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

For the quarterly period ended March ~~30, 2021~~29, 2022


☐	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) 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	The Nasdaq ~~Global Select~~Stock Market LLC

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 ⌧☒ No ◻☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧☒ No ◻☐

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 filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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.~~Act. ◻☐

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

As of April ~~26, 2021, 46,479,297~~25, 2022, 52,786,422 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

INDEX

			Page Number

PART I	FINANCIAL INFORMATION
	Item 1.	~~Unaudited~~ Financial Statements:
		Condensed Consolidated Balance Sheets(Unaudited)	1
		Condensed Consolidated Statements of Income/(Loss)(Unaudited)	2
		Condensed Consolidated Statements of Comprehensive ~~Income/(Loss)~~Income (Unaudited)	63
		Condensed Consolidated Statements of Stockholders’ Equity and Series A Convertible Preferred Stock(Unaudited)	4
		Condensed Consolidated Statements of Cash Flows(Unaudited)	5
		Notes to Condensed Consolidated Financial Statements(Unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2728
	Item 4.	Controls and Procedures	2829

PART II	OTHER INFORMATION		2829
	Item 1.	Legal Proceedings	2829
	Item 1A.	Risk Factors	2829
	Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds	2930
	Item 6.	Exhibits	3031

Signatures			3132

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)~~

March 30,

December 29,

2021

2020
ASSETS

Current assets:

Cash and cash equivalents

$
181,345

$
154,085
Accounts and other receivable

57,815

75,787
Income taxes receivable

34,973

36,889
Inventories

38,955

39,288
Prepaid expenses

30,727

35,310
Total current assets

343,815

341,359

Property and equipment, net

760,722

774,137

Other assets:

Intangible assets, net

253,152

253,160
Operating lease assets

1,245,892

1,251,027
Other

131,858

127,371
Total other assets

1,630,902

1,631,558

Total assets

$
2,735,439

$
2,747,054

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
56,047

$
58,432
Gift card liabilities

166,178

184,655
Operating lease liabilities

132,521

132,519
Other accrued expenses

203,211

210,461
Total current liabilities

557,957

586,067

Long-term debt

280,000

280,000
Operating lease liabilities

1,216,473

1,224,321
Other noncurrent liabilities

151,010

149,725
Commitments and contingencies (Note 8)

Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; 200,000 and 200,000 shares issued and outstanding at March 30, 2021 and December 29, 2020, respectively

213,485

218,248
Stockholders’ equity:

Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; NaN issued

—

—
Common stock, $.01 par value, 250,000,000 shares authorized; 99,508,470 and 98,645,147 shares issued at March 30, 2021 and December 29, 2020, respectively

995

986
Additional paid-in capital

904,045

878,148
Retained earnings

1,114,047

1,110,087
Treasury stock, 53,101,293 and 53,026,409 shares at cost at March 30, 2021 and December 29, 2020, respectively

(1,700,700)

(1,696,743)
Accumulated other comprehensive loss

(1,873)

(3,785)
Total stockholders’ equity

316,514

288,693

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

$
2,735,439

$
2,747,054


	March 29,		December 28,
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	183,556	$	189,627
Accounts and other receivable		66,451		100,504
Income taxes receivable		36,893		36,173
Inventories		46,680		42,839
Prepaid expenses		33,741		36,446
Total current assets		367,321		405,589
Property and equipment, net		744,751		741,746
Other assets:
Intangible assets, net		251,655		251,701
Operating lease assets		1,240,552		1,241,237
Other		149,462		157,852
Total other assets		1,641,669		1,650,790
Total assets	$	2,753,741	$	2,798,125

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	61,741	$	54,086
Gift card liabilities		185,512		211,182
Operating lease liabilities		144,966		131,818
Other accrued expenses		202,217		239,187
Total current liabilities		594,436		636,273

Long-term debt		466,521		466,017
Operating lease liabilities		1,201,550		1,218,269
Other noncurrent liabilities		135,908		147,400
Commitments and contingencies (Note 8)
Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; NaN issued		—		—
Stockholders’ equity:
Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; NaN issued		—		—
Common stock, $.01 par value, 250,000,000 shares authorized; 106,028,803 and 105,365,678 shares issued at March 29, 2022 and December 28, 2021, respectively		1,060		1,054
Additional paid-in capital		868,410		862,758
Retained earnings		1,192,335		1,169,150
Treasury stock, 53,236,854 and 53,139,172 shares at cost at March 29, 2022 and December 28, 2021, respectively		(1,706,447)		(1,702,509)
Accumulated other comprehensive loss		(32)		(287)
Total stockholders’ equity		355,326		330,166
Total liabilities, Series A convertible preferred stock and stockholders’ equity	$	2,753,741	$	2,798,125

See the accompanying notes to the condensed consolidated financial statements

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)

(In thousands, except per share data)

(Unaudited)


					Thirteen		Thirteen
	Thirteen		Thirteen		Weeks Ended		Weeks Ended
	Weeks Ended		Weeks Ended		March 29, 2022		March 30, 2021
	March 30, 2021		March 31, 2020
Revenues	$	627,417	$	615,106	$	793,710	$	627,417

Costs and expenses:
Cost of sales		135,875		140,905		188,501		135,875
Labor expenses		229,732		236,982		295,763		229,732
Other operating costs and expenses		181,533		167,970		207,635		181,533
General and administrative expenses		44,427		43,960		49,123		44,427
Depreciation and amortization expenses		22,006		23,562		21,505		22,006
Impairment of assets and lease termination expenses		594		191,896		207		594
Acquisition-related costs		—		1,236
Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)		550		(4,466)
Acquisition-related contingent consideration, compensation and amortization expenses						891		550
Preopening costs		3,856		3,119		1,764		3,856
Total costs and expenses		618,573		805,164		765,389		618,573
Income/(loss) from operations		8,844		(190,058)
Income from operations						28,321		8,844
Interest and other expense, net		(2,694)		(1,518)		(1,461)		(2,694)
Income/(loss) before income taxes		6,150		(191,576)
Income tax provision/(benefit)		2,282		(55,413)
Net income/(loss)		3,868		(136,163)
Income before income taxes						26,860		6,150
Income tax provision						3,697		2,282
Net income						23,163		3,868
Dividends on Series A preferred stock		(5,070)		0		—		(5,070)
Net loss available to common stockholders	$	(1,202)	$	(136,163)
Net income/(loss) available to common stockholders					$	23,163	$	(1,202)

Net loss per common share:
Net income/(loss) per common share:
Basic	$	(0.03)	$	(3.11)	$	0.46	$	(0.03)
Diluted	$	(0.03)	$	(3.11)
Diluted (Note 11)					$	0.45	$	(0.03)

Weighted-average common shares outstanding:
Basic		44,189		43,773		50,333		44,189
Diluted		44,189		43,773		51,013		44,189

See the accompanying notes to the condensed consolidated financial statements.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME/(LOSS)~~INCOME

(In thousands)

(Unaudited)

Thirteen

Thirteen

Weeks Ended

Weeks Ended

March 30, 2021

March 31, 2020

Net income/(loss)

$
3,868

$
(136,163)
Other comprehensive gain/(loss):

Foreign currency translation adjustment

174

(936)
Unrealized gain/(loss) on derivative, net of tax

1,738

(2,370)
Other comprehensive gain/(loss)

1,912

(3,306)
Total comprehensive income/(loss)

$
5,780

$
(139,469)
Comprehensive income attributable to preferred stockholders

(5,070)

—
Total comprehensive income/(loss) available to common stockholders

$
710

$
(139,469)


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

Net income	$	23,163	$	3,868
Other comprehensive gain:
Foreign currency translation adjustment		255		174
Unrealized gain on derivative, net of tax		—		1,738
Other comprehensive gain		255		1,912
Total comprehensive income	$	23,418	$	5,780
Comprehensive income attributable to Series A preferred stockholders		—		(5,070)
Total comprehensive income available to common stockholders	$	23,418	$	710

See the accompanying notes to the condensed consolidated financial statements

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

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

(In thousands)

(Unaudited)

For the thirteen weeks ended March 29, 2022:


													Accumulated
	Series A Convertible						Additional						Other
	Preferred Stock			Common Stock			Paid-in		Retained		Treasury		Comprehensive
	Shares	Amount		Shares	Amount		Capital		Earnings		Stock		Loss		Total
Balance, December 28, 2021	—	$	—	105,366	$	1,054	$	862,758	$	1,169,150	$	(1,702,509)	$	(287)	$	330,166
Net income	—		—	—		—		—		23,163		—		—		23,163
Foreign currency translation adjustment	—		—	—		—		—		—		—		255		255
Cash dividends declared common stock, net of forfeitures	—		—	—		—		—		22		—		—		22
Stock-based compensation	—		—	608		6		5,569		—		—		—		5,575
Common stock issued under stock-based compensation plans	—		—	55		0		83		—		—		—		83
Treasury stock purchases	—		—	—		—		—		—		(3,938)		—		(3,938)
Balance, March 29, 2022	—	$	—	106,029	$	1,060	$	868,410	$	1,192,335	$	(1,706,447)	$	(32)	$	355,326

For the thirteen weeks ended March 30, 2021:

Accumulated


Series A Convertible

Additional

Other

Preferred Stock

Common Stock

Paid-in

Retained

Treasury

Comprehensive

Shares


Amount


Shares

Amount

Capital

Earnings

Stock

Loss

Total
Balance, December 29, 2020

200

$
218,248

98,645

$
986

$
878,148

$
1,110,087

$
(1,696,743)

$
(3,785)

$
288,693
Cumulative effect of adopting ASU 2020-06

—

(4,763)

—

—

—

4,763

—

—

4,763
Balance, December 29, 2020, as adjusted

200

213,485

98,645

986

878,148

1,114,850

(1,696,743)

(3,785)

293,456
Net income

—

—

—

—

—

3,868

—

—

3,868
Foreign currency translation adjustment

—

—

—

—

—

—

—

174

174
Change in derivative, net of tax

—

—

—

—

—

—

—

1,738

1,738
Cash dividends declared Common stock, net of forfeitures

—

—

—

—

—

399

—

—

399
Stock-based compensation

—

—

293

3

5,480

—

—

—

5,483
Common stock issued under stock-based compensation plans

—

—

570

6

20,417

—

—

—

20,423
Treasury stock purchases

—

—

—

—

—

—

(3,957)

—

(3,957)
Cash dividend declared Series A preferred stock, $25.35 per share

—

—

—

—

—

(5,070)

—

—

(5,070)
Balance, March 30, 2021

200

$
213,485

99,508

$
995

$
904,045

$
1,114,047

$
(1,700,700)

$
(1,873)

