What changed in this filing

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Item 9A. Controls and Procedures

2025-02-24 compared with 2024-02-26 · 209 added, 227 removed, 846 unchanged (34% of the section changed)

4 unchanged sentences

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of January 2, 2024.

Management’s Report on Internal Control over Financial Reporting

4 unchanged sentences

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of January 2, 2024 based on the criteria in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of January 2,2024.

The effectiveness of our internal control over financial reporting as of January 2, 2024 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV, Item 15 of this report.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV, Item 15 of this report.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the three months ended January 2, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a - 15(f) and 15d - 15(f) under the Securities Exchange Act of 1934) during the three months ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

5 unchanged sentences

We intend to satisfy disclosure requirements under Item 5.05 of Form 8 - K regarding an amendment to, or waiver from, a provision of the Code of Ethics for Executive Officers, Senior Financial Officers and Directors by posting such information on our website, at the address and location specified above, or as otherwise required by the Nasdaq Global Market.

We have adopted a special trading policy and procedures (the “Trading Policy”) governing the purchases, sale and other dispositions of our securities that applies to our directors, officers and certain other designated persons, with certain provisions generally applicable to all staff members.

We also follow procedures for the repurchase of our securities.

We believe that our Trading Policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations , and listing standards applicable to us.

A copy of our Trading Policy is filed as Exhibit 19.1 to this Form 10-K.

Information with respect to our executive officers is included in Part I, Item 1 of this report.

21 unchanged sentences

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

4 unchanged sentences

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of The Cheesecake Factory Incorporated and subsidiaries (the Company) as of January 2, 2024 and January 3, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity and series A convertible preferred stock, and cash flows for each of the years in the three-year period ended January 2, 2024, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of January 2, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 2, 2024 and January 3, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended January 2, 2024, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of The Cheesecake Factory Incorporated and subsidiaries (the Company) as of December 31, 2024 and January 2, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and January 2, 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

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If the carrying amount of an asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.

The Company’s property and equipment, net, and operating lease asset balances as of January 2, 2024 were $791.1 million and $1,302.2 million, respectively.

The Company’s property and equipment, net, and operating lease asset balances as of December 31, 2024 were $840.8 million and $1,400.4 million, respectively.

Based upon the analyses performed, the Company recognized pre-tax impairment charges for long-lived assets of $13.6 million in fiscal year 2024.

25 unchanged sentences

Total other assets

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

9 unchanged sentences

Commitments and contingencies (Note 13)

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

Stockholders’ equity:

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

107,195,287 shares issued and 50,652,129 shares outstanding at January 2, 2024 and 106,323,117 shares issued and 51,173,597 shares outstanding at January 3, 2023

108,387,574 shares issued and 51,332,298 shares outstanding at December 31, 2024 and 107,195,287 shares issued and 50,652,129 shares outstanding at January 2, 2024

Additional paid-in capital

Retained earnings

Treasury stock inclusive of excise tax, 56,543,158 and 55,149,520 shares at cost at January 2, 2024 and January 3, 2023, respectively

Treasury stock inclusive of excise tax, 57,055,276 and 56,543,158 shares at cost at December 31, 2024 and January 2, 2024, respectively

( 1,829,953 )

2 unchanged sentences

Total stockholders’ equity

Total liabilities, Series A convertible preferred stock and stockholders’ equity

Total liabilities and stockholders’ equity

See the accompanying notes to the consolidated financial statements.

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Income from operations

Interest and other expense, net

Interest expense, net

Other income, net

Income before income taxes

Income tax benefit

Dividends on Series A preferred stock

Undistributed earnings allocated to Series A preferred stock

Net income available to common stockholders

Income tax provision/(benefit)

Net income per common share:

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(In thousands)

Other comprehensive gain/(loss):

Other comprehensive (loss)/gain:

Foreign currency translation adjustment

Unrealized gain on derivative, net of tax

Other comprehensive gain/(loss)

Other comprehensive (loss)/gain

Total comprehensive income

Comprehensive income attributable to Series A preferred stockholders

Total comprehensive income available to common stockholders

See the accompanying notes to the consolidated financial statements.

THE CHEESECAKE FACTORY INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND SERIES A CONVERTIBLE PREFERRED STOCK

(In thousands)

Series A Convertible

Preferred Stock

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

Comprehensive

1 unchanged sentence

( 1,702,509 )

Cumulative effect of adopting ASU 2020-06

Balance, December 29, 2020, as adjusted

( 1,696,743 )

Foreign currency translation adjustment

Change in derivative, net of tax

Cash dividends declared common stock, net of forfeitures

Cash dividends declared common stock, net of forfeitures, $ 0.81 per share

Stock-based compensation

Common stock issued under stock-based compensation plans

Common stock issuance

Treasury stock purchases

Series A preferred stock cash-settled conversion

Series A preferred stock conversion to common stock

Deemed dividends on Series A preferred stock

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

Balance, December 28, 2021

Balance, January 3, 2023

( 1,765,641 )

2 unchanged sentences

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases

Treasury stock purchases, inclusive of excise tax

Balance, January 2, 2024

3 unchanged sentences

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases, inclusive of excise tax

