UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~October 3, 2017~~March 31, 2020

or


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Commission File Number: 0-20574

THE CHEESECAKE FACTORY INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware		51-0340466
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

26901 Malibu Hills Road
Calabasas Hills, California		91301
(Address of principal executive offices)		(Zip Code)

~~(818)~~ (818) 871-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $.01 per share	CAKE	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x⌧ No o◻

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x⌧ No o◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filerx	☒	Accelerated filero	☐

Non-accelerated filero	☐	Smaller reporting companyo	☐
~~(Do not check if a smaller reporting company)~~		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x⌧

As of ~~November 1, 2017, 45,785,285~~June 15, 2020, 45,462,133 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.

Table of Contents

EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by The Cheesecake Factory Incorporated (the “Company”) with the Securities and Exchange Commission (the “SEC”) on May 5, 2020, the Company was unable to file this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) by the original deadline of May 11, 2020 due to the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic.

These considerable developments triggered the need to perform impairment assessments of the Company’s long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC. Future changes in estimates could further impact the carrying value of these items.

On March 4, 2020, the SEC issued an order (Release No. 34-88318) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, as amended by Release No. 34-88465 issued on March 25, 2020 (collectively, the “Order”). In light of the significant impact of the COVID-19 pandemic, the Company was unable to complete the analyses described above in time to file its Quarterly Report by the original filing deadline without unreasonable effort or expense. Accordingly, the Company relied on the Order to postpone the filing of this Quarterly Report to provide it with additional time to finalize these assessments as well as prepare additional required disclosures related to the COVID-19 pandemic.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

INDEX

			~~Page~~ ~~Number~~
			Page Number
~~PART I~~	~~FINANCIAL INFORMATION~~
PART I	~~Item 1.~~FINANCIAL INFORMATION		~~Unaudited Financial Statements:~~
	Item 1.	Unaudited Financial Statements:	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Income	2
		Condensed Consolidated Statements of Comprehensive Income	3
		Condensed Consolidated Statements of ~~Income~~Stockholders’ Equity	4
		Condensed Consolidated Statements of ~~Comprehensive Income~~Cash Flows	5
		Notes to Condensed Consolidated ~~Statement of Stockholders’ Equity~~Financial Statements	6
	Item 2.	~~Condensed Consolidated Statements of Cash Flows~~	7
		~~Notes to Condensed Consolidated Financial Statements~~	8
	~~Item 2.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1518
	Item 3.
	~~Item 3.~~	Quantitative and Qualitative Disclosures About Market Risk	2327
	Item 4.	Controls and Procedures	2328

PART II	OTHER INFORMATION		29
	Item 1.	Legal Proceedings	2429
	Item 1A.	Risk Factors	2429
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2530
	Item 6.	Exhibits	2632

Signatures			2734

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

October 3,
2017

January 3,
2017

ASSETS

Current assets:

Cash and cash equivalents

$
19,795

$
53,839

Accounts receivable

13,195

15,632

Income taxes receivable

5,038

—

Other receivables

33,897

64,592

Inventories

44,195

34,926

Prepaid expenses

48,521

52,438

Total current assets

164,641

221,427

Property and equipment, net

933,484

910,134

Other assets:

Intangible assets, net

23,546

23,054

Prepaid rent

39,652

42,162

Other

114,005

96,542

Total other assets

177,203

161,758

Total assets

$
1,275,328

$
1,293,319

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
46,572

$
41,564

Income taxes payable

—

2,299

Gift card liability

116,419

153,629

Other accrued expenses

159,823

179,034

Total current liabilities

322,814

376,526

Deferred income taxes

83,540

82,401

Deferred rent

74,784

71,575

Deemed landlord financing liability

113,607

100,576

Long-term debt

30,000

—

Other noncurrent liabilities

67,224

59,034

Commitments and contingencies (Note 4)

Stockholders’ equity:

Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued

—

—

Common stock, $.01 par value, 250,000,000 shares authorized; 95,271,640 and 94,672,037 issued at October 3, 2017 and January 3, 2017, respectively

953

947

Additional paid-in capital

797,505

774,137

Retained earnings

1,301,209

1,238,012

Treasury stock, 49,143,167 and 46,979,659 shares at cost at October 3, 2017 and January 3, 2017, respectively

(1,516,269
)
(1,409,889
)
Accumulated other comprehensive loss

(39
)
—

Total stockholders’ equity

583,359

603,207

Total liabilities and stockholders’ equity

$
1,275,328

$
1,293,319


	March 31,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	81,023	$	58,416
Accounts receivable		22,862		25,619
Income taxes receivable		49,179		4,626
Other receivables		27,283		64,683
Inventories		47,822		47,225
Prepaid expenses		42,489		43,946
Total current assets		270,658		244,515
Property and equipment, net		818,283		831,599
Other assets:
Intangible assets, net		254,401		437,207
Operating lease assets		1,257,428		1,240,976
Other		75,012		86,296
Total other assets		1,586,841		1,764,479
Total assets	$	2,675,782	$	2,840,593
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55,894	$	61,946
Gift card liabilities		161,215		187,978
Operating lease liabilities		123,189		128,081
Other accrued expenses		166,828		236,582
Total current liabilities		507,126		614,587

Deferred income taxes		23,838		33,847
Long-term debt		380,000		290,000
Operating lease liabilities		1,217,582		1,189,869
Other noncurrent liabilities		128,265		140,548
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; NaN issued		—		—
Common stock, $.01 par value, 250,000,000 shares authorized; 98,452,351 and 97,685,178 shares issued at March 31, 2020 and December 31, 2019, respectively		985		977
Additional paid-in capital		861,641		855,989
Retained earnings		1,255,794		1,408,333
Treasury stock, 52,991,015 and 52,916,434 shares at cost at March 31, 2020 and December 31, 2019, respectively		(1,695,708)		(1,693,122)
Accumulated other comprehensive loss		(3,741)		(435)
Total stockholders’ equity		418,971		571,742
Total liabilities and stockholders’ equity	$	2,675,782	$	2,840,593

See the accompanying notes to the condensed consolidated financial statements

1

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Revenues	$	615,106	$	599,481

Costs and expenses:
Cost of sales		140,905		136,187
Labor expenses		236,982		217,310
Other operating costs and expenses		167,970		153,221
General and administrative expenses		43,960		39,123
Depreciation and amortization expenses		23,562		21,362
Impairment of assets and lease terminations		191,896		—
Acquisition-related costs		1,236		—
Acquisition-related contingent consideration, compensation and amortization		(4,466)		—
Preopening costs		3,119		2,130
Total costs and expenses		805,164		569,333
(Loss)/income from operations		(190,058)		30,148
Loss on investment in unconsolidated affiliates		—		(1,450)
Interest and other income/(expense), net		(1,518)		2
(Loss)/Income before income taxes		(191,576)		28,700
Income tax (benefit)/provision		(55,413)		1,716
Net (loss)/income	$	(136,163)	$	26,984

Net (loss)/income per share:
Basic	$	(3.11)	$	0.61
Diluted	$	(3.11)	$	0.60

Weighted average shares outstanding:
Basic		43,773		44,255
Diluted		43,773		44,984

See the accompanying notes to the condensed consolidated financial statements.

2

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

~~(In thousands, except per share data)~~

~~(Unaudited)~~(In thousands)

(Unaudited)

Thirteen
Weeks Ended
October 3, 2017

Thirteen
Weeks Ended
September 27, 2016

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Revenues

$
555,392

$
560,018

$
1,688,687

$
1,672,573

Costs and expenses:

Cost of sales

127,453

128,838

385,373

386,544

Labor expenses

193,466

186,567

580,364

557,436

Other operating costs and expenses

138,423

134,877

411,534

396,414

General and administrative expenses

35,364

36,057

106,946

107,179

Depreciation and amortization expenses

22,999

21,634

69,492

64,559

Impairment of assets and lease terminations

—

—

1,231

—

Preopening costs

3,370

1,982

5,649

6,594

Total costs and expenses

521,075

509,955

1,560,589

1,518,726

Income from operations

34,317

50,063

128,098

153,847

Interest and other expense, net

(1,600
)
(2,477
)
(4,426
)
(6,962
)
Income before income taxes

32,717

47,586

123,672

146,885

Income tax provision

6,272

13,012

24,018

39,772

Net income

$
26,445

$
34,574

$
99,654

$
107,113

Net income per share:

Basic

$
0.57

$
0.72

$
2.11

$
2.22

Diluted

$
0.56

$
0.70

$
2.05

$
2.16

��

Weighted average shares outstanding:

Basic

46,602

47,815

47,323

48,188

Diluted

47,519

49,212

48,582

49,604

Cash dividends declared per common share

$
0.29

$
0.24

$
0.77

$
0.64


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Net (loss)/income	$	(136,163)	$	26,984
Other comprehensive (loss)/gain:
Foreign currency translation adjustment		(936)		239
Unrealized loss on derivative, net of tax		(2,370)		—
Other comprehensive (loss)/gain		(3,306)		239
Total comprehensive (loss)/income	$	(139,469)	$	27,223

See the accompanying notes to the condensed consolidated financial statements

3

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

For the thirteen weeks ended March 31, 2020:


										Accumulated
	Shares of			Additional						Other
	Common	Common		Paid-in		Retained		Treasury		Comprehensive
	Stock	Stock		Capital		Earnings		Stock		Loss		Total
Balance, December 31, 2019	97,685	$	977	$	855,989	$	1,408,333	$	(1,693,122)	$	(435)	$	571,742
Net loss	—		—		—		(136,163)		—		—		(136,163)
Foreign currency translation adjustment	—		—		—		—		—		(936)		(936)
Change in derivative, net of tax	—		—		—		—		—		(2,370)		(2,370)
Cash dividends declared Common stock, $0.36 per share	—		—		—		(16,376)		—		—		(16,376)
Stock-based compensation	566		6		5,541		—		—		—		5,547
Common stock issued under stock-based compensation plans	203		2		111		—		—		—		113
Treasury stock purchases	—		—		—		—		(2,586)		—		(2,586)
Balance, March 31, 2020	98,454	$	985	$	861,641	$	1,255,794	$	(1,695,708)	$	(3,741)	$	418,971

For the thirteen weeks ended April 2, 2019:


										Accumulated
	Shares of			Additional						Other
	Common	Common		Paid-in		Retained		Treasury		Comprehensive
	Stock	Stock		Capital		Earnings		Stock		Loss		Total
Balance, January 1, 2019	96,622	$	967	$	828,676	$	1,384,494	$	(1,642,140)	$	(938)	$	571,059
Cumulative effect of adopting the pronouncement related to lease accounting, net of tax	—		—		—		(41,466)		—		—		(41,466)
Balance, January 1, 2019, as adjusted	96,622		967		828,676		1,343,028		(1,642,140)		(938)		529,593
Net income	—		—		—		26,984		—		—		26,984
Foreign currency translation adjustment	—		—		—		—		—		239		239
Cash dividends declared Common stock, $0.33 per share	—		—		—		(14,952)		—		—		(14,952)
Stock-based compensation	350		3		5,907		—		—		—		5,910
Common stock issued under stock-based compensation plans	412		4		5,537		—		—		—		5,541
Treasury stock purchases	—		—		—		—		(11,071)		—		(11,071)
Balance, April 2, 2019	97,384	$	974	$	840,120	$	1,355,060	$	(1,653,211)	$	(699)	$	542,244

See the accompanying notes to the condensed consolidated financial statements.

4

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~CASH FLOWS

(In thousands)

(Unaudited)

Thirteen
Weeks Ended
October 3, 2017

Thirteen
Weeks Ended
September 27, 2016

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Net income

$
26,445

$
34,574

$
99,654

$
107,113

Other comprehensive loss:

Foreign currency translation adjustment

(39
)
—

(39
)
—

Other comprehensive loss

(39
)
—

(39
)
—

Total comprehensive income

$
26,406

$
34,574

$
99,615

$
107,113


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Cash flows from operating activities:
Net (loss)/income	$	(136,163)	$	26,984
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expenses		23,562		21,362
Impairment of assets and lease terminations		191,571		—
Deferred income taxes		(11,231)		1,792
Stock-based compensation		5,507		5,847
Loss from investments in unconsolidated affiliates		—		1,450
Changes in assets and liabilities:
Accounts and other receivable		38,312		43,295
Income taxes receivable/payable		(44,553)		(681)
Inventories		(605)		(3,142)
Prepaid expenses		1,452		(10,621)
Operating lease assets/liabilities		1,851		1,130
Other assets		13,279		(5,896)
Accounts payable		(3,464)		(11,623)
Gift card liabilities		(26,753)		(26,594)
Other accrued expenses		(85,745)		(9,787)
Cash (used in)/provided by operating activities		(32,980)		33,516
Cash flows from investing activities:
Additions to property and equipment		(15,775)		(13,351)
Additions to intangible assets		(128)		(96)
Investments in unconsolidated affiliates		—		(3,000)
Loans made to unconsolidated affiliates		—		(11,000)
Cash used in investing activities		(15,903)		(27,447)
Cash flows from financing activities:
Borrowings on credit facility		90,000		20,000
Repayments on credit facility		—		(10,000)
Proceeds from exercise of stock options		113		5,541
Cash dividends paid		(15,791)		(14,628)
Treasury stock purchases		(2,586)		(11,071)
Cash provided by/(used in) financing activities		71,736		(10,158)
Foreign currency translation adjustment		(246)		40
Net change in cash and cash equivalents		22,607		(4,049)
Cash and cash equivalents at beginning of period		58,416		26,578
Cash and cash equivalents at end of period	$	81,023	$	22,529

Supplemental disclosures:
Interest paid	$	253	$	316
Income taxes paid	$	352	$	566
Construction payable	$	3,945	$	2,670

See the accompanying notes to the condensed consolidated financial statements.

5

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

~~CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY~~

~~(In thousands)~~

~~(Unaudited)~~

Shares of
Common
Stock

Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Total

Balance, January 3, 2017

94,672

$
947

$
774,137

$
1,238,012

$
(1,409,889
)
$
—

$
603,207

Net income

—

—

—

99,654

—

—

99,654

Foreign currency translation adjustment

—

—

—

—

—

(39
)
(39
)
Cash dividends declared

—

—

—

(36,457
)
—

—

(36,457
)
Stock-based compensation

—

—

15,274

—

—

—

15,274

Common stock issued under stock-based compensation plans

600

6

8,094

—

—

—

8,100

Treasury stock purchases

—

—

—

—

(106,380
)
—

(106,380
)
Balance, October 3, 2017

95,272

$
953

$
797,505

$
1,301,209

$
(1,516,269
)
$
(39
)
$
583,359

~~See the accompanying notes to the condensed consolidated financial statements.~~

~~THE CHEESECAKE FACTORY INCORPORATED~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Cash flows from operating activities:

Net income

$
99,654

$
107,113

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

Depreciation and amortization expenses

69,492

64,559

Deferred income taxes

1,139

564

Impairment of assets and lease terminations

1,491

—

Stock-based compensation

15,067

16,177

Tax impact of stock options exercised, net of cancellations

—

8,450

Other

—

2,945

Changes in assets and liabilities:

Accounts receivable

2,437

209

Other receivables

30,695

41,893

Inventories

(9,269
)
(1,531
)
Prepaid expenses

3,917

5,639

Other assets

(6,045
)
(2,201
)
Accounts payable

(2,042
)
(4,526
)
Income taxes receivable/payable

(7,337
)
18,280

Other accrued expenses

(44,989
)
(32,520
)
Cash provided by operating activities

154,210

225,051

Cash flows from investing activities:

Additions to property and equipment

(73,417
)
(70,607
)
Additions to intangible assets

(903
)
(1,294
)
Investment in unconsolidated affiliates

(9,000
)
—

Cash used in investing activities

(83,320
)
(71,901
)
Cash flows from financing activities:

Deemed landlord financing proceeds

3,216

2,673

Deemed landlord financing payments

(3,214
)
(2,705
)
Borrowings on credit facility

30,000

—

Proceeds from exercise of stock options

8,100

18,923

Cash dividends paid

(36,632
)
(31,049
)
Treasury stock purchases

(106,380
)
(119,001
)
Cash used in financing activities

(104,910
)
(131,159
)
Foreign currency translation adjustment

(24
)
—

Net change in cash and cash equivalents

(34,044
)
21,991

Cash and cash equivalents at beginning of period

53,839

43,854

Cash and cash equivalents at end of period

$
19,795

$
65,845

Supplemental disclosures:

Interest paid

$
5,155

$
4,719

Income taxes paid

$
30,195

$
12,769

Construction payable

$
13,556

$
9,161

~~See the accompanying notes to the condensed consolidated financial statements.~~

~~THE CHEESECAKE FACTORY INCORPORATED~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

1. 

Basis of Presentation ~~and Significant Accounting Policies~~

The accompanying condensed consolidated financial statements include the accounts of The Cheesecake Factory Incorporated and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) ~~and with the instructions to Form 10-Q and Article 10 of Regulation S-X.~~. All intercompany accounts and transactions for the periods presented have been eliminated in consolidation. The unaudited financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results that may be achieved for any other interim period or for the full fiscal year. 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 3, 2017~~December 31, 2019 filed with the SEC on March 11, 2020 (“fiscal 2019 10-K”).

On October 2, ~~2017.~~2019, we completed the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC, including Flower Child and all other FRC brands (the "Acquisitions"). The results of operations, financial position and cash flows of the acquired businesses are included in our consolidated financial statements as of the acquisition date.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal 2020 consists of 52 weeks and will end on December 29, 2020. Fiscal 2019, which ended on December 31, 2019, was also a 52-week year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates.