$
316,514

~~For the thirteen weeks ended March 31, 2020:~~


													Accumulated																Accumulated
	Series A Convertible						Additional						Other				Series A Convertible						Additional						Other
	Preferred Stock			Common Stock			Paid-in		Retained		Treasury		Comprehensive				Preferred Stock			Common Stock			Paid-in		Retained		Treasury		Comprehensive
	Shares	Amount		Shares	Amount		Capital		Earnings		Stock		Loss		Total		Shares	Amount		Shares	Amount		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)
Balance, December 29, 2020																	200	$	218,248	98,645	$	986	$	878,148	$	1,110,087	$	(1,696,743)	$	(3,785)	$	288,693
Cumulative effect of adopting ASU 2020-06																	—		(4,763)	—		—		—		4,763		—		—		4,763
Balance, December 29, 2020, as adjusted																	200		213,485	98,645		986		878,148		1,114,850		(1,696,743)		(3,785)		293,456
Net income																	—		—	—		—		—		3,868		—		—		3,868
Foreign currency translation adjustment	—		—	—		—		—		—		—		(936)		(936)	—		—	—		—		—		—		—		174		174
Change in derivative, net of tax	—		—	—		—		—		—		—		(2,370)		(2,370)	—		—	—		—		—		—		—		1,738		1,738
Cash dividends declared Common stock, $0.36 per share	—		—	—		—		—		(16,376)		—		—		(16,376)
Cash dividends declared common stock, net of forfeitures																	—		—	—		—		—		399		—		—		399
Stock-based compensation	—		—	566		6		5,541		—		—		—		5,547	—		—	293		3		5,480		—		—		—		5,483
Common stock issued under stock-based compensation plans	—		—	203		2		111		—		—		—		113	—		—	570		6		20,417		—		—		—		20,423
Treasury stock purchases	—		—	—		—		—		—		(2,586)		—		(2,586)	—		—	—		—		—		—		(3,957)		—		(3,957)
Balance, March 31, 2020	—	$	—	98,454	$	985	$	861,641	$	1,255,794	$	(1,695,708)	$	(3,741)	$	418,971
Cash dividends declared Series A preferred stock, $25.35 per share																	—		—	—		—		—		(5,070)		—		—		(5,070)
Balance, March 30, 2021																	200	$	213,485	99,508	$	995	$	904,045	$	1,114,047	$	(1,700,700)	$	(1,873)	$	316,514

See the accompanying notes to the condensed consolidated financial statements.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021
Cash flows from operating activities:
Net income/(loss)	$	3,868	$	(136,163)

Adjustments to reconcile net income/(loss) to cash provided by/(used in) operating activities:
Net income					$	23,163	$	3,868
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expenses		22,006		23,562		21,505		22,006
Impairment of assets and lease termination expense		431		191,571		149		431
Deferred income taxes		(1,508)		(11,231)		3,869		(1,508)
Stock-based compensation		5,444		5,507		5,518		5,444
Changes in assets and liabilities:
Accounts and other receivables		15,517		38,312		34,287		15,517
Income taxes receivable/payable		1,916		(44,553)		(720)		1,916
Inventories		408		(605)		(3,839)		408
Prepaid expenses		4,584		1,452		2,707		4,584
Operating lease assets/liabilities		(2,684)		1,851		(2,852)		(2,684)
Other assets		(2,113)		13,279		4,049		(2,113)
Accounts payable		(1,588)		(3,464)		12,106		(1,588)
Gift card liabilities		(18,480)		(26,753)		(25,674)		(18,480)
Other accrued expenses		(6,159)		(85,745)		(40,756)		(6,159)
Cash provided by/(used in) operating activities		21,642		(32,980)

Cash provided by operating activities						33,512		21,642
Cash flows from investing activities:
Additions to property and equipment		(7,227)		(15,775)		(29,093)		(7,227)
Additions to intangible assets		(480)		(128)		(139)		(480)
Other		(1,000)		—		600		(1,000)
Cash used in investing activities		(8,707)		(15,903)		(28,632)		(8,707)

Cash flows from financing activities:
Borrowings on credit facility		—		90,000
Acquisition-related deferred consideration and compensation						(7,187)		—
Proceeds from exercise of stock options		20,423		113		83		20,423
Cash dividends paid		(2,179)		(15,791)
Common stock dividends paid						—		(2,179)
Treasury stock purchases		(3,957)		(2,586)		(3,938)		(3,957)
Cash provided by financing activities		14,287		71,736
Cash (used in)/provided by financing activities						(11,042)		14,287
Foreign currency translation adjustment		38		(246)		91		38
Net change in cash and cash equivalents		27,260		22,607		(6,071)		27,260
Cash and cash equivalents at beginning of period		154,085		58,416		189,627		154,085
Cash and cash equivalents at end of period	$	181,345	$	81,023	$	183,556	$	181,345

Supplemental disclosures:
Interest paid	$	1,742	$	253	$	1,136	$	1,742
Income taxes paid	$	327	$	352	$	465	$	327
Construction payable	$	4,206	$	3,945	$	8,806	$	4,206

See the accompanying notes to the condensed consolidated financial statements.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

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”). 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 December ~~29, 2020~~28, 2021 filed with the SEC on February ~~24, 2021 ("fiscal 2020 10-K").~~22, 2022.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal ~~2021~~year 2022 consists of 5253 weeks and will end on ~~December 28, 2021.~~January 3, 2023. Fiscal ~~2020,~~year 2021, which ended on December ~~29, 2020,~~28, 2021, was ~~also~~ a 52-week year.

Beginning with our fiscal 2020 10-K, we combined accounts receivable and other receivable on the consolidated balance sheet and statement of cash flow. Corresponding balances for the thirteen weeks ended March 31, 2020 were reclassified to conform to the current presentation.

Use of Estimates

COVID-19 Pandemic

The Company is subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health EmergencyBeginning in March ~~2020. We experienced significant disruptions~~2020, COVID-19 and measures to ~~our business as suggested and mandated social distancing and shelter-in-place orders~~prevent its spread led to ~~the~~ temporary ~~closure of a number of restaurants across our portfolio while the remaining locations shifted~~closures, shifts to an off-premise only operating model ~~on an interim basis. In the second quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant~~or reduced dining ~~rooms, and we began to reopen dining rooms~~room capacity across our ~~concepts. However,~~portfolio. While restrictions on the type of permitted operating model and occupancy capacity may continue to ~~change. We cannot predict how long~~change, currently all of our restaurants are operating with no capacity restrictions. The ongoing effects of COVID-19 and its variants, including, but not limited to, consumer behavior, capacity restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our restaurants and disruptions in the 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 restaurant industry as a whole. The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior,supply chain, will determine the ~~continued significance of the~~ impact ~~of the COVID-19 pandemic~~ to our operating results and financial position. The impact to our operations has been most notable during the periods of greatest accelerating COVID-19 case counts. We have incurred and will continue to incur additional costs to address government regulations and the safety of our staff members and customers.

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Recent Accounting Pronouncements

In August 2020, the ~~FASB~~Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update ~~("ASU"~~(“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an ~~Entity's~~Entity’s Own Equity, which is intended to simplify the accounting and measurement of convertible instruments and the settlement assessment for contracts in an ~~entity's~~entity’s own equity. This pronouncement is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. The guidance allows for either full retrospective adoption or modified retrospective adoption. We adopted this guidance in the first quarter of fiscal 2021 utilizing the modified retrospective method and, accordingly, recorded a ~~$4.8~~$4.8 million cumulative adjustment to retained earnings to reverse previously recorded beneficial conversion features.

As further discussed in Note 5, we issued certain convertible senior notes due 2026 (“Notes”) during the second quarter of fiscal 2021, and the accounting for these instruments was based on the guidance in ASU 2020-06. Additionally, the impact on diluted earnings per share of the Notes was calculated based on the if-converted method, as further described in Note 11.

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2. 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~~liabilities;

●

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

●

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

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 30, 2021						March 29, 2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	85,596	$	—	$	—	$	88,010	$	—	$	—
Non-qualified deferred compensation liabilities		(84,418)		—		—		(87,052)		—		—
Acquisition-related deferred consideration		—		(38,326)		—		—		(21,721)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(7,706)		—		—		(17,193)
Interest rate swap		—		(2,288)		—


	December 29, 2020						December 28, 2021
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	83,485	$	—	$	—	$	92,588	$	—	$	—
Non-qualified deferred compensation liabilities		(83,702)		—		—		(92,012)		—		—
Acquisition-related deferred consideration		—		(38,119)		—		—		(21,642)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(7,465)		—		—		(23,894)
Interest rate swap		—		(4,591)		—

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


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

Beginning balance	$	23,894	$	7,465
Payment		(7,187)		—
Change in fair value		486		241
Ending balance	$	17,193	$	7,706

The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment. The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at March 29, 2022 was $0 to ~~$32.0~~$204.0 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):

Thirteen

Thirteen

Weeks Ended

Weeks Ended

March 30, 2021

March 31, 2020

Beginning balance

$
7,465

$
13,218
Change in fair value

241

(5,938)
Ending balance

$
7,706

$
7,280

~~The change~~significant decrease in the fair value of the contingent consideration and compensation liabilities during the first quarter of fiscal ~~2020~~2022 primarily ~~stemmed from~~related to the ~~delay~~payment of ~~future new restaurant openings caused by~~$7.2 million per the ~~impact of the COVID-19 pandemic on the estimated cash flows used in the valuation.~~Fox Restaurant Concept LLC (“FRC”) acquisition agreement.

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

As of March 29, 2022, we had $345.0 million aggregate principal amount of Notes outstanding. The estimated fair value of the Notes based on a market approach as of March 29, 2022 was approximately $308.4 million and determined based on the estimated

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or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period. See Note 5 for further discussion of the Notes.

3. Inventories

Inventories consisted of (in thousands):


	March 30, 2021		December 29, 2020		March 29, 2022		December 28, 2021
Restaurant food and supplies	$	24,190	$	24,282	$	26,628	$	27,877
Bakery finished goods and work in progress		7,642		7,861		11,905		7,951
Bakery raw materials and supplies		7,123		7,145		8,147		7,011
Total	$	38,955	$	39,288	$	46,680	$	42,839

4. Gift Cards

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


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021
Gift card liabilities:
Beginning balance	$	184,655	$	187,978	$	211,182	$	184,655
Activations		16,465		17,340		20,590		16,465
Redemptions and breakage		(34,942)		(44,103)		(46,260)		(34,942)
Ending balance	$	166,178	$	161,215	$	185,512	$	166,178


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021
Gift card contract assets:
Beginning balance	$	17,955	$	23,172	$	18,468	$	17,955
Deferrals		2,295		2,203		2,702		2,295
Amortization		(3,995)		(4,690)		(3,629)		(3,995)
Ending balance	$	16,255	$	20,685	$	17,541	$	16,255

~~The significant declines in redemptions and breakage during the first quarter of 2021 compared to 2020 stem from the impact of the COVID-19 pandemic on our business.~~

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5. Long-Term Debt

Revolving Credit Facility

On March 30, 2021, we entered into a Second Amendment (the “Second Amendment”) to our existing Third Amended and Restated Loan Agreement, dated July 30, 2019 (as amended by that certain First Amendment, dated as of May 1, 2020 and by the Second Amendment, collectively, the “Amended Credit Agreement”). The Amended Credit Agreement, which terminates on July 30, 2024, consists of a $400 million revolving loan facility (the “Revolving Facility”), including a $40 million sublimit for letters of credit.The Amended Credit Agreement also provides the ability to increase the Revolving Facility in an amount not to exceed (a) during the Covenant Relief Period (as defined below), $125 million and (b) thereafter, $200 million. The funding of any such increases are subject to receipt of lender commitments and satisfaction of customary conditions precedent. Certain of our material subsidiaries have guaranteed our obligations under the Amended Credit Agreement.

