital

Retained earnings

Treasury stock, 53,596,559 and 53,139,172 shares at cost at June 28, 2022 and December 28, 2021, respectively

Treasury stock, 54,485,868 and 53,139,172 shares at cost at September 27, 2022 and December 28, 2021, respectively

( 1,744,005 )

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THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME

(In thousands, except per share data)

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Costs and expenses:

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Total costs and expenses

Income from operations

(Loss)/income from operations

Interest and other expense, net

Income before income taxes

Income tax provision

(Loss)/income before income taxes

Income tax (benefit)/provision

Net (loss)/income

Dividends on Series A preferred stock

Undistributed earnings allocated to Series A preferred stock

Net income available to common stockholders

Net income per common share:

Net (loss)/income available to common stockholders

Net (loss)/income per common share:

Diluted (Note 11)

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THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In thousands)

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Net (loss)/income

Other comprehensive (loss)/gain:

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Other comprehensive (loss)/gain

Total comprehensive income

Total comprehensive (loss)/income

Comprehensive income attributable to Series A preferred stockholders

Total comprehensive income available to common stockholders

Total comprehensive (loss)/income available to common stockholders

See the accompanying notes to the condensed consolidated financial statements

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(In thousands)

For the twenty-six weeks ended June 28, 2022:

For the thirty-nine weeks ended September 27, 2022:

Series A Convertible

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( 1,717,326 )

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

Foreign currency translation adjustment

Cash dividends declared common stock, net of forfeitures, $ 0.27 per share

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases

Balance, September 27, 2022

( 1,744,005 )

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

Series A Convertible

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( 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 )

See the accompanying notes to the condensed consolidated financial statements.

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(In thousands)

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

Cash flows from operating activities:

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Actual results could differ from these estimates.

COVID-19 Pandemic

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.

COVID-19 Pandemic and Other Impacts to our Operating Environment

We have experienced significant disruptions to our business as federal, state and local restrictions have fluctuated over time to mitigate the spread of the COVID-19 virus.

While most of our restaurants operated with no restrictions on indoor dining during the 2021 fiscal year and 2022 fiscal year to date, our operations were notably impacted during periods of accelerating case counts which led to restaurant staff quarantines and a shift in consumer behavior towards sheltering-in-place and social distancing.

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

During fiscal year 2022 to date, along with COVID-19, our operating results have been impacted by geopolitical and other macroeconomic factors, leading to increased commodity and wage inflation and other increased costs.

The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events, could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation and disruptions in the supply chain.

If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending share repurchases and dividends, increasing borrowings on our credit facility or modifying our operating strategies.

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

Recent Accounting Pronouncements

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The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):

June 28, 2022

September 27, 2022

Assets/(Liabilities)

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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):

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

Beginning balance

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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 utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at June 28, 2022 was $ 0 to $ 204.0 million.

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

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

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

The fair values of our cash and cash equivalents, accounts and other receivables, income taxes receivable, prepaid expenses, accounts payable, income taxes payable and other accrued liabilities approximate their carrying amounts.

As of June 28, 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 June 28, 2022 was approximately $ 269.1 million and was determined based on the estimated

or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period.

As of September 27, 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 September 27, 2022 was approximately $ 269.1 million and was determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period.

The decrease in the fair value of the Notes was primarily due to a decline in our stock price from the date of the issuance of Notes.

See Note 5 for further discussion of the Notes.

Inventories consisted of (in thousands):

June 28, 2022

September 27, 2022

December 28, 2021

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Bakery raw materials and supplies

The increase in bakery finished goods and work in progress inventory primarily relates to lower than typical levels at December 28, 2021 due to challenges ramping back up after the initial COVID-19 shutdown, as well as higher valuations at September 27, 2022 due to the significant cost inflation experienced during fiscal 2022.

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

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Gift card liabilities:

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Ending balance

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Gift card contract assets:

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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 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 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.

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”) was suspended until the quarter ending December 28, 2021 (the “Covenant Relief Period”), (ii) continued to impose a monthly Liquidity covenant of $ 100 million (with “Liquidity” being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the Revolving Facility) until the Company 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.

