Company Quick10K Filing
Cheesecake Factory
Price38.84 EPS2
Shares45 P/E20
MCap1,730 P/FCF8
Net Debt232 EBIT101
TEV1,962 TEV/EBIT19
TTM 2019-12-31, in MM, except price, ratios
10-Q 2021-03-30 Filed 2021-05-03
10-K 2020-12-29 Filed 2021-02-24
10-Q 2020-09-29 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-03
10-Q 2020-03-31 Filed 2020-06-22
10-K 2019-12-31 Filed 2020-03-12
10-Q 2019-10-01 Filed 2019-11-08
10-Q 2019-07-02 Filed 2019-08-05
10-Q 2019-04-02 Filed 2019-05-06
10-K 2019-01-01 Filed 2019-03-04
10-Q 2018-10-02 Filed 2018-11-09
10-Q 2018-07-03 Filed 2018-08-06
10-Q 2018-04-03 Filed 2018-05-11
10-K 2018-01-02 Filed 2018-02-28
10-Q 2017-10-03 Filed 2017-11-08
10-Q 2017-07-04 Filed 2017-08-09
10-Q 2017-04-04 Filed 2017-05-11
10-K 2017-01-03 Filed 2017-03-02
10-Q 2016-09-27 Filed 2016-11-03
10-Q 2016-06-28 Filed 2016-08-04
10-Q 2016-03-29 Filed 2016-05-05
10-K 2015-12-29 Filed 2016-02-25
10-Q 2015-09-29 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-30 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-07-01 Filed 2014-08-08
10-Q 2014-04-01 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-10-01 Filed 2013-11-08
10-Q 2013-07-02 Filed 2013-08-09
10-Q 2013-04-02 Filed 2013-05-10
10-K 2013-01-01 Filed 2013-02-28
10-Q 2012-10-02 Filed 2012-11-09
10-Q 2012-07-03 Filed 2012-08-10
10-Q 2012-04-03 Filed 2012-05-11
10-K 2012-01-03 Filed 2012-02-29
10-Q 2011-09-27 Filed 2011-11-04
10-Q 2011-06-28 Filed 2011-08-05
10-Q 2011-03-29 Filed 2011-05-06
10-K 2010-12-28 Filed 2011-02-23
10-Q 2010-09-28 Filed 2010-11-04
10-Q 2010-06-29 Filed 2010-08-05
10-Q 2010-03-30 Filed 2010-05-06
10-K 2009-12-29 Filed 2010-02-26
8-K 2020-10-29
8-K 2020-10-08
8-K 2020-09-02
8-K 2020-08-26
8-K 2020-07-29
8-K 2020-07-15
8-K 2020-05-27
8-K 2020-05-13
8-K 2020-05-01
8-K 2020-04-22
8-K 2020-04-20
8-K 2020-04-02
8-K 2020-03-25
8-K 2020-03-23
8-K 2020-02-25
8-K 2020-02-18
8-K 2020-01-22
8-K 2019-11-04
8-K 2019-10-23
8-K 2019-10-01
8-K 2019-07-25
8-K 2019-07-03
8-K 2019-05-30
8-K 2019-05-22
8-K 2019-04-25
8-K 2019-04-02
8-K 2019-03-05
8-K 2019-02-13
8-K 2019-01-22
8-K 2018-11-06
8-K 2018-10-25
8-K 2018-10-02
8-K 2018-07-26
8-K 2018-07-09
8-K 2018-06-12
8-K 2018-05-31
8-K 2018-05-11
8-K 2018-04-23
8-K 2018-03-28
8-K 2018-03-06
8-K 2018-03-01
8-K 2018-02-20
8-K 2018-02-15
8-K 2018-01-24
8-K 2018-01-04

CAKE 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits
EX-10.2 cake-20210330xex10d2.htm
EX-31.1 cake-20210330xex31d1.htm
EX-31.2 cake-20210330xex31d2.htm
EX-32.1 cake-20210330xex32d1.htm
EX-32.2 cake-20210330xex32d2.htm

Cheesecake Factory Earnings 2021-03-30

Balance SheetIncome StatementCash Flow
2.92.31.71.20.60.02011201420172021
Assets, Equity
0.70.60.40.30.10.02011201420172021
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32011201420172021
Ops, Inv, Fin

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 30, 2021

or

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

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      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 April 26, 2021, 46,479,297 shares of the registrant’s Common Stock, $.01 par value per share, were outstanding.