COVID-19 Pandemic

The Company is subject to risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency on March 13, 2020. We have experienced significant disruptions to our business due to suggested and mandated social distancing and shelter-in-place orders, which resulted in the temporary closure of a number of restaurants across our portfolio, while the remaining locations shifted to an off-premise only operating model on an interim basis. In late April 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms. As of June 22, 2020, we have reopened dining rooms in 194 locations across our concepts, however we will be operating under capacity restrictions for some time as social distancing protocols remain in place. As of March 31, 2020 and June 22, 2020 respectively, 33 and 19 of our restaurants were temporarily closed and 261 and 81 restaurants were operating in an off-premise only model.

In response to the pandemic, the Company and its Board of Directors implemented the following measures to preserve liquidity and enhance financial flexibility:

●

Eliminated non-essential capital expenditures and expenses;

●

Suspended new unit development;

●

Reduced board, executive and corporate support staff compensation;

●

Furloughed approximately 41,000 hourly staff members;

6

Table of Contents

●

Engaged in discussions with our landlords regarding ongoing rent obligations, including the potential deferral, abatement and/or restructuring of rent otherwise payable during the period of the COVID-19 pandemic related closure;

●

Increased borrowings under our revolving credit facility;

●

Raised additional equity capital; and

●

Suspended the dividend on our common stock and share repurchases.

We ~~utilize a 52/53-week fiscal year ending~~cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the ~~Tuesday closest~~restaurants industry as a whole. The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the significance of the impact to ~~December 31~~our operating results and financial position.

In addition, these considerable developments have triggered the need to perform impairment assessments of our long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC. Future changes in estimates could further impact the carrying value of these items. (See Notes 3 and 4 for ~~financial reporting purposes. Fiscal year 2017 consists~~further discussion of ~~52 weeks~~impairment of long-lived and ~~will end on January 2, 2018. Fiscal 2016, which ended on January 3, 2017, was a 53-week year.~~intangible assets, respectively. See Note 8 for further discussion of the revaluation of contingent consideration.)

See “Risk Factors” included in Part II, Item 1A for further discussion of risks associated with the COVID-19 pandemic.

Derivative Financial Instruments

We recognize derivative financial instruments on the balance sheet at fair value under a Level 2 categorization. Our only derivative is an interest rate swap which is designated as a cash flow hedge. Therefore, the effective portion of the changes in fair value are recognized in accumulated other comprehensive income until the hedged item is recognized in earnings, and the ineffective portion of changes in the fair value are immediately recognized in earnings as interest expense. We classify cash inflows and outflows from derivatives within operating activities on the consolidated statements of cash flows. See Note 7 for further discussion of this interest rate swap.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update eliminates, adds and modifies certain disclosure requirements for fair value measurements. We adopted this standard as of the beginning of fiscal 2020 and such adoption did not have a significant impact on our consolidated financial statements.

2. Inventories

Inventories consisted of (in thousands):


	March 31, 2020		December 31, 2019
Restaurant food and supplies	$	23,131	$	25,057
Bakery finished goods and work in progress		18,247		16,000
Bakery raw materials and supplies		6,444		6,168
Total	$	47,822	$	47,225

3. Impairment of Long-Lived Assets ~~and Lease Terminations~~

We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate the carrying value of the assets or asset group may not be recoverable. ~~Factors considered include, but are not limited~~Due to the significant ~~underperformance relative~~impact of the COVID-19 pandemic on our operations, we determined it was necessary to ~~historical or projected future operating~~perform an interim test of our long-lived assets during the first quarter of fiscal 2020. Based on the results ~~significant changes in the manner in which an asset is being used, an expectation that an asset will be disposed~~ of ~~significantly before the end~~these assessments, we recorded $8.9 million of its previously estimated useful life and significant negative industry or economic trends. We regularly review restaurants that are cash flow negative for the previous four quarters and those that are being considered for closure or relocation to determine if impairment testing is warranted. At any given time, we may be monitoring a small number of locations, and future impairment charges could be required if individual restaurant performance does not improve or we make the decision to close or relocate a restaurant.

~~We recorded $1.2 million in the thirty-nine weeks ended October 3, 2017 of accelerated depreciation and impairment~~ expense primarily related to the ~~relocation~~impairment of one The Cheesecake Factory, ~~restaurant~~one North Italia, two Other FRC and ~~the~~four Other restaurants. These amounts are recorded in impairment of assets and lease ~~expiration of one The Cheesecake Factory restaurant.~~

~~Foreign Currency~~

~~The Canadian dollar is~~terminations on the functional currency for our Canadian restaurant operations. Revenue and expense accounts are translated into U.S. dollars using the average exchange rates during the reporting period. Assets and liabilities are translated using the exchange rates in effect at the reporting period end date. Equity accounts are translated at historical rates, except for the change in retained earnings which is the result of the income statement translation process. Translation gains and losses are reported as a separate component in our condensed consolidated statements of ~~comprehensive income and would only be realized upon~~income.

7

Table of Contents

4. Intangible Assets, net

The following table presents the ~~sale or upon complete or substantially complete liquidation~~components of ~~the business. Gains and losses from foreign currency transactions are recognized in~~ our ~~condensed consolidated statements of income in interest and other expense, net.~~intangible assets, net (in thousands):


	March 31, 2020		December 31, 2019
Indefinite-lived intangible assets:
Goodwill	$	1,451	$	78,355
Trade names and trademarks		233,567		337,027
Transferable alcoholic beverage licenses		8,545		8,575
Total indefinite-lived intangible assets		243,563		423,957
Definite-lived intangible assets, net:
Licensing agreements		7,627		10,060
Non-transferable alcoholic beverage licenses		3,211		3,190
Total definite-lived intangible assets		10,838		13,250
Total intangible assets, net	$	254,401	$	437,207

~~Recent Accounting Pronouncements~~

In March 2016, the Financial Accounting Standards Board (“FASB”) issued guidance affecting all entities that issue share-based payment awards to their employees. This update covers such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This guidance is effective for annual and interim periods beginning after December 15, 2016. We adopted these provisions prospectively inDuring the first quarter of fiscal ~~2017. This guidance requires~~2020, we finalized our purchase accounting for the ~~tax impact~~Acquisitions, increasing goodwill by $2.5 million with an offsetting decrease in trade names and trademarks.

Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on estimated undiscounted future cash flows.

Due to the decrease in our stock ~~options exercised and vested restricted stock to be recorded in~~price coupled with the income tax provision instead of additional paid-in capital, which decreased our income tax provision by $0.2 million and $5.7 million in the thirteen and thirty-nine weeks ended October 3, 2017, respectively. In addition, the excess tax benefitdining room closures related to ~~stock options exercised is no longer reclassified from cash flows from operating activities to cash flows from financing activities on~~ the ~~condensed consolidated statements of cash flows. In this filing, we adjusted the prior year condensed consolidated statements of cash flows to conform~~COVID-19 pandemic and significant decline to the ~~current year presentation. We will continue~~equity value of our peers and overall U.S. stock market, we determined it was necessary to ~~estimate forfeitures each period, so there is no change to~~perform an interim assessment of our ~~accounting policy related to forfeitures.~~

~~In February 2016, the FASB issued guidance that requires a lessee to recognize on the balance sheet a liability to make lease payments~~indefinite and a corresponding right-of-use asset. The standard also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018 and requires a modified retrospective approach. Although early adoption is permitted, we will adopt these provisions indefinite-lived intangible assets during the first quarter of fiscal ~~2019. This guidance will have a material effect on our condensed consolidated balance sheets.~~

~~In July 2015,~~2020. For the ~~FASB issued guidance that requires inventory within~~goodwill impairment test, the ~~scope~~estimated fair value of the ~~standard~~reporting units was determined using a blend of the income and market capitalization approaches. For the income approach, we performed a discounted cash flow analysis. The fair value of the other indefinite-lived assets was estimated using the relief from royalty method. There were a number of estimates and significant judgments made by management in performing these evaluations, such as future unit growth, average unit volumes, cash flows and discount rates. Accordingly, actual results could vary significantly from such estimates. Based on the results of these assessments, we recorded impairment expense of $79.4 million, $101.0 million and $2.3 million related to ~~be measured at~~goodwill, trade names and trademarks, and licensing agreements, respectively. More than half of the ~~lower of cost or net realizable value. Previous guidance required inventory to be measured at~~total impairment amount was driven by the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). This guidance was effective for fiscal years beginning after December 15, 2016, with early adoption permitted. Our adoption of this guidance in the first quarter of fiscal 2017 had an immaterial impact on our ~~condensed consolidated financial statements.~~

~~In May 2014,~~market capitalization, with the ~~FASB issued accounting guidance that provides a comprehensive new revenue recognition model that supersedes most of the existing revenue recognition requirements and requires entities~~balance related to ~~recognize revenue at an amount that reflects the consideration~~lower future cash flow estimates. The reduced projections stemmed primarily from our decision to ~~which a company expects to be entitled in exchange for transferring goods or services to a customer. In August 2015, the FASB deferred the effective date of this standard~~delay fiscal 2020 unit development, thereby moving our expected unit growth trajectory out by one ~~year with early adoption permitted no earlier than the original effective date.~~year. The ~~guidance is now effective for us beginning in the first quarter of fiscal 2018. In March~~cash flow estimates assumed that average unit volumes and ~~April 2016, the FASB provided additional guidance~~margins would substantially return to pre-COVID-19 levels by mid-fiscal 2021.

5. Gift Cards

The following tables present information related to ~~implementation. This standard is not expected to have a material impact on our condensed consolidated financial statements.~~

~~2. Inventories~~

~~Inventories consisted of~~gift cards (in thousands):

October 3, 2017

January 3, 2017

Restaurant food and supplies

$
17,447

$
16,555

Bakery finished goods and work in progress(1)

21,064

12,121

Bakery raw materials and supplies

5,684

6,250

Total

$
44,195

$
34,926


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
Gift card liabilities:	March 31, 2020		April 2, 2019
Beginning balance	$	187,978	$	172,336
Activations		17,340		20,373
Redemptions and breakage		(44,103)		(46,964)
Ending balance	$	161,215	$	145,745

8

~~(1) We began construction~~Table of ~~an infrastructure upgrade~~Contents


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019
Gift card contract assets: ⁽¹⁾
Beginning balance	$	23,172	$	23,388
Deferrals		2,203		2,596
Amortization		(4,690)		(4,711)
Ending balance	$	20,685	$	21,273

(1)	Included in prepaid expenses on the condensed consolidated balance sheets.

6. Leases

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


	Thirteen Weeks Ended		Thirteen Weeks Ended
	March 31, 2020		April 2, 2019
Operating	$	33,041	$	26,427
Variable		15,828		16,335
Short-term		129		77
Total	$	48,998	$	42,839

Supplemental information related to our California bakery and anticipate that we will shut down production at this facility for several months in fiscal 2018. Accordingly, we are increasing our finished goods inventory temporarily to support operations during the period that the California bakery will be closed.leases (in thousands, except percentages):


	Thirteen Weeks Ended		Thirteen Weeks Ended
Cash paid for amounts included in the measurement of lease liabilities:	March 31, 2020		April 2, 2019
Operating cash flows from operating leases	$	30,760	$	24,213
Right-of-use assets obtained in exchange for new operating lease liabilities		14,929		5,768

3.7. Long-Term Debt

~~We maintain~~On July 30, 2019, we entered into a ~~$200 million unsecured revolving credit facility (“Facility”~~Third Amended and Restated Loan Agreement (the “Facility”), ~~$50~~which amends and restates in its entirety our prior Second Amended and Restated Loan Agreement dated as of December 22, 2015. The Facility, which terminates on July 30, 2024, provides us with revolving loan commitments that total $400 million of(of which $40 million may be used for issuances of letters of ~~credit. Availability under the Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs.~~credit). The Facility ~~which matures on December 22, 2020,~~ contains a commitment increase feature that could provide for an additional ~~$100~~$200 million in available credit upon our request and subject to the participating lenders electing to increase their commitments or ~~by means of the addition of~~ new ~~lenders. Certain of our material subsidiaries guarantee our obligations under~~lenders being added to the Facility. ~~During the third quarter of fiscal 2017, we borrowed $30.0 million on the Facility to fund a portion of our stock repurchases.~~ At ~~October 3, 2017,~~March 31, 2020, we had net availability for borrowings of ~~$149.3~~$0.6 million, based on a ~~$30.0~~$380.0 million outstanding debt balance and ~~$20.7~~$19.4 million in standby letters of credit. During the first quarter of fiscal 2020, we increased our borrowings under the Facility to bolster our cash position and enhance financial flexibility given the impact of the COVID-19 pandemic on our operations.

~~We are~~At March 31, 2020, we were subject to certain financial covenants under the Facility requiring us to maintain (i) a maximum ~~“Net~~"Net Adjusted Leverage ~~Ratio”~~Ratio" of ~~4.0~~4.75 and (ii) a minimum ratio of EBITDAR to interest and ~~rental~~rent expense ~~ratio (“EBITDAR Ratio”)~~ of 1.9 ~~with each~~("EBITDAR Ratio"), as well as customary events of default that, if triggered, could result in acceleration of the ~~capitalized terms in this Note 3 defined in~~maturity of the ~~Facility or in this Note 3.~~Facility. The Facility also limits cash distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters. ~~Our Net Adjusted Leverage and EBITDAR Ratios were 2.7 and 2.9, respectively, at October 3, 2017, and we were in compliance with all covenants in effect at that date.~~

9

Table of Contents

~~Borrowings~~At March 31, 2020. borrowings under the Facility ~~bear~~bore interest, at our option, at a rate ~~per annum~~ equal to ~~either~~either: (i) the ~~Adjusted~~adjusted LIBO Rate (as customarily defined) (the “Adjusted LIBO Rate”) plus a margin ~~ranging from 1.00% to 1.75%~~that is based on our ~~Net Adjusted Leverage Ratio~~net adjusted leverage ratio, or (ii) the sum of (a) the highest of (1) the rate of interest ~~publicly announced~~last quoted by ~~JPMorgan Chase Bank~~The Wall Street Journal as ~~its~~the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal ~~Funds Effective Rate~~Reserve Bank of New York as the effective federal funds rate or the ~~Overnight~~rate that is published by the Federal Reserve Bank ~~Funding Rate,~~of New York as an overnight bank funding rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin ~~ranging from 0.00%~~that is based on our net adjusted leverage ratio. Letters of credit issued under the Facility bear fees that are equivalent to ~~0.75%~~the interest rate margin that is applicable to revolving loans that bear interest at the adjusted LIBO Rate plus other customary fees charged by the issuing bank. Under the Facility, we paid certain customary loan origination fees and will pay an unused fee on the unused portion of the Facility that is also based on our Net Adjusted Leverage Ratio. ~~We also pay customary fees~~Our Net Adjusted Leverage and EBITDAR Ratios were 4.3 and 2.3, respectively, at March 31, 2020, and we were in compliance with all covenants in effect at that date.

Our obligations under the Facility are unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Facility. The Facility will be used for our general corporate purposes, including for the issuance of standby letters of credit to support our self-insurance programs, and to fund dividends, stock repurchases and permitted acquisitions.

As further discussed in Note 15, on May 1, 2020, we amended the Facility to provide additional financial flexibility, including relief of certain of the covenants discussed above.

On March 13, 2020, we entered into an interest rate swap agreement to manage our exposure to interest rate movements on our Facility. The agreement became effective on April 1, 2020 and matures on April 1, 2025. The interest rate swap entitles us to receive a variable rate of interest based on the ~~unused portion~~one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802%. The notional amount of the ~~Facility~~swap agreement is $280.0 million through March 31, 2023 and $140.0 million from April 1, 2023 through April 1, 2025. The differences between the variable LIBO rate and the interest rate swap rate are settled monthly. We did not make any payments to settle the interest rate swap during the three months ended March 31, 2020. At March 31, 2020, the fair value of our interest rate swap was a liability of $3.1 million and was included in long-term other liabilities in the condensed consolidated balance sheet. Changes in the valuation of the interest rate swap were included as a component of other comprehensive income and will be reclassified to earnings as realized.

We classified this interest rate swap within Level 2 of the valuation hierarchy described in Note 8. Our counterparty under this arrangement provided monthly statements of the market values of these instruments based on ~~our outstanding letters~~significant inputs that were observable or could be derived principally from, or corroborated by, observable market data for substantially the full term of ~~credit.~~the asset or liability. The impact on the derivative liabilities for the Company’s and the counterparty’s non-performance risk to the derivative trades was considered when measuring the fair value of derivative liabilities.

4.8. Fair Value Measurements

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

●

Level 1: Quoted prices in active markets for identical assets or liabilities.

●

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities

●

Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions

10

Table of Contents

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):


	March 31, 2020
	Level 1		Level 2		Level 3
Assets (Liabilities)
Non-qualified deferred compensation assets	$	63,836	$	—	$	—
Non-qualified deferred compensation liabilities		(64,679)		—		—
Interest rate swap		—		(3,141)		—
Acquisition-related deferred consideration		—		(55,405)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(7,280)


	December 31, 2019
	Level 1		Level 2		Level 3
Assets (Liabilities)
Non-qualified deferred compensation assets	$	77,228	$	—	$	—
Non-qualified deferred compensation liabilities		(76,255)		—		—
Acquisition-related deferred consideration		—		(53,933)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(13,218)

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 0 minimum or maximum payment. The undiscounted range of outcomes per the Monte Carlo model was $ 0 to $ 35.6 million. Results could change materially if different estimates and assumptions were used. 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):


Balance, December 31, 2019	$	13,218
Change in fair value		(5,938)
Balance, March 31, 2020	$	7,280

The significant change in the fair value of the contingent consideration during the first quarter of fiscal 2020 related to the impact of the COVID-19 pandemic on the estimated cash flows used in the valuation, primarily stemming from the delay of future new restaurant openings.

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.

