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 ~~September 27, 2022~~July 4, 2023


☐	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 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. ☐

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 ~~October 24, 2022, 51,420,136~~July 31, 2023, 51,275,532 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.	Financial Statements:
		Condensed Consolidated Balance Sheets (Unaudited)	1
		Condensed Consolidated Statements of ~~(Loss)/~~Income (Unaudited)	2
		Condensed Consolidated Statements of Comprehensive ~~(Loss)/~~Income (Unaudited)	3
		Condensed Consolidated Statements of Stockholders’ Equity ~~and Series A Convertible Preferred Stock~~ (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3328
	Item 4.	Controls and Procedures	3429

PART II	OTHER INFORMATION		3530
	Item 1.	Legal Proceedings	3530
	Item 1A.	Risk Factors	3530
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3530
	Item 5.	Other Items	30
	Item 6.	Exhibits	3631

Signatures			3732

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

September 27,

December 28,

2022

2021

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
133,157

$
189,627
Accounts and other receivables

67,661

100,504
Income taxes receivable

23,692

36,173
Inventories

62,275

42,839
Prepaid expenses

30,953

36,446
Total current assets

317,738

405,589
Property and equipment, net

755,524

741,746
Other assets:

Intangible assets, net

251,639

251,701
Operating lease assets

1,267,241

1,241,237
Other

141,932

157,852
Total other assets

1,660,812

1,650,790
Total assets

$
2,734,074

$
2,798,125

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
59,030

$
54,086
Gift card liabilities

174,725

211,182
Operating lease liabilities

147,413

131,818
Other accrued expenses

225,000

239,187
Total current liabilities

606,168

636,273

Long-term debt

467,528

466,017
Operating lease liabilities

1,215,009

1,218,269
Other noncurrent liabilities

121,873

147,400
Commitments and contingencies (Note 8)

Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; none issued

—

—
Stockholders’ equity:

Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; none issued

—

—
Common stock, $.01 par value, 250,000,000 shares authorized; 106,156,302 and 105,365,678 shares issued at September 27, 2022 and December 28, 2021, respectively

1,062

1,054
Additional paid-in capital

880,215

862,758
Retained earnings

1,187,280

1,169,150
Treasury stock, 54,485,868 and 53,139,172 shares at cost at September 27, 2022 and December 28, 2021, respectively

(1,744,005)

(1,702,509)
Accumulated other comprehensive loss

(1,056)

(287)
Total stockholders’ equity

323,496

330,166
Total liabilities, Series A convertible preferred stock and stockholders’ equity

$
2,734,074

$
2,798,125


	July 4,		January 3,
	2023		2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	91,557	$	114,777
Accounts and other receivables		71,366		105,511
Income taxes receivable		22,739		21,522
Inventories		60,868		55,559
Prepaid expenses		52,641		48,399
Total current assets		299,171		345,768
Property and equipment, net		770,315		746,051
Other assets:
Intangible assets, net		251,559		251,524
Operating lease assets		1,280,758		1,268,986
Other		167,905		162,891
Total other assets		1,700,222		1,683,401
Total assets	$	2,769,708	$	2,775,220

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	72,682	$	66,638
Gift card liabilities		187,483		219,808
Operating lease liabilities		142,370		139,099
Other accrued expenses		220,917		231,133
Total current liabilities		623,452		656,678

Long-term debt		469,040		468,032
Operating lease liabilities		1,228,664		1,233,497
Other noncurrent liabilities		122,649		125,010
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued and outstanding		—		—
Common stock, $.01 par value, 250,000,000 shares authorized; 107,042,941 shares issued and 51,271,545 shares outstanding at July 4, 2023 and 106,323,117 shares issued and 51,173,597 shares outstanding at January 3, 2023		1,070		1,063
Additional paid-in capital		899,792		887,485
Retained earnings		1,213,115		1,170,078
Treasury stock inclusive of excise tax, 55,771,396 and 55,149,520 shares at cost at July 4, 2023 and January 3, 2023, respectively		(1,787,419)		(1,765,641)
Accumulated other comprehensive loss		(655)		(982)
Total stockholders’ equity		325,903		292,003
Total liabilities and stockholders’ equity	$	2,769,708	$	2,775,220

See the accompanying notes to the condensed consolidated financial statements

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

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

(In thousands, except per share data)

(Unaudited)


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022

Revenues	$	784,001	$	754,474	$	2,410,354	$	2,150,847	$	866,170	$	832,643	$	1,732,284	$	1,626,353

Costs and expenses:
Cost of sales		197,774		169,418		590,457		474,237
Food and beverage costs										201,094		204,182		407,318		392,683
Labor expenses		293,040		279,957		893,322		784,501		306,149		304,519		617,677		600,282
Other operating costs and expenses		217,009		201,490		643,844		582,518		226,996		219,200		457,925		426,835
General and administrative expenses		50,324		45,802		149,638		138,457		54,488		50,191		108,557		99,314
Depreciation and amortization expenses		22,651		22,576		66,764		66,805		23,332		22,608		46,287		44,113
Impairment of assets and lease termination expenses		—		—		313		594
Impairment of assets and lease termination (income)/expenses										(653)		106		1,589		313
Acquisition-related contingent consideration, compensation and amortization expenses		1,081		685		2,920		12,592		1,287		948		2,476		1,839
Preopening costs		4,327		3,169		9,038		9,804		6,006		2,947		9,058		4,711
Total costs and expenses		786,206		723,097		2,356,296		2,069,508		818,699		804,701		1,650,887		1,570,090
(Loss)/income from operations		(2,205)		31,377		54,058		81,339
Income from operations										47,471		27,942		81,397		56,263
Interest and other expense, net		(1,315)		(1,794)		(3,906)		(9,194)		(2,162)		(1,130)		(4,042)		(2,591)
(Loss)/income before income taxes		(3,520)		29,583		50,152		72,145
Income tax (benefit)/provision		(1,122)		(3,097)		3,731		1,882
Net (loss)/income		(2,398)		32,680		46,421		70,263
Dividends on Series A preferred stock		—		—		—		(18,661)
Undistributed earnings allocated to Series A preferred stock		—		—		—		(5,804)
Net (loss)/income available to common stockholders	$	(2,398)	$	32,680	$	46,421	$	45,798
Income before income taxes										45,309		26,812		77,355		53,672
Income tax provision										2,634		1,156		6,630		4,853
Net income									$	42,675	$	25,656	$	70,725	$	48,819

Net (loss)/income per common share:
Net income per share:
Basic	$	(0.05)	$	0.65	$	0.93	$	0.98	$	0.88	$	0.51	$	1.46	$	0.97
Diluted (Note 11)	$	(0.05)	$	0.64	$	0.92	$	0.96
Diluted (Note 10)									$	0.87	$	0.50	$	1.43	$	0.96

Weighted-average common shares outstanding:
Weighted-average shares outstanding:
Basic		49,653		50,212		50,124		46,624		48,492		50,387		48,593		50,360
Diluted		49,653		51,113		50,708		47,675		49,085		50,929		49,296		50,966

See the accompanying notes to the condensed consolidated financial statements.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

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

(In thousands)

(Unaudited)

Thirteen

Thirteen

Thirty-Nine

Thirty-Nine


Weeks Ended

Weeks Ended

Weeks Ended

Weeks Ended

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Net (loss)/income

$
(2,398)

$
32,680

$
46,421

$
70,263
Other comprehensive (loss)/gain:

Foreign currency translation adjustment

(724)

(238)

(769)

155
Unrealized gain on derivative, net of tax

—

—

—

3,464
Other comprehensive (loss)/gain

(724)

(238)

(769)

3,619
Total comprehensive (loss)/income

(3,122)

32,442

45,652

73,882
Comprehensive income attributable to Series A preferred stockholders

—

—

—

(24,872)
Total comprehensive (loss)/income available to common stockholders

$
(3,122)

$
32,442

$
45,652

$
49,010


	Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022

Net income	$	42,675	$	25,656	$	70,725	$	48,819
Other comprehensive gain/(loss):
Foreign currency translation adjustment		180		(300)		327		(45)
Other comprehensive gain/(loss)		180		(300)		327		(45)
Total comprehensive income	$	42,855	$	25,356	$	71,052	$	48,774

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 ~~thirty-nine~~twenty-six weeks ended ~~September 27, 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
Net income

—

—

—

—

—

25,656

—

—

25,656
Foreign currency translation adjustment

—

—

—

—

—

—

—

(300)

(300)
Cash dividends declared common stock, net of forfeitures, $0.27 per share

—

—

—

—

—

(14,260)

—

—

(14,260)
Stock-based compensation

—

—

(40)

0

6,141

—

—

—

6,141
Common stock issued under stock-based compensation plans

—

—

41

0

0

—

—

—

0
Treasury stock purchases

—

—

—

—

—

—

(10,879)

—

(10,879)
Balance, June 28, 2022

—

$
—

106,030

$
1,060

$
874,551

$
1,203,731

$
(1,717,326)

$
(332)

$
361,684
Net loss

—

—

—

—

—

(2,398)

—

—

(2,398)
Foreign currency translation adjustment

—

—

—

—

—

—

—

(724)

(724)
Cash dividends declared common stock, net of forfeitures, $0.27 per share

—

—

—

—

—

(14,053)

—

—

(14,053)
Stock-based compensation

—

—

32

1

5,664

—

—

—

5,665
Common stock issued under stock-based compensation plans

—

—

94

1

0

—

—

—

1
Treasury stock purchases

—

—

—

—

—

—

(26,679)

—

(26,679)
Balance, September 27, 2022

—

$
—

106,156

$
1,062

$
880,215

$
1,187,280

$
(1,744,005)

$
(1,056)

$
323,496

July 4,

~~Table of Contents~~

~~For the thirty-nine weeks ended September 28, 2021:~~ 2023:

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 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
Net income

—

—

—

—

—

33,715

—

—

33,715
Foreign currency translation adjustment

—

—

—

—

—

—

—

219

219
Change in derivative, net of tax

—

—

—

—

—

—

—

1,726

1,726
Cash dividends declared common stock, net of forfeitures

—

—

—

—

—

15

—

—

15
Stock-based compensation

—

—

44

1

5,540

—

—

—

5,541
Common stock issued under stock-based compensation plans

—

—

118

1

4,361

—

—

—

4,362
Common stock issuance

—

—

3,125

31

167,019

—

—

—

167,050
Treasury stock purchases

—

—

—

—

—

—

(603)

—

(603)
Series A preferred stock cash-settled conversion

(150)

(160,114)

—

—

(283,637)

—

—

—

(283,637)
Series A preferred stock conversion to common stock

(50)

(53,371)

2,401

24

53,273

—

—

—

53,297
Deemed dividends on Series A preferred stock

—

—

—

—

—

(13,591)

—

—

(13,591)
Balance, June 29, 2021

—

$
—

105,196

$
1,052

$
850,601

$
1,134,186

$
(1,701,303)

$
72

$
284,608
Net income

—

—

—

—

—

32,680

—

—

32,680
Foreign currency translation adjustment

—

—

—

—

—

—

—

(238)

(238)
Cash dividends declared common stock, net of forfeitures

—

—

—

—

—

135

—

—

135
Stock-based compensation

—

—

59

1

5,441

—

—

—

5,442
Common stock issued under stock-based compensation plans

—

—

38

0

—

—

—

—

—
Treasury stock purchases

—

—

—

—

—

—

(681)

—

(681)
Balance, September 28, 2021

—

$
—

105,293

$
1,053

$
856,042

$
1,167,001

$
(1,701,984)

$
(166)

$
321,946


										Accumulated
				Additional						Other
	Common Stock			Paid-in		Retained		Treasury		Comprehensive
	Shares	Amount		Capital		Earnings		Stock		(Loss)/Income		Total
Balance, January 3, 2023	106,323	$	1,063	$	887,485	$	1,170,078	$	(1,765,641)	$	(982)	$	292,003
Net income	—		—		—		28,050		—		—		28,050
Foreign currency translation adjustment	—		—		—		—		—		147		147
Cash dividends declared common stock, net of forfeitures, $0.27 per share	—		—		—		(13,929)		—		—		(13,929)
Stock-based compensation	628		6		5,938		—		—		—		5,944
Treasury stock purchases	—		—		—		—		(12,376)		—		(12,376)
Balance, April 4, 2023	106,951	$	1,069	$	893,423	$	1,184,199	$	(1,778,017)	$	(835)	$	299,839
Net income	—		—		—		42,675		—		—		42,675
Foreign currency translation adjustment	—		—		—		—		—		180		180
Cash dividends declared common stock, net of forfeitures, $0.27 per share	—		—		—		(13,759)		—		—		(13,759)
Stock-based compensation	92		1		6,369		—		—		—		6,370
Treasury stock purchases, inclusive of excise tax	—		—		—		—		(9,402)		—		(9,402)
Balance, July 4, 2023	107,043	$	1,070	$	899,792	$	1,213,115	$	(1,787,419)	$	(655)	$	325,903

Table of Contents

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


										Accumulated
				Additional						Other
	Common Stock			Paid-in		Retained		Treasury		Comprehensive
	Shares	Amount		Capital		Earnings		Stock		(Loss)/Income		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
Net income	—		—		—		25,656		—		—		25,656
Foreign currency translation adjustment	—		—		—		—		—		(300)		(300)
Cash dividends declared common stock, net of forfeitures, $0.27 per share	—		—		—		(14,260)		—		—		(14,260)
Stock-based compensation	(40)		0		6,141		—		—		—		6,141
Common stock issued under stock-based compensation plans	41		0		0		—		—		—		0
Treasury stock purchases	—		—		—		—		(10,879)		—		(10,879)
Balance, June 28, 2022	106,030	$	1,060	$	874,551	$	1,203,731	$	(1,717,326)	$	(332)	$	361,684

See the accompanying notes to the condensed consolidated financial statements.