Balance, January 2, 2024

Balance, December 31, 2024

( 1,829,953 )

9 unchanged sentences

Stock-based compensation

Payment of deferred consideration and compensation in excess of acquisition-date fair value

Changes in assets and liabilities:

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Repayments on credit facility

Convertible debt issuance

Convertible debt direct and incremental costs

Series A preferred stock cash-settled conversion

Series A preferred stock conversion direct and incremental costs

Series A preferred stock dividend paid

Common stock issuance

Common stock issuance direct and incremental costs

Proceeds from exercise of stock options

Common stock dividends paid

Treasury stock purchases

Treasury stock purchases, inclusive of excise tax

Cash used in financing activities

14 unchanged sentences

We are culinary forward and relentlessly focused on hospitality.

We currently own and operate 334 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (216 locations), North Italia ® (37 locations), Flower Child ® (32 locations) and a collection within our Fox Restaurant Concepts (“FRC”) portfolio (41 locations).

We currently own and operate 352 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (215 locations), North Italia ® (43 locations), Flower Child ® (38 locations) and a collection within our Fox Restaurant Concepts (“Other FRC”) portfolio (49 locations).

Internationally, 34 The Cheesecake Factory ® restaurants operate under licensing agreements.

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Fiscal year 2025 will consist of 52 weeks.

In fiscal year 2024, we separately disclosed interest expense, net and other income, net on the consolidated statement of income.

Corresponding prior year balances were reclassified to conform to the current year presentation.

Use of Estimates

3 unchanged sentences

Geopolitical and Other Macroeconomic Impacts to our Operating Environment

During fiscal 2021 and 2022, the COVID - 19 pandemic continued to affect our business during periods of accelerated case counts in which we experienced increased restaurant staff absenteeism and temporary shifts in consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels.

Along with the COVID-19 pandemic, our operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation.

Some of these factors continued to impact our operating results in fiscal 2023, contributing to significantly increased commodity and other costs.

We also encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as supply chain challenges.

The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delay in new restaurant openings.

In recent years, our operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation.

Our commodity and wage inflationary environment began returning to more historical levels in fiscal 2024.

The impact of ongoing geopolitical and macroeconomic events could lead to further wage inflation, product and services cost inflation, disruptions in the supply chain, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings.

Adverse weather conditions and natural disasters may further exacerbate a number of these factors.

Any of these factors may have an adverse impact on our business and materially adversely affect our financial performance.

Cash and Cash Equivalents

Amounts receivable from credit card processors, totaling $ 21.0 million and $ 19.1 million at January 2, 2024 and January 3, 2023, respectively, are considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.

Amounts receivable from credit card processors, totaling $ 30.4 million and $ 21.0 million at December 31, 2024 and January 2, 2024, respectively, are considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.

Our cash management system provides for the funding of all major bank disbursement accounts on a daily basis as checks are presented for payment.

31 unchanged sentences

Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair value, which is determined based on discounted future net cash flows expected to be generated by the assets.

In fiscal 2023, we recorded $ 29.5 million of expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory ( one previously impaired), one North Italia (previously impaired), one Other FRC and two Other restaurant lease terminations.

In fiscal 2022, we recorded $ 31.4 million of expense primarily related to the impairment of long - lived assets for three The Cheesecake Factory, one Other FRC and three Other restaurants.

In fiscal 2021, we recorded $ 16.3 million of expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants.

In fiscal 2024, we recorded $ 13.6 million of expense primarily related to the impairment of long-lived assets for one The Cheesecake Factory (previously partially impaired) and six Other FRC locations ( one previously partially impaired) and lease termination income, net for four The Cheesecake Factory restaurants, one Grand Lux Cafe location, one Flower Child location, one Social Monk location and one Other FRC location (that closed in early fiscal 2025).

In fiscal 2022, we recorded $ 31.4 million of expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory, one Other FRC and three Grand Lux Cafe locations.

These amounts are recorded in impairment of assets and lease terminations on the consolidated statements of income.

2 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

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We performed our annual impairment assessment of definite-lived intangible assets as of the first day of the fourth quarters of fiscal 2024, 2023 and 2022.

We concluded there was no impairment for fiscal 2023 and 2022 and recorded $ 1.3 million of impairment expense in fiscal 2021 related to licensing agreements.

We concluded there was no impairment for fiscal 2024, fiscal 2023 and 2022.

Amortization expenses related to our definite-lived intangible assets were $ 0.7 million, $ 0.8 million and $ 0.7 million for fiscal 2024, 2023 and 2022, respectively.

Definite-lived intangible assets will be amortized over one to 52 years .

Definite-lived intangible assets will be amortized over two to 51 years .

We evaluate the useful lives of our intangible assets, other than goodwill, at each reporting period to determine if they are definite or indefinite-lived.

8 unchanged sentences

Our consumer packaged goods minimum guarantees do not require distinct performance obligations.

Therefore, related revenue is recognized on a straight-line basis over the life of the applicable agreements, ranging from five to seven years .

As our development and site fee agreements do not contain distinct performance obligations, related revenue is recognized on a straight-line basis over the life of the applicable agreements, ranging from eight to 30 years .