9. Commitments and Contingencies

On ~~November 26, 2014,~~June 7, 2018, the California Department of Industrial Relations issued a ~~former restaurant hourly employee filed a class action lawsuit in~~$4.2 million wage citation jointly against the ~~San Diego County Superior Court,~~Company and our vendor that provides janitorial services to 8 of our Southern California restaurants, alleging that the ~~Company violated~~janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor Code and California Business and Professions Code, by failing to pay overtime, to permit required rest breaks and to provide accurate wage statements, among other claims (Masters v. The Cheesecake Factory Restaurants, Inc., et al.; Case No 37-2014-00040278). By stipulation, the parties agreed to transfer(Wage Citation Case No. ~~37-2014-00040278~~35-CM-188798-16). The wage citation seeks to the Orange County Superior Court. On March 2, 2015, Case No. 37-2014-00040278 was officially transferred and assigned a new Case No. 30-2015-00775529 in the Orange County Superior Court. On June 27, 2016, we gave notice to the court that Case Nos. CIV1504091 and BC603620 described below may be related. On May 23, 2017, the parties participated in voluntary mediation, which concluded without resolution. Subsequent to the plaintiff filing a second amended complaint on July 14, 2017, the parties agreed to resume mediation. The plaintiff seeks unspecified amounts of fees,recover penalties and other monetary payments on behalf of the ~~plaintiff and other purported class members. We intend~~employees that worked for this vendor or its subcontractor. On June 28, 2018, we filed an appeal of the wage citation. On June 11, 2020, the DLSE postponed the hearing on the Company’s appeal due to ~~vigorously defend this action. Based upon the current status of this matter, we have reserved an immaterial amount.~~

On May 28, 2015, a group of current and former restaurant hourly employees filed a class action lawsuit in the United States District Court for the Eastern District of New York, alleging that the Company violated the Fair Labor Standards Act and New York Labor Code, by requiring employees to purchase uniforms for work and violated the State of New York’s minimum wage and overtime provisions (Guglielmo v. The Cheesecake Factory Restaurants, Inc., et al; Case No. 2:15-CV-03117). On September 8, 2015, the Company filed its responsesafety concerns related to the complaint, requesting the court to compel arbitration against opt-in plaintiffs with valid arbitration agreements. On July 21, 2016, the court issued an order confirming the agreement of the parties to dismiss all class claims with prejudice and to allow the case to proceed as a collective action covering a limited number of the Company’s restaurants in the State of New York. On July 31, 2017, the parties participated in voluntary mediation, which concluded without resolution. The plaintiffs seek unspecified amounts of penalties and other monetary payments. We intend to vigorously defend this action. However, itCOVID-19 pandemic. It is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments.

On November 10, 2015, a current restaurant hourly employee filed a class action lawsuit in the Marin County Superior Court, alleging that the Company failed to provide complete and accurate wage statements as set forth in the California Labor Code. On January 26, 2016, the plaintiff filed a First Amended Complaint. The lawsuit seeks unspecified penalties under California’s Private Attorneys General Act (“PAGA”) in addition to other monetary payments (Brown v. The Cheesecake Factory Restaurants, Inc.; Case No. CIV1504091). On April 18, 2016, the court granted our motion to compel individual arbitration of the plaintiff’s wage statement claim and stayed the PAGA claim until completion of the individual arbitration. On June 28, 2016, we gave notice to the court that Case Nos. 30-2015-00775529 and BC603620 may be related. On September 6, 2016, the parties engaged in settlement discussion and reached agreement on the terms of a final settlement agreement. On February 21, 2017, the court granted the parties’ motion for preliminary approval of the class action settlement, and preliminarily enjoined the plaintiffs in Case Nos. 30-2015-00775529 and 37-2014-00040278 from prosecuting any claims released in Case No. CIV1504091. On July 11, 2017, the court signed the Order and Judgment Granting Final Approval of Class Action Settlement in Case No. CIV1504091. The settlement agreement is a full and final resolution of Case No. CIV150491 and a partial resolution of Case Nos. 30-2015-00775529 and BC603620. We have reserved an immaterial amount to comply with our obligations under the approved settlement agreement.

On December 10, 2015, a former restaurant management employee filed a class action lawsuit in the Los Angeles County Superior Court, alleging that the Company improperly classified its managerial employees, failed to pay overtime, and failed to provide accurate wage statements, in addition to other claims. The lawsuit seeks unspecified penalties under PAGA in addition to other monetary payments (Tagalogon v. The Cheesecake Factory Restaurants, Inc.; Case No. BC603620). On March 23, 2016, the parties issued their joint status conference statement at which time we gave notice to the court that Case Nos. 30-2015-00775529 and CIV1504091 may be related. On April 29, 2016, the Company filed its response to the complaint. We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments.

On April 24, 2016, a class action lawsuit was filed in the United States District Court for the Eastern District of New York alleging that the Company violated the New York deceptive business practices statute by improperly calculating suggested gratuities on split payment checks (Rodriguez v. The Cheesecake Factory Restaurants, Inc.; Case No. 2:16-cv-02006-JFB-AKT). The lawsuit seeks unspecified penalties in addition to other monetary payments. On September 1, 2016, the Company filed a motion to dismiss the plaintiff’s complaint. On October 10, 2016, the plaintiff filed an amended complaint to limit the scope of the complaint to the State of New York only. On August 11, 2017, the court granted the Company’s motion to dismiss Case No. 2:16-cv-02006-JFB-AKT in its entirety with prejudice. On September 14, 2017, the plaintiff in Case No. 2:16-cv-02006-JFB-AKT filed a notice of appeal with the United States Court of Appeals for the Second Circuit, which was subsequently withdrawn.

On July 12, 2017, a lawsuit was filed in the Los Angeles County Superior Court alleging similar claims to Case No. 2:16-cv-02006-JFB-AKT, alleging violations of California’s unfair business practices statute (Goldman v. The Cheesecake Factory Incorporated; Case No. BC668334). We intend to vigorously defend this action. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments.

~~During the first quarter of fiscal 2017,~~22, 2018, the Internal Revenue Service ~~(“IRS”)~~ issued ~~its examination report~~a Notice of Deficiency in which they disallowed $8.0 million of our §199 Domestic Production Activities Deduction for tax years 2010, 2011 and ~~2012 in which they disallowed~~2012. On September 11, 2018 we petitioned the United States Tax Court for a total of $12.9 million of our §199 Domestic Production Activity Deductions for the subject years. On February 27, 2017, we submitted a Protest Memorandum indicating our disagreement with the disallowance and requesting a review of our case by the Appeals Divisionredetermination of the ~~IRS. Our case is now under the jurisdiction of the Appeals Division, and on August 8, 2017 we held an opening conference with the Appeals Team Case Leader in the Los Angeles Appeals office.~~deficiency. The tax court has assigned docket number 18150-18 to our case. We intend to vigorously defend our position in litigation and based on our analysis of the law, regulations and relevant facts, we ~~believe our position will be sustained. Based on the current status of this matter, we~~ have not reserved for any potential future payments.

~~On February 3, 2017, a class action lawsuit was filed in the United States District Court for the Southern District~~11

Table of Florida, alleging that the Company violated the Fair and Accurate Credit Transaction Act, by failing to properly censor consumer credit or debit card information. (Muransky v. The Cheesecake Factory Incorporated; Case No. 0:17-cv-60229-JEM). On February 21, 2017 and February 28, 2017, two additional lawsuits were filed in California and New York, respectively, alleging similar claims to Case No. 0:17-cv-60229-JEM. (Tibbits v. The Cheesecake Factory Incorporated; Case No. 1:17-cv-00968 ( E.D.N.Y.); Zhang v. The Cheesecake Factory Incorporated; Case No 8:17-cv-00357 (C.D. Cal.)). The Company filed a motion to transfer and dismiss Case No. 0:17-cv-60229-JEM on March 24, 2017 and similarly filed a motion to transfer and dismiss Case No. 1:17-cv-00968 on April 7, 2017. On October 16, 2017, the Florida court granted the Company’s motion to transfer Case No. 0:17-cv-60229JEM to California to be consolidated with Case No. 8:17-cv-00357, and the plaintiff filed a motion for reconsideration thereof. The plaintiff in Case No. 1:17-cv-00968 has agreed to transfer its case to California to be consolidated with Case No 8:17-cv-00357. The lawsuits seek unspecified penalties in addition to other monetary payments. We intend to vigorously defend these actions. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from these matters and, accordingly, we have not reserved for any potential future payments.Contents

On February 3, 2017, five present and former restaurant hourly employees filed a class action lawsuit in the San Diego County Superior Court, alleging that the Company violated the California Labor Code and California Business and Professions Code, by failing to permit required meal and rest breaks, and failing to provide accurate wage statements, among other claims. (Abdelaziz v. The Cheesecake Factory Restaurants, Inc., et al.; Case No 37-2016-00039775-CU-OE-CTL). On February 22, 2017, a lawsuit was filed in the San Diego County Superior Court, alleging similar claims to Case No. 37-2016-00039775-CU-OE-CTL (Rodriguez v. The Cheesecake Factory Restaurants, Inc., et al.; Case No. 37-2017-00006571-CU-OE-CTL). The San Diego County Superior Court consolidated Case Nos. 37-2016-00039775-CU-OR-CTL and 37-2017-00006571-CU-OE-CTL. These lawsuits seek unspecified penalties under the California Private Attorneys’ General Act in addition to other monetary payments. We intend to vigorously defend these actions. However, it is not possible at this time to reasonably estimate the outcome of or any potential liability from this matter and, accordingly, we have not reserved for any potential future payments.

Within the ordinary course of our business, we are subject to private lawsuits, government audits, 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. A number of these claims may exist at any given time, and some of the claims may be pled as class actions. From time to time, we are also involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks and other intellectual property, both domestically and abroad. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are legally determined to be liable.

At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any pending lawsuits, audits, proceedings and claims will not have a material adverse effect individually or in the aggregate on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, audits, proceedings or claims. Legal costs related to such claims are expensed as incurred.

5.10. Stockholders’ Equity

On ~~July 27, 2017,~~February 18, 2020, our Board of Directors (“Board”) ~~declared~~approved a quarterly cash dividend of ~~$0.29~~$0.36 per share that was paid on ~~August 29, 2017~~March 20, 2020 to the stockholders of record at the close of business on ~~August 16, 2017.~~March 9, 2020. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of ~~our~~the Facility and applicable law, and such other factors that ~~the~~our Board considers relevant.

~~On July 21, 2016,~~

Under authorization by our Board ~~increased the authorization~~ to repurchase up to 56.0 million shares of our common stock, ~~by 7.5 million shares to 56.0 million shares. Under this and all previous authorizations,~~ we have cumulatively repurchased ~~49.1~~53.0 million shares at a total cost of ~~$1,516.3~~$1,695.7 million through ~~October 3, 2017,~~March 31, 2020, including ~~1.6~~0.1 million shares at a cost of ~~$75.8~~$2.6 million repurchased during the ~~third~~first quarter of fiscal ~~2017. Repurchased common stock is reflected as a reduction of stockholders’~~2020. Our objectives regarding share repurchases are to offset the dilution to our shares outstanding that results from equity ~~in treasury stock. Share repurchases have been executed under stock repurchase plans adopted from time~~compensation grants and to ~~time by~~supplement our Board in furtherance of its repurchase authorization and are intended to qualify for safe harbor protection in accordance with Rule 10b5-1 and Rule 10b-18 of the Securities Act of 1934. Repurchases made during the third quarter of fiscal 2017 were made under a stock repurchase plan adopted by our Board on April 27, 2017, effective from July 5, 2017 through December 29, 2017.

earnings per share growth. Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us. ~~All purchases in the open market are made in compliance with Rule 10b-18.~~ We make the determination to repurchase shares based on several factors, including ~~an evaluation of~~ current and ~~future~~forecasted operating cash flows, capital needs associated with new restaurant development ~~current~~ and ~~forecasted cash flows, including~~maintenance of existing locations, dividend payments, ~~and growth capital contributions to North Italia and Flower Child, a review of our capital structure~~debt levels and cost of ~~capital,~~borrowing, obligations associated with the Acquisitions, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and financial covenants under ~~our~~the Facility that limit share repurchases based on a defined ratio.

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Facility, as amended on May 1, 2020, our Board of Directors suspended the quarterly dividend on our common stock, as well as share repurchases. (See ~~Note 3~~Notes 7 and 15 for further discussion of our ~~long-term debt.~~Facility.) ~~Our objectives with regard~~As further discussed in Note 15, to ~~share repurchases are to offset~~increase our liquidity given the ~~dilution to~~impact of the COVID-19 pandemic on our operations, we sold 200,000 shares ~~outstanding that results from equity compensation grants and to supplement our earnings per share growth.~~of Series A Convertible Preferred Stock on April 20, 2020 for an aggregate purchase price of $200 million.

6.11. Stock-Based Compensation

On April 5, 2017, our Board approved an amendment to our 2010 Stock Incentive Plan to increase the number of shares of common stock ~~available~~reserved for grant under the plan to 12.7 million shares from 9.2 million shares. This amendment was approved by our stockholders at our annual meeting held on June 8, 2017. On April 4, 2019, our Board adopted The Cheesecake Factory Incorporated Stock Incentive Plan. This plan was approved by our stockholders at our annual meeting held on May 30, 2019. The maximum number of shares of common stock available for grant under this plan is 4.8 million shares plus 1.8 million shares, which, as of May 30, 2019, were available for issuance under our 2010 Stock Incentive Plan plus 1.9 million shares which may become available for issuance under The Cheesecake Factory Incorporated Stock Incentive Plan due to forfeiture or lapse of awards under our 2010 Stock Incentive Plan following May 30, 2019. Approximately 4.8 million of these shares were available for grant as of March 31, 2020.

12

Table of Contents

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

Thirteen
Weeks Ended
October 3, 2017

Thirteen
Weeks Ended
September 27, 2016

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Labor expenses

$
1,726

$
1,494

$
5,187

$
4,458

Other operating costs and expenses

64

61

226

186

General and administrative expenses

3,489

3,318

9,654

11,533

Total stock-based compensation

5,279

4,873

15,067

16,177

Income tax benefit

2,019

1,864

5,763

6,188

Total stock-based compensation, net of taxes

$
3,260

$
3,009

$
9,304

$
9,989

Capitalized stock-based compensation (1)

$
58

$
104

$
207

$
253


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Labor expenses	$	1,966	$	1,720
Other operating costs and expenses		70		69
General and administrative expenses		3,471		4,058
Total stock-based compensation		5,507		5,847
Income tax benefit		1,353		1,438
Total stock-based compensation, net of taxes	$	4,154	$	4,409

Capitalized stock-based compensation⁽¹⁾	$	40	$	63

~~(1)~~

(1)

It is our policy to capitalize the portion of stock-based compensation costs for our internal development department that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations and equipment installation. Capitalized stock-based compensation is included in property and equipment, net on the condensed consolidated balance sheets.

Stock Options

The weighted-average fair value at the ~~portion of stock-based compensation costs~~grant date for our internal development and construction, legal, and facilities departments that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations, lease, intellectual property, liquor license acquisition activities and equipment installation. Capitalized stock-based compensation is included in property and equipment, net and other assets on the condensed consolidated balance sheets.

~~Stock Options~~

~~We did not issue any stock~~ options issued during the ~~third quarters~~first quarter of fiscal ~~2017 or~~2020 and 2019 was $6.66 and $9.90 per share, respectively. The fair value of options was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions for the first quarter of fiscal ~~2016.~~ 2020 and 2019, respectively: (a) an expected option term of 6.9 years in both periods, (b) expected stock price volatility of 25.7% and 26.3%, (c) a risk-free interest rate of 1.5% and 2.6%, and (d) a dividend yield on our stock of 3.6% and 2.9%.

Stock option activity during the ~~thirty-nine~~thirteen weeks ended ~~October 3, 2017~~March 31, 2020 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(In thousands)		(Per share)		(In years)	(In thousands)
Outstanding at January 3, 2017	1,955		$	37.65	4.0	$	42,592

											Weighted
											Average
									Weighted		Remaining
									Average		Contractual	Aggregate
								Shares	Exercise Price		Term	Intrinsic Value ⁽¹⁾
								(In thousands)	(Per share)		(In years)	(In thousands)
Outstanding at December 31, 2019								1,829	$	47.32	4.3	$	844
Granted	199		61.49					654		40.16
Exercised	(307	)	26.37					(4)		29.79
Forfeited or cancelled	(69	)	46.06					—		—
Outstanding at October 3, 2017	1,778		$	41.88	4.1	$	9,184

Exercisable at October 3, 2017	1,073		$	35.91	2.9	$	8,734
Outstanding at March 31, 2020								2,479	$	45.46	5.5	$	10,687

Exercisable at March 31, 2020								1,239	$	46.79	3.0	$	6,380

(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.

~~(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.

The total intrinsic value of options exercised during the thirteen ~~and thirty-nine~~ weeks ended ~~October 3, 2017~~March 31, 2020 and April 2, 2019 was ~~$0.4~~$35.6 million and ~~$10.4 million, respectively. The total intrinsic value of options exercised during the thirteen and thirty-nine weeks ended September 27, 2016 was $6.0 million and $24.6~~$3.4 million, respectively. As of ~~October 3, 2017,~~March 31, 2020, total unrecognized stock-based compensation expense related to unvested stock options was ~~$6.3~~$10.5 million, which we expect to recognize over a ~~weighted average~~weighted-average period of approximately ~~2.8~~4.0 years.

13

Table of Contents

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the ~~thirty-nine~~thirteen weeks ended ~~October 3, 2017~~March 31, 2020 was as follows:

	Shares		Weighted Average Fair Value
	(In thousands)		(Per share)

Outstanding at January 3, 2017	1,861		$	45.11

						Weighted
						Average
					Shares	Fair Value
					(In thousands)	(Per share)
Outstanding at December 31, 2019					1,764	$	47.76
Granted	400		56.86		579		40.01
Vested	(396	)	38.27		(208)		51.38
Forfeited	(103	)	44.98		(70)		55.70
Outstanding at October 3, 2017	1,762		$	49.12
Outstanding at March 31, 2020					2,065	$	44.96

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~~first quarter of fiscal ~~2017~~2020 and ~~fiscal 2016~~2019 was ~~$42.03~~$40.01 and ~~$50.44,~~$46.03, respectively. The fair value of shares that vested during the ~~thirteen~~first quarter of fiscal 2020 and ~~thirty-nine weeks ended October 3, 2017~~2019 was ~~$2.2~~$10.4 million and ~~$15.1 million, respectively. The fair value of shares that vested during the thirteen and thirty-nine weeks ended September 27, 2016 was $1.4 million and $10.1~~$11.1 million, respectively. As of ~~October 3, 2017,~~March 31, 2020, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was ~~$39.4~~$47.3 million, which we expect to recognize over a ~~weighted average~~weighted-average period of approximately ~~2.7~~3.4 years.

12. Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions allowing for the carryback of net operating losses generated in fiscal years 2018, 2019 and 2020 and technical amendments regarding the expensing of qualified improvement property (“QIP”). As a result of the CARES Act, we expect to carry back our anticipated fiscal 2020 loss and reduce taxes payable for accelerated depreciation on QIP placed in service during fiscal 2018 and 2019. We expect to file carryback claims during fiscal 2021, and we estimate that these claims will generate cash refunds of approximately $36 million.

Our effective income tax rate was 28.9% and 6.0% for the first quarters of fiscal 2020 and 2019, respectively. The increase resulted primarily from a lower proportion of employment credits in relation to pre-tax (loss)/income and a benefit arising from the expected carryback of our anticipated fiscal 2020 loss to prior years when the federal statutory rate was 35%. Without the carryback provisions of the CARES Act, we would expect the fiscal 2020 loss to provide a tax benefit at the statutory rate of 21%. The 14% rate benefit is reflected primarily in the annual effective tax rate, although the portion representing prior year temporary differences that are estimated to reverse in fiscal 2020 and become part of the fiscal 2020 loss carryback was recognized as a discrete item in the first quarter of fiscal 2020.

We expect to have federal credit carryforwards of approximately $30 million at the end of fiscal 2020 compared to $14.3 million at December 31, 2019. This increase was driven primarily by our fiscal 2020 loss. We assess the available evidence to estimate if sufficient future taxable income will be generated to use these carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. Based on this evaluation, we concluded that no valuation allowance is required. This assessment could change if estimates of future taxable income during the carryforward period are revised.

As a result of the goodwill impairment discussed in Note 4, we recorded a deferred tax asset of $17.2 million in the first quarter of fiscal 2020.

14

Table of Contents

7.13. Net (Loss)/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. As of March 31, 2020 and April 2, 2019, 2.1 million shares and 1.8 million shares, respectively, of restricted stock issued to staff members were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal periods ended on those dates. Diluted net income per share ~~reflects~~includes the ~~impact~~dilutive effect of outstanding equity awards, calculated using the treasury stock method. ~~As of October 3, 2017 and September 27, 2016, we excluded 1.3 million and 1.4 million shares, respectively,~~Shares of common stock equivalents of 3.8 million and 2.0 million as of March 31, 2020 and April 2, 2019, respectively, were excluded from the diluted calculation due to their anti-dilutive effect.

	Thirteen Weeks Ended October 3, 2017		Thirteen Weeks Ended September 27, 2016		Thirty-Nine Weeks Ended October 3, 2017		Thirty-Nine Weeks Ended September 27, 2016
	(In thousands, except per share data)
Net income	$	26,445	$	34,574	$	99,654	$	107,113


									Thirteen		Thirteen
									Weeks Ended		Weeks Ended
									March 31, 2020		April 2, 2019
									(In thousands, except per share data)
Net (loss)/income									$	(136,163)	$	26,984

Basic weighted average shares outstanding	46,602		47,815		47,323		48,188			43,773		44,255
Dilutive effect of equity awards	917		1,397		1,259		1,416			—		729


Diluted weighted average shares outstanding	47,519		49,212		48,582		49,604			43,773		44,984

Basic net income per share	$	0.57	$	0.72	$	2.11	$	2.22

Diluted net income per share	$	0.56	$	0.70	$	2.05	$	2.16

Basic net (loss)/income per share									$	(3.11)	$	0.61

Diluted net (loss)/income per share									$	(3.11)	$	0.60

15

Table of Contents

8.14. Segment Information

~~For decision-making purposes,~~Our operating segments , the businesses for which our management reviews discrete financial information for decision-making purposes, are comprised of The Cheesecake Factory, ~~Grand Lux Cafe and Rock Sugar Pan Asian Kitchen restaurants (transitioning to RockSugar Southeast Asian Kitchen),~~North Italia, Flower Child, the other FRC brands, our bakery division and ~~our international licensing operations.~~Grand Lux Cafe. Based on quantitative thresholds set forth in ~~ASC~~FASB Accounting Standards Codification (" ASC”) 280, “Segment Reporting,” The Cheesecake Factory, ~~is our~~North Italia and the other FRC brands are the only ~~business~~businesses that ~~meets~~meet the criteria of a reportable operating segment. ~~Grand Lux Cafe, Rock Sugar Pan Asian Kitchen, bakery and international licensing~~The remaining operating segments, including Flower Child, along with our businesses that don’t qualify as operating segments are combined in Other. Unallocated corporate expenses, ~~assets and~~ capital expenditures and assets, which were previously classified in a separate Corporate line, are ~~presented below as reconciling items~~also combined in Other. In addition, gift card costs, which were previously classified in The Cheesecake Factory restaurants reportable segment, are combined in Other. Corresponding prior year balances were reclassified to conform to the ~~amounts presented in the condensed consolidated financial statements.~~current year presentation.

Segment information is presented below (in thousands):

	Thirteen Weeks Ended October 3, 2017			Thirteen Weeks Ended September 27, 2016			Thirty-Nine Weeks Ended October 3, 2017			Thirty-Nine Weeks Ended September 27, 2016

													Thirteen		Thirteen
													Weeks Ended		Weeks Ended
													March 31, 2020		April 2, 2019
Revenues:
The Cheesecake Factory restaurants	$	507,572		$	512,040		$	1,543,034		$	1,530,274		$	488,471	$	548,633
North Italia														30,512		—
Other FRC														35,583		—
Other	47,820			47,978			145,653			142,299				60,540		50,848
Total	$	555,392		$	560,018		$	1,688,687		$	1,672,573		$	615,106	$	599,481

Income/(loss) from operations:
The Cheesecake Factory restaurants (1)	$	60,496		$	76,808		$	207,028		$	233,385

Income/(loss) from operations: ⁽¹⁾
The Cheesecake Factory restaurants													$	39,324	$	65,939
North Italia														(72,086)		—
Other FRC														(69,964)		—
Other	6,003			6,753			18,932			19,434				(87,332)		(35,791)
Corporate	(32,182		)	(33,498		)	(97,862		)	(98,972		)
Total	$	34,317		$	50,063		$	128,098		$	153,847		$	(190,058)	$	30,148


Depreciation and amortization:
The Cheesecake Factory restaurants	$	19,012		$	18,381		$	57,140		$	54,855		$	17,277	$	17,608
North Italia														965		—
Other FRC														1,201		—
Other	2,795			2,057			8,770			6,200				4,119		3,754
Corporate	1,192			1,196			3,582			3,504
Total	$	22,999		$	21,634		$	69,492		$	64,559		$	23,562	$	21,362


Preopening costs:
The Cheesecake Factory restaurants													$	1,414	$	1,481
North Italia														953		—
Other FRC														(159)		—
Other														911		649
Total													$	3,119	$	2,130

Capital expenditures:
The Cheesecake Factory restaurants	$	24,530		$	25,896		$	64,650		$	61,968		$	8,598	$	11,892
North Italia														2,964		—
Other FRC														1,104		—
Other	4,638			3,661			6,549			7,132				3,109		1,459
Corporate	550			842			2,218			1,507
Total	$	29,718		$	30,399		$	73,417		$	70,607		$	15,775	$	13,351

16

Table of Contents


	March 31, 2020		December 31, 2019
Total assets: ⁽¹⁾
The Cheesecake Factory restaurants	$	1,638,660	$	1,701,418
North Italia		254,939		297,840
Other FRC		271,700		310,414
Other		510,483		530,921
Total	$	2,675,782	$	2,840,593

(1)

During the first quarter of fiscal 2020, we recorded impairment of assets and lease terminations expense of $0.6 million for The Cheesecake Factory restaurants, $71.5 million for North Italia, $72.9 million for Other FRC and $46.8 million for Other (See Note 3 and 4 for further discussion of these charges.)

15. Subsequent Events

On May 1, 2020 (the “Effective Date”), we entered into a First Amendment (the “Amendment”) to the Facility (as amended by the Amendment, the “Amended Facility”). The Amended Facility provides for, among other things, (i) a covenant relief period (the “Covenant Relief Period”) from the Effective Date until we demonstrate compliance with our financial covenants as of the quarter ending on or after June 29, 2021, during which we are not required to comply with financial covenants requiring maintenance of a maximum ratio of net adjusted debt to EBITDAR (the “Net Adjusted Leverage Ratio”) of 4.75 to 1.00 and a minimum ratio of EBITDAR to interest and rent expense of 1.90 to 1.00 (the “EBITDAR to Interest and Rental Expense Ratio”), (ii) a substitution of the Net Adjusted Leverage Ratio and EBITDAR to Interest and Rental Expense Ratio covenants with a liquidity covenant for the calendar month ending May 31, 2020 and continuing through the calendar month ending February 28, 2021 that requires our liquidity to be at least $65,000,000 at the end of each calendar month (with liquidity being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the revolving facility) (and solely for the fiscal quarter ending March 30, 2021, we can meet either (x) both the Net Adjusted Leverage Ratio test and the EBITDAR to Interest and Rental Expense Ratio test or (y) meet the minimum liquidity test), with the minimum liquidity covenant to be tested again from the calendar month ending April 30, 2021 until we demonstrate compliance with the Net Adjusted Leverage Ratio and EBITDAR to Interest and Rental Expense Ratio for a fiscal quarter ending on or after March 30, 2021, (iii) a lowered amount of permitted increases to revolving loan commitments under the Amended Facility during the Covenant Relief Period from $200,000,000 to $125,000,000, (iv) a limit on capital expenditures not to exceed $90,000,000 during the Covenant Relief Period, and (v) increased limitations on the our ability to make restricted payments, incur debt, and consummate acquisitions during the Covenant Relief Period.

October 3, 2017

January 3, 2017

Total assets:

The Cheesecake Factory restaurants

$
903,989

$
950,372

Other

163,227

157,842

Corporate

208,112

185,105

Total

$
1,275,328

$
1,293,319

Borrowings under the Amended Facility during the Covenant Relief Period bear interest, at our option, at a rate equal to either: (i) the adjusted LIBO Rate (as customarily defined, the “Adjusted LIBO Rate”) plus 2.5%, or (ii) the sum of (a) the highest of (1) ~~Includes $1.2 million~~ the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the ~~thirty-nine weeks ended October 3, 2017,~~United States, (2) the greater of ~~accelerated depreciation~~the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank funding rate, in either case plus 0.5%, and ~~impairment expense related~~(3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) 1.50%. We will also pay a fee of 0.40% on the daily amount of unused commitments under the Amended Facility.

On April 20, 2020, to increase our liquidity given the impact of the COVID-19 pandemic on our operations, we sold 200,000 shares of Series A Convertible Preferred Stock for an aggregate purchase price of $200 million. In connection with the closing, we paid a commitment fee of $2 million to the ~~relocation~~purchaser. The convertible preferred stock ranks senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. The holders are entitled to dividends on the purchase price, without giving effect to any commitment fee, plus all accrued and unpaid dividends at the rate of ~~one~~9.5% per annum, payable in cash or, at our option, paid-in-kind. The ~~Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant. This amount was recorded~~holders are also entitled to participate in ~~impairment of assets and lease terminations in the condensed consolidated statements of income.~~

~~9. Subsequent Events~~

~~On October 26, 2017, our Board~~dividends declared ~~a quarterly cash dividend of $0.29 per share to be~~or paid on ~~November 28, 2017 to the stockholders~~our common stock on an as-converted basis.

17

Table of ~~record at the close of business on November 15, 2017.~~Contents

On October 26, 2017, our Board approved the adoption of a stock repurchase plan intended to qualify for safe harbor protection in accordance with Rule 10b5-1 of the Securities Act of 1934, as amended. This plan will be effective from December 1, 2017 through April 30, 2018.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Certain information included in this Form 10-Q and other materials filed or to be filed by us with the ~~SEC,~~Securities and Exchange Commission (“SEC”), as well as information included in oral or written statements made by us or on our behalf, may contain forward-looking statements about our current and presently expected performance trends, growth plans, business goals and other matters.

These statements may be contained in our filings with the SEC, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Statements set forth in or incorporated into this report regarding our expectations for growth in company-owned and licensed locations, comparable sales, operating margins and diluted net earnings per share, as well as achieving our other financial objectives; our intention to repurchase stock, pay dividends, invest growth capital in North Italia and Flower Child, develop a fast casual concept and expand our consumer packaged goods licensing revenue; and all otherThese statements ~~that are not historical facts~~ are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the~~(together with the Securities Act, the “Acts”). This includes, without limitation, the effects of the COVID-19 pandemic on our financial condition and our results of operation, financial guidance and projections and statements with respect to the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”) and expectations regarding accelerated and diversified revenue growth as a result of the acquisition of North Italia and FRC, as well as expectations of our future financial condition, results of operations, cash flows, plans, targets, goals, objectives, performance, growth potential, competitive position and business; and our ability to: leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory® brand to other retail opportunities; deliver comparable sales growth; provide a differentiated experience to customers; outperform the casual dining industry and increase our market share; leverage sales increases and manage flow through; manage cost pressures, including increasing wage rates, insurance costs and legal expenses, and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other staff; manage risks associated with the magnitude and complexity of regulations in the jurisdictions where our restaurants are located; increase shareholder value; find suitable sites and manage increasing construction costs; profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept internationally; support the growth of North Italia and other FRC restaurants; operate Social Monk Asian Kitchen; and utilize our capital effectively and continue to increase cash dividends and repurchase our shares. These forward-looking statements may be affected by factors outside of our control including: the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants and our bakery operations; economic, public health and political conditions that impact consumer confidence and spending, including the impact of the COVID-19 pandemic and other health epidemics or pandemics on the global economy; changes in laws impacting our business, including laws and regulations related to the COVID-19 pandemic impacting restaurant operations and customer access to off- and on-premise dining, and increases in minimum wages and benefit costs; the economic health of our landlords and other tenants in retail centers in which its restaurants are located, and our ability to successfully continue its lease arrangements with landlords; unanticipated costs that may arise in connection with a return to normal course of business, including potential negative impacts from furlough actions; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to us; the timing of the resumption of our new unit development; compliance with debt covenants; strategic capital allocation decisions including share repurchases and dividends; the ability to achieve projected financial results; economic and political conditions that impact consumer confidence and spending; impact of tax reform legislation; acceptance and success of The Cheesecake Factory ~~Incorporated~~in international markets; acceptance and ~~its subsidiaries,~~success of North Italia and the FRC concepts, Social Monk Asian Kitchen and other concepts; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; changes in laws impacting our business, including increases in minimum wages and benefit costs; adverse weather conditions in regions in which our restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risk, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in our filings with the SEC. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar ~~expressions,~~expressions. These statements are based on our current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements.

18

Table of Contents

In connection with the “safe harbor” provisions of the Acts, we have identified and are disclosing important factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. (See Part II, Item 1A of this report, “Risk Factors,” and Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended ~~January 3, 2017.~~December 31, 2019.) These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC. Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Although we believe that the assumptions underlying forward-looking statements are currently reasonable, any of the assumptions could be incorrect or incomplete, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date on which they are ~~made. Except as may be required by law,~~made, and we ~~do not~~ undertake ~~any~~no obligation to ~~modify~~publicly update or revise any forward-looking ~~statement~~statements or to ~~take into account~~make any other forward-looking statements, whether as a result of new information, future events or otherwise, ~~reflect subsequent events, corrections in underlying assumptions, or changes in circumstances arising after the date that the forward-looking statement was made.~~unless required to do so by law.

~~General~~COVID-19 Pandemic

This discussion and analysis, which contains forward-looking statements, should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes ~~included in this Form 10-Q~~ in Part I, Item 1 of this report and with the following items included in our Annual Report on Form 10-K for the fiscal year ended ~~January 3, 2017:~~December 31, 2019: the audited consolidated financial statements and related notes in Part IV, Item 15; the ~~“Risk Factors”~~"Risk Factors" included in Part I, Item 1A; the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Part II, Item 7; and the cautionary statements included throughout ~~the report.~~this Form 10-Q. The inclusion of supplementary analytical and related information herein may require us to make estimates and assumptions to enable us to fairly present, in all material respects, our analysis of trends and expectations with respect to our results of operations and financial position.

The Company is subject to risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency on March 13, 2020. We have experienced significant disruptions to our business due to suggested and mandated social distancing and shelter-in-place orders, which resulted in the temporary closure of a number of restaurants across our portfolio, while the remaining locations shifted to an off-premise only operating model on an interim basis. In late April 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms. As of June 22, 2020, we have reopened dining rooms in 194 locations across our concepts, however we will be operating under capacity restrictions for some time as social distancing protocols remain in place. As of March 31, 2020 and June 22, 2020 respectively, 33 and 19 of our restaurants were temporarily closed and 261 and 81 restaurants were operating in an off-premise only model.

In response to the pandemic, the Company and its Board of Directors implemented the following measures to preserve liquidity and enhance financial flexibility:

●

Eliminated non-essential capital expenditures and expenses;

●

Suspended new unit development;

●

Reduced board, executive and corporate support staff compensation;

●

Furloughed approximately 41,000 hourly staff members;

●

Engaged in discussions with our landlords regarding ongoing rent obligations, including the potential deferral, abatement and/or restructuring of rent otherwise payable during the period of the COVID-19 pandemic related closure;

●

Increased borrowings under our revolving credit facility;

●

Raised additional equity capital; and

●

Suspended the dividend on our common stock and share repurchases.