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THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Thirty-Nine		Thirty-Nine		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022
Cash flows from operating activities:
Net income	$	46,421	$	70,263	$	70,725	$	48,819
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expenses		66,764		66,805		46,287		44,113
Impairment of assets and lease termination expense		250		394
Impairment of assets and lease termination (income)/expense						(768)		250
Deferred income taxes		(2,633)		(5,227)		2,469		279
Stock-based compensation		17,220		16,329		12,227		11,607
Changes in assets and liabilities:
Accounts and other receivables		23,835		8,121		31,740		23,781
Income taxes receivable/payable		12,481		(3,749)		(1,216)		(3,618)
Inventories		(19,442)		(3,907)		(5,306)		(9,447)
Prepaid expenses		5,487		5,596		(4,240)		3,071
Operating lease assets/liabilities		(13,758)		(4,386)		(12,218)		(9,813)
Other assets		18,447		(5,682)		(7,107)		14,992
Accounts payable		11,177		(3,771)		627		8,937
Gift card liabilities		(36,448)		(23,143)		(32,328)		(28,887)
Other accrued expenses		(30,904)		1,517		624		(16,567)
Cash provided by operating activities		98,897		119,160		101,516		87,517
Cash flows from investing activities:
Additions to property and equipment		(78,053)		(49,158)		(62,660)		(46,382)
Additions to intangible assets		(489)		(482)		(392)		(282)
Other		485		(1,283)		(156)		646
Cash used in investing activities		(78,057)		(50,923)		(63,208)		(46,018)
Cash flows from financing activities:
Acquisition-related deferred consideration and compensation		(7,187)		—		(12,994)		(7,187)
Repayment on credit facility		—		(150,000)
Convertible debt issuance		—		345,000
Convertible debt direct and incremental costs		—		(10,074)
Series A preferred stock cash-settled conversion		—		(443,751)
Series A preferred stock conversion direct and incremental costs		—		(74)
Series A preferred stock dividends paid		—		(18,661)
Common stock issuance		—		175,000
Common stock issuance direct and incremental costs		—		(7,950)
Proceeds from exercise of stock options		84		24,785		—		83
Common stock dividends paid		(28,350)		(337)		(26,998)		(14,288)
Treasury stock purchases		(41,496)		(5,241)		(21,695)		(14,817)
Cash used in financing activities		(76,949)		(91,303)		(61,687)		(36,209)
Foreign currency translation adjustment		(361)		11		159		(26)
Net change in cash and cash equivalents		(56,470)		(23,055)		(23,220)		5,264
Cash and cash equivalents at beginning of period		189,627		154,085		114,777		189,627
Cash and cash equivalents at end of period	$	133,157	$	131,030	$	91,557	$	194,891

Supplemental disclosures:
Interest paid	$	4,706	$	7,749	$	5,308	$	2,726
Income taxes paid	$	13,603	$	9,128	$	5,175	$	9,720
Construction payable	$	10,545	$	3,236	$	14,752	$	8,439

See the accompanying notes to the condensed consolidated financial statements.

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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 28, 2021~~January 3, 2023 filed with the SEC on February ~~22, 2022.~~27, 2023.

We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal year ~~2022~~2023 consists of 5352 weeks and will end on January ~~3, 2023.~~2, 2024. Fiscal year ~~2021,~~2022, which ended on ~~December 28, 2021,~~January 3, 2023 was a ~~52-week~~53-week year.

Use of Estimates

COVID-19 Pandemic and Other Impacts to our Operating Environment

~~We have experienced significant disruptions to our business as federal, state and local restrictions have fluctuated over time to mitigate the spread of~~During fiscal 2022, the COVID-19 ~~virus. While most of~~pandemic continued to affect our ~~restaurants operated with no restrictions on indoor dining during the 2021 fiscal year and 2022 fiscal year to date, our operations were notably impacted~~business during periods of ~~accelerating~~accelerated case counts in which ~~led to~~we experienced increased restaurant staff ~~quarantines~~absenteeism and ~~a shift~~temporary shifts in consumer behavior, ~~towards sheltering-in-place~~such as changes in customer traffic or the mix between on-premise and ~~social distancing. We have incurred and may continue to incur additional costs to address government regulations and~~off-premise channels. Along with the ~~safety of our staff members and customers. During fiscal year 2022 to date, along with~~ COVID-19 pandemic, our operating results ~~have been~~were impacted by geopolitical and ~~other~~ macroeconomic ~~factors, leading to~~events, causing supply chain challenges and significantly increased commodity and wage ~~inflation~~inflation. Some of these factors have continued to impact our operating results in fiscal 2023, contributing to significantly increased commodity and other ~~increased~~ costs. We have also encountered delays in opening new restaurants due to supply chain challenges and delays in permitting, construction, landlord readiness, and equipment availability.

The ongoing ~~effects~~impact of ~~COVID-19 and its variants, along with other~~ geopolitical and macroeconomic events could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, ~~and~~ disruptions in the supply ~~chain. If these factors significantly~~chain and delay in new restaurant openings. For more information regarding the risks to our business relating to the COVID-19 pandemic and other geopolitical and macroeconomic events, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2023.

Recent Accounting Pronouncements

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact ~~our cash flow in~~to the future, we may again implement mitigation actions such as suspending share repurchases and dividends, increasing borrowings on our credit facility or modifying our operating strategies. Some of these measures may have an adverse impact on our business.consolidated financial statements.

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~~Recent Accounting Pronouncements~~

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an 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 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 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.

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; and~~liabilities

●

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):


	September 27, 2022						July 4, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	73,721	$	—	$	—	$	85,779	$	—	$	—
Non-qualified deferred compensation liabilities		(73,462)		—		—		(87,330)		—		—
Acquisition-related deferred consideration		—		(21,898)		—		—		(11,048)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(18,414)		—		—		(17,119)


	December 28, 2021						January 3, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	92,588	$	—	$	—	$	78,542	$	—	$	—
Non-qualified deferred compensation liabilities		(92,012)		—		—		(78,286)		—		—
Acquisition-related deferred consideration		—		(21,642)		—		—		(10,751)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(23,894)		—		—		(28,565)

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):


	Thirty-Nine		Thirty-Nine		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022

Beginning balance	$	23,894	$	7,465	$	28,565	$	23,894
Payment		(7,187)		—		(12,994)		(7,187)
Change in fair value		1,707		11,555		1,548		1,057
Ending balance	$	18,414	$	19,020	$	17,119	$	17,764

~~Table of Contents~~

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 ~~September 27, 2022~~July 4, 2023 was $0 to ~~$204.0~~$276.0 million. Results could change materially if different estimates and assumptions were used. ~~The significant decrease in the fair value of the contingent consideration and compensation liabilities during~~During the first ~~three quarters~~six months of fiscal 2023 and fiscal 2022, ~~primarily related to the payment~~we made payments of $13.0 million and $7.2 million, respectively, per the Fox Restaurant Concept LLC (“FRC”) acquisition agreement.

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

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As of ~~September 27, 2022,~~July 4, 2023, we had $345.0 million aggregate principal amount of Notes outstanding. The estimated fair value of the Notes based on a market approach as of ~~September 27, 2022~~July 4, 2023 was approximately ~~$269.1~~$290.5 million and was determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period. The decrease in the fair value of the Notes was primarily due to a decline in our stock price from the date of the issuance of the Notes. See Note 5 for further discussion of the Notes.

3. Inventories

Inventories consisted of (in thousands):

September 27, 2022

December 28, 2021
Restaurant food and supplies

$
29,255

$
27,877
Bakery finished goods and work in progress⁽¹⁾

25,140

7,951
Bakery raw materials and supplies

7,880

7,011
Total

$
62,275

$
42,839

~~(1)~~

July 4, 2023

January 3, 2023
Restaurant food and supplies

$
30,486

$
30,783
Bakery finished goods and work in progress

21,131

17,250
Bakery raw materials and supplies

9,251

7,526
Total

$
60,868

$
55,559

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

4. Gift Cards

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


	Thirteen			Thirteen	Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022
Gift card liabilities:
Beginning balance	$	182,295	$	169,098	$	211,182	$	184,655	$	191,908	$	185,512	$	219,808	$	211,182
Activations		20,650		18,364		69,847		67,316		26,718		28,607		45,316		49,197
Redemptions and breakage		(28,220)		(25,949)		(106,304)		(90,458)		(31,143)		(31,824)		(77,641)		(78,084)
Ending balance	$	174,725	$	161,513	$	174,725	$	161,513	$	187,483	$	182,295	$	187,483	$	182,295


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022
Gift card contract assets:
Beginning balance	$	17,061	$	15,811	$	18,468	$	17,955	$	18,367	$	17,541	$	19,886	$	18,468
Deferrals		2,268		2,273		8,159		7,980		2,905		3,189		5,314		5,891
Amortization		(3,674)		(3,814)		(10,972)		(11,665)		(3,903)		(3,669)		(7,831)		(7,298)
Ending balance	$	15,655	$	14,270	$	15,655	$	14,270	$	17,369	$	17,061	$	17,369	$	17,061

5. Long-Term Debt

Revolving Credit Facility

On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit. The Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $200 million in revolving loan commitments. Our obligations under the Revolver Facility are unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Revolver Facility.

On October 6, 2022, we repaid the outstanding balance under the then-existing credit agreement and borrowed the same amount on the Revolver Facility. As of July 4, 2023, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit under the Revolver Facility.

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~~5. Long-Term Debt~~

~~Revolving Credit~~Under the Revolver 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~~the following financial covenants as of ~~lender commitments and satisfaction~~the last day of ~~customary conditions precedent. Certain~~each fiscal quarter: (i) a maximum ratio 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~~“Amended Net Adjusted Leverage Ratio”) of 4.25 and ~~the~~(ii) a minimum ratio of EBITDAR to interest and rent expense ~~ratio covenant (the “EBITDAR~~(“EBITDAR Ratio”) ~~was suspended until the quarter ending December 28, 2021 (the “Covenant Relief Period”), (ii) continued to impose a monthly Liquidity covenant~~ of $100 million (with “Liquidity” being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the Revolving Facility) until the Company demonstrated compliance with the financial covenants as of the quarter ending December 28, 2021, (iii) provided that the obligations thereunder be secured by a first priority security interest in substantially all of our and any guarantor’s property, with such property to be released upon (a) the termination of the Covenant Relief Period, (b) the Company’s compliance with the1.90. The Amended Net Adjusted Leverage Ratio ~~and the EBITDAR Ratio as~~includes a rental expense multiplier of ~~the quarter ending on March 29, 2022, (c) neither the Company nor any~~six. As of the guarantors having incurred unsecured debt using certain debt baskets under the Revolving Facility unless such debt is convertible debt or subordinated on customary debt subordination terms reasonably acceptable to the administrative agent and (d) no default or event of default having occurred or continuing, (iv) amended certain negative covenants during the Covenant Relief Period, including certain restrictions on capital expenditures, restricted payments, investments and indebtedness, and (v) permitted the payment of cash dividends with respect to our Series A Convertible Preferred Stock, par value $0.01 per share (“Series A preferred stock”) for each fiscal quarter of 2021 in an amount not to exceed $5.25 million per quarter. Subsequent to the Covenant Relief Period, we are required to maintain (i) a maximum Net Adjusted Leverage Ratio of 4.75 and (ii) a minimum EBITDAR Ratio of 1.9. Our Net Adjusted Leverage and EBITDAR Ratios were 3.7 and 2.1, respectively, at September 27, 2022. Our compliance with the financial covenants set forth in the Revolving Facility as of September 27, 2022 was measured under the Fourth Revolving Facility (as defined in Note 13 below), and as of such dateJuly 4, 2023, we were in ~~compliance. Concurrently with our delivery of the compliance certificate demonstrating our~~ compliance with all the ~~financial~~foregoing covenants in ~~the Amended Credit Agreement as of December 28, 2021, the Covenant Relief Period was terminated.~~effect at that date.