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 4.1 and 2.2 , respectively, at June 28, 2022, and we were in compliance with all covenants in effect at that date.

Our Net Adjusted Leverage and EBITDAR Ratios were 3.7 and 2.1 , respectively, at September 27, 2022.

Our compliance with the financial covenants set forth in the Revolving Facility as of September 27, 2022 was measured under the Fourth Revolving Facility (as defined in Note 13 below), and as of such date we were in compliance.

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.

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

At June 28, 2022, we had net availability for borrowings of $ 237.7 million, based on a $ 130.0 million outstanding debt balance and $ 32.3 million in standby letters of credit.

At September 27, 2022, we had net availability for borrowings of $ 238.5 million, based on a $ 130.0 million outstanding debt balance and $ 31.5 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.

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

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

supplemented by a first supplemental indenture (the “Supplemental Indenture,” and the Base Indenture, as supplemented by the Supplemental Indenture, the “Indenture”), dated as of June 15, 2021, between the Company and the Trustee.

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

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

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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 June 28, 2022, the conversion rate is 12.8586 shares of common stock per $ 1,000 principal amount of the Notes, which represents a conversion price of approximately $ 77.77 per share of common stock.

In connection with the cash dividend that was declared by our Board on July 21, 2022, on August 11, 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.

As of September 27, 2022, the conversion rate is 12.9717 shares of common stock per $ 1,000 principal amount of the Notes, which represents a conversion price of approximately $ 77.09 per share of common stock.

In connection with the cash dividend that was declared by our Board on October 26, 2022, on November 14, 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 their 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;

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

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

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

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

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

If any other Event of Default occurs and is continuing, then, the Trustee, by notice to us, or noteholders of at least 25 % of the aggregate principal amount of

Notes then outstanding, by notice to us and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately.

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

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

As of June 28, 2022, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 337.0 million, net of unamortized issuance costs.

Total amortization expense was $ 0.5 million and $ 1.0 million during the thirteen and twenty-six weeks ended June 28, 2022, respectively.

The effective interest rate for the Notes was 0.96 % as of June 28, 2022.

As of September 27, 2022, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 337.5 million, net of unamortized issuance costs.

Total amortization expense was $ 0.5 million and $ 1.5 million during the thirteen and thirty-nine weeks ended September 27, 2022, respectively.

The effective interest rate for the Notes was 0.96 % as of September 27, 2022.

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

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Supplemental information related to leases (in thousands):

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

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

1 unchanged sentence

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

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.

We terminated our interest rate swap agreement, which was designated as a cash flow hedge, 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 credit facility.

The interest rate swap entitled us to receive a variable rate of interest based on the one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802 % .

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

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

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

The following table summarizes the changes related to the interest rate swap in accumulated other comprehensive income (“AOCI”), net of tax, during the twenty-six weeks ended June 29, 2021 (in thousands):

The following table summarizes the changes related to the interest rate swap in accumulated other comprehensive income (“AOCI”), net of tax, during the thirty-nine weeks ended September 28, 2021 (in thousands):

Beginning balance

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On June 28, 2018, we filed an appeal of the wage citation.

The hearing on the Company’s appeal is scheduled to take place in September 2022.

Based on the current status of this matter, we have reserved an immaterial amount.

On July 7, 2022, the parties participated in voluntary mediation and reached a tentative settlement on the wage citation.

The settlement is subject to documentation and final agency approval.

We have reserved an immaterial amount for settlement purposes.

On June 22, 2018, the Internal Revenue Service issued a Notice of Deficiency in which they disallowed a portion of our §199 Domestic Production Activities Deduction for tax years 2010, 2011 and 2012.

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On May 11, 2022, the court entered the Decision in accordance with the stipulation of the parties.

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

We have recorded 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.

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Common Stock – Dividends and Share Repurchases

On April 21, 2022, our Board declared a quarterly cash dividend of $ 0.27 per share that was paid on May 24, 2022 to the stockholders of record of each share of our common stock at the close of business on May 11, 2022.

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 53.6 million shares at a total cost of $ 1,717.3 million through June 28, 2022, with 359,705 shares and 457,387 shares repurchased at a cost of $ 10.9 million and $ 14.8 million during the thirteen and twenty-six weeks ended June 28, 2022, respectively.