Therefore, related revenue is recognized on a straight-line basis over the life of the applicable agreements, ranging from three to six years .

Deferred and recognized revenue for new minimum guarantees for consumer packaged goods and for new site and development agreements were immaterial in all periods presented.

61 unchanged sentences

Most of our advertising costs are included in other operating costs and expenses and were $ 36.5 million, $ 34.7 million and $ 24.0 million in fiscal 2024, 2023 and 2022, respectively.

The increase in fiscal 2023 is primarily due to the launch of our Cheesecake Rewards TM program.

The increase in fiscal 2023 is primarily due to the launch of our Cheesecake Rewards ® program.

Preopening Costs

14 unchanged sentences

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 January 2, 2024, January 3, 2023 and December 28, 2021, 2.9 million shares, 2.5 million shares and 2.1 million shares, respectively, of restricted stock and restricted stock units issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal years 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.

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

At December 31, 2024, January 2, 2024 and January 3, 2023, 3.2 million shares, 2.9 million shares and 2.5 million shares, respectively, of restricted stock and restricted stock units issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal years ended on those dates.

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

Common stock equivalents for our convertible senior notes due 2026 (“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.

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.

(In thousands, except per share data)

Basic net income per common share:

Dividends on Series A preferred stock

Undistributed earnings allocated to Series A preferred stock

Net 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

Reallocation of undistributed earnings to Series A preferred stock

Net income available to common stockholders for diluted EPS

Basic weighted-average shares outstanding

Dilutive effect of equity awards (1)

Diluted weighted average shares outstanding

Diluted net income per common share

Basic net income per share

Diluted net income per share

(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock units of 2.2 million, 2.9 million and 3.3 million for fiscal 2024, 2023 and 2022, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.

2 unchanged sentences

Comprehensive income includes all changes in equity during a period except those resulting from investment by and distribution to owners.

Our comprehensive income consists of net income, unrealized gains on our interest rate swap and translation gains/(losses) related to our Canadian restaurant operations.

Our comprehensive income consists of net income and translation gains/(losses) related to our Canadian restaurant operations.

Foreign Currency

5 unchanged sentences

Translation gains and losses are reported as a separate component in our consolidated statements of comprehensive income and would only be realized upon the sale or upon complete or substantially complete liquidation of the business.

Gains and losses from foreign currency transactions are recognized in our consolidated statements of income in interest and other expense, net.

Gains and losses from foreign currency transactions are recognized in our consolidated statements of income in other income, net.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

The amendment is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.

The amendment should be applied retrospectively to all prior periods presented in the financial statements.

We adopted this standard as of the end of fiscal 2024 and such adoption did not have a significant impact on our disclosures.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

1 unchanged sentence

The amendment also provides further disclosure comparability.

The amendments are effective for fiscal years beginning after December 15, 2024.

The amendment is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied prospectively.

The amendment should be applied prospectively.

However, retrospective application is permitted.

Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.

Management is currently evaluating this ASU to determine its impact on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires more detailed disclosures of certain categories of expenses such as inventory purchases, employee compensation and depreciation that are components of existing expense captions presented on the face of the income statement.

The amendment is effective for fiscal years beginning after December 15, 2026.

Early adoption is permitted.

The amendment should be applied prospectively.

However, retrospective application is permitted.

Management is currently evaluating this ASU to determine its impact on our disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt- Debt with Conversion and Other Options (Topic 470):

Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

The amendments in this update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted.

The amendment is effective for fiscal years beginning after December 15, 2025.

Early adoption is permitted.

The amendment should be applied prospectively.

However, retrospective application is permitted.

Management is currently evaluating this ASU to determine its impact on our consolidated financial statements.

Fair Value Measurements

4 unchanged sentences

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

January 2, 2024

December 31, 2024

Assets/(Liabilities)

6 unchanged sentences

Non-qualified deferred compensation liabilities

Acquisition-related deferred consideration (1)

Acquisition-related contingent consideration and compensation liability

(1) The final $ 11.3 million payment related to the Acquisition - related deferred consideration was made in fiscal year 2023.

Changes in the fair value of non-qualified deferred compensation assets and liabilities are recognized in interest and other expense, net in our consolidated statements of income.

Changes in the fair value of the acquisition-related deferred and contingent consideration and compensation liability are recognized in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of income.

Changes in the fair value of non-qualified deferred compensation assets and liabilities are recognized in other expense, net in our consolidated statements of income.

Changes in the fair value of the acquisition-related contingent consideration and compensation liability are recognized in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of income.

The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liability categorized as Level 3 (in thousands):

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

3 unchanged sentences

The fair value of the acquisition-related contingent consideration and compensation liability 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 liability was $ 2.6 million to $ 235.4 million at January 2, 2024 and $ 0 to $ 276.0 million at January 3, 2023.

The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liability was $ 0.0 million to $ 142.4 million at December 31, 2024 and $ 2.6 million to $ 235.4 million at January 2, 2024.