The Second Amendment, among other things, (i) extended the prior covenant relief period during which the testing of the net adjusted debt to EBITDAR ratio covenant (the “Net Adjusted Leverage Ratio”) and the EBITDAR to interest and rent expense ratio covenant (the “EBITDAR Ratio”) iswas suspended until the quarter ending December 28, 2021 (the “Covenant Relief Period”), (ii) continued to impose a monthly ~~liquidity~~Liquidity covenant of $100 million (with “Liquidity” being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the Revolving Facility) until the Company ~~has~~ demonstrated compliance with the financial covenants as of the quarter ending December 28, 2021, (iii) provided that the obligations thereunder be secured by a first priority security interest in substantially all of our and any guarantor’s property, with such property to be released upon (a) the termination of the Covenant Relief Period, (b) the Company’s compliance with the Net Adjusted Leverage Ratio and the EBITDAR Ratio as of the

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quarter ending on March 29, 2022, (c) neither the Company nor any of the guarantors having incurred unsecured debt using certain debt baskets under the Revolving Facility unless such debt is convertible debt or subordinated on customary debt subordination terms reasonably acceptable to the administrative agent and (d) no default or event of default having occurred or continuing, (iv) amended certain negative covenants during the Covenant Relief Period, including certain restrictions on capital expenditures, restricted payments, investments and indebtedness, and (v) permitted the payment of cash dividends with respect to our Series A Convertible Preferred Stock, par value ~~$0.1~~$0.01 per share (“Series A preferred stock”) for each fiscal quarter of 2021 in an amount not to exceed $5.25 million per quarter. Subsequent to the Covenant Relief Period, we are required to maintain (i) a maximum Net Adjusted Leverage Ratio of 4.75 and (ii) a minimum EBITDAR Ratio of 1.9. Our Net Adjusted Leverage and EBITDAR Ratios were 3.9 and 2.3, respectively, at March 29, 2022, and we were in compliance with all covenants in effect at that date. Concurrently with our delivery of the compliance certificate demonstrating our compliance with the financial covenants in the Amended Credit Agreement as of December 28, 2021, the Covenant Relief Period was terminated.

Borrowings under the Amended Credit Agreement during the Covenant Relief Period ~~bear~~bore 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) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of 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 (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) 1.5%. WeDuring the Covenant Relief Period, we also ~~pay~~incurred a fee of 0.4% on the daily amount of unused ~~commitments under the Amended Credit Agreement.~~commitments.

Subsequent to the Covenant Relief Period, borrowings under the Amended Credit Agreement ~~will~~ bear interest, at our option, at a rate equal to either: (i) the Adjusted LIBO Rate plus a margin that is based on our net adjusted leverage ratio, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of 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 (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin that is based on our net adjusted leverage ratio. Subsequent to the Covenant Relief Period, we will also incur a fee of 0.1% to 0.2% on the daily amount of unused commitments.

Letters of credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the adjusted LIBO Rate plus other customary fees charged by the issuing bank. We paid certain customary loan origination fees in conjunction with the Amended Credit Agreement. ~~During the first quarter of fiscal 2021~~At March 29, 2022, we had net availability for borrowings of ~~$96.6~~$240.1 million, based on a ~~$280.0~~$130.0 million outstanding debt balance and ~~$23.4~~$29.9 million in standby letters of credit. ~~Our Liquidity balance was $300.4 million at March 29, 2021, and we were in compliance with all covenants under the Amended Credit Agreement in effect at that date.~~

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Convertible Senior Notes

On June 15, 2021, we issued $345.0 million aggregate principal amount of convertible senior notes due 2026 (“Notes”). The net proceeds from the sale of the Notes were approximately $334.9 million after deducting issuance costs related to the Notes.

The Notes are senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness; (ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. The Notes were issued pursuant to, and are governed by, an indenture (the “Base Indenture”) between us and a trustee (“Trustee”), dated as of June 15, 2021, as supplemented by a first supplemental indenture (the “Supplemental Indenture,” and the Base Indenture, as supplemented by the Supplemental Indenture, the “Indenture”), dated as of June 15, 2021, between the Company and the Trustee.

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The Notes accrue interest at a rate of 0.375% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021. The Notes will mature on June 15, 2026, unless earlier repurchased, redeemed or converted. Before February 17, 2026, noteholders will have the right to convert their Notes only upon the occurrence of certain events. From and after February 17, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of our common stock. However, upon conversion of any Notes, the conversion value, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of 30 trading days, will be paid in cash up to at least the principal amount of the Notes being converted. The initial conversion rate is 12.7551 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $78.40 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. As of March 29, 2022, no conditions were met that would have impacted the initial conversion rate or conversion price. In connection with the cash dividend that was declared by our Board on April 21, 2022, on May 12, 2022 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at our option at any time, and from time to time, on or after June 20, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (ii) the trading day immediately before the date we send such notice. However, we may not redeem less than all of the outstanding Notes unless at least $150.0 million aggregate principal amount of Notes are outstanding and not called for redemption as of the time we send the related redemption notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.

The Notes will have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) our failure to send certain notices under the Indenture within specified periods of time; (iii) our failure to comply with certain covenants in the Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of our assets and our subsidiaries, taken as a whole, to another person; (iv) a default by us in our other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $20,000,000; (vi) the rendering of certain judgments against us or any of our significant subsidiaries for the payment of at least $25,000,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; and (vii) certain events of bankruptcy, insolvency and reorganization involving us or any of our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of ours) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to us, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to us and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in

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the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.

As of March 29, 2022, the Notes had a gross principal balance of $345.0 million and a balance of $336.5 million, net of unamortized issuance costs of $8.5 million. Total amortization expense was $0.5 million during the first quarter fiscal 2022. The effective interest rate for the Notes was 0.96% as of March 29, 2022.

6. Leases

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


	Thirteen Weeks Ended		Thirteen Weeks Ended		Thirteen Weeks Ended		Thirteen Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021
Operating	$	32,394	$	33,041	$	32,876	$	32,394
Variable		16,481		15,828		19,654		16,481
Short-term		70		129		26		70
Total	$	48,945	$	48,998	$	52,556	$	48,945

Supplemental information related to leases (in thousands):

			��
	Thirteen			Thirteen		Thirteen		Thirteen
	Weeks Ended			Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021			March 31, 2020		March 29, 2022		March 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	33,926		$	30,760
Operating cash flows for operating leases						$	34,351	$	33,926
Right-of-use assets obtained in exchange for new operating lease liabilities		7,372			14,929		—		7,372

7. Derivative

~~The Company has an~~We terminated our interest rate swap agreement in the second quarter of fiscal 2021. This interest rate swap, which ~~matures~~would have matured on April 1, 2025, was established to manage our exposure to interest rate movements on our Revolving ~~Facility.The~~Facility. The interest rate swap ~~entitles~~entitled us to receive a variable rate of interest based on the one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802%. The notional amount of the swap agreement iswas $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~~were settled monthly. ~~We determined that at both March 30, 2021 and March 31, 2020,~~Prior to termination, the interest rate swap ~~agreement~~ was determined to be an effective hedging agreement.

Our only derivative iswas the aforementioned interest rate swap, which is designated as a cash flow hedge. At March 30, 2021 and March 31, 2020, the fair value of our interest rate swap was a liability of $2.3 million and $3.1 million, respectively. We reclassified $0.5 million out of accumulated other comprehensive loss (“AOCL”) in the first quarter of fiscal 2021 and none out of AOCL in the first quarter of 2020 for the monthly settlement of the interest rate swap. NaN gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings in the first ~~quarter~~three quarters of fiscal ~~2021 or 2020.~~2021.

The following table summarizes the changes ~~in AOCL, net of tax,~~ related to the interest rate swap in accumulated other comprehensive income (“AOCI”), net of tax, during the thirteen weeks ended March 30, 2021 (in thousands):

Thirteen

Thirteen

Weeks Ended

Weeks Ended

March 30, 2021

March 31, 2020
Beginning balance

$
(3,464)

$
0
Other comprehensive loss before reclassifications

1,270

(2,370)
Amounts reclassified from AOCL

468

—
Other comprehensive loss, net of tax

1,738

(2,370)
Ending balance

$
(1,726)

$
(2,370)



Beginning balance	$	(3,464)
Other comprehensive loss before reclassifications		1,270
Amounts reclassified from AOCI		468
Other comprehensive loss, net of tax		1,738
Ending balance	$	(1,726)

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

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8. Commitments and Contingencies

On June 7, 2018, the California Department of Industrial Relations issued a $4.2 million wage citation jointly against the Company and our vendor that provides janitorial services to 8 of our Southern California restaurants, alleging that the janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor Code (Wage Citation Case No. 35-CM-188798-16). The wage citation seeks to recover penalties and other monetary payments on behalf of the employees that worked for this vendor or its subcontractor. On June 28, 2018, we filed an appeal of the wage citation. On June 11, 2020, the DLSE postponed the hearing on the Company’s appeal due to safety concerns related to the COVID-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 June 22, 2018, the Internal Revenue Service issued 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. On September 11, 2018 we petitioned the United States Tax Court for a redetermination of the deficiency. The tax court has assigned docket number 18150-18 to our case. ~~We intend~~On June 30, 2021, the judge issued a ruling on certain procedural motions filed by the parties and set a timeline to ~~vigorously defend our position in litigation~~conclude discovery and ~~based on our analysis~~determine if the matter will proceed to trial. On April 29, 2022, the parties filed a Settlement Stipulation and a Proposed Stipulated Decision (the “Decision”) with the tax court stipulating to the amount of income tax deficiency and the tax court’s entry of the ~~law, regulations and relevant facts, we~~Decision. We have ~~not~~ reserved ~~for any potential future payments.~~an immaterial amount in connection with the Decision.

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

9. Stockholders’ Equity and Series A Convertible Preferred Stock

Common Stock ~~-Dividends~~Issuance

On June 15, 2021, we issued 3.125 million shares of our common stock for $175.0 million. In connection with the issuance, we incurred direct and incremental costs of $8.0 million.

Common Stock – Dividends and Share Repurchases

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of the Amended Credit Agreement, in March 2020, our Board of Directors (“Board”) suspended ~~the quarterly dividend~~declaring dividends on our common stock as well as our share ~~repurchases. Prior to this suspension,~~repurchase programs. In April 2022, our Board declared ~~cash dividends of $0.36 per common~~a quarterly dividend and reinstated our share repurchase programs. (See Note 13 for further information on the ~~first quarter of fiscal 2020.~~approved dividend.) Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Amended Credit Agreement and applicable law, and such other factors that the Board considers relevant. (See Note 5 for further discussion of our long-term debt.)

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Our share repurchase ~~authorization~~program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. ~~Shares~~Share repurchases may be ~~repurchased~~made from time to time in ~~the~~ open market ~~or through~~purchases, privately negotiated transactions, ~~at times and prices considered appropriate by us.~~accelerated share repurchase programs, issuer self-tender offers or otherwise. Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the ~~acquisitions of North Italia and~~ FRC ~~(the "Acquisition "),~~acquisition agreement, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and ~~financial~~ covenants under the Amended Credit Agreement that limit share repurchases based on a defined ratio. (See Note 5 for further discussion of our long-term debt.)

Series A Convertible Preferred Stock

On April 20, 2020, ~~to increase our liquidity given the impact of the COVID-19 pandemic on our operations,~~ we issued 200,000 shares of Series A ~~preferred stock,~~Convertible Preferred Stock, par value $0.01 per share for an aggregate purchase price of $200 million, or $1,000 per share. In connection with the issuance, we incurred direct and incremental costs of $10.3 million, including financial advisory fees, closing costs, legal expenses, a commitment fee and other offering-related expenses. These direct and incremental costs reduced the Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020, the first measurement date.

The Series A preferred stock ranks senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution upon which each share of Series A preferred stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price (without giving effect to the commitment fee), plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock. At March 30, 2021, the Liquidation Preference was $1,067.42 per share.

~~Dividend Rights~~

The holders of Series A preferred stock are entitled to dividends on the Liquidation Preference at the rate of 9.5% per annum, payable in cash or, at our option, paid in-kind. Such holders are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis. During the first quarter of fiscal 2021, we declared a cash dividend of $5.1 million, or $25.35 per share.