We ~~utilize a 52/53-week fiscal year ending~~cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the ~~Tuesday closest to December 31 for financial reporting purposes. Fiscal year 2017 consists~~restaurants industry as a whole. The extent of ~~52 weeks and will end on January 2, 2018. Fiscal 2016, which ended on January 3, 2017, was a 53-week year. The estimated~~the reopening process, along with the potential impact of the ~~53rd week in fiscal 2016 was an increase in revenues and diluted net income per share of approximately $54.7 million and $0.07, respectively.~~

~~Our business operates in~~COVID-19 pandemic on consumer spending behavior, will determine the ~~upscale casual dining segment~~significance of the ~~restaurant industry. As~~impact to our operating results and financial position.

19

Table of ~~November 8, 2017, we operated 209 Company-owned restaurants: 195 under The Cheesecake Factory® mark, 13 under~~Contents

In addition, these considerable developments have triggered the ~~Grand Lux Cafe® mark~~need to perform impairment assessments of our long-lived assets, goodwill and ~~one currently under~~other intangible assets and a revaluation of contingent consideration associated with the ~~Rock Sugar Pan Asian Kitchen® mark (which is~~acquisition of Fox Restaurant Concepts LLC. Future changes in estimates could further impact the ~~process~~carrying value of ~~a tradename change~~these items. (See Notes 3 and 4 of Notes to ~~RockSugar Southeast Asian Kitchen~~ ~~TM). Internationally, 18~~ Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of impairment of long-lived and intangible assets, respectively. See Note 9 of Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of the revaluation of contingent consideration.)

General

The Cheesecake Factory ~~branded~~Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory^®, North Italia^® and a collection within the FRC subsidiary. As of March 31, 2020 and June 22, 2020 respectively, 33 and 19 of our restaurants were temporarily closed and 261 and 81 locations were operating in an off-premise only model due to the ~~Middle East, China and Mexico are operated by third parties~~COVID-19 pandemic. Internationally, 26 The Cheesecake Factory^® restaurants operate under licensing agreements. ~~We also operated~~As of March 31, 2020 and June 22, 2020 respectively, six and one were temporarily closed. Our bakery division operates two ~~bakery production~~ facilities that produce ~~desserts~~quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. We are selectively pursuing other means to leverage our competitive strengths, including developing, investing in or acquiring new restaurant concepts (such as North Italia and Flower Child), and expanding The Cheesecake Factory® brand to other retail opportunities through The Cheesecake Factory At Home™ consumer packaged goods.

Overview

Our strategy is driven by our commitment to customer satisfaction and is focused primarily on menu innovation, service and operational execution to continue to differentiate ourselves from other restaurant concepts, as well as to drive competitively strong performance that is sustainable. Financially, we are focused on prudently managing expenses at our restaurants, bakery facilities and corporate support center, and leveraging our size to make the best use of our purchasing power.

Investing in new ~~company-owned~~Company-owned restaurant development is our top long-term capital allocation priority, with a focus on opening our concepts in premier locations within both new and existing ~~markets in the United States. We~~markets. For The Cheesecake Factory concept, we target an average cash-on-cash return on investment of approximately 20% to 25% at the unit level. We target an average cash-on-cash return on investment of about 35% for the North Italia concept and 25% to 30% for the FRC concepts. Returns are affected by the cost to build restaurants, the level of revenues that each restaurant can deliver and our ability to maximize the profitability of restaurants. Investing in new restaurant development that meets our return on investment criteria is expected to support achieving mid-teens Company-level return on invested capital. Due to the COVID-19 pandemic, we have suspended new unit development until more clarity on the restaurant industry operating environment emerges. We currently have 7 locations under development. However, we are monitoring operating conditions in their respective markets to determine when to move forward with these new unit openings.

Our domestic revenue growth (comprised of our annual unit growth and comparable sales growth), combined with international expansion, contribution from our incremental growth opportunities, a robust share repurchase program and our dividend provide a framework with high visibility and one that supports our long-term financial objective of mid-teens growth in total return to shareholders. We define our total returns as earnings per share growth plus our dividend yield. The following are the key performance levers that we believe will contribute to achieving these goals:

·~~Grow Overall Revenues.~~Our overall revenue growth is primarily driven by revenues from new restaurant openings and increases in comparable restaurant ~~sales, and royalties and bakery sales from additional licensed international locations.~~sales. Changes in comparable restaurant sales come from variations in customer traffic, as well as in ~~check average.~~average check.

~~Our~~For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check ~~average~~ and stabilizing customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value ~~and~~ (2) focusing on service and hospitality with the goal of delivering an exceptional customer ~~experience.~~experience and (3) continuing to provide our customers with convenient options for off-premise dining. We are continuing our efforts on a number of initiatives, including a greater focus on increasing customer throughput in our restaurants, ~~building on~~leveraging the success of our gift card program, ~~partnering~~working with a third ~~parties~~party to provide delivery services for our restaurants, ~~capitalizing on~~increasing customer awareness of our ~~redesigned~~online ordering capabilities, augmenting our marketing programs, enhancing our training programs and leveraging ~~a new guest~~our customer satisfaction measurement ~~platform and pursuing online ordering capabilities.~~platform.

~~Check average~~Average check is driven by menu price increases and/or changes in menu mix. ~~Our~~We generally update The Cheesecake Factory restaurant menus twice a year, and our philosophy ~~with regard to menu pricing~~ is to use price increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer traffic levels. We plan to continue targeting menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies, and expect near-term increases to be at the higher end of this range.

~~In addition,~~On October 2, 2019, we ~~are pursuing a number~~completed the acquisitions of incremental growth opportunities, which we believe will contribute to revenue growth over time. These include measured growth of our Grand Lux Cafe and Rock Sugar Pan Asian Kitchen concepts, our investments in North Italia and FRC, including Flower Child ~~internal development~~(the “Acquisitions”), which we expect will accelerate and diversify our revenue growth once the restaurant operating environment stabilizes following the COVID-19 pandemic.

20

Table of a fast casual concept and consumer packaged goods opportunities, including The Cheesecake Factory At Home™-branded cookie, cupcake and cheesecake mixes, as well as a line of confections that are now available at a variety of retail stores.Contents

·~~Stabilize and Expand Operating~~ Margins ~~(Income from Operations Expressed as a Percentage of Revenues).~~ ~~Operating margins~~ are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative ~~expenses~~ (“G&A”) expenses and preopening expenses. Our ~~current~~ objective is to ~~stabilize~~recapture our ~~operating~~pre-COVID-19 margins, and longer-term to drive margin expansion, by ~~capturing fixed cost leverage primarily through increasing~~maintaining flat restaurant-level margins at The Cheesecake Factory concept, leveraging our bakery operations, international ~~royalties~~ and ~~contribution from our incremental growth opportunities. Maximizing our purchasing power as our business grows~~consumer packaged goods royalty revenue streams and ~~operating our restaurants as productively as possible should help offset cost inflation, thereby supporting our margin expansion goal. By efficiently scaling~~G&A expense over time, and optimizing our restaurant ~~and bakery support infrastructure and improving our internal processes,~~portfolio.

When the restaurant industry operating environment normalizes from the COVID-19 impact, we ~~anticipate maintaining G&A expenses approximately flat as a percentage of revenues on a year-over-year basis.~~

·~~Return Capital~~expect the Company to ~~Shareholders~~~~. We have historically generated a significant amount of free~~return to positive cash flow ~~which~~generation. At that point, we ~~define as cash flow from operations less~~plan to maintain a balanced capital ~~expenditures~~allocation strategy, comprised of: investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our $400 million unsecured revolving credit facility (the “Facility”) and reinstating our ~~growth capital contributions to North Italia and Flower Child. We utilize substantially all of our free cash flow plus proceeds received from employee stock option exercises for dividends~~dividend and share ~~repurchases,~~repurchase program, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth. To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Facility as amended by a First Amendment (the “Amendment”), dated May 1, 2020, to the Facility (the Facility, as amended by the Amendment, the “Amended Facility”), our Board of Directors suspended the quarterly dividend on our common stock, as well as share repurchases. Our ability to declare dividends and repurchase shares in the future will be subject to financial covenants under the Amended Facility, among other factors.

Longer-term, we believe our domestic revenue growth (comprised of our annual unit growth and comparable sales growth), combined with international expansion, planned debt repayment and an anticipated capital return program will support our long-term financial objective of 13% to 14% total return to shareholders, on average. We define our total return as earnings per share growth plus our dividend yield.

21

Table of Contents

Results of Operations

The following table presents, for the periods indicated, information from our condensed consolidated statements of income expressed as percentages of revenues. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any other interim period or for the full fiscal year.

Thirteen
Weeks Ended
October 3, 2017

Thirteen
Weeks Ended
September 27, 2016

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Revenues

100.0
%
100.0
%
100.0
%
100.0
%

Costs and expenses:

Cost of sales

22.9

23.0

22.8

23.1

Labor expenses

34.9

33.3

34.4

33.3

Other operating costs and expenses

24.9

24.1

24.4

23.7

General and administrative expenses

6.4

6.4

6.3

6.4

Depreciation and amortization expenses

4.1

3.9

4.1

3.9

Impairment of assets and lease expiration

—

—

0.1

—

Preopening costs

0.6

0.4

0.3

0.4

Total costs and expenses

93.8

91.1

92.4

90.8

Income from operations

6.2

8.9

7.6

9.2

Interest and other expense, net

(0.3
)
(0.4
)
(0.3
)
(0.4
)
Income before income taxes

5.9

8.5

7.3

8.8

Income tax provision

1.1

2.3

1.4

2.4

Net income

4.8
%
6.2
%
5.9
%
6.4
%


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Revenues	100.0	%	100.0	%

Costs and expenses:
Cost of sales	22.9		22.7
Labor expenses	38.6		36.2
Other operating costs and expenses	27.3		25.6
General and administrative expenses	7.1		6.5
Depreciation and amortization expenses	3.8		3.6
Impairment of assets and lease terminations	31.2		—
Acquisition-related costs	0.2		—
Acquisition-related contingent consideration and amortization	(0.7)		—
Preopening costs	0.5		0.4
Total costs and expenses	130.9		95.0
(Loss)/income from operations	(30.9)		5.0
Loss on investments in unconsolidated affiliates	—		(0.2)
Interest and other expense, net	(0.2)		0.0
(Loss)/income before income taxes	(31.1)		4.8
Income tax (benefit)/provision	(9.0)		0.3
Net (loss)/income	(22.1)	%	4.5	%

Thirteen Weeks Ended ~~October 3, 2017~~March 31, 2020 Compared to Thirteen Weeks Ended ~~September 27, 2016~~April 2, 2019

Revenues

Revenues ~~decreased 0.8%~~increased 2.6% to ~~$555.4~~$615.1 million for the thirteen weeks ended ~~October 3, 2017~~March 31, 2020 compared to ~~$560.0~~$599.5 million for the thirteen weeks ended ~~September 27, 2016,~~April 2, 2019, primarily due to ~~negative~~additional revenue related to the acquired restaurants and new restaurant openings, partially offset by a decline in comparable restaurant sales, ~~and a decline~~reflecting the March 2020 impact of the COVID-19 pandemic.

Revenue contribution from the acquired concepts in ~~third-party bakery sales, partially offset by new restaurant openings.~~

~~Comparable sales at~~the first quarter of fiscal 2020 totaled $84.1 million. The Cheesecake Factory ~~restaurants decreased~~comparable sales declined by ~~2.3%~~12.9%, or ~~$11.2~~$68.8 million, from the ~~third~~first quarter of fiscal ~~2016. Our~~2019, reflecting 3.3% growth through February, offset by a 46.4% decline in March due to the impact of the COVID-19 pandemic. The Cheesecake Factory comparable sales decline was driven by a decline in customer traffic of ~~4.3%~~18%, partially offset by average check growth of ~~2.0%~~5.1% (based on an increase of ~~2.4%~~3.2% in menu pricing and a ~~decrease of 0.4%~~1.9% positive change in mix). ~~Significant hurricane activity in the third quarter of fiscal 2017 negatively impacted comparable sales by approximately 0.8% and diluted net income per share by approximately $0.04.~~

We implemented effective menu price increases of approximately ~~1.1%~~1.5% and ~~1.4%~~1.6% in the first quarter of fiscal 2020 and third ~~quarters~~quarter of fiscal ~~2017,~~2019, respectively. ~~Total operating weeks at The Cheesecake Factory restaurants increased 2.2% to 2,511 for the thirteen weeks ended October 3, 2017 compared to the comparable prior year period.~~ The Cheesecake Factory average sales per restaurant operating week decreased ~~3.0%~~13.0% to ~~$202,150~~$182,674 in the ~~third~~first quarter of fiscal ~~2017 compared to $208,400~~2020 from $209,963 in the ~~third~~first quarter of fiscal ~~2016.~~

~~Comparable sales~~2019. Total operating weeks at ~~our Grand Lux Cafe~~The Cheesecake Factory restaurants ~~decreased by 3.5% from the prior year third quarter driven by a decrease in customer traffic partially offset by an increase in average check. Significant hurricane activity~~increased 2.3% to 2,674 in the ~~third~~first quarter of fiscal ~~2017 negatively impacted~~2020 compared to 2,613 in the prior year. North Italia comparable sales bydeclined approximately ~~1.4%. We implemented effective menu price increases of approximately 0.8% and 1.3%~~12% during the ~~second quarter of 2017 and the fourth~~first quarter of fiscal ~~2016, respectively.~~2020, reflecting 5% growth through February, offset by a 48% decline in March due to the impact of the COVID-19 pandemic. North Italia average sales per restaurant operating week for the first quarter of fiscal 2020 was $105,214 based on 290 operating weeks.

~~Restaurants~~The Cheesecake Factory restaurants become eligible to enter ~~our~~the comparable sales base in their 19th month of operation. At ~~October 3, 2017,~~March 31, 2020, there were eight The Cheesecake Factory restaurants ~~and one Grand Lux Cafe~~ not yet in ~~our~~the comparable sales base. International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from ~~our~~ comparable sales calculations. ~~Factors outside~~North Italia restaurants become eligible to enter the comparable sales base in their 13^th month of ~~our control, such as macroeconomic conditions, weather patterns, timing~~operations. At March 31, 2020 there were 10 North Italia restaurants not yet in the comparable sales base.

22

Table of holidays, competition and other factors, including those referenced in Part I, Item lA, “Risk Factors,” of our Annual Report on Form 10-K for the year ended January 3, 2017, can impact comparable sales.Contents

We generally update and reprint our menus twice a year. As part of these menu updates, we evaluate the need for price increases based on those operating cost increases of which we are aware or that we can reasonably expect. While menu price increases can contribute to higher comparable restaurant sales in addition to offsetting margin pressure, we carefully consider all potential price increases in light of the extent to which we believe they may impact customer traffic.

External bakery sales were ~~$12.6~~$13.8 million for the ~~third~~first quarter of fiscal ~~year 2017~~2020 compared to ~~$13.3~~$12.9 million in the comparable prior year period.

Cost of Sales

Cost of sales consists of food, beverage, retail and bakery production supply costs incurred in conjunction with our restaurant and bakery revenues, and excludes depreciation, which is captured separately in depreciation and amortization expenses. As a percentage of revenues, cost of sales was 22.9% for the ~~third~~first quarter of fiscal ~~2017~~2020 compared to ~~23.0%~~22.7% for the comparable period of fiscal ~~2016, primarily driven by lower meat and dessert~~2019. Higher produce costs were partially offset by ~~higher produce and dairy costs.~~

~~The Cheesecake Factory restaurant menus are among~~a slight change in mix associated with the most diversified in the foodservice industry and, accordingly, are not overly dependent on a few select commodities. Changes in costs for one commodity sometimes can be offset by cost changes in other commodity categories. The principal commodity categories for our restaurants include general grocery items, dairy, produce, seafood, poultry, meat and bread. See the discussion of our contracting activities in Item 3 — “Quantitative and Qualitative Disclosures About Market Risk.”Acquisitions.

As has been our past practice, we will carefully consider opportunities to introduce new menu items and implement selected menu price increases to help offset any expected cost increases for key commodities and other goods and services. For new restaurants, cost of sales will typically be higher for a period of time after opening until our management team becomes more accustomed to predicting, managing and servicing the sales volumes at these restaurants.

Labor Expenses

As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery direct production labor, including associated fringe benefits, were ~~34.9%~~38.6% and ~~33.3%~~36.2% in the ~~third~~first quarters of fiscal ~~2017~~2020 and ~~2016,~~2019, respectively. This variance was ~~driven~~ primarily bydue to costs associated with the COVID-19 pandemic, including maintaining our full restaurant management team in the reduced sales environment, as well as higher ~~wage rates, sales deleverage and increased self-insured~~ group medical insurance costs ~~due to~~reflecting both higher large claims activity ~~relative to~~and the ~~third quarter of fiscal 2016.~~costs associated with healthcare benefits for our furloughed staff members.

Other Operating Costs and Expenses

Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), other operating expenses (excluding food costs and labor expenses, which are reported separately) and bakery production overhead and distribution expenses. As a percentage of revenues, other operating costs and expenses were ~~24.9%~~27.3% and ~~24.1%~~25.6% for the thirteen weeks ended ~~October 3, 2017~~March 31, 2020 and ~~September 27, 2016,~~April 2, 2019, respectively. This variance was primarily ~~related to higher repairs and maintenance, marketing and utilities costs, as well as~~driven by sales deleverage, ~~on rent.~~partially offset by lower restaurant incentive compensation costs.