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

During fiscal 2024, the fair value of the contingent consideration and compensation liability decreased by $ 5.3 million due to a payment of $ 6.5 million per the FRC acquisition agreement and a $ 1.9 million decrease in the fair value primarily stemming from a change in the volatility factors, as well as a decrease in fiscal 2025 revenues and estimated future revenues utilized in the calculation, partially offset by $ 3.1 million of amortization.

During fiscal 2023, the fair value of the contingent consideration and compensation liability decreased by $ 3.1 million due to a payment of $ 13.0 million per the FRC acquisition agreement, partially offset by $ 9.9 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the calculation and amortization.

During fiscal 2022, the fair value of the contingent consideration and compensation liability increased by $ 4.7 million due to an $ 11.9 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $ 7.2 million per the FRC acquisition agreement.

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

At both January 2, 2024 and January 3, 2023, 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 January 2, 2024 and January 3, 2023 was approximately $ 298.8 million and $ 282.9 million, respectively, and determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period.

The fair value of our Revolver Facility (as defined below) approximates carrying value due to the variable interest rate.

At both December 31, 2024 and January 2, 2024, 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 December 31, 2024 and January 2, 2024 was approximately $ 339.5 million and $ 298.8 million, respectively, and determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period.

The increase in the fair value of the Notes was primarily due to an increase in our stock price.

3 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

Gift card distributors

Bakery customers

Landlord construction contributions

Bakery customers

Insurance providers

2 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

2 unchanged sentences

Bakery raw materials and supplies

(1) The increase in bakery finished goods and work in progress inventory is primarily driven by a build-up of weeks on hand to improve our supply resiliency.

Prepaid Expenses

1 unchanged sentence

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

Gift card contract assets

Prepaid rent (1)

(1) The primary cause for the increase in prepaid rent expenses is a higher number of restaurants under construction at January 2, 2024 where the lease has not yet commenced compared to the prior year.

Property and Equipment

1 unchanged sentence

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

12 unchanged sentences

Repair and maintenance expenses for fiscal 2024, 2023 and 2022 were $ 103.8 million, $ 99.5 million and $ 89.1 million, respectively and are recorded in other operating costs and expenses.

Net (income)/expense for property and equipment disposals was ($ 0.4 ) million, $ 1.6 million and $ 1.1 million, in fiscal 2023, 2022 and 2021, respectively.

Net expense/(income) for property and equipment disposals was $ 0.4 million, ($ 0.4 ) million and $ 1.6 million, in fiscal 2024, 2023 and 2022, respectively.

Other assets consisted of (in thousands):

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

5 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

4 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

6 unchanged sentences

Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

3 unchanged sentences

Payroll and sales taxes

Deferred consideration (2)

(1) The increase in accrued salaries and wages was primarily due to the timing of payroll disbursements in relation to the fiscal 2023 versus 2022 year-end dates.

(2) The final $ 11.3 million payment related to the Acquisition-related deferred consideration was made in fiscal year 2023.

(1) The increase in other was primarily due to the increase in the current portion of the acquisition-related contingent consideration and compensation liability.

See Note 2 for further discussion of the fair value measurement.

Long-Term Debt

9 unchanged sentences

As of January 2, 2024, we had net availability for borrowings of $ 236.5 million, based on a $ 130.0 million outstanding debt balance and $ 33.5 million in standby letters of credit under the Revolver Facility.

In the fourth quarter of fiscal 2024 we repaid $ 20.0

million on the Revolver Facility.

As of December 31, 2024, we had net availability for borrowings of $ 256.5 million, based on a $ 110.0 million outstanding debt balance and $ 33.5 million in standby letters of credit under the Revolver Facility.

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

1 unchanged sentence

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

At January 2, 2024, we were in compliance with all covenants in effect at that date.

At December 31, 2024, we were in compliance with all covenants in effect at that date.

Borrowings under the Loan Agreement bear interest, at our election, at a rate equal to either:

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Convertible Senior Notes

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

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

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

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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.

At January 2, 2024, the conversion rate for the Notes was 13.4936 shares of common stock per $ 1,000 principal amount of the Notes, which represents a conversion price of approximately $ 74.11 per share of common stock.

At December 31, 2024, the conversion rate for the Notes was 13.8741 shares of common stock per $ 1,000 principal amount of the Notes, which represents a conversion price of approximately $ 72.08 per share of common stock.

In connection with the cash dividend that was declared by our Board on February 13, 2025, on March 5, 2025 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.

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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 January 2, 2024, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 340.0 million, net of unamortized issuance costs of $ 5.0 million.

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

Total amortization expense was $ 2.0 million, $ 2.0 million and $ 1.1 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively and was included in interest expense in the consolidated statements of income.

The effective interest rate for the Notes was 0.96 % as of January 2, 2024.

As of December 31, 2024, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 342.1 million, net of unamortized issuance costs of $ 2.9 million.

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

Total amortization expense was $ 2.0 million, $ 2.0 million and $ 2.0 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively and was included in interest expense, net in the consolidated statements of income.

The effective interest rate for the Notes was 0.96 % as of December 31, 2024.