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

INDEX

 

Page
Number

PART I

FINANCIAL INFORMATION

Item 1.

Unaudited Financial Statements:

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Income/(Loss)

2

Condensed Consolidated Statements of Comprehensive Income/(Loss)

6

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

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

28

PART II

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

29

Item 6.

Exhibits

30

Signatures

31

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.        Financial Statements.

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

March 30,

December 29,

    

2021

    

2020

ASSETS

Current assets:

Cash and cash equivalents

$

181,345

$

154,085

Accounts and other receivable

57,815

75,787

Income taxes receivable

 

34,973

 

36,889

Inventories

 

38,955

 

39,288

Prepaid expenses

 

30,727

 

35,310

Total current assets

 

343,815

 

341,359

Property and equipment, net

 

760,722

 

774,137

Other assets:

Intangible assets, net

 

253,152

 

253,160

Operating lease assets

 

1,245,892

 

1,251,027

Other

131,858

127,371

Total other assets

1,630,902

1,631,558

Total assets

$

2,735,439

$

2,747,054

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

56,047

$

58,432

Gift card liabilities

 

166,178

 

184,655

Operating lease liabilities

132,521

132,519

Other accrued expenses

203,211

210,461

Total current liabilities

557,957

586,067

Long-term debt

 

280,000

 

280,000

Operating lease liabilities

 

1,216,473

 

1,224,321

Other noncurrent liabilities

151,010

149,725

Commitments and contingencies (Note 8)

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

 

213,485

 

218,248

Stockholders’ equity:

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

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

995

986

Additional paid-in capital

 

904,045

 

878,148

Retained earnings

 

1,114,047

 

1,110,087

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

 

(1,700,700)

 

(1,696,743)

Accumulated other comprehensive loss

 

(1,873)

 

(3,785)

Total stockholders’ equity

 

316,514

 

288,693

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

$

2,735,439

$

2,747,054

See the accompanying notes to the condensed consolidated financial statements

1

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)

(In thousands, except per share data)

(Unaudited)

Thirteen

Thirteen

Weeks Ended

Weeks Ended

    

March 30, 2021

    

March 31, 2020

Revenues

$

627,417

$

615,106

Costs and expenses:

Cost of sales

 

135,875

 

140,905

Labor expenses

 

229,732

 

236,982

Other operating costs and expenses

 

181,533

 

167,970

General and administrative expenses

 

44,427

 

43,960

Depreciation and amortization expenses

 

22,006

 

23,562

Impairment of assets and lease termination expenses

 

594

 

191,896

Acquisition-related costs

1,236

Acquisition-related contingent consideration, compensation and amortization expenses/(benefit)

550

(4,466)

Preopening costs

 

3,856

 

3,119

Total costs and expenses

 

618,573

 

805,164

Income/(loss) from operations

 

8,844

 

(190,058)

Interest and other expense, net

 

(2,694)

 

(1,518)

Income/(loss) before income taxes

 

6,150

 

(191,576)

Income tax provision/(benefit)

 

2,282

 

(55,413)

Net income/(loss)

3,868

(136,163)

Dividends on Series A preferred stock

 

(5,070)

 

Net loss available to common stockholders

$

(1,202)

$

(136,163)

Net loss per common share:

Basic

$

(0.03)

$

(3.11)

Diluted

$

(0.03)

$

(3.11)

Weighted-average common shares outstanding:

Basic

 

44,189

 

43,773

Diluted

 

44,189

 

43,773

See the accompanying notes to the condensed consolidated financial statements.