Borrowings under the ~~Amended Credit~~Loan Agreement ~~during the Covenant Relief Period bore~~bear interest, at ~~our option,~~the Company’s election, at a rate equal to either: (i) the sum of (A) adjusted ~~LIBO Rate~~term SOFR (as ~~customarily~~ defined in the ~~“Adjusted LIBO~~Loan Agreement, the “Term SOFR Rate”) plus ~~2.5%~~(B) a rate variable based on the Amended Net Adjusted Leverage Ratio, ranging from 1.00% to 1.75%, or (ii) the sum of ~~(a)~~(A) the highest of ~~(1)~~(x) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, ~~(2)~~(y) the greater of the rate calculated by the Federal Reserve Bank of New York as the ~~effective~~ federal funds effective rate or the rate that is published by the Federal Reserve Bank of New York as anthe overnight bank funding rate, in either case, plus ~~0.5%~~0.50%, and ~~(3)~~(z) the one-month ~~Adjusted LIBO~~Term SOFR Rate plus ~~1.0%~~1.00%, plus ~~(b) 1.5%~~(B) a rate variable based on the Net Adjusted Leverage Ratio, ranging from 0.00% to 0.75%. ~~During the Covenant Relief Period, we~~The Company will also ~~incurred~~pay a fee ~~of 0.4%~~variable based on the Net Adjusted Leverage Ratio, ranging from 0.125% to 0.25%, on the daily amount of unused ~~commitments.~~

~~Subsequent to the Covenant Relief Period, borrowings~~commitments under the Amended Credit Agreement 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.

Loan Agreement. Letters of credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the adjusted ~~LIBO Rate~~SOFR plus other customary fees charged by the issuing bank. We paid certain customary loan origination fees in conjunction with the ~~Amended Credit~~Loan Agreement. ~~At September 27, 2022, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit.~~

~~Table~~We are also subject to customary events of ~~Contents~~

~~The Amended Credit Agreement contains customary affirmative and negative covenants, including~~default that, if triggered, could result in acceleration of the maturity of the Revolver Facility. Subject to certain exceptions, the Revolver Facility also limits ~~on cash dividends and share repurchases~~distributions with respect to our equity interests, such as cash dividends and ~~restrictions~~share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters. 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.

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.

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 ~~September 27, 2022,~~July 4, 2023, the conversion rate ~~is 12.9717~~for the Notes was 13.2717 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately ~~$77.09~~$75.35 per share of common stock. In connection with the cash dividend that was declared by our Board on ~~October 26, 2022,~~July 27, 2023, on ~~November 14, 2022~~August 15, 2023 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with ~~their~~the terms.

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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.

~~Table of Contents~~

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 ~~contain~~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 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 ~~September 27, 2022,~~July 4, 2023, the Notes had a gross principal balance of $345.0 million and a balance of ~~$337.5~~$339.0 million, net of unamortized issuance ~~costs.~~costs of $6.0 million. Total amortization expense was $0.5 million and ~~$1.5~~$1.0 million during ~~the~~ thirteen and ~~thirty-nine~~twenty-six weeks ended ~~September 27,~~July 4, 2023, respectively. Total amortization expense was $0.5 million and $1.0 million during thirteen and twenty-six weeks ended June 28, 2022, respectively. The effective interest rate for the Notes was 0.96% as of ~~September 27, 2022.~~July 4, 2023.

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6. Leases

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


	Thirteen Weeks Ended		Thirteen Weeks Ended		Thirty-Nine Weeks Ended		Thirty-Nine Weeks Ended		Thirteen Weeks Ended		Thirteen Weeks Ended		Twenty-Six Weeks Ended		Twenty-Six Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022
Operating	$	34,629	$	33,034	$	102,282	$	97,889	$	35,897	$	34,777	$	71,268	$	67,653
Variable		19,723		18,972		60,073		54,664		22,112		20,695		44,312		40,349
Short-term		27		71		80		212		38		27		80		54
Total	$	54,379	$	52,077	$	162,435	$	152,765	$	58,047	$	55,499	$	115,660	$	108,056

Supplemental information related to leases (in thousands):

Thirty-Nine

Thirty-Nine

Weeks Ended

Weeks Ended

September 27, 2022

September 28, 2021
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$
102,675

$
103,318
Right-of-use assets obtained in exchange for new operating lease liabilities

51,436

50,953

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~~7. Derivative~~

~~We terminated our~~ interest rate swap agreement, which was designated as a cash flow hedge, in the second quarter of fiscal 2021. This interest rate swap, which would have matured on April 1, 2025, was established to manage our exposure to interest rate movements on our credit facility. The interest rate swap entitled us to receive a variable rate of interest based on the one-month LIBO rate in exchange for the payment of a fixed interest rate of 0.802%. The notional amount of the swap agreement was $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 were settled monthly. Prior to termination, the interest rate swap was determined to be an effective hedging agreement. No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings in the first two quarters of fiscal 2021.

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


~~Beginning balance~~	$	~~(3,464)~~
~~Other comprehensive loss before reclassifications~~		~~2,514~~
~~Amounts reclassified from AOCI~~		~~950~~
~~Other comprehensive loss, net of tax~~		~~3,464~~
~~Ending balance~~	$	—

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 our and the counterparty’s non-performance risk to the derivative trade was considered when measuring the fair value of derivative liability.


	Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended
	July 4, 2023		June 28, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	72,608	$	68,202
Right-of-use assets obtained in exchange for new operating lease liabilities		16,679		19,295

8.7. 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 eight of our Southern California restaurants, alleging that the janitorial vendor or its subcontractor failed to comply with various provisions of the California Labor Code (Wage Citation Case No. 35-CM-188798-16). The wage citation seeks to recover penalties and other monetary payments on behalf of the employees that worked for this vendor or its subcontractor. On June 28, 2018, we filed an appeal of the wage citation. On ~~July 7,~~November 10, 2022, the parties participated in voluntary mediation and reached a tentative settlement on the wage citation. The settlement is subject to documentation and final agency approval. We have reserved an immaterial amount for settlement purposes.

On ~~June 22, 2018,~~February 10, 2023, a class action complaint was filed against the ~~Internal Revenue Service issued a Notice of Deficiency~~Company in ~~which they disallowed a portion of our §199 Domestic Production Activities Deduction for tax years 2010, 2011 and 2012. On September 11, 2018, we petitioned~~ the United States ~~Tax~~District Court for ~~a redetermination~~the Southern District of California, (Lightoller vs. TCF Co. LLC., Case No. 3:23-cv-00272-AJB-NLS), alleging violations of state privacy laws. The lawsuit alleges that the ~~deficiency. The tax court assigned docket number 18150-18 to our case. On April 29, 2022,~~Company violated state wiretapping and privacy laws by improperly tracking and/or recording the ~~parties~~keystrokes of visitors on the Company’s website without permission. A similar case was filed ~~a Settlement Stipulation and a Proposed Stipulated Decision (the “Decision”) with~~on the ~~tax court stipulating to~~United States District Court for the ~~amount~~District of ~~income tax deficiency.~~Maryland on February 21, 2023 (Curd v. TCF CO. LLC; Civil Action No. 1:23-cv-00472-JMC). On May ~~11, 2022,~~10, 2023, the ~~court entered~~plaintiffs in Case Nos. 3:23-cv-00272 and 1:23-cv-00472 voluntarily dismissed their complaints against the ~~Decision in accordance with the stipulation of the parties. We have recorded an immaterial amount in connection with the Decision.~~Company without prejudice.

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.

~~Table of Contents~~

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.

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9.8. Stockholders’ Equity ~~and Series A Convertible Preferred Stock~~

~~Common Stock Issuance~~

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

Common Stock – Dividends and Share Repurchases

On ~~July 21, 2022,~~May 10, 2023, our Board declared a quarterly cash dividend of $0.27 per share that was paid on ~~August 23, 2022~~June 6, 2023 to the stockholders of record of each share of our common stock at the close of business on ~~August 10, 2022.~~May 24, 2023. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the ~~Fourth Amended Credit~~Loan Agreement ~~(as defined in Note 13 below)~~ and applicable law, and such other factors that the Board considers relevant. (See Notes 5 and 1312 for further discussion of our long-term debt and dividends declared subsequent to ~~September 27, 2022,~~July 4, 2023, respectively.)

Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. Share repurchases may be made from time to time in open market purchases, ~~privately negotiated~~privately-negotiated transactions, 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 FRC acquisition agreement, our share price and current market conditions. The timing and number of shares repurchased are also subject to legal constraints and covenants under the ~~Fourth Amended Credit~~Loan Agreement that limit share repurchases based on a defined ratio. (See ~~Notes~~Note 5 ~~and 13~~ for further discussion of our long-term ~~debt and increased authorized amount under our share repurchase program, respectively.~~debt.)

~~Series A Convertible Preferred Stock~~

On April 20, 2020, we issued 200,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share for an aggregate purchase price of $200 million, or $1,000 per share. In connection with the issuance, we incurred direct and incremental costs of $10.3 million, including financial advisory fees, closing costs, legal expenses, a commitment fee and other offering-related expenses. These direct and incremental costs reduced the Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020, the first measurement date. Upon adoption of ASU 2020-06 in the first quarter of fiscal 2021, we recorded a $4.8 million cumulative adjustment to retained earnings to reverse beneficial conversion features recorded during fiscal 2020.

On June 15, 2021, we paid $443.8 million in connection with the cash-settled conversion of 150,000 shares of our outstanding Series A preferred stock (effected through a repurchase agreement), which was recognized through additional paid in capital. We also share-settled the conversion of the remaining 50,000 shares of our outstanding Series A convertible preferred stock into 2,400,864 shares of our common stock. These are both based on the then current Liquidation Preference per share of $1,067.42 and conversion price of $22.23.

~~Table of Contents~~

During the first quarter of fiscal 2021, we declared a cash dividend of $5.1 million, or $25.35 per share, on the Series A preferred stock. During the second quarter of fiscal 2021, $13.6 million in payments were made in connection with the conversion of the preferred stock, consisting of $3.9 million, or $19.72 per share of accrued dividends and $9.7 million of an inducement, which was also deemed to be a dividend.

~~10.~~9. Stock-Based Compensation

We maintain stock-based incentive 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.

On March 24, 2022, our Board approved an amendment to our The Cheesecake Factory Incorporated Stock Incentive Plan to increase the number of shares of common stock reserved for grant under the plan to 19.8 million shares from 17.5 million shares. This amendment was approved by our stockholders at our annual meeting held on May 23, 2022.

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


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022

Labor expenses	$	2,237	$	2,137	$	6,621	$	6,240	$	2,426	$	2,194	$	4,788	$	4,384
Other operating costs and expenses		74		72		224		218		76		74		151		150
General and administrative expenses		3,302		3,185		10,375		9,871		3,823		3,821		7,288		7,073
Total stock-based compensation		5,613		5,394		17,220		16,329		6,325		6,089		12,227		11,607
Income tax benefit		1,379		1,325		4,229		4,010		1,579		1,495		3,053		2,850
Total stock-based compensation, net of taxes	$	4,234	$	4,069	$	12,991	$	12,319	$	4,746	$	4,594	$	9,174	$	8,757

Capitalized stock-based compensation ⁽¹⁾	$	52	$	48	$	161	$	137	$	45	$	52	$	87	$	109

(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 ~~third quarter~~second quarters of fiscal ~~2022 or~~2023 and fiscal ~~2021.~~2022. Stock option activity during the ~~thirty-nine~~twenty-six weeks ended ~~September 27, 2022~~July 4, 2023 was as follows:


				Weighted-						Weighted-
				Average						Average
		Weighted-		Remaining				Weighted-		Remaining
		Average		Contractual	Aggregate			Average		Contractual	Aggregate
	Shares	Exercise Price		Term	Intrinsic 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 28, 2021	1,716	$	46.14	5.1	$	0
Outstanding at January 3, 2023							1,685	$	46.11	4.2	$	0
Granted	—		—				40		40.42
Exercised	(2)		40.16				—		—
Forfeited or cancelled	(29)		48.19				(175)		48.01
Outstanding at September 27, 2022	1,685	$	46.11	4.4	$	0
Outstanding at July 4, 2023							1,550	$	45.75	4.3	$	0

Exercisable at September 27, 2022	1,119	$	48.10	3.5	$	0
Exercisable at July 4, 2023							1,198	$	47.12	3.6	$	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~~period-end date.