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

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

Operating cash flows from operating leases

Operating cash flows for operating leases

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

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Weighted-average discount rate — operating leases

As of January 2, 2024, the maturities of our operating lease liabilities were as follows (in thousands):

As of December 31, 2024, the maturities of our operating lease liabilities were as follows (in thousands):

Fiscal year 2025

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Fiscal year ended

January 2, 2024

December 31, 2024

January 2, 2024

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(1) See Note 16 for further discussion of our non-qualified deferred compensation assets and liabilities.

(2) See Note 2 for further discussion of the fair value measurement of this liability.

Commitments and Contingencies

Purchase obligations, which include inventory purchases, equipment purchases, information technology and other miscellaneous commitments, were $ 101.4 million and $ 129.9 million at January 2, 2024 and January 3, 2023, respectively.

Purchase obligations, which include inventory purchases, equipment purchases, information technology and other miscellaneous commitments, were $ 147.8 million and $ 101.4 million at December 31, 2024 and January 2, 2024, respectively.

These purchase obligations are primarily due within three years and recorded as liabilities when goods are received or services rendered.

Real estate obligations, which include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were $ 414.8 million and $ 252.4 million at January 2, 2024 and January 3, 2023, respectively.

The FRC acquisition agreement included a contingent consideration provision of which the remainder is payable annually from 2024 through 2027 and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child with considerations made in the event we undergo a change in control or divest any FRC brand (other than North Italia and Flower Child) during the five years after closing.

The liability for this contingent consideration provision was $ 25.5 million at January 2, 2024.

Real estate obligations, which include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were $ 315.4 million and $ 414.8 million at December 31, 2024 and January 2, 2024, respectively.

The liability for this contingent consideration provision was $ 20.2 million at December 31, 2024.

See Note 2 for discussion of the fair value measurement of this liability.

We are also required to provide financing to FRC in an amount sufficient to support achievement of these targets during the five years after closing.

As credit guarantees to insurers, we had $ 33.5 million and $ 31.5 million at January 2, 2024 and January 3, 2023, respectively, in standby letters of credit related to our self-insurance liabilities.

As credit guarantees to insurers, we had $ 33.5 million at both December 31, 2024 and January 2, 2024, in standby letters of credit related to our self-insurance liabilities.

All standby letters of credit are renewable annually.

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The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to us (“IBNR”) as of the balance sheet date.

The total accrued liability for our self-insured plans was $ 71.5 million and $ 71.9 million at January 2, 2024 and January 3, 2023, respectively.

On June 7, 2018, the California Department of Industrial Relations issued a $ 4.2 million wage citation jointly against the Company and our vendor that provides janitorial services to eight of our Southern California restaurants, alleging that the janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor Code (Wage Citation Case No.

35-CM-188798-16).

The wage citation seeks to recover penalties and other monetary payments on behalf of the employees that worked for this vendor or its subcontractor.

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

On November 10, 2022, the parties participated in voluntary mediation and reached a settlement of all claims.

We reserved an immaterial amount for settlement purposes.

Final payment under the settlement agreement was made in October 2023 following the final agency approval.

On February 10, 2023, a class action complaint was filed against the Company in the United States District Court for the Southern District of California (Lightoller vs.

LLC., Case No.

3:23-cv-00272-AJB-NLS), alleging violations of state privacy laws.

The lawsuit alleges that the Company violated state wiretapping and privacy laws by improperly tracking and/or recording the keystrokes of visitors on the Company’s website without permission.

A similar case was filed in the United States District Court for the District of Maryland on February 21, 2023 (Curd v.

Civil Action No.

1:23-cv-00472-JMC).

On May 10, 2023, the plaintiffs in Case Nos.

3:23-cv-00272 and 1:23-cv-00472 voluntarily dismissed their complaints against the Company without prejudice.

The total accrued liability for our self-insured plans was $ 73.6 million and $ 71.5 million at December 31, 2024 and January 2, 2024, respectively.

On June 7, 2024, the Internal Revenue Service (“IRS”) issued its examination report for tax years 2015 through 2020 in which it proposed to disallow a portion of our depreciation deductions and Domestic Production Activity Deductions and to assess penalties.

On August 12, 2024, we submitted Protest Memoranda indicating our disagreement with a majority of the findings in the examination report, and our case is now under the jurisdiction of the Appeals Division.

We expect to hold an opening conference with Appeals in the second quarter of fiscal 2025.

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

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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We have employment agreements with certain of our executive officers that provide for payments to those officers in the event of an actual or constructive termination of their employment, including in the event of a termination without cause, an acquirer failure to assume or continue equity awards following a change in control of the Company or, otherwise, in the event of death or disability as defined in those agreements.

Aggregate payments totaling approximately $ 3.4 million, excluding accrued potential bonuses of $ 2.6 million, which are subject to approval by the Compensation Committee, would have been required by those agreements had all such officers terminated their employment for reasons requiring such payments as of January 2, 2024.

Aggregate payments totaling approximately $ 3.5 million, excluding accrued potential bonuses of $ 3.3 million, which are subject to approval by the Compensation Committee, would have been required by those agreements had all such officers terminated their employment for reasons requiring such payments as of December 31, 2024.

In addition, the employment agreement with our Chief Executive Officer specifies an annual founder’s retirement benefit of $ 650,000 for ten years , commencing six months after termination of his full-time employment.