~~Conversion Rights~~

Each holder has the right, at its option, to convert its Series A preferred stock, in whole or in part, into fully paid and non-assessable shares of our common stock at a conversion price equal to $22.23 per share, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events and certain anti-dilutive offerings if they occur on or prior to April 19, 2021. At March 30, 2021, the number of common shares that would be required to be issued upon conversion of the outstanding shares of Series A preferred stock was 9.6 million. Pursuant to the terms of the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq listing rules (the “Stockholder Approval”), no holder may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of common stock if and solely to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of the then outstanding common stock. We have the right to settle any conversion in cash. As of March 30, 2021, the Series A preferred stock was convertible into approximately 17.1% of our outstanding common stock, on an as-converted basis.

After April 20, 2023 and subject to certain conditions, we may, at our option, require conversion of all of the outstanding shares of Series A preferred stock to common stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date we notify the holders of Series A preferred stock of the election to convert, the closing price of the common stock is at least 200% of the conversion price. We will not exercise our right to mandatorily convert all outstanding shares of Series A preferred stock unless certain liquidity conditions with regard to the shares of common stock to be issued upon such conversion are satisfied.

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

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~~Redemption Rights~~features recorded during fiscal 2020.

On ~~and after October 20, 2027, holders~~June 15, 2021, we paid $443.8 million in connection with the cash-settled conversion of ~~the~~150,000 shares of our outstanding Series A preferred stock ~~have~~(effected through a repurchase agreement), which was recognized through additional paid in capital. We also share-settled the ~~right to require redemption of all or any part~~conversion of the remaining 50,000 shares of our outstanding Series A convertible preferred stock for an amount equal to the Liquidation Preference. Upon certain change of control events, we are required to redeem, subject to conversion rights of the holders of Series A preferred stock, all of the outstandinginto 2,400,864 shares of ~~Series A preferred stock for cash consideration equal to~~our common stock. These are both based on the ~~greater of (i) the~~then current Liquidation Preference per share of $1,067.42 and ~~(ii) the amount that such holder would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.~~conversion price of $22.23.

~~We may redeem any~~During the first quarter of fiscal 2021, we declared a cash dividend of $5.1 million, or all of the Series A preferred stock for an amount equal to (i) 120% of the Liquidation Preference thereof at any time between April 21, 2025 and April 19, 2026 and (ii) 100% of the Liquidation Preference at any time beginning on April 20, 2026, provided that such holder will have the right to convert the Series A preferred stock immediately prior to and in lieu of such redemption. To the extent such holder elects to convert the Series A preferred stock in lieu of such redemption and the number of shares of common stock issuable upon such conversion would exceed 19.9% of the outstanding shares of common stock, and the Stockholder Approval has not been obtained as of such date, any portion in excess of such limit will remain outstanding as Series A preferred stock.

~~Voting Rights~~

Holders of Series A preferred stock are generally entitled to vote with the holders of the common stock on an as-converted basis. Holders of Series A preferred stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect$25.35 per share, on the Series A preferred ~~stock, issuances~~stock. During the second quarter of ~~securities that are senior to, or equal~~fiscal 2021, $13.6 million in ~~priority~~payments were made in connection with the Series A preferred stock and certain business combinations and binding or statutory share exchanges or reclassification involving the Series A preferred stock unless such events do not adversely affect the rights, preferences or voting powers of such preferred stock. In addition, for so long as the holders of Series A preferred stock hold record and beneficial ownership of 25% of the Series A preferred stock issued to them, such holders will have the right to designate 1 member to our board of directors. If the holders cease to have such designation right, for so long as the holders have record and beneficial ownership of shares of common stock issued upon conversion of the ~~Series A~~ preferred stock, ~~that constitute at least 5%~~consisting of ~~the outstanding common stock, the holders will have the right~~$3.9 million, or $19.72 per share of accrued dividends and $9.7 million of an inducement, which is also deemed to ~~nominate 1 person for election to our board of directors.~~be a dividend.

10. Stock-Based Compensation

We maintain stock-based incentive ~~plan~~plans under which incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units may be granted to staff members, consultants and non-employee directors. The following table presents information related to stock-based compensation, net of forfeitures (in thousands):


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021

Labor expenses	$	2,043	$	1,966	$	2,190	$	2,043
Other operating costs and expenses		74		70		76		74
General and administrative expenses		3,327		3,471		3,252		3,327
Total stock-based compensation		5,444		5,507		5,518		5,444
Income tax benefit		1,337		1,353		1,355		1,337
Total stock-based compensation, net of taxes	$	4,107	$	4,154	$	4,163	$	4,107

Capitalized stock-based compensation ⁽¹⁾	$	39	$	40	$	57	$	39

(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.

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Stock Options

We did not issue any stock options during the first quarter of fiscal 2022 or fiscal 2021. The weighted-average fair value at the grant date for options issued during the first quarter of fiscal 2020 was $6.66 per share. 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 2020: (a) an expected option term of 6.9 years, (b) expected stock price volatility of 25.7%, (c) a risk-free interest rate of 1.5% and (d) a dividend yield on our stock of 3.6%.

Stock option activity during the thirteen weeks ended March ~~30, 2021~~29, 2022 was as follows:


				Weighted-						Weighted-
				Average						Average
		Weighted-		Remaining	Aggregate			Weighted-		Remaining
		Average		Contractual	Intrinsic			Average		Contractual	Aggregate
	Shares	Exercise Price		Term	Value⁽¹⁾		Shares	Exercise Price		Term	Intrinsic Value ⁽¹⁾
	(In thousands)	(Per share)		(In years)	(In thousands)		(In thousands)	(Per share)		(In years)	(In thousands)
Outstanding at December 29, 2020	2,294	$	45.35	5.0	$	307
Outstanding at December 28, 2021							1,716	$	46.14	5.1	$	0
Granted	—		—				—		—
Exercised	(484)		42.18				(2)		40.16
Forfeited or cancelled	—		—				(29)		48.19
Outstanding at March 30, 2021	1,810	$	46.20	5.7	$	6,914
Outstanding at March 29, 2022							1,685	$	46.11	4.9	$	0

Exercisable at March 30, 2021	953	$	48.80	4.2	$	6,473
Exercisable at March 29, 2022							1,114	$	48.09	4.0	$	0

(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 weeks ended March 29, 2022 and March 30, 2021 ~~and March 31, 2020~~ was ~~$5.7~~$4.9 million and ~~$35.6~~$5.7 million, respectively. As of March ~~30, 2021,~~29, 2022, total unrecognized stock-based compensation expense related to unvested stock options was ~~$6.5~~$4.1 million, which we expect to recognize over a weighted-average period of approximately ~~3.2~~2.4 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirteen weeks ended March ~~30, 2021~~29, 2022 was as follows:


		Weighted-			Weighted-
		Average			Average
		Fair		Shares	Fair Value
	Shares	Value		(In thousands)	(Per share)
	(In thousands)	(Per share)
Outstanding at December 29, 2020	2,008	$	43.70
Outstanding at December 28, 2021				2,123	$	44.82
Granted	385		48.38	642		39.59
Vested	(199)		47.93	(258)		48.16
Forfeited	(92)		45.34	(34)		43.13
Outstanding at March 30, 2021	2,102	$	44.08
Outstanding at March 29, 2022				2,473	$	43.13

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 first quarter of fiscal 2022 and 2021 was $39.59 and ~~2020 was~~ $48.38, ~~and $40.01,~~ respectively. The fair value of shares that vested during the thirteen weeks ended March 29, 2022 and March 30, 2021 was $12.4 million and $9.5 ~~million.~~million, respectively. As of March ~~30, 2021,~~29, 2022, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was ~~$46.5~~$61.7 million, which we expect to recognize over a weighted-average period of approximately ~~3.2~~3.3 years.

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11. Net Income/(Loss) Per Share

Basic net income/(loss) per share is computed by dividing net income/(loss) available to common stockholders by the weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock awards. At ~~both~~March 29, 2022 and March 30, 2021, 2.5 million and ~~March 31, 2020,~~ 2.1 million shares, respectively, of restricted stock issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal periods ended on those dates.

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Diluted net ~~income~~income/(loss) per share is computed by dividing net ~~income~~income/(loss) available to common stockholders by the weighted-average number of common stock equivalents outstanding for the period. Common stock equivalents for the Notes are determined by application of the if-converted method, and common stock equivalents for outstanding stock options and restricted stock are determined by the application of the treasury stock method.

Holders of our Series A Convertible Preferred Stock, par value $0.01 per share (the ~~"Series~~“Series A preferred ~~stock"~~stock”) ~~participate~~participated in dividends on an as-converted basis when declared on common stock. As a result, our Series A preferred stock ~~meets~~met the definition of a participating security which ~~requires~~required us to apply the two-class method to compute both basic and diluted net income per share. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that would otherwise have been available to common stockholders. In addition, as our Series A preferred stock iswas a participating security, we ~~are~~were required to calculate diluted net income per share under the if-converted method in addition to the two-class method and utilize the most dilutive result. In periods where there iswas a net loss, no allocation of undistributed net loss to preferred stockholders iswas performed as the holders of our Series A preferred stock ~~are~~were not contractually obligated to participate in our losses.


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021

	(In thousands, except per share data)				(In thousands, except per share data)
Basic net income/(loss) per common share:
Net income/(loss)	$	3,868	$	(136,163)
Net income					$	23,163	$	3,868
Dividends on Series A preferred stock		(5,070)		—		—		(5,070)
Net loss available to common stockholders		(1,202)		(136,163)
Net income/(loss) available to common stockholders						23,163		(1,202)
Basic weighted-average shares outstanding		44,189		43,773		50,333		44,189
Basic net loss per common share	$	(0.03)	$	(3.11)
Basic net income/(loss) per common share					$	0.46	$	(0.03)

Diluted net income/(loss) per common share:
Net loss available to common stockholders	$	(1,202)	$	(136,163)
Net income/(loss) available to common stockholders					$	23,163	$	(1,202)
Reallocation of undistributed earnings to Series A preferred stock						—		—
Net income/(loss) available to common stockholders for diluted EPS						23,163		(1,202)
Basic weighted-average shares outstanding		44,189		43,773		50,333		44,189
Dilutive effect of equity awards ⁽¹⁾		—		—		680		—
Diluted weighted-average shares outstanding		44,189		43,773		51,013		44,189
Diluted net loss per common share	$	(0.03)	$	(3.11)
Diluted net income/(loss) per common share					$	0.45	$	(0.03)

(1)

Shares of common stock equivalents related to outstanding stock options and restricted stock of ~~1.5~~2.9 million and ~~3.8~~1.5 million as of March ~~30, 2021~~29, 2022 and March ~~31, 2020,~~30, 2021, respectively, were excluded from the diluted calculation due to their anti-dilutive ~~effect~~.effect. No shares of common stock equivalents related to the Notes were included in the diluted calculation due to their anti-dilutive effect.

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12. Segment Information

Our operating segments, the businesses for which our management reviews discrete financial information for decision-making purposes, are comprised of The Cheesecake Factory, North Italia, Flower Child, the other FRC brands, our bakery division and Grand Lux Cafe. Based on quantitative thresholds set forth in ~~ASC~~Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” The Cheesecake Factory, North Italia and the other FRC brands are the only businesses that meet the criteria of a reportable operating segment. The remaining operating segments (Flower Child, our bakery division and Grand Lux Cafe) along with our businesses that ~~don’t~~do not qualify as operating segments are combined in Other. Unallocated corporate expenses, capital expenditures and assets are also combined in Other.