~~General and Administrative~~G&A Expenses

~~General and administrative (“~~G~~&A”)~~&A expenses consist of the restaurant management recruiting and training program, ~~as well as the~~ restaurant field supervision, corporate support and bakery administrative ~~organizations.~~organizations, as well as gift card commissions to third-party distributors. As a percentage of revenues, G&A expenses were ~~6.4%~~7.1% and 6.5% for ~~both~~ the ~~third~~first quarters of fiscal ~~2017~~2020 and ~~2016. There~~2019, respectively. This variance was aprimarily due to sales deleverage, partially offset by lower corporate ~~bonus accrual, offset by an increase in legal costs and professional fees, as well as sales deleverage.~~incentive compensation costs.

Depreciation and Amortization Expenses

As a percentage of revenues, depreciation and amortization expenses were ~~4.1%~~3.8% and ~~3.9%~~3.6% for the ~~thirteen weeks ended October~~first quarters of fiscal 2020 and 2019, respectively.

Impairment of Assets and Lease Terminations

In the first quarter of fiscal 2020, we recorded $191.9 million of impairment of assets and lease termination expense primarily related to goodwill, trade names, trademarks and licensing agreements associated with the Acquisitions, as well as to long-lived assets for one The Cheesecake Factory, one North Italia, two Other FRC and four Other restaurants. See Notes 3 ~~2017~~ and 4 of Notes Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of our long-lived and intangible assets, respectively. We recorded no impairment of assets and lease terminations expense in the ~~comparable period~~first quarter of ~~last year, respectively. This increase was primarily due to expense on asset disposals and sales deleverage.~~fiscal 2019.

Acquisition-Related Costs

In the first quarter of fiscal 2020, we recorded $1.2 million of costs to effect and integrate the Acquisitions.

23

Table of Contents

Acquisition-Related Contingent Consideration, Compensation and Amortization

In the first quarter of fiscal 2020, we recorded a benefit of $4.5 million in acquisition-related contingent consideration, compensation and amortization, reflecting a $6.0 million decrease in the fair value of the contingent consideration and compensation liabilities related to impact of the COVID-19 pandemic, partially offset by an increase of $1.5 million in the deferred consideration liability.

Preopening Costs

Preopening costs were ~~$3.4~~$3.1 million for the thirteen weeks ended ~~October 3, 2017~~March 31, 2020 compared to ~~$2.0~~$2.1 million in the comparable period of fiscal ~~2016.~~2019. We opened one ~~The Cheesecake Factory restaurant~~North Italia and one Flower Child in the ~~third~~first quarter of fiscal ~~2017~~2020 compared to ~~no openings~~one Social Monk Asian Kitchen in the comparable prior year period. Preopening costs include all costs to relocate and compensate restaurant management ~~employees~~staff members during the preopening period, costs to recruit and train hourly restaurant ~~employees,~~staff members, and wages, travel and lodging costs for our opening training team and other support staff members. Also included are expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs, and corporate travel and support activities. Preopening costs can fluctuate significantly from period to period based on the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Loss on Investment in Unconsolidated Affiliates

Loss on investment in unconsolidated affiliates, which represented our share of pre-acquisition losses incurred by North Italia and Flower Child was $1.5 million in the first quarter of fiscal 2019. There was no corresponding amount for the first quarter of fiscal 2020 as we acquired the outstanding equity interests in these concepts in the fourth quarter of fiscal 2019.

Interest and Other ~~Expense,~~Income/(Expense), Net

Interest and other ~~expense,~~income/(expense), net was ~~$1.6~~$1.5 million of expense for the ~~third~~first quarter of fiscal ~~2017~~2020 compared to ~~$2.5 million~~$1,651 of income for the comparable ~~period last year. Interest expense associated with landlord construction allowances deemed~~prior year period. This variance was primarily due to ~~be financings in accordance with accounting guidance was $1.4 million and $1.2 million in~~increased borrowings on our Facility to effect the ~~third quarters of fiscal 2017 and 2016, respectively.~~Acquisition.

Income Tax (Benefit)/Provision

Our effective income tax rate was ~~19.2%~~28.9% and 6.0% for the ~~third quarter~~first quarters of fiscal ~~2017 compared to 27.3% for the comparable prior year period. This decrease was~~2020 and 2019, respectively. The increase resulted primarily due to the implementation of new accounting guidance that requires the tax impact of exercised stock options and vested restricted stock to be recorded in the income tax provision instead of additional paid-in capital,from a ~~higher~~lower proportion of ~~FICA tip credit~~employment credits in relation to pre-tax (loss)/income and ~~higher non-taxable gains on our investments in variable life insurance contracts used to support our Executive Savings Plan (“ESP”),~~ a non-qualified deferred compensation plan. (See “Recent Accounting Pronouncements” in Note 1 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of this accounting change.)

~~Thirty-Nine Weeks Ended October 3, 2017 Compared to Thirty-Nine Weeks Ended September 27, 2016~~

~~Revenues~~

Revenues increased 1.0% to $1,688.7 million for the thirty-nine weeks ended October 3, 2017 compared to $1,672.6 million for the thirty-nine weeks ended September 27, 2016, primarily due to new restaurant openings and third party bakery sales, partially offset by negative comparable restaurant sales.

~~Comparable sales at The Cheesecake Factory restaurants decreased by 0.8%, or $12.2 million,~~benefit arising from the ~~first three quarters~~expected carryback of our anticipated fiscal ~~2016. Our comparable sales decline~~2020 loss to prior years when the federal statutory rate was ~~driven by~~35%. Without the carryback provisions of the CARES Act, we would expect the fiscal 2020 loss to provide a ~~decline in customer traffic~~tax benefit at the statutory rate of ~~3.0%, partially offset by average check growth of 2.2% (based on an increase of 2.3% in menu pricing and a decrease of 0.1% in mix)~~21%. ~~Significant hurricane activity~~The 14% rate benefit is reflected primarily in the ~~third~~annual effective tax rate, although the portion representing prior year temporary differences that are estimated to reverse in fiscal 2020 and become part of the fiscal 2020 loss carryback was recognized as a discrete item in the first quarter of fiscal 2017 negatively impacted comparable sales for the thirty-nine weeks ended October 3, 2017 by approximately 0.3%. Total operating weeks at The Cheesecake Factory restaurants increased 2.8% to 7,550 for the thirty-nine weeks ended October 3, 2017 versus the comparable prior year period. The Cheesecake Factory average sales per restaurant operating week decreased 2.0% to $204,400 in the first three quarters of fiscal 2017 versus $208,500 in the comparable period of fiscal 2016.2020.

Comparable sales at our Grand Lux Cafe restaurants decreased by 2.5% from the first three quarters of fiscal 2016, driven by a decrease in customer traffic of 5.0%, partially offset by an increase in average check. Significant hurricane activity in the third quarter of fiscal 2017 negatively impacted comparable sales for the thirty-nine weeks ended October 3, 2017 by approximately 0.5%.

~~External bakery sales were $37.8 million for the first three quarters of fiscal year 2017 compared to $36.4 million in the comparable prior year period.~~

~~Cost of Sales~~

As a percentage of revenues, cost of sales was 22.8% for the first three quarters of fiscal 2017 compared to 23.1% for the comparable period of fiscal 2016, primarily driven by favorability across various categories.

~~Labor Expenses~~

As a percentage of revenues, labor expenses were 34.4% and 33.3% in the first three quarters of fiscal 2017 and 2016, respectively. This variance was driven primarily by higher wage rates and sales deleverage.

~~Other Operating Costs and Expenses~~

As a percentage of revenues, other operating costs and expenses were 24.4% and 23.7% for the thirty-nine weeks ended October 3, 2017 and September 27, 2016, respectively. This variance was primarily related to higher repairs and maintenance, marketing and utilities costs, as well as increased general liability insurance expense due to higher large claims activity relative to the first three quarters of fiscal 2016.

~~General and Administrative Expenses~~

As a percentage of revenues, G&A expenses were 6.3% and 6.4% for the first three quarters of fiscal 2017 and 2016, respectively. This decrease was primarily due to a lower corporate bonus accrual and reduced stock-based compensation expense, partially offset by an increase in legal costs and sales deleverage.

~~Depreciation and Amortization Expenses~~

As a percentage of revenues, depreciation and amortization expenses were 4.1% and 3.9% for the thirty-nine weeks ended October 3, 2017 and the comparable period of last year, respectively. This increase was primarily due to expense on asset disposals and sales deleverage.

~~Impairment of Assets and Lease Terminations~~

In the first three quarters of fiscal 2017, we recorded $1.2 million of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant. We incurred no impairment of assets and lease terminations expense during the comparable period of fiscal 2016.

~~Preopening Costs~~

Preopening costs were $5.6 million for the thirty-nine weeks ended October 3, 2017 compared to $6.6 million in the comparable period of fiscal 2016. In the first three quarters of fiscal 2017, we opened one The Cheesecake Factory restaurant and relocated another The Cheesecake Factory restaurant compared to opening two new The Cheesecake Factory restaurants in the first three quarters of the prior year.

~~Interest and Other Expense, Net~~

Interest and other expense, net was $4.4 million for the first three quarters of fiscal 2017 compared to $7.0 million for the comparable period last year. Interest expense associated with landlord construction allowances deemed to be financings in accordance with accounting guidance was $4.4 million and $4.0 million in the first three quarters of fiscal 2017 and 2016, respectively.

~~Income Tax Provision~~

Our effective income tax rate was 19.4% for the first three quarters of fiscal 2017 compared to 27.1% for the comparable prior year period. This decrease is primarily due to the implementation of new accounting guidance that requires the tax impact of exercised stock options and vested restricted stock to be recorded in the income tax provision instead of additional paid-in capital, a higher proportion of FICA tip credit in relation to pre-tax income and higher non-taxable gains on our investments in variable life insurance contracts used to support our ESP. (See “Recent Accounting Pronouncements” in Note 1 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of this accounting change.)

Non-GAAP Measures

Adjusted net income and adjusted diluted net income per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. We calculate these non-GAAP measures by eliminating from net (loss)/income and diluted net (loss)/income per share the impact of items we do not consider indicative of our ongoing operations. We ~~believe~~use these ~~adjusted~~non-GAAP financial measures ~~provide additional information~~for financial and operational decision-making and as a means to ~~facilitate the comparison of our past and present financial results. We utilize results that both include and exclude the identified items in evaluating business performance.~~evaluate period-to-period comparisons. Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to the adjusted items.

24

Table of Contents

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

Thirteen
Weeks Ended
October 3, 2017

Thirteen
Weeks Ended
September 27, 2016

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Net income

$
26,445

$
34,574

$
99,654

$
107,113

After-tax impact from:

Impairment of assets and lease terminations (1)

—

—

739

—

Adjusted net income

$
26,445

$
34,574

$
100,393

$
107,113

Diluted net income per share

$
0.56

$
0.70

$
2.05

$
2.16

After-tax impact from:

Impairment of assets and lease terminations (1)

—

—

0.02

—

Adjusted diluted net income per share

$
0.56

$
0.70

$
2.07

$
2.16


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019

Net (loss)/income	$	(136,163)	$	26,984
COVID-19 related costs ⁽¹⁾		3,290		—
Impairment of assets and lease terminations ⁽²⁾		191,896		—
Loss on investments in unconsolidated affiliates ⁽³⁾		—		1,450
Acquisition-related costs ⁽⁴⁾		1,236		—
Acquisition-related contingent consideration, compensation and amortization expenses ⁽⁵⁾		(4,466)		—
Tax effect of adjustments ⁽⁶⁾		(49,908)		(377)
Adjusted net income	$	5,885	$	28,057

Diluted net (loss)/income per share	$	(3.11)	$	0.60
COVID-19 related costs ⁽¹⁾		0.07		—
Impairment of assets and lease terminations ⁽²⁾		4.38		—
Loss on investments in unconsolidated affiliates ⁽³⁾		—		0.03
Acquisition-related costs ⁽⁴⁾		0.03		—
Acquisition-related contingent consideration, compensation and amortization expenses ⁽⁵⁾		(0.10)		—
Tax effect of adjustments ⁽⁶⁾		(1.14)		(0.01)
Adjusted diluted net income per share ⁽⁷⁾	$	0.13	$	0.62

(1)

Represents incremental costs associated with the COVID-19 pandemic primarily related to healthcare and meal benefits for furloughed staff members. These costs were recorded in labor expenses and other operating costs and expenses on the consolidated statements of income.

(2)

Primarily represents impairment of goodwill, trade names, trademarks and licensing agreements associated with the Acquisitions, as well as impairment of long-lived assets for one The Cheesecake Factory, one North Italia, two Other FRC and four Other restaurants.

(3)

Represents our share of pre-acquisition losses incurred by North Italia and Flower Child.

(4)

Represents costs incurred to effect and integrate the Acquisitions.

(5)

Represents changes in the fair value of the acquisition-related deferred consideration and contingent consideration and compensation liabilities, as well as amortization of definite-lived licensing agreements.

(6)

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

(7)

Adjusted diluted net income per share may not add due to rounding.

25

~~(1)~~ ~~Includes $0.7 million incurred in the thirty-nine weeks ended October 3, 2017~~Table of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant. The associated pre-tax amount was $1.2 million. This amount was recorded in impairment of assets and lease terminations in the condensed consolidated statements of income.Contents

~~Fiscal 2017 Outlook~~

For the fourth quarter of fiscal 2017, we estimate diluted net income per share will be between $0.50 and $0.54 based on an assumed comparable restaurant sales range of between down 1% and flat at The Cheesecake Factory restaurants.

We estimate adjusted diluted net income per share for fiscal 2017 will be between $2.57 and $2.61 based on an assumed comparable sales decline of approximately 1% at The Cheesecake Factory restaurants, as well as the following cost assumptions. We currently expect food cost inflation of about 1% to 2% for fiscal 2017, reflecting higher prices in seafood, produce and dairy costs, partially offset by lower meat costs. For fiscal 2017, we are estimating wage rate inflation of approximately 5% and an effective tax rate of approximately 20%, reflecting the adoption of new accounting guidance related to stock-based compensation. (See “Recent Accounting Pronouncements” in Note 1 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of this change.) Adjusted diluted net income per share excludes $1.2 million of accelerated depreciation and impairment expense related to the relocation of one The Cheesecake Factory restaurant and the lease expiration of one The Cheesecake Factory restaurant.

In fiscal 2017, we plan to open eight new restaurants, including the relocation of one The Cheesecake Factory restaurant, which opened in June, and our second RockSugar Southeast Asian Kitchen. In addition to these Company-owned locations, we expect four restaurants to open internationally under licensing agreements in fiscal 2017.

For fiscal 2017, we expect cash capital expenditures to range between $110 million and $115 million and growth capital contributions to North Italia and Flower Child to range between $10 million and $15 million. We also anticipate completing between $125 million and $150 million in share repurchases. (See “Liquidity and Capital Resources” for further discussion of expected 2017 capital expenditures.)

~~Fiscal 2018 Outlook~~

We estimate diluted net income per share for fiscal 2018 will be between $2.50 and $2.75 based on an assumed comparable sales range of between flat and up 1% at The Cheesecake Factory restaurants. Inflation for our market basket of commodities is indexing slightly over 3% for fiscal 2018, with increases across several categories, most notably in poultry, dairy, bread and seafood costs. However, we are in the early stages of contracting and are working diligently to procure product at the most favorable prices possible. For fiscal 2018, we are estimating wage inflation of approximately 5% and an effective tax rate of approximately 24% without consideration of any potential tax reform.

Given current industry dynamics including customer traffic declines and wage rates inflation, which is impacting both restaurant labor and construction costs, we plan to open as many as four to six new restaurants, including one Grand Lux Cafe, in fiscal 2018. In addition to these Company-owned locations, we expect as many as four to five restaurants to open internationally under licensing agreements.

We expect fiscal 2018 cash capital expenditures to range between $80 million and $105 million and growth capital contributions to North Italia and Flower Child to range between $10 million and $15 million. We anticipate utilizing substantially all of our free cash flow, plus proceeds received from employee stock option exercises, for dividends and share repurchases.

Liquidity and Capital Resources

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

Thirty-Nine
Weeks Ended
October 3, 2017

Thirty-Nine
Weeks Ended
September 27, 2016

Cash provided by operating activities

$
154.2

$
225.1

Capital expenditures

$
(73.4
)
$
(70.6
)
Investment in unconsolidated affiliates

$
(9.0
)
$
—

Proceeds from exercise of stock options

$
8.1

$
18.9

Borrowings on credit facility

$
30.0

$
—

Treasury stock purchases

$
(106.4
)
$
(119.0
)
Cash dividends paid

$
(36.6
)
$
(31.0
)


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 31, 2020		April 2, 2019
Cash (used in)/provided by operating activities	$	(33.0)	$	33.5
Additions to property and equipment	$	(15.8)	$	(13.4)
Growth capital provided to unconsolidated affiliates	$	—	$	(14.0)
Net borrowings on credit facility	$	90.0	$	10.0
Proceeds from exercise of stock options	$	0.0	$	5.5
Cash dividends paid	$	(15.8)	$	(14.6)
Treasury stock purchases	$	(2.6)	$	(11.1)

During the ~~thirty-nine~~thirteen weeks ended ~~October 3, 2017,~~March 31, 2020, our cash and cash equivalents ~~decreased~~increased by ~~$34.0~~$22.6 million to ~~$19.8 million. This decrease~~$81.0 million.This increase was primarily attributable to ~~treasury stock purchases, capital expenditures, dividend payments and additional investments in North Italia and Flower Child,~~borrowings on the Amended Facility, partially offset by cash ~~provided by~~used in operating activities, ~~borrowings on our credit facility and proceeds from exercises of employee stock options.~~

For fiscal 2017, we currently estimate our cash outlays for capital expenditures to range between $110 million and $115 million, net of agreed-upon up-front cash landlord construction contributions and excluding $12.4 million of expected non-capitalizable preopening costs for new restaurants. The amount reflected as additions to property and equipment inand dividend payments.