Stockholders’ Equity

Common Stock Issuance

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

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

Common Stock - Dividends and Share Repurchases

Following the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement, our Board declared a quarterly dividend in the second quarter of fiscal 2022 and has declared quarterly dividends since then.

Our Board declared dividends of $ 1.08 per common share in the aggregate during fiscal 2023.

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 Loan Agreement and applicable law, and such other factors that the Board considers relevant.

Our Board reinstated and declared a quarterly dividend in the second quarter of fiscal 2022 and has continued to pay quarterly dividends through fiscal 2024.

Our Board declared dividends of $ 1.08 per common share in the aggregate during each fiscal 2024 and fiscal 2023.

pursuant to the terms and conditions of the Loan Agreement and applicable law, and such other factors that the Board considers relevant.

(See Note 10 for further discussion of our long-term debt.)

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

Under this authorization, we have cumulatively repurchased 56.5 million shares at a total cost of $ 1,811.7 million, excluding excise tax, through January 2, 2024.

Under this authorization, we have cumulatively repurchased 57.1 million shares at a total cost of $ 1,829.7 million, excluding excise tax, through December 31, 2024.

During fiscal 2024, 2023 and 2022, we repurchased 0.5 million, 1.4 million and 2.0 million shares of our common stock at a cost of $ 18.0 million, $ 46.1 million and $ 63.1 million, excluding excise tax, respectively.

The increase from fiscal 2021 to 2022 is primarily due to the resumption of our share repurchase program in the second quarter of fiscal 2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement.

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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(See Note 10 for further discussion of our long-term debt.)

Series A Convertible Preferred Stock

On April 20, 2020, we issued 200,000 shares of Series A Convertible Preferred Stock, par value $ 0.01 per share (the “Series A preferred stock”) for an aggregate purchase price of $ 200 million, or $ 1,000 per share.

In connection with the issuance, we incurred direct and incremental costs of $ 10.3 million, including financial advisory fees, closing costs, legal expenses, a commitment fee and other offering-related expenses.

These direct and incremental costs reduced the Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020, the first measurement date.

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

The Series A preferred stock ranked senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution upon which each share of Series A preferred stock would be entitled to receive an amount per share equal to the greater of (i) the purchase price (without giving effect to the commitment fee), plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.

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

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

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

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

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

Stock-Based Compensation

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This amendment was approved by our stockholders at our annual meeting held on May 23, 2022.

Approximately 3.1 million of these shares were available for grant as of January 2, 2024.

Approximately 1.4 million of these shares were available for grant as of December 31, 2024.

Stock options generally vest at 20 % per year and expire eight to ten years from the date of grant.

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Stock Options

The weighted-average fair value at the grant date for options issued during fiscal 2023 was $ 15.76 per share.

The fair value of options issued was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions:

The weighted-average fair value at the grant date for options issued during fiscal 2024 and fiscal 2023 were $ 12.45 and $ 15.76 per share, respectively.

In fiscal 2024, the fair value of options issued was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions:

(a) an expected option term of 6.9 years, (b) expected stock price volatility of 41.9 %, (c) a risk-free interest rate of 4.3 % and (d) a dividend yield on our stock of 3.1 %.

We did not issue any stock options during fiscal 2022 or 2021.

In fiscal 2023, the fair value of options issued was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions:

(a) an expected option term of 6.7 years, (b) expected stock price volatility of 45.2 %, (c) a risk-free interest rate of 4.0 % and (d) a dividend yield on our stock of 2.7 %.

We did not issue any stock options during fiscal 2022.

The expected option term represents the estimated period of time until exercise and is based on historical experience of similar options, giving consideration to the contractual terms, vesting schedules and expectations of future staff member behavior.

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(1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal year 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 year-end date.

There were no options exercised during fiscal 2023.

The total intrinsic value of options exercised during fiscal 2024 and 2022 was $ 2.0 million and $ 4.9 million, respectively.

As of January 2, 2024, total unrecognized stock-based compensation expense related to unvested stock options was $ 1.5 million, which we expect to recognize over a weighted-average period of approximately 1.3 years.

There were no options exercised during fiscal 2023.

As of December 31, 2024, total unrecognized stock-based compensation expense

related to unvested stock options was $ 1.3 million, which we expect to recognize over a weighted-average period of approximately 1.9 years.

Restricted Shares and Restricted Share Units

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The fair value of shares that vested during fiscal 2024, 2023 and 2022 was $ 24.8 million, $ 21.8 million and $ 18.5 million, respectively.

As of January 2, 2024, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 57.1 million, which we expect to recognize over a weighted-average period of approximately 2.9 years.

As of December 31, 2024, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 58.6 million, which we expect to recognize over a weighted-average period of approximately 2.8 years.

Employee Benefit Plans

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Our consolidated balance sheets reflect investments in other assets and our obligation to participants in the Non-Qualified Plans in other noncurrent liabilities.

Gains and losses related to our non-qualified deferred compensation assets and liabilities are reflected in interest and other expense, net in our consolidated statements of income.

Gains and losses related to our non-qualified deferred compensation assets and liabilities are reflected in other income, net in our consolidated statements of income.