Segment information is presented below (in thousands):

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~~Segment information is presented below (in thousands):~~


	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	March 29, 2022		March 30, 2021
Revenues:
The Cheesecake Factory restaurants	$	609,816	$	499,389
North Italia		52,757		32,823
Other FRC		58,832		36,194
Other		72,305		59,011
Total	$	793,710	$	627,417

Income from operations:
The Cheesecake Factory restaurants	$	63,444	$	44,481
North Italia		3,678		332
Other FRC		7,329		3,880
Other		(46,130)		(39,849)
Total	$	28,321	$	8,844

Depreciation and amortization expenses:
The Cheesecake Factory restaurants	$	15,587	$	16,320
North Italia		1,298		844
Other FRC		1,581		1,177
Other		3,039		3,665
Total	$	21,505	$	22,006

Impairment of assets and lease termination expenses:
The Cheesecake Factory restaurants	$	(165)	$	—
North Italia		—		—
Other FRC		—		—
Other		372		594
Total	$	207	$	594

Preopening costs:
The Cheesecake Factory restaurants	$	1,034	$	2,063
North Italia		410		1,217
Other FRC		(11)		463
Other		331		113
Total	$	1,764	$	3,856

Capital expenditures:
The Cheesecake Factory restaurants	$	20,597	$	4,080
North Italia		3,004		1,212
Other FRC		3,856		719
Other		1,636		1,216
Total	$	29,093	$	7,227

Thirteen

Thirteen

Weeks Ended

Weeks Ended

March 30, 2021

March 31, 2020
Revenues:

The Cheesecake Factory

$
499,389

$
488,471
North Italia

32,823

30,512
Other FRC

36,194

35,583
Other

59,011

60,540
Total

$
627,417

$
615,106

Income/(loss) from operations:

The Cheesecake Factory

$
44,481

$
39,324
North Italia

332

(72,086)
Other FRC

3,880

(69,964)
Other

(39,849)

(87,332)
Total

$
8,844

$
(190,058)

Depreciation and amortization expenses:

The Cheesecake Factory

$
16,320

$
17,277
North Italia

844

965
Other FRC

1,177

1,201
Other

3,665

4,119
Total

$
22,006

$
23,562

Impairment of assets and lease termination expenses:

The Cheesecake Factory

$
—

$
616
North Italia

—

71,524
Other FRC

—

72,939
Other

594

46,817
Total

$
594

$
191,896

Preopening costs:

The Cheesecake Factory

$
2,063

$
1,414
North Italia

1,217

953
Other FRC

463

(159)
Other

113

911
Total

$
3,856

$
3,119

Capital expenditures:

The Cheesecake Factory

$
4,080

$
8,598
North Italia

1,212

2,964
Other FRC

719

1,104
Other

1,216

3,109
Total

$
7,227

$
15,775


	March 30, 2021		December 29, 2020		March 29, 2022		December 28, 2021
Total assets:
The Cheesecake Factory	$	1,622,997	$	1,671,733
The Cheesecake Factory restaurants					$	1,608,027	$	1,653,161
North Italia		244,345		270,218		272,594		270,029
Other FRC		285,108		308,866		276,943		276,369
Other		582,989		496,237		596,177		598,566
Total	$	2,735,439	$	2,747,054	$	2,753,741	$	2,798,125

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13. Subsequent Events

On ~~March 30, 2021, the Audit Committee of~~April 21, 2022, our Board declared a quarterly cash dividend of ~~$5.1 million, or $25.35~~$0.27 per share to be paid on ~~our Series A preferred stock, which was~~ ~~paid~~on ~~March 31, 2021~~May 24, 2022 to the ~~holders~~stockholders of record of each share of our common stock at the close of business on ~~March 15, 2021.~~May 11, 2022.

Also on April 21, 2022, our Board reinstated our share repurchase program.

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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 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. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (together with the Securities Act, the “Acts”). This includes, without limitation, statements regarding corporate social responsibility (“CSR”) and in our ~~corporate social responsibility (CSR)~~CSR report, the effects of the COVID-19 pandemic on our financial condition and our results of operation, including our expectation with respect to our ability to reopen and keep open our restaurants, financial guidance and projections and statements with respect to the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”) and expectations regardingoperations, accelerated and diversified revenue growth as a result of the acquisition of North Italia and ~~FRC,~~Fox Restaurant Concepts LLC (“FRC”), financial guidance and projections as well as expectations of our future financial condition, results of operations, sales, target growth rates, cash flows, quarterly dividends, corporate strategy, plans, targets, goals, objectives, performance, growth potential, competitive position and ~~business;~~business, and statements regarding our ability to: leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory^® brand to other retail opportunities; maintain our aggregate sales volumes; deliver comparable sales growth; 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 ~~the~~other FRC ~~brands;~~restaurants; operate Social Monk Asian Kitchen and other concepts; and utilize our capital ~~effectively.~~effectively and continue to issue cash dividends and repurchase our shares. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants and our bakery operations; supply chain disruptions and inflation; the geopolitical environment, demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational damage to us or any of our brands; economic, public health and political conditions that impact consumer confidence and spending, including the impact of the COVID-19 pandemic and other health epidemics or pandemics on the global economy; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the FRC ~~brands~~concepts, Social Monk Asian Kitchen and ~~our~~ 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 laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premises dining; increases in minimum wages and benefit costs; the economic health of our landlords and other tenants in retail centers in which our restaurants are located, and our ability to successfully manage our lease arrangements with landlords; 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 any share repurchases or dividends; the ability to achieve projected financial results; economic and political conditions that impact consumer confidence and spending; the ~~resolutions~~resolution of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation; adverse weather conditions in regions in which our restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the ~~risk,~~risks, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in our filings with the SEC. 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. 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.

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In connection with the “safe harbor” provisions of the Acts, we have identified and are disclosing important factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. (See Part II, Item 1A of this report, “Risk Factors,” and Part I, Item 1A, “Risk Factors,” included in our Annual Report

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on Form 10-K for the fiscal year ended December ~~29, 2020.~~28, 2021.) These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC. 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, and we undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law.

The below discussion and analysis, which contains forward-looking statements, should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes 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 ~~29, 2020:~~28, 2021: 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~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” included in Part II, Item 7; and the cautionary statements included throughout 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.

COVID-19 Pandemic

The Company is subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health EmergencyBeginning in March ~~2020. We experienced significant disruptions~~2020, COVID-19 and measures to ~~our business as suggested and mandated social distancing and shelter-in-place orders~~prevent its spread led to ~~the~~ temporary ~~closure of a number of restaurants across our portfolio while the remaining locations shifted~~closures, shifts to an off-premise only operating model ~~on an interim basis. In the second quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant~~or reduced dining ~~rooms, and we began to reopen dining rooms~~room capacity across our ~~concepts.~~portfolio. While restrictions on the type of permitted operating model and occupancy capacity may continue to change, ~~as of April 27, 2021, nearly~~currently all of ~~the Company’s~~our restaurants ~~were~~are operating with no capacity restrictions. The ongoing effects of COVID-19 and its variants, including, but not limited ~~indoor dining~~to, consumer behavior, capacity ~~with The Cheesecake Factory~~restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our restaurants ~~with reopened dining rooms operating on average at 60% indoor capacity. As of April 27, 2021, one The Cheesecake Factory location was operating an off-premise only model~~ and ~~two Other FRC locations were temporarily closed and plan to reopen~~disruptions in the ~~second quarter of fiscal 2021.~~

~~We cannot predict how long the COVID-19 pandemic~~supply chain, 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 restaurant 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 our operating results and financial position. The impact to our operations has been most notable during the periods of greatest accelerating COVID-19 case counts. We have incurred and will continue to incur additional costs to address government regulations and the safety of our staff members and customers. If, in the future, we experience significant disruptions related to COVID-19, we may again implement mitigation actions such as raising additional financing, not declaring future dividends, suspending share repurchases, suspending capital spending, implementing furloughs or modifying our operating strategies. Some of these measures may have an adverse impact on our business.

General

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. We currently own and operate ~~298~~307 restaurants throughout the United States and Canada under brands including 208 The Cheesecake Factory^®, 29 North Italia^® restaurants and a collection within our FRC business. Internationally, 2829 The Cheesecake Factory^® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers.

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.

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Investing in new Company-owned restaurant development is our top long-term capital ~~allocation~~deployment priority, with a focus on opening our concepts in premier locations within both new and existing markets. We expect our acquisition of North Italia and FRC to further accelerate and diversify our growth opportunities. 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~~approximately 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.

Our overall revenue growth is primarily driven by revenues from new restaurant openings and increases in comparable restaurant sales. Changes in comparable restaurant sales come from variations in customer traffic as well as in average check.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and ~~stabilizing~~maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient options for off-premise dining, as we believe there is opportunity for a longer-term ~~increase in~~elevation of our off-premise mix ~~as we emerge from the COVID-19 pandemic.~~compared to pre-COVID-19 pandemic levels. We are continuing our efforts on a number of initiatives, including menu innovation, a greater focus on increasing customer throughput in our restaurants, leveraging our gift card program, working with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities, augmenting our marketing programs, enhancing our training programs and leveraging our customer satisfaction measurement platform.

Average check is driven by menu price increases and/or changes in menu mix. We generally update The Cheesecake Factory ~~restaurant~~ menus twice aeach year, and our philosophy is to use price increases to help offset key operating cost increases in a manner that balances protecting both our margins and customer traffic levels. We have historically targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies. ~~Currently,~~Due to the cost pressures we are currently experiencing, particularly in commodities, in the first quarter of fiscal 2022, we implemented price increases above our historical levels to protect margins. Future near-term pricing actions may also be at levels above historical norms. In addition, on a regular basis, we carefully consider opportunities to adjust our menu ~~pricing is at the higher end of this range. We will continue~~offerings or ingredients to ~~evaluate future pricing decisions in light of the COVID-19 pandemic operating environment.~~

~~On October 2, 2019, we completed the acquisitions of North Italia~~help manage product availability and ~~FRC, including Flower Child , which we expect will further accelerate and diversify our revenue following the COVID-19 pandemic.~~cost.

Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses. Our objective is to recapture our pre-COVID-19 pandemic margins and longer-term to drive margin expansion, by ~~maintaining flat~~leveraging incremental sales to increase restaurant-level margins at The Cheesecake Factory concept, leveraging our bakery operations, international and consumer packaged goods royalty revenue streams and G&A expense over time, and optimizing our restaurant portfolio.

~~Our future cash flow performance will depend on the evolving COVID-19 pandemic regulatory landscape, as well as economic conditions and consumer behavior.~~ We ~~would expect cash generation to increase as the operating environment for the full-service segment of the restaurant industry normalizes from the COVID-19 pandemic impact. Longer-term, we~~ plan to employ a balanced capital allocation strategy, comprised of: investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our Revolving Facility ~~(as defined below)~~ and ~~reinstating~~returning capital to shareholders through our dividend and share repurchase ~~program,~~programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth. ~~At present, our~~Future decisions to pay or to increase or decrease dividends ~~on our common stock and share repurchases are suspended. Our ability~~or to ~~declare common dividends and~~ repurchase shares inare at the ~~future~~discretion of the Board and will be ~~subject~~dependent on a number of factors, including limitations pursuant to ~~financial covenants under~~the terms and conditions of the Amended Credit Agreement ~~(as defined below), among other factors.~~and applicable law.