2

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

(Unaudited)

Thirteen

Thirteen

   

Weeks Ended

   

Weeks Ended

March 30, 2021

March 31, 2020

Net income/(loss)

$

3,868

$

(136,163)

Other comprehensive gain/(loss):

 

 

Foreign currency translation adjustment

 

174

 

(936)

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

1,738

(2,370)

Other comprehensive gain/(loss)

 

1,912

 

(3,306)

Total comprehensive income/(loss)

$

5,780

$

(139,469)

Comprehensive income attributable to preferred stockholders

(5,070)

Total comprehensive income/(loss) available to common stockholders

$

710

$

(139,469)

See the accompanying notes to the condensed consolidated financial statements

3

Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

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

(In thousands)

(Unaudited)

For the thirteen weeks ended March 30, 2021:

    

    

    

    

    

    

    

Accumulated

    

Series A Convertible

Additional

Other

Preferred Stock

Common Stock

Paid-in

Retained

Treasury

Comprehensive

Shares

  

  

Amount

  

  

Shares

Amount

Capital

Earnings

Stock

Loss

Total

Balance, December 29, 2020

 

200

$

218,248

98,645

$

986

$

878,148

$

1,110,087

$

(1,696,743)

$

(3,785)

$

288,693

Cumulative effect of adopting ASU 2020-06

(4,763)

4,763

4,763

Balance, December 29, 2020, as adjusted

200

213,485

98,645

986

878,148

1,114,850

(1,696,743)

(3,785)

293,456

Net income

3,868

3,868

Foreign currency translation adjustment

174

174

Change in derivative, net of tax

 

 

 

 

 

 

1,738

 

1,738

Cash dividends declared Common stock, net of forfeitures

399

399

Stock-based compensation

 

293

 

3

 

5,480

 

 

 

5,483

Common stock issued under stock-based compensation plans

 

570

 

6

 

20,417

 

 

20,423

Treasury stock purchases

(3,957)

(3,957)

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

(5,070)

(5,070)

Balance, March 30, 2021

200

$

213,485

99,508

$

995

$

904,045

$

1,114,047

$

(1,700,700)

$

(1,873)

$

316,514

For the thirteen weeks ended March 31, 2020:

    

    

 

 

    

    

    

    

    

Accumulated

    

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 31, 2019

 

$

97,685

$

977

$

855,989

$

1,408,333

$

(1,693,122)

$

(435)

$

571,742

Net loss

 

 

 

 

(136,163)

 

 

 

(136,163)

Foreign currency translation adjustment

(936)

(936)

Change in derivative, net of tax

(2,370)

(2,370)

Cash dividends declared Common stock, $0.36 per share

 

 

 

 

(16,376)

 

 

 

(16,376)

Stock-based compensation

 

566

 

6

 

5,541

 

 

 

5,547

Common stock issued under stock-based compensation plans

203

2

111

113

Treasury stock purchases

(2,586)

(2,586)

Balance, March 31, 2020

$

98,454

$

985

$

861,641

$

1,255,794

$

(1,695,708)

$

(3,741)

$

418,971

See the accompanying notes to the condensed consolidated financial statements.

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Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Thirteen

Thirteen

    

Weeks Ended

Weeks Ended

March 30, 2021

    

March 31, 2020

Cash flows from operating activities:

Net income/(loss)

$

3,868

$

(136,163)

Adjustments to reconcile net income/(loss) to cash provided by/(used in) operating activities:

Depreciation and amortization expenses

22,006

23,562

Impairment of assets and lease termination expense

 

431

 

191,571

Deferred income taxes

(1,508)

(11,231)

Stock-based compensation

 

5,444

 

5,507

Changes in assets and liabilities:

Accounts and other receivables

15,517

38,312

Income taxes receivable/payable

 

1,916

 

(44,553)

Inventories

 

408

 

(605)

Prepaid expenses

 

4,584

 

1,452

Operating lease assets/liabilities

 

(2,684)

 

1,851

Other assets

(2,113)

13,279

Accounts payable

 

(1,588)

 

(3,464)

Gift card liabilities

 

(18,480)

 

(26,753)

Other accrued expenses

(6,159)

(85,745)

Cash provided by/(used in) operating activities

 

21,642

 

(32,980)

Cash flows from investing activities:

Additions to property and equipment

 

(7,227)

 

(15,775)

Additions to intangible assets

 

(480)

 

(128)

Other

(1,000)

Cash used in investing activities

 

(8,707)

 