Cash flows from operations decreased by $66.5 million from the condensed consolidated statements of cash flows may vary from this estimate based on the accounting treatment of each lease. Our estimate for capital expenditures for fiscal 2017 contemplates a net outlay of $63 million to $65 million for as many as eight restaurants expected to be opened during fiscal 2017. Expected fiscal 2017 capital expenditures also include $36 million to $37 million for replacements, enhancements and capacity additions to our existing restaurants and $11 million to $13 million for bakery and corporate infrastructure investments, including the commencement of an infrastructure upgrade of our California bakery.

During fiscal 2016, we entered into a strategic relationship with Fox Restaurant Concepts LLC (“FRC”) with respect to two of its brands, North Italia and Flower Child, that share a number of parallels with us in terms of culture and philosophy, and that we believe have significant opportunity for growth. FRC, or its affiliates, will continue to own the intellectual property, manage day-to-day operations and provide infrastructure support to facilitate the near-term growth of both of these concepts. We made initial minority equity investments of $42 million in these concepts during fiscal 2016 and will provide ongoing growth capital over time, including an additional $9 million invested during the secondfirst quarter of fiscal ~~2017. We~~2020 primarily due the impact of the COVID-19 pandemic. Typically, our requirement for working capital has not been significant since our restaurant customers pay for their food and beverage purchases in cash or cash equivalents at the time of sale, and we are able to sell many of our restaurant inventory items before payment is due to the suppliers of such items. However, as previously discussed, all of our restaurants temporarily closed their dining rooms due to the COVID-19 pandemic, and we may not be able to generate sufficient cash to cover all of our operations until they can reopen at full capacity. In addition, we cannot predict how quickly our guests will return to our restaurants once such restrictions have been lifted or the ~~right,~~impact this will have on consumer spending habits.

Capital expenditures were $15.8 million and ~~an obligation if certain financial, legal and operational conditions are met, to acquire the remaining interest in either or both of these concepts~~$13.4 million in the ~~next two~~first quarter of fiscal 2020 and 2019, respectively. Due to ~~four years. These transactions~~the COVID-19 pandemic, we have suspended new unit development until more clarity on the restaurant industry operating environment emerges. We currently have 7 locations under development. However, we are ~~not expected~~monitoring operating conditions in their respective markets to ~~have a material impact~~determine when to move forward with these new unit openings. We currently estimate cash capital expenditures to be approximately $5 million per quarter for the remainder of fiscal 2020 for necessary maintenance on our ~~financial condition over~~existing restaurants.

As of March 31, 2020, we maintained the next several years, and we do not anticipate that we will need to incur debt to fund our ongoing growth capital commitments during the investment period. Should we ultimately acquire one or both concepts, we would evaluate the appropriate capital structure at that time.

~~We maintain~~Facility, a ~~$200~~$400 million unsecured revolving credit facility, ~~(“Facility”), $50~~$40 million of which ~~may~~could be used for issuances of letters of credit. ~~Availability under the Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs.~~ The Facility, which ~~matures~~terminates on ~~December 22, 2020,~~July 30, 2024, contains a commitment increase feature that could provide for an additional ~~$100~~$200 million in available credit upon our request and ~~subject to~~ the ~~participating lenders electing to increase their commitments or by means~~satisfaction of ~~the addition of new lenders.~~certain conditions. Certain of our material subsidiaries ~~guarantee~~have guaranteed our obligations under the Facility. During the ~~third~~first quarter of fiscal ~~2017,~~2020, we ~~borrowed $30 million on~~increased our borrowings under the Facility to ~~fund a portion of~~bolster our ~~stock repurchases.~~cash position and enhance financial flexibility. At ~~October 3, 2017,~~March 31, 2020, we had net availability for borrowings of ~~$149.3~~$0.6 million, based on a ~~$30.0~~$380.0 million outstanding debt balance and ~~$20.7~~$19.4 million in standby letters of credit. The Facility limits cash distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio. WeAs of March 31, 2020, we were in compliance with the covenants set forth in ~~effect at October 3, 2017.~~the Facility. (See Note 37 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term debt.) As further discussed in Note 15 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report, on May 1, 2020, we amended the Facility to provide additional financial flexibility.

In fiscal 2012, our Board approved the initiation of a cash dividend to our stockholders, which is subject to quarterly Board approval. ~~Cash dividends have been declared during every quarter since initiation.~~ 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 ~~our~~the Facility and applicable law, and other such factors that the Board considers relevant.

~~On July 21, 2016,~~26

Table of Contents

Under authorization by our Board ~~increased the authorization~~ to repurchase ~~our common stock by 7.5 million shares~~up to 56.0 million ~~shares. Under this and all previous authorizations,~~shares of our common stock, we have cumulatively repurchased ~~49.1~~53.0 million shares at a total cost of ~~$1,516.3~~$1,695.7 million through ~~October 3, 2017,~~March 31, 2020, including ~~1.6~~0.1 million shares at a cost of ~~$75.8~~$2.6 million repurchased during the ~~third~~first quarter of fiscal ~~2017.~~2020. Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. We make the determination to repurchase shares based on several factors, including ~~an evaluation of~~ current and ~~future~~forecasted operating cash flows, capital needs associated with new restaurant development ~~current~~ and ~~forecasted cash flows, including~~maintenance of existing locations, dividend payments, ~~and growth capital contributions to North Italia and Flower Child, a review of our capital structure~~debt levels and cost of ~~capital,~~borrowing, obligations associated with the Acquisitions, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and financial covenants under ~~our~~the Facility that limit share repurchases based on a defined ratio. ~~(See Note 3 of Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of our long-term debt.)~~ Our objectives ~~with regard to~~regarding share repurchases are to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. (See Note 510 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase authorization and methods.)

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Facility, as amended on May 1, 2020, our Board of Directors suspended the quarterly dividend on our common stock, as well as share repurchases. (See Notes 7 and 15 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our Facility.) In addition, as further discussed in Note 15 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report, to increase our liquidity given the impact of the COVID-19 pandemic on our operations, we sold 200,000 shares of Series A Convertible Preferred Stock on April 20, 2020 for an aggregate purchase price of $200 million.

The Acquisitions included a provision for contingent consideration which is payable on October 2, 2024 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). We are also required to provide financing to FRC in an amount sufficient to support achievement of these targets during the five years ending October 2, 2024.

As of March 31, 2020, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.

Based on our current ~~expansion objectives,~~projections, we believe that during the upcoming 12 months our cash and cash equivalents, combined with expected cash flows provided by operations, anticipated cash refunds from our net operating loss carryback claims and available borrowings under ~~our~~the Amended Facility, ~~and expected landlord construction contributions~~ should be sufficient in the aggregate to ~~finance~~meet our ~~capital allocation strategy, including capital expenditures, share repurchases, cash dividends and growth capital contributions~~short-term obligations. See Note 12 of Notes to North Italia and Flower Child, and allow us to consider additional possible capital allocation strategies, such as developing or acquiring other growth vehicles. We continue to plan to return substantially allCondensed Consolidated Financial Statements in Part I, Item 1 of this report for discussion of our ~~free cash flow plus proceeds received from employee stock option exercises to stockholders in the form of dividends and share repurchases.~~

As of October 3, 2017, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties other than the arrangement with FRC that we entered into in fiscal 2016. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.income taxes.

Recent Accounting Pronouncements

See Note 1 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for a summary of new accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The following discussion of market risks contains forward-looking ~~statements.~~statements and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report and with the following items included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019: the audited consolidated financial statements and related notes in Part IV, Item 15; the “Risk Factors” included in Part I, Item 1A; the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7; and the cautionary statements included throughout the report. Actual results may differ materially from the following discussion based on general conditions in the commodity and financial markets.

27

Table of Contents

We purchase food and other commodities for use in our operations based on market prices established with our suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control. ~~Substantially~~We mitigate the risk of supply shortages and obtain competitive prices by utilizing multiple qualified suppliers for substantially all of our ingredients and ~~supplies are available from multiple qualified suppliers, which helps mitigate our risk of commodity availability and obtain competitive prices.~~supplies. We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as ~~cream cheese,~~certain dairy products and poultry, depending on market conditions and expected demand. Historically, we were unable to contract directly for extended periods of time for certain of our commodities such as certain produce items, wild-caught fresh fish and certain dairy products. During 2015, we began entering into longer-term fixed pricing agreements for additional dairy items, and weWe continue to evaluate the possibility of entering into similar arrangements for ~~additional commodities. We~~other commodities and also periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing ~~our~~ risk and variability ~~in these categories.~~associated with such commodities. Although these vehicles ~~and markets~~ may be available to us, as of March 31, 2020, we ~~may choose~~had chosen not to enter into any hedging contracts due to pricing volatility, excessive risk premiums, hedge inefficiencies or other factors. ~~Where~~Commodities for which we ~~had~~have not entered into ~~long-term~~ contracts ~~commodities~~ can be subject to unforeseen supply and cost fluctuations, which at times may be significant. Additionally, the cost of commodities subject to governmental regulation, such as dairy and corn, can be ~~even more~~especially susceptible to price ~~fluctuation than~~fluctuation. Commodities we purchase on the international market may be subject to even greater fluctuations in cost and availability, which could result from a variety of factors, including the value of the U.S. dollar relative to other ~~products.~~currencies, international trade disputes, tariffs and varying global demand. We may or may not have the ability to increase menu prices or vary menu items in response to food commodity price increases. For ~~each of~~both the ~~third~~first quarters of fiscal ~~2017~~2020 and ~~2016,~~2019, a hypothetical increase of 1% in food costs would have negatively impacted cost of sales by ~~$1.3 million. For each of the thirty-nine weeks ended October 3, 2017 and September 27, 2016, a hypothetical increase of 1% in food costs would have negatively impacted cost of sales by $3.9~~$1.4 million.

We are exposed to market risk from interest rate changes on our funded debt. This exposure relates to the component of the interest rate on ~~our~~the Facility that is indexed to market rates. Based on ~~$30.0 million of~~ outstanding borrowings at ~~October 3, 2017,~~March 31, 2020 and December 31, 2019, a hypothetical 1% rise in interest rates would ~~increase~~have increased interest expense by ~~$300,000~~$3.8 million and $2.9 million, respectively, on an annual basis. ~~We had no outstanding borrowings at January 3, 2017, and therefore, had no exposure to interest rate fluctuations on funded debt at that date.~~ (See Note 37 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term debt.)

We are also subject to market risk related to our investments in variable life insurance contracts used to support our ~~Executive Savings Plan, a~~ non-qualified executive deferred compensation plan to the extent these investments are not equivalent to the related liability. In addition, because changes in these investments are not taxable, gains and losses result in tax benefit and tax expense, respectively, and directly affect net income through the ~~full impact of gains or losses directly affects net income.~~income tax provision. Based on balances at ~~October 3, 2017~~March 31, 2020 and ~~January 3, 2017,~~December 31, 2019, a hypothetical 10% decline in the market value of our deferred compensation asset and related liability would not have impacted income before income taxes. However, under such scenario, net income would have declined by ~~$2.3~~$1.5 million and $1.9 million at ~~October 3, 2017~~March 31, 2020 and ~~$2.0 million at January 3, 2017.~~December 31, 2019, respectively.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that ~~material~~ information ~~relating to the Company and our subsidiaries~~ required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 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 ~~October 3, 2017.~~March 31, 2020.

Changes in Internal Control over Financial Reporting

We acquired North Italia and the remaining business of Fox Restaurant Concepts on October 2, 2019. We have not fully evaluated any changes in internal control over financial reporting associated with the acquisition and therefore any material changes that may result from these acquisitions have not been disclosed in this report. We intend to disclose all material changes resulting from these acquisitions within or prior to the time of our first annual assessment of internal control over financial reporting that is required to include these entities.

28

Table of Contents

There have been no other 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 fiscal quarter ended ~~October 3, 2017~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 49 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Item 1A. Risk Factors.

A description of the risk factors associated with our business is contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended ~~January 3, 2017~~December 1, 2019 (“Annual Report”). These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC.

~~There have been no material changes in our~~In light of the evolving COVID-19 pandemic, we are supplementing the risk factors ~~since the filing of~~disclosed in our Annual Report ~~other than~~as follows:

Risks Related to ~~enhance~~Our Financial Performance

The outbreak of, and local, state and federal governmental responses to, the ~~following risk factor~~COVID-19 pandemic have significantly disrupted and will continue to ~~reflect~~disrupt our ~~March 28, 2017 execution of a lease agreement~~business, which has and could continue to ~~open our first Company-owned international location in Toronto, Canada:~~

We face a variety of risks related to our international expansion and global brand development efforts that could negatively affect our brand, require additional infrastructure to support such efforts, and expose us to additional liabilities under foreign laws, any of which could materially adversely affect our financial ~~performance.~~condition and operating results for an extended period of time.

~~International operations have a unique set~~The outbreak of, ~~risks that differ from country~~and local, state and federal governmental responses to, country, and can include, among other risks, political instability, governmental corruption, social, religious and ethnic unrest, anti-American sentiment, delayed and potentially less effective ability to respond to a crisis occurring internationally, changes in global economic conditions (such as currency valuation, disposable income, climate change, unemployment levels and increases in the ~~prices of commodities and labor), the regulatory environment, immigration, labor and pension laws, income and other taxes, consumer preferences and practices,~~COVID-19 pandemic, as well as ~~changes in the laws and regulations governing foreign investment, joint ventures or licensing arrangements in countries where~~ our ~~restaurants or our licensees are located, the financial stability and wherewithal of our licensees, and local import controls.~~

~~The products and services offered at our branded international restaurants may be negatively affected by factors outside of our control, including, but not limited to:~~

· ~~difficulties in achieving the consistency of product quality and service as compared to restaurants we operate in the United States;~~

· ~~changes to our recipes required by cultural norms;~~

· ~~inability to obtain, at a reasonable cost, adequate and reliable supplies of ingredients and products necessary to execute our diverse menu;~~

· ~~availability of experienced management to operate international restaurants according to our domestic standards;~~

· ~~changes in economic conditions of our licensees, whether or not related~~responses to the ~~operation of~~outbreak, have significantly disrupted and will continue to disrupt our ~~restaurants;~~

· differences, changes or uncertainties in economic, regulatory, legal, immigration, social, climatic, and political conditions, including the possibility of terrorism, social unrest, trade embargos and/or trade restrictions, which may delay our international expansion, result in periodic or permanent closure of foreign restaurants, affect our ability to supply our international restaurants with necessary supplies and ingredients and affect international perception of our brand; and

· ~~currency fluctuations, trade restrictions or tariffs adversely affecting our or our licensees’ ability to import goods from~~business. In the United States and other ~~parts~~regions, social distancing restrictions have been enacted and in many areas individuals are restricted from non-essential movements outside of their homes. In response to the COVID-19 pandemic and these changing conditions, we have temporarily closed a number of restaurants across our portfolio with the remaining locations shifted to an off-premise only operating model on an interim basis. In late April 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, however we will be operating under capacity restrictions for some time as social distancing protocols remain in place. Additionally, an outbreak or perceived outbreak of the ~~world that are required for operating our branded restaurants, including our cakes which are wholly manufactured in the United States.~~

~~Our international licensees are authorized~~COVID-19 pandemic connected to ~~operate The Cheesecake Factory restaurant concept using certain~~one or more of our ~~Intellectual Property~~restaurants could cause negative publicity directed at any of our brands and ~~systems, and~~cause customers to ~~provide~~avoid our ~~branded food and bakery products directly~~restaurants. We cannot predict how long the pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to ~~consumers in The Cheesecake Factory restaurants opened in the licensed trade areas. We provide extensive and detailed training~~what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our ~~licensees so their employees may be able to effectively execute our operating processes and procedures. However, since~~dining rooms during or following social distancing protocols. Similarly, we ~~do not operate these restaurants directly, we can provide no assurance that our licensees~~cannot predict the effects the COVID-19 pandemic will ~~adhere~~have on the restaurant industry as a whole or the share of customer traffic to our ~~operating standards in the same manner as we would were such~~ restaurants ~~operated directly by us.~~

~~If we~~compared to other restaurants or ~~our licensees have difficulty operating our international restaurants effectively, or if we or they fail to receive an adequate return on investment, and~~outlets. Any of these difficulties are attributed to us or our brand, our reputation and brand value could be harmed, our revenues from these restaurants could be diminished, and our international growth may be slowed, any of whichchanges could materially adversely affect our financial performance.

~~In order to support our international expansion, our bakeries supply certain~~Our restaurant operations could be further disrupted if any of our ~~bakery products~~restaurant staff members is diagnosed with COVID-19, which has occurred at some of our restaurants, requiring the quarantine of some or all of a restaurant’s staff members and the temporary closure of the restaurant. If a significant percentage of our workforce is unable to work, due to COVID-19 illness, quarantine, limitations on travel or other government restrictions in connection with the COVID-19 pandemic, our ~~branded international restaurants. In order to~~operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations. Our suppliers could be similarly adversely impacted by the COVID-19 pandemic, and we could face shortages of food items or other supplies at our restaurants and our operations and sales could be adversely impacted by such supply bakery products to these restaurants, we must adapt certain recipes to eliminate locally prohibited ingredients, comply with labeling requirements that differ from those in the United States, and maintain certifications required to export to such countries.interruptions. In addition, ~~unexpected events outside of our control, such as trade restrictions, import~~we furloughed approximately 41,000 staff members, and ~~export embargos, governmental shutdowns~~although some have returned to work, we may need to implement additional furloughs depending on future events. Staff members who are furloughed might seek and ~~disruptions in shipping, may affect our ability to transport adequate levels of our bakery products to our international restaurants, for~~find other employment, which we are the sole source of supply. A failure to adequately supply bakery products to our internationally branded restaurants could affect the customer experience at those restaurants, resulting in decreased sales, and could, depending upon the reason for the failure, trigger contractual defaults on our part, any of which could materially adversely affect our financial performance.
As we continue the international expansion of our brand, we must comply with regulations and legal requirements, including those related to immigration and the protection of our Intellectual Property. Additionally, we must comply with domestic laws affecting United States businesses that operate internationally, including the Foreign Corrupt Practices Act and anti-boycott laws, and with foreign laws in the countries in which we expand our restaurants. (See Risk Factor —“Changes in, or any failure to comply with, applicable laws or regulations could materially adversely affect our ability to ~~operate~~properly staff and reopen our restaurants ~~and/~~with experienced staff members when the business interruptions caused by the COVID-19 pandemic abate or end.