We maintain self-insured medical and dental benefit plans for our staff members.

The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported to us as of the balance sheet date.

The accrued liability for our self-insured benefit plans, which is included in other accrued expenses, was $ 11.3 million and $ 14.0 million as of January 2, 2024 and January 3, 2023, respectively.

The accrued liability for our self-insured benefit plans, which is included in other accrued expenses, was $ 11.0 million and $ 11.3 million as of December 31, 2024 and January 2, 2024, respectively.

(See Note 1 for further discussion of accounting for our self-insurance liabilities.)

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Total deferred

Total benefit

Total provision/(benefit)

The following reconciles the U.S.

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Other credits and incentives

Impact of net operating loss carryback

Deferred compensation

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Effective tax rate

On March 27, 2020, the CARES Act was signed into law.

It included provisions allowing for the carryback of net operating losses generated in fiscal years 2018, 2019 and 2020.

During fiscal 2021, we filed a refund claim in the amount of $ 18.4 million for our fiscal 2020 net operating loss carryback, which was received during fiscal 2022.

In January 2022, we filed amended returns for tax years 2018 and 2019 requesting total refunds of $ 21.3 million for credits released by our fiscal 2020 loss carryback.

These refunds have not yet been received.

The effects of these claims were primarily included in our fiscal 2020 provision for income taxes, using estimates based on the best information available at the time we prepared our fiscal 2020 consolidated financial statements, and were adjusted to as-filed actual amounts in our fiscal 2021 provision for income taxes.

These adjustments had a minor effect on our fiscal 2021 provision for income taxes.

In our fiscal 2021 provision for income taxes, we also recorded the effects of accelerating the remittance of certain FICA taxes that had been deferred pursuant to the CARES Act.

The accelerated remittance increased the value of our fiscal 2020 loss carryback by $ 4.3 million.

We made no further adjustments in our fiscal 2023 provision for income taxes relating to these amounts.

Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):

January 2, 2024

December 31, 2024

January 2, 2024

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Net deferred tax asset

At January 2, 2024 and January 3, 2023, we had $ 72.8 million and $ 56.5 million, respectively of U.S.

At December 31, 2024 and January 2, 2024, we had $ 79.8 million and $ 72.8 million, respectively of U.S.

federal credit carryforwards which begin to expire in 2042 and $ 0.2 million and $ 1.6 million, respectively, of state hiring and investment credits which begin to expire in 2025.

At January 2, 2024 and January 3, 2023, we had $ 2.3 million and $ 2.5 million, respectively of foreign net operating loss carryforwards which begin to expire in 2038 and $ 27.4 million and $ 46.6 million, respectively, of state net operating loss carryforwards with statutory carryforward periods ranging from 5 years to no expiration period.

At December 31, 2024 and January 2, 2024, we had $ 1.9 million and $ 2.3 million, respectively of foreign net operating loss carryforwards which begin to expire in 2037 and $ 23.7 million and $ 27.4 million, respectively, of state net operating loss carryforwards with statutory carryforward periods ranging from 5 years to no expiration period.

The earliest year that a material state net operating loss will expire is 2032.

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We did not need to consider tax planning strategies in this analysis.

Based on this evaluation, at January 2, 2024 and January 3, 2023 we carried a valuation allowance of $ 1.4 million and $ 1.2 million, respectively, to reflect the amount that we will likely not realize.

Based on this evaluation, at December 31, 2024 and January 2, 2024 we carried a valuation allowance of $ 0.6 million and $ 1.4 million, respectively, to reflect the amount that we will likely not realize.

This assessment could change if estimates of future taxable income during the carryforward period are revised.

The earliest tax year still subject to examination by a significant taxing jurisdiction is 2015.

At January 2, 2024, we had a reserve of $ 3.8 million for uncertain tax positions, all of which would favorably impact our effective income tax rate if resolved in our favor.

At December 31, 2024, we had a reserve of $ 3.4 million for uncertain tax positions, all of which would favorably impact our effective income tax rate if resolved in our favor.

A reconciliation of the beginning and ending amount of our uncertain tax positions is as follows (in thousands):

Balance at beginning of year

Additions related to prior year tax positions

Additions related to current period tax positions

(Reductions)/additions related to prior year tax positions

Reductions related to current period tax positions

Reductions related to settlements with taxing authorities

Balance at end of year

At January 2, 2024 and January 3, 2023, we had $ 1.4 million and $ 2.2 million, respectively, of accrued interest and penalties related to uncertain tax positions.

$ 0.3 million of the balance of uncertain tax positions at January 2, 2024 related to tax positions for which it is reasonably possible that the total amount could decrease during the next twelve months based on the lapses of statutes of limitations.

At December 31, 2024 and January 2, 2024, we had $ 0.1 million and $ 1.4 million, respectively, of accrued interest and penalties related to uncertain tax positions.

Segment Information

Our operating segments, the businesses for which our management reviews discrete financial information for decision-making purposes, are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands and our bakery division.

Our chief operating decision maker (“CODM”) is the Chief Executive Officer, President and Chief Financial Officer.

Our CODM allocates resources and evaluates the performance of each operating segment based on the segment’s revenue and income/(loss) from operations, comparing actual results to historical and previously forecasted financial information.

Significant expenses are expenses that are regularly provided to the CODM and are include in segment income/(loss).

Our operating segments, are aligned with our strategic priorities and are the businesses for which our CODM reviews discrete financial information for decision-making purposes, are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands and our bakery division.

Based on quantitative thresholds set forth in ASC 280, “Segment Reporting,” The Cheesecake Factory, North Italia and the other FRC brands are the only businesses that meet the criteria of a reportable operating segment.

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Segment information is presented below (in thousands):

The Cheesecake Factory restaurants

Income from operations:

The Cheesecake Factory restaurants

For the fifty-two weeks ended December 31, 2024

The Cheesecake

Costs and expenses:

Food and beverage costs

Labor expenses

Other operating costs and expenses

General and administrative expenses

Depreciation and amortization expenses

The Cheesecake Factory restaurants

Impairment of assets and lease termination (income)/expenses

Acquisition-related contingent consideration, compensation and amortization expenses

Preopening costs

Total costs and expenses

Income/(loss) from operations

Capital expenditures

For the fifty-two weeks ended January 2, 2024

The Cheesecake

Costs and expenses:

Food and beverage costs

Labor expenses

Other operating costs and expenses

General and administrative expenses

Depreciation and amortization expenses

Impairment of assets and lease termination expenses

The Cheesecake Factory restaurants

Acquisition-related contingent consideration, compensation and amortization expenses

Preopening costs

The Cheesecake Factory restaurants

Total costs and expenses

Income/(loss) from operations

Capital expenditures

The Cheesecake Factory restaurants

Total assets:

The Cheesecake Factory restaurants

(1) Fiscal 2023, 2022 and fiscal 2021 include $ 11.7 million, $ 13.4 million and $ 19.5 million, respectively, of acquisition-related expenses.

These amounts were recorded in acquisition-related costs and acquisition-related contingent consideration, compensation and amortization expenses in the consolidated statements of income.

For the fifty-three weeks ended January 3, 2023

The Cheesecake

Costs and expenses:

Food and beverage costs

Labor expenses

Other operating costs and expenses

General and administrative expenses

Depreciation and amortization expenses

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

Capital expenditures

Subsequent Events

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Exhibit Number

Filed/Furnished with SEC

Form of Reorganization Agreement (P)

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Exhibit Number

Filed/Furnished with SEC

First Supplemental Indenture, dated as of June 15, 2021, between The Cheesecake Factory Incorporated and U.S.

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Form of Indemnification Agreement*

Indemnification Agreement, dates as of April 20, 2020, between The Cheesecake Factory Incorporated and Paul D.

Inducement Agreement dated as of July 27, 2005

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The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended effective as of February 27, 2013*

The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended April 3, 2014*

Incorporated by

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Exhibit Number

The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended April 3, 2014*

Filed/Furnished with SEC

The Cheesecake Factory Incorporated 2010 Stock Incentive Plan as amended May 28, 2015*

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Exhibit Number

Filed/Furnished with SEC

Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement for Senior Executive under the 2010 Stock Incentive Plan, for equity grants made after February 15, 2018*

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Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement for Executive Officers under The Cheesecake Factory Incorporated Stock Incentive Plan*

Filed herewith

Form of Notice of Grant and Stock Option Agreement and/or Restricted Share Agreement under The Cheesecake Factory Incorporated Stock Incentive Plan*

Filed herewith

Form of Notice of Grant and Restricted Share Agreement for MEP I under The Cheesecake Factory Incorporated Stock Incentive Plan*

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Fourth Amended and Restated Loan Agreement, with JPMorgan Chase Bank, National Association dated as of October 6, 2022

List of Subsidiaries

The Registrant’s Special Trading Policy and Procedures

Filed herewith

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Exhibit Number

Filed/Furnished with SEC

List of Subsidiaries

Filed herewith

Consent of Independent Registered Public Accounting Firm — KPMG LLP

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Principal Executive Officer

Filed herewith

Furnished herewith

Certification Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Principal Financial Officer

Filed herewith

Furnished herewith

The Registrant’s Policy for Recover of Erroneously Awarded Compensation

Filed herewith

The following materials from The Cheesecake Factory Incorporated’s Annual Report on Form 10-K for the year ended January 2, 2024, formatted in Inline eXtensible Business Reporting Language (iXBRL):

The following materials from The Cheesecake Factory Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in Inline eXtensible Business Reporting Language (iXBRL):

(i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statement of stockholders’ equity, (v) consolidated statements of cash flows, and (vi) the notes to the consolidated financial statements

Filed herewith

The cover page of The Cheesecake Factory Incorporated’s Annual Report on Form 10-K for the year ended January 2, 2024, formatted in iXBRL (included with Exhibit 101.1)

The cover page of The Cheesecake Factory Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in iXBRL (included with Exhibit 101.1)

Filed herewith

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February 24, 2025

/s/ LAURENCE B.

February 24, 2025

February 26, 2024

/s/ HERBERT SIMON

February 26, 2024

Herbert Simon

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-K

Item 9A. Controls and Procedures