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

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Results of Operations

The following table presents, for the periods indicated, information from our condensed consolidated statements of income/(loss) 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		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021
Revenues	100.0	%	100.0	%	100.0	%	100.0	%

Costs and expenses:
Cost of sales	21.7		22.9		23.7		21.7
Labor expenses	36.6		38.6		37.3		36.6
Other operating costs and expenses	28.9		27.3		26.2		28.9
General and administrative expenses	7.1		7.1		6.2		7.1
Depreciation and amortization expenses	3.5		3.8		2.7		3.5
Impairment of assets and lease termination expenses	0.1		31.2		—		0.1
Acquisition-related costs	—		0.2
Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)	0.1		(0.7)
Acquisition-related contingent consideration, compensation and amortization expenses					0.1		0.1
Preopening costs	0.6		0.5		0.2		0.6
Total costs and expenses	98.6		130.9		96.4		98.6
Income/(loss) from operations	1.4		(30.9)
Income from operations					3.6		1.4
Interest and other expense, net	(0.4)		(0.2)		(0.2)		(0.4)
Income/(loss) before income taxes	1.0		(31.1)
Income tax provision/(benefit)	0.4		(9.0)
Net income/(loss)	0.6		(22.1)
Income before income taxes					3.4		1.0
Income tax provision					0.5		0.4
Net income					2.9		0.6
Dividends on Series A preferred stock	(0.8)		—		—		(0.8)
Net loss available to common stockholders	(0.2)	%	(22.1)	%
Net income/(loss) available to common stockholders					2.9	%	(0.2)	%

Thirteen Weeks Ended March ~~30, 2021~~29, 2022 Compared to Thirteen Weeks Ended March ~~31, 2020~~30, 2021

Revenues

Revenues increased ~~2.0%~~24.1% to ~~$627.4~~$778.4 million for the fiscal quarter ended March ~~30, 2021~~29, 2022 compared to ~~$615.1~~$627.4 million for the comparable prior year period, primarily due to an increase in comparable restaurant sales, reflecting the impact of the COVID-19 pandemic in the first quarter of fiscal 2021, as well as additional revenue related to new restaurant ~~openings and third-party bakery sales, partially offset by permanent and temporary restaurant closures.~~openings.

The Cheesecake Factory comparable sales increased by ~~2.8%~~20.7%, or ~~$13.0~~$102.6 million, from the first quarter of fiscal ~~2020 and decreased 10.4% from the first quarter of fiscal 2019.~~2021. The increase from fiscal ~~2020~~2021 was primarily driven by ~~average check growth of 19.6% (based on an increase of 3.0% in menu pricing and a 16.6% positive change in mix), partially offset by decline in~~increased customer traffic of ~~16.8%~~25.3% primarily due to the impact of the COVID-19 ~~pandemic. We implemented effective~~pandemic in the prior year, partially offset by a decline in average check of 4.6% (based on a 8.2% negative change in mix, partially offset by an increase of 3.6% in menu ~~price increases of approximately 1.5% in both the first quarter of fiscal 2021 and third quarter of fiscal 2020.~~pricing). Sales through the off-premise channel comprised approximately ~~43%~~28% of our restaurant sales during the first quarter of fiscal ~~2021~~2022 as compared to ~~22%~~43% in the first quarter of fiscal ~~2020~~2021 as many customers have returned to on-premise dining, whereas consumer behavior had shifted towards the off-premise ~~dining throughout~~channel during the prior year period due to the pandemic. However, off-premise sales mix remains elevated versus the pre-pandemic level of 17% during the first quarter of fiscal 2019. We account for each off-premise order as one ~~guest~~customer for traffic measurement purposes. Therefore, average check is generally higher for off-premise orders as most ~~off-premise orders~~ are for more than one customer. In turn, the ~~high~~lower mix of sales in the off-premise channel during the first quarter of fiscal 2022 compared to the prior year first quarter was the primary driver of the ~~positive~~negative change in mix and also ~~had a corresponding impact on~~contributed to the increase in traffic. We implemented effective menu price increases of approximately 3.3% and 1.5% in the ~~reported traffic.~~first quarter of fiscal 2022 and third quarter of fiscal 2021, respectively. The Cheesecake Factory average sales per restaurant operating week increased ~~2.1%~~20.9% to $225,523 in the first quarter of fiscal 2022 from $186,478 in the first quarter of fiscal ~~2021 from $182,674 in the first quarter of fiscal 2020.~~2021. Total operating weeks at The Cheesecake Factory restaurants increased ~~0.1%~~1.0% to ~~2,678~~2,704 in the first quarter of fiscal ~~2021~~2022 compared to ~~2,674~~2,678 in the prior year.

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North Italia comparable sales increased approximately 5%32% from the first quarter of fiscal ~~2020 and decreased approximately 5% compared~~2021. The increase from fiscal 2021 was primarily driven by increased customer traffic of 32% primarily due to the ~~first quarter~~impact of ~~fiscal 2019.~~the COVID-19 pandemic in the prior year, partially offset by a decrease in average check of 1% (based on a 5% negative change in mix, partially offset by an increase of 4% in menu pricing). North Italia average sales per restaurant operating week increased ~~3.0%~~29.2% to ~~$108,327~~$139,940 in the first quarter of fiscal ~~2021~~2022 from ~~$105,214~~$108,328 in the first quarter of fiscal ~~2020.~~2021. Total operating weeks at North Italia increased ~~4.5%~~24.4% to ~~303~~377 in the first quarter of fiscal ~~2021~~2022 compared to ~~290~~303 in the prior year.

Restaurants become eligible to enter the comparable sales base in their 19th month of operation. At March ~~30, 2021,~~29, 2022, there were ~~four~~three The Cheesecake Factory restaurants and ~~three~~six North Italia restaurants not yet in the comparable sales base. International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from comparable sales calculations.

~~External bakery sales were $16.7 million for the first quarter of fiscal 2021 compared to $13.8 million in the comparable prior year period.~~

Cost of Sales

Cost of sales consists of food, beverage and bakery production supply costs incurred in conjunction with our restaurant and bakery revenues, and excludes depreciation, which is captured separately in depreciation and amortization expenses. As a percentage of revenues, cost of sales was ~~21.7%~~23.7% and ~~22.9%~~21.7% in the first quarters of fiscal 2022 and 2021, ~~and 2020,~~ respectively, ~~reflecting~~primarily due to inflation in excess of pricing across most categories (2.4%), partially offset by a shift in sales mix within the restaurants and a ~~higher~~lower proportion of third-party bakery revenues ~~and pricing leverage.~~

(0.4%).

Labor Expenses

As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery direct production labor, including associated fringe benefits, were ~~36.6%~~37.3% and ~~38.6%~~36.6% in the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. This ~~decrease~~increase was primarily due to ~~deleverage~~wage rates and overtime (1.2%) as well as training labor (0.3%), partially offset by pricing leverage (0.8%) in the prior year when costs associated with the COVID-19 pandemic, including maintaining our full restaurant management team and healthcare benefits for our furloughed staff members, were incurred in the reduced sales environment.

first quarter of fiscal 2022.

Other Operating Costs and Expenses

Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), marketing, including delivery commissions, ~~and~~ 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 ~~28.9%~~26.2% and ~~27.3%~~28.9% in the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. This variance was primarily driven by ~~increased~~pricing leverage (1.6%), sales leverage within the occupancy and building costs (0.6%), and lower restaurant-level incentive compensation expense ~~costs associated with COVID-19, such as additional sanitation and personal protective equipment, and marketing expenses,~~(0.5%), partially offset by ~~decreased occupancy costs.~~

higher general liability insurance due to lower claim activity in the prior year (0.2%).

G&A Expenses

G&A expenses consist of the restaurant management recruiting and training program, restaurant field supervision, corporate support and bakery administrative organizations, as well as gift card commissions to third-party distributors. As a percentage of revenues, G&A expenses were 6.2% and 7.1% in ~~both~~ the first quarters of fiscal 2022 and 2021, respectively. This variance was primarily driven by sales leverage and ~~2020~~expense management (0.6%), as ~~higher~~well as lower corporate incentive compensation expense ~~was offset by cost management efforts.~~

(0.3%).

Depreciation and Amortization Expenses

As a percentage of revenues, depreciation and amortization expenses decreased to ~~3.5%~~2.7% in the first quarter of fiscal ~~2021~~2022 from ~~3.8%~~3.5% in the comparable prior year ~~period.~~

period due primarily to sales leverage.

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Impairment of Assets and Lease Terminations

During the first quarter of fiscal 2022, we recorded impairment of assets and lease terminations expense of $0.2 million related to lease termination costs and accelerated depreciation for two Grand Lux Cafe locations that closed during the quarter. In the first quarter of fiscal 2021, we recorded impairment of assets and lease terminations expense of $0.6 million related to lease termination costs for two Other restaurants, one of which closed during the fourth quarter of fiscal 2020 and one that closed at the beginning of the first quarter of fiscal 2021. In the first quarter of fiscal 2020, we recorded $8.9 million of impairment of assets and lease terminations expense primarily related to the impairment of one The Cheesecake Factory, one North Italia, two Other FRC and four Other restaurants. In addition, during the first quarter of fiscal 2020, we determined it was necessary to perform an interim assessment of our goodwill, trade names, trademarks and licensing agreements due to the decrease in our stock price coupled with the dining room closures related to the COVID-19 pandemic and significant decline to the equity value of our peers and overall U.S. stock market. Based on the results of this assessment, we recorded $191.9 million of impairment expense. More than half of the total impairment amount was driven by the impact on our market capitalization, with the balance related to lower future cash flow estimates.

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

InWe recorded $0.9 million and $0.6 million during the first quarter of fiscal 2022 and 2021, ~~we recorded $0.6 million~~respectively, of acquisition-related contingent consideration, compensation and amortization, primarily reflecting changes in the fair value of the deferred and contingent consideration and compensation liabilities. In the first quarter of fiscal 2020, we recorded a benefit of $4.5 million, reflecting a $6.0 million decrease in the fair value of the contingent consideration and compensation liabilities related to the impact of the COVID-19 pandemic, partially offset by an increase of $1.5 million in the deferred consideration liability.

amortization.

Preopening Costs

Preopening costs were ~~$3.9~~$1.8 million and ~~$3.1~~$3.9 million in the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. We ~~opened~~had no openings in the first quarter of fiscal 2022 compared to one The Cheesecake Factory, one North Italia and one Other FRC ~~location in the first quarter of fiscal 2021 compared to one North Italia and one Flower Child~~ location in the comparable prior year period. Preopening costs include all costs to relocate and compensate restaurant management staff members during the preopening period, costs to recruit and train hourly restaurant staff members, and wages, travel and lodging costs for our opening training team and other support staff members. Also included are expenses for maintaining a roster of trained managers for pending openings, the associated temporary housing and other costs necessary to relocate managers in alignment with future restaurant opening and operating needs, and corporate travel and support activities. Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant.

Interest and Other Expense, Net

Interest and other expense, net was ~~$2.7~~$1.5 million and ~~$1.5~~$2.7 million for the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. This ~~variance~~decrease was primarily due to ~~lower gains on~~interest in the prior year related to our ~~investments used to support our non-qualified executive deferred compensation plan.~~

interest rate swap, which was terminated in June 2021 ($0.5 million), as well as favorability across several other categories.

Income Tax ~~Provision/(Benefit)~~Provision

Our effective income tax rate was ~~37.1%~~13.8% and ~~28.9%~~37.1% for the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease resulted primarily from a reserve for an uncertain tax position recorded in the first quarter of fiscal 2021, ~~related to tenant improvement allowances,~~ partially offset by a ~~higher~~lower proportion of employment credits in relation to pre-tax ~~income/(loss)~~income in the first quarter of fiscal ~~2021 and a benefit in the prior year arising from the expected carryback of our anticipated fiscal 2020 loss to prior years when the federal statutory rate was 35%.~~2022.