~~Table of Contents~~

There were no options exercised during the ~~third quarters~~thirteen and twenty-six weeks ended July 4, 2023. There were no options exercised during the second quarter of fiscal ~~2022 or 2021.~~2022. The total intrinsic value of options exercised during the ~~first three quarters of fiscal~~twenty-six weeks ended June 28, 2022 ~~and 2021 were~~was $4.9 ~~million and $7.1 million, respectively.~~million. As of ~~September 27, 2022,~~July 4, 2023, total unrecognized stock-based compensation expense related to unvested stock options was ~~$3.1~~$2.3 million, which we expect to recognize over a weighted-average period of approximately ~~1.9~~1.8 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the ~~thirty-nine~~twenty-six weeks ended ~~September 27, 2022~~July 4, 2023 was as follows:


		Weighted-			Weighted-
		Average			Average
	Shares	Fair Value		Shares	Fair Value
	(In thousands)	(Per share)		(In thousands)	(Per share)
Outstanding at December 28, 2021	2,123	$	44.82
Outstanding at January 3, 2023				2,512	$	41.93
Granted	783		37.64	783		39.02
Vested	(356)		46.03	(386)		42.88
Forfeited	(110)		41.91	(61)		39.60
Outstanding at September 27, 2022	2,440	$	42.47
Outstanding at July 4, 2023				2,848	$	41.05

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant. The weighted average fair value for restricted shares and restricted share units issued during the ~~third~~second quarter of fiscal 2023 and 2022 was $33.84 and ~~2021 was $28.59 and $51.95,~~$30.49, respectively. The fair value of shares that vested during the thirteen and ~~thirty-nine~~twenty-six weeks ended ~~September 27, 2022~~July 4, 2023 was ~~$1.9~~$1.4 million and ~~$16.4~~$16.6 million, respectively. The fair value of shares that vested during the thirteen ~~weeks~~ and ~~thirty-nine~~twenty-six weeks ended ~~September~~June 28, ~~2021~~2022 was $2.1 million and ~~$13.3~~$14.5 million, respectively. As of ~~September 27, 2022,~~July 4, 2023, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was ~~$53.3~~$63.6 million, which we expect to recognize over a weighted-average period of approximately ~~3.0~~3.2 years.

~~11.~~10. Net ~~(Loss)/~~Income Per Share

Basic net ~~(loss)/~~income per share is computed by dividing net ~~(loss)/~~income ~~available to common stockholders~~ by the weighted-average number of common shares outstanding during the period, reduced by unvested restricted stock awards. ~~At September 27,~~As of July 4, 2023 and June 28, 2022, ~~and September 28, 2021, 2.4~~2.8 million and ~~2.1~~2.4 million shares, respectively, of restricted stock and restricted stock units issued were unvested and, therefore, excluded from the calculation of basic earnings per share for the fiscal periods ended on those dates.

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

~~Table of Contents~~

Holders of our Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A preferred stock”) participated in dividends on an as-converted basis when declared on common stock. As a result, our Series A preferred stock met the definition of a participating security which required us to apply the two-class method to compute both basic and diluted net (loss)/income per share. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that would otherwise have been available to common stockholders. In addition, as our Series A preferred stock was a participating security, we were required to calculate diluted net (loss)/income per share under the if-converted method in addition to the two-class method and utilize the most dilutive result.

Thirteen

Thirteen

Thirty-Nine

Thirty-Nine

Weeks Ended

Weeks Ended

Weeks Ended

Weeks Ended


September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

(In thousands, except per share data)
Basic net (loss)/income per common share:

Net (loss)/income

$
(2,398)

$
32,680

$
46,421

$
70,263
Dividends on Series A preferred stock

—

—

—

(18,661)
Undistributed earnings allocated to Series A preferred stock

—

—

—

(5,804)
Net (loss)/income available to common stockholders

(2,398)

32,680

46,421

45,798
Basic weighted-average shares outstanding

49,653

50,212

50,124

46,624
Basic net (loss)/income per common share

$
(0.05)

$
0.65

$
0.93

$
0.98

Diluted net (loss)/income per common share:

Net (loss)/income available to common stockholders

(2,398)

32,680

46,421

45,798
Reallocation of undistributed earnings to Series A preferred stock

—

—

—

114
Net (loss)/income available to common stockholders for diluted earnings per share

(2,398)

32,680

46,421

45,912
Basic weighted-average shares outstanding

49,653

50,212

50,124

46,624
Dilutive effect of equity awards ⁽¹⁾

—

901

584

1,051
Diluted weighted-average shares outstanding

49,653

51,113

50,708

47,675
Diluted net (loss)/income per common share

$
(0.05)

$
0.64

$
0.92

$
0.96


	Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022

	(In thousands, except per share data)
Net income	$	42,675	$	25,656	$	70,725	$	48,819

Basic weighted-average shares outstanding		48,492		50,387		48,593		50,360
Dilutive effect of equity awards ⁽¹⁾		593		542		703		606
Diluted weighted-average shares outstanding		49,085		50,929		49,296		50,966

Basic net income per share	$	0.88	$	0.51	$	1.46	$	0.97

Diluted net income per share	$	0.87	$	0.50	$	1.43	$	0.96

(1)

Shares of common stock equivalents related to outstanding stock options, restricted stock and restricted stock units of ~~3.3~~2.6 million and ~~3.8~~3.1 million ~~as of September 27,~~for July 4, 2023 and June 28, 2022, ~~and September 28, 2021,~~ respectively, were excluded from the diluted calculation due to their anti-dilutive effect. No shares of common stock equivalents related to the Notes were included in the diluted calculation due to their anti-dilutive effect.

~~12.~~11. Segment Information

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

1715

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Segment information is presented below (in thousands):


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022
Revenues:
The Cheesecake Factory restaurants	$	602,902	$	592,555	$	1,853,576	$	1,698,635	$	652,481	$	640,858	$	1,308,481	$	1,250,674
North Italia		54,113		44,357		163,108		120,747		65,934		56,238		129,237		108,995
Other FRC		52,193		44,326		171,045		127,978		65,728		60,020		134,368		118,852
Other		74,793		73,236		222,625		203,487		82,027		75,527		160,198		147,832
Total	$	784,001	$	754,474	$	2,410,354	$	2,150,847	$	866,170	$	832,643	$	1,732,284	$	1,626,353

(Loss)/income from operations:
Income from operations:
The Cheesecake Factory restaurants	$	42,122	$	66,791	$	169,893	$	194,470	$	85,677	$	64,327	$	164,073	$	127,771
North Italia		1,655		1,962		10,381		5,320		6,627		5,048		11,233		8,726
Other FRC		4,109		3,403		18,231		14,565		6,079		6,793		14,790		14,122
Other		(50,091)		(40,779)		(144,447)		(133,016)		(50,912)		(48,226)		(108,699)		(94,356)
Total	$	(2,205)	$	31,377	$	54,058	$	81,339	$	47,471	$	27,942	$	81,397	$	56,263

Depreciation and amortization:
The Cheesecake Factory restaurants	$	15,874	$	16,414	$	47,736	$	49,221	$	16,235	$	16,275	$	32,244	$	31,862
North Italia		1,556		1,068		4,076		2,893		1,668		1,222		3,135		2,520
Other FRC		1,661		1,208		4,712		3,423		1,809		1,470		3,736		3,051
Other		3,560		3,886		10,240		11,268		3,620		3,641		7,172		6,680
Total	$	22,651	$	22,576	$	66,764	$	66,805	$	23,332	$	22,608	$	46,287	$	44,113

Impairment of assets and lease termination expenses:
The Cheesecake Factory restaurants	$	—	$	—	$	(59)	$	—
North Italia		—		—		—		—
Other FRC		—		—		—		—
Other		—		—		372		594
Total	$	—	$	—	$	313	$	594

Capital expenditures:
Impairment of assets and lease termination (income)/expenses:
The Cheesecake Factory restaurants	$	19,176	$	10,680	$	48,097	$	22,606	$	38	$	106	$	131	$	(59)
North Italia		3,281		2,606		11,110		9,095		—		—		—		—
Other FRC		5,175		3,614		11,014		10,979		—		—		55		—
Other		4,039		1,356		7,832		6,478		(691)		—		1,403		372
Total	$	31,671	$	18,256	$	78,053	$	49,158	$	(653)	$	106	$	1,589	$	313

Preopening costs:
The Cheesecake Factory restaurants	$	2,757	$	968	$	5,163	$	3,616	$	3,091	$	1,372	$	4,539	$	2,406
North Italia		1,341		1,057		2,755		3,335		618		1,004		1,064		1,414
Other FRC		84		849		357		1,948		1,999		284		2,720		273
Other		145		295		763		905		298		287		735		618
Total	$	4,327	$	3,169	$	9,038	$	9,804	$	6,006	$	2,947	$	9,058	$	4,711
Capital expenditures:
The Cheesecake Factory restaurants									$	8,543	$	8,324	$	31,756	$	28,921
North Italia										6,879		4,825		13,010		7,829
Other FRC										6,005		1,983		11,170		5,839
Other										3,271		2,157		6,724		3,793
Total									$	24,698	$	17,289	$	62,660	$	46,382


	September 27, 2022		December 28, 2021		July 4, 2023		January 3, 2023
Total assets:
The Cheesecake Factory restaurants	$	1,564,945	$	1,653,161	$	1,568,359	$	1,625,073
North Italia		303,130		270,029		320,658		306,642
Other FRC		296,465		276,369		324,404		301,618
Other		569,534		598,566		556,287		541,887
Total	$	2,734,074	$	2,798,125	$	2,769,708	$	2,775,220

~~Table of Contents~~

~~13.~~12. Subsequent Events

On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Fourth Amended Credit Agreement” and the revolving credit facility provided thereunder, the “Fourth Revolving Facility”). The Fourth Amended Credit Agreement amends and restates in its entirety our prior Amended Credit Agreement. The Fourth Revolving Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit. The Fourth Revolving Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $200 million in revolving loan commitments. Our obligations under the Fourth Revolving Facility are unsecured. Certain of our material subsidiaries have guaranteed our obligations under the Fourth Revolving Facility. On October 6, 2022 we repaid the outstanding balance under the Revolving Facility and borrowed the same amount on the Fourth Revolving Facility. As of the date of this report, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit under the Fourth Revolving Facility.

Under the Fourth Revolving Facility, we are subject to the following financial covenants as of the last day of each fiscal quarter: (i) a maximum ratio of net adjusted debt to EBITDAR (the “Amended Net Adjusted Leverage Ratio”) of 4.25 and (ii) a minimum ratio of EBITDAR to interest and rent expense of 1.90. The Amended Net Adjusted Leverage Ratio includes a rental expense multiplier of six as compared to eight in the Amended Credit Agreement.

Borrowings under the Fourth Amended Credit Agreement bear interest, at the Company’s election, at a rate equal to either: (i) the sum of (A) adjusted term SOFR (as defined in the Fourth Amended Credit Agreement, the “Term SOFR Rate”) plus (B) a rate variable based on the Amended Net Adjusted Leverage Ratio, ranging from 1.00% to 1.75%, or (ii) the sum of (A) the highest of (x) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (y) the greater of the rate calculated by the Federal Reserve Bank of New York as the federal funds effective rate or the rate that is published by the Federal Reserve Bank of New York as the overnight bank funding rate, in either case, plus 0.50%, and (z) the one-month Term SOFR Rate plus 1.00%, plus (B) a rate variable based on the Net Adjusted Leverage Ratio, ranging from 0.00% to 0.75%. The Company will also pay a fee variable based on the Net Adjusted Leverage Ratio, ranging from 0.125% to 0.25%, on the daily amount of unused commitments under the Fourth Amended Credit Agreement.

Letters of credit bear fees that are equivalent to the interest rate margin that is applicable to revolving loans that bear interest at the adjusted SOFR plus other customary fees charged by the issuing bank. We paid certain customary loan origination fees in conjunction with the Loan Agreement.

We are also subject to customary events of default that, if triggered, could result in acceleration of the maturity of the Fourth Revolving Facility. Subject to certain exceptions, the Fourth Revolving Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

~~On October 26, 2022,~~July 27, 2023, our Board declared a quarterly cash dividend of $0.27 per share to be paid on ~~November 28, 2022~~August 29, 2023 to the stockholders of record of each share of our common stock at the close of business on ~~November 15, 2022.~~

On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million shares to 61.0 million shares. See Note 9 for further discussion on our repurchase authorization and methods.