29

Table of Contents

In addition, while we have taken actions to manage our liquidity position in response to the COVID-19 pandemic, we may need to seek additional sources of liquidity. The COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be available on favorable terms, or at all, especially the longer the COVID-19 pandemic lasts or if it were to reoccur. To this end, on May 1, 2020, we entered into an amendment to our Facility that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021. Following the end of the covenant relief period, a material increase in our level of debt could cause our net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratios to exceed the maximum levels permitted under the covenants in the Amended Facility. To increase our ~~cost~~liquidity given the impact of COVID-19 on our operations, we also sold 200,000 shares of Series A Convertible Preferred Stock on April 20, 2020 for an aggregate purchase price of $200 million. See Note 15 of Notes to ~~do so,~~Condensed Consolidated Financial Statements in Part 1, Item 1 of this report for further discussion of these events.

The impact of COVID-19 on our business has resulted in the impairment of certain of our long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC. Future changes in estimates could further impact the carrying value of these items.

Our efforts to address our rent obligations during the COVID-19 pandemic are ongoing and our ability to obtain rent concessions will vary by landlord. While we continue to engage in discussions with our landlords, certain of our landlords have alleged that we are in default of our leases with them. If we are unable to reach an agreement with these landlords, we may face eviction proceedings, which could be expensive to litigate and may jeopardize our ability to continue operations at the impacted restaurant. The COVID-19 pandemic has also adversely affected our ability to open new restaurants, and we have paused nearly all construction of new restaurants and certain remodeling projects at existing restaurants. These changes may materially adversely affect our ability to grow our business, particularly if these construction pauses are in place for a significant amount of time.

The impact global and domestic economic conditions have on consumer discretionary spending could materially adversely affect our financial performance.~~”) Our~~

Dining out is a discretionary expenditure that historically has been influenced by domestic and global economic conditions. The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have led to a national and global economic downturn. Consumer discretionary spending has weakened. Reduced discretionary spending could influence off-premise dining, customer traffic in our restaurants when it resumes and average check amount, which in turn could have a material impact on our financial performance.

Global and domestic conditions, including as a result of COVID-19, that have an effect on consumer discretionary spending include, but may not be limited to: unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy. Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any of these additional factors affecting consumer discretionary spending may ~~also be materially adversely affected by liabilities, costs~~further influence customer traffic in our restaurants and ~~expenses we may incur in the event we become subject to lawsuits or other legal actions resulting from~~average check amount, thus potentially having a further material impact on our acts or omissions or the acts or omissions of our licensees. There can be no assurance that any insurance coverage or contractual indemnifications would be effective to protect against such liabilities.financial performance.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents ~~information regarding~~ our ~~purchase~~purchases of our common stock during the thirteen weeks ended ~~October 3, 2017~~March 31, 2020 (in thousands, except per share data):

Period

Total Number
of
Shares
Purchased (1)

Average
Price Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs

July 5 — August 8, 2017

1,020

$
48.60

1,019

7,481

August 9 — September 5, 2017

237

45.09

232

7,244

September 6 — October 3, 2017

391

39.78

377

6,853

Total

1,648

1,628


Total Number



Total Number of Shares

Maximum Number of

of

Average

Purchased as Part of

Shares that May Yet Be

Shares

Price Paid

Publicly Announced

Purchased Under the
Period

Purchased ⁽¹⁾

per Share

Plans or Programs

Plans or Programs
January 1 — February 4, 2020

—

$
—

—

3,080
February 5 — March 3, 2020

58

35.60

—

3,022
March 4 — March 31, 2020

17

31.52

—

3,005
Total

75



—

30

~~(1) The total number~~Table of ~~shares purchased includes 20,063~~Contents

(1)	The total number of shares purchased includes 74,581 shares withheld upon vesting of restricted share awards to satisfy tax withholding obligations.

OnUnder the July 21, 2016 authorization by our Board ~~increased the authorization~~ to repurchase up to 56.0 million shares of our common stock, ~~by 7.5 million shares to 56.0 million shares. Under this and all previous authorizations,~~ we have cumulatively repurchased ~~49.1~~53.0 million shares at a total cost of ~~$1,516.3~~$1,695.7 million through ~~October 3, 2017,~~March 31, 2020, including ~~1.6~~0.1 million shares at a cost of ~~$75.8~~$2.6 million during the ~~third~~first quarter of fiscal ~~2017.~~2020. Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. (See Note 510 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase authorization and methods.)

~~Our~~ The timing and number of shares repurchased are also subject to legal constraints and financial covenants under the Facility ~~limits cash distributions with respect to our equity interests, such as cash dividends and~~that limit share repurchases based on a defined ratio. To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Facility, we suspended share repurchases. (See ~~Note 3~~Notes 7 and 15 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our ~~long-term debt.~~Amended Facility.)

31

Table of Contents

Item 6. Exhibits

Exhibit
No.

Item

Form

File Number

Incorporated by
Reference from
Exhibit Number

Filed with SEC
2.1

Purchase Agreement, dated as of November 14, 2016, as amended by Amendment & Option Exercise Agreement, dated as of July 30, 2019, by and among The Cheesecake Factory Incorporated and the other Parties thereto*

10-Q

000-20574

2.1

11/8/19
2.2

First Amendment to Option Exercise Agreement and Second Amendment to Purchase Agreement and Operating Agreement, dated as of October 2, 2019, by and among The Cheesecake Factory Incorporated and the other Parties thereto*

10-Q

000-20574

2.2

11/8/19
2.3

Membership Interest Purchase Agreement, dated as of July 30, 2019, by and among The Cheesecake Factory Restaurants, Inc., Fox Restaurant Concepts LLC, the Sellers party thereto, SWF Posse LLC, as Seller’s representative, and, solely for limited purposes set forth therein, The Cheesecake Factory Incorporated*†

10-Q

000-20574

2.3

11/8/19
2.4

First Amendment to Membership Interest Purchase Agreement, dated as of October 2, 2019, by and among The Cheesecake Factory Restaurants, Inc., Fox Restaurant Concepts LLC, and SWF Posse LLC, as Seller’s representative*

10-Q

000-20574

2.4

11/8/19
3.1

Restated Certificate of Incorporation of The Cheesecake Factory Incorporated

10-Q

000-20574

3.2

8/6/18
3.2

Certificate of Designations of The Cheesecake Factory Incorporated, dated April 20, 2020

8-K

000-20574

3.1

4/20/20
3.3

Bylaws of The Cheesecake Factory Incorporated (Amended and Restated on May 20, 2009)

8-K

000-20574

3.8

5/27/09
10.1

Form of Notice of Grant and Stock Unit Grant Agreement for Directors under The Cheesecake Factory Incorporated Stock Incentive Plan#

—

—

—

Filed herewith
10.2

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

—

—

—

Filed herewith
10.3

Subscription Agreement, dated April 20, 2020, by and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC

8-K

000-20574

10.1

4/20/20
10.4

Registration Rights Agreement, dated April 20, 2020, by and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC

8-K

000-20574

10.2

4/20/20
10.5

Acknowledgement and Support Agreement, dated April 20, 2020, by and between David Overton and RC Cake Holdings LLC

8-K

000-20574

10.3

4/20/20
10.6

First Amendment, dated as of May 1, 2020, to the Third Amended and Restated Loan Agreement, dated as of July 30, 2019 , between The Cheesecake Factory Incorporated, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto

8-K

000-20574

10.1

5/5/20
31.1

Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer

—

—

—

Filed herewith
31.2

Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer

—

—

—

Filed herewith
32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer

—

—

—

Filed herewith
32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer

—

—

—

Filed herewith
101.1

The following materials from The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statement of stockholders’ equity, (v) condensed consolidated statements of cash flows, and (vi) the notes to the condensed consolidated financial statements

—

—

—

Filed herewith
104.1

The cover page of The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (included with Exhibit 101.1)

—

—

—

Filed herewith

32

Table of Contents

~~Exhibit~~ ~~No.~~	~~Item~~	~~Form~~	~~File Number~~	~~Incorporated by~~ ~~Reference from~~ ~~Exhibit Number~~	~~Filed with SEC~~

~~31.1~~	~~Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer~~	—	—	—	~~Filed herewith~~

~~31.2~~	~~Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer~~	—	—	—	~~Filed herewith~~

~~32.1~~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer*	—	—	—	~~Filed herewith~~

~~32.2~~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer*	—	—	—	~~Filed herewith~~

~~101~~	XBRL (Extensible Business Reporting Language) The following materials from The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2017, formatted in Extensive Business Reporting Language (XBRL), (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statement of stockholders’ equity, (v) condensed consolidated statements of cash flows, and (vi) the notes to the condensed consolidated financial statements.	—	—	—	~~Filed herewith~~

* ~~A certification furnished~~The schedules (or similar attachments) to this exhibit have been omitted from this filing pursuant to Item ~~601(b)(2)~~601(a)(5) of ~~Regulations S-K~~Regulation S-K. The Company will ~~not be deemed “filed” for purposes~~furnish copies of ~~Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),~~any such schedules or ~~otherwise subject~~similar attachments) to the ~~liability of that section. Such certification will~~SEC upon request.

† Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be ~~deemed~~competitively harmful if publicly disclosed.

# Management contract or compensatory plan or arrangement required to be ~~incorporated by reference into any filing under the Securities Act~~filed as an exhibit.

33

Table of ~~1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.~~Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 8, 2017~~June 22, 2020
THE CHEESECAKE FACTORY INCORPORATED

By:
/s/ DAVID OVERTON

David Overton

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

By:
/s/ MATTHEW E. CLARK

Matthew E. Clark

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)
~~By:~~
~~/s/ CHERYL M. SLOMANN~~
~~Cheryl M. Slomann~~
~~Senior Vice President, Finance and Corporate Controller~~
~~(Principal Accounting Officer)~~

27

34

Table of Contents

35

	October 3, 2017			January 3, 2017

ASSETS
Current assets:
Cash and cash equivalents	$	19,795		$	53,839
Accounts receivable	13,195			15,632
Income taxes receivable	5,038			—
Other receivables	33,897			64,592
Inventories	44,195			34,926
Prepaid expenses	48,521			52,438
Total current assets	164,641			221,427
Property and equipment, net	933,484			910,134
Other assets:
Intangible assets, net	23,546			23,054
Prepaid rent	39,652			42,162
Other	114,005			96,542
Total other assets	177,203			161,758
Total assets	$	1,275,328		$	1,293,319
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	46,572		$	41,564
Income taxes payable	—			2,299
Gift card liability	116,419			153,629
Other accrued expenses	159,823			179,034
Total current liabilities	322,814			376,526

Deferred income taxes	83,540			82,401
Deferred rent	74,784			71,575
Deemed landlord financing liability	113,607			100,576
Long-term debt	30,000			—
Other noncurrent liabilities	67,224			59,034
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued	—			—
Common stock, $.01 par value, 250,000,000 shares authorized; 95,271,640 and 94,672,037 issued at October 3, 2017 and January 3, 2017, respectively	953			947
Additional paid-in capital	797,505			774,137
Retained earnings	1,301,209			1,238,012
Treasury stock, 49,143,167 and 46,979,659 shares at cost at October 3, 2017 and January 3, 2017, respectively	(1,516,269		)	(1,409,889		)
Accumulated other comprehensive loss	(39		)	—
Total stockholders’ equity	583,359			603,207
Total liabilities and stockholders’ equity	$	1,275,328		$	1,293,319

	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total

Balance, January 3, 2017	94,672	$	947	$	774,137	$	1,238,012		$	(1,409,889	)	$	—		$	603,207
Net income	—	—		—		99,654			—			—			99,654
Foreign currency translation adjustment	—	—		—		—			—			(39		)	(39		)
Cash dividends declared	—	—		—		(36,457		)	—			—			(36,457		)
Stock-based compensation	—	—		15,274		—			—			—			15,274
Common stock issued under stock-based compensation plans	600	6		8,094		—			—			—			8,100
Treasury stock purchases	—	—		—		—			(106,380		)	—			(106,380		)
Balance, October 3, 2017	95,272	$	953	$	797,505	$	1,301,209		$	(1,516,269	)	$	(39	)	$	583,359

	October 3, 2017		January 3, 2017

Restaurant food and supplies	$	17,447	$	16,555
Bakery finished goods and work in progress(1)	21,064		12,121
Bakery raw materials and supplies	5,684		6,250
Total	$	44,195	$	34,926

	October 3, 2017		January 3, 2017
Total assets:
The Cheesecake Factory restaurants	$	903,989	$	950,372
Other	163,227		157,842
Corporate	208,112		185,105
Total	$	1,275,328	$	1,293,319

	Thirty-Nine Weeks Ended October 3, 2017			Thirty-Nine Weeks Ended September 27, 2016
Cash provided by operating activities	$	154.2		$	225.1
Capital expenditures	$	(73.4	)	$	(70.6	)
Investment in unconsolidated affiliates	$	(9.0	)	$	—
Proceeds from exercise of stock options	$	8.1		$	18.9
Borrowings on credit facility	$	30.0		$	—
Treasury stock purchases	$	(106.4	)	$	(119.0	)
Cash dividends paid	$	(36.6	)	$	(31.0	)

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 5 — August 8, 2017	1,020	$	48.60	1,019	7,481
August 9 — September 5, 2017	237	45.09		232	7,244
September 6 — October 3, 2017	391	39.78		377	6,853
Total	1,648			1,628


	Total Number			Total Number of Shares	Maximum Number of
	of	Average		Purchased as Part of	Shares that May Yet Be
	Shares	Price Paid		Publicly Announced	Purchased Under the
Period	Purchased ⁽¹⁾	per Share		Plans or Programs	Plans or Programs
January 1 — February 4, 2020	—	$	—	—	3,080
February 5 — March 3, 2020	58		35.60	—	3,022
March 4 — March 31, 2020	17		31.52	—	3,005
Total	75			—

Exhibit No.	Item	Form	File Number	Incorporated by Reference from Exhibit Number	Filed with SEC
2.1	Purchase Agreement, dated as of November 14, 2016, as amended by Amendment & Option Exercise Agreement, dated as of July 30, 2019, by and among The Cheesecake Factory Incorporated and the other Parties thereto*	10-Q	000-20574	2.1	11/8/19
2.2	First Amendment to Option Exercise Agreement and Second Amendment to Purchase Agreement and Operating Agreement, dated as of October 2, 2019, by and among The Cheesecake Factory Incorporated and the other Parties thereto*	10-Q	000-20574	2.2	11/8/19
2.3	Membership Interest Purchase Agreement, dated as of July 30, 2019, by and among The Cheesecake Factory Restaurants, Inc., Fox Restaurant Concepts LLC, the Sellers party thereto, SWF Posse LLC, as Seller’s representative, and, solely for limited purposes set forth therein, The Cheesecake Factory Incorporated*†	10-Q	000-20574	2.3	11/8/19
2.4	First Amendment to Membership Interest Purchase Agreement, dated as of October 2, 2019, by and among The Cheesecake Factory Restaurants, Inc., Fox Restaurant Concepts LLC, and SWF Posse LLC, as Seller’s representative*	10-Q	000-20574	2.4	11/8/19
3.1	Restated Certificate of Incorporation of The Cheesecake Factory Incorporated	10-Q	000-20574	3.2	8/6/18
3.2	Certificate of Designations of The Cheesecake Factory Incorporated, dated April 20, 2020	8-K	000-20574	3.1	4/20/20
3.3	Bylaws of The Cheesecake Factory Incorporated (Amended and Restated on May 20, 2009)	8-K	000-20574	3.8	5/27/09
10.1	Form of Notice of Grant and Stock Unit Grant Agreement for Directors under The Cheesecake Factory Incorporated Stock Incentive Plan#	—	—	—	Filed herewith
10.2	Indemnification Agreement, dated as of April 20, 2020, between The Cheesecake Factory Incorporated and Paul D. Ginsberg#	—	—	—	Filed herewith
10.3	Subscription Agreement, dated April 20, 2020, by and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC	8-K	000-20574	10.1	4/20/20
10.4	Registration Rights Agreement, dated April 20, 2020, by and between The Cheesecake Factory Incorporated and RC Cake Holdings LLC	8-K	000-20574	10.2	4/20/20
10.5	Acknowledgement and Support Agreement, dated April 20, 2020, by and between David Overton and RC Cake Holdings LLC	8-K	000-20574	10.3	4/20/20
10.6	First Amendment, dated as of May 1, 2020, to the Third Amended and Restated Loan Agreement, dated as of July 30, 2019 , between The Cheesecake Factory Incorporated, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto	8-K	000-20574	10.1	5/5/20
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer	—	—	—	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer	—	—	—	Filed herewith
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer	—	—	—	Filed herewith
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer	—	—	—	Filed herewith
101.1	The following materials from The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of comprehensive income, (iv) condensed consolidated statement of stockholders’ equity, (v) condensed consolidated statements of cash flows, and (vi) the notes to the condensed consolidated financial statements	—	—	—	Filed herewith
104.1	The cover page of The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (included with Exhibit 101.1)	—	—	—	Filed herewith


Date: ~~November 8, 2017~~June 22, 2020	THE CHEESECAKE FACTORY INCORPORATED

	By:	/s/ DAVID OVERTON
		David Overton
			Chairman of the Board and Chief Executive Officer
			(Principal Executive Officer)

	By:	/s/ MATTHEW E. CLARK
		Matthew E. Clark
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

	~~By:~~	~~/s/ CHERYL M. SLOMANN~~
		~~Cheryl M. Slomann~~
		~~Senior Vice President, Finance and Corporate Controller~~
		~~(Principal Accounting Officer)~~