(15,903)

Cash flows from financing activities:

Borrowings on credit facility

90,000

Proceeds from exercise of stock options

 

20,423

 

113

Cash dividends paid

 

(2,179)

 

(15,791)

Treasury stock purchases

 

(3,957)

 

(2,586)

Cash provided by financing activities

 

14,287

 

71,736

Foreign currency translation adjustment

 

38

 

(246)

Net change in cash and cash equivalents

27,260

22,607

Cash and cash equivalents at beginning of period

 

154,085

 

58,416

Cash and cash equivalents at end of period

$

181,345

$

81,023

Supplemental disclosures:

Interest paid

$

1,742

$

253

Income taxes paid

$

327

$

352

Construction payable

$

4,206

$

3,945

See the accompanying notes to the condensed consolidated financial statements.

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Table of Contents

THE CHEESECAKE FACTORY INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.   Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of The Cheesecake Factory Incorporated and its wholly owned subsidiaries (referred to herein collectively as the “Company,” “we,” “us” and “our”) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions for the periods presented have been eliminated in consolidation. The unaudited financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results that may be achieved for any other interim period or for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2020 filed with the SEC on February 24, 2021 ("fiscal 2020 10-K").

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

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

Use of Estimates

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

COVID-19 Pandemic

The Company is subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency in March 2020. We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of a number of restaurants across our portfolio while the remaining locations shifted to an off-premise only operating model on an interim basis. In the second quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms across our concepts. However, restrictions on the type of permitted operating model and occupancy capacity continue to change. We cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent we can maintain off-premise sales volumes or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole. The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

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Table of Contents

Recent Accounting Pronouncements

In August 2020, the 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.

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
Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions

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

March 30, 2021

    

Level 1

    

Level 2

    

Level 3

Assets/(Liabilities)

 

Non-qualified deferred compensation assets

$

85,596

$

$

Non-qualified deferred compensation liabilities

(84,418)

Acquisition-related deferred consideration

(38,326)

Acquisition-related contingent consideration and compensation liabilities

(7,706)

Interest rate swap

(2,288)

December 29, 2020

    

Level 1

    

Level 2

    

Level 3

Assets/(Liabilities)

Non-qualified deferred compensation assets

$

83,485

$

$

Non-qualified deferred compensation liabilities

(83,702)

 

Acquisition-related deferred consideration

(38,119)

Acquisition-related contingent consideration and compensation liabilities

(7,465)

Interest rate swap

(4,591)

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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 was $0 to $32.0 million. Results could change materially if different estimates and assumptions were used. The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liabilities categorized as Level 3 (in thousands):

    

Thirteen

    

Thirteen

Weeks Ended

Weeks Ended

March 30, 2021

March 31, 2020

Beginning balance

$

7,465

$

13,218

Change in fair value

 

241

 

(5,938)

Ending balance

$

7,706

$

7,280

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

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

3.  Inventories

Inventories consisted of (in thousands):

    

March 30, 2021

    

December 29, 2020

Restaurant food and supplies

$

24,190

$

24,282

Bakery finished goods and work in progress

 

7,642

 

7,861

Bakery raw materials and supplies

 

7,123

 

7,145

Total

$

38,955

$

39,288

4.  Gift Cards

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

Thirteen

Thirteen

Weeks Ended

Weeks Ended

    

March 30, 2021

    

March 31, 2020

Gift card liabilities:

Beginning balance

$

184,655

 

$

187,978

Activations

 

16,465

 

17,340

Redemptions and breakage

 

(34,942)

 

(44,103)

Ending balance

$

166,178

 

$

161,215

Thirteen

Thirteen

Weeks Ended

Weeks Ended

    

March 30, 2021

    

March 31, 2020

Gift card contract assets:

Beginning balance

$

17,955

 

$

23,172

Deferrals

 

2,295

 

2,203

Amortization

 

(3,995)

 

(4,690)

Ending balance

$

16,255

 