August 16, 2023.

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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 we have filed or ~~to be filed by us~~may file 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 CSR report, the effects of ~~the COVID-19 pandemic~~geopolitical and macroeconomic factors on our financial condition and our results of operations, ~~accelerated and diversified revenue growth as a result of the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”),~~ financial guidance and projections as well as expectations of our future financial condition, ~~our focus on returning to pre-pandemic margins,~~ results of operations, sales, target growth rates, cash flows, quarterly dividends, ~~menu pricing,~~ corporate strategy, plans, targets, goals, objectives, performance, growth potential, competitive position and business, and statements regarding our ability to: leverage our competitive strengths, including developing and 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 ~~inflation and other~~ cost pressures, including, ~~but not limited to, impacts to~~increasing wage rates ~~commodities~~ and ~~services costs, utilities expenses,~~ insurance costs, ~~and legal expenses,~~ and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other staff; ~~manage risks associated with the magnitude and complexity of regulations in the jurisdictions where our restaurants are located;~~ increase shareholder value; find suitable sites and manage increasing construction costs; profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept internationally; support the growth of North Italia and other FRC restaurants; ~~operate Social Monk Asian Kitchen and other concepts;~~ and utilize our capital ~~effectively and continue to issue cash dividends and repurchase our shares.~~effectively. These forward-looking statements may be affected by various factors including: ~~the rapidly evolving nature~~economic, public health and political conditions that impact consumer confidence and spending, including rising interest rates, periods of ~~the COVID-19 pandemic~~heightened inflation and ~~related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants~~market instability, and ~~our bakery operations;~~armed conflicts; supply chain ~~disruptions and inflation; the geopolitical environment,~~disruptions; 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~~pandemic and ~~political conditions that impact consumer confidence and spending,~~related containment measures, including the ~~impact of the COVID-19 pandemic and other health epidemics~~potential for quarantines or ~~pandemics~~restriction on ~~the global economy;~~in-person dining; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the FRC ~~concepts, Social Monk Asian Kitchen and other~~ concepts; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; changes in laws impacting our business, ~~including 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;~~ the economic health of suppliers, licensees, vendors and other third parties providing goods or services to us; the timing of our new unit development; compliance with debt covenants; strategic capital allocation decisions including ~~any~~with respect to share repurchases or dividends; the ability to achieve projected financial results; the resolution of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation; changes in laws impacting our business; 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 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 on Form 10-K for the fiscal year ended ~~December 28, 2021.~~January 3, 2023.) 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 28, 2021:~~January 3, 2023: the audited consolidated financial statements and related notes in Part IV, Item 15; the “Risk Factors” included in Part I, Item 1A; the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7; and the cautionary statements included throughout 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 and Other Impacts to our Operating Environment

The ongoing ~~effects~~impact of ~~COVID-19 and its variants, along with other~~ geopolitical and macroeconomic events could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, ~~and~~ disruptions in the supply ~~chain. If these factors significantly impact~~chain and delay in new restaurant openings. For more information regarding the risks to our ~~cash flow~~business relating to the COVID-19 pandemic and other geopolitical and macroeconomic events, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the future, we may again implement mitigation actions such as suspending share repurchases and dividends, increasing borrowings on our credit facility or modifying our operating strategies. Some of these measures may have an adverse impact on out business.fiscal year ended January 3, 2023.

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 ~~314~~321 restaurants throughout the United States and Canada under brands including ~~210~~ The Cheesecake Factory^® (211 locations), 32 North Italia^® ~~restaurants~~(33 locations), Flower Child^® (31 locations) and a collection ~~within our~~of other FRC ~~business.~~brands (37 locations). Internationally, 2930 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 ~~deployment~~allocation priority, with a focus on opening our concepts in premier locations within both new and existing markets. We ~~expect our acquisition of~~plan to continue expanding The Cheesecake Factory and North Italia concepts, and in addition, our FRC ~~to further accelerate and diversify our growth opportunities.~~subsidiary serves as an incubation engine, creating additional concepts for potential future growth. For The Cheesecake Factory concept, we target an average cash-on-cash return on investment of approximately 20% to 25% at the unit ~~level.~~level, calculated by dividing restaurant-level profit (earnings before interest, taxes, depreciation and amortization and preopening costs) by our cash investment. We target an average cash-on-cash return on investment of 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.

For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and 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 elevation of our off-premise mix 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 including the nationwide launch of a guest rewards program, enhancing our training programs and leveraging our customer satisfaction measurement platform.

Average check isvariations are driven by menu price increases and/or changes in menu mix. We generally update The Cheesecake Factory menus twice each year, and our philosophy is to use price increases to help offset key operating cost increases in a manner that balances supporting both our margin objectives and customer traffic levels. ~~In prior years,~~Prior to fiscal 2022, we ~~have~~ targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies. ~~Due to~~In the ~~inflationary cost pressures~~first quarter of fiscal 2022, we ~~are experiencing, we implemented~~started implementing menu price increases above our historical levels, ~~in the first and third quarters of fiscal 2022 to support our longer-term restaurant-level margin objectives and are in the process of implementing~~including an incremental price increase in the fourth quarter of fiscal ~~2022.~~2022, to offset significant inflationary cost pressures. Future near-term pricing actions may also be at levels above historical norms to keep pace with any significant cost increases. In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and 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 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.

We plan to employ a balanced capital allocation strategy comprised ~~of:~~of investing in new restaurants that are expected to meet our targeted returns, repaying borrowings under our Revolving Facility and returning capital to shareholders through our dividend and share repurchase programs, the latter of which offsets dilution from our equity compensation program and supports our earnings per share growth. Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of the ~~Fourth Amended Credit~~Loan Agreement 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 margin expansion, planned debt 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 ~~(loss)/~~income expressed as percentages of revenues. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any other interim period or for the full fiscal year.


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine		Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022
Revenues	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Costs and expenses:
Cost of sales	25.2		22.5		24.5		22.0
Food and beverage costs									23.2		24.5		23.5		24.1
Labor expenses	37.4		37.1		37.1		36.5		35.3		36.6		35.7		36.9
Other operating costs and expenses	27.7		26.7		26.7		27.1		26.2		26.3		26.4		26.3
General and administrative expenses	6.4		6.1		6.2		6.4		6.4		6.0		6.3		6.1
Depreciation and amortization expenses	2.9		3.0		2.8		3.1		2.7		2.7		2.7		2.7
Impairment of assets and lease termination expenses	—		—		0.0		0.0
Impairment of assets and lease termination (income)/expenses									(0.1)		—		0.1		0.0
Acquisition-related contingent consideration, compensation and amortization expenses	0.1		0.1		0.1		0.6		0.1		0.1		0.1		0.1
Preopening costs	0.6		0.4		0.4		0.5		0.7		0.4		0.5		0.3
Total costs and expenses	100.3		95.9		97.8		96.2		94.5		96.6		95.3		96.5
(Loss)/income from operations	(0.3)		4.1		2.2		3.8
Income from operations									5.5		3.4		4.7		3.5
Interest and other expense, net	(0.1)		(0.2)		(0.1)		(0.4)		(0.3)		(0.2)		(0.2)		(0.2)
(Loss)/income before income taxes	(0.4)		3.9		2.1		3.4
Income tax (benefit)/provision	(0.1)		(0.4)		0.2		0.1
Net (loss)/income	(0.3)		4.3		1.9		3.3
Dividends on Series A preferred stock	—		—		—		(0.9)
Undistributed earnings allocated to Series A preferred stock	—		—		—		(0.3)
Net (loss)/income available to common stockholders	(0.3)	%	4.3	%	1.9	%	2.1	%
Income before income taxes									5.2		3.2		4.5		3.3
Income tax provision									0.3		0.1		0.4		0.3
Net income									4.9	%	3.1	%	4.1	%	3.0	%

Thirteen Weeks Ended ~~September 27, 2022~~July 4, 2023 Compared to Thirteen Weeks Ended ~~September~~June 28, ~~2021~~2022

Revenues

Revenues increased ~~3.9%~~4.0% to ~~$784.0~~$866.2 million for the fiscal quarter ended ~~September 27, 2022~~July 4, 2023 compared to ~~$754.5~~$832.6 million for the comparable prior year period, primarily due to an increase in comparable restaurant sales, as well as additional revenue related to new restaurant openings.

The Cheesecake Factory average sales per restaurant operating week increased 0.7% to $238,654 in the second quarter of fiscal 2023 from $237,004 in the second quarter of fiscal 2022. Total operating weeks at The Cheesecake Factory restaurants increased 1.1% to 2,734 in the second quarter of fiscal 2023 compared to 2,704 in the prior year. The Cheesecake Factory comparable sales increased by ~~1.1%~~1.5%, or ~~$6.3~~$9.6 million, from the ~~third~~second quarter of fiscal ~~2021~~2022 and increased ~~9.5%~~14.1% from the ~~third~~second quarter of fiscal ~~2019.~~2019 on an operating week basis. The increase from fiscal ~~2021~~2022 was primarily driven by an increase in average check of ~~1.0%~~5.2% (based on an increase of ~~6.0%~~10.6% in menu pricing, partially offset by ~~5.0%~~5.4% negative impact from mix) ~~and increased~~, partially offset by decreased customer traffic of ~~0.1%~~3.7%. We implemented effective menu price increases of approximately 4.25%, 2.8% and 3.5% in the third and fourth quarters of fiscal 2022 and the first quarter of fiscal 2023, respectively. We are in the process of implementing approximately a 2.0% price increase in the third quarter of fiscal 2023. Sales through the off-premise channel comprised approximately ~~23%~~22% of our restaurant sales during the ~~third~~second quarter of fiscal ~~2022~~2023 as compared to ~~28%~~25% in the ~~third~~second quarter of fiscal ~~2021. Off-premise~~2022. However, off-premise sales mix ~~remains~~remained elevated versus the pre-pandemic level of ~~15%~~16% during the ~~third~~second quarter of fiscal ~~2019, even as customers continue to return to on-premise dining.~~2019. We account for each off-premise order as one customer for traffic measurement purposes. Therefore, average check is generally higher for off-premise orders as most are for more than one customer. In turn, the lower mix of sales in the off-premise channel during the ~~third~~second quarter of fiscal ~~2022~~2023 compared to the prior year ~~third~~second quarter comprised approximately 2%1% of the negative change in mix with a positive correlative impact to traffic. ~~We implemented effective menu price increases of approximately 3.25%~~In addition, both traffic and ~~4.25% in~~mix declined relative to the ~~first~~higher traffic levels and ~~third quarters of fiscal 2022, respectively, and are in~~incident rates associated with the ~~process of implementing an incremental 2.8% price increase in the fourth~~post pandemic surge that benefited our second quarter of fiscal 2022. ~~The Cheesecake Factory average sales per restaurant operating week increased 1.1% to $222,884 in~~However, incident rates remained elevated versus the third quarter of fiscal 2022 from $220,362 in the third quarter of fiscal 2021. Total operating weeks at The Cheesecake Factory restaurants increased 0.6% to 2,705 in the third quarter of fiscal 2022 compared to 2,689 in the prior year.pre-pandemic level.

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North Italia average sales per restaurant operating week increased 3.3% to $153,692 in the second quarter of fiscal 2023 from $148,778 in the second quarter of fiscal 2022. Total operating weeks at North Italia increased 13.5% to 429 in the second quarter of fiscal 2023 compared to 378 in the prior year. North Italia comparable sales increased approximately ~~10%~~8% from the ~~third~~second quarter of fiscal ~~2021~~2022 and increased ~~18%~~approximately 30% from the ~~third~~second quarter of fiscal ~~2019.~~2019 on an operating week basis. The increase from fiscal ~~2021~~2022 was primarily driven by ~~increased customer traffic of 5%, as well as~~ an increase in average check of 5%6.4% (based on an increase of 8%8.2% in menu pricing, partially offset by a 3%1.8% negative impact from mix), as well as increased customer traffic of 1.6%. We implemented effective menu price increases of approximately ~~2.0%~~4.25% and ~~5.5%~~4.00% in the fourth quarter of fiscal ~~2021~~2022 and the second quarter of fiscal 2022, respectively, and are in the process of implementing a 4.3% price increase in the fourth quarter of fiscal 2022. North Italia average sales per restaurant operating week increased 7.8% to $136,994 in the third quarter of fiscal 2022 from $127,098 in the third quarter of fiscal 2021. Total operating weeks at North Italia increased 13.2% to 395 in the third quarter of fiscal 2022 compared to 349 in the prior year.2023, respectively.