On July 21, 2022, our Board declared a quarterly cash dividend of $ 0.27 per share that was paid on August 23, 2022 to the stockholders of record of each share of our common stock at the close of business on August 10, 2022.

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 Fourth Amended Credit Agreement (as defined in Note 13 below) and applicable law, and such other factors that the Board considers relevant.

(See Notes 5 and 13 for further discussion of our long-term debt and dividends declared subsequent to September 27, 2022, respectively.)

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased 54.5 million shares at a total cost of $ 1,744.0 million through September 27, 2022, with 889,309 shares and 1,346,696 shares repurchased at a cost of $ 26.7 million and $ 41.5 million during the thirteen and thirty-nine weeks ended September 27, 2022, respectively.

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.

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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.)

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

(See Notes 5 and 13 for further discussion of our long-term debt and increased authorized amount under our share repurchase program, respectively.)

Series A Convertible Preferred Stock

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

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Labor expenses

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Stock Options

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

Stock option activity during the twenty-six weeks ended June 28, 2022 was as follows:

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

Stock option activity during the thirty-nine weeks ended September 27, 2022 was as follows:

Exercise Price

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Forfeited or cancelled

Outstanding at June 28, 2022

Exercisable at June 28, 2022

Outstanding at September 27, 2022

Exercisable at September 27, 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 June 28, 2022.

The total intrinsic value of options exercised during the twenty-six weeks ended June 28, 2022 was $ 4.9 million.

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

As of June 28, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $ 3.6 million, which we expect to recognize over a weighted-average period of approximately 2.2 years.

There were no options exercised during the third quarters of fiscal 2022 or 2021.

The total intrinsic value of options exercised during the first three quarters of fiscal 2022 and 2021 were $ 4.9 million and $ 7.1 million, respectively.

As of September 27, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $ 3.1 million, which we expect to recognize over a weighted-average period of approximately 1.9 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the twenty-six weeks ended June 28, 2022 was as follows:

Restricted share and restricted share unit activity during the thirty-nine weeks ended September 27, 2022 was as follows:

(In thousands)

Outstanding at December 28, 2021

Outstanding at June 28, 2022

Outstanding at September 27, 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 second quarter of fiscal 2022 and 2021 was $ 30.49 and $ 59.07 , respectively.

The fair value of shares that vested during the thirteen and twenty-six weeks ended June 28, 2022 was $ 2.1 million and $ 14.5 million, respectively.

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

As of June 28, 2022, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 54.9 million, which we expect to recognize over a weighted-average period of approximately 3.1 years.

Net Income Per Share

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

At June 28, 2022 and June 29, 2021, 2.4 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 per share is computed by dividing net income available to common stockholders by the weighted-average number of common stock equivalents outstanding for the period.

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.

The weighted average fair value for restricted shares and restricted share units issued during the third quarter of fiscal 2022 and 2021 was $ 28.59 and $ 51.95 , respectively.

The fair value of shares that vested during the thirteen and thirty-nine weeks ended September 27, 2022 was $ 1.9 million and $ 16.4 million, 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.

As of September 27, 2022, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 53.3 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.

Net (Loss)/Income Per Share

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

At September 27, 2022 and September 28, 2021, 2.4 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 (loss)/income per share is computed by dividing net (loss)/income 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, restricted stock and restricted stock units 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 required us to apply the two-class method to compute both basic and diluted net income per share.

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 (loss)/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 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.

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

In addition, as our Series A preferred stock was a participating security, we were required to calculate diluted net (loss)/income per share under the if-converted method in addition to the two-class method and utilize the most dilutive result.

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

(In thousands, except per share data)

Basic net income per common share:

Basic net (loss)/income per common share:

Net (loss)/income

Dividends on Series A preferred stock

Undistributed earnings allocated to Series A preferred stock

Net income available to common stockholders

Net (loss)/income available to common stockholders

Basic weighted-average shares outstanding

Basic net income per common share

Diluted net income per common share:

Net income available to common stockholders

Basic net (loss)/income per common share

Diluted net (loss)/income per common share:

Net (loss)/income available to common stockholders

Reallocation of undistributed earnings to Series A preferred stock

Net income available to common stockholders for diluted earnings per share

Net (loss)/income available to common stockholders for diluted earnings per share

Basic weighted-average shares outstanding

1 unchanged sentence

Diluted weighted-average shares outstanding

Diluted net income per common share

(1) Shares of common stock equivalents related to outstanding stock options and restricted stock of 3.1 million and 0.9 million as of June 28, 2022 and June 29, 2021, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.