$

20,685

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

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Table of Contents

5.  Long-Term Debt

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

The Second Amendment, among other things, (i) extended the prior covenant relief period during which the testing of the net adjusted debt to EBITDAR ratio covenant (the “Net Adjusted Leverage Ratio”) and the EBITDAR to interest and rent expense ratio covenant (the “EBITDAR Ratio”) is suspended until the quarter ending December 28, 2021 (the “Covenant Relief Period”), (ii) continued to impose a monthly liquidity covenant of $100 million until the Company has demonstrated compliance with the financial covenants as of the quarter ending December 28, 2021, (iii) provided that the obligations thereunder be secured by a first priority security interest in substantially all of our and any guarantor’s property, with such property to be released upon (a) the termination of the Covenant Relief Period, (b) the Company’s compliance with the Net Adjusted Leverage Ratio and the EBITDAR Ratio as of the quarter ending on March 29, 2022, (c) neither the Company nor any of the guarantors having incurred unsecured debt using certain debt baskets under the Revolving Facility unless such debt is convertible debt or subordinated on customary debt subordination terms reasonably acceptable to the administrative agent and (d) no default or event of default having occurred or continuing, (iv) amended certain negative covenants during the Covenant Relief Period, including certain restrictions on capital expenditures, restricted payments, investments and indebtedness, and (v) permitted the payment of cash dividends with respect to our Series A Convertible Preferred Stock, par value $0.1 per share (“Series A preferred stock”) for each fiscal quarter of 2021 in an amount not to exceed $5.25 million per quarter.

Borrowings under the Amended Credit Agreement during the Covenant Relief Period bear interest, at our option, at a rate equal to either: (i) the adjusted LIBO Rate (as customarily defined, the “Adjusted LIBO Rate”) plus 2.5%, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank funding rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) 1.5%. We also pay a fee of 0.4% on the daily amount of unused commitments under the Amended Credit Agreement.

Subsequent to the Covenant Relief Period, borrowings under the Amended Credit Agreement will bear interest, at our option, at a rate equal to either: (i) the Adjusted LIBO Rate plus a margin that is based on our net adjusted leverage ratio, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank funding rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin that is based on our net adjusted leverage ratio.

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

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Table of Contents

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.

6. Leases

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

Thirteen
Weeks Ended

Thirteen
Weeks Ended

    

March 30, 2021

    

March 31, 2020

Operating

$

32,394

$

33,041

Variable

16,481

15,828

Short-term

70

129

Total

$

48,945

$

48,998

Supplemental information related to leases (in thousands):

Thirteen

Thirteen

 

Weeks Ended

    

Weeks Ended

    

March 30, 2021

March 31, 2020

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

Operating cash flows from operating leases

$

33,926

$

30,760

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

7,372

14,929

7. Derivative

The Company has an interest rate swap agreement, which matures on April 1, 2025, to manage our exposure to interest rate movements on our Revolving Facility.The interest rate swap entitles 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 is $280.0 million through March 31, 2023 and $140.0 million from April 1, 2023 through April 1, 2025. The differences between the variable LIBO rate and the interest rate swap rate are settled monthly. We determined that at both March 30, 2021 and March 31, 2020, the interest rate swap agreement was an effective hedging agreement.

Our only derivative is the aforementioned interest rate swap, which is designated as a cash flow hedge. At March 30, 2021 and March 31, 2020, the fair value of our interest rate swap was a liability of $2.3 million and $3.1 million, respectively. We reclassified $0.5 million out of accumulated other comprehensive loss (“AOCL”) in the first quarter of fiscal 2021 and none out of AOCL in the first quarter of 2020 for the monthly settlement of the interest rate swap. No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings in the first quarter of fiscal 2021 or 2020.

The following table summarizes the changes in AOCL, net of tax, related to the interest rate swap (in thousands):

Thirteen

Thirteen

    

Weeks Ended

    

Weeks Ended

March 30, 2021

March 31, 2020

Beginning balance

$

(3,464)

$

Other comprehensive loss before reclassifications

 

1,270

(2,370)

Amounts reclassified from AOCL

 

468

Other comprehensive loss, net of tax

 

1,738

(2,370)

Ending balance

$

(1,726)

$

(2,370)

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Table of Contents

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

8. Commitments and Contingencies

On June 7, 2018, the California Department of Industrial Relations issued a $