Restaurants become eligible to enter the comparable sales base in their ~~19th~~19^th month of operation. ~~At September 27, 2022,~~As of July 4, 2023, there were ~~three~~four The Cheesecake Factory restaurants and ~~seven~~four 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.

~~Cost of Sales~~Food and Beverage Costs

~~Cost~~Food and beverage costs consist of ~~sales consists of~~raw materials and ingredients used in the food and beverage products sold in our restaurants and ~~bakery production supply costs incurred in conjunction with~~to our ~~restaurant and bakery revenues, and excludes depreciation, which is captured separately in depreciation and amortization expenses.~~third-party customers. As a percentage of revenues, ~~cost of sales was 25.2%~~food and ~~22.5%~~beverage costs were 23.2% and 24.5% in the ~~third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively, primarily due to menu pricing leverage that were slightly in excess of inflation across most categories (1.3%), partially offset by favorable dairy pricing in ~~excess~~the second quarter of ~~menu price increases (2.6%~~fiscal 2022 (0.2%).

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 ~~37.4%~~35.3% and ~~37.1%~~36.6% in the ~~third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This ~~increase~~decrease was primarily due to ~~increased staffing levels compared to the prior year (0.5%), as well as~~menu pricing leverage in excess of wage rate inflation ~~in excess of menu price increases (0.3%) and training costs (0.2%~~(1.3%), partially offset by ~~a decline in group medical insurance costs due to lower claim activity (0.7%~~increased manager staffing levels (0.2%) ~~in the third quarter of fiscal 2022.~~.

Other Operating Costs and Expenses

Other operating costs and expenses consist of all other restaurant-level operating costs, the major components of which are occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), dining room and to-go supplies, repairs and maintenance, janitorial expenses, credit card processing fees, marketing including delivery commissions, ~~other operating expenses (excluding food costs~~ and ~~labor expenses, which are reported separately) and~~incentive compensation, as well as bakery production ~~overhead and distribution expenses.~~overhead. As a percentage of revenues, other operating costs and expenses were ~~27.7%~~26.2% and ~~26.7%~~26.3% in the ~~third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This variance was primarily driven by ~~utilities (0.5%~~lower workers compensation insurance costs due to higher claim activity in the second quarter of fiscal 2022 (0.2%), lower off-premise costs due to sales mix and ~~building maintenance expense (0.4%~~lower supply costs (0.2%) ~~inflation in excess of menu price increases.~~, partially offset by launch cost related to our Rewards program (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 6.4% and ~~6.1%~~6.0% in ~~the third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This variance was primarily driven by ~~higher travel and meeting expenses as we return to more normalized business operations (0.3%~~increased staffing levels (0.2%).

~~Depreciation and Amortization Expenses~~

~~As a percentage of revenues, depreciation and amortization expenses decreased to 2.9% in the third quarter of fiscal 2022 from 3.0% in the comparable prior year period due primarily to sales leverage.~~

~~Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses~~

We recorded $1.1 million and $0.7 million of acquisition-related contingent consideration, compensation and amortization during the third quarters of fiscal 2022 and 2021, respectively, reflecting changes in the fair value of the deferred and contingent consideration and compensation liabilities, and amortization of acquired definite-lived licensing agreements.

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Preopening Costs

Preopening costs were ~~$4.3~~$6.0 million and ~~$3.2~~$2.9 million in the ~~third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. We opened one The Cheesecake Factory ~~one North Italia~~ and ~~one~~two Other FRC locations in the ~~third~~second quarter of fiscal ~~2022~~2023 compared to ~~two~~one North Italia ~~one Other FRC location~~restaurant and one ~~Other~~Flower Child location in the comparable prior year period. ~~Preopening~~The second quarter of fiscal 2023 was negatively impacted by delays in the timing of new restaurant openings that resulted in additional cost. Restaurant-level 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 in preopening costs 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.~~needs. 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 ~~$1.3~~$2.2 million and ~~$1.8~~$1.1 million for the ~~third~~second quarters of fiscal 2023 and 2022, ~~and 2021,~~ respectively. This increase was primarily due to higher interest on our Revolver Facility ($1.6 million).

Income Tax ~~(Benefit)/~~Provision

Our effective income tax rate was ~~31.9%~~5.8% and ~~(10.5%)~~4.3% for the ~~third~~second quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. The increase was primarily due to a ~~cumulative benefit recorded~~lower proportion of employment credits in ~~the fiscal 2022 third quarter tax provision resulting from a decline~~relation to income before income taxes in ~~annual forecasted pre-tax income from~~ the second quarter toof fiscal 2023 (9.4%), partially offset by non-taxable gains in the ~~third~~second quarter of fiscal 2022, a benefit recorded in the third quarter of fiscal 2021 arising from an increase to our fiscal 2020 loss carryback as a result of repaying 100% of the FICA taxes that were deferred in fiscal 2020 under the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) and higher nondeductible losses in the third quarter of fiscal 20222023 as compared to non-deductible losses in the comparable prior year period on our investments in variable life insurance contracts used to support our non-qualified deferred compensation plan ~~(“ESP”~~(6.7%)~~. These factors were partially offset by~~, a ~~higher~~lower proportion of ~~employment credits~~state tax expense in relation to ~~pre-tax~~ income before taxes (0.7%) and a lower proportion of tax shortfall related to equity compensation in relation to income before taxes (0.2%) in the ~~third~~second quarter of fiscal ~~2022.~~2023.

~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 27, 2022~~July 4, 2023 Compared to ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September~~June 28, ~~2021~~2022

Revenues

Revenues increased ~~12.1%~~6.5% to ~~$2,410.4~~$1,732.3 million for the ~~three quarters~~first six months of ~~2022~~2023 compared to ~~$2,150.8~~$1,626.4 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 three quarters of fiscal 2021,~~ as well as additional revenue related to new restaurant openings.

The Cheesecake Factory average sales per restaurant operating week increased 3.4% to $239,167 in the first six months of fiscal 2023 from $231,264 in the first six months of fiscal 2022. Total operating weeks at The Cheesecake Factory restaurants increased 1.2% to 5,471 in the first six months of fiscal 2023 compared to 5,408 in the prior year. Because our strong sales week between Christmas and New Year’s Day was captured as the 53rd week of fiscal 2022, that high-volume week was replaced with an average sales week in the first quarter of 2023. This negatively impacted revenues by approximately $10 million in the first quarter of fiscal 2023. The Cheesecake Factory comparable sales increased by ~~8.2%~~3.6%, or ~~$137.3~~$44.0 million, from the first ~~three quarters~~six months of fiscal ~~2021~~2022 and increased ~~10.2%~~14.5% from the first ~~three quarters~~six months of fiscal ~~2019.~~2019 on an operating week basis. The increase from fiscal ~~2021~~2022 was primarily driven by ~~increased customer traffic of 9.2% primarily due to the impact of the COVID-19 pandemic in the prior year, partially offset by a decline~~an increase in average check of ~~1.0%~~5.0% (based on ~~a 5.8%~~an increase of 10.5% in menu pricing, partially offset by 5.5% negative impact from ~~mix,~~mix), partially offset by ~~an increase~~decreased customer traffic of ~~4.8% in menu pricing)~~1.4%. Sales through the off-premise channel comprised approximately ~~25%~~22% of our restaurant sales during the first ~~three quarters~~six months of fiscal ~~2022~~2023 as compared to ~~33%~~26% in the comparable prior year period as more customers have returned to on-premise dining, whereas consumer behavior had shifted towards the off-premise channel during the prior year period due to the pandemic.first six months of fiscal 2022. However, off-premise sales mix remains elevated versus the pre-pandemic level of 16% during the first ~~three quarters~~six months of fiscal 2019. The lower mix of sales in the off-premise channel during the first three quarters of fiscal 2022 versus the comparable prior year third quarter comprised approximately 4% of the negative change in mix with a positive correlative impact to traffic. The Cheesecake Factory average sales per restaurant operating week increased 8.4% to $228,470 in the first three quarters of fiscal 2022 from $210,801 in the first three quarters of fiscal 2021. Total operating weeks at The Cheesecake Factory restaurants increased 0.7% to 8,113 in the first three quarters of fiscal 2022 compared to 8,058 in the comparable prior year period.

North Italia comparable sales increased approximately 17% from the first three quarters of fiscal 2021 and increased approximately 21% from the first three quarters of fiscal 2019. The increase from fiscal 2021 was primarily driven by increased customer traffic of 14%, as well as an increase in average check of 3% (based on an increase of 5% in menu pricing, partially off by a 2% negative impact from mix). North Italia average sales per restaurant operating week increased ~~15.1%~~4.3% to ~~$141,833~~$150,626 in the first ~~three quarters~~six months of fiscal ~~2022~~2023 from ~~$123,211~~$144,365 in the first ~~three quarters~~six months of fiscal ~~2021.~~2022. Total operating weeks at North Italia increased ~~17.3%~~13.6% to ~~1,150~~858 in the first ~~three quarters~~six months of fiscal 2023 compared to 755 in the prior year. North Italia comparable sales increased approximately 8% from the first six months of fiscal 2022 ~~compared to 980~~and increased approximately 30% from the first six months of fiscal 2019 on an operating week basis. The increase from fiscal 2022 was primarily driven by an increase in ~~the prior year.~~average check of 5.6% (based on an increase of 8.0% in menu pricing, partially offset by a 2.4% negative impact from mix), as well as increased customer traffic of 2.4%.

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~~Cost of Sales~~Food and Beverage Costs

As a percentage of revenues, ~~cost of sales was 24.5%~~food and ~~22.0%~~beverage costs were 23.5% and 24.1% in the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively, primarily due to menu price increases slightly in excess of inflation across most categories (0.9%), partially offset by favorable dairy pricing in ~~excess of menu price increases (2.2%~~fiscal 2022 (0.3%).

Labor Expenses

As a percentage of revenues, labor expenses were ~~37.1%~~35.7% and ~~36.5%~~36.9% in the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This ~~increase~~decrease was primarily due to menu pricing leverage in excess of wage rate inflation ~~in excess of menu price increases (0.9%~~(1.1%)~~, partially offset by~~ and a ~~decrease~~decline in group medical insurance costs due to lower claim activity ~~(0.6%~~(0.2%) in the first ~~three quarters~~quarter of fiscal ~~2022.~~2023.

Other Operating Costs and Expenses

As a percentage of revenues, other operating costs and expenses were ~~26.7%~~26.4% and ~~27.1%~~26.3% in the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This variance was primarily driven by ~~sales leverage within occupancy and building~~launch costs ~~(0.3%~~related to our Rewards program (0.2%).

G&A Expenses

As a percentage of revenues, G&A expenses were ~~6.2%~~6.4 % and ~~6.4%~~6.1% in the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This variance was primarily driven by ~~lower corporate incentive compensation expense (0.2%).~~

~~Depreciation and Amortization Expenses~~

As a percentage of revenues, depreciation and amortization expenses decreased to 2.8% in the first three quarters of fiscal 2022 from 3.1% in the comparable prior year period due primarily to sales leverage.

~~Impairment of Assets and Lease Terminations Expenses~~

During the first three quarters of fiscal 2022, we recorded impairment of assets and lease terminations expense of $0.3 million related to lease termination costs and accelerated depreciation for two Grand Lux Cafe locations that closed during the first quarter of fiscal 2022. During the first three quarters 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.

~~Acquisition-Related Contingent Consideration, Compensation and Amortization Expenses~~

We recorded $2.9 million and $12.6 million during the first three quarters of fiscal 2022 and 2021, respectively, of acquisition-related contingent consideration, compensation and amortization. This decrease is primarily related to the impact of an amendment to the FRC acquisition agreement in the second quarter of fiscal 2021 that, among other things, extended the measurement period through fiscal 2026.increases across several categories.

Preopening Costs

Preopening costs were ~~$9.0~~$9.1 million and ~~$9.8~~$4.7 million in the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. We opened one The Cheesecake Factory, ~~two North Italia,~~ one Flower Child and three Other FRC ~~and one Other~~ location in the first ~~three quarters~~half of fiscal ~~2022~~2023 compared to one ~~The Cheesecake Factory, five~~ North Italia ~~restaurants, two Other FRC~~ and ~~two Other locations~~one Flower Child location in the comparable prior year period. The first six months of fiscal 2023 was negatively impacted by delays in the timing of new restaurant openings that resulted in additional cost.