Diluted net (loss)/income per common share

(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock units of 3.3 million and 3.8 million as of September 27, 2022 and September 28, 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.

5 unchanged sentences

Segment information is presented below (in thousands):

June 28, 2022

June 29, 2021

June 28, 2022

June 29, 2021

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

The Cheesecake Factory restaurants

Income from operations:

(Loss)/income from operations:

The Cheesecake Factory restaurants

7 unchanged sentences

The Cheesecake Factory restaurants

June 28, 2022

September 27, 2022

December 28, 2021

2 unchanged sentences

Subsequent Events

On July 21, 2022, our Board declared a quarterly cash dividend of $ 0.27 per share to be paid on August 23, 2022 to the stockholders of record of each share of our common stock at the close of business on August 10, 2022.

On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Fourth Amended Credit Agreement” and the revolving credit facility provided thereunder, the “Fourth Revolving Facility”).

The Fourth Amended Credit Agreement amends and restates in its entirety our prior Amended Credit Agreement.

The Fourth Revolving Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $ 400 million, of which $ 50 million may be used for issuances of letters of credit.

The Fourth Revolving Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $ 200 million in revolving loan commitments.

Our obligations under the Fourth Revolving Facility are unsecured.

Certain of our material subsidiaries have guaranteed our obligations under the Fourth Revolving Facility.

On October 6, 2022 we repaid the outstanding balance under the Revolving Facility and borrowed the same amount on the Fourth Revolving Facility.

As of the date of this report, we had net availability for borrowings of $ 238.5 million, based on a $ 130.0 million outstanding debt balance and $ 31.5 million in standby letters of credit under the Fourth Revolving Facility.

Under the Fourth Revolving Facility, we are subject to the following financial covenants as of the last day of each fiscal quarter:

(i) a maximum ratio of net adjusted debt to EBITDAR (the “Amended Net Adjusted Leverage Ratio”) of 4.25 and (ii) a minimum ratio of EBITDAR to interest and rent expense of 1.90 .

The Amended Net Adjusted Leverage Ratio includes a rental expense multiplier of six as compared to eight in the Amended Credit Agreement.

Borrowings under the Fourth Amended Credit Agreement bear interest, at the Company’s election, at a rate equal to either:

(i) the sum of (A) adjusted term SOFR (as defined in the Fourth Amended Credit Agreement, the “Term SOFR Rate”) plus (B) a rate variable based on the Amended Net Adjusted Leverage Ratio, ranging from 1.00 % to 1.75 %, or (ii) the sum of (A) the highest of (x) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (y) the greater of the rate calculated by the Federal Reserve Bank of New York as the federal funds effective rate or the rate that is published by the Federal Reserve Bank of New York as the overnight bank funding rate, in either case, plus 0.50 %, and (z) the one-month Term SOFR Rate plus 1.00 %, plus (B) a rate variable based on the Net Adjusted Leverage Ratio, ranging from 0.00 % to 0.75 %.

The Company will also pay a fee variable based on the Net Adjusted Leverage Ratio, ranging from 0.125 % to 0.25 %, on the daily amount of unused commitments under the Fourth Amended Credit Agreement.

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 SOFR plus other customary fees charged by the issuing bank.

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

We are also subject to customary events of default that, if triggered, could result in acceleration of the maturity of the Fourth Revolving Facility.

Subject to certain exceptions, the Fourth Revolving Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

On October 26, 2022, our Board declared a quarterly cash dividend of $ 0.27 per share to be paid on November 28, 2022 to the stockholders of record of each share of our common stock at the close of business on November 15, 2022.

On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million shares to 61.0 million shares.

See Note 9 for further discussion on our repurchase authorization and methods.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements