What changed in this filing

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Item 1. Financial Statements

2025-05-05 compared with 2024-11-04 · 204 added, 163 removed, 273 unchanged (57% of the section changed)

29 unchanged sentences

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

107,983,084 shares issued and 50,939,646 shares outstanding at October 1, 2024 and 107,195,287 shares issued and 50,652,129 shares outstanding at January 2, 2024

109,191,933 shares issued and 49,530,542 shares outstanding at April 1, 2025 and 108,387,574 shares issued and 51,332,298 shares outstanding at December 31, 2024

Additional paid-in capital

Retained earnings

Treasury stock inclusive of excise tax, 57,043,438 and 56,543,158 shares at cost at October 1, 2024 and January 2, 2024, respectively

Treasury stock inclusive of excise tax, 59,661,391 and 57,055,276 shares at cost at April 1, 2025 and December 31, 2024, respectively

( 1,972,311 )

7 unchanged sentences

(In thousands, except per share data)

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Costs and expenses:

4 unchanged sentences

Depreciation and amortization expenses

Impairment of assets and lease termination (income)/expenses

Impairment of assets and lease termination expenses

Acquisition-related contingent consideration, compensation and amortization expenses

2 unchanged sentences

Income from operations

Interest and other expense, net

Interest expense, net

Loss on extinguishment of debt

Other income, net

Income before income taxes

Income tax provision/(benefit)

Income tax provision

Net income per share:

5 unchanged sentences

(In thousands)

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Other comprehensive gain/(loss):

6 unchanged sentences

(In thousands, except per share data)

For the thirty-nine weeks ended October 1, 2024:

For the thirteen weeks ended April 1, 2025:

Comprehensive

Loss/ (Income)

Balance, January 2, 2024

Balance, December 31, 2024

( 1,829,953 )

2 unchanged sentences

Stock-based compensation

Common stock issued under stock-based compensation plans

Treasury stock purchases, inclusive of excise tax

1 unchanged sentence

( 1,972,311 )

Foreign currency translation adjustment

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

Stock-based compensation

Treasury stock purchases, inclusive of excise tax

Balance, July 2, 2024

( 1,828,382 )

Foreign currency translation adjustment

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

Stock-based compensation

Treasury stock purchases, inclusive of excise tax

Balance, October 1, 2024

( 1,829,462 )

For the thirty-nine weeks ended October 3, 2023:

For the thirteen weeks ended April 2, 2024:

Comprehensive

5 unchanged sentences

Stock-based compensation

Treasury stock purchases

Balance, April 4, 2023

( 1,778,017 )

Foreign currency translation adjustment

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

Stock-based compensation

Treasury stock purchases, inclusive of excise tax

Balance, July 4, 2023

( 1,787,419 )

Foreign currency translation adjustment

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

Stock-based compensation

Treasury stock purchases, inclusive of excise tax

Balance, October 3, 2023

Balance, April 2, 2024

( 1,824,493 )

3 unchanged sentences

(In thousands)

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization expenses

Impairment of assets and lease termination income

Impairment of assets and lease termination expenses

Loss on debt extinguishment

Deferred income taxes

Stock-based compensation

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

Changes in assets and liabilities:

12 unchanged sentences

Cash flows from financing activities:

Acquisition-related deferred consideration and compensation

Repayments on credit facility

Proceeds from long-term convertible debt

Repayment on long-term convertible debt, including premium on extinguishment

Issuance costs associated with long-term debt

Proceeds from exercise of stock options

Common stock dividends paid

Treasury stock purchases

Cash used in financing activities

Treasury stock purchases, inclusive of excise tax

Cash provided by/ (used in) financing activities

Foreign currency translation adjustment

16 unchanged sentences

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”).

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2024 filed with the SEC on February 26, 2024.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“Annual Report”) filed with the SEC on February 24, 2025.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes.

Fiscal year 2025 consists of 52 weeks and will end on December 30, 2025.

Fiscal year 2023, which ended on January 2, 2024, was also a 52 -week year.

Fiscal year 2024, ended on December 31, 2024 and was also a 52 -week year.

In the first quarter of fiscal year 2025, we separately disclosed interest expense, net and other income, net on the condensed 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

Beginning in 2021, our operating results were impacted by geopolitical and other macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation.

While we have seen improvements in many of these areas, some of these factors continue to impact our operating results in fiscal 2024, contributing to significantly increased commodity and other costs.

We have 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.

Climate change may further exacerbate a number of these factors.

For more information regarding the risks to our business relating to the geopolitical and macroeconomic events, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 2, 2024.

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.

For more information regarding the risks to our business relating to the geopolitical and macroeconomic events, see Part II, Item 1A of this report “Risk Factors,” and “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 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 amendment should be applied retrospectively to all prior periods presented in the financial statements.

Management does not expect this ASU to have a material impact on our disclosures.

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

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which updates income tax disclosures related to the rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

The amendment also provides further disclosure comparability.

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

Early adoption is permitted.

The amendment should be applied prospectively.

However, retrospective application is permitted.

The update also provides further disclosure comparability.

The amendment is effective for fiscal years beginning after December 15, 2024, with early adoption 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 2024-03, 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, with early adoption 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 ASU also clarifies 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, with early adoption 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):

October 1, 2024

April 1, 2025

Assets/(Liabilities)

2 unchanged sentences

Acquisition-related contingent consideration and compensation liabilities

January 2, 2024

December 31, 2024

Assets/(Liabilities)

3 unchanged sentences

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):

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Beginning balance

2 unchanged sentences

The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment.

The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at October 1, 2024 was $ 2.6 million to $ 235.4 million.

The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities on April 1, 2025 was $ 0.0 million to $ 142.4 million.

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

During the first nine months of fiscal 2024 and fiscal 2023, we made payments of $ 6.5 million and $ 13.0 million, respectively, per the Fox Restaurant Concept LLC (“FRC”) acquisition agreement.

During the first three months of fiscal 2025 and 2024, we did not make any payments, pursuant to 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 due to their short duration.

As of October 1, 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 October 1, 2024 was approximately $ 325.7 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 fair value of our Revolver Facility (as defined below) approximates carrying value due to the variable interest rate.

As of April 1, 2025, we had $ 69.0 million aggregate principal amount of convertible senior notes due 2026 (“2026 Notes”) outstanding.

The estimated fair value of the 2026 Notes based on a market approach as of April 1, 2025 was approximately $ 67.6 million and was determined based on the estimated or actual bids and offers of the 2026 Notes in an over-the-counter market on the last business day of the reporting period.

The decrease in the fair value of the 2026 Notes was primarily due to a decline in our stock price from the date of the issuance of the 2026 Notes.

See Note 5 for further discussion of the Notes.

As of April 1, 2025, we had $ 575.0 million aggregate principal amount of convertible senior notes due 2030 (“2030 Notes”) outstanding.

The estimated fair value of the 2030 Notes based on a market approach as of April 1, 2025 was approximately $ 550.9 million and was determined based on the estimated or actual bids and offers of the 2030 Notes in an over-the-counter market on the last business day of the reporting period.

The decrease in the fair value of the 2030 Notes was primarily due to a decline in our stock price from the date of the issuance of the 2030 Notes.

See Note 5 for further discussion of the 2026 Notes and 2030 Notes.

Inventories consisted of (in thousands):

October 1, 2024

January 2, 2024

April 1, 2025

December 31, 2024

Restaurant food and supplies

1 unchanged sentence

Bakery raw materials and supplies

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.

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

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Gift card liabilities:

2 unchanged sentences

Ending balance

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Gift card contract assets:

4 unchanged sentences

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

The Loan Agreement amends and restates in its entirety our prior credit agreement.

The Revolver 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.

2 unchanged sentences

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

As of October 1, 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.

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.

In the first quarter of fiscal 2025 we repaid $ 110.0 million on the Revolver Facility.

As of April 1, 2025, we had net availability for borrowings of $ 366.5 million, based on no 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:

(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 (“EBITDAR Ratio”) of 1.90 .

The Amended Net Adjusted Leverage Ratio includes a rental expense multiplier of six .

As of October 1, 2024, we were in compliance with all the foregoing covenants in effect at that date.

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

The Net Adjusted Leverage Ratio includes a rental expense multiplier of six .

As of April 1, 2025, we were in compliance with all the foregoing covenants in effect at that date.

Borrowings under the Loan 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 Loan 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 %.

(i) the sum of (A) adjusted term SOFR (as defined in the Loan Agreement, the “Term SOFR Rate”) plus (B) a rate variable based on the 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 Loan 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.

Letters of credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the Term SOFR Rate plus other customary fees charged by the issuing bank.

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

2 unchanged sentences

2030 Convertible Senior Notes

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

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

On February 28, 2025, we issued $ 575.0 million aggregate principal amount of convertible senior notes (“2030 Notes”).

The net proceeds from the sale of the 2030 Notes were approximately $ 558.5 million after deducting issuance costs of $ 16.5 million.

The 2030 Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness;

(ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2030 Notes;

(iii) effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness;

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

The 2030 Notes were issued pursuant to, and are governed by, an indenture (the “2030 Indenture”), dated as of February 28, 2025, between us and U.S.

Bank Trust Company, National Association, as trustee (the “2030 Note Trustee”).

The 2030 Notes accrue interest at a rate of 2.00 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2025.

The 2030 Notes will mature on March 15, 2030, unless earlier repurchased, redeemed or converted.

Before November 15, 2029, noteholders will have the right to convert their 2030 Notes only upon the occurrence of certain events, including but not limited to, the Company’s common stock trading above 130 % of the conversion price for a specific period, the 2030 Notes per $ 1,000 in principal amount trading below 98 % of the product of the trading price of the Company’s common stock and the conversion rate for a specific period, and certain fundamental changes to corporate structure.

From and after November 15, 2029, noteholders may convert their 2030 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

We will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of our common stock.

The kind and amount of consideration due upon conversion will be determined based on the conversion value of the 2030 Notes, measured proportionately for each trading day in an “Observation Period” (as defined in the 2030 Indenture) consisting of 35 trading days, and settled following the completion of that Observation Period.

The consideration due in respect of each trading day in the Observation Period will consist of cash, up to at least the proportional amount of the principal amount being converted, and any excess of the proportional conversion value for that trading day that will not be settled in cash will be settled in shares of our common stock.

The initial conversion rate is 14.1377 shares of our common stock per $ 1,000 principal amount of 2030 Notes, which represents an initial conversion price of approximately $ 70.73 per share of our common stock.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events, but will not be adjusted for regular quarterly dividends that do not exceed the dividend threshold (initially equal to $ 0.27 per share of common stock as defined in the 2030 Indenture).

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2030 Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

As of April 1, 2025, the conversion rate for the 2030 Notes was 14.1377 shares of common stock per $ 1,000 principal amount of the 2030 Notes, which represents a conversion price of approximately $ 70.73 per share of common stock.

The 2030 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 March 20, 2028 and on or before the 35th scheduled trading day immediately before the maturity date, but only if (i) the notes are “Freely Tradable” (as defined in the 2030 Indenture), and all accrued and unpaid additional interest, if any, has been paid in full, as of the date we send the related redemption notice;

and (ii) the last reported sale price per share of our common stock exceeds 130 % of the conversion price on (1) 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 such redemption notice;

and (2) the trading day immediately before the date we send such redemption notice.

However, we may not redeem less than all of the outstanding 2030 Notes unless at least $ 150.0 million aggregate principal amount of 2030 Notes are outstanding and not called for redemption as of the time we send the related redemption notice.

The redemption price will be a cash amount equal to the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

In addition, calling any 2030 Note for redemption will constitute a Make-Whole Fundamental Change with respect to that 2030 Note, in which case the conversion rate applicable to the conversion of that 2030 Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the 2030 Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their 2030 Notes at a cash repurchase price equal to the principal amount of the 2030 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

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

The 2030 Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the 2030 Indenture), which include the following:

(i) certain payment defaults on the 2030 Notes (which, in the case of a default in the payment of interest on the 2030 Notes, will be subject to a 30-day cure period);

(ii) our failure to send certain notices under the 2030 Indenture within specified periods of time;

(iii) our failure to comply with certain covenants in the 2030 Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of our assets and our subsidiaries, taken as a whole, to another person;

(iv) a default by us in our other obligations or agreements under the 2030 Indenture or the 2030 Notes if such default is not cured or waived within 60 days after notice is given in accordance with the 2030 Indenture;

(v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $ 20.0 million;

(vi) the rendering of certain judgments against us or any of our significant subsidiaries for the payment of at least $ 50.0 million, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished;

and (vii) certain events of bankruptcy, insolvency and reorganization involving us or our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to our significant subsidiary) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2030 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 2030 Note Trustee, by notice to us, or noteholders of at least 25 % of the aggregate principal amount of 2030 Notes then outstanding, by notice to us and the 2030 Note Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2030 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 2030 Indenture consists exclusively of the right of the noteholders to receive special interest on the 2030 Notes for up to 180 days at a specified rate per annum not exceeding 0.50 % on the principal amount of the 2030 Notes.

As of April 1, 2025, the 2030 Notes had a gross principal balance of $ 575.0 million and a balance of $ 558.8 million, net of unamortized issuance costs of $ 16.2 million.

Total amortization expense was $ 0.3 million during the thirteen weeks ended April 1, 2025.

The effective interest rate for the 2030 Notes was 2.57 % as of April 1, 2025.

2026 Convertible Senior Notes

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

The net proceeds from the sale of the 2026 Notes were approximately $ 334.9 million after deducting issuance costs of $ 10.1 million.

On February 28, 2025, we used part of the net proceeds from the issuance of the 2030 Notes to repurchase approximately $ 276.0 million aggregate principal amount of the 2026 Notes in a privately-negotiated transaction for aggregate consideration of $ 289.8 million (the “2026 Note Repurchase Transaction”).

The 2026 Note Repurchase Transaction was accounted for as a debt extinguishment.

The 2026 Note Repurchase Transactions resulted in a $ 15.9 million loss on early debt extinguishment in the first quarter of fiscal 2025, of which $ 2.1 million consisted of unamortized issuance costs.

The 2026 Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness;

(ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated to the 2026 Notes;

1 unchanged sentence

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 2026 Notes were issued pursuant to, and are governed by, an indenture (the “Base Indenture”) between us and a trustee (“2026 Note 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 “2026 Indenture”), dated as of June 15, 2021, between the Company and the 2026 Note Trustee.

The 2026 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.

7 unchanged sentences

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2026 Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

As of October 1, 2024, the conversion rate for the Notes was 13.7961 shares of common stock per $ 1,000 principal amount of the Notes, which represents a conversion price of approximately $ 72.48 per share of common stock.

In connection with the cash dividend that was declared by our Board on October 23, 2024, on November 13, 2024 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 April 1, 2025, the conversion rate for the 2026 Notes was 13.9491 shares of common stock per $ 1,000 principal amount of the 2026 Notes, which represents a conversion price of approximately $ 71.69 per share of common stock.

In connection with the cash dividend that was declared by our Board of Directors ("Board") on April 24, 2025, on May 14, 2025 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the 2026 Notes in accordance with the terms.

The 2026 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;

13 unchanged sentences

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 2026 Notes then outstanding will immediately become due and payable without any further action or notice by any person.

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

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

As of October 1, 2024, the Notes had a gross principal balance of $ 345.0 million and a balance of $ 341.6 million, net of unamortized issuance costs of $ 3.4 million.

Total amortization expense was $ 0.5 million and $ 1.5 million during the thirteen and thirty-nine weeks ended October 1, 2024, respectively.

Total amortization expense was $ 0.5 million and $ 1.5 million during thirteen and thirty-nine weeks ended October 3, 2023, respectively.

The effective interest rate for the Notes was 0.96 % as of October 1, 2024.

If any other Event of Default occurs and is continuing, then, the 2026 Note Trustee, by notice to us, or noteholders of at least 25 % of the aggregate principal amount of 2026 Notes then outstanding, by notice to us and the 2026 Note Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2026 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 2026 Note 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 April 1, 2025, the 2026 Notes had a gross principal balance of $ 69.0 million and a balance of $ 68.5 million, net of unamortized issuance costs of $ 0.5 million.

Total amortization expense was $ 0.4 million and $ 0.5 million during the first quarter of fiscal 2025 and fiscal 2024, respectively.

The effective interest rate for the 2026 Notes was 0.96 % as of April 1, 2025.

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

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Supplemental information related to leases (in thousands):

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

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

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Commitments and Contingencies

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

These matters typically involve claims from customers, staff members and others related to operational and employment issues common to the foodservice industry.

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 (“Appeals”).

We expect to hold an opening conference with Appeals later in fiscal 2025.

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

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

These matters often involve claims from customers, staff members and others related to operational and employment issues common to the food service industry.

A number of these claims may exist at any given time, and some of the claims may be pled as class actions.

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Common Stock – Dividends and Share Repurchases

On July 25, 2024 , our Board declared a quarterly cash dividend of $ 0.27 per share, which was paid on August 27, 2024 to the stockholders of record of each share of our common stock at the close of business on August 14, 2024 .

On February 13, 2025 , our Board declared a quarterly cash dividend of $ 0.27 per share, which was paid on March 18,2025 , to the stockholders of record of each share of our common stock at the close of business on March 5, 2025 .

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.

(See Notes 5 and 12 for further discussion of our long-term debt and dividends declared subsequent to October 1, 2024, respectively.)

Under authorization by our Board to repurchase up to 61.0 million shares of our common stock, we have cumulatively repurchased 57.0 million shares at a total cost of $ 1,829.2 million, excluding excise tax, through October 1, 2024, with 29,450 and 0.5 million shares repurchased at a cost of $ 1.1 million and $ 17.5 million, excluding excise tax, during the thirteen and thirty-nine weeks ended October 1, 2024, 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.

(See Notes 5 and 12 for further discussion of our long-term debt and dividends declared subsequent to April 1, 2025, respectively.)

Under authorization by our Board to repurchase up to 61.0 million shares of our common stock, we have cumulatively repurchased 59.7 million shares at a total cost of $ 1,971.0 million, excluding excise tax, through April 1, 2025, with 2.6 million shares repurchased at a cost of $ 141.4 million, excluding excise tax, during the thirteen weeks ended April 1, 2025, inclusive of the 2.4 million shares of our common stock repurchased concurrently with the 2030 Notes issuance in privately negotiated transactions.

Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that result from equity compensation grants and to supplement our earnings per share growth.

Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.

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

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

April 1, 2025

April 2, 2024

Labor expenses

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Stock Options

We did not issue any stock options during the third quarters of fiscal 2024 and fiscal 2023.

Stock option activity during the thirty-nine weeks ended October 1, 2024 was as follows:

We did not issue any stock options during the first quarter of fiscal 2025.

The weighted-average fair value at the grant date for options issued during the first quarter of fiscal 2024 was $ 12.45 .

The fair value of options issued was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions for the first quarter of fiscal 2024:

(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 %.

Stock option activity during the thirteen weeks ended April 1, 2025 was as follows:

Exercise Price

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(In thousands)

Outstanding at January 2, 2024

Outstanding at December 31, 2024

Forfeited or cancelled

Outstanding at October 1, 2024

Exercisable at October 1, 2024

Outstanding at April 1, 2025

Exercisable at April 1, 2025

(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 and thirty-nine weeks ended October 1, 2024.

There were no options exercised during the thirteen and thirty-nine weeks ended October 3, 2023.

As of October 1, 2024, total unrecognized stock-based compensation expense related to unvested stock options was $ 1.6 million, which we expect to recognize over a weighted-average period of approximately 2.1 years.

The total intrinsic value of options exercised during the first quarter of fiscal 2025 was $ 0.1 million.

There were no options exercised in the first quarter of fiscal 2024.

As April 1, 2025, total unrecognized stock-based compensation expense related to unvested stock options was $ 1.1 million, which we expect to recognize over a weighted-average period of approximately 3.6 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended October 1, 2024 was as follows:

Restricted share and restricted share unit activity during the thirteen weeks ended April 1, 2025 was as follows:

(In thousands)

Outstanding at January 2, 2024

Outstanding at October 1, 2024

Outstanding at December 31, 2024

Outstanding at April 1, 2025

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant.

The weighted average fair value for restricted shares and restricted share units issued during the third quarter of fiscal 2024 and 2023 was $ 36.69 and $ 36.81 , respectively.

The fair value of shares that vested during the thirteen and thirty-nine weeks ended October 1, 2024 was $ 1.9 million and $ 24.4 million, respectively.

The fair value of shares that vested during the thirteen and thirty-nine weeks ended October 3, 2023 was $ 3.3 million and $ 19.9 million, respectively.

As of October 1, 2024, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 61.7 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.

The weighted average fair value for restricted shares and restricted share units issued during the first quarter of fiscal 2025 and 2024 was $ 51.89 and $ 34.77 , respectively.

The fair value of shares that vested during the thirteen weeks ended April 1, 2025 and April 2, 2024 was $ 22.4 million and $ 17.8 million, respectively.

As of April 1, 2025, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $ 78.9 million, which we expect to recognize over a weighted-average period of approximately 3.3 years.

Net Income Per Share

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.

As of October 1, 2024 and October 3, 2023, 3.2 million and 2.8 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 periods ended on those dates.

As of April 1, 2025 and April 2, 2024, an aggregate of 3.3 million and 3.2 million shares, of restricted stock and restricted stock units issued were unvested, respectively, 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 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.

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

Common stock equivalents for the 2026 Notes and 2030 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.

April 1, 2025

April 2, 2024

(In thousands, except per share data)

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Diluted net income per share

(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock units of 2.7 million and 2.8 million for October 1, 2024 and October 3, 2023, 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.

(1) Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock units of 0.8 million and 2.4 million for April 1, 2025 and April 2, 2024, were excluded from the diluted calculation due to their anti-dilutive effect.

No shares of common stock equivalents related to the 2026 Notes or 2030 Notes were included in the diluted calculation due to their anti-dilutive effect.

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.

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

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 included 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 Restaurants, 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 Restaurants, North Italia and the other FRC brands are the only businesses that meet the criteria of a reportable operating segment.

The remaining operating segments (Flower Child and our bakery division) along with our businesses that do not qualify as operating segments are combined in Other.

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Segment information is presented below (in thousands):

October 1, 2024

October 3, 2023

October 1, 2024

October 3, 2023

The Cheesecake Factory restaurants

Income from operations:

The Cheesecake Factory restaurants

Depreciation and amortization:

The Cheesecake Factory restaurants

Impairment of assets and lease termination (income)/expenses:

The Cheesecake Factory restaurants

For the thirteen weeks ended April 1, 2025

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

The Cheesecake Factory restaurants

Total costs and expenses

Income/(loss) from operations

Capital expenditures

The Cheesecake Factory restaurants

October 1, 2024

January 2, 2024

For the thirteen weeks ended April 2, 2024

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

The following table presents information related to segment assets (in thousands):

April 1, 2025

December 31, 2024

Total assets:

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Subsequent Events

On October 23, 2024 , our Board declared a quarterly cash dividend of $ 0.27 per share to be paid on November 26, 2024 to the stockholders of record of each share of our common stock at the close of business on November 13, 2024 .

On April 24, 2025 , our Board declared a quarterly cash dividend of $ 0.27 per share to be paid on May 27, 2025 to the stockholders of record of each share of our common stock at the close of business on May 14, 2025 .

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