Interest and Other Expense, Net

Interest and other expense, net was ~~$3.9~~$4.0 million and ~~$9.2~~$2.6 million for the ~~three quarters~~first six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. This ~~decrease~~increase was primarily due to higher interest ~~expense in the prior year~~on our Revolver Facility ($~~4.1 million), mainly related to our interest rate swap, which was terminated in June 2021 ($3.3~~2.8 million).

~~Table of Contents~~

Income Tax ~~(Benefit)/~~Provision

Our effective income tax rate was ~~7.4%~~8.6% and ~~2.6%~~9.0% for the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase resulted~~decrease was primarily ~~from nondeductible losses~~due to non-taxable gains in the first ~~three quarters~~six months of fiscal ~~2022~~2023 as compared to ~~non-taxable gains~~non-deductible losses in the comparable prior year period on our investments in variable life insurance contracts used to support our ~~ESP and a benefit recorded in 2021 arising from an increase to our fiscal 2020 loss carryback as a result of repaying 100% of the FICA taxes that were~~non-qualified deferred ~~in fiscal 2020 under the CARES Act,~~compensation plan (4.0%), partially offset by a ~~higher~~lower proportion of employment credits in relation to ~~pre-tax~~ income before income taxes in the first ~~three quarters~~six months of fiscal ~~2022 and our reserve for an uncertain tax position recorded in the comparable prior year period.~~2023 (3.6%).

Non-GAAP Measures

Adjusted net ~~(loss)/~~income and adjusted ~~if- converted~~diluted net ~~(loss)/~~income per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP. These non-GAAP measures may not be comparable to ~~similarly titled~~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 ~~available to common stockholders~~ and diluted net ~~(loss)/~~income 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 excluded the preferred dividend and assumed all convertible preferred shares had been converted into common stock. (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.) 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.

2723

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

Thirteen

Thirteen

Thirty-Nine

Thirty-Nine

Weeks Ended

Weeks Ended

Weeks Ended

Weeks Ended


September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021

Net (loss)/income available to common stockholders

$
(2,398)

$
32,680

$
46,421

$
45,798
Dividends on Series A preferred stock

—

—

—

18,661
Net income attributable to Series A preferred stock

—

—

—

5,804
COVID-19 related costs ⁽¹⁾

—

—

—

4,917
Impairment of assets and lease termination expenses

—

—

313

594
Acquisition-related contingent consideration, compensation and amortization expenses

1,081

685

2,920

12,592
Termination of interest rate swap

—

—

—

2,354
Uncertain tax position

—

—

—

2,471
Tax effect of adjustments ⁽²⁾

(281)

(178)

(840)

(5,318)
Adjusted net (loss)/income

$
(1,598)

$
33,187

$
48,814

$
87,873
Diluted net (loss)/income per common share

$
(0.05)

$
0.64

$
0.92

$
0.96
Dividends on Series A preferred stock

—

—

—

0.35
Net income attributable to Series A preferred stock

—

—

—

0.11
Assumed impact of potential conversion of Series A preferred stock into common stock ⁽³⁾

—

—

—

(0.11)
COVID-19 related costs ⁽¹⁾

—

—

—

0.09
Impairment of assets and lease termination expenses

—

—

0.01

0.01
Acquisition-related contingent consideration, compensation and amortization expenses

0.02

0.01

0.06

0.23
Termination of interest rate swap

—

—

—

0.04
Uncertain tax positions

—

—

—

0.05
Tax effect of adjustments ⁽²⁾

(0.01)

(0.00)

(0.02)

(0.10)
Adjusted if-converted net (loss)/income per share ⁽⁴⁾

$
(0.03)

$
0.65

$
0.96

$
1.64


	Thirteen		Thirteen		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	July 4, 2023		June 28, 2022		July 4, 2023		June 28, 2022

Net income	$	42,675	$	25,656	$	70,725	$	48,819
Impairment of assets and lease termination (income)/expenses		(653)		106		1,589		313
Acquisition-related contingent consideration, compensation and amortization expenses		1,287		948		2,476		1,839
Tax effect of adjustments ⁽¹⁾		(165)		(275)		(1,057)		(559)
Adjusted net income	$	43,144	$	26,435	$	73,733	$	50,412

Diluted net income per share	$	0.87	$	0.50	$	1.43	$	0.96
Impairment of assets and lease termination (income)/expenses		(0.01)		0.00		0.03		0.01
Acquisition-related contingent consideration, compensation and amortization expenses		0.03		0.02		0.05		0.04
Tax effect of adjustments⁽¹⁾		(0.00)		(0.01)		(0.02)		(0.01)
Adjusted diluted net income per share ⁽²⁾	$	0.88	$	0.52	$	1.50	$	0.99

(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.

~~(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 (0 and 5,908,167 shares for the thirteen and thirty-nine weeks ended September 28, 2021, respectively), resulting in an assumption of 51,112,650 and 53,582,824 weighted-average common shares outstanding for the thirteen and thirty-nine weeks ended September 28, 2021.

~~(4)~~(2)

Adjusted net ~~(loss)/~~income per share may not add due to rounding.

Fiscal ~~2022~~2023 Outlook

Based on ~~our fiscal 2022 year-to-date performance~~recent trends and ~~recent trends,~~assuming no material operating or consumer disruptions, we anticipate total revenue for ~~the fourth quarter of~~ fiscal ~~2022~~2023 to be approximately $900 million to $930 million, including the impact of the 53rd operating week. Fourth quarter-to-date through October 25, 2022, The Cheesecake Factory comparable sales increased approximately 2.8% and 14.0% compared to the comparable periods in fiscal 2021 and fiscal 2019, respectively. Fourth quarter-to-date through October 25, 2022, North Italia comparable sales increased approximately 9% and 25% compared to the comparable periods in fiscal 2021 and fiscal 2019, respectively.$3.5 billion.

~~Table of Contents~~

~~We are~~During fiscal 2023, we currently ~~estimating~~estimate total inflation across our commodities, total labor (factoring in the ~~following~~latest trends in wage rates and channel mix, as well as in other components such as payroll taxes and benefits) and other operating costs and expenses ~~for~~to be in the ~~fourth quarter of fiscal 2022.~~mid-single digit range. However, there remains measurable risk associated with cost fluctuations driven by the current environment. We anticipate commodity inflation of approximately 15% and expect net labor inflation of approximately 5% when factoring in wage rates and channel mix, among other components such as payroll taxes and benefits. We anticipate other operating costs and expenses as a percentage of revenues to be approximately 25.5%. In addition, we expect G&A expenses of approximately $55 million to $56 million,estimate preopening costs of approximately ~~$7 million and depreciation and amortization expenses~~$26 million. Based on these factors, we expect fiscal 2023 net income margin of approximately ~~$25 million in the fourth quarter of fiscal 2022, including the 53rd operating week, and are utilizing a tax rate of 8% for modeling purposes.~~4%.

We plan to open as many as 1320 new restaurants in fiscal ~~2022,~~2023, including ~~three~~as many as six The Cheesecake Factory restaurants, ~~four~~five North Italia restaurants and as many as ~~six~~nine restaurants within our FRC business, which includes three Flower Child locations. In recent years, we have encountered delays in opening new restaurants due to supply chain challenges, as well as to longer lead times in obtaining licenses and permits. We anticipate approximately $130 million in cash capital expenditures to support this level of unit development, as well as required maintenance on our restaurants. Restaurant opening dates may be impacted by supply chain challenges and permit approval delays.

~~Fiscal 2023 Outlook~~

Based on our fiscal 2022 year-to-date performance and recent trends, we anticipate total revenue for fiscal 2023 to be approximately $3.5 billion to $3.6 billion. We anticipate commodity and net labor inflation to be in the mid-single digit range.

We plan to open as many as 21 to 24 new restaurants in fiscal 2023, including four to five The Cheesecake Factory restaurants, seven to eight North Italia restaurants and ten to eleven restaurants within our FRC business, which includes three to four Flower Child locations. We anticipate approximately $150$160 million to $170 million in cash capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.

Total revenues for the third quarter of fiscal 2023 are expected to be approximately $835 million to $855 million. We anticipate commodity inflation to be in the low-single digit range and expect labor inflation to be in the mid-single digit range. Based on these factors, we expect third quarter fiscal 2023 net income margin of approximately 2.75% at the mid-point of the estimated revenue range.

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,

Table of Contents

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 Series A 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.

~~Table of Contents~~

During the first ~~three quarters~~six months of fiscal ~~2022,~~2023, our cash and cash equivalents decreased by ~~$56.5~~$23.2 million to ~~$133.2~~$91.6 million. The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions):


	Thirty-Nine		Thirty-Nine		Twenty-Six		Twenty-Six
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		July 4, 2023		June 28, 2022
Cash provided by operating activities	$	98.9	$	119.2	$	101.5	$	87.5
Additions to property and equipment		(78.1)		(49.2)		(62.7)		(46.4)
Acquisition-related deferred consideration and compensation		(7.2)		—		(13.0)		(7.2)
Convertible debt issuance, net of issuance cost		—		334.9
Common stock issuance, net of issuance cost		—		167.1
Repayments on credit facility		—		(150.0)
Series A preferred stock cash-settled conversion		—		(443.8)
Series A preferred stock dividends paid		—		(18.7)
Proceeds from exercise of stock options		0.1		24.8
Common stock dividends paid		(28.3)		(0.3)		(27.0)		(14.3)
Treasury stock purchases		(41.5)		(5.2)
Treasury stock purchases, inclusive of excise tax						(21.7)		(14.8)

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Cash Provided by Operating Activities

Cash flows from operations ~~decreased~~increased by ~~$20.3~~$14.0 million from the first ~~three quarters~~six months of fiscal ~~2021~~2022 primarily due to ~~lower~~higher net income and ~~higher fiscal year-end 2021 liabilities related to increased sales and staffing levels that were~~lower incentive compensation paid in the first ~~three quarters~~six months of fiscal ~~2022~~2023 compared to ~~those accrued at fiscal year-end 2020 and paid in~~ the first ~~three quarters~~six months of fiscal ~~2021.~~2022. These factors were partially offset by ~~collection~~timing of accounts payable disbursements in relation to the fiscal 2022 versus 2021 year-end dates and the sales tax liabilities due to increased sales at fiscal 2022 year end. Typically, our requirement for working capital has not been significant since our restaurant customers pay for their food and beverage purchases in cash or cash equivalents at the time of sale, and we are able to sell many of our ~~fiscal 2020 net operating loss carryback refund.~~restaurant inventory items before payment is due to the suppliers of such items.

Property and Equipment

Capital expenditures for new restaurants, including locations under development, were ~~$36.9~~$37.8 million and ~~$23.6~~$21.7 million for the first ~~three quarters~~six months of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. Capital expenditures also included ~~$37.3~~$22.0 million and ~~$21.7~~$22.4 million for our existing restaurants and ~~$3.9~~$2.9 million and ~~$3.9~~$2.3 million for bakery and corporate capacity and infrastructure investments in the first ~~three quarters~~six months of fiscal 2023 and 2022, respectively.

We opened five restaurants in the first six months of fiscal 2023 comprised of one The Cheesecake Factory, one Flower Child and ~~2021, respectively.~~three Other FRC locations compared to one North Italia and one Flower Child location in the first six months of fiscal 2022. We ~~currently~~expect to open as many as 20 new restaurants in fiscal 2023 across our portfolio of concepts. We anticipate ~~fiscal 2022~~approximately $160 million to $170 million in capital expenditures to ~~be approximately $130 million.~~support this level of unit development, as well as required maintenance on our restaurants.

Acquisition-Related Deferred Consideration and Compensation

During the ~~first quarter~~six months of fiscal 2023 and 2022, we made ~~a payment~~payments of $13.0 million and $7.2 million, respectively, for contingent consideration and compensation related to the FRC acquisition.

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. The net proceeds from the sale of the Notes were approximately $334.9 million after deducting issuance costs related to the Notes. ~~At September 27, 2022,~~As of July 4, 2023, the conversion rate for the Notes was ~~12.9717~~13.2717 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately ~~$77.09~~$75.35 per share of common stock. In connection with the cash dividend that was declared by our Board on ~~October 26, 2022,~~July 27, 2023, on ~~November 14, 2022~~August 15, 2023 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.)

~~Common Stock Issuance~~

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

~~Table of Contents~~

Credit Facility

On March 30, 2021, we entered into an amendment to our existing loan agreement (the “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 $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. Our compliance with the financial covenants set forth in the Revolving Facility as of September 27, 2022 was measured under the Fourth Revolving Facility, and as such date we were in compliance with such financial covenants.

In the second quarter of fiscal 2021, we utilized a portion of the net proceeds from our Notes and common share offerings to reduce the balance on our Revolving Facility by $150.0 million. At September 27, 2022, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit.