~~Table of Contents~~

Non-GAAP Measures

Adjusted net ~~income~~income/(loss) and adjusted net ~~income~~income/(loss) per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. We calculate these non-GAAP measures by eliminating from net ~~loss~~income/(loss) and diluted net ~~loss~~income/(loss) per common share the impact of items we do not consider indicative of our ongoing operations. To reflect the potential impact of the conversion of our Series A preferred stock into common stock for the period that it was outstanding prior to the conversion on June 15, 2021, we ~~exclude~~excluded the preferred dividend and ~~assume~~assumed all convertible preferred shares ~~convert~~have been converted into common stock. (See Note 9 of Notes to ~~common~~Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our preferred stock.) We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. 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.

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


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021

Net loss available to common stockholders	$	(1,202)	$	(136,163)
Net income/(loss) available to common stockholders					$	23,163	$	(1,202)
Dividends on Series A preferred stock		5,070		—		—		5,070
COVID-19 related costs ⁽¹⁾		4,917		3,290		—		4,917
Impairment of assets and lease termination expenses		594		191,896		207		594
Acquisition-related costs		—		1,236
Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)		550		(4,466)
Uncertain tax position related to tenant improvement allowances		2,471		—
Acquisition-related contingent consideration, compensation and amortization expenses						891		550
Uncertain tax positions						—		2,471
Tax effect of adjustments ⁽²⁾		(1,576)		(49,908)		(286)		(1,576)
Adjusted net income	$	10,824	$	5,885
Adjusted net income/(loss)					$	23,975	$	10,824

Diluted net loss per common share	$	(0.03)	$	(3.11)
Diluted net income/(loss) per common share					$	0.45	$	(0.03)
Dividends on Series A preferred stock		0.09		—		—		0.09
Assumed impact of potential conversion of Series A preferred stock into common stock ⁽³⁾		0.00		—
Assumed impact of potential conversion of preferred stock into common stock ⁽³⁾						—		0.00
COVID-19 related costs ⁽¹⁾		0.09		0.07		—		0.09
Impairment of assets and lease termination expenses		0.01		4.38		0.00		0.01
Acquisition-related costs		—		0.03
Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)		0.01		(0.10)
Uncertain tax position related to tenant improvement allowances		0.05		—
Acquisition-related contingent consideration, compensation and amortization expenses						0.02		0.01
Uncertain tax position						—		0.05
Tax effect of adjustments ⁽²⁾		(0.03)		(1.14)		(0.01)		(0.03)
Adjusted net income per share ⁽⁴⁾	$	0.20	$	0.13
Adjusted if-converted net income/(loss) per share ⁽⁴⁾					$	0.47	$	0.20

(1)

Represents incremental costs associated with the COVID-19 pandemic such as additional sanitation, personal protective equipment, sick and vaccination pay, and healthcare benefits associated with furloughed staff members. For the thirteen weeks ended March 30, 2021, we recorded $4.9 million for these costs with approximately $4.6 million reflected in other operating expenses and $0.3 million in labor expenses. For the thirteen weeks ended March 31, 2020, we recorded $3.3 million for these costs with approximately $2.3 million reflected in labor expenses and $1.0 million in other operating expenses.

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

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

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

~~Second Quarter~~ Fiscal ~~2021 Update~~2022 Outlook

~~Second quarter-to-date through April 27, 2021,~~Based on extrapolating recent trends and assuming no material disruptions from COVID-19 or other factors, we anticipate total revenue for the second quarter of fiscal 2022 to be approximately $830 million to $850 million and for the full fiscal year to be approximately $3.3 billion to $3.4 billion, with The Cheesecake Factory ~~restaurant comparable~~fiscal year 2022 average sales ~~increased~~per location reaching just over $12 million, including the impact of the 53rd operating week. We remain committed to protecting our longer-term restaurant-level margins and will take appropriate actions, including additional menu pricing to offset structural and permanent costs, as needed. However, we will likely continue to absorb short-term cost fluctuations driven by the current environment. Including the February 2022 price increase, we currently have 4.75% pricing in The Cheesecake Factory menu and anticipate taking another menu price increase that is above our historical norm in the third quarter of fiscal 2022.

For fiscal year 2022, we expect commodity inflation of low to mid double digits inclusive of the recent geopolitical environment, with mid-teens inflation in the second quarter of fiscal 2022 moderating to high single digit inflation in the fourth quarter of fiscal 2022. We expect fiscal year 2022 net labor inflation of approximately ~~220%~~6% when factoring in wage rates and ~~7% compared~~channel mix, among other components such as payroll taxes and benefits. We also anticipate other operating costs and expenses as a percentage of revenues to improve as we move through the ~~comparable period in~~year, with a full year average of approximately 25.5%. In addition, we expect fiscal ~~2020~~2022 G&A expenses of approximately $210 million, preopening costs of approximately $18 million, depreciation and ~~fiscal 2019, respectively. Second quarter-to-date~~amortization expenses of approximately $90 million and are utilizing a tax rate of approximately 11% to 12% for modeling purposes.

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~~through April 27, 2021, North Italia comparable sales increased approximately 336% and 8% compared to the comparable period in fiscal 2020 and fiscal 2019, respectively.~~

~~Fiscal 2021 Outlook~~

For fiscal 2021, we currently estimate commodity cost inflation of approximately 2% and continue to expect government-mandated minimum wage impacts to be more favorable than in recent years. However, there is some uncertainty to overall hourly wage rate inflation given the more competitive current industry labor environment. In addition, we estimate G&A of approximately $47 million per quarter for the remainder of fiscal 2021.

We plan to open as many as 1415 to 16 new restaurants in fiscal ~~2021,~~2022, including ~~two~~four The Cheesecake Factory restaurants, ~~six~~four to five North Italia restaurants and ~~six~~as many as seven restaurants within our FRC business, which includes ~~two~~three to four Flower Child locations. ~~Internationally, we expect to open as many as three The Cheesecake Factory restaurants under licensing agreements.~~ We ~~currently estimate fiscal 2021~~anticipate approximately $150 million in cash capital expenditures to ~~be approximately $100 million. This estimate contemplates a net outlay~~support this level of ~~approximately $47 million for restaurants expected to open during fiscal 2021, approximately $43 million for replacements, enhancements and capacity additions to~~unit development, as well as required maintenance on our ~~existing restaurants and approximately $10 million for bakery and corporate infrastructure investments.~~restaurants.

Liquidity and Capital Resources

Our corporate financial objectives are to maintain a sufficiently strong and conservative balance sheet to support our operating initiatives and unit growth while maintaining financial flexibility to provide the financial resources necessary to protect and enhance the competitiveness of our restaurant and bakery brands and to provide a prudent level of financial capacity to manage the risks and uncertainties of conducting our business operations under various economic and industry cycles. Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures. However, given the impact of the COVID-19 pandemic on our operations, during fiscal 2020 we increased borrowings under our credit facility and issued convertible preferred stock to increase our liquidity. During fiscal 2021, we used net proceeds from issuing convertible senior notes and additional common stock to fund the repurchase of the majority of our Series A preferred stock and the conversion of the remaining Series A preferred stock into common stock, simplifying our capital structure and eliminating future convertible preferred stock dividends. We also utilized a portion of the net proceeds to reduce borrowings under our credit facility.

Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of our restaurant locations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure. We are not limited to the use of lease arrangements as our only method of opening new restaurants. However, we believe our operating lease arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner.

During the first quarter of fiscal ~~2021,~~2022, our cash and cash equivalents ~~increased~~decreased by ~~$27.3~~$6.1 million to ~~$181.3~~$183.6 million. The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions):


	Thirteen		Thirteen		Thirteen		Thirteen
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	March 30, 2021		March 31, 2020		March 29, 2022		March 30, 2021

Cash provided by/(used in) operating activities	$	21.6	$	(33.0)
Cash provided by operating activities					$	33.5	$	21.6
Additions to property and equipment		(7.2)		(15.8)		(29.1)		(7.2)
Net borrowings on credit facility		—		90.0
Proceeds from exercise of stock options		20.4		0.0
Cash dividends paid		(2.2)		(15.8)
Treasury stock purchases		(4.0)		(2.6)
Acquisition-related deferred consideration and compensation						(7.2)		—

Cash Provided ~~by/(Used in)~~by Operating Activities

Cash flows from operations increased by ~~$54.6~~$11.9 million from the first quarter of fiscal ~~2020~~2021 primarily due to a lesser impact ~~from~~of the COVID-19 pandemic during the first quarter of fiscal 2021. Our future cash flow performance will depend on the evolving COVID-19 pandemic regulatory landscape, as well as economic conditions and consumer behavior. We would expect cash generation to increase as the operating environment for the full-service segment of the restaurant industry normalizes from the COVID-19 pandemic impact.pandemic.

Property and Equipment

Capital expenditures for new restaurants, including locations under development, were ~~$7.2~~$16.5 million and ~~$15.8~~($0.3) million for the first quarters of fiscal 2022 and 2021, respectively. Capital expenditures also included $12.2 million and $6.7 million for our existing restaurants and $0.4 million and $0.8 million for bakery and corporate capacity and infrastructure investments in the first quarters of fiscal 2022 and 2021, respectively. We currently anticipate fiscal 2022 capital expenditures to be approximately $150 million.

Acquisition-Related Deferred Consideration and Compensation

During the first quarter of fiscal ~~2021~~2022, we made a payment of $7.2 million for contingent consideration and ~~2020, respectively. We opened three restaurants in fiscal 2021 comprised of one The Cheesecake Factory, one North Italia and one Other~~compensation related to the FRC location, of which a significant amount of the development was completed in fiscal 2020, compared to one North Italia and one Flower Child restaurant during the comparable prior year period. We currently estimate fiscal 2021 cash capital expenditures to be approximately $100 million.

acquisition.

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Convertible Senior Notes

On June 15, 2021, we issued $345.0 million in aggregate principal amount of convertible senior notes (“Notes”), which will mature on June 15, 2026, unless earlier repurchased, redeemed or converted. At March 29, 2022, the conversion rate for the Notes was 12.7551 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately $78.40 per share of common stock. In connection with the cash dividend that was declared by our Board on April 21, 2022, on May 12, 2022 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms. (See Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of the Notes.)

Revolving Credit Facility

On March 30, 2021, we entered into an Amended Credit Agreement, which terminates on July 30, 2024, and consists of a $400 million revolving loan facility (the “Revolving Facility”), including a $40 million sublimit for letters of credit. The Amended Credit Agreement also provides the ability to increase the Revolving Facility in an amount not to exceed (a) during the Covenant Relief Period ~~(as defined below)~~ $125 million and (b) thereafter, $200 million. The funding of any such increases are subject to receipt of lender commitments and satisfaction of customary conditions precedent. Certain of our material subsidiaries have guaranteed our obligations under the Amended Credit Agreement.

The Amended Credit Agreement contains customary affirmative and negative covenants, including limits on cash dividends and share repurchases with respect to our equity interests, and restrictions on indebtedness, liens, investments, sales of assets, fundamental changes and other matters. The Amended Credit Agreement also contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgements, cross defaults to material indebtedness and events constituting a change of control. The occurrence of an event of default could result in the termination of commitments under the Revolving Facility, the declaration that all outstanding loans are immediately due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding letters of credit. As of March ~~30, 2021,~~29, 2022, we were in compliance with the covenants set forth in the Revolving Facility. At March 29, 2022, we had net availability for borrowings of $240.1 million, based on a $130.0 million outstanding debt balance and $29.9 million in standby letters of credit. (See Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term debt.)

During the first quarter of fiscal 2020, we increased our borrowings under the Revolving Facility by $90.0 million to bolster our cash position and enhance financial flexibility given the impact of the COVID-19 pandemic on our operations. During the third and fourth quarters of fiscal 2020, we repaid $100.0 million of the outstanding balance on the Revolving Facility such that at March 30, 2021, we had net availability for borrowings of $96.6 million, based on a $280.0 million outstanding debt balance and $23.4 million in standby letters of credit.

~~Series A Preferred~~Common Stock ~~Issuance~~

During the second quarter of fiscal 2020, we issued 200,000 shares of Series A preferred stock for an aggregate purchase price of $200 million to increase our liquidity given the impact of the COVID-19 pandemic on our operations. (See Note 9 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our preferred stock.)

~~Cash~~ Dividends

To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of the Amended Credit Agreement, ~~in March 2020,~~ our Board suspended ~~the quarterly dividend~~declaring dividends on our common stock. ~~Prior to this suspension, our Board declared cash dividends of $0.36 per common share for the first quarter of fiscal 2020.~~ Cash dividends of $2.2 million were paid in the first quarter of fiscal 2021, represent dividends previously accrued on restricted stock awards that vested during those quarters. In April 2022, our Board declared a quarterly dividend. (See Note 13 for further information on the ~~quarter.~~approved dividend.) Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Amended Credit Agreement and applicable law, and other such factors that the Board considers relevant.

Share Repurchases

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased ~~53.1~~53.2 million shares at a total cost of ~~$1,700.7~~$1,706.4 million through March ~~30, 2021~~29, 2022 with ~~0.1 million~~97,682 shares repurchased at a cost of ~~$4.0~~$3.9 million during the first quarter of fiscal ~~2021~~2022 to satisfy tax withholding obligations on vested restricted share awards. Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. Our share repurchase ~~authorization~~program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.

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To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Credit Agreement, ~~in March 2020,~~ our Board suspended our share ~~repurchases.~~repurchase program. In April 2022, our Board reinstated our share repurchase program. Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market

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conditions. The timing and number of shares repurchased are also subject to legal constraints and ~~financial~~ covenants under the Amended Credit Agreement that limit share repurchases based on a defined ratio. (See Note 9 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase authorization and methods.)

Cash Flow Outlook

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

As of March ~~30, 2021,~~29, 2022, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended December 28, 2021.

Recent Accounting Pronouncements

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 and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes in Part I, Item 1 of this report and with the following items in our Annual Report on Form 10-K for the fiscal year ended December ~~30, 2020:~~28, 2021: the audited consolidated financial statements and related notes in Part IV, Item 15; the “Risk Factors” in Part I, Item 1A; the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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.

We purchase food and other commodities for use in our operations based on market prices established with our suppliers. Many of ~~the~~these commodities ~~purchased by us~~ can be subject to market volatility ~~due to market~~driven by supply and demand factors outside of our ~~control. We mitigate~~control, including the ~~risk~~relative availability of labor and distribution, weather, natural disasters, inventory levels, and political and economic conditions. Climate change may further exacerbate a number of these factors. During fiscal 2021, we began to experience certain supply shortages and ~~obtain competitive prices by utilizing multiple qualified suppliers for substantially all our ingredients~~transportation delays largely attributable to impacts of the COVID-19 pandemic. We expect these shortages and ~~supplies.~~delays to continue in fiscal 2022.

We negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand. We continue to evaluate the possibility of entering into similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities. ~~Although these vehicles may be available to us, as~~As of March ~~30, 2021,~~29, 2022, we had ~~chosen not to enter into any~~no hedging contracts ~~due to pricing volatility, excessive risk premiums, hedge inefficiencies or other factors.~~in place. Commodities for which we have not entered into contracts 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 especially susceptible to price 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 currencies, international trade disputes, tariffs, ~~and~~ varying global ~~demand.~~demand and the geopolitical environment. We may or may not have the ability to increase menu prices or vary menu items in response to food commodity price increases. For ~~both~~ the first quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, a hypothetical increase of 1% in food costs would have negatively impacted cost of sales by $1.9 million and $1.4 ~~million.~~million, respectively.

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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 the ~~Revolving~~Amended Facility that is indexed to market rates. Based on outstanding borrowings at both March ~~30, 2021~~29, 2022 and December ~~29, 2020,~~28, 2021, a hypothetical 1% rise in interest rates would have increased interest expense by ~~$2.8~~$1.3 million, ~~and $2.8 million, respectively,~~ on an annual basis. (See Note 5 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term debt.)

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We are also subject to market risk related to our investments in variable life insurance contracts used to support our 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 income tax provision. Based on balances at March ~~30, 2021~~29, 2022 and December ~~29, 2020,~~28, 2021, 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 a scenario, net income would have declined by ~~$2.2~~$2.3 million at both March ~~30, 2021~~29, 2022 and December ~~29, 2020.~~28, 2021, 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 information 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 March ~~30, 2021.~~29, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended March ~~30, 2021~~29, 2022 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 8 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 December ~~29, 2020~~28, 2021 (“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 risk factors since the filing of our Annual Report.~~

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

The following table presents our purchases of our common stock during the fiscal quarter ended March ~~30, 2021:~~29, 2022:


				Total Number of	Maximum Number				Total Number of	Maximum Number
				Shares Purchased	of Shares that May				Shares Purchased	of Shares that May
	Total Number			as Part of Publicly	Yet be Purchased	Total Number			as Part of Publicly	Yet be Purchased
	of Shares	Average Price		Announced Plans	Under the Plans or	of Shares	Average Price		Announced Plans	Under the Plans or
Period	Purchased ⁽¹⁾	Paid per Share		or Programs	Programs	Purchased ⁽¹⁾	Paid per Share		or Programs	Programs
December 30, 2021 — February 2, 2021	2,450	$	37.23	—	2,967,807
February 3 — March 2, 2021	55,518		51.49	—	2,912,289
March 3, 2021 — March 30, 2021	17,332		58.11	—	2,894,957
December 29, 2021 — February 1, 2022						—	$	—	—	2,857,078
February 2 — March 1, 2022						85,210		40.25	—	2,771,868
March 2 — March 29, 2022						12,472		40.82	—	2,759,396
Total	75,300			—		97,682			—

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

Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased ~~53.1~~53.2 million shares at a total cost of ~~$1,700.7~~$1,706.4 million through March ~~30, 2021~~29, 2022 with ~~0.1 million~~97,682 shares repurchased at a cost of ~~$4.0~~$3.9 million during the first quarter of fiscal ~~2020~~2022 to satisfy tax withholding obligations on vested restricted share awards. Our share repurchase ~~authorization~~program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our credit facility, ~~in March 2020,~~ our Board suspended our share ~~repurchases.~~repurchases programs. In April 2022, our Board reinstated our share repurchase program. The timing and number of shares repurchased are also subject to legal constraints and ~~financial~~ covenants under our credit facility that limit share repurchases based on a defined ratio.

On April 20, 2020, to increase our liquidity given the impact of the COVID-19 pandemic on our operations, we issued 200,000 shares of Series A preferred stock for an aggregate purchase price of $200 million. During the first quarter of fiscal 2021, we declared a cash dividend of $5.1 million, or $25.35 per share.

Each holder of Series A preferred stock has the right, at its option, to convert its Series A preferred stock, in whole or in part, into fully paid and non-assessable shares of our common stock at a conversion price equal to $22.23 per share, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events and certain anti-dilutive offerings occurring through April 19, 2021. Pursuant to the terms of the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq Listing Rules, no holder may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of our common stock if and solely to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of the then outstanding common stock. The Company has the right to settle any conversion in cash.

After April 20, 2023 and subject to certain conditions, we may, at our option, require conversion of all of the outstanding shares of Series A preferred stock to common stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date we notify the holders of the Series A preferred stock of the election to convert, the closing price of the common stock is at least 200% of the conversion price. We will not exercise our right to mandatorily convert all outstanding shares of Series A preferred stock unless certain liquidity conditions with regard to the shares of common stock to be issued upon such conversion are satisfied.

~~The shares of common stock issuable upon conversion of shares of the Series A preferred stock will be issued in reliance upon the exemption from registration in Section 3(a)(9) of the Securities Act.~~

~~(See Note 9 of Notes to Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our stockholders' equity and Series A preferred stock.)~~

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Item 6. Exhibits

Exhibit
No.

Item

Form

File Number

Incorporated by
Reference from
Exhibit Number

Filed with SEC

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

Second Amendment to the Third Amended and Restated Loan Agreement, dated as of March 30, 2021, among The Cheesecake Factory Incorporated, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto

8-K

000-20574

10.1

4/5/21
10.2

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

—

—

—

Filed herewith
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 30, 2021, 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 30, 2021, formatted in iXBRL (included with Exhibit 101.1)

—

—

—

Filed herewith

* The schedules (or similar attachments) to this exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules or similar attachments) to the SEC upon request.

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

~~# Management contract or compensatory plan or arrangement required to be filed as an exhibit.~~

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

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
4.1	Indenture, dated as of June 15, 2021, between The Cheesecake Factory Incorporated and U.S. Bank National Association, as trustee	8-K	000-20574	4.1	6/15/21
4.2	First Supplemental Indenture, dated as of June 15, 2021, between The Cheesecake Factory Incorporated and U.S. Bank National Association, as trustee	8-K	000-20574	4.2	6/15/21
4.3	Form of certificate representing the 0.375% Convertible Senior Notes due 2026 (included as Exhibit A to Exhibit 4.2)	8-K	000-20574	4.3	6/15/21
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 29, 2022, 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 29, 2022, formatted in iXBRL (included with Exhibit 101.1)	—	—	—	Filed herewith

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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: May ~~3, 2021~~2, 2022	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)

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	March 30,		December 29,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	181,345	$	154,085
Accounts and other receivable		57,815		75,787
Income taxes receivable		34,973		36,889
Inventories		38,955		39,288
Prepaid expenses		30,727		35,310
Total current assets		343,815		341,359

Property and equipment, net		760,722		774,137

Other assets:
Intangible assets, net		253,152		253,160
Operating lease assets		1,245,892		1,251,027
Other		131,858		127,371
Total other assets		1,630,902		1,631,558

Total assets	$	2,735,439	$	2,747,054

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	56,047	$	58,432
Gift card liabilities		166,178		184,655
Operating lease liabilities		132,521		132,519
Other accrued expenses		203,211		210,461
Total current liabilities		557,957		586,067

Long-term debt		280,000		280,000
Operating lease liabilities		1,216,473		1,224,321
Other noncurrent liabilities		151,010		149,725
Commitments and contingencies (Note 8)
Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; 200,000 and 200,000 shares issued and outstanding at March 30, 2021 and December 29, 2020, respectively		213,485		218,248
Stockholders’ equity:
Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; NaN issued		—		—
Common stock, $.01 par value, 250,000,000 shares authorized; 99,508,470 and 98,645,147 shares issued at March 30, 2021 and December 29, 2020, respectively		995		986
Additional paid-in capital		904,045		878,148
Retained earnings		1,114,047		1,110,087
Treasury stock, 53,101,293 and 53,026,409 shares at cost at March 30, 2021 and December 29, 2020, respectively		(1,700,700)		(1,696,743)
Accumulated other comprehensive loss		(1,873)		(3,785)
Total stockholders’ equity		316,514		288,693

Total liabilities, Series A convertible preferred stock and stockholders’ equity	$	2,735,439	$	2,747,054