On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the ~~“Fourth Amended Credit~~“Loan Agreement” and the revolving credit facility provided thereunder, the ~~“Fourth Revolving~~“Revolver Facility”). The ~~Fourth Amended Credit~~Loan Agreement amends and restates in its entirety our prior ~~Amended Credit Agreement.~~credit agreement. The ~~Fourth Revolving~~Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit. The ~~Fourth Revolving~~Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $200 million in revolving loan commitments. Our obligations under the ~~Fourth Revolving~~Revolver Facility are unsecured. Certain of our material subsidiaries have guaranteed our obligations under the ~~Fourth Revolving Facility. On October 6, 2022 we repaid the outstanding balance under the Revolving Facility and borrowed the same amount on the Fourth Revolving~~Revolver Facility. As of ~~the date of this report,~~July 4, 2023, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit under the ~~Fourth Revolving~~Revolver Facility.

Under the ~~Fourth Revolving~~Revolver Facility, we are subject to financial covenants, as ~~of the last day of each fiscal quarter. We are also subject~~well as to customary events of default that, if triggered, could result in acceleration of the maturity of the ~~Fourth Revolving~~Revolver Facility. Subject to certain exceptions, the ~~Fourth Revolving~~Revolver Facility also limits distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio, and also sets forth negative covenants that restrict indebtedness, liens, investments, sales of assets, fundamental changes and other matters.

~~(See Notes~~ (See Note 5 ~~and 13~~ of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our long-term ~~debt and the October 6, 2022 amendment.~~debt.)

~~Series A Preferred Stock~~

During the second quarter of fiscal 2021, we paid a cash dividend on our Series A preferred stock of $5.1 million. Additionally, during the second quarter of fiscal 2021, we paid $457.3 million in connection with the cash-settled conversion of 150,000 shares of our outstanding Series A preferred stock (effected through a repurchase agreement), and the share-settled conversion of the remaining 50,000 shares of our outstanding Series A preferred stock into 2,400,864 shares of our common stock, of which $13.6 million was deemed to be a dividend. (See Note 9 of Notes to Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our preferred stock.)

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Common Stock Dividends

Common stock dividends of ~~$28.3~~$27.0 million and ~~$0.3~~$14.3 million were paid in the first ~~three quarters~~six months of fiscal 2023 and 2022, ~~and 2021,~~ respectively. ~~The~~This increase is primarily due to the resumption of our quarterly dividend in the second quarter of fiscal 2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Amended Credit Agreement. As further discussed in Note 1312 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report, in ~~October 2022,~~July 2023, our Board declared a quarterly dividend to be paid in ~~the fourth quarter of fiscal 2022.~~August 2023. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the ~~Fourth Amended Credit~~Loan 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~~61.0 million shares of our common stock, we have cumulatively repurchased ~~54.5~~55.8 million shares at a total cost of ~~$1,744.0~~$1,787.3 million, excluding excise tax, through ~~September 27, 2022.~~July 4, 2023. We repurchased ~~1.3~~0.6 million shares at a cost of ~~$41.5~~$21.7 million, excluding excise tax, during the first ~~three quarters~~six months of fiscal ~~2022~~2023 compared to ~~0.1~~0.5 million shares at a cost of ~~$5.2~~$14.8 million during the comparable fiscal ~~2021~~2022 period. ~~$26.2 million of the~~This increase is primarily due to the resumption of our share repurchase program in the second quarter of fiscal ~~2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Amended Credit Agreement.~~2022. The remaining variance represents the change in repurchases made 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 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. Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the FRC acquisition, 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 Fourth Amended Credit~~our Loan Agreement that limit share repurchases based on a defined ratio. (See ~~Notes 9 and 13~~Note 8 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase ~~authorization and methods and increased authorized amount under our share repurchase program, respectively.~~authorization.)

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 and the foreseeable future.

As of ~~September 27, 2022,~~July 4, 2023, 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.~~January 3, 2023.

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.

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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 28, 2021:~~January 3, 2023: 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~~The cost of products and ~~other commodities for use~~services used in our operations ~~based on market prices established with our suppliers. Many of these commodities can be~~is subject to ~~market~~ volatility ~~driven by supply and demand factors outside of our control, including~~due to the relative availability of labor and distribution, weather, natural disasters, inventory levels and ~~political and~~other supply and/or demand impacting events such as geopolitical events, economic ~~conditions.~~conditions or other unforeseen circumstances. Climate change may further exacerbate a number of these factors. During fiscal 2021, we began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages ~~have~~ continued in fiscal 2022 and ~~have been~~were exacerbated by ~~the~~ geopolitical ~~unrest in fiscal 2022.~~unrest. The aggregate impact of these and other factors ~~have~~ contributed to significant cost inflation. While we have seen improvements in many of these areas, the absolute level of commodity costs has remained elevated contributing to ongoing inflation above historical levels.

We attempt to 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. While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these efforts may not be successful or yield our intended benefits. 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. As of ~~September 27, 2022,~~July 4, 2023, we had no hedging contracts in place. Commodities not subject to fixed price and volume agreements can be subject to unforeseen supply and cost fluctuations, which at times may be significant.

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~~Goods 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, geopolitical unrest and varying global ~~demand and the geopolitical environment.~~demand. We ~~may or~~ may not have the ability to increase menu prices or vary menu items in response to food commodity price increases. For ~~the third quarters~~second quarter of both fiscal ~~2022~~2023 and ~~2021,~~2022, a hypothetical increase of 1% in food costs would have negatively impacted cost of sales by $2.0 ~~million and $1.7 million, respectively.~~million.

We are exposed to market risk from interest rate changes on our funded debt. This exposure relates to the component of the interest rate on our ~~Revolving Facility~~Loan Agreement that is indexed to market rates. Based on outstanding borrowings at both ~~September 27, 2022~~July 4, 2023 and ~~December 28, 2021,~~January 3, 2023, a hypothetical 1% rise in interest rates would have increased interest expense by $1.3 million, 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.)

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~~plans 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 ~~(loss)/~~income through the income tax ~~(benefit)/~~provision. Based on balances at ~~September 27, 2022~~July 4, 2023 and ~~December 28, 2021,~~January 3, 2023, 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 ~~(loss)/~~income would have declined by ~~$1.9 million and $2.3~~$2.0 million at ~~September 27, 2022~~both July 4, 2023 and ~~December 28, 2021, respectively.~~January 3, 2023.

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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 ~~September 27, 2022.~~July 4, 2023.

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 ~~September 27, 2022~~July 4, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 87 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 28, 2021~~January 3, 2023 (“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.

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 ~~September 27, 2022~~July 4, 2023 (in thousands, except per share data):


				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 ⁽²⁾		or Programs	Programs
June 29 — August 2, 2022	373	$	27.63	369	2,027
August 3 — August 30, 2022	261		31.51	254	1,765
August 31 — September 27, 2022	255		31.92	251	1,510
April 5 — May 9, 2023						221	$	33.18	221	5,284
May 10 — June 6, 2023						6		32.99	—	5,278
June 7 — July 4, 2023						53		33.50	49	5,225
Total	889			874		280			270

(1)	The total number of shares purchased includes ~~15,294~~10,683 shares withheld upon vesting of restricted share awards to satisfy tax withholding obligations.

(2)The dollar value of shares repurchased excludes excise tax due under the Inflation Reduction Act of 2022.

Under authorization by our Board to repurchase up to ~~56.0~~61.0 million shares of our common stock, we have cumulatively repurchased ~~54.5~~55.8 million shares at a total cost of ~~$1,744.0~~$1,787.3 million, excluding excise tax, through ~~September 27, 2022~~July 4, 2023 with ~~889,309~~0.3 million shares repurchased at a cost of ~~$26.7~~$9.3 million, excluding excise tax, during the ~~third~~second quarter of fiscal ~~2022.~~2023. Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. The timing and number of shares repurchased are subject to legal constraints and financial covenants under our ~~credit facility~~Loan Agreement that limit share repurchases based on a defined ratio. (See ~~Notes 9 and 13~~Note 8 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further discussion of our repurchase ~~authorization and methods and increased authorized amount under our share repurchase program, respectively.~~authorization.)

Item 5. Other information.

During the fiscal quarter ended July 4, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

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Item 6. Exhibits

Exhibit No.	Item	Form	File Number	Incorporated by Reference from Exhibit Number	Filed with SEC	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	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	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 October 26, 2022	—	—	—	Filed herewith	Bylaws of The Cheesecake Factory Incorporated, amended and restated on October 26, 2022	8-K	000-20574	3.1	11/1/22
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
10.1	Fourth Amended and Restated Loan Agreement with JPMorgan Chase Bank, National Association dates as of October 6, 2022	—	—	—	Filed herewith	Amended Employment Agreement for David Overton, dates as of April 5, 2023	—	—	—	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer	—	—	—	Filed herewith	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	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	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	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 September 27, 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	The following materials from The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2023, 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 September 27, 2022, formatted in iXBRL (included with Exhibit 101.1)	—	—	—	Filed herewith	The cover page of The Cheesecake Factory Incorporated’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2023, 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: ~~November 2, 2022~~August 7, 2023	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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	September 27,		December 28,
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	133,157	$	189,627
Accounts and other receivables		67,661		100,504
Income taxes receivable		23,692		36,173
Inventories		62,275		42,839
Prepaid expenses		30,953		36,446
Total current assets		317,738		405,589
Property and equipment, net		755,524		741,746
Other assets:
Intangible assets, net		251,639		251,701
Operating lease assets		1,267,241		1,241,237
Other		141,932		157,852
Total other assets		1,660,812		1,650,790
Total assets	$	2,734,074	$	2,798,125

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	59,030	$	54,086
Gift card liabilities		174,725		211,182
Operating lease liabilities		147,413		131,818
Other accrued expenses		225,000		239,187
Total current liabilities		606,168		636,273

Long-term debt		467,528		466,017
Operating lease liabilities		1,215,009		1,218,269
Other noncurrent liabilities		121,873		147,400
Commitments and contingencies (Note 8)
Series A convertible preferred stock, $.01 par value, 200,000 shares authorized; none issued		—		—
Stockholders’ equity:
Preferred stock, $.01 par value, other than Series A convertible preferred stock, 4,800,000 shares authorized; none issued		—		—
Common stock, $.01 par value, 250,000,000 shares authorized; 106,156,302 and 105,365,678 shares issued at September 27, 2022 and December 28, 2021, respectively		1,062		1,054
Additional paid-in capital		880,215		862,758
Retained earnings		1,187,280		1,169,150
Treasury stock, 54,485,868 and 53,139,172 shares at cost at September 27, 2022 and December 28, 2021, respectively		(1,744,005)		(1,702,509)
Accumulated other comprehensive loss		(1,056)		(287)
Total stockholders’ equity		323,496		330,166
Total liabilities, Series A convertible preferred stock and stockholders’ equity	$	2,734,074	$	2,798,125


														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
Net income	—		—	—			—		—		25,656		—		—		25,656
Foreign currency translation adjustment	—		—	—			—		—		—		—		(300)		(300)
Cash dividends declared common stock, net of forfeitures, $0.27 per share	—		—	—			—		—		(14,260)		—		—		(14,260)
Stock-based compensation	—		—	(40)			0		6,141		—		—		—		6,141
Common stock issued under stock-based compensation plans	—		—	41			0		0		—		—		—		0
Treasury stock purchases	—		—	—			—		—		—		(10,879)		—		(10,879)
Balance, June 28, 2022	—	$	—	106,030		$	1,060	$	874,551	$	1,203,731	$	(1,717,326)	$	(332)	$	361,684
Net loss	—		—	—			—		—		(2,398)		—		—		(2,398)
Foreign currency translation adjustment	—		—	—			—		—		—		—		(724)		(724)
Cash dividends declared common stock, net of forfeitures, $0.27 per share	—		—	—			—		—		(14,053)		—		—		(14,053)
Stock-based compensation	—		—	32			1		5,664		—		—		—		5,665
Common stock issued under stock-based compensation plans	—		—	94			1		0		—		—		—		1
Treasury stock purchases	—		—	—			—		—		—		(26,679)		—		(26,679)
Balance, September 27, 2022	—	$	—	106,156		$	1,062	$	880,215	$	1,187,280	$	(1,744,005)	$	(1,056)	$	323,496


	September 27, 2022		December 28, 2021
Restaurant food and supplies	$	29,255	$	27,877
Bakery finished goods and work in progress⁽¹⁾		25,140		7,951
Bakery raw materials and supplies		7,880		7,011
Total	$	62,275	